The Department of Legal Affairs, Government of India released the draft Arbitration and Conciliation (Amendment) Bill, 2024 (the “Draft Bill”), proposing numerous key amendments aimed at further strengthening institutional arbitration, reducing court intervention in arbitrations and ensuring timely conclusion of arbitration proceedings.
Earlier, on 12 June 2023, the Expert Committee on Arbitration Law was set up under the chairmanship of Dr. T.K. Vishwanathan to examine the working of arbitration law in the country and propose reforms to the Arbitration and Conciliation Act, 1996 (the “Act”). The Expert Committee submitted its report on 7 February 2024, suggesting various amendments to the Act. Subsequently, the Government of India released the Draft Bill on 18 October 2024, inviting public comments on the same.
Some of the key amendments proposed by the Draft Bill and the implications of the changes are discussed below.
Key Amendments proposed in the Draft Bill
1. Name of the Act – The Draft Bill proposes to amend Section 1(1), thereby renaming the act from ‘Arbitration and Conciliation Act, 1996’ to ‘Arbitration Act, 1996’.
2. Introduction of seat of arbitration – The Draft Bill introduces the concept of “seat of arbitration” and proposes two separate options to amend Section 20 of the Act:[1]
Option I:[2] Section 20 of the Act will be amended and the marginal heading will be substituted with “Seat of arbitration”. Similarly, the term ‘place’ in sub-section (1) and (2) will be replaced with ‘seat’ and the term ‘place’ in sub-section (3) shall be replaced with ‘venue’. In addition, a new definition of ‘court’ will be inserted through Section 2A,[3] replacing the earlier definition under Section 2(1)(e).
Under the new definition, where the parties have agreed upon the seat of arbitration, court will mean: (i) in case of domestic arbitration, a court having territorial and pecuniary jurisdiction over the seat; and (ii) in case of international commercial arbitration, a high court having territorial jurisdiction over the seat. In all other cases, court shall mean the court having territorial and pecuniary jurisdiction or the high court having territorial jurisdiction, as the case may be, to decide disputes forming the subject matter of arbitration. This would also be in accordance with the ruling by the Supreme Court in BALCO v. Kaiser Aluminium.[4]
While this option is in line with the principle of party autonomy, there would be a contradiction between Section 2A (1)(ii) & (2)(ii) and Section 20(2) of the amended Act. On the one hand, Section 2A (1)(ii) & (2)(ii), in the absence of a seat, confers the jurisdiction on the courts/ high courts, which would ordinarily have the jurisdiction to decide disputes forming the subject matter of arbitration. On the other hand, Section 20(2), in the absence of a seat, mandates the arbitral tribunal to determine the same, having regard to the circumstances of the case, including the convenience of the parties. Naturally, the enforcement of the latter would render the former otiose and vice versa. This may lead to ambiguity and is required to be addressed.
Option II:[5] The framework of the parties agreeing upon the ‘seat’ of arbitration will be done away with and the seat, in case of domestic arbitration, shall be the place where the contract/arbitration agreement is executed or where the cause of action has arisen. The parties may however agree upon the venue of arbitration, failing which the arbitral tribunal shall decide the venue of arbitration. As this option seeks to retain the existing definition of courts, the jurisdiction in case of international commercial arbitration would be conferred on the high courts having jurisdiction on the subject matter of arbitration.
Opting for Option II would be a more drastic amendment since it would do away with the framework of the parties opting for a ‘seat’ of arbitration which is based on the well settled principle of party autonomy. Such an amendment may therefore affect the freedom of parties to have a seat of their choice which is one of the reasons parties prefer arbitration over litigation.
Further, the proposed Section 20(1) under this option uses the language “domestic arbitration other than international commercial arbitration”, which may be incorrect since neither the Act nor the Draft Bill define “domestic arbitration”. The amendment act should therefore either define what constitutes a domestic arbitration or use the language “arbitration other than international commercial arbitration”, which has presently been used in Section 34 (2A) or 2(1)(e)(i) of the Act.
