LETTER TO THE MINISTER OF LAW AND JUSTICE

New Delhi
Dear Arjun Ram Meghwal ji, 07 February, 2024

We have the privilege and honour to present the report of the Expert Committee on
Arbitration Law, set up on 12 June 2023, to examine the working of the Arbitration Law in
the country and recommend reforms to the Arbitration & Conciliation Act, 1996. The
Committee has considered the various recommendations in detail, besides undertaking
further research, and examining the prevalent best practises, both nationally and
internationally. This report sets out our final conclusions and recommendations. It also
includes a draft Bill to implement our recommendations and an Explanatory Memorandum
explaining the provisions of the Bill in simple language and also the amended version of the
sections as proposed in the Bill to facilitate ease of understanding the proposed changes.

Many of the amendments proposed are necessitated due to conflicting judgements of courts.
Since appeals and reviews may take time hence, it would be necessary we implement the
recommendations by requisite legislative intervention as early as possible. It is not advisable
to wait for courts to reconsider and self-correct. However, it is for the Government to decide
whether or not to implement our recommendations, in whole or in part. We have not listed
every proposal or reason given by various stakeholders but have considered them all.

The Committee has not released the Report in the public domain as the mandate of the
Committee was to prepare a draft of the proposed amendments and make other
recommendations to the Government. However, in view of the expectations from all
stakeholders who are awaiting the response of the Government on the hurdles in making the
Act an alternative dispute resolution in letter and spirit, the Report ought to be made available
to the public.

India is one of the fastest growing economies. It is currently ranked as the world’s fifth
largest economy with a GDP of $ 3.73 trillion and the world’s third largest Economy when
the GDP is compared on the basis of Purchasing Power Parity (PPP) at $ 10.51 trillion. A
vision to increase the size of the Indian economy to $ 5 trillion was envisaged in a report by
a group of the Commerce & Industry Ministry. The report suggested that by taking short and
long term measures like the development of infrastructure, providing ease of living, creating
Digital India, ease of doing business and tackling the problem of pollution etc, India’s potential
to become a $ 5 trillion economy by 2024-25 is within the realm of possibility.

The Committee sincerely believes that the reforms proposed in the present Report, if
implemented in their true spirit, will play a crucial role in making India a global player in the
arbitration sector, make India a favourable destination for international commercial arbitration
and contribute to the realisation of the vision of $ 5 trillion economy by creating a legal
environment that is favourable for economic investment.

We thank you for providing us an opportunity to present our views on the issues arising from
the implementation of the Act and related matters.

1
 Report of the Expert Committee to Examine the Working of the Arbitration Law and
Recommend Reforms in the Arbitration and Conciliation Act 1996 to make it
alternative in the letter and spirit.

Shri Dr. T. K. Viswanathan

Former Secretary General, Lok Sabha Parliament of India
Former Secretary, Ministry of Law & Justice, Government of India
(Chairman)
Digitally signed by
Amal Kumar Amal Kumar Ganguli
Ganguli Date: 2024.02.07
18:30:40 +05'30'

Shri N. Venkatraman Shri Gourab Banerji Shri A.K. Ganguli Shri Dr. Shardul Shri Bahram Vakil
Senior Advocate, Senior Advocate, Senior Advocate, Shroff Advocate
Additional Solicitor Supreme Court of Supreme Court of India Advocate AZB & Partners
General India (Member) Shardul Amarchand (Member)
(Member) (Member) Mangaldas & Co.
(Member)

Shri Dr. Rajiv Mani Shri R. Sreenivas Shri Shreyas Jayasimha Shri Saurav Agarwal Shri Vyom Shah
Secretary, Joint Secretary, Advocate Advocate, Advocate
Legislative Legislative Aarna Law Supreme Court of High Court of
Department, Department, (Member) India Judicature at
Ministry of Law and Ministry of Law and (Member) Bombay
Justice and holding Justice and Law (Member)
additional charge as Secretary
Law Secretary, (Member)
Legal Affairs
(Member)

CEO, Niti Aayog President, CII Chairman, NHAI/ Secretary, Ministry Secretary,
(Member) (Member) Secretary, MoRTH of Railways Department of
(Member) (Member) Economic Affairs
(Member)

Secretary,
Secretary, Department of Public Enterprises/ Ministry of Housing & Urban Affairs/ DG,
CPSEs CPWD
(Member) (Member)

2
 THE REPORT

TABLE OF CONTENTS

Sno. Particulars Page No.

1. PART 1 - EXECUTIVE SUMMARY 6- 21
1.1 Preface
1.2 Terms Of Reference and Prefatory Remarks
1.3 The Objects of The Committee
1.4 Working Process of The Committee
1.5 The Report
1.6 Structure Of the Report
2. PART 2 – BRIEF HISTORY 22- 30
2.1 Evolution of Arbitration Prior to the 1940 Act
2.2 Brief History of the 1940 Act
2.3 Brief History of the 1996 Act
2.4 176th Report of the Law Commission
2.5 Arbitration and Conciliation Amendment Bill, 2003
2.6 Justice Saraf Committee
2.7 194th Report of the Law Commission
2.8 The 246th Report of the Law Commission, and the
Arbitration and Concilition (Amendment) Act, 2015
2.9 Justice Srikrishna Committee Report (HLC) 2017
2.10 The Arbitration and Comciliaiton (Amendment) Act,
2019
2.11 The Arbitration and Comciliaiton (Amendment) Act,
2021
3. PART 3 - KEY RECOMMENDATIONS FOR 31- 79
AMENDMENT OF THE ACT
3.1 Amendment to the Preamble and the Short Title of the
Arbitration and Conciliation Act 1996
3.2 Replacement of “Place” with “Seat” or “Venue” in the
Act
3.3 Amendment to the Definition of ‘Court’ having regard
to the amendment relating to the Seat of the
Arbitration
3.4 Administrative Assistance by Techno-Legal Utilities
3.5 Validation of Insufficiently stamped or not duly
stamped arbitration agreement
3.6 Timeline for disposal of Applications under Section 8
3.7 Applications to Court for Interim Measure of
Protection under Section 9
3.8 Appointment of Arbitrators-Amendments to Section
11
3.9 Retired Employees as Arbitrators
3.10 Arbitrators Fees -Omission of Section 11A & Fourth
Schedule
3.11 Disclosure requirements of Arbitrators Section 12,

3
 and the Fifth and Seventh Schedule
3.12 Ensuring Independence and impartiality of Arbitral
Institutions: Recommended addition of Section 12A
3.13 Emergency Arbitration New Section 12B
3.14 Challenge to an Arbitrator -Section 13
3.15 Arbitral Tribunal deciding an Application under
Section 16
3.16 Section 17 Appeals from Section 9 And 12B
3.17 Third-Party Funding: requirement of disclosure under
the proposed Section 18A
3.18 Proposed introduction of Model Rules of Procedure
Section 19
3.19 Arbitrations in Virtual Mode: Proposed addition of
Section 19A & Amendment of Section 24
3.20 Period for completing the filing of Pleadings in
Arbitration-Section 23(4)
3.21 Time Limit for Arbitral Award - Section 29A
3.22 Special Procedure for Small and Medium Value
Claims Adjudication
3.23 Form of Award and Post Award Interest Rate- Section
31
3.24 Regime For Costs - Section 31A
3.25 Setting aside and/or varying Awards under Section 34
3.26 Enforcement of Awards under Section 36
3.27 Modifications to provisions regarding Appeals under
Section 37
3.28 Miscellaneous and consequential amendments
3.29 Transitory Clause
4. PART 4 – CONCLUSION AND WAY FORWARD 80- 111
4.1 Suggestions for building an Ecosystem for India to
emerge as a Hub of International Commercial
Arbitration
4.2 Revitalizing Pary Autonomy
4.3 Institutional Arbitration as a Preferred Model for High
Value Claims
4.4 Techno Legal Utilities as Drivers of Change
4.5 Arbitrators And Due Process Paranoia
4.6 Specialized Arbitration Division and Bar
4.7 Empirical Research and a viable Ecosystem - Prelude
to Law Reform
4.8 Stamp Act and Uniform E-Stamping Process
4.9 Need For Separate Act for Domestic Arbitration and
International Commercial Arbitration
4.10 A Separate Legal Framework for Investor State
Dispute Settlement
4.11 Arbitration in SEZs/Gift Cities
4.12 ODR Service Providers
4.13 Use Of Artificial Intelligence in Arbitrations
4.14 Diversity in Arbitral Appointments and Gender

4
 Diversity
4.15 Training For Arbitrators
4.16 Arbitration And Jurisconsults
5. PART 5 – APPENDICES
5.1 Appendix 1 – Summary of Recommendations 1- 13
Received by Committee

5.2 Appendix 2 – The Arbitration and Conciliation 1- 32

(Amendment) Bill, 2023 [Arrangement of Clauses]

5.3 Appendix 3 – Explanatory Memoranda to the

Arbitration and Conciliation (Amendment) Bill, 2023 1- 24

5.4 Appendix 4 – Sections of the Arbitration Act as they 1- 44

would appear after the Amendment

5.5 Appendix 5 – List of all the Meetings and Summary 1- 4

5
 PART I

1. EXECUTIVE SUMMARY

1.1 PREFACE

1.1.1 The Arbitration and Conciliation Act, 1996 (“Act”), was enacted to
consolidate and amend the law relating to domestic arbitration, international
commercial arbitration (“ICA”) and enforcement of foreign arbitral awards
and also to define the law relating to conciliation. This Act was enacted by
specifically taking into account, the United Nations Commission on
International Trade Law Model Law, 1985. (“UNCITRAL Model Law”)

1.1.2 The Act replaced the Arbitration Act, 1940, the Arbitration (Protocol
and Convention) Act, 1937, and the Foreign Award (Recognition and
Enforcement) Act, 1961. Since its enactment in 1996, the working of the Act
has been examined by the Law Commission in its 176th, 222nd, and 246th
Report. Separately, a High Powered Committee was also constituted in 2017
to examine specific aspects of the 1996 Act.

1.1.3 The first attempt to address the difficulties encountered in the working
of the Act was made in 2001 when the Law Commission undertook a
comprehensive review of the provisions of the Act and made
recommendations in its 176th Report in 2001.

1.1.4 The Arbitration and Conciliation (Amendment) Bill 2003 was

introduced in Rajya Sabha in 2003 to give effect to recommendations of the
176th Report of the Law Commission. The Bill was examined by the
Parliamentary Committee which recommended that the provisions of the Bill
were open to more court interventions. Consequently, the Bill was not
enacted into law.

1.1.5 The second major attempt to address the shortcomings of the 1996 Act
was made by the Law Commission in its 246th Report in 2014. The 246th
Report suggested major reforms to the then existing arbitral regime.

1.1.6 The Arbitration and Conciliation (Amendment) Act, 2015 (“2015

Amendments”) which was enacted pursuant to the 246th Report of the Law
Commission was aimed at addressing the criticism of the working of the Act.

1.1.7 A third major attempt was made to address further concerns arising out
of the working of the arbitration regime, when the Ministry of Law
constituted on 13 January 2017, a High- Level Committee under the
Chairmanship of Hon’ble Justice B. N. Srikrishna, Former Judge of the
Hon’ble Supreme Court of India (“Supreme Court”), to review the
institutionalisation of arbitration mechanisms in India (“Srikrishna
Committee”). On 30 July 2017, the Srikrishna Committee submitted its
Report, suggesting various measures to, inter alia, strengthen institutional
arbitration in India (“HLC Report”).
6
1.1.8 Pursuant to the recommendations in the Srikrishna Committee Report,
the Arbitration and Conciliation (Amendment) Act, 2019 (“2019
Amendments”), was enacted.

1.1.9 In 2021, the Act was again amended to address the issue of corrupt
practices in securing contracts or arbitral awards and to promote India as a
hub of ICA by attracting eminent arbitrators to the country.

1.1.10 In 2023, the Mediation Act 2023 was enacted which contained self-
contained provisions for mediation, repealing the provisions relating to
Conciliation in the Arbitration and Conciliation Act 1996.

1.1.11 It is against this background that on 14 June 2023, the Ministry of

Law & Justice, Government of India (“Government”) vide its notification
dated 14 June 2023 constituted this Expert Committee (“Committee”) to
examine the working of arbitration law in India and recommend reforms to
the Act.

1.1.12 The Committee functioned under the Chairpersonship of Dr. T.K.

Viswanathan, former Law Secretary and Secretary General of the 15th Lok
Sabha, to examine the working of arbitration law in India and to recommend
reforms to the Act.

1.1.13 The Committee comprised of various other eminent members

including Mr. N. Venkatraman (Senior Advocate & Additional Solicitor
General of India), Mr. Gourab Banerji (Senior Advocate), Mr. A.K. Ganguli
(Senior Advocate), Mr. Shardul S. Shroff (Executive Chairman, Shardul
Amarchand Mangaldas & Co), Mr. Bahram Vakil (Co-Founder, AZB &
Partners), Mr. Saurav Agarwal (Advocate), Mr. Tejas Karia (Partner and
Head – Arbitration, Shardul Amarchand Mangaldas) for Confederation of
Indian Industries, Mr. Shreyas Jayasimha (Advocate and co-Founder - Aarna
Law, India and Simha Law, Singapore), Mr. Vyom Shah (Advocate),
representative of NITI Aayog, representative of Public Enterprises/CPSES,
representative of Department of Confederation of Public Indian Industries,
representative of National Highways Authority of India/Ministry of Road
Transport and Highways, representative of Ministry of Railways,
representative of Department of Economic Affairs, representative of
Ministry of Housing & Urban Affairs / Central Public Works Department,
representative of Legislative Department and Dr. Rajiv Mani, Additional
Secretary, Department of Legal Affairs.

1.2 TERMS OF REFERENCE AND PREFATORY REMARKS

1.2.1 The Committee’s prefatory remarks in relation to the Terms of

Reference notified by the Government for the Committee (“Terms of
Reference”) have been detailed below.

1.2.2 Having undertaken extensive consultation with various stakeholders,

the Committee has identified several issues in the present arbitration regime.
7
The issues identified against each Term of Reference, and the broad outline
of solutions proposed, have been briefly addressed below.

1.2.3 Evaluate and analyse the operation of the extant arbitration

ecosystem in the country, including the working of the Act, highlighting its
strengths, weaknesses and challenges vis-à-vis other important foreign
jurisdictions:

(i) The Committee encountered the general perception among

stakeholders that the Arbitration and Conciliation Act,1996 has
not been able to realise its stated objectives. The present
arbitration regime is not widely perceived as being a fair,
efficient, inexpensive and competent mechanism to meet the
evolving needs of business and commerce;

(ii) The arbitral process is often delayed right from the pre-arbitral
stage itself. This includes the delays encountered during the
appointment stage, which often require the intervention of
court. Further, even after commencement of the arbitral
process, strict timelines are not maintained, leading to further
delays ;

(iii) 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;

(iv) The cost of participating in the arbitral process has shot up. This
has led to instances of an unexpected financial burden on the
parties. This has also led to several disputes concerning fees and
costs of arbitral tribunals, which further contributes to delay in
the arbitral process;

(v) Arbitral proceedings are further delayed due to dilatory tactics

adopted by certain parties, which include frivolous challenges
to the competence, jurisdiction and constitution of an arbitral
tribunal. Such avoidable challenges are often raised on grounds
of bias, or apparent conflict of interest ;

(vi) There is also a perception that the Indian arbitration regime

must be tailored to accommodate the specific requirements of
small and medium value arbitrations;

(vii) The Committee has also noted the need for the Indian arbitration
regime to account for the overwhelming preference for ad-hoc
arbitrations in India. This is in contrast to the experience in other
UNCITRAL Model Law jurisdictions, where the arbitral process
is mostly institutionalized;

8
 (viii) In certain jurisdictions, there is a significant backlog of
arbitration matters pending before the courts;

(ix) Finally, the reluctance to adopt technology in arbitrations is a

major stumbling block in the goal of making India a hub of
International commercial arbitration.

