New Delhi: A law which seeks to ensure that arbitration proceedings between corporates to settle commercial disputes quickly was today cleared by the Union Cabinet.
The amendments to the Arbitration and Conciliation Act, 1996 came up for discussion before the Cabinet for the third time.
While on August 4, the Cabinet had given in principle approval to amendments, it had asked the Law Ministry to recast the provisions on timelines for arbitrators.
The Cabinet had cleared an ordinance to amend the arbitration law in December last year but it was never sent to the President for his approval.
The draft ordinance had also set a fee structure for arbitrators but it has been removed from the amendments cleared today amid pressure by a section of arbitrators.
The amendments to the law comes in the midst of government's keenness to attract the maximum foreign investment. Foreign companies were said to be hesitant to do business in India because of the long-drawn litigations.
As per the amendments cleared today, the Arbitral Tribunal will make its award within 12 months. Parties may extend such period up to six months. Thereafter, it can only be extended by the court on sufficient cause.
The court, while extending the period, may also order reduction of fees of arbitrator not exceeding five per cent for each month of delay if the court finds that the proceedings have been delayed for reasons attributable to the arbitral tribunal.
If the award is made within a period of six months, arbitrator may get additional fees if the parties agree.
The Law Ministry has also proposed to insert a provision to fast track procedure for conducting arbitration. Parties to the dispute may agree that their dispute be resolved through fast track procedure. Award in such cases will be given in six months.
An amendment to Section 34 relates to grounds for challenge of an arbitral award, to restrict the term 'Public Policy of India' as a ground for challenging the award by explaining that only where making of award was induced or affected by fraud or corruption, or it is in contravention with the fundamental policy of Indian law or is in conflict with the most basic notions of morality or justice, the award shall be treated as against the public policy of India.
A new provision has been inserted to provide that application to challenge the award is to be disposed of by the Court within one year.
In order to ensure neutrality of arbitrators, it is proposed to amend Section 12 to the effect that when a person is approached in connection with possible appointment of arbitrator, he shall disclose in writing about existence of any relationship or interest of any kind, which is likely to give rise to "justifiable doubts".
