Alternative Dispute Redressal Mechanism

Recently, Parliament passed the Arbitration and Conciliation (Amendment) Bill, 2021.

Arbitration and Conciliation Act, 1996 was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and the law relating to conciliation.

• Further, the act was amended in 2015, to make arbitration process user friendly, cost effective and ensure speedy disposal and neutrality of arbitrators.
• amended in 2019 to promote institutional arbitration in the country.

Arbitration and Conciliation (Amendment) Bill, 2021

• Objective
• Grant unconditional stay of enforcement of arbitration award
• Omit 8th schedule which provides qualification for arbitatrators
• Specify qualifications, experience and norms for arbitrators

Key features of the bill:

• Automatic stay on awards: granted by the Court, even during the pendency of the setting aside application, if satisfied that  relevant arbitration agreement was induced by fraud or corruption.
• Qualifications of arbitrators: removes 8th Schedule, now will be specified under the regulations by Arbitration Council of India (ACI).

Impact of amendment bill over dispute resolution mechanism

• Check fraud and corruption: ensure stakeholder get an opportunity to seek unconditional stay where arbitral award is induced by fraud or corruption.
• Promote India as Hub of commercial arbitration

 

Alternative Dispute Resolution (ADR) mechanism

• Arbitration and Conciliation are modes of ADR mechanism, in which disputes are settled without litigation.
• ADR facilitate parties to deal with the underlying issues in dispute in a more cost-effective manner and with increased efficacy.

• Arbitration Council of India (ACI)
• Arbitration and Conciliation (Amendment) Act 2019
• set for grading of arbitral institutions and accreditation of arbitrators.
• will be headed by a Chairperson, who has been a Judge of the Supreme Court or a Chief Justice or Judge of a High Court or an eminent person appointed by central government in consultation with the Chief Justice of India.
• two Full-time Members from amongst eminent arbitration practitioners and academicians and one representative of a recognized body of commerce and industry nominated on rotational basis as a Part-time Member.
• Secretary, Department of Legal Affairs, Ministry of Law & Justice; Secretary, Department of Expenditure, Ministry of Finance and Chief Executive Officer, ACI will be ex-officio Members.

Issues with proposed amendment in bill

• Prolonged litigation process: It is very easy for the losing party to allege corruption and obtain an automatic stay on enforcement of the arbitral award.
• Floodgates of litigation: As the amendment in act is in retrospective manner i.e. from 2015, with respect to automatic stay may open floodgates of litigation.
• Bill does not define Fraud/ Corruption.
• Amendment will affect enforcement of contracts and ultimately affect ease of doing business in India.

India at 163rd place among 190 countries, according to World Bank’s Ease of Doing Business report when it comes to enforcement of contract. Hence, this bill can be in right in direction to address the issues by facilitate quick enforcement of contracts, easy recovery of monetary claims, etc.