1.2.4 Recommend a framework of model arbitration system, which is

efficient, effective, economical and caters to the requirements of the users:

(i) In many instances, the arbitral tribunal insists on strict rules of

procedure and evidence, which can lead to delays. It also defeats
the purpose of arbitral proceedings being distinct and
unshackled from the rigours of regular court proceedings;

(ii) Party autonomy requires the parties to have the final say in the
choice of procedure to be adopted by the arbitral tribunal.
However, in practice, most parties leave matters of procedure to
the discretion of the arbitral tribunal;

(iii) The prevalent practice is contrary to the intent of Section 19 of

the Act, which states that the parties are free to agree on the
procedure to be followed by the arbitral tribunal in conducting
its proceedings. Further, Section 19 specifically provides that
the arbitral tribunal is not bound by the Code of Civil Procedure,
1908 and the Indian Evidence Act, 1872 ;

(iv) Different arbitrators adopt different rules of procedure which is

not surprising while considering that arbitrators come from
different backgrounds and training. While rules of arbitral
institutions normally lay down the procedure that guide the
proceedings, there is no such guidance in case of ad hoc
arbitrations;

(v) The Committee has also noted the absence of uniform model
rules of procedure for ad-hoc arbitral tribunals and the resultant
wide variance in rules of procedure adopted by such arbitral
tribunals;

(vi) In this regard, the Committee has recommended a model

procedure that can be used by the arbitral tribunals as a guide.
This model procedure has been prepared considering the
prevalent best practices. This is also to ensure some certainty
and uniformity in matters of procedural steps to be taken, the
approximate time that would be consumed and the rules.
Nonetheless, any such procedure should also have due regard to
party autonomy.

(vii) Besides procedural aspects, since it is entirely within the

domain of the Arbitrators “to determine the admissibility,
9
 relevance, materiality and weight of any evidence”, the Tribunal
has to ensure that this duty is discharged having due regard to
the rules of natural justice, fair play and the established rules on
admissibility, relevance, materiality and weight of evidence.

(viii) There is a need to devise a strategy to develop a competitive

environment in the arbitration services market for domestic and
international parties. This is likely to sub-serve the interests of
the users, particularly in building a regime of efficient and cost-
effective arbitration;

(ix) There is also a need to integrate professionals from various

professional spheres, including business and commerce, into the
arbitration regime ;

(x) Parties must be encouraged to work out the estimated costs of

arbitral proceedings while entering into an arbitration
agreement. Such estimated costs should specifically mention
the cap for arbitrator fees and other expenses, which, in turn,
should be reflected in the arbitration agreement.

1.2.5 Propose measures to fast track enforcement of award by suggesting

modifications to existing provisions relating to setting aside of award and
appeal so as to lend finality to arbitral award, expeditiously:

(i) Arbitration disputes can be fast-tracked by creating a separate

Arbitration Division in every High Court;

(ii) In any event, execution proceedings must be heard and decided

expeditiously;

(iii) Unless there is a stay on enforcement, the enforcing Court

should endeavour to dispose of an enforcement petition within 9
months from its institution. Further, adjournments in such
proceedings must be granted sparingly, and for exceptional
reasons only.

1.2.6 Recommend statutory means to minimise recourse to judicial

authorities/Courts in arbitration centric dispute resolution mechanisms:

(i) While oversight by a court is essential to the legitimacy and

integrity of the arbitral process, its role must be limited to
overall supervision, and a second-look at the post-award stage.
A second-look by courts must also be within the parameters
provided in Section 34 of the Act;

(ii) There is an urgent need to institutionalize the process of

appointment of arbitrators, and minimize court intervention at
the very first stage;
10
 (iii) In any event, the Supreme Court and the High Courts must
endeavour to dispose of applications for appointment of
arbitrators expeditiously, and without any delay.

1.2.7 Suggest administrative mechanism/SOP for minimising routine

challenge to arbitral awards by the Government in disputes involving
them:

(i) Challenging an arbitral award, which has little scope for success
in most cases, exposes the party challenging the award to an
additional interest- burden, until the challenge is finally decided.
Post award, the interest is normally calculated on the principal
amount and may also include pendente lite interest;

(ii) Any decision to challenge an arbitral award must be based on

an honest assessment about the prospects of success, as weighed
against the estimated costs of litigation (including interest).
Routine challenge to arbitral awards must be avoided, and
bona-fide administrative suggestions to not challenge an arbitral
award must be given finality. In most cases, an independent
review of arbitral awards by persons not connected to the
arbitral process would be useful;

(iii) The legal personnel involved in the arbitral process must

identify the grounds of challenge, and make a realistic and
reasonable assessment of the prospect of success. This may be
supervised by a senior law officer. Periodic reviews (quarterly
or semi-annually) of the outcome of challenges to arbitral
awards must be carried out;

(iv) Simultaneously, the Government may consider initiating

discussions with the successful party, to explore the possibility
of a settlement. More often than not, the successful party may
be willing to give up some of the awarded amount to avoid the
risks of uncertainty arising out of pendency of the challenge to the
award; and

(v) Further, as an alternative, a standing committee of officers may

be appointed to immediately examine an award after it is
delivered, to decide whether to challenge it, or attempt to settle
it. Fortnightly reviews of all arbitral awards must be undertaken
to ensure that the timeline for challenging an award does not
expire.

1.2.8 Recommend principles for determination of costs of arbitration:

(i) The principles for determination of costs of arbitration have

already been laid down in detail in section 31A of the Act and
require no further elaboration;
11
 (ii) While the power to award costs rests with the tribunal,
arbitrator’s fees and related costs of conducting and
participating in arbitration proceedings should generally be
awarded to the party determined by the tribunal under Section
31-A(2);

(iii) Insofar as other costs are concerned, the tribunals should

normally award costs to the successful party, unless there are
reasons to not grant the same;

(iv) The Court entertaining a challenge to an award should generally

direct the party challenging the award to pay the costs awarded
within the time so directed, subject to the final outcome of the
challenge to the award;

(v) In this regard, suitable amendments have been suggested to

Section 31A of the Act.

1.2.9 Recommend principles reducing the costs of arbitration and for

determination of fees of arbitrators:

(i) Party autonomy enables parties to have the final say in the
choice of procedure to be adopted by the arbitral tribunal. Thus,
parties can specifically provide for a regime of costs (including
arbitrators’ fees) in the arbitration agreement itself. This will
reduce uncertainty regarding costs once a dispute arises, and
enable organizations to optimally allocate and plan resources
towards each dispute;

(ii) The 246th Law Commission noted that arbitrators’ fees was a
key area of concern, especially in ad-hoc arbitrations. The Law
Commission recommended a model schedule of fees. This
formed Section 11-A and Fourth Schedule to the Act, as
inserted by the 2015 Amendment Act;

(iii) However, the fees fixed under the Fourth Schedule have been
met with reluctance. The Schedule was fixed way back in 2015,
and has not been revised periodically. The Committee has
received requests from arbitrators for revision and amendment
to the Schedule to make it dynamic;

(iv) In this view, the Committee has recommended that the Fourth
Schedule be shifted to the Rules so that the Government is in a
position to prescribe Alternate Fee Arrangements which are in
vogue in many other jurisdictions and to provide different fee
structures for different class of arbitrations such as small and
medium value claims and also periodically revise the rates as
well as make provisions / suitable alterations in future to meet
the needs of changing times without the need to amend the Act.
12
1.2.10 Recommend a charter of duties for guidance of arbitral tribunal,
parties and arbitral institutions:

(i) The distinction between an arbitration and a Court system is the

liberty of having a chosen judge, but that has its own problems.
The most important duty that all the stake holders have is to
ensure the independence and impartiality of the arbitrators and
arbitral institutions, otherwise the system would fail;

(ii) Arbitrators, lawyers, experts, parties and arbitral institution are

all stakeholders, and they have to work together to make the
system efficient and successful. For this purpose, the
requirement of disclosure has to be seriously and honestly met;

(iii) The Arbitration Council should specify, by regulation, a Charter

of Duties for arbitral institutions;

(iv) Every Arbitral Institution should prescribe a Charter of Duties

for its Arbitrators;

(v) In this regard, the Guidelines on Conduct of Arbitrators,

published by the Indian Arbitration Forum, would be useful.

1.2.11 Examine the feasibility of enacting separate laws for domestic

arbitration and international arbitration and for enforcement of certain
foreign awards:

(i) This aspect was considered when the 1996 Act was enacted.
Many stakeholders and senior lawyers strongly supported the
idea of two different legal frameworks when the UNCITRAL
Model Law was adopted in 1996, as followed in certain
jurisdictions such as South Africa and the U.K;

(ii) One of the major criticisms levelled against the Act, right from
its inception, was that the UNCITRAL Model Law was adopted
without significant modifications to suit India’s local
conditions. In other jurisdictions, some countries adopted
certain provisions of the Model Law, but considered that they
could extend, simplify or liberalise the Model Law. Examples
include the Netherlands in 1986 and Switzerland in 1987. Italy
and England decided not to follow the Model Law closely;

(iii) The Model Law was mainly intended to enable various countries
to have a common model for ‘international commercial
arbitration’. However, the 1996 Act applies to purely domestic
arbitrations as well;

(iv) However, at that time, the suggestion for a separate law for
domestic arbitrations was not agreed to and it was decided to
13
 have a single law governing both international commercial
arbitrations as well as for domestic arbitrations repealing the
1940 Act;

(v) Having enacted a single Act for both international and domestic
arbitrations, the 1996 Act has been sufficiently fine-tuned by
judicial pronouncements and legislative amendments. The
present Act has been accepted by the international as well as
domestic users. As such, the Act can continue to be the legal
framework for international commercial arbitration. If the
amendments proposed in this Report are implemented, the
Committee is confident that India will emerge as a hub of
international commercial arbitration;

(vi) The current Act has stood the test of time for international
commercial arbitrations. The present Act can be further
amended to incorporate further changes in the UNCITRAL
Model Law introduced in 2006, if necessary;

(vii) It is widely accepted that domestic arbitrations do require

greater supervision than international arbitrations;

(viii) The Committee is of the opinion that a separate law for domestic
arbitration is desirable for the reasons stated below –

(a) The UNCITRAL Model Law is based mainly on the

experience of western countries where arbitrations are
mostly conducted under the auspices of arbitral
institutions;

(b) Informed consent of parties in respect of arbitral costs,

including arbitrator’s fees, is necessitated. Parties should
have the final word on the choice and fees of the
arbitrators, the expenses likely to be borne by the parties
and procedure followed by the arbitral tribunal. Parties
should have the choice for opting for a fixed cost
arbitration where arbitrators’ fees are capped;

(c) A separate domestic law will be necessary to address

India specific concerns. which can be finalised by the
Government after holding consultations with the Bar
Council and Advocates’ Associations and trade
associations or make a reference to the Law Commission
to undertake this exercise.

(ix) However, at this stage, it is not feasible for this Committee to

immediately draft and suggest a separate law for domestic
arbitration. This will require a longer consultative process with
all stakeholders, further deliberations and policy inputs.
Nevertheless, the Committee suggests that separate legislation
14
 ought to be considered at an appropriate time so as to tailor the
distinct arbitration legislations to the requirements of domestic
and international commercial arbitration, as the case may be;

(x) Insofar as enforcement of foreign awards is concerned, the

existing statutory scheme does not require any changes.
However, delay in enforcement of awards, irrespective of
whether it is a domestic or a foreign award, requires to be
addressed at the earliest.

1.2.12 Recommend templates for model arbitration agreement for

adoption by parties and model award for guidance of arbitrators:

(i) The arbitration agreement is the cornerstone of arbitration.

Parties should exercise due diligence while concluding any
agreement. Amongst other things parties should examine
whether to stipulate in the arbitration clause the following:
1. the law governing the contract;
2. the seat of arbitration and venue of proceedings;
3. the language of the arbitration;
4. the law governing the arbitration agreement;
5. the composition of the arbitral tribunal: whether sole
arbitrator or three;
6. the procedure governing the conduct of arbitral proceedings;
7. mode of the conduct of arbitral proceedings namely virtual
/hybrid or physical;
8. fees of arbitrators whether capped or per sittings or value
based.

(ii) Certain standard clauses can be modified to take account of the

requirements of national laws and any other special
requirements. This can be best addressed by arbitral institutions
by prescribing model arbitration agreements and model awards
for guidance of parties and arbitrators;

(iii) The Arbitration Council is suited to, and must periodically

publish, guidelines on model awards and model templates.

1.2.13 Design and develop a handbook for Arbitrators to standardise their

functions; and

(a) The Committee has recommended a model procedure for

arbitrators. In addition, the Arbitration Council can be tasked
with the responsibility of periodically publishing best practices
to be followed by arbitrators and arbitral tribunals to
standardise their functions;

(b) Moreover, arbitral institutions should conduct periodic

familiarisation courses and workshops at the grass-root level in
local languages in consultation with local Advocates’
15
 Associations. This is to ensure familiarisation of prospective
arbitrators and other stakeholders with the arbitration process at
the district level;

(c) The Arbitration Council could periodically circulate publications

of UNCITRAL like the UNCITRAL NOTES ON
ORGANIZING ARBITRAL PROCEEDINGS. This will ensure
all stakeholders are updated and familiar with the latest developments
and guidelines issued by UNCITRAL;

(d) The Indian Arbitration Forum periodically publishes a

Handbook on Arbitration which serves as a valuable guide to
arbitrators regarding procedural rules required in the conduct of
arbitral proceedings;

(e) The Arbitration Council should also regularly publicise

international practices in arbitration which provide mechanisms
for the presentation of documents, witnesses of fact and expert
witnesses, inspections, as well as the conduct of evidentiary
hearings (for instance, the IBA Rules on the Taking of Evidence
in International Arbitration). These Rules form a useful guide,
to be used in conjunction with, and adopted together with
institutional, ad -hoc, or other rules or procedures governing
international arbitrations.

1.2.14 Suggest any other measures including the need for a new
legislation on arbitration in simple language.

(i) One of the major criticisms levelled against the Act, was that
the UNCITRAL Model was adopted without substantial
modifications. This was in contrast to the law in other countries,
where the Model Law was amended to suit domestic needs.
Some countries adopted certain provisions of the Model Law,
but considered that they could extend, simplify or liberalise the
Model Law. Examples include the Netherlands in 1986 and
Switzerland in 1987. Italy and England decided not to follow
the Model Law closely;

(ii) The Model Law was mainly intended to enable various

countries to have a common model for ‘international
commercial arbitration.’ The 1996 Act has been made
applicable to purely domestic arbitrations as well. This has
given rise to some concerns;

(iii) However, several judicial pronouncements and legislative

interventions have taken place since the 1996 Act was initially
introduced. Drastic changes to the provisions of the Act may
result in further litigation, and unsettling the jurisprudence
which has otherwise crystallised, and is widely accepted;

16
 (iv) Nevertheless the Committee feels a separate domestic law is
necessary to address these India specific concerns, which can
be finalised by the Government after holding consultations with
all the Bar Councils, Advocates’ Associations, trade
associations, or consider making a reference to the Law
Commission to undertake this exercise.

1.2.15 RE: PLAIN LANGUAGE DRAFTING

(i) The need to draft legislation in plain language is widely

recognized. Plain drafting means a person who reads the
document must be able to find and understand the information
easily. In cases where legislation itself cannot be simplified
further, one can rely on extraneous material along with the Act
to simplify the text;

(ii) The importance of plain drafting was noted as far back as 2005,
by the Department Related Standing Committee on Personnel,
Public Grievances, Law & Justice;

(iii) In 2005, the Legislative Department made presentations on the

developments in other commonwealth jurisdictions, and
suggested two important techniques. The techniques suggested
included an Explanatory Memorandum, and a Schedule
containing the sections which will appear after amendment
which could serve as external aids to understanding of the
provisions of the Act;

(iv) The practice of Explanatory Memoranda being annexed to the

Bill, followed in certain Commonwealth countries, is
instructive. The purpose of such Explanatory Memoranda is to
act as a summary and guide to the provisions of the Bill. It
further provides information, particularly for members of the
Legislature. In several cases, the courts in the U.K have also
found Explanatory Memoranda useful in conjunction with other
extraneous material;

(v) This Explanatory Memoranda is drafted in parallel with the

drafting of the Bill. When the Bills change and develop in the
course of the drafting process, supplementary Explanatory
Memoranda are also moved for amendment;

(vi) Explanatory Memoranda do not form part of the Bill and do not
claim to be authoritative. They do not receive the Parliament’s
approval. This means that there is freedom to use techniques
which cannot generally be used in the Bill. The notes can
explain the background to the measures; summarize its principal
provisions; give worked examples; and explain difficult concepts
by setting them out in different ways;

17
(vii) The Explanatory Memoranda are designed to help the reader
navigate the legislation. The current practice of annexing Notes
to clauses for Bills with several clauses is not adequate to
facilitate Members of Parliament to easily understand the
contents of the Bill. Moreover, Notes on clauses are discarded
once the Bill is passed by one House of Parliament and are not
transmitted along with the Bill as passed by the House. Also
Notes on clauses are not amended to tally with the amendments
made to the Bill during the passage in the House and do not
present a permanent record;

(viii) Hence, instead of the current practice of annexing Notes on

Clauses, the Committee has annexed Explanatory Notes in plain
language;

(ix) The Department Related Standing Committee on Personnel,

Public Grievances, Law & Justice in its 6th Report on Demands
for Grants 2005-06 of the Ministry of Law & Justice emphasized
on the need for simplification of laws so that the common man
can easily understand them and observed at para 7.41 as
follows:

“The Committee notes that the process

of simplification of laws is the need of the day.
Common law countries like England has started
simplifying its laws. The Committee observes
that legislative language is often quite technical,
intricate and incomprehensible for common
man for whom laws are made. It feels that laws
should be drafted in national or regional
languages to convey the purpose and intent of
framing laws and all Central laws are
translated into Hindi making the provisions
known to the masses. The Committee, therefore,
recommends that the Government should
explore the ways and means to simplify laws so
as to be understood even by people having no
specialized knowledge of legal formulations. In
other words, Legislative Department should act
as a catalyst for launching a movement for plain
language drafting of laws and instruments of
subsidiary legislation.”

