Government issues ordinance to amend Section 36 of the Arbitration and Conciliation Act, 1996.

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The latest ordinance promulgated by the president has amended section 36 and has also omitted the 8th schedule of the Arbitration and Conciliation Act, 1996.

Written by Nishtha Narayan

Government of India on Wednesday passed the Arbitration and Conciliation (amendment) Ordinance, 2020 that has amended the section 36 of the Arbitration and Conciliation Act, 1996. The ordinance was promulgated by the President of India.

The ordinance also eliminated the 8th schedule of the Act which comprised qualification and experience of an arbitrator The ordinance also substituted the 43J of the Act . The substituted 43J of the Act states that “”43J. The qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations.””

The ordinance states that, “to address the concerns raised by stakeholders after the enactment of the Arbitration and Conciliation (Amendment) Act, 2019 and to ensure that all the stakeholder parties get an opportunity to seek unconditional stay of enforcement of arbitral awards where the underlying arbitration agreement or contract or making of the arbitral award are induced by fraud or corruption, it has become necessary to make further amendments to the Arbitration and Conciliation Act, 1996.”

The ordinance widens the scope of the Arbitration law by making the remedy to obtain an unconditional stay on the enforcement of the arbitral award available to all the stakeholders. This amendment will apply to the cases where the arbitral award has been passed on the basis of an agreement which has been induced by fraud or corruption.

The ordinance states that, “In section 36 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the principal Act), in sub-section (3), after the proviso, the following shall be inserted and shall be deemed to have been inserted with effect from 23rd day of October, 2015, namely:—

“Provided further that where the Court is satisfied that a prima facie case is made out,-—

(a) that 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.””

As per section 36 of the Act, the arbitral award was enforceable even if challenged under section 34 of the Arbitration and Conciliation Act, 1996. Section 34 of the Act talks about the grounds under which an application/appeal to set aside the Arbitral award could be filed. The courts used to grant a stay on the enforcement of award while it was in pendency (section 34) only subject to certain conditions as  deemed fit by the Court.

As per the latest amendment, the court can grant an unconditional stay on an award based on an agreement induced by fraud or corruption during the pendency of the appeal under section 34 of the Arbitration Act.

Read the ordinance here – https://www.livelaw.in/pdf_upload/pdf_upload-384085.pdf

Source of the story

– https://economictimes.indiatimes.com/news/economy/policy/government-issues-ordinance-to-amend-arbitration-law/articleshow/79045017.cms

– https://www.business-standard.com/article/pti-stories/govt-issues-ordnance-to-amend-arbitration-law-120110401546_1.html

https://www.barandbench.com/news/president-promulgates-arbitration-and-conciliation-ordinance-2020