Lastly, since this option seeks to retain the existing definition of courts under Section 2(1)(e),[6] there may be an incongruence between Section 2(1)(e)(i) and the proposed Section 20(1) as the former would be wider in ambit as compared to the latter. This may result in inconsistencies if a party were to approach a court which may have jurisdiction in terms of Section 2(1)(e)(i) (by applying jurisdictional principles in the Code of Civil Procedure, 1908) but not under Section 20(1). For instance, approaching a court having jurisdiction over where the defendant resides (one of the grounds under Section 2(1)(e)) but not where the cause of action arose or where the contract was executed (requirements for Section 20(1) under Option II).
The Draft Bill has also proposed to replace the term ‘place’ with ‘seat’ in certain other provisions, such as the proviso to Section 2(2), Section 28, and Section 31(4) of the Act. Interestingly, the term ‘place’ in Section 2(2) of the Act has not been substituted with ‘seat’.[7] Ignoring the possibility of it being an error in drafting, leaving ‘place’ in Section 2(2) unaltered would stand to reason if Option II above were to be adopted, as in that case, while ‘place’ would be replaced by the ‘seat’ of arbitration in the domestic context, the Act would still apply to international commercial arbitrations taking ‘place’ in India by virtue of Section 2(2). In the latter case, the ‘place’ of arbitration being in India would mean that Indian law is the lex arbitri or curial law of the arbitration. However, if Option I were to be adopted, Section 2(2) would be required to be amended accordingly to clarify that the Act would also extend to international commercial arbitrations taking place in India. Needless to mention, such concept of ‘place’ (i.e., geographical in nature) would be different from the interpretation provided in various earlier judgments equating it to ‘seat’ and such precedents may not be applicable to such an interpretation of Section 2(2).
3. Emergency Arbitration – In line with the Supreme Court’s ruling in Amazon v. Future Retail,[8] the Draft Bill seeks to insert a new Section 9A, providing for the framework of ‘emergency arbitrators’, to facilitate grant of interim measures prior to the constitution of the arbitral tribunal. However, such an appointment of an emergency arbitrator can be made by an arbitral institution only.
The emergency arbitrator shall conduct proceedings in the manner specified by the Arbitration Council of India (the “Council”). Further, any order passed by the emergency arbitrator shall be enforceable in the same manner as an order of the arbitral tribunal under Section 17(2) of the Act. Lastly, an order of the emergency arbitrator may be confirmed, modified, or vacated by an order or an arbitral award made by the arbitral tribunal.
It is unclear whether an emergency arbitration seated outside India is covered under Section 9A or not. This is because the proviso to Section 2(2), which enlists the provisions of Part I of the Act that are applicable to an arbitration seated outside India as well, only includes Section 9A (2). Section 9A (2) merely states that proceedings of emergency arbitrator shall be conducted in the manner specified by the Council. Neither Section 9A (3), which makes an award by an emergency arbitrator enforceable in terms of Section 17(2), nor Section 17 (2) itself is applicable to an arbitration seated outside India. Hence, it seems Section 9A does not include emergency arbitrations seated outside India.
Rules of arbitral institutions such as SIAC, ICC and LCIA typically state that the seat of the arbitration shall be the seat of the emergency arbitration as well, in the absence of any specific stipulation. Since the parties do not usually specify the seat of emergency arbitration, it is likely that in case of an arbitration seated outside India, the seat of emergency arbitration would also be outside India. In such a case, given the lack of clarity on whether Section 9A includes emergency arbitrations seated outside India, it remains to be seen if an award passed by the emergency arbitrator would be directly enforceable in India.
4. Introduction of Arbitral Appellate Tribunal and its Functions – The Draft Bill has proposed to insert Section 34A[9] to the Act and introduce ‘appellate arbitral tribunals’ as an alternative to courts for adjudicating an application under Section 34 of the Act. The arbitral institutions may provide for an appellate arbitral tribunal, which would possess the same powers as a court.
Accordingly, an application for setting aside an arbitral award may lie to either an appellate arbitral tribunal or a court. However, where the parties have agreed to take recourse to the appellate arbitral tribunal, no application can be filed before the court. The appellate arbitral tribunal, while deciding an application under Section 34, is required to follow such procedure, as may be specified by the Council.
