The (Indian) Arbitration and Conciliation (Amendment) Act, 2021 ("Amendment Act"), passed in March 2021 has amended the Arbitration and Conciliation Act, 1996 ("Act") which governs the law relating to arbitration and conciliation in India.
The key amendments are:
- The Amendment Act has introduced additional provisions to the Act which requires the relevant Court to unconditionally stay an arbitration award made in India where the Court is satisfied that a prima facie case is made out that:
a. the arbitration agreement; or
b. contract which is the basis of the award; or
c. the making of the award;
has been induced or effected by fraud or corruption.
This amendment will be applicable retrospectively and is applicable only to Indian seated arbitration. Furthermore, stay on arbitration award should be effective until the Court adjudicates the application for setting aside the arbitration award on the grounds of fraud or corruption.
Prior to this amendment, a party could have filed an application before the Court for setting aside an arbitral award on ground of frauds. However, the party may not have secured an automatic stay. The Amendment now requires the court to mandatorily stay the award if prima facie case of fraud is made.
Experts have opined that the amendment which provides unconditional blanket stay was unwarranted as this will provide a gateway to the losing party to stall the arbitration award by alleging fraud, which will result in protracted litigation. Some experts believe that the Act had adequate provisions to deal with situations where arbitration awards or arbitration agreements or the underlying contracts are induced or effected by fraud or corruption.
- The Amendment Act has omitted the Eighth Schedule from the Act. The Eighth Schedule, which was introduced in 2019, provided norms relating to qualifications, experience and accreditation of arbitrators. Instead of Eighth Schedule, provisions have been included to clarify the qualifications, experience and norms for accreditation of arbitrators shall be provided in a separate regulation to be framed by the Government. It was perceived that the qualifications and norms prescribed for acting as arbitrators were restrictive. For example, the parties to an Indian-seated arbitration could not have appointed foreign professionals as arbitrators. This amendment is aimed towards making a course correction.
Srijoy Das, IDI Country Expert for agency & distribution in India