Lok Sabha has passed the Arbitration and Conciliation (Amendment) Bill 2021

Stakeholder parties can seek an unconditional stay on enforcement of arbitral awards

• The Lok Sabha has passed the Arbitration and Conciliation (amendment) Bill 2021
• It is to replace an ordinance that enabled certain arbitral awards to be “unconditionally stayed”
• Arbitration is an alternative dispute resolution (ADR) procedure in which a dispute is submitted

Background of the amendment

• The Law Minister Ravi Shankar Prasad introduced the bill in the Lok Sabha on February 4, 2021
• The provisions of the bill were, however, already into force through an ordinance that was promulgated on November 4th, 2020
• The law minister highlighted that; India wants to be an excellent hub for the arbitration
• So, the government has passed the bill and is working in direction of making India a big hub for domestic and international arbitration
• Until recently, an arbitration award was enforceable even if an appeal was filed against it in the court under Section 36 of the law
• The court, however, could grant a stay on the award on conditions as it deemed fit

Key Highlights of the Bill

• It seeks to amend the Arbitration and Conciliation Act, 1996 so as to

(i) enable automatic stay on awards in certain cases and

(ii) specify by regulations the qualifications, experience and norms for accreditation of arbitrators

• Seeks to ensure that stakeholder parties can seek an unconditional stay on enforcement of arbitral awards in cases where the “arbitration agreement or contract is induced by fraud or corruption
• Also does away with the 8th Schedule of the Act that contained the necessary qualifications for accreditation of arbitrators
• Added a proviso in Section 36 of the Arbitration Act and will come into effect retrospectively from October 23, 2015
• As per this amendment, if the Court is satisfied that a prima facie case is made out that the arbitration agreement or contract which is the basis of the award was induced or effected by fraud or corruption, it will stay the award unconditionally pending disposal of the challenge made to the award under Section 34

What is “Enforcement of arbitral awards”?

• Section 36 of the Arbitration & Conciliation Act was amended in 2015 to the effect that the mere filing of a Section 34 application does not stay the enforcement of the award, and it can be stayed on an application and subject to conditions imposed by the court
• However, the latest amendment is a slight departure from the 2015 amendment. It has the effect of unconditionally staying the enforcement of the award passed on the basis of the arbitration agreement, induced by fraud or corruption

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