However, to call such a tribunal an ‘appellate’ arbitral tribunal may be inaccurate since a court or tribunal under Section 34 does not sit in appeal over the arbitral award.[10] In view of the settled position, the term ‘appellate arbitral tribunal’ would be a misnomer, and better terminology ought to be adopted (e.g., ‘annulment tribunal’ under the ICSID Convention).
Another limitation of Section 34A would be the non-recognition of an ad hoc appellate arbitral tribunal. It would be interesting to see if an appellate arbitral tribunal constituted at the instance of the parties rather than an arbitral institution, is granted recognition under the Act, particularly when the Supreme Court has anyway upheld the validity of a 2-tier arbitration proceedings in M/s Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd, which did not restrict the principle to institutional arbitration.[11] Therefore, even without a statutory recognition in the Draft Bill, two-tier arbitration may still be possible in view of judicial precedents.
Lastly, the Draft Bill does not propose to make corresponding amendments to Section 36 of the Act, which grants power to the courts to stay the enforcement of an arbitral award. In that case, a literal interpretation of the proposed Section 34[12] and 34A, and the existing Section 36[13] would suggest that an application for seeking a stay on the enforcement of arbitral award would be filed before the court, even when an application for setting aside the arbitral award is filed before the appellate arbitral tribunal. While under the present scheme of the Act, proceedings under Sections 34 and 36 would likely end up in the same court, this would not be the case as per the Draft Bill where a petition under Section 34 is filed before the appellate arbitral tribunal. Since the application under Section 36 would anyway be filed before the court, there would be a multiplicity of proceedings.
5. Regime for challenging an arbitral award – The Draft Bill proposes to introduce subtle yet significant changes to the framework of challenging and seeking the setting aside of an arbitral award under Section 34[14] of the Act. These include:
iii. The Draft Bill proposes to recategorize the grounds of challenge under Section 34 of the Act. Under the existing Section 34, the grounds of challenge have been categorized under two heads: (i) grounds which a party making an application must establish on the basis of the arbitral record (Section 34(2)(a)), and (ii) grounds in relation to which the court may arrive at a finding on its own (Section 34(2)(b) and Section 34(2A)). Under the new proposed regime, all the grounds would be required to be established by the party making an application. Further, Section 34(2) would stipulate the grounds based on which, a court can set aside an arbitral award in whole only and Section 34(2A) would stipulate the grounds based on which, a court can set aside an arbitral award in whole or in part.
This is a departure from the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”), to which India is a signatory, and which provides for grounds that could be relied upon by a party challenging an award as well as grounds which if found to apply by the court (as opposed to the burden being on the challenging party to establish), would result in the court setting aside the award. The challenge mechanism in the UNCITRAL Model Law on International Commercial Arbitration (upon which much of the Act is based) is also based on the grounds found in the New York Convention. If the proposed amendment were to be adopted, it would be interesting to see how this shift in the burden to establish all the grounds to the party challenging an award would shape the development of jurisprudence on challenge to an arbitral award in India as opposed to other jurisdictions that are based on the Model Law.
6. Limitation Period – The Draft Bill proposes to introduce the following amendments as regards the period of limitation under the Act:
1.Where an application for interim relief under Section 9 has been filed prior to the commencement of the arbitral proceedings, the arbitral proceedings would have to be commenced within 90 days from the date of filing of such an application. Presently, the arbitral proceedings are required to be commenced within 90 days from the date of passing of an order, or within such further time as the court may determine. As such, the period to initiate arbitration proceedings has been curtailed and might result in arbitration proceedings being initiated even prior to any order being granted in the proceedings under Section 9 of the Act.
2.An application for appointment of arbitrators under sub-section (4), (5) or (6) of Section 11 would have to be filed within 60 days from the failure or refusal of appointment of arbitrator(s). Presently, no such limitation period has been prescribed in the Act. However, the Supreme Court had held that such an application must be filed within three years from the date of failure or refusal, in terms of Article 137 of the First Schedule of the Limitation Act, 1963.[15] In fact, the Supreme Court in BSNL v. Nortel Networks (India) (P) Ltd.,[16] while reiterating the three year limitation period, opined that this was an unduly long period of limitation that runs contrary to the scheme of the Act and recommended that the Parliament should fill this lacuna by effecting an appropriate amendment to Section 11.