(x) Recently, the Ministry of Environment, Forest and Climate

Change has taken significant initiatives towards plain language
drafting. It has adopted the practice of circulating Explanatory
Memoranda and Schedule of amended provisions, with
descriptions explaining the provisions. The Ministry circulated,
along with the Forest (Conservation) Amendment Bill 2023, an
Explanatory Memorandum explaining the provisions of the
18
 Forest (Conservation) Amendment Bill 2023 and a simplified
version explaining the provisions of the Act as proposed to be
amended along with a description to each section. This greatly
facilitated the understanding of the proposed amendments;

(xi) In view of the above, the Committee has annexed an

Explanatory Memoranda explaining the provisions of the
proposed amendments to the Arbitration Act 1996 in simple
language, and also an amended version of the sections for easy
understanding by the readers;

(xii) It is further recommended that the 1996 Act, and other

accompanying materials like the Explanatory Memoranda,
should be translated in all official languages.

1.3 THE OBJECTS OF THE COMMITTEE

1.3.1 In view of the above mandate, the Committee undertook this exercise to

(i) identify the fault-lines and issues which require clarity in the
Indian arbitration regime;

(ii) update the Act to reflect the changes in commerce and industry
since its enactment;

(iii) ensure greater adherence to the principle of party autonomy and

consent;

(iv) recommend simplified procedures to make arbitral proceedings

time bound and cost effective;

(v) minimise intervention of courts in arbitral proceedings;

(vi) develop a professional environment in arbitration services;

(vii) facilitate the use of technology in arbitrations to attain greater

productivity and outcomes;

(viii) suggest measures to establish India as a hub of international

arbitration;

(ix) recommend measures to enhance the ease of doing business and

ease of living;

(x) provide external aids to understand the provisions of the Act

which will enable all the stakeholders including those who are
not proficient in legal language to understand the effect of the
provisions of the Act.

(xi) provide a special procedure for small and medium value claims
19
 arbitrations;

(xii) revitalize the Arbitration Act as an effective ADR mechanism for

dispute settlement;

(xiii) suggest measures to make the provisions of the Act user

friendly for all the stakeholders by reducing the delays, costs,
and time.

1.3.2 The Committee undertook an evaluation and analysis of the operation

of the extant arbitration ecosystem in the country, including the working of
the Act. It has attempted to highlight the strengths, weaknesses and
challenges vis-à- vis other important foreign jurisdictions and judicial
pronouncements. Accordingly, it has suggested amendments to the Act to-

(i) make it efficient, effective, and economical, and to better cater

to the requirements of business and commerce;

(ii) leverage the latest innovations in technology for the efficient

conduct of judicial and arbitral proceedings, reducing costs and
avoiding inordinate delays;

(iii) facilitate arbitrations to migrate to virtual mode and adopt

technology, to help India emerge as a global player and
favoured seat in international commercial arbitration;

(iv) facilitate the Ease of Doing Business to attract Foreign

investment;

(v) enable greater participation of arbitrators with rich domain

knowledge and judicial experience in arbitrations ;

1.4 WORKING PROCESS OF THE COMMITTEE

1.4.1 By the Government’s notices dated 22 June 2023 and 4 July 2023, the
Committee had invited concise written comments and suggestions from all
stakeholders on various aspects of the working of the Act in line with the
Committee’s Terms of Reference. The Committee had received an
enthusiastic response, evidenced by the numerous suggestions it received
from a wide range of sources including industry bodies, advocates, law firms,
private sector entities, etc.

1.4.2 The Committee has conducted 6 (six) meetings till date (along with
two additional meetings held with specific stakeholders), and the Committee
has received a total of 124 (one hundred and twenty-four)
comments/suggestions from various stakeholders. A list of all the meetings
and summary is at Appendix V.

20
 1.5 THE REPORT

1.5.1 The Committee has considered the various recommendations in detail,

besides undertaking further research, and examining the prevalent best
practises, both nationally and internationally. This report sets out our final
conclusions and recommendations. It also includes a draft Bill to implement
our recommendations. The Committee has considered all the proposals
received by it, even if it may not find mention in the Report.

1.5.2 This Report is the culmination of the Committee’s deliberations after

carefully considering the wide-ranging views expressed by various
stakeholders, for which the Committee is grateful.

1.5.3 A summary of the proposed amendments and conclusions and way

forward is at Appendix III.

1.6 STRUCTURE OF THE REPORT

1.6.1 PART I - Executive Summary

1.6.2 PART II – Brief History of Arbitration in India

1.6.3 PART III – Key Recommendations for amendment of the Act

1.6.4 PART IV – Conclusions and Way Forward

1.6.5 Appendices

(a) Appendix 1 contains a summary of the recommendations made

by the Committee;

(b) Appendix 2 contains the draft Bill, which sets out the proposed
amendments to the Arbitration and Conciliation Act 1996 to give
effect to the recommendations;

(c) Appendix 3 contains Explanatory Notes to accompany the draft

Bill, which explain in detail and in plain language each clause in
the Bill;

(d) Appendix 4 contains sections of the Arbitration Act as they would

appear after the textual amendments to facilitate ease of
understanding the sections after amendment;

(e) Appendix 5 contains the summary of the various meetings held

by the Committee;

21
 PART II

2. BRIEF HISTORY OF ARBITRATION IN INDIA

2.1 EVOLUTION OF ARBITRATION PRIOR TO THE 1940 ACT

2.1.1 Arbitration has a long and rich tradition in India. Even before the advent
of the British, the final and conclusive settlement of differences by tribunals
chosen by the parties themselves, was common amongst Hindus in ancient
India. In fact, the Puga (assemblies), Sreni (corporations / guilds) and Kula
(village councils) courts of ancient India have been described as ‘arbitration
courts’ as they were private tribunals not constituted by a royal authority and
resembled modern-day arbitrators. However, they could only decide disputes
which related to matters within their special knowledge, for example, trade
disputes.1

2.1.2 After the advent of British rule, the Regulations introduced in

Bengal,2 Madras3 and Bombay4 provided for reference to arbitration. It also
provided for setting aside of arbitral awards, arbitral awards having the force
of decrees, etc. Thereafter, the Act 8 of 1859, which codified the procedure
of Civil Courts, provided for arbitration in the course of suits.5

2.1.3 The enactment of the Indian Arbitration Act, 1899 (“1899 Act”)
marked a key development in India’s arbitration history. The 1899 Act
applied to cases where, if the subject-matter submitted to arbitration were the
subject of a suit, such suit could have been instituted in a Presidency town.

2.1.4 The application of the 1899 Act was initially limited to Presidency
towns. It was extended to all places to which it did not apply then by the
Second Schedule to the Code of Civil Procedure, 1908 (“CPC”). Section 89
of the CPC and the Second Schedule to the CPC also introduced more
extensive provisions on arbitration.

2.2. BRIEF HISTORY OF THE 1940 ACT

2.2.1 In the 1920s, the Civil Justice Committee was appointed to report on
the machinery of civil justice. The Civil Justice Committee’s Report made
various suggestions regarding modification of the law relating to arbitration.
Pursuant to the enactment of the (English) Arbitration Act of 1934, in 1938,
the Government of India appointed Shri Ratan Mohan Chatterjee as a special
officer for revision of the law of arbitration. Eventually, the Arbitration Act,
1940 (“1940 Act”), was enacted.

1
Dr. Priyanath Sen’s Tagore Law Lectures, 1909 on “The General Principles of Hindu Jurisprudence”,
cited by Dr. P.B. Gajendragadkar in his address to the Fifth International Arbitration Congress.
2
Bengal Regulations of 1772, 1780, 1781, 1787, 1793, 1803 and 1813. The extension of the Bengal
Regulations to Banaras and the ceded Provinces meant that these Regulations covered a large portion of
Northern and Eastern India.
3
Madras Regulations of 1816.
4
Bombay Regulations of 1827.
5
sections 312 to 325 of Act 8 of 1859
22
 2.2.2 After the passing of the 1940 Act, the law on arbitration in India, which
was thus far contained in two separate enactments, i.e., the 1899 Act and the
Second Schedule to the CPC, was consolidated in one statute. The 1940 Act
drew from the provisions of the (English) Arbitration Act of 1934 and was
intended to be a complete code on arbitration law.

2.2.3 The scheme of the 1940 Act dealt with: (i) arbitration without
intervention of Court (Chapter II); (ii) arbitration with intervention of Court
where there is no suit pending (Chapter III); (iii) arbitration in suits (Chapter
IV); and (iv) provisions which are common to all the three kinds of arbitration
(Chapters V to VII and the Schedules). Under the 1940 Act, an award could
not be enforced without approval of the Court, and by securing a judgment
in terms of the award. Further, the Court had the power to modify, remit, or
set aside the award.

2.2.4 The 1940 Act did not deal with enforcement of foreign awards. For this
purpose, the Legislature enacted the Arbitration (Protocol and Convention)
Act, 1937 for Geneva Convention Awards and the Foreign Awards
(Recognition and Enforcement) Act, 1961 for New York Convention
Awards.

2.2.5 The 76th Report published by the Law Commission of India on the 1940
Act inter alia noted that while the scheme of the 1940 Act was by and large
sound, some provisions caused difficulties in practice, and resulted in delays
and needless expenses. In the 76th Report, the Law Commission attempted to
improve the provisions regarding resolution of disputes under the 1940 Act
by recommending certain amendments. This included a recommendation to
add a proviso to section 28 of the Act, forbidding an extension beyond one
year for making the award, except for special and adequate reasons to be
recorded.

2.2.6 Recognizing the need for competent arbitrators and an arbitration bar,
the 76th Report also noted in its ultimate analysis that there is much truth in
the saying that “an arbitration is as good as an arbitrator”.

2.2.7 The challenges, arising out of the working of the 1940 Act, were
succinctly described by the Supreme Court in Guru Nanak Foundation v.
Rattan Singh,6 where the Court noted as follows:

“Interminable, time consuming, complex and expensive court

procedures impelled jurists to search for an alternative forum, less
formal, more effective and speedy for resolution of disputes avoiding
procedural claptrap and this led them to Arbitration Act, 1940 (‘Act’ for
short). However, the way in which the proceedings under the Act are
conducted and without an exception challenged in Courts, has made
lawyers laugh and legal philosophers weep.”

6
(1981) 4 SCC 634.
23
 2.3 BRIEF HISTORY OF THE 1996 ACT

2.3.1 The liberalisation of the economy in 1991 acted as a catalyst to usher

in further steps to promote foreign investment, create a comfortable business
environment and promote investor confidence in the Indian dispute
resolution mechanism.

2.3.2 A need was felt to bring uniformity in the law, by aligning it with the
United Nations Commission on International Trade Law (“UNCITRAL”)
Model on Commercial International Arbitration, 1985. This led to the
enactment of the Arbitration and Conciliation Act, 1996. The 1996 Act was
a self-contained Code, and enacted to attain the objectives of consolidating
and amending existing laws relating to domestic arbitration. It also aimed at
defining conciliation, and creating a unified legal framework for fair and
effective settlement of disputes. Based on the Model Law, the 1996 Act
replaced the 1940 Act.

2.3.3 The Act was aimed at curbing delays in the conduct of arbitration. It
further consolidated the law relating to domestic arbitration, international
commercial arbitration and enforcement of foreign arbitral awards. Speedy
arbitrations and minimal judicial intervention were its key objectives.

2.4 176TH REPORT OF THE LAW COMMISSION

2.4.1 In its 176th Report, published on 12 September 2001 (“176th Report”),

the Law Commission undertook a comprehensive review of the 1996 Act,
and recommended several amendments.

2.4.2 The Law Commission observed that while minimum judicial

interference in setting aside an award would be a guiding principle for
international arbitral awards, it could not be wholly applied to domestic
arbitrations.

2.4.3 In that view, it recommended insertion of two additional grounds of

challenge to a domestic award at the Section 34 stage, viz. substantial error
of law apparent on the face of the award, and where no reasons have been
provided in the arbitral award.

2.4.4 The 176th Report also contained a draft Arbitration and Conciliation
(Amendment) Bill, 2001. The Government, after inviting comments of the
State Governments and certain commercial organisations, decided to accept
almost all the recommendations. In addition, some suggestions made by the
leading senior lawyers, jurists and representatives of commercial
organisations in a special seminar organized by the Law Ministry were also
accepted.

2.5 ARBITRATION AND CONCILIATION AMENDMENT BILL,

2003

2.5.1 The Arbitration and Conciliation Amendment Bill, 2003 (“2003 Bill”)
24
was introduced in the Rajya Sabha in December 2003.

2.5.2 The amendments were stated to have been suggested for the following
reasons:

(i) To resolve the conflict between some judgments of the High

Court under the Act;
(ii) To bring it in conformity with the Model Law in certain respects;
and
(iii) To improve upon the Model Law for speeding up of arbitral and
Court proceedings in India.

2.5.3 The Statement of Objects and Reasons highlighted the following

important features of the Bill as follows:

(a) to enable the judicial authority to decide jurisdictional issues,

subject to strict rules, where an application is made before it by a
party raising any jurisdictional question;

(b) to empower the Courts to make reference to arbitration in case

all the parties to a legal proceeding enter into an arbitration
agreement to resolve their disputes during the pendency of such
proceeding before it;

(c) to provide for the appointment of arbitrators by the Chief

Justice of the Supreme Court or the High Court or his nominees
to be an appointment made on the judicial side, with a view to
prevent writ petitions being filed on the basis that it is an
administrative order of the Chief Justice;

(d) to provide that where the place of arbitration under Part I of the
existing Act is in India, whether in regard to arbitration between
Indian parties or an international arbitration in India and
arbitration between Indian parties, Indian law will apply;

(e) to provide for completion of arbitrations under the existing Act

within one year from commencement of arbitration
proceedings. However, at the end of one year the Court will fix
up a time schedule for completion of the proceedings until the
award is passed;

(f) to empower the arbitral tribunal to pass peremptory orders for

implementation of interlocutory orders of the arbitral tribunal
and in case they are not implemented, to enable the Court to
order costs or pass other orders in default;

(g) to provide for the Arbitration Division in the High Courts and
for its jurisdiction and special procedure under Chapter IXA for
the speedy enforcement of awards made under the Arbitration
25
 Act, 1940, the existing Act including awards made outside
India;

(h) to provide provisions for speeding up and completing all

arbitrations under the existing Act, including those arbitrations
pending under the repealed Arbitration Act, 1940 within a
stipulated time;

(i) to introduce a new Chapter XI relating to single member fast

track arbitral tribunal wherein the filing of pleadings and
evidence will be on fast-track basis and award will have to be
pronounced within six months and to specify procedure therefor
in a new Schedule.

2.6 JUSTICE SARAF COMMITTEE

2.6.1 The Ministry of Law & Justice, Government of India, constituted the
Justice Saraf Committee to examine the implications of the
recommendations of the 176th Report and the amendments proposed by the
2003 Bill.

2.6.2 The Justice Saraf Committee recommended various modifications and

opined that the proposed Bill would in fact, lead to greater interference by
Courts. It apprehended that courts would sit in appeal over arbitral awards,
contrary to international best practices.

2.6.3 The Justice Saraf Committee was of the view that the Government
should instead bring in a fresh, and comprehensive legislation on the subject.

