The Panchayat system in India is where the idea of arbitration initially surfaced. Indian civilisation encouraged dispute settlement by tribunals chosen by the parties themselves. In India, arbitration has been widely used since the late eighteenth century. Arbitration in India was made official by the Indian Arbitration Act, 1899, a more detailed piece of legislation. It was only permitted in the three cities that held the presidency at the time—Calcutta, Bombay, and Madras. Arbitration was also legislated in Section 89 and Schedule II of the Code of Civil Procedure from 1908. A large portion of British India was not covered by the Act of 1899, but Section 89 and Schedule II of the Code of Civil Procedure, 1908, extend the provisions of arbitration to these territories.
ARBITRATION ACT 1940
The former Arbitration Act, 1899, as well as the pertinent articles of the Code of Civil Procedure, 1908, were repealed when the Arbitration Act, 1940, was created. Yet, the Act of 1899 and the rules of the Code of Civil Procedure, 1908 were unjust and more technical. The Arbitration Act of 1940's standout characteristic was that it solely addressed domestic arbitrations and was inappropriate for the execution of foreign judgements. Due to its appalling functioning, the 1940 Arbitration Act was unable to accomplish its goals.
The arbitral system at the time was largely based on a distrust of the arbitral procedure, which drew severe criticism from the courts. In F.C.I. v. Joginderpal Mohinderpal, the Hon. Supreme Court stated that the law of arbitration should be made clear, less technical, and more responsible. It should also be responsive to the canons of justice and fair play, and require the arbitrator to abide by such procedures and norms that will inspire trust, not only by granting justice to the parties but also by giving the impression that justice has been granted.
In order to enforce awards made under the Geneva Convention of 1927 and the New York Conventions, to which India is a signatory, a separate law, the Foreign Awards (Recognition and Enforcement) Act, 1961, was adopted. The Arbitration Act of 1940 did not address the enforcement of foreign awards.
Instead of overhauling the entire structure, the Commission suggested changing a few Act provisions. As a result, the United Nations International Commission on International Trade Law (UNICTRAL) model law and regulations, published in 1985, served as the foundation for the 1996 enactment of the Arbitration and Conciliation Act.
ARBITRATION AND CONCILIATION ACT 1996
Despite harsh criticism from the bar and the judiciary, the 1940 Act on Arbitration was not amended in order to make it more effective. After the significant economic reform in 1991, efforts were made to entice international investment, which necessitated a welcoming business climate and ease of doing business. Because of this, the Act of 1940 was abolished and the Arbitration and Conciliation Act of 1996 was put into effect. Unusually, the Act of 1996 encompassed both local and foreign arbitration and was based on the UNCITRAL Model Law on International Business Arbitration, 1985. The Act of 1996 was primarily implemented to reduce arbitration delays and boost international investors' faith in the ease of doing business.
The Hon'ble Supreme Court of India's certain rulings were roundly criticised for taking a backwards stance and increasing judicial interference even in the foreign-seated arbitration. It took the Honourable Supreme Court ten years to resolve this dispute in Bharat Aluminium and Co. v. Kaiser Aluminium and Co. (hereafter referred to as BALCO), where it was decided that Part I of the Act does not apply to Part II of the Act because Part I and Part II were mutually exclusive of one another. The BALCO decision had the result that interim applications under Section 9 of the Act in foreign-seated arbitrations covered by Part II of the Act could not be entertained by Indian courts.
Also, there was no deadline by which the arbitrator had to issue a decision, which led to a protracted arbitration process. The cost of arbitration was frequently much more than the cost of litigation or the remedy sought, which went against the spirit of the Act of 1996 and was another problem with it.
THE ARBITRATION CONCILIATION ACT (AS AMENDED) 2015
Eminent lawyers, judges, and legal experts from across the nation were asked for their opinions on how the Act of 1996 should operate in order to take into account concerns like costs, delays, and court intervention. The 1996 Act was subsequently amended with the passage of the Arbitration and Conciliation (Amendment) Act, 2015.
The Arbitration and Conciliation Act, 1996 underwent some significant revisions in order to remedy the shortcomings of the prior law as well as to bring the current arbitration law into compliance with other foreign arbitration laws with the goal of making India a centre for arbitration.
Some significant changes include the following:
1. The provisions of Sections 9, 27, clause (a) of sub-section (1), and sub-section (3) of Section 37 must likewise apply to international commercial arbitrations, subject to any agreement to the contrary. This was stated in a proviso to Section 2(2).
2. Moreover, Section 9 was modified to state that after the arbitral tribunal is established, the Court shall not consider an application unless circumstances so require, minimising the Court's involvement.
3. Moreover, Section 17 was altered, transferring to the arbitral tribunal all Section 9 Court powers.
4. The Act of 1996 was amended to include Section 29A, which set the deadline for issuing an arbitral award at twelve months following the formation of the arbitral panel (2015 amendment).
5. The scope of court intervention was narrowed by amending Section 34 of the Act of 1996.
THE ARBITRATION CONCILIATION ACT (AS AMENDED 2019)
Although several difficulties were addressed by the Arbitration and Conciliation (Amendment) Act, 2015, some issues persisted in the arbitral process. One such issue was the lack of an institutional arbitration culture in the nation as the majority of arbitrations were ad hoc.
The Arbitration and Conciliation (Amendment) Act, 2019 was then passed on August 9th, 2019. The implementation of an efficient arbitration structure, institutional arbitration promotion, and the settling of some doubts brought on by the 2015 amendment were the key goals of this amendment.
These are some of the most important changes:
1. The establishment of the Arbitration Council of India (ACI) aimed to promote institutional arbitration in the nation as well as the advancement of various types of alternative dispute resolution, such as conciliation, mediation, and arbitration.
2. Moreover, the ACI was introduced, with its mandated grading of arbitral institutions.
3. In addition, the arbitral institutions mandated a mandatory 30-day window from the moment the request was accepted for the appointment of an arbitrator.
4. Also, the Eighth Schedule was added, outlining numerous standards, credentials, and endorsements for arbitrators.
5. To facilitate a speedy resolution, Section 29 A was modified to change the deadlines for completing the arbitration process.
The Amendment Act of 2019 added the 8th Schedule, which stated that a person may not serve as an arbitrator unless they were qualified as advocate under the Advocates Act of 1961 and had 10 years of experience in the field. Regarding whether or whether this clause applied to international arbitrators as well, there were numerous questions raised.
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