3.The Draft Bill proposes to insert Section 37(1A), which provides that an appeal under Section 37[17] of the Act shall be filed no later than 60 days from the date of receipt of the order being appealed against. In the existing framework, there was no such period of limitation.
7. Timelines for disposal of applications – The Draft Bill also proposes to introduce timelines for the disposal of certain applications under the Act, which are as follows:
8. Role of Institutional Arbitration – In the current framework, ‘arbitral institution’ as defined in Section 2(ca), only includes arbitral institutions designated by the Supreme Court or a High Court under the Act. However, the Draft Bill aims to strengthen the institutional arbitration framework in the country by substituting the definition of ‘arbitral institution’ with a wider definition, i.e., “a body or organisation that provides for conduct of arbitration proceedings under its aegis, by an arbitral tribunal as per its own rules of procedure or as otherwise agreed by the parties.” Furthermore, the Draft Bill proposes to confer powers upon the arbitral institution at par with that of the court, to decide the extension of the arbitral tribunal’s mandate or substitution of the arbitrator(s) under Section 29A (3) to (6) of the Act.
9. Omission of Fourth Schedule and Determination of Fee of Arbitral Tribunal – The Draft Bill proposes to omit the Fourth Schedule of the Act which prescribes a fee schedule for the arbitrators based on the sum in dispute. Section 11A will be modified accordingly, and the fees of the arbitral tribunal will be such as specified by the Council, unless the parties have agreed upon the same or the arbitration is being conducted under the aegis of an arbitral institution having rules for determining the fees payable to the arbitral tribunal.
10. Form and Content of the Arbitral Award – The Draft Bill proposes to insert Section 31 (2A) that would make it mandatory for the arbitral award to state that the following has been ensured: (a) a party was not under some incapacity; (b) the arbitration agreement is valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; (c) parties were given proper notice of the appointment of arbitrator or of the arbitral proceedings or were otherwise able to present their case; (d) the composition of arbitral tribunal was as per the agreement of the parties; (e) the arbitration procedure followed was in accordance with the agreement of the parties; (f) the subject matter of dispute is capable of settlement by arbitration under the law for the time being in force; (g) the arbitral award only deals with disputes contemplated by or falling within the terms of the submission to arbitration.
This proposal seeks to reduce the likelihood of an arbitral award being set aside on the grounds outlined in proposed Section 34(2) of the Act and minimize any delay or hindrance in achieving the finality of a dispute.
Additionally, the Draft Bill also intends to modify the rate of interest on the sum directed to be paid by an arbitral award under Section 31(7)(b) of the Act, from the existing “rate of 2% higher than the current rate of interest prevalent on the date of award” to the “rate of 3% higher than the prevailing repo rate of the Reserve Bank of India prevalent on the date of award”.
11. Stamping of Arbitral Awards – The Draft Bill proposes to amend Section 31(1) of the Act, which provides for the form and contents of the arbitral award, to mandate the stamping of the arbitral award. However, the Draft Bill does not clarify as to who will bear the cost of stamping the arbitral award. In the absence of any specific provision in this regard, it appears that an arbitral tribunal will determine the payment of stamp duty under Section 31A as part of costs of arbitration provided in Section 31(8) of the Act.
12. Amendment to Section 9 – The Draft Bill proposes to make it impermissible to file an application under Section 9 of the Act during the arbitral proceedings by omitting the term ‘or during’ in Section 9(1). Accordingly, Section 9(3), which states that the court cannot entertain an application under Section 9(1) after the constitution of an arbitral tribunal unless the remedy under Section 17 would be inefficacious, has been proposed to be deleted.
13. Deletion of Section 42 – Section 42 of the Act provides that where an application with respect to an arbitration agreement is filed in a court, all subsequent applications arising out of that agreement and the arbitral proceedings will be made in that court only. The Draft Bill has proposed to delete this provision entirely.In our opinion, Section 42 should be retained if the amendment act opts for Option II for amending Section 20 of the Act (Introduction of ‘Seat’ and ‘Venue’). This is because in case of Option II, the jurisdiction of courts would be determined in accordance with either Section 2(1)(e) of the Act or the seat of arbitration (being the place where arbitration agreement was executed or where the cause of action arose). Either way, courts at multiple places may have jurisdiction over the arbitration under Option II and in such a case, Section 42 would be helpful in narrowing down multiple courts having jurisdiction over the arbitration.
