LS passes bill for stays on arbitral awards ‘tainted by fraud’


The Lok Sabha on Friday passed a Bill that aims to empower courts to grant unconditional stays on the enforcement of arbitration awards tainted by fraud or corruption.

The Arbitration and Conciliation (Amendment) Bill, 2021 was passed unanimously despite objections raised by the Congress, the Trinamool Congress, the Biju Janata Dal, the Nationalist Congress Party, the Revolutionary Socialist Party (RSP) and other opposition parties, who raised doubts on its intent.

The Bill aims to ensure that all stakeholders get opportunities to seek unconditional stays on the enforcement of arbitral awards where the arbitration agreement or contract is induced by fraud or corruption.

It also seeks to remove provisions that prescribe qualifications and accreditation of arbitrators, which had effectively excluded foreign nationals from acting in Indian arbitrations.

The qualifications are now to be specified by regulations, which are yet to be notified.

Union Law Minister Ravi Shankar Prasad, while pushing for the passage of the Bill, said “it is pure public policy” and mentioned that “there will be a chance to challenge the award”.

“We are determined to make India an arbitration hub. Foreign arbitrators are welcomed in India…And if there is any hiccup in the law, this government will come up with amendments to correct things.”

The Bill was introduced last week.

Opposing the Bill, Congress leader in the house Adhir Ranjan Chowdhury said that he moved a statutory resolution to disapprove the promulgation of the ordinance.

“I do not find any cause and argument… I have failed to substantiate the view of the minister for promulgation of the ordinance…You (government) should reconsider the Bill to find out loopholes and plug the lapses.”

Trinamool member Saugata Roy said: “I also oppose on this very trivial Bill as the power was misused by the government by coming with a Bill for an ordinance brought four months ago with just a little bit difference.”

On November 4 last year, President Ram Nath Kovind had promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2020, which amends Sections 36 (enforcement) and 43-J (norms for accreditation) of the Arbitration and Conciliation Act, 1996 (Arbitration Act).

BJD leader Pinaki Mishra suggested the government to look into the Bill for reconsiderationm mentioning that existing sections in the current act already cover the points which is being amended through small changes with the new section.

NCP’s Supriya Sule asked why the government always comes up with an ordinance with small changes.

Raising doubts over the intent of the Bill, RSP leader N.K. Premchandran said it is “abuse” of legislative process as only a piecemeal changes have been made to the existing comprehensive act passed in 2015.

“For whom did the government come up with the Bill. What was the urgency when the government came with an ordinance during Covid crisis? This should be cleared. It raised apprehensions. This is not healthy move for legislation. The intent of the Bill lacks clarity, logic and reasoning,” he said.

A provision inserted by the Ordinance stipulates that the court, if satisfied that a prima facie case has been made out, shall stay the award unconditionally pending disposal of the challenge under Section 34 (Application for setting aside arbitral award) of the Arbitration Act.

The Ordinance also omits the Eighth Schedule of the Arbitration Act, which deals with qualifications and experience of arbitrators. This provision had faced criticism from some quarters that the conditions prescribed in the law came in way of India getting the benefit of having foreign arbitrators.

A government functionary said that a “wrong impression” had been created on the issue. “The government dropped the 8th Schedule to do away with that impression,” the official told IANS.

Now, the qualifications on the basis of which arbitrators will be accredited will be prescribed by regulations, which will be framed by a proposed Arbitration Council.

The provision will come into effect retrospectively from October 23, 2015.