2.6.4 The 2003 Bill was thereafter extensively discussed in the Parliamentary
Standing Committee and was withdrawn.

2.7 194TH REPORT OF THE LAW COMMISSION

2.7.1 In 2005 the Law Commission undertook a suo-moto exercise to analyse

the Division Bench judgment of the Madras High Court in The
Commissioner Corporation of Chennai v. K. Ramdass & Co. 7 . The
judgment concerned stamping and registration of arbitral awards.

2.7.2 In the judgment, the High Court had suggested that the Law
Commission consider a legislative exercise to ensure requisite stamping and
registration.

2.7.3 The Law Commission’s review of the legal position culminated in the 194th
Report of the Law Commission. The Commission suggested suitable
amendments to the 1996 Act, which inter alia included an amendment
requiring the award to be duly stamped and registered, if required.

7
(O.P.D. No. 27597/02) dated 17 December 2003 (modified on 30 January 2004).
26
 2.7.4 However, these amendments were not ultimately carried out.

2.8 THE 246TH REPORT OF THE LAW COMMISSION, AND

THE ARBITRATION AND CONCILIATION (AMENDMENT)
ACT, 2015

2.8.1 In 2014, the Law Commission was entrusted with the task of reviewing
the 1996 Act. In its 246th Report, the Law Commission analysed the
arbitration law in India in some detail, and recommended several key
amendments.

2.8.2 This was shortly followed by the Arbitration and Conciliation

(Amendment) Act, 2015. Some salient features of the 2015 Amendment were
as follows:
(i) Sections 9, 27, 37(1)(a) and 37(3) were made applicable to
international commercial arbitrations even if the place of arbitration was
outside India, or the arbitral award was enforceable under Part II of the
Act;8
(ii) Interim orders of arbitral tribunals were made enforceable in the same
manner as if were a decree of a court;9
(iii) It was made obligatory for arbitrators to disclose circumstances
concerning their independence, impartibility and availability;10
(iv) Specific timeframes were introduced for conclusion of arbitral
proceedings; 11
(v) An optional fast-tracked procedure was introduced under Section 29-
B; 12
(vi) A comprehensive costs regime was introduced; 13
(vii) Explanations were added to Sections 34 and 48 of the Act, to clarify
and narrow challenges to awards on the grounds related to ‘public policy’;
(viii) ‘patent illegality’ was statutorily recognized as a ground to set aside
a domestic award under Section 34;
(ix) Courts were obligated to dispose of challenges to arbitral awards
within one year;14 and
(x) it was clarified that there would be no automatic stay of awards merely
upon challenging the award, and a separate application would have to be
filed seeking stay of the arbitral award.15

2.8.3 In Hindustan Construction Co. Ltd. v. Union of India,16 the Supreme

Court observed that “salutary provisions …were made to correct defects that
were found in the working of the Arbitration Act, 1996…which was
strengthened by the 2015 Amendment Act” (emphasised). The 2015

8
Proviso to section 2(2) of the Act
9
sections 9 and 17 of the Act.
10
section 12 read with the Fifth and Seventh Schedules of the Act.
11
section 29A of the Act
12
section 29B of the Act.
13
sections 31A of the Act.
14
section 34(6) of the Act.
15
section 36(2) of the Act.
16
(2020) 17 SCC 324, Paragraphs 50 & 60
27
Amendments played a pivotal role in streamlining various arbitral and
judicial processes under the Act, which has resulted in enhancing the
attractiveness of India as a seat for arbitrations.

2.9 JUSTICE SRIKRISHNA COMMITTEE REPORT (HLC) 2017

2.9.1 In 2016, a High-Level Committee to ‘Review Institutionalization of

Arbitration Mechanism in India’ was set up under the chairmanship of
Justice B.N. Srikrishna. The key recommendations made by the High Level
Committee were as follows:

(a) Constitution of an Arbitration Promotion Council of India

(APCI): An autonomous body, with representation from
various stakeholders was recommended to be set up for grading
arbitral institutions in India;

(b) Accreditation of arbitrators: It was suggested that the APCI could

recognise professional institutes providing for accreditation of
arbitrators. Accreditation could be made a condition for acting
as an arbitrator in disputes arising out of commercial contracts
entered into by the government and its agencies;

(c) Creation of a specialist arbitration bar: Measures were

recommended to be taken to facilitate the creation of an
arbitration bar, by providing for admission of advocates on the
rolls of the APCI as arbitration lawyers, encouraging the
establishment of fora of young arbitration practitioners, and
providing courses in arbitration law and practice in law schools
and universities in India;

(d) Creation of a specialist arbitration bench: It was also

recommended that judges hearing arbitration matters should be
provided with periodic refresher courses in arbitration law and
practice.

2.9.2 The High Level Committee also suggested various Amendments to the
Arbitration and Conciliation Act 1996.

2.9.3. Bilateral investment arbitrations involving the Union of India: Various

recommendations were issued for effective dispute management and
resolution and dispute prevention, including:

(a) appointment of the Department of Economic Affairs as the

Designated Representative of the Government in existing BITs;
(b) creation of the post of an International Law Adviser, to advise the
Government and coordinate dispute resolution strategy for the
Government in disputes arising out of its international law obligations,
particularly disputes arising out of BITs;
(c) establishment of a five-member permanent Inter-Ministerial
Committee in order to ensure effective management of disputes arising
28
 out of BITs entered into by the Government; and
(d) tasking the Department of Economic Affairs with the preparation
and implementation of dispute prevention strategies in order to prevent
disputes from arising or escalating to formal dispute resolution
proceedings.

2.10 THE ARBITRATION AND CONCILIATION

(AMENDMENT) ACT, 2019

2.10.1 The HLC Report was followed by the Arbitration and Conciliation
(Amendment) Act, 2019. The amendments, carried out with a view to boost
institutional arbitrations, inter alia provided for:
(i) appointment of arbitrators by designated arbitral institutions; 17 (ii)
changes to time limits for appointment of arbitrators, 18 completion of
pleadings 19 and making of awards; 20 (iii) applications for setting aside of
awards to be based on the arbitral record;21 (iv) confidentiality obligations on
arbitrators, arbitral institutions and parties;22 (v) protection of arbitrators for
actions taken in good faith; 23 and (vi) establishment of the Arbitration
Council of India.24

2.10.2 However, Section 87 the 2019 Amendment Act restored the earlier
position of automatic stay of arbitral awards merely upon the filing a
challenge, for all arbitral proceedings which had commenced before 23
October 2015. This appears to have been necessitated by the Supreme
Court’s judgment in BCCI v. Kochi Cricket (P) Ltd.25

2.10.3 Section 87 of the 2019 Amendment Act was struck down by the
Supreme Court in Hindustan Construction Company Limited & Anr. v.
Union of India & Ors.,26 as being manifestly arbitrary and contrary to the
object sought to be achieved by the 2015 Amendments.

2.10.4 While some of the amendments in the 2019 Amendments are yet to
be notified, the positive steps to promote institutional arbitration in India are
commendable. The 2019 Amendments, if and when notified, would
ultimately prove to be a strong boost for institutional arbitration in India.

2.11 THE ARBITRATION AND CONCILIATION

(AMENDMENT) ACT, 2021

2.11.1 In 2021, the Act was amended yet again. The amendment inter alia

17
section 11(3A) of the Act (not in force as on date).
18
section 11(13) of the Act (not in force as on date).
19
section 23(4) of the Act.
20
section 29A(1) of the Act.
21
section 34(2) of the Act.
22
section 42A of the Act.
23
section 42B of the Act.
24
sections 43A-43N of the Act (not in force as on date).
25
BCCI v. Kochi Cricket (P) Ltd., (2018) 6 SCC 287
26
2019 SCC OnLine SC 1520.
29
deleted the Eighth Schedule (introduced by the 2019 Amendments), which
had provided the qualifications for appointment as an arbitrator. The Eighth
Schedule had invited heavy criticism for being restrictive and unclear,
especially in respect of appointment of foreign arbitrators in India-seated
arbitrations. The deletion of the Eighth Schedule has been widely perceived
as another welcome step towards promoting arbitrations in India. This has
been widely perceived as another welcome step towards promoting
arbitrations in India.

30
 PART III

3. KEY RECOMMENDATIONS FOR AMENDMENT OF THE

ACT

3.1. AMENDMENT TO THE PREAMBLE AND THE

SHORT TITLE OF THE ARBITRATION AND
CONCILIATION ACT 1996

3.1.1 The Mediation Act 2023 has comprehensively provided for mediation,
which was earlier part of the Arbitration and Conciliation Act 1996. Since
the provisions relating to conciliation in the Arbitration Act 1996 have been
omitted by the Mediation Act, 2023 it became necessary to omit the
references to conciliation in the Arbitration Act.

3.1.2 Though section 61 of the Mediation Act made consequential

amendments to the Arbitration and Conciliation Act 1996 through the Sixth
Schedule, the references to conciliation in the Preamble and the Short Title
references remained. Consequently, it is necessary to amend the Preamble to
the Act, the Long Title and the Short Title to omit references to conciliation.

3.1.3 The Committee recommends amendment to the Preamble to the Act

and to the short title to omit references to the word Conciliation.

Recommendation
Amendment
(i) of the Long Title and Short Title
(ii) in the Preamble
(iii) in subsection (1) of section 1
to omit the words “and conciliation”.

31
 3.2 REPLACEMENT OF “PLACE” WITH “SEAT” OR
“VENUE” IN THE ACT.

3.2.1 The Act in its current form in sections 2(2), 20 (1), 20(2), 20(3), 28 and
31(4) refers to the “place” of arbitration. Section 2(2) of the Act stipulates
that Part I of the Act would apply where the place of arbitration is in India.
The proviso, which was inserted by the 2015 Amendments, further extends
the application of sections 9, 27 and sections 37(1)(b) and (3) to ICA, even
though the place of arbitration is outside India.

3.2.2 The presence and interpretation of multiple terms, viz. “seat”, “place”
and “venue” has created ambiguity and uncertainty. Therefore, the Bill
proposes to delete the term “place”, wherever it occurs in sub-section (2) of
section 2 of the Act and replace it with the term “seat”. Similar amendments
are suggested in sections 20(1), 20(2), 28 and 31(4). The word “place” is to
be replaced with the word “venue” in section 20(3).

3.2.3 The difference between “seat” and “venue” has been the subject matter
of judicial pronouncements. In BBR (India) Private Limited v. Singla
Constructions private Limited, (2023) 1 SCC 693, the Supreme Court held
that the ‘seat’, once fixed by the arbitral tribunal under section 20(2) of the
Act remains static and fixed unless changed by express mutual consent of the
parties, whereas the ‘venue’ of the arbitration can change and move from the
‘seat’ to a new location. Jurisdiction comes from “seat” and not “venue”.

3.2.4 The Supreme Court, in BALCO v. Kaiser Aluminium Technical

Services Inc., (2012) 9 SCC 552 and subsequent judgments, has held that the
word “place” mentioned in section 20(1) and 20(2) refers to the seat of
arbitration, and in section 20(3) refers to the venue of the arbitration. The
proposed amendment is also consistent with the international usage
concerning the ‘seat of arbitration’ as opposed to ‘place of arbitration’. 27
Even the 246th Law Commission Report had suggested that the replacement
of the word “place” with “seat” and/or “venue” as may be applicable. This
Committee endorses the same.

3.2.5 The substitution of “seat” for “place” in sections 20(1) and 20(2) of the
Act also gives the parties the right to choose the “seat” of arbitration, which
in turn resolves the issue of jurisdiction. While the concept of a judicial seat
established in the international sphere while deciding which country will
have jurisdiction, it has also acquired importance in the context of India-
seated domestic arbitrations, in view of the law propounded by the Supreme
Court from time to time.

3.2.6 Therefore, it is proposed to delete the term “place”, wherever it occurs

27
For instance, please refer to Article 21.1 of the Arbitration Rules of the Singapore International
Arbitration Centre, 2016 (“SIAC Rules”); Article 14 of the 2018 Hong Kong International Arbitration
Centre Administered Arbitration Rules, 2018 (“HKIAC Rules”); Article 16 of the Arbitration Rules of
the London Court of International Arbitration, 2020 (“LCIA Rules”).
32
in various sections of the Act and replace it with the term “seat”. The
proposed amendment is consistent with the international usage of ‘seat of
arbitration’ as opposed to ‘place of arbitration’.

3.2.7 The substitution of the term “seat” and “venue” instead of “place” will
bring the Act in consonance with internationally accepted practices and the
law declared by the Hon’ble Supreme Court. Accordingly, the Committee
recommends the following amendments:

Recommendation
Amendment of section 20(3) by substituting the word “place” with
the word “venue”;
Amendment of sections 2(2), 20(1), 20(2), 28(1) and 31(4) by
substituting the word “place” with the word “seat”.

3.3 AMENDMENT TO THE DEFINITION OF ‘COURT’

HAVING REGARD TO THE AMENDMENT RELATING TO
THE SEAT OF THE ARBITRATION

3.3.1 The current definition of Court is similar to the definition of Court in

the 1940 Act. As presently contained in section 2(1)(e) of the Act, it is solely
based on the jurisdiction of the subject matter of arbitration. Also relevant is
section 42 which provides that a Court once approached would be the Court
having jurisdiction to hear further applications under Part 1 of the Act.

3.3.2 However, the Supreme Court has held in BALCO v. Kaiser Aluminium
Technical Services Inc., (2012) 9 SCC 552, Indus Mobile Distribution Pvt
Ltd v Datawind Innovations Pvt Ltd & Ors. (2017) 7 SCC 678 and more
recently in BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234, that all
applications must be made to the Court having original jurisdiction over the
seat of the arbitration, including for domestic arbitrations. The concept of
“seat” has been recognised by the Supreme Court even in the context of
purely domestic arbitrations. It should therefore be given statutory
recognition.

3.3.3 There may be instances where parties choose a neutral “seat” which
would otherwise not grant the court jurisdiction over the dispute under Indian
law. Similarly, there may also be instances where parties have later agreed
to a “seat” under section 20(1), after approaching an earlier court. In such
instances, it is imperative that the law provide for jurisdiction of the court of
the “seat” of the arbitration. In that view, it is proposed to amend the
definition of “Court” to mean the court, first and foremost, having
jurisdiction over the seat of the arbitration, and only if such seat is not
determined, then the court having jurisdiction over the subject matter of the
arbitration. Section 42 will also have to be appropriately amended.

33
 3.3.4 The definition of ‘Court’ was amended in 2015 to ensure that for
international commercial arbitrations, jurisdiction is exercised by the High
Court, even if such High Court does not exercise ordinary original civil
jurisdiction. However, with an increase in institutional arbitrations and
variation in the quantum of claim amounts, it was felt that the current
definition is not sufficient.

3.3.5 Therefore, the proposed amendment seeks to further provide clarity on

the court of first instance for both international commercial arbitrations and
domestic arbitrations, depending on whether it is institutional or ad-hoc
arbitration, while also considering the value of the subject matter of the
arbitration. To further incentivise institutional arbitration, it is suggested that
for institutional arbitrations having a Specified Value of Rs. 50 crores or
higher, the Court will be the jurisdictional High Court, having original
jurisdiction or jurisdiction to hear appeals from subordinate Courts over the
seat of the arbitration and if no seat has been determined, then the Court
having jurisdiction over the subject matter of arbitration. A similar provision
is already in force for international commercial arbitrations.

3.3.6 To carry out these amendments to Court, Committee recommends that

a new section 2A be incorporated to clearly define the term Court to reflect
the above recommendation.

Recommendation
Insertion of new section 2A to provide a definition of Court in the following terms-:
(i) Courts means the Court first and foremost having jurisdiction over the seat
of the arbitration and only if such seat is not determined then having jurisdiction over
the subject matter of the arbitration;
(ii) To make a consequential amendment to section 42;
(iii) to further incentivise institutional arbitration, it is proposed that for
arbitrations having a Specified Value of Rs. 50 crores or higher, the Court under
section 2(1)(e) will be the jurisdictional High Court, having original jurisdiction or
jurisdiction to hear appeals from subordinate Courts over the seat of the arbitration
and if no seat has been determined, then the Court having jurisdiction over the subject
matter of arbitration;
(iv) it is proposed to provide in the definition that the Specified Value will be
calculated on the basis of principles specified in section 12 of the Commercial Courts
Act, 2015.