14. Narrow scope for “Equal Treatment” under Section 18 – The Draft Bill aims to modify Section 18[18] of the Act and substitute the words “full opportunity” with the words “fair and reasonable opportunity”, thereby narrowing the scope of opportunity afforded to the parties to present their case.
15. Settlement to be governed by the Mediation Act, 2023 – The Sixth Schedule of the Mediation Act, 2023 had substituted Sections 61 to 81 of the Act with new Sections 61 and 62, whereby any reference to conciliation is now construed as mediation under the Mediation Act, 2023. Accordingly, the Draft Bill seeks to omit all references to the term ‘conciliation’ across the Act.
Furthermore, any settlement agreement arrived at, in terms of Section 30 of the Act, is now enforceable in the form of a mediated settlement agreement in accordance with the provisions of the Mediation Act, 2023.
16. Online Dispute Resolution – The Draft Bill proposes to modify the definition of “arbitration” under Section 2(1)(a) to include an arbitration conducted, wholly or partly, by use of audio-video electronic means. The proposed Section 2(1)(aa) defines “audio-video electronic means” to encompass the use of any communication device for video conferencing, filing of pleadings, recording of evidence, transmission of electronic communication, and other incidental matters, as specified by the Council. Accordingly, Section 7(4)(a) and Section 31(5) are also proposed to be amended to recognise the digital signing of a document containing an arbitration agreement and an arbitral award, respectively.
17. Composition and Function of Arbitral Council of India – The Draft Bill has expanded the eligibility criteria for certain members of the Council. Under the proposed Section 43C(1)(a), it is no longer necessary for a Chairperson to have been a Judge of the Supreme Court, or Chief Justice of a High Court, or a Judge of a High Court, or an eminent person having special knowledge and experience. Any person with the “ability, integrity and standing having adequate knowledge and professional experience or shown capacity in dealing with problems relating to law, alternative dispute resolution preferably arbitration, public affairs or administration” is qualified to be appointed the Chairperson by the Central Government.
Moreover, under the proposed Section 43D(2), the Council has been entrusted with extensive duties inter alia including laying down model arbitration agreements, model code of conduct for arbitrators, model rules of arbitral procedures, manner of conduct of proceedings through the use of audio-video electronic means, manner of maintenance of the depository and criteria for recognition of arbitral institutions, and deciding upon renewal, withdrawal, suspension or cancellation of the such recognition.
In our view, the Draft Bill seeks to bring changes in several crucial areas of the law of arbitration in India. The proposed amendments address numerous lacunae/ ambiguities in law and will prove to be critical in ensuring a speedy disposal of commercial disputes in India. However, as discussed above, certain aspects of the Draft Bill require further clarity and the final amendment bill would need to recalibrate some of the proposed amendments to ensure that they do not inadvertently give rise to new ambiguities or challenges.
Footnotes
1 Existing Provision:
(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.
2 Proposed Option I:
(2) Failing any agreement referred to in sub-section (1), the seat of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any venue it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.
3 Proposed Section 2A:
2A. (1) In case of arbitration other than international commercial arbitration,
(i) where seat of arbitration has been agreed by the parties or determined by the arbitral tribunal as per Section 20, the court means the court having pecuniary and territorial jurisdiction over the seat of arbitration.
(ii) in all other cases, the court means the court having pecuniary and territorial jurisdiction to decide the disputes forming the subject-matter of the arbitration if the same had been the subject-matter of a suit.
(2) In case of international commercial arbitration,
(i) where the seat of arbitration has been agreed by the parties or determined by the arbitral tribunal as per Section 20, Court means the High Court having territorial jurisdiction over the seat.
(ii) in all other cases, Court means the High Court having territorial jurisdiction to decide disputes forming the subject matter of arbitration.
(3) In arbitrations which are conducted solely through audio visual electronic means, the provisions of sub-section (1) or sub-section (2), as the case may be, shall mutatis mutandis apply.
