Expert Panel Suggests Amendments To Arbitration And Conciliation Act

An expert panel on arbitration in New Delhi has recommended significant changes to the current system, including resolving cases within 60 days, establishing specialised arbitration benches, and creating an investment court for bilateral investment disputes. These reforms aim to align India with global arbitration standards and support the government's goal of achieving a $5 trillion economy by 2024-25.

While the panel advised caution regarding the adoption of artificial intelligence in the legal sector, it urged the government to monitor advancements in AI before implementing widespread use. The committee, formed in June 2023 and chaired by former law secretary TK Vishwanathan, submitted its report to the law ministry on February 7.

Recommendations include amending the Arbitration & Conciliation Act, 1996, to define 'court,' designate high courts for arbitrations over Rs 50 crore, and allow courts to stay arbitral awards with partial payment. The panel also proposed expediting arbitration proceedings and differentiating laws for domestic and international arbitration.

Speaking with BW Legal World, Alipak Banerjee, Head, International Disputes Resolution (Delhi Office) at Nishith Desai Associates said that the proposed changes will strengthen the arbitration ecosystem in India.

"The recommendation says that arbitration disputes can be fast tracked by creating a separate arbitration division in every High Court. Specialised arbitration benches have been a long demand of the arbitration lawyers across the country, and will help in reducing the backlog of cases, and also bring specialised judges who deal with complex disputes that are subject to arbitration. For example, in Delhi High Court there is a specialised intellectual property division that hears IP cases. And, in the last 1-2 years, it has worked extremely well. Earlier, all IP cases were listed before the original side of the court, but after coming into existence of the specialised bench, the disposal of cases has improved, there is less inconsistency in the rulings of co-ordinate benches. Therefore, the suggestion is praiseworthy and if implemented, will help in the effective disposal of the cases," Banerjee added.

The emphasis on institutional arbitration was proposed by Justice B N Srikrishna on 30 July 2017. His report suggested many reforms to strengthen institutional arbitration in India. The expert report correctly suggests that “…it has also been noted that there is an overwhelming prevalence of ad-hoc arbitrations as compared to institutional arbitrations. This had been noted by the Justice Srikrishna Committee in 2017. While remedial measures had suggested, such measures are yet to take full effect…”. The report also focused on the need for institutional arbitration for high value claims. However, in order to ensure acceptability of institutional arbitration, there needs to be mindset change, and the parties should agree to its inclusion at the time of entering into the documentation.

Banerjee further said that the recommendations suggested were impressive and the emphasis on techno utilities – such as virtual hearings, model rule of procedure in arbitration, disclosures to be made in cases of third party funding, emergency arbitration and enforceability of orders passed by the emergency arbitrator in India seated arbitrations, the timelines for referral to arbitration, guidance for the arbitral institutions and code of ethics to be published by the arbitral institutions, clarification in respect of seat v. venue, removal of the arbitrator fee schedule, special provisions for small and medium value claims, regime for costs, amendments suggested in enforcement of award etc. will improve the arbitration landscape in India, and attract India as a leading arbitration hub.

The report also discusses whether there should be two different enactments for domestic and international arbitration, and suggests that there is no need for that bifurcation: investment arbitration and the Arbitration Act – setting up investment courts, use of Artificial Intelligence and Blockchain in arbitration, specialized arbitration division and bar, ODR service providers etc.

"Overall, it is a impressive exercise and some serious deliberations have going into preparing this comprehensive report. We need to see how much of the report/ recommendation is accepted by the government and what kind of legislative reforms are introduced by the Parliament," Banerjee added.

The committee has also suggested incorporating techno-legal utilities to support arbitration processes, promoting the establishment of high-quality arbitral institutions, and encouraging legal stakeholders to participate in their creation. The panel emphasised the importance of reliable arbitral institutions, technology adoption, and collaboration among stakeholders for effective legal reforms.

Banerjee further said that there could have been some more guidance on issue of arbitrability – issues that can be arbitrated, the scheme of law that will govern the law governing the arbitration agreement.

He said that, "This has been the issue of contention in Anupam Mittal v. Westbridge, where the Singapore High Court and Court of Appeal and Bombay High Court have arrived at a different finding. Even the UK law reforms have proposed inclusion of a section to deal with this issue. Although India has adopted consistent position, but it could have been codified to avoid any litigation in future."

Anupam Mittal judgment:

The dispute was governed by Indian law, but seated in Singapore, and administered by International Chamber of Commerce. Anupam Mittal approached the National Company Law Tribunal seeking certain statutory remedies in respect of alleged corporate oppression. Subsequently, an application was filed by Westbridge, and the Singapore High Court restrained Anupam Mittal from approaching National Company Law Tribunal. The allegations relating to oppression and mismanagement, are arbitrable in Singapore but not in India. The Singapore High Court restrained Anupam Mittal from approaching the NCLT, on the premise that the arbitration was seated in Singapore, and the law of the seat should determine the issue of arbitrability, and under Singapore laws, allegations of oppression are arbitrability. 

On appeal, the Singapore Court of Appeal agreed with the findings of the Singapore High Court. In the interim, Anupam Mittal had filed a suit before Bombay High Court seeking a declaration that NCLT is the only forum that can adjudicate the allegations relation to oppression. Recently, the Bombay High Court differed with the Singapore High Court and Court of Appeal and concluded that in India, the issue or arbitrability has to be decided by the law governing the arbitration agreement, which in turn is the law governing the substantive contract (i.e., Indian law) and therefore, since Indian law did not allow arbitration in respect of allegations of oppression and mismanagement, the Singapore Court of Appeal could not have passed the restraint order restraining Anupam Mittal from continuing with the allegations of oppression before the NCLT.

Banerjee emphasised that legislative amendments could have been proposed in relation to the principle to add non-signatory in the arbitration, the principles around lifting the corporate veil, doctrine of alter ego – and in this case, specific reference could have been drawn from the recent judgment of the Supreme Court in Cox and Kings Ltd v. SAP India Pvt. Ltd. & Anr. Earlier the doctrine was primarily premised on the principle of alter ego or lifting of the corporate veil in any transaction. 

"The Supreme Court’s judgment takes a different view and holds that principle of a single economic unit cannot be the sole basis for invoking the group of companies doctrine. The judgment clarifies that all the cumulative factors prescribed by the Supreme Court in ONGC v. Discovery Enterprise, such as (i) mutual intent of the parties; (ii) relationship of a non-signatory to a party which is a signatory to the agreement; (iii) commonality of the subject-matter; (iv) composite nature of the transactions; and (v) performance of the contract, must be examined to apply the doctrine," Banerjee added.