3.4 ADMINISTRATIVE ASSISTANCE BY TECHNO-LEGAL

UTILITIES

34
 3.4.1 Section 6 provides for arbitral tribunals availing administrative
assistance provided by suitable persons or institution to conduct arbitration
proceedings. It is proposed to amend section 6 by introducing techno-legal
utilities as one of the functionaries, in addition to “suitable institution or
person” to facilitate the conduct of arbitral proceedings. This will facilitate
proceedings before arbitral tribunals, especially ad hoc tribunals. Availing
technology services will reduce expenses in the conduct of proceedings
currently carried out in the physical mode.

3.4.2 The Law Commission in its 176th Report had observed at as follows:

“The above section was drafted on the model of Art. 8 of the

UNCITRAL Report on Adoption of Conciliation Rules (prepared by
the United Nations Commission on International Trade Law), which
was, more or less, in the same language. In fact, in that Report it was
suggested that if the conciliators arrange for administrative
assistance, they must not merely consult the parties but must also
obtain their consent. In practice, however, at any rate in India, it is
becoming increasingly common for arbitration proceedings being
conducted at expensive venues. On several occasions, even when the
proceedings last for a very short duration, the parties have to pay for
a whole day. If the venue is a five-star hotel, the expense will be
heavier. Parties feel embarrassed if they have to reject request for an
expensive venue”

3.4.3 The problem of expensive venues and travel costs associated with
arbitrations can be effectively addressed by arbitral proceedings migrating to
virtual or hybrid mode. For this purpose, the Committee has proposed to
introduce certain provisions for the involvement of techno-legal utilities in
arbitral proceedings.

3.4.4 Virtual dispute resolution mechanisms, and the growing use and role of
technology in the efficient conduct of arbitral proceedings, will enable parties
to avail the services of such utilities to facilitate arbitration proceedings in a
more efficacious manner.

3.4.5 Apart from reducing the cost of expensive venues and travel costs, there
are many other advantages in adopting technology in arbitration. For
instance, lawyers spend much of their time ploughing through documents.
Document automation can be used in arbitral proceedings to reduce charges
for examination of documents and material evidence by legal experts time
because it enables documents to be generated in minutes whereas in the past
they would have taken many hours to craft. 28 More recently, a new set of
techniques have been adopted, drawing from disciplines of machine learning,
big data and predictive analytics. These emerging systems can play a crucial

28
Richard Susskind -Tomorrows Lawyers-An Introduction to Your Future (OUP) Kindle 3rd Edition p
65;
35
 role in analysing document sets or summarizing or extracting key provisions
of contracts. Blockchain technology enables data and documents to be shared
in a way that makes it all but impossible to change or falsify such documents
and it permits sharing securely among users with no single person or
authority in control.29

3.4.6 These utilities provide a wide variety of services based on digital

platforms. The proposed amendment merely provides an indicative list of
techno-legal services, for instance, providing the necessary technological
infrastructure, secure online platforms for efficient document sharing,
management and collaboration for the conduct of arbitration proceedings;
technology support for transcription/recordings and for virtual court rooms;
communication tools; depository of records; cybersecurity, etc.

3.4.7 The proposed amendment further seeks to expand the scope of techno-
legal utilities, and enable virtual and remote participation in arbitral
proceedings.

3.4.8 For the effective utilisation of technology in dispute resolution, it is

necessary to statutorily recognise and enable the parties to submit inter alia
documents electronically; conduct virtual hearings; provide systems for
recording of evidence of witnesses, depository of documents in digital form,
authentication of records etc. The proposed amendment confers adequate
discretion upon the Central Government to make Rules in this regard.

3.4.9 Providing statutory recognition to Techno Legal utilities will facilitate

the migration of ad hoc arbitrations, which currently lack the backend support
in the form of secretarial and technological services, to more efficient and
technologically savvy environment. It is hoped that this will catalyse India’s
emergence as a hub of international commercial arbitration.

3.4.10 In this background, the Committee recommends amendments to

section 6 and the insertion of new sections 6A and 6B:

29
Susskind ibid p 72;
36
Recommendation
(a) amendment to section 6 to include Techno Legal Utilities as a suitable institution to
provide administrative assistance;
(b) Insertion of new Section 6A –to provide for ‘Techno-Legal Utilities’, which
provide techno-legal services to ad hoc as well as to institutional arbitrations. Techno-
Legal services include, but are not limited to, secure online platforms for efficient
document sharing, technological support for transcription, recordings and virtual
hearings and cybersecurity measures.
(c) Insertion of new section 6B for regulating the functioning of the Techno-Legal
Utility and providing for such Techno-Legal Utilities to be serviced by a registry with
properly delineated functions.

37
3.5 VALIDATION OF INSUFFICIENTLY STAMPED OR NOT
DULY STAMPED ARBITRATION AGREEMENT

3.5.1 The issue arising out of the requirement of an adequately stamped

arbitration agreement has been the subject matter of various judicial
pronouncements by the Supreme Court of India.

3.5.2 A Division bench of the Supreme Court of India in SMS Tea Estates
(P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 (“SMS Tea
Estate”), having regard to section 35 of the Stamp Act, held that the Courts
cannot act upon arbitration agreements/ arbitration clauses contained in
insufficiently stamped or unstamped instruments unless the stamp duty and
penalty due on such instruments was paid.

The Supreme Court had occasion to reconsider this aspect, after the introduction
of Section 11(6A) by the 2015 Amendment, in Garware Wall Ropes Ltd v.
Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209
(“Garware”). The Supreme Court re-iterated the law laid down in SMS Tea
Estate. It held that an arbitration agreement contained in unstamped
instruments or insufficiently stamped instruments could only be acted upon/
become enforceable in law after they were duly stamped. The judgment in
Garware was cited with approval by a three-judge bench of the Supreme
Court in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1
(“Vidya Drolia”), albeit in a different context.

3.5.3 Subsequently, in N.N. Global Mercantile (P) Ltd. v. Indo Unique

Flame Ltd., (2021) 4 SCC 379, another three Judge Bench of the Supreme
Court of India took a contrary view that there was no legal impediment to
the enforceability of the arbitration agreement, pending payment of stamp
duty on the substantive contract. The decision, relying on the doctrine of
severability, held that an arbitration agreement was distinct, separate, and
independent from the underlying commercial contract. As such, non-
payment of stamp duty would not invalidate the arbitration clause contained
in the agreement, or render it unenforceable. However, since the earlier co-
ordinate Bench in Vidya Drolia had expressed a contrary view, the matter was
referred to a larger bench expressing doubts over the correctness of the view
taken by the co-ordinate Bench in Vidya Drolia and Garware.

3.5.4 The reference culminated in the judgment of a five-judge Constitution

bench of the Supreme Court of India in NN Global-II. The decision,
rendered on 25 April 2023, ruled that an unstamped instrument, on which
stamp duty is payable, containing an arbitration clause “cannot be said to be
a contract, which is enforceable in law within the meaning of section 2(h) of
the [Indian] Contract Act and is not enforceable under section 2(g) of the
[Indian] Contract Act.” It thus held that the arbitration clause contained in
an unstamped or insufficiently stamped instrument could not be acted upon
unless deficit stamp duty is paid and a certificate to that effect is issued by
the concerned authorities.

3.5.5 NN Global-II raised concerns in the arbitration community regarding

38
 the enforceability of arbitration agreements which were entered into prior to
the judgement, as well as the potential delays in deciding applications: (i) for
interim measures under section 9; and (ii) to appoint arbitrators under section
11.

3.5.6 By creating a legal hurdle of stamping before appointment of arbitrators

or grant of interim relief, the Supreme Court took away the power of the
arbitral tribunal to decide its own jurisdiction and also the existence of the
arbitration agreement. At the stage of appointment of arbitrators or granting
interim relief prior to constitution of the arbitration tribunal, there are no
substantive proceedings before the Court. Such proceedings are only
supportive in nature, to aid an early constitution of the arbitral tribunal or to
protect the subject-matter of the dispute in the ultimate arbitration
proceedings.

3.5.7 By prescribing a mini-trial at this stage, for impounding and

adjudication of the stamp duty, the decision created a procedural difficulty
in speedy constitution of the tribunal and the urgent need to protect the
subject-matter of the dispute.

3.5.8 Default in the payment of stamp duty, or its insufficiency, is a curable

defect as per the proviso to section 35 of the Stamp Act and most of the state
legislations relating to stamping.

3.5.9 In Bhaskar Raju and Brothers v. Dharmaratnakara Rai Bahadur

Arcot Narainswamy Mudaliar Chattram30, another five-judge bench of the
Supreme Court doubted the view taken in NN Global-II. Therefore, it
referred the issue to a seven-judge bench.

3.5.10 This resulted in the judgment of the seven-judge Constitution bench

dated 13 December, 2023, in In Re: Interplay Between Arbitration
Agreements Under The Arbitration And Conciliation Act 1996 And The
Indian Stamp Act 1899, 2023 INSC 1066.

3.5.11 The seven-judge bench in In Re: Interplay between Arbitration

Agreements, overruled NN Global-II and SMS Tea Estate. It held that an
unstamped agreement is not rendered void or void ab initio or unenforceable,
and that an objection as to stamping does not fall for determination under
Sections 8 or 11 of the Arbitration Act.

3.5.12 It was specifically held in In Re: Interplay between Arbitration

Agreements that any objections in relation to the stamping of the agreement
fall within the ambit of the arbitral tribunal. However, the judgment did not
elaborate upon the stage of examination, or the procedure to be followed by
the arbitral tribunal in deciding such objections.

3.5.12 In view of the above, the Committee has recommended the insertion

30
Curative Petition (C) No. 44 of 2023 in Review Petition (C) No.704 of 2021 in Civil Appeal No.
1599 of 2020

39
of Section 7-A to the 1996 Act. Besides giving statutory recognition to the
judgment in In Re: Interplay between Arbitration Agreements, the
provision aims at bringing certainty and uniformity in the approach of
arbitral tribunals on this aspect.

3.5.13 It is proposed to allow the admission of an insufficiently stamped or

unstamped arbitration agreement into evidence, and for the same to be acted
upon by a Court, an arbitral tribunal, or any other judicial fora for the
purposes of the Act. The proposed provision begins with a non-obstante
clause to legislatively overrule the effect of any judgment, decree or order of
any Court, anything contained in the Indian Stamp Act, 1899 (“Stamp Act”)
or any other law for the time being in force to enable Courts, arbitral
tribunals, and judicial authorities to act on unstamped or insufficiently
stamped arbitration agreements. Further, the Bill seeks to give retrospective
effect to the proposed section 7A from 22 August 1996 in order to ensure that
technical pleas of non-stamping or insufficient stamping do not delay the
commencement of arbitration proceedings between the parties.

3.5.14 The proposed provision also contains a proviso which empowers the
judicial authority, Court, or arbitral tribunal to direct parties to pay stamp
duty on the arbitration agreement so as to cure any defect in case of
insufficiently stamped arbitration agreements. The said stamp duty will be
payable in accordance with the provisions of the Stamp Act or any other law
for the time being in force. This ensures that the interest of the revenue is
protected, while not unduly delaying the arbitral process.

3.5.15 The proposed amendment therefore seeks to legislatively settle the

issue by allowing Courts, tribunals and other judicial authorities to act upon
an unstamped or inadequately stamped arbitration agreement until the
arbitral tribunal directs the parties to cure the defect in payment of stamp
duty “at a stage it considers appropriate”. Further, the proposed amendment
re-affirms the principle of the arbitral tribunal’s competence to rule on issues
concerning its own jurisdiction, minimizes judicial intervention and facilitates
expeditious constitution of arbitral tribunal.

3.5.16 Additionally, the proposed amendment seeks to be made effective

with retrospective effect from 22 August 1996 in order to (i) ensure that
technical pleas of non-stamping or insufficient stamping do not delay the
commencement of arbitration proceedings between the parties; and (ii)
exclude any challenge to the appointment of arbitrators, the conduct of
arbitral proceedings or any other consequent actions on the ground of non-
payment of stamp duty or insufficient stamp duty.

3.5.17 Accordingly, the Committee recommends that the legal position

should be legislatively settled through a suitable validation clause.

40
 Recommendation
To insert a new section 7A to provide that notwithstanding any
judgment, decree or order of any Court or anything contained in the
Indian Stamp Act, 1899, or any other law in force, an arbitration
agreement not duly stamped or insufficiently stamped shall be
admitted in evidence and shall be acted upon by any Court, an
arbitral tribunal, or any other judicial authority for the purposes of
the Act and the arbitral tribunal shall direct a party to pay the
requisite stamp duty at an appropriate stage.

To provide in section 9 of the Amending Act a validation clause

to provide that section 7A in the principal Act shall be deemed
always to have been in force at all material times with effect from
22nd August 1996 and accordingly no suit or other proceedings
shall be initiated, maintained or continued in any Court, tribunal or
other authority challenging the appointment of arbitrators or the
conduct of proceedings or any action taken thereof on the ground
that the arbitration agreement was not duly stamped or
insufficiently stamped in accordance with the relevant provisions
of the Indian Stamp Act 1899 or any other law for the time being in
force

3.6 TIMELINE FOR DISPOSAL OF APPLICATIONS UNDER

SECTION 8

3.6.1 Section 8 of the Act was introduced to promote and uphold the
principles of party autonomy and the use of arbitration as an alternative
dispute resolution mechanism. It aims to minimize judicial intervention and
interference in arbitration matters and allows for parties to resolve their
disputes by mutual agreement.

3.6.2 Very often, parties institute a suit or other legal proceeding before a
judicial authority despite being bound by an arbitration agreement. Under
Section 8, the judicial authority is bound to refer the matter to arbitration, if
it is covered by an arbitration agreement. Section 8 ensures the effectiveness
of arbitration as a dispute resolution mechanism in India, and prevents
unscrupulous parties from circumventing it.

3.6.3 Section 8 was also amended by the 2015 Amendments to ensure that
parties did not subvert the arbitration agreement. However, in practice, such
applications take a long time to get decided in view of the delays in Courts.
Arbitration is also rarely commenced during the pendency of the application.
This negates the purpose and intent behind section 8(3). To expedite disposal
of such applications, it is proposed that a timeline of 60 days be introduced
for deciding an application under section 8.

41
 3.6.4 In keeping with the overall objective of reducing the timelines for
arbitration proceedings, the Bill seeks to add sub-section (4) under section 8
of the Act to include a directory timeline of 60 days to ensure that applications
filed under this provision are disposed of by the Court as expeditiously as
possible.

Recommendation
It is proposed to amend section 8 to provide that an application filed under sub-
section (1) shall be disposed of by the Court as expeditiously as possible and
endeavour shall be made to dispose of the matter within a period of sixty days
from the date of the application.

3.7 APPLICATIONS TO COURT FOR INTERIM MEASURE

OF PROTECTION UNDER SECTION 9

3.7.1 Applications for interim protection under Section 9 are routinely filed
by parties, which clogs the court’s dockets. In some instances, parties obtain
an ad-interim order under section 9 but the application itself remains to be
finally heard and disposed of. The Committee is of the opinion that applications
under section 9 must be disposed of expeditiously. In instances where an arbitral
tribunal has been constituted, such an application ought to be relegated to the
arbitral tribunal. This was also the objective behind insertion of section 9(3)
of the 1996 Act, which states that once the arbitral tribunal has been
constituted, the Court shall not entertain an application under section 9(1),
unless the Court finds that circumstances exist which may not render the
remedy provided under section 17 efficacious.

3.7.2 Further, the Act currently provides that a party is required to commence
arbitrations within 90 days from receipt of an order under section 9. In the
spirit of discouraging parties to routinely resort to section 9, it is further
proposed to expedite the timeline for commencing arbitrations, by requiring
a party to commence arbitrations within 30 days of making a section 9
application to the Court. This amendment is expected to incentivise parties to
view section 9 as a stop-gap arrangement only, prior to the constitution of
the arbitral tribunal. The arbitral tribunal, once constituted, can vary the
orders passed under section 9 or by the emergency arbitrator if it deems
appropriate, in exercise of powers under section 17. In view thereof, enabling
amendments are also proposed to section 17.

42
3.7.3 The further amendment to section 9 provides that once an arbitral
tribunal is constituted, the parties may approach the tribunal for interim
reliefs under section 17 and not proceed with the application under section
9, unless deemed necessary by the Court. This is expected to significantly
reduce the backlog before the Courts, and also promote urgent interim filings
before an emergency arbitrator, or an arbitral tribunal, as may be necessary.
To further incentivise approaching the arbitral tribunal for obtaining interim
measures of protection, the Court may direct that if the arbitration is not
commenced within the stipulated time period, the order shall stand vacated.
As on date, the Act does not provide a consequence to not commencing
arbitration proceedings within the stipulated time-frame. The Committee is
of the opinion that some legislative certainty in this regard is desirable.

