The 1996 Act was substantially amended in 2015 and 2019 to address emerging challenges: delays in making awards, lack of institutional arbitration, fee regulation, arbitrator qualifications, and the problem of automatic stays on awards. A further amendment in 2021 addressed the issue of unconditional stays where awards were obtained through fraud.
Why: Despite the 1996 Act's improvements over the 1940 Act, practical problems persisted: arbitrations still took years, costs spiralled, and losing parties routinely obtained automatic stays by merely filing a S.34 challenge.
Legal Framework
| Amendment | Date of Effect | Basis |
|---|---|---|
| 2015 Amendment Act | 23 October 2015 | 246th Law Commission Report (2014); Justice B.N. Srikrishna Committee |
| 2019 Amendment Act | 30 August 2019 | Recommendations of Justice B.N. Srikrishna High Level Committee (2017) |
| 2021 Amendment Act | 4 November 2021 | Arbitration and Conciliation (Amendment) Ordinance, 2020 |
Key Changes: 2015 Amendment
| Provision | Change | Effect | Illustrated Example |
|---|---|---|---|
| S.11(6A) (new) | Court to confine examination to existence of arbitration agreement | Reduces scope of judicial inquiry at appointment stage | Pre-2015: Court at S.11 stage would examine validity of the agreement, whether claims are time-barred, and merits. Post-2015: Court only checks "does an agreement exist?" and appoints. Everything else is for the tribunal. |
| S.12(5) + Fifth Schedule | Specified relationships creating ineligibility of arbitrator | Prevents conflicts of interest; unilateral appointments by one party in certain cases invalid | A PSU's Managing Director appoints his retired colleague as arbitrator. Post-2015: the MD is ineligible (Seventh Schedule: employee of party). His appointment power is extinguished (TRF Ltd, 2017). |
| S.17 | Tribunal empowered to grant interim measures enforceable as court orders | Reduces dependence on courts for interim relief | Pre-2015: Tribunal orders an injunction, respondent ignores it. Claimant must go to court under S.9 to get an enforceable order. Post-2015: Tribunal's S.17 order is DIRECTLY enforceable as a court order. Police can enforce it. |
| S.29A (new) | Award to be made within 12 months; extendable by 6 months with consent; further extension only by court | Addresses endemic delays | Timeline example: Pleadings complete on 1 Jan 2025. Arbitrator MUST make award by 31 Dec 2025 (12 months). If not done, parties consent to 6-month extension → deadline = 30 June 2026. If still not done, arbitrator must apply to court. If court refuses extension → mandate terminates automatically. New arbitrator appointed. |
| S.29B (new) | Fast-track procedure (6 months; written pleadings only; no oral hearing unless requested) | Summary procedure for simpler disputes | A Rs. 15 lakh commercial dispute: parties agree to fast track. No cross-examination, no oral arguments. Just written submissions + documents. Arbitrator decides in 6 months. Saves time and money for smaller disputes. |
| S.31(7A) | Tribunal to award interest at 2% above current rate of interest | Rate regulation for pre and post-award interest | If SBI's lending rate is 8.5%, post-award interest = 10.5%. Pre-2015: arbitrators sometimes awarded 18-24% interest with no regulation. Now capped. |
| S.34 Explanation 1 | "Public policy of India" defined: includes fundamental policy of Indian law, conflict with morality/justice, patent illegality (domestic only) | Narrows challenge grounds; overrules expansive interpretations | Pre-2015: ONGC v Saw Pipes allowed courts to set aside for "any violation of Indian law." Post-2015: only FUNDAMENTAL policy (natural justice, unjust enrichment), not every statutory provision. A wrong interest calculation is NOT fundamental policy. |
| S.36 (amended) | Filing of S.34 application does not automatically stay enforcement of award | Removes automatic stay; losing party must obtain separate stay order | Before 2015: Arbitrator awards Rs. 50 crores to Claimant. Respondent files S.34 (costs Rs. 10,000). Award automatically frozen. Claimant gets nothing for 5-7 years while S.34 is decided. This was ABUSE: losing parties filed S.34 just to get automatic stay. After 2015: Respondent files S.34. Award is NOT frozen. Claimant can execute immediately. If respondent wants stay, it must separately apply and the court will likely require a deposit/bank guarantee. |
| S.75/S.81 (amended) | Arbitrator/conciliator immune from legal proceedings for acts done in good faith | Legal protection for neutrals | A losing party sues the arbitrator for "wrongly deciding the case." Post-2015: the suit is not maintainable. The arbitrator has statutory immunity for good-faith acts. |
| Fourth Schedule (new) | Model fee schedule for arbitrators | Regulates arbitrator fees based on claim value | Claim = Rs. 5 crores. Fourth Schedule prescribes approximately Rs. 15-20 lakhs as arbitrator fee (for sole arbitrator). Pre-2015: some arbitrators charged Rs. 50 lakhs+ for the same claim. |
Key Changes: 2019 Amendment
| Provision | Change | Effect |
|---|---|---|
| S.11(3A) (new) | Supreme Court/High Court to designate arbitral institutions for appointment | Institutional arbitration promoted; court no longer directly appoints |
| S.43A-43M (new, Part IA) | Arbitration Council of India (ACI) established | Body to promote arbitration, grade institutions, accredit arbitrators |
| S.43J + Eighth Schedule (new) | Qualifications of arbitrators prescribed | Later omitted by 2020 Ordinance (replaced with regulations to be framed by ACI) |
| S.87 (new) | 2015 amendments apply only to arbitrations commenced on or after 23.10.2015 (unless parties agree otherwise) | Clarifies prospective application; overrules BCCI v Kochi Cricket (2018) |
| S.29A amended | Time period starts from completion of pleadings (S.23(4)), not from arbitrator's appointment | More realistic timeline |
| Confidentiality (S.42A, new) | Parties, arbitrator, and institution to maintain confidentiality | Statutory mandate for confidentiality |
| S.42B (new) | Arbitrator protected from suit for good-faith acts | Reinforces arbitrator immunity |
Key Changes: 2021 Amendment
| Provision | Change | Effect |
|---|---|---|
| S.36(3) proviso (new) | Unconditional stay on enforcement if court prima facie finds award induced by fraud/corruption | Protects parties against enforcement of tainted awards |
| S.43J substituted | Arbitrator qualifications to be specified by regulations (not Eighth Schedule) | Eighth Schedule omitted; flexibility for ACI to frame rules |
Recall Check
- What time limit does S.29A (post-2015) prescribe for making an arbitral award?
