The article discusses some of the key provisions in the Draft Arbitration and Conciliation (Amendment) Bill 2024 which is currently out for public comments. Click here to read Part I.
The Draft Bill proposes several changes to Section 31 which deals with the form and contents of an arbitral award. These include certain minimum contents of the award, a provision for awards to be digitally signed and a simpler provision for interest calculation. The most notable change, however, is the addition of the requirement that awards should be duly stamped from the very inception.
While stamping has always been a requirement for enforcement, parties typically wait for the completion of the challenge procedure before paying stamp duty on the award as it stands at that time. The Draft Bill takes away this flexibility. Further, it appears to place the duty of stamping on the arbitral tribunal. While the arbitral tribunal could direct one or both parties to provide stamp paper, this may lead to unnecessary complications before the award has been pronounced. Parties would possibly guess the outcome and take obstructive actions. Even otherwise, parties should have the flexibility to subject the award to a challenge procedure before paying stamp duty. Parties could also dispute the existence of a valid award on grounds of inadequate stamp duty.
The Draft Bill substantially overhauls Section 34 which deals with the setting aside of arbitral awards.
First, the Draft Bill proposes permitting parties to challenge an award before an “appellate arbitral tribunal” instead of a court. The Draft Bill proposes the insertion of a new Section 34A, as per which appellate arbitral tribunals under the rules of arbitral institutions are allowed to set aside awards. It appears that appellate arbitral tribunals are only contemplated in institutional arbitrations, although no leading arbitral institution offers any such mechanism for appellate arbitral tribunals to review awards.
While two-tiered arbitration clauses have been upheld by the Supreme Court and are reflective of party autonomy, the Draft Bill’s provisions are not reflective of such autonomy. The Draft Bill does not appear to permit appellate arbitral tribunals in ad hoc arbitrations. Further, appellate arbitral tribunals are required to review the award only on the grounds in Section 34 – which might not be what parties agree to do in a two-tiered arbitration clause. This is of course notwithstanding the fact that allowing appellate arbitral tribunals to review awards would add another layer of appeal within the arbitration process, leading to more complexity and delay.
Second, the Draft Bill expressly allows the partial setting aside of awards and permits the court (or the appellate arbitral tribunal) to direct the arbitral tribunal to decide those issues on which the award has been set aside in part. The Indian judiciary has recently wrestled with the issues of partial setting aside and modification of awards, with a three-judge bench in Gayatri Balasamy v. M/s ISG Novasoft Technologies Limited, SLP(C) Nos. 15336-1537/2021, referring the issue of modification to a larger Bench. Whilst courts are currently not allowed to modify awards (see NHAI v M. Hakeem, (2021) 9 SCC 1), except for the limited allowance on interest modification (Vedanta Limited v. Shenzhen Shandong Nuclear Power, (2019) 11 SCC 465), various decisions have observed that courts have the power to partially set aside awards and that this does amount to modification of an award (see for instance, National Highways Authority of India v. Trichy Thanjavur Expressway Limited, 2023 SCC OnLine Del 5183).
The Expert Committee had proposed clarifying the position by substituting the words “set aside by the Court” with the words “set aside in whole or in part by the Court." The Expert Committee also proposed permitting courts to modify the award in exceptional circumstances to meet the ends of justice. The lack of clarity about what constituted “exceptional circumstances” was problematic as parties would invariably try their luck in getting the award modified by the court. The Draft Bill takes up the Committee’s recommendations and expressly allows the partial setting aside of arbitral awards by the Court or an appellate arbitral tribunal. However, instead of the Committee’s recommendation allowing for modification of awards, the Draft Bill proposes remitting the award to the arbitral tribunal on issues on which it has been partially set aside. This is hardly a solution, as it would effectively be a mandate to the arbitral tribunal to relook at the arbitral record and correct its decision – in other words, reverse its decision on the issues on which the arbitral award has been partially set aside.
Third, the Draft Bill takes away the distinction in scrutiny between domestic and international commercial arbitration. In the case of domestic arbitration, the Act allows courts an additional ground – patent illegality - over and above the grounds listed in the UNCITRAL Model Law to set aside arbitral awards. The proposed Section 34(2A)(ii) of the Draft Bill does not contain any wording to show that the patent illegality ground is limited to domestic arbitral awards. As a result, awards arising out of international commercial arbitrations would now be vulnerable to setting aside on the patent illegality ground. This represents a significant deviation from the approach taken since the 2015 amendments and might create more uncertainty for users.
As the Draft Bill makes its way through consultation and scrutiny, it stands at a critical point between offering essential reform and risking legislative redundancy. The provisions for strengthening institutional arbitration and on emergency arbitration address longstanding challenges in India’s arbitration framework. However, other provisions raise concerns regarding whether these amendments are genuinely transformative or redundant. The Draft Bill takes away parties’ right to claim interim relief from courts during the arbitration proceedings. Similarly, the Draft Bill limits party autonomy in choosing the seat of the arbitration and radically recasts Section 34, potentially leading to increased uncertainty and likelihood of challenges, on the scope of interference in setting aside applications.
There is a need for thorough deliberation and further changes to address issues such as those discussed in this post in order to avoid the Draft Bill putting forth redundant amendments to the already complex Indian arbitration regime. Simply put, “if it ain’t broke, don’t fix it!”
About the authors: Anjali Anchayil is a partner at JSA, Advocates & Solicitors.
Aiman Singh Kler is an advocate practising in the Delhi High Court.
Views expressed are personal.
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