3.7.4 However, these amendments, to bring out an effective solution, would

still require that the Court not entertain applications filed under section 9
once a tribunal is constituted. Very often, parties may obtain an urgent ad-
interim order under section 9 but the application itself remains to be finally
heard and disposed of. As per the law settled in Arcelor Mittal Nippon Steel
(India) Ltd. v. Essar Bulk Terminal Ltd., (2022) 1 SCC 712, the expression
“entertain” under section 9(3) of the Act, means to consider the issues raised
by application of mind. It was held that the bar of Section 9(3) would not
operate, once an application has been entertained and taken up for
consideration. In that case, the bar under Section 9(3) was held to not operate,
as the hearing was concluded and judgment was reserved.

Virtually all matters are heard for ad-interim relief and consequently, these
matters would be said to have been ‘entertained’ by the Court. In view of the
law laid down in Arcelor Mittal, such matters would continue to be heard and
decided by the Court. This not only perpetuates the pendency of section 9
applications in Court, but it also renders the arbitral tribunal incapable of
hearing and granting interim measures of protection on the issues that are
subject matter of the section 9 application.

3.7.5 It is thus felt that under section 9(3) of the Act, a Court must be
precluded from not only applying its mind to the matter, i.e., “entertaining”
an application under section (9), but also from proceeding with the matter
altogether, unless it finds that circumstances exist which may not render the
remedy provided under section 17 efficacious.

3.7.6 Therefore, the Bill seeks to substitute the word ‘entertain’ in sub-section
(3) of section 9 with ‘proceed with’. The Bill further proposes to reduce the
time period for commencement of arbitral proceedings to 30 days from the
date of making an application under section 9. The Bill also seeks to add a
provision that permits the Court to direct that the order under section 9 is to
enable the party to approach the arbitral tribunal under section 17 and if
arbitration proceedings are not commenced within the stipulated time, the
order shall stand vacated.

43
 Recommendation

It is proposed to amend section 9-

(i) to substitute subsection (2) to provide that
where, before the commencement of the arbitral
proceedings, a party applies to a Court for any interim
measure of protection under sub-section (1), it shall also
commence the arbitral proceedings within 30 days from the
date of making such application to the Court;

(ii) to insert a new subsection (2A) to provide that

where, before the commencement of the arbitral
proceedings, a party applies to a Court for any interim
measure of protection under sub-section (1), the Court, for
the purposes of enabling the parties to approach the arbitral
tribunal for adequate interim measures under section 17,
may grant relief under sub-section (1) and shall further
direct that if the arbitral proceedings are not commenced by
the party within the period specified in sub-section (2), the
interim measure granted under the said sub-section shall
stand vacated on the expiry of the said period;

3.8 APPOINTMENT OF ARBITRATORS-AMENDMENTS TO

SECTION 11:

3.8.1 Section 11 of the Act outlines the procedure for appointment of

arbitrators where parties are unable to mutually agree on the appointment of
an arbitrator. Despite the 2015 and 2019 Amendments making significant
inroads in ensuring neutrality of arbitral tribunals, two issues have persisted
with regard to the constitution of arbitral tribunals.

3.8.2 Firstly, entities with greater bargaining power insist on arbitration

clauses providing for unilateral power to constitute/ appoint arbitral
tribunals. This issue has been largely resolved by pronouncements of the
Supreme Court. In TRF Ltd. v. Energo Engg., (2017) 8 SCC 377 (“TRF”),
the Supreme Court held that a person ineligible to act as arbitrator under
section 12(5) of the Act is also ineligible to nominate a person to act as
arbitrator. Extrapolating this principle, the Supreme Court in Perkins
Eastman v. HSCC (India) Limited, (2020) 20 SCC 760 (“Perkins”), held
that a party or an official or an authority interested in the dispute would be
disentitled to make appointment of an arbitrator.

3.8.3 Thus, after Perkins (supra), it is abundantly clear that one party cannot
unilaterally appoint arbitrators to adjudicate the dispute, notwithstanding any
agreement to the contrary. The proposed Bill codifies the law declared by the
Supreme Court in Perkins (supra). However, the proposed Bill also gives a

25
right to the parties to continue with the procedure of unilateral appointment
of arbitrators by a party if there is an express agreement executed between
them subsequent to disputes having arisen between them.

3.8.4 Second, several public sector undertakings and governmental bodies

provide for panel- based appointment of arbitrators. In other words, one party
is constrained to nominate an arbitrator from the panel furnished by the other
party. Usually, the panel of arbitrators comprises of retired employees or
consultants of the party nominating the panel. The Supreme Court in
Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd., (2017)
4 SCC 665 (“Voestalpine”) and Central Organisation for Railways
Electrification v. M/s ECI-SPIC-SMO-MCML (JV), 2019 SCC OnLine SC
1635 (“CORE”), has upheld the right of one party to compel the other party
to appoint person(s) to act as arbitrator from a panel of arbitrators furnished
by it. In order to ensure neutrality of arbitrators, it was felt that such a
procedure for appointment of arbitrators should only be permitted if there is
an express agreement between the parties subsequent to disputes having
arisen between them.

3.8.5 To deal with the legal issues which arise as a result of the aforesaid
judgements, it is proposed to mandate the appointment of arbitrators to be
strictly through consent of both parties. This is notwithstanding an agreement
to the contrary between the parties regarding the appointment of an arbitrator.
However, the parties have been given the option to waive the applicability of
this provision by an express agreement executed subsequent to disputes
having arisen between the parties.

3.8.6 It is thus proposed to amend section 11 to make the three significant

changes in appointment of arbitrators by inserting three new subsections
(2A),(2B) and (2C) in section 11. This aims to address the observations of
the Supreme Court in its recent judgements with regard to unilateral
appointment of arbitrators, as also appointments from a panel unilaterally
constituted by one party. It reinforces the principle of equality enshrined in
section 18 which provides that parties shall be treated with equality. As a
corollary, it follows that if an arbitration agreement provides one party with
the sole right to determine the composition of the arbitral tribunal, it places
the other party at a disadvantage. Such an arrangement is bad in law.

3.8.7 To address the problem of arbitration clauses providing for unilateral

power to constitute/ appoint arbitral tribunals it is proposed to provide in the
proposed new sub section (2A) that the procedure for appointment of
arbitrators shall offer equal right to parties to choose the arbitrators or
presiding arbitrator, as the case may be, and no party shall have the exclusive
right to appoint a sole arbitrator or a presiding arbitrator. Where the
appointment procedure agreed upon by the parties provides for the unilateral
appointment of a sole arbitrator or a presiding arbitrator at the option of one
party, then the appointment of the sole arbitrator or the presiding arbitrator
shall, notwithstanding anything to the contrary specified in the appointment
procedure contained in the agreement, be made in accordance with the
provisions of sub-section (6).Parties may, subsequent to disputes having

26
arisen between them, waive the applicability of this sub- section by an express
agreement in writing.

3.8.8 To address arbitration clauses providing for panel-based appointment

of arbitrators it is proposed to insert a new sub-section (2B) to the effect, that
the procedure for appointment of arbitrators shall offer equal right to parties
to choose from a panel of arbitrators or presiding arbitrators, as the case may
be, and no party shall have the exclusive right to insist that the other party
appoint arbitrators from a panel offered by it for the appointment of an
arbitrator or presiding arbitrator. Where the appointment procedure agreed
upon by the parties provides for the appointment of arbitrators from a panel
selected by any party, then the appointment of the arbitrators shall,
notwithstanding anything to the contrary specified in the appointment
procedure contained in the agreement, be made in accordance with the
provisions of sub-section (6).Parties may, subsequent to disputes having
arisen between them, waive the applicability of this sub-section by an
express agreement in writing.

3.9 RETIRED EMPLOYEES AS ARBITRATORS

3.9.1 The Fifth and Seventh Schedules suggest that only serving employees
of one of the parties are disqualified by the statute. There is no reference to
disqualification of a retired employees of one of the parties. However, the
entry relating to past business relationships with a party has given rise to
doubts as to whether retired employees can be appointed as arbitrators. The
issue attains great significance when the panel of arbitrators, offered by one
party to the other to choose the arbitrator from, is comprised only of retired
employees.

3.9.2 In the judgment of Government of Haryana PWD Haryana(B&R)

Branch v. G.F. Toll Road (P) Ltd., (2019) 3 SCC 505, the Supreme Court
accepted the appointment of a retired officer of the Government. However,
at the time of such appointment, the provisions of the 2015 Amendments had
not come into force. Therefore, the said judgment cannot be considered as a
precedent on the issue of eligibility of retired employees as arbitrators.

3.9.3 In Voestalpine, the 31 retired officers on the panel of arbitrators did not
include former employees of the employer. In the facts of the case, the
Supreme Court pointed out that the said retired officers of the Government
or PSUs were not disqualified under the Fifth and Seventh Schedules as they
were not serving employees of Delhi Metro Rail Corporation.

3.9.4 It was thus implied in Voestalpine that a retired employee of one of the
parties cannot be appointed, though retired employees of other organisations
could be appointed as arbitrators. It was also implied that retired officers of
one of the parties are not likely to be independent and unbiased.

3.9.5 In this context, the Committee is of the opinion that instead of imposing
a blanket disqualification on all retired employees from being appointed as
an arbitrator by their erstwhile employers, it would be prudent to prescribe a

27
cooling-off period after retirement. This is akin to a cooling-off period
prescribed for a government servant before accepting employment after
retirement.

3.9.6 It is desirable that experienced persons and experts with domain

knowledge are available for appointment as arbitrators. A blanket ban on
retired employees may restrict the pool which is not desirable. Modern business
corporations are not monolithic in structure and deal with a variety of areas
of operation. An employee working in one department may have no
connection with the other departments. Moreover, such a blanket ban on
retired employees will effectively rule out all retired Government employees
from acting as arbitrators in Government contracts. Government contracts
involve public money, and it is necessary to have people with integrity and
honesty to act as arbitrators. The expertise, integrity and honesty of retired
officers are easily subject to verification. Hence, subject to the completion of
the cooling period after retirement, the Committee recommends that retired
employees should not be ineligible to act as arbitrators.

3.9.7 It is therefore proposed to add in the new subsection (2C) that an

arbitrator who is an employee, consultant, advisor or has any other past or
present business relationship with either of the parties cannot be appointed
as an arbitrator to adjudicate the dispute, unless the cooling-off period of two
years is fulfilled.

3.9.8 It is proposed to provide in new subsection (2C) that no person referred

to in serial number 1 of the Seventh Schedule shall be appointed as arbitrator
unless he has completed a mandatory cooling period of two years from the
date of cessation of such relationship. Parties may, subsequent to disputes
having arisen between them, waive the applicability of this sub-section by an
express agreement in writing.

3.9.9 To expedite appointment of arbitrators, it is proposed to amend

subsection (4)(a) to substitute the words “within thirty days” with
“expeditiously but not later than fifteen days”. It is further proposed to
substitute the words “thirty days” in sub-section (4)(b) with “expeditiously
but not later than fifteen days”. Both these amendments are necessary to cut
down the delays which are currently experienced in the time taken for
appointment of arbitrators.

3.9.10 To give primacy to sub-sections (2A), (2B) and (2C), it is proposed to

amend subsection (6) to substitute the words “unless the agreement on the
appointment procedure provides other means for securing the appointment”
with the words “notwithstanding that anything contained in the agreement
on the appointment procedure provides other means for securing the
appointment”.

3.9.11 This amendment is necessary in cases where the court or arbitral

institution has to intervene to appoint an arbitrator where the parties have
failed to reach an agreement.

28
3.9.12 It is also proposed to add sub-section (16) to include a time-frame of
30 days to ensure that applications filed under this provision are disposed of
by the Court as expeditiously as possible.

29
Recommendation
To amend section 11 to
(a) insert a new subsection (2A) to provide that the
procedure for appointment of arbitrators shall offer an equal right to
parties to choose the arbitrators or presiding arbitrator, as the case
may be, and no party shall have the exclusive right to appoint a sole
arbitrator or a presiding arbitrator and where the appointment
procedure agreed upon by the parties provides for the unilateral
appointment of a sole arbitrator or a presiding arbitrator at the option
of one party, then the appointment of the sole arbitrator or the
presiding arbitrator shall, notwithstanding anything to the contrary
specified in the appointment procedure contained in the agreement,
be made in accordance with the provisions of sub-section (6);
(b) to insert a new subsection (2B) to provide that, the
procedure for appointment of arbitrators shall offer an equal right to
parties to choose arbitrators or presiding arbitrators, as the case may
be, and no party shall have the exclusive right to insist that the other
party appoint arbitrators from a panel offered by it for the
appointment of an arbitrator or presiding arbitrator, and where the
appointment procedure agreed upon by the parties provides for the
appointment of arbitrators from a panel selected by any party, then
the appointment of the arbitrators shall, notwithstanding anything to
the contrary specified in the appointment procedure contained in the
agreement, be made in accordance with the provisions of sub-section
(6);
(c) to insert a new subsection (2C) to provide that no person
referred to in serial number 1 of the Seventh Schedule shall be
appointed as arbitrator unless he has completed a mandatory cooling-
off period of two years from the date of cessation of such relationship;
(d) to insert a proviso to all the three sub sections that parties
may, subsequent to disputes having arisen between them, waive the
applicability of the said sub-sections by an express agreement in
writing;
(e) in sub section (4) to substitute in clauses (a) and (b) the
words “within thirty days” with the words “expeditiously but not later
than fifteen days”;
(f) in sub-section (6) to substitute for the words, “unless the
agreement on the appointment procedure provides other means for
securing the appointment” the following words “notwithstanding
anything contained in the agreement or the appointment procedure
provides other means for securing the appointment.”;
(g) in sub-section (14) to substitute for the words “subject to
the rates specified in the Fourth Schedule” the words “as may be
prescribed considering the quantum of the claim and counterclaim,
requirement of leading oral evidence, time spent on the arbitration
proceedings and other similar factors that may be considered”;
(h) to insert new sub-section 15 to provide that subject to the
provisions of sub- section (14), the fees of each of the arbitrators in
the arbitral tribunal shall be fixed by written agreement between the
parties, failing which fees shall be payable to each arbitrator as may

30
 be prescribed considering the quantum of the claim and counterclaim,
requirement of leading oral evidence, time spent on the arbitration
proceedings and other similar factors that may be considered;
(i) to insert new sub-section 16 to provide that (16) an
application filed under this section shall be disposed of as
expeditiously as possible and an endeavour shall be made to dispose
of the matter within a period of thirty days from the date of the
application.

3.10. ARBITRATORS FEES – OMISSION OF SECTION 11A &

FOURTH SCHEDULE

3.10.1 It is widely perceived that the costs of arbitration have shot up. In
some instances, it exceeds the amount in dispute. It is thus necessary to
evolve a mechanism to curtail costs in arbitration proceedings to make
arbitration an effective alternative dispute mechanism. In its 246th Report,
the Law Commission examined the issue relating to fees charged by
arbitrators. The Report noted that fees of arbitrators was one of the main
complaints against arbitration in India, especially in ad hoc arbitration. The
high costs associated with the arbitrations included the arbitrary, unilateral
and disproportionate fixation of fees by several arbitrators.

3.10.2 The Law Commission also observed that in ad hoc arbitrations, fees
are often charged on a "per sitting" basis (with sometimes two/three sittings
in a day in the same dispute and between the same parties), dates are usually
spread out over a long period of time, and proceedings continue for years -
which result in increasing costs, and denial of justice.

3.10.3 Calculation of arbitrators’ fees on an hourly or per sitting basis may

require a relook. It is felt that such an approach encourages inefficiency, as
it rewards lawyers and arbitrators who take longer to complete the
proceedings. It further penalises those who operate efficiently.

3.10.4 The 246th Law Commission Report took note of this aspect, which
also finds mention in Union of India v. Singh Builders Syndicate, (2009) 4
SCC 523. In that case, the Court observed as follows:

“[T]he cost of arbitration can be high if the arbitral tribunal consists

of retired Judges… There is no doubt a prevalent opinion that the
cost of arbitration becomes very high in many cases where retired
Judges are arbitrators. The large number of sittings and charging of
very high fees per sitting, with several add-ons, without any ceiling,
have many a time resulted in the cost of arbitration approaching or
even exceeding the amount involved in the dispute or the amount of
the award. When an arbitrator is appointed by a court without
indicating fees, either both parties or at least one party is at a
disadvantage. Firstly, the parties feel constrained to agree to
whatever fees is suggested by the arbitrator, even if it is high or
beyond their capacity. Secondly, if a high fee is claimed by the
arbitrator and one party agrees to pay such fee, the other party, who

31
 is unable to afford such fee or reluctant to pay such high fee, is put
to an embarrassing position. He will not be in a position to express
his reservation or objection to the high fee, owing to an apprehension
that refusal by him to agree for the fee suggested by the arbitrator,
may prejudice his case or create a bias in favour of the other party
who readily agreed to pay the high fee.”

