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IMPLICATIONS OF THE ARBITRATION AND CONCILIATION (AMENDMENT) ACT, 2021


FLURRY OF CHALLENGES, JURISPRUDENCE AND ENFORCEMENT


Introduction

The Arbitration and Conciliation Act, 1996 (“Act”) in India has been a subject of progressive approach along with continuous piecemeal and gradual amendments to make India a pro-arbitration pivot and an effective business destination by providing a sturdy dispute resolution mechanism that enhances the ease of doing business in India. As a latest attempt to rebuilt the Act recent annunciation of the Arbitration and Conciliation (Amendment) Ordinance, 2020 and replaced by the Arbitration and Conciliation (Amendment) Act, 2021 is a step intended in a similar direction. According to this amendment it is added that the text to Section 36(3) of the Act, after the proviso, which pertains to the enforcement of the arbitral award: “Provided further that where the Court is satisfied that a prima facie case is made out that, — (a) the arbitration agreement or contract which is the basis of the award; or (b) the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under Section 34 to the award. Explanation – for further clarification, the above proviso shall apply to all courts cases of arbitral proceedings, irrespective of whether the proceedings of court or arbitral proceedings were commenced before or after the Arbitration and Conciliation (Amendment) Act, 2015. Effectively, the 2021 Amendment revives and relaunches the power to grant an unconditional stay on the enforcement of arbitral award, which is raised because of fraud and corruption to the Indian Courts. Undoubtedly, this Amendment attracted much attention, criticism, and disconcert within the arbitration community. Because of granting such immunity to grant an unconditional stay on the enforcement of the arbitral award existed prior to the 2015 amendment, which resulted in an onslaught of challenges to delay the enforcement proceedings. It was addressed by the amendment Act of 2015, which cleared out the unconditional stay on the enforcement proceeding and empowered Indian Courts to impose several conditions on the stay of enforcement proceeding to avoid losing parties from filling unwarranted and waggish challenges. However, the 2021 Amendment has omitted the efforts of 2015 amendment and has revived the course of unconditional stay on arbitral award in the cause of fraud or corruption.


Jurisprudence and development of Arbitration

Frances Kellor, the only female founder of American Arbitration Association once said that in search of peace and justice, arbitration is the earliest amongst all of mankind’s adventures. Long before when law was undefined and courts were unorganised, people had restored and followed the peripheral adjustments and accords or settlement of disputes under the ambit of arbitration. It was prevalent long before the territorial laws came into existence. As per the several biblical theories King Solomon was the first arbitrator when he initiated a settlement, further incidents of arbitration also took place in the era of Philip the Second back in 337 B.C. Further, the course of arbitration flourished in India around at the end of 19th century. It was further recognised as form of dispute resolution with the enactment of India Arbitration Act, 1899. Along with the progression and amendments of this act and arbitration, controversies were the kith and kin of dispute resolution in India whether it’s the case of Bhatia International v. Bulk Trading S.A and Another (2002), Venture Global Engineering v. Satyam Computer Services Ltd. (2008) or Bharat Aluminium and Co. v. Kaiser Aluminium and Co. (2012) and several other cases. In these cases, the question of the integrity of dispute resolution raised in front of the Apex Court, however it has been dealt with the revolutionary method of justice system but the question arises here that whether the jurisprudence of the arbitral system has been compromised?


Fraud or Corruption: in the arbitration agreement or contract and at the time of making of award –

It has been thoroughly discussed in the previous Acts and amendments that how fraud and corruption stand as an obstacle for making an arbitral award and enforcement of arbitral proceedings, how it can be weaponised by losing parties. In furtherance, if the parties intend to plead before the court to prove the allegations of fraud or corruption, arbitral tribunal is the appropriate forum to raise such contentions by either of the party. The arbitral tribunal is the competent authority to reckon comprehensive evidence and can conduct an in-depth scrutiny to determine whether the agreement or contract of arbitral enforcement is vitiated by fraud or corruption. According, to the Section 34 of the Act the parties have an option to fill an application for setting aside of the arbitral award of the application and if the parties are still not satisfied with the previous recourse, they can appeal under Section 37(1)(c) of the Act against the order of the Section 34. Additional contention related to the 2021 Amendment Act has emerged as it does not pretend to provide any justifiable ground or relief to the parties, and it simply uplifted the dilemma that the parties should face this unjustifiable situation of fraud as envisioned by the 2021 Amendment Act. Therefore, it may not be a subtle way of foretelling that 2021 Amendment is merely akin to summing up an additional level of scrutiny in particular cases in the form of interim measurement without any adequate safeguards. It can be proved as the potent tool of harassment by losing parties to harass the opponents in every arbitral proceeding by filling an application under fraud or corruption and further consequences can hit the case in several ways as to interference or to delay the enforcement and it could lead to excessive interference to the very purpose of enforcing dispute resolution by the Arbitral Tribunal. Therefore, this can affect the parties to go under the method of dispute resolution as an arbitration mechanism and commercially trading parties will be hesitant to do or continue approaching arbitral tribunal and will eventually start subjecting to the ordeals of the court to seek relief due to lack of robust dispute resolution mechanism.


CONCLUSION

Adding an extra appellate layer of judicial intervention within the scope of proving that the 2021 Amendment is a cure for arbitral enforcements are still blurry, this proviso may prove as a side effect for dispute resolution method. If the enforcement on the arbitral award may relinquish the pro-enforcement approach to empowering the courts to grant a subsequent unconditional stay on arbitral award due to fraud or corruption allegations, that may affect the regime of arbitral system immensely and the absence of the safeguards against these enforcements may lead to excess of unaccountability of commercial giants to the arbitral enforcement method comprising of dispute resolution mechanism, which further may cause to the absence of safeguards for eliminating false, vexatious, and frivolous enforcement applications for an unconditional stay. This may impact rigorously on the existence pertaining to the accountability, finality, and binding nature of an arbitral award, the impact on the enforceability of the agreement or contract may lead to an unease of doing business in India for the commercial trading and dispute resolution methods as well.

Reference –


Prakher Shukla

Second year student

Dr. B. R. Ambedkar National Law University, Sonipat, Haryana

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