04 2012 9 SCC 552, Para 100. In this case, the Supreme Court held that the term ‘place’ in Section 20(1) and (2) of the Act refers to the seat of arbitration while Section 20(3) of the Act refers to the venue of arbitration.
5 Proposed Option II:
(2) Notwithstanding sub-section (1), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any venue it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.
6 Existing Section 2(1)(e):
(e) ― Court means—
(i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;
(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;
7 Section 2(2) of the Act states, “This Part shall apply where the place of arbitration is in India: […]”
8 Civil Appeal Nos. 4492-4493 of 2021. In this case, the Supreme Court held that the ‘award’ passed by an Emergency Arbitrator in an arbitration seated in India is enforceable under Section 17(2) of the Act as an interim order of an arbitral tribunal made under Section 17(1) of the Act.
9 Proposed Section 34A:
34A. Appellate Arbitral Tribunal.— (1) The arbitral institutions may, provide for an appellate arbitral tribunal to entertain applications made under Section 34, for setting aside an arbitral award.
(2) The appellate arbitral tribunal while deciding an application under Section 34 shall follow such procedure, as may be specified by the Council.
10 MMTC v. Vedanta, 2019 (4) SCC 163.
11 Civil Appeal No. 2562 of 2006.
12 Proposed Section 34(1):
Provided that where parties have agreed to take recourse to an appellate arbitral tribunal under this sub-section, no application for setting aside an arbitral award shall lie before the Court.
13 Section 36:
[…]
(2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.
(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:
14 Proposed Section 34:
[…]
(1A) The party in its application made under sub-section (1) shall make a disclosure with respect to any challenge pending or decided in respect of all arbitral awards, if any, passed for any disputes having arisen between the parties from a common defined legal relationship, whether contractual or not.
(1B) The Court or an appellate arbitral tribunal shall, prior to hearing an application under this Section, formulate specific grounds which arise and the application may thereafter be heard on whether the said grounds are made out or not,
Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court or an appellate arbitral tribunal to hear subsequently, for reasons to be recorded in writing, any other grounds not formulated by it earlier.
(2) An arbitral award may be set aside in whole by the Court or an appellate arbitral tribunal, as the case may be, only if the party making the application establishes on the basis of the record of the arbitral tribunal that—
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(v) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force.
(2A) An arbitral award may be set aside in whole or in part by the Court or an appellate arbitral tribunal, as the case may be, only if the party making the application establishes on the basis of the record of the arbitral tribunal that—
(i) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(ii) the arbitral award is in conflict with the public policy of India.
(iii)the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—
(i) the making of the award was induced or affected by fraud or corruption; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(7) Where the arbitral award is set aside in part, the Court or an appellate arbitral tribunal, as the case may be, may direct that the arbitral tribunal shall decide in a fixed time, only the issues on which the award has been set aside:
Provided that the said arbitral tribunal shall make the award on the said issues on the basis of existing records in the original arbitral award, unless the Court or an appellate arbitral tribunal, as the case may be, directs to the contrary:
Provided further that the arbitral tribunal shall be bound by the findings of the original arbitral award, which have not been set aside.
15 Grasim Industries v. State of Kerala, Civil Appeal No. 3180 of 2007.
16 (2021) 5 SCC 738.
17 Proposed Section 37:
case may be, namely:—
(a) refusing to refer the parties to arbitration under section 8;
(aa) refusing to appoint an arbitrator under Section 11;
(b) granting or refusing to grant any measure under section 9;
(c) setting aside or refusing to set aside an arbitral award under section 34.
(1A) Notwithstanding anything contained in any other law, an appeal under sub-section (1) shall be made within 60 days from the date of receipt of the Order appealed against, but not thereafter.
Authors: Arunav Guha Roy – Partner and Priyanshu Jain – Associate
Disclaimer: This article only highlights key issues and is not intended to be comprehensive. The contents of this article do not constitute any opinion or determination on, or certification in respect of, the application of Indian law by Talwar Thakore & Associates (“TT&A”). No part of this article should be considered an advertisement or solicitation of TT&A’s professional services.
By browsing this website you agree that you are, of your own accord, seeking further information regarding TT&A. No part of this website should be construed as an advertisement of or solicitation for our professional services. No information provided on this shall be construed as legal advice.