3.10.5 The Law Commission observed that the fee structure for arbitrators
must be rationalised. In order to provide a workable solution to this problem,
the 246th Report recommended a model schedule of fees. It also
recommended that High Courts be empowered to frame appropriate rules for
the fixation of arbitrators’ fees by taking the model schedule into account.
These recommendations were implemented resulting in the enactment of
section 11A and the Fourth Schedule by the 2015 Amendment Act.

3.10.6 Although section 11A and the Fourth Schedule were incorporated to
provide a framework for determining the fees of arbitrators, its execution was
riddled with several issues. The Supreme Court, in ONGC v. Afcons
Gunanusa JV, 2022 SCC OnLine SC 1122, observed that the Fourth
Schedule was to serve as a guide for different High Courts to frame rules for
determining the fees of arbitrators. However, the High Courts had been slow
in framing these rules for the purpose of determination of fees and the
manner of payment to the arbitral tribunal. Apart from the High Courts of
Rajasthan, Kerala and Bombay, other High Courts had not framed rules
under section 11(14) of the Act for the determination of fees. Further, the
rules framed by High Courts of Bombay and Rajasthan only governed
arbitrators appointed by the Courts. Thus, the purpose of section 11(14) for
regulating fees in ad-hoc arbitrations remained unrealised.

3.10.7 The Supreme Court further held that the failure of many High Courts
to notify the rules had led to a situation where the purpose of introducing the
Fourth Schedule and sub-section (14) to section 11 had been rendered
nugatory, and the Court-appointed arbitrator(s) continued to impose
unilateral and arbitrary fees on parties. Further, such unilateral fixation of
fees violated the principle of party autonomy, which was central to the
resolution of disputes through arbitration.

3.10.8 The Committee received many recommendations highlighting several

problems with the Fourth Schedule of the Act. It was further highlighted that
ad hoc tribunals did not always follow the prescribed fees under Fourth
Schedule of the Act.

3.10.9 The ceiling on arbitrators’ fees was fixed way back in 2015.
Necessarily, the ceiling requires a relook, and must be periodically reviewed
and revised.

3.10.10 The Schedule should adequately compensate an arbitrator for

adjudicating complex disputes, which require significant devotion of time
and resources. The current system of fee calculation is based entirely on the
quantum of the claim. It is felt that the quantum of the claim may not be the

32
 most appropriate yardstick to determine arbitrators’ fees. The additional
parameter to determine arbitrators’ fees could include providing an
additional percentage of fee if the parties decide to lead oral or expert
evidence. This is in contrast to arbitrations where the dispute is narrow and/or
is being adjudicated on basis of documents.

3.10.11 It is further recommended that a mechanism to determine the fees,

in cases where a dispute is settled and the tribunal’s mandate is terminated,
be devised. Such a mechanism may also consider instances where the
tribunal is reconstituted.

3.10.12 Globally, Alternative Fee Arrangements (AFA) are being

increasingly resorted to, in order to cut down cost of arbitral services.31 Such
an arrangement may be considered in respect of arbitrators’ fees as well.
Under this model, fees are charged on a fixed cost basis, with an agreed upper
ceiling. This is known as Value Billing, which involves consideration of a
variety of factors while charging for the value of work undertaken, rather
than the time expended. Under this mechanism, charges are based on both
the time and cost saved.

3.10.13 Considering the issues faced by various stakeholders, the Committee

has proposed the omission of section 11-A and the Fourth Schedule from the
Act. Further, it is recommended that the Central Government be empowered
to prescribe the legal framework for fees of arbitrators by framing
appropriate rules. This will enable the Government to dynamically adapt the
fee structure for different categories of arbitrations, and consider Alternative
Fee Arrangements. It is expected that this will ensure that costs of arbitral
proceedings can be rationalised and moderated.

3.10.14 The Committee has recommended amendments to amend

subsections (14) and (15) of section 11 to empower the Central Government
by rules to regulate fees, which will give flexibility to deal with different type
of cases and also avoid the need to amend the Fourth Schedule. Further, the
amendments suggested provide that the fees shall consider the quantum of
the claim and counterclaim, requirement of leading oral evidence, time spent
on the arbitration proceedings and other similar factors that may be
considered. Accordingly, the Committee recommends omission of section
11-A and consequently the Fourth Schedule from the Act.

Recommendation
It is proposed to omit section 11A.

3.11 DISCLOSURE REQUIREMENTS OF ARBITRATORS

UNDER SECTION 12, AND THE FIFTH AND SEVENTH
SCHEDULES

31
Susskind .p 35 infra

33
3.11.1 As observed by the Law Commission in its 246th Report, arbitral
proceedings must be conducted in accordance with principles of natural
justice. In the context of arbitration, neutrality of arbitrators, viz. their
independence and impartiality, is critical to the entire process. In the Act, the
test for neutrality is set out in section 12(3) which provides – “An arbitrator
may be challenged only if (a) circumstances exist that give rise to justifiable
doubts as to his independence or impartiality…”

3.11.2 The Commission noted that the Act did not lay down any other
conditions to identify the “circumstances” which gives rise to “justifiable
doubts”. This has led to ambiguity and uncertainty.

3.11.3 To deal with such a situation, the Law Commission, in its 246th
Report, suggested the requirement of specific disclosures by the arbitrators,
at the stage of appointment, regarding existence of any relationship or
interest of any kind which is likely to give rise to justifiable doubts as to his
impartiality. This was supplemented by recommending incorporation of the
Fifth and Seventh Schedules, which were drawn from the Red and Orange
lists of the IBA Guidelines on Conflicts of Interest in International
Arbitration. This provided a ‘guide’ and a frame of reference as to whether
circumstances exist to give rise to justifiable doubts as to neutrality and
impartiality of arbitrators.

3.11.4 The Law Commission, however, felt that party autonomy must be
respected and parties should be allowed to waive an arbitrator’s ineligibility.
The recommendation was accepted, and the 2015 Amendment Act
incorporated two schedules, namely the Fifth and Seventh Schedules in the
Act. Though the insertion of the two Schedules has made the disclosure
requirements clear and precise, yet, in practice, certain difficulties have
arisen.

3.11.5 To further strengthen the disclosure norms the Committee is of the

opinion that Section 12 should be amended, and a more detailed format for
disclosure must be incorporated in the Sixth Schedule. This will preclude
parties challenging an arbitrator’s appointment belatedly, on the ground that
the circumstances leading to the challenge were not known to them earlier.
This is likely to further reduce frivolous and meritless challenges to the
arbitral tribunal’s composition, on grounds of bias and impartiality. Such
challenges often cause undue embarrassment to the arbitrators, besides
delaying the proceedings.

3.11.6 It is further proposed to amend section 12 and clarify the procedure to

be followed by an arbitrator upon his appointment.

3.11.7 The ambit of disclosure under section 12(1) of the Act is required to
include past and present relationships not only of the potential arbitrator, but
also his close family member(s). Explanation 1 to the Fifth and Seventh
Schedules states that the term “close family member” refers to a spouse,
sibling, child, parent, or life partner.

34
3.11.8 Further, such disclosure should also include details of: (i) counsel (s)
representing or advising any of the parties; and (ii) other arbitrators. The
amendment seeks to add four new explanations to section 12 of the Act.

3.11.9 The Sixth Schedule, introduced by the 2015 Amendment, requires

arbitrators to the parties and co-arbitrators, to disclose the number of ongoing
arbitrations, and disclose circumstances which are likely to affect his/her
ability to devote sufficient time to the arbitration. In particular, it refers to
his/her ability to complete the entire arbitration within 12 months.

3.11.10 In many instances, arbitrators who have a heavy docket are unable
to devote enough time to an arbitration. In such cases, the parties are often
faced with long delays and extended schedules, despite no fault of theirs.

3.11.11 Such practice is also contrary to the spirit of the proviso to Section
24 (1) which provides “the arbitral tribunal shall, as far as possible, hold oral
hearings for the presentation of evidence or for oral argument on day-to-day
basis, and not grant any adjournments unless sufficient cause is made out…”.

3.11.12 It has also been noted by the Committee that several arbitrators do
not disclose the number of ongoing arbitrations pending with them.

3.11.13 Arbitration as a mode of dispute resolution is preferred since it is

perceived as a faster and more efficacious remedy than courts. Faster disposal
of cases involving commercial disputes is in the interest of the economy. It
is also essential to building an efficient infrastructure in the country.

3.11.14 Accordingly, it is necessary to ensure that an arbitrator’s docket is

not unduly heavy. Therefore, it is proposed to introduce a new sub-section
(6) to prevent arbitrators from accepting fresh arbitrations in excess of 15
on-going arbitrations, after the commencement of the Arbitration and
Conciliation (Amendment) Act, 2023.

3.11.15 However, with a view to preserve party autonomy, it is further

recommended to confer the discretion to waive the applicability of such a
restriction on the parties. However, such a waiver must be given after
disputes having arisen between them, through an express written agreement.

3.11.16 The disclosure as per the proposed Sixth Schedule is sought to be

made mandatory even in respect of arbitrations pending at the time of
commencement of the Arbitration and Conciliation (Amendment) Act,
2023. Such disclosure should be made by the arbitrators within fifteen
days of such commencement, and a copy forwarded to the Court or arbitral
institution appointing them, as the case may be.

3.11.17 In this background, the Committee recommends amendments to

section 12 to provide for stricter disclosure norms in Sixth Schedule, and to
impose a limit to the maximum number of ongoing arbitrations per arbitrator
at a given point in time.

35
Recommendation:- Amendment of section 12

(a) subsection (1) to provide that when any person is

approached in connection with his possible appointment as arbitrator he
shall forthwith truly and fully disclose in the Form specified in the Sixth
Schedule-
(i) any circumstances or matters of his or his close
family members, past or present relationship with or any interest
in any of the parties, or the counsel representing or advising any
of the parties, or with other arbitrators or in relation to the subject
matter in dispute, whether personal, financial, business,
professional or any other kind;
(ii) a declaration that there are no past or present matters
or circumstances which exist which is likely to give rise to
justifiable doubts as to his independence or impartiality or conflict
of interest having regard to the grounds stated in the Fifth
Schedule;
(iii) a declaration that he has the ability to devote
sufficient time to the arbitration and in particular his ability to
complete the entire arbitration within the initial period of 12
months, after completion of pleadings under section 23(4) of the
Act.

(b) in sub-section (2) to substitute for the words “shall,

without delay, disclose to the parties” with the words “shall,
contemporaneously and promptly and without delay, disclose to the
parties”.

(c) to insert a new subsection (6) to provide that no person,

after the commencement of the Arbitration and Conciliation
(Amendment) Act, 2023 shall accept any fresh arbitration in excess of
fifteen on-going arbitrations at any given point of time. However, the
parties may, subsequent to disputes having arisen between them, waive the
applicability of this sub-section by an express agreement in writing.

(d) to insert a new subsection (7) to provide that every

arbitrator in arbitrations pending at the commencement of the Arbitration
and Conciliation (Amendment) Act, 2023 shall, within fifteen days from
the date of such commencement, file a disclosure in the Form specified
in the Sixth Schedule to the Court or the arbitral tribunal appointing him
and in other cases, to the parties.

3.12 ENSURING INDEPENDENCE AND IMPARTIALITY OF

ARBITRAL INSTITUTIONS: RECOMMENDED ADDITION

36
 OF SECTION 12A

3.12.1 To supplement the proposed amendments to section 12 of the Act, it

is proposed that a new section 12A be added. Section 12A is to impose the
duty of independence and impartiality upon arbitral institutions as well.
Since arbitral institutions play a significant role in the appointment of
arbitrators, case management and conduct of proceedings, it is necessary to
ensure independence and impartiality in their functioning as well.

3.12.2 Section 12A seeks to make it mandatory for arbitral institutions to

periodically disclose and publish information concerning their ownership and
management, in such form as may be prescribed. Further, the Bill casts a duty
upon arbitral institutions to ensure fairness in appointment of arbitrators.
This includes ensuring that all eligible arbitrators are fairly considered for
appointment by an institution. No arbitrator should be unduly favoured, and
all matters should be evenly distributed amongst the empanelled arbitrators,
as far as practicable.

3.12.3 Arbitral institutions would be required to maintain a database of

arbitrators, containing details regarding their professional expertise, number
of ongoing arbitrations, calendar of dates and other details to facilitate the
parties in planning their schedule. The creation and maintenance of a
database of arbitrators will further promote transparency, improve case
management, and ensure expeditious conduct of proceedings. It would
ensure transparency regarding the availability of arbitrators and their
expertise vis-à-vis the subject matter of the dispute, etc. It will also oblige
arbitral institutions to monitor the timelines of proceedings to ensure their
conclusion without delay.

3.12.4 The proposed amendment also requires arbitral institutions to publish

a code of ethics for arbitrators. Leading arbitral institutions already have a
code of ethics for arbitrators. Some examples are the HKIAC, Code of Ethical
Conduct, 2017; ICC Note to Parties and Arbitral Tribunals on the Conduct
of the Arbitration, 2021; LCIA Notes for Arbitrators, 2017; and SIAC Code
of Ethics for an Arbitrator, 2015; etc.

3.12.5 Since arbitrators are engaged in providing specialised expert services, it

is necessary to have a written code of their duties and obligations. A code of
ethics would guide the arbitrators as to their role in the conduct of arbitral
proceedings. Such a code may also be accompanied with consequences on
account of non-compliances with the obligations contained therein. The
Committee therefore recommends that arbitral institutions be required to draft
a code of ethics for arbitral proceedings to be conducted under their aegis. Such a code
would be binding.

3.12.6 Accordingly, the Committee recommends the insertion of a new

section 12A to provide for duties and responsibilities of arbitral institutions to
ensure their independence and impartiality.

37
Recommendation
It is proposed to insert new section 12A to provide:
(1) Arbitral institutions shall be independent and impartial and shall maintain highest
standards of professional excellence and their ownership and management shall be
disclosed and published periodically from time to time in such form as may be
prescribed.
(2) Arbitral institutions, while appointing arbitrators, shall ensure that the appointments
are as far as possible evenly distributed and no undue favours are shown to any
arbitrator.
(3) Arbitral institutions shall for the purposes of appointment of arbitrators, maintain
a data base of arbitrators with details about their professional expertise, number of
ongoing arbitrations, calendar of available dates and such other details to facilitate the
parties to plan their schedule.
(4) Arbitral institutions shall monitor the timelines of the arbitrations to ensure they
are concluded without undue delay.
(5) Arbitral institutions shall publish a Code of Ethics for Arbitrators;

3.13 EMERGENCY ARBITRATION NEW SECTION 12B

3.13.2 Very often, parties approach the courts for interim relief pending the
constitution of the arbitral tribunal under section 9. However, in many
instances courts are unable to grant urgent interim reliefs due to the heavy
workload. To address this difficulty, many Institutional Arbitration Rules
provide for the appointment of emergency arbitrators.

3.13.1 The need for appointment of emergency arbitrators was necessitated

due to the demand by some claimants for swift interim relief in commercial
proceedings. A party that needs urgent interim or conservatory measures and
cannot await the constitution of an arbitral tribunal may apply for emergency
relief by seeking appointment of an emergency arbitrator.

3.13.3 A party that needs urgent interim or conservatory measures, may

apply for emergency relief in accordance with the emergency arbitrator
provisions under the rules of the respective arbitral institutions. The
application can be submitted at the same time, before or after the "Request
for Arbitration", but no emergency arbitrator shall be appointed after the file
has been transmitted to the arbitral tribunal.

3.13.4 Insofar as appointment of emergency arbitrators is concerned, the rules

of various arbitral institutions in India provide for the appointment of an

38
emergency arbitrator. Such appointments however, do not have explicit
legislative sanction under the Act. Absence of express legal sanction to
emergency arbitrator’s awards may result in significant hindrances to their
enforcement. The issue of enforceability or an emergency arbitrator’s award
fell for consideration before the Supreme Court of India in Amazon.com NV
Investment Holdings LLC v. Future Retail Ltd. & Ors., (2022) 1 SCC 209,
wherein the Court held that an emergency arbitrator’s award will be
considered as an order enforceable under section 17(1) of the Act.
Consequently, legal recognition to an emergency arbitrator’s award was
provided.