- How did the 2015 Amendment change the automatic stay of award under S.36?
- What is the purpose of the Arbitration Council of India established under the 2019 Amendment?
Key Cases
BCCI v Kochi Cricket (2018) BCCI-v-Kochi-Cricket-2018 Issue: Whether the 2015 amendments apply retrospectively to arbitrations commenced before 23.10.2015. Rule: The 2015 amendments (especially S.36 on automatic stay) apply to all S.34 applications filed after 23.10.2015, regardless of when arbitration commenced. Held: Retrospective application of the removal of automatic stay. Later overruled by S.87 of the 2019 Amendment which clarified prospective-only application.
Ssangyong Engineering v NHAI (2019) Ssangyong-Engineering-v-NHAI-2019 Issue: Scope of "patent illegality" as a ground for setting aside under S.34 post-2015 Amendment. Rule: "Patent illegality appearing on the face of the award" does not include erroneous application of law; it is limited to:
-
(a) contravention of substantive law
-
(b) contravention of the Arbitration Act
-
(c) contravention of agreed procedure.
Held: Narrowed the scope of judicial review; courts cannot reappreciate evidence or correct errors of fact. Patent illegality must go to the root of the matter.
Distinctions
| Basis | Pre-2015 Position | Post-2015 Position |
|---|---|---|
| Time limit for award | No statutory limit | 12 + 6 months (S.29A) |
| Automatic stay | S.34 filing = automatic stay | No automatic stay; separate application needed (S.36) |
| Arbitrator conflicts | No statutory schedule | Fifth Schedule lists relationships creating ineligibility |
| Tribunal interim orders | Enforceable only through court | Directly enforceable as court orders (S.17) |
| Fee regulation | No regulation | Fourth Schedule (model fee table) |
| Public policy (S.34) | Wide: Renusagar + ONGC interpretations | Narrow: Explanation defines as fundamental policy, morality/justice, patent illegality |
| Appointment (S.11) | Court examines all aspects | Court confined to existence of arbitration agreement (S.11(6A)) |
| Fast track | No provision | S.29B: 6 months, written pleadings, no oral hearing |
Flashcards
Q: What is the time limit for making an arbitral award under S.29A? A: 12 months from completion of pleadings under S.23(4), extendable by 6 months with party consent. Further extension only by court on sufficient cause.
Q: What happens if the award is not made within the S.29A timeline? A: The mandate of the arbitrator terminates unless the court extends the period. Court may also substitute the arbitrator and reduce fees.
Q: How did the 2015 Amendment change S.36 (enforcement)? A: Removed automatic stay. Filing a S.34 application no longer stays enforcement. Losing party must apply for and obtain a separate stay order from the court.
Q: What is the Arbitration Council of India (ACI)? A: An independent body established under S.43A-43M (2019 Amendment) to promote arbitration/ADR, grade arbitral institutions, and frame regulations for arbitrator accreditation.
Q: What did S.87 (2019 Amendment) clarify? A: That 2015 amendments apply only to arbitrations commenced on or after 23.10.2015 and court proceedings arising from such arbitrations, unless parties agree otherwise. Overruled BCCI v Kochi Cricket (2018).
Q: What is the fast-track procedure under S.29B? A: A summary procedure: award within 6 months; decided on written pleadings/documents; no oral hearing unless parties request or tribunal deems necessary.
Q: What ground was added in 2021 for unconditional stay of an award? A: Under S.36(3) proviso, if the court prima facie finds that the award was induced or affected by fraud or corruption, it shall grant an unconditional stay on enforcement.
Exam Scenario
In 2014, X and Y entered into a construction contract with an arbitration clause. A dispute arose in 2016. The sole arbitrator was appointed in January 2017 and made the award in March 2019 (26 months after appointment). Y challenges the award under S.34 arguing that the arbitrator's mandate had terminated under S.29A. Advise.
Approach: (1) The arbitration commenced after 23.10.2015, so the 2015 amendments apply (S.87 clarification). (2) S.29A (post-2019 amendment) computes the 12-month period from completion of pleadings (S.23(4)), not from appointment. Determine when pleadings were completed. (3) If the award was made more than 18 months (12+6) after completion of pleadings without court extension, the mandate stands terminated (S.29A(4)). The award would be without jurisdiction. (4) However, if Y participated in the proceedings beyond the deadline without objecting, the objection may be deemed waived (S.4: waiver of right to object). (5) Cite Ssangyong Engineering v NHAI (2019) for the narrow scope of S.34 challenge; this is a jurisdictional issue (mandate termination) falling within S.34(2)(a)(v): award deals with dispute not contemplated by or beyond the scope of valid submission. Advise that the challenge may succeed on jurisdictional grounds.