3.13.5 In this context, the 246th Report of the Law Commission of India had
recommended to recognise the concept of emergency arbitrator by widening
the definition of “arbitral tribunal” under section 2(1)(d) of the Act to mean
and include an emergency arbitrator. However, this recommendation was not
incorporated in the 2015 Amendment to the Act.

3.13.6 In 2019, the Srikrishna Committee Report also made

recommendations to include emergency arbitration in the Act. However,
neither the 2019 Amendments nor the 2021 Amendments have ultimately
incorporated any provisions for emergency arbitration in the Act.

3.13.7 According to the 246th Report of the Law Commission, it is necessary

to provide statutory recognition to emergency arbitrators to ensure that
orders passed by emergency arbitrators appointed under institutional rules
such as the SIAC Arbitration Rules, are given statutory recognition in India.
It was further stated that unless the emergency arbitrator is recognized, his
orders on urgent interim measures cannot be enforced in the courts in India,
which will ultimately defeat the very rationale for the appointment of
emergency arbitrators.

3.13.8 Under the Rules of the International Chamber of Commerce (“ICC”),

one of the key changes effected in 2012 was the creation of an emergency
arbitration procedure to provide interim and conservatory relief prior to the
constitution of the arbitral tribunal. Article 29 and Appendix V of the 2012
Rules provide for the appointment of an emergency arbitrator who can issue
orders concerning interim or conservatory measures "that cannot await the
constitution of an arbitral tribunal”.

3.13.9 The London Court of International Arbitration (“LCIA”) amended its

Rules in 2014, incorporating Article 9B to provide for appointment of an
emergency arbitrator who can grant emergency relief. The LCIA Court will
strive to appoint the emergency arbitrator (who will always be a sole
arbitrator) within three days of an application, and s/he shall decide the claim
for emergency relief as soon as possible, but no later than 14 days following
his/her appointment. No hearing is necessary for the emergency arbitrator to
reach a decision. Once a tribunal is formed, it may confirm, vary, discharge,
or revoke any order made by the emergency arbitrator. In addition to the
emergency arbitrator option set out above, the 2014 LCIA Rules retain the
option provided under the 1998 Rules which allows parties to apply for the

39
expedited formation of the tribunal in cases of “exceptional urgency”.

3.13.10 The arbitral institutions in India conducting institutional arbitrations

will have to take note of the international trend in view of the international
best practices and the recommendations of the 246th Report of the Law
Commission and would be required to make suitable revision to their Rules
on a priority basis.

3.13.11 The Committee is of the considered view that it is important to

introduce statutory provisions on emergency arbitration in the Act to avoid
confusion regarding the validity of the emergency arbitration procedure and
enforcement of orders passed by emergency arbitrators. The provisions
regarding emergency arbitration when applied in a uniform and consistent
manner will reduce the filing of applications under Section 9 to the Courts
and also incentivise the use of arbitral institutions to conduct arbitration
proceedings. Emergency arbitrators would be equipped, as per the rules of
the institution, to pass orders within a very short frame of time ranging from
a few days, but not exceeding 30 days. This would ensure adequate
protection of the parties’ interest by achieving the twin objectives of
obviating unnecessary recourse to Courts under section 9 and promotion of
institutional arbitration.

3.13.12 Pertinently, according to the Mumbai Centre for International

Arbitration’s (“MCIA”) Annual Report of 2022, two applications were
received for the appointment of emergency arbitrator under the MCIA Rules.
In both these applications, the MCIA appointed an arbitrator within 24 hours,
and both awards were delivered within the 14-day timeline as mandated
under the MCIA Rules.

3.13.13 Incorporating provisions regarding emergency arbitration would also

make India a prominent seat of arbitration. According to the 2021 survey
report published by the Queen Mary University of London and White & Case
(“2021 International Arbitration Survey”), when asked about the adaptations
that would make other seats more attractive to the users, 39% of the
participants replied highlighting the “ability to enforce decisions of
emergency arbitrators or interim measures by arbitral tribunals”. Hence,
there is a demand from the stakeholders to ensure statutory recognition to
orders passed by emergency arbitrators.

3.13.14 The statutory regime in India currently lacks provisions supporting

the enforcement of emergency arbitrator awards, as opposed to the position
in developed arbitration jurisdictions such as Singapore and Hong Kong,
which have recognised the enforceability of orders given by an emergency
arbitrator. It is suggested that the law may be suitably amended to recognize
an emergency arbitrator’s order passed in India seated arbitrations, which
shall be enforced in the same manner as if it is an order of the arbitral tribunal
enforced under section 17(2).

3.13.15 Foreign-seated emergency arbitrators’ orders are not directly

enforceable in India except by applying to Court under section 9 of the Act

40
 [Raffles Design International India Private Limited & Anr. v. Educomp
Professional Education Limited & Ors., 2016 SCC OnLine Del 5521,
Shanghai Electric Group Co. Ltd. v. Reliance Infrastructure Ltd., 2022
SCC OnLine Del 2112, Uphealth Holdings INC. v. Glocal Healthcare
Systems (P) Ltd., 2023 SCC OnLine Cal 2442]. The Committee is of the
opinion that the present position be retained and enforcement of orders from
foreign-seated emergency arbitrators be implemented by way of a section 9
Application before the Courts.

3.13.16 The Committee does not suggest an expansion of the definition of

“arbitral tribunal” under section 2(1)(d) of the Act to include an emergency
arbitrator as that would render the orders passed in an emergency arbitration
amenable to the appellate mechanism prescribed under Section 37 of the Act.
The Committee is of the opinion that remedy by way of appeal under Section
37 of the Act is unnecessary for orders passed by an emergency arbitrator as
independent recourses against such orders are available under the Rules of
the relevant arbitral institutions appointed by the parties to adjudicate the
dispute and in any event such orders are subject to review by the arbitral
tribunal.

3.13.17 The question of whether the expression “emergency award” as

recommended by the Law Commission in their 246th Report fits within the
definition of “award” under the Act was also discussed. It was felt that there
is a qualitative difference in the nature of an emergency order passed by an
emergency arbitrator as against that of an award passed by an arbitral
tribunal. Both cannot be treated on an equal footing under the Act. The
provisions relating to challenge of an award under the Act should not be made
applicable to orders of the emergency arbitrator as they are amenable to
challenge and/or modification by the arbitral institution and the arbitral
tribunal.

3.13.18 It is also proposed to impose a duty on emergency arbitrators to pass

orders or awards of interim relief without any delay. Currently, various
arbitral institutions around the world provide expedited timelines for
orders/awards by emergency arbitrators32. An upper limit of 30 days has been
stipulated from the date of the emergency arbitrator’s appointment for
passing of the order. One of the objects underlying the appointment of an
emergency arbitrator is for expeditious relief where circumstances demand
the same. Statutory introduction of a timeline for passing an order or award
of interim relief by an emergency arbitrator is in furtherance of this objective.

3.13.19 The Committee recommends insertion of new section 12B to

explicitly recognise emergency arbitration and orders passed pursuant
thereto. Arbitral institutions may, for the purpose of this Act, enact rules for
the appointment of emergency arbitrators and regulate the conduct of
emergency arbitral proceedings. Consequently, an amendment to define

32
ICC Rules, 2021 – Within 15 days from date of file transmission; SIAC Rules, 2016 – Within 14 days
from date of appointment;. LCIA Rules, 2020 – Within 14 days from date of appointment;.
MCIA Rules, 2017 – Within 14 days from date of appointment; Delhi International Arbitration
Centre (“DIAC”) Rules, 2023 - Within 14 days from date of appointment; etc.

41
 ‘emergency arbitrator’ in clause section 2(1) (ea) of the Act as the emergency
arbitrator appointed under section 12B, is recommended;

Recommendation
(1) It is proposed to insert new section 12B to provide the following: -
(i) Arbitral institutions may, for the purposes of this Act, provide for
the appointment of emergency arbitrators and the conduct of emergency
arbitral proceedings under their rules.
(ii) An emergency arbitrator appointed under this section shall enter upon
the reference without delay and pass his order or award of interim relief as
expeditiously as possible and in any event not exceeding 30 days from the date on
which s/he was appointed;
(iii) Any order issued by an emergency arbitrator shall be enforced in the
same manner as if it is an order of arbitral tribunal enforced under sub-section (2) of
section 17.”
(2) It is proposed to amend section 2(1) to insert a new clause (ea) defining
emergency arbitrator as the emergency arbitrator appointed under section 12B.

3.14 CHALLENGE TO AN ARBITRATOR -SECTION 13

3.14.1 Currently, a challenge to the arbitrator, when a party has justifiable

doubts as per section 12(1) of the Act, is to be made to the arbitral tribunal
itself under section 13 of the Act and if such challenge fails, then the
arbitration continues, and the grounds can be taken up while challenging the
final award under section 34. This not only makes, to some extent, the
arbitrator a judge in his own cause when deciding an application under section
13, but also forces an unwilling party to continue with the arbitration without
timely recourse against the order passed by the arbitrator under section 13.

3.14.2 Rejection of an application under section 13 would in most

circumstances result in an application under section 34 by the aggrieved
party wherein the same grounds taken in the Section 13 application are
reagitated along with the merits of the award. This would result in increased
burden on the Court’s docket as well as delay in the proceedings. In some
instances, a recalcitrant party may resort to filing of writ petitions and even
suits on the strength of peculiar facts to warrant judicial interference,
ultimately leading to the mandate of minimal judicial interference under
section 5 of the Act being vitiated, despite the Court’s attempt to uphold the
said mandate.

3.14.3 The question that arises for consideration is whether it is desirable to

provide for an immediate appeal to the Court under Section 37 against the

42
decision of an arbitral tribunal rejecting an application under Section 13
challenging the arbitrator or whether such a challenge can be made only after
the award is passed. The 176th Report of the Law Commission dealt with this
question in its Report.

3.14.4 The176th Report of the Law Commission traced the position in other
jurisdictions and also the UNCITRAL debates and the Model Law.
According to the Report, the English Act, 1996 did not contain any provision
for challenging an arbitral tribunal before the same tribunal and a subsequent
challenge to the tribunal’s decision thereon. On the other hand, Section 24 of
the English Act, 1996 prescribes a challenge procedure before the Court.

3.14.5 The Model Law in Art. 13 provides for an immediate appeal against
an interlocutory order of the arbitral tribunal rejecting a plea of bias or
disqualification. However, the said remedy is omitted in the Indian
Arbitration and Conciliation Act in Section 13 as well as in sub section (2)
of sec. 37.

3.14.6 Art.13(3) of the Model Law provides for an immediate right of appeal
and challenge to the arbitrator’s decision on bias before the Court within 30
days. Further, it makes the Court’s decision on such a challenge non-
appealable. While such a challenge before the Court is pending, the Model
Law contemplates that the arbitral proceedings ‘may’ continue and the
arbitrator may make an award as well. Several countries which have adopted
the Model Law have retained the text of Art. 13(3) (See sec. 1037(3) of
German Arbitration Act, 1998, sec. 13(2) of Schedule to the Australian Act,
Art. 13(3) of the Canadian Act, 1985, Art. 13(3) of the Schedule to the Ireland
Act, 1998, Art. 1393 of the first schedule of the New Zealand Act, 1999).

3.14.7 The 176th Report also notes 1985 Report of the UN Commission on
the adoption of the Model Law which considered this question elaborately
(see paras 121 to 134) and finally came to the conclusion that if the plea of
bias is rejected, there must be an immediate appeal. It considered different
alternatives. It considered (in para 122) the plea that if Art. 13(3) is deleted,
it would ‘reduce the risk of dilatory tactics’. It also considered that pleas that,
at any rate, Art. 13(3) may be restricted to cases of a single arbitrator or a
majority against whom a plea of bias was raised. Another suggestion was that
it should be left to the tribunal whether to permit immediate Court
intervention or not, when a plea of bias was refused. On the other hand, there
were suggestions (para 123) that pending court decision, the arbitral tribunal
should not be allowed to go ahead since such ‘continuation would cause
unnecessary waste of time and costs if the court later sustained the challenge
or that it should not go forward if the court granted a stay’. After considering
all these suggestions, the UN Commission observed that the ‘prevailing
view, however, was to retain the system adopted in Art. 13 of the Model Law
since it would strike an apparent balance between the need for preventing
obstruction or dilatory tactics and the desire of avoiding waste of time and
money.’

3.14.8 The 176th Report, after elaborately discussing the pros and cons as

43
 discussed above, decided against providing an appeal against an order of the
arbitral tribunal refusing the challenge under Section 13.

3.14.9 However, the Committee is of the considered opinion, with due

respect to the view taken in the 176th report, that it is necessary to provide a
provision for appeal against the order rejecting an application under section
13 because in the Indian context, a Judge deciding his/her own case has not
been well received by parties. In almost all cases where a sole arbitrator
presides, challenge has to be made before the same person and parties who
failed to succeed resort to dilatory tactics in order to subvert the proceedings.

3.14.10 It is therefore suggested that an appeal mechanism under section 37

be provided, which permits an appeal to the Court against the order of an
arbitrator rejecting an application under section 13. Since the Court will have
the benefit of a reasoned order of the arbitral tribunal and the arbitration is still
at an interim stage, the appeal should not unnecessarily detain the Courts,
unless the facts already on record merit interference.

3.14.11 Further, since an appeal is recommended to be provided against the

order of an arbitrator rejecting an application under section 13, parties cannot
be permitted to raise the same grounds in an application under section 34
which have been taken in a section 13 application. In the event the parties do
not challenge the arbitrator’s order, the arbitrator’s order shall attain finality
on this aspect and the parties cannot challenge the same in an application
under section 34.

3.14.12 The Committee therefore proposes to omit subsection 13 (5) which

provides for appeal under section 34 where the challenge is rejected. Suitable
amendments have been suggested to section 37 to provide for appeal from
rejection of the application under section 13.

Recommendation
It is proposed to omit subsection (5) of section 13 which provides for an appeal under
section 34 and instead provide an appeal under section 37 against any order passed
under Section 13 of the Act.

3.15 ARBITRAL TRIBUNAL DECIDING AN APPLICATION UNDER

SECTION 16

3.15.1 Section 16 enshrines the competence of the arbitral tribunal to rule on

its jurisdiction. Currently, if a challenge to the jurisdiction of the arbitrator
under section 16 is accepted, such order is appealable under section 37.
However, if the application under section 16 is rejected, then the arbitration
continues, and the grounds objecting to the arbitrator’s jurisdiction that were
taken in a section 16 application can be taken up while challenging the final
award under section 34. A party therefore has no option but to continue with
the arbitration if its challenge to the jurisdiction of the tribunal, validity or

44
existence of the arbitration agreement are rejected.

3.15.2 The Committee notes that absence of a provision for an appeal against
the order rejecting a Section 16 application prompts the parties to raise their
objections to the jurisdiction, existence and/or validity at the very outset,
such as in the application under Section 11 for appointment of arbitrator or
sometimes by resorting to the extra ordinary remedy of writ jurisdiction. This
invariably results in delays at the pre-reference stage and widens the scope
of inquiry. Further, absence of a provision for appeal against an order
rejecting a Section 16 Application condemns the parties including a reluctant
one to participate in an arbitration without timely recourse, resulting in
significant costs.

3.15.3 The consequence of the lack of provision for appeal against an order
rejecting a section 16 application can also be felt at the stage of setting aside
of the award under section 34, wherein the same grounds agitated in the
section 16 application are reagitated in a section 34 application before the
courts along with a challenge on the other aspects of the award, thereby
increasing the burden on courts and causing significant delay in the
proceedings. The Committee therefore suggests a mechanism under section
37 of the Act which permits an appeal against the order of an arbitrator
rejecting an application under section 16. The Committee notes that the said
position is reflected in the UNCITRAL Model Law, and is of the opinion
that the Court entertaining the appeal under section 37 would benefit from a
reasoned order passed by the arbitrator while rejecting an application under
section 16.

3.15.4 This question of appeal was also discussed in the 176th Report of the
Law Commission at para of their Report which is reproduced below:

“2.12.1 Section 16 - Request for a right of appeal in section 37(2)

against an interlocutory order of the arbitral tribunal rejecting the
pleas under sub-sections (2) and (3) of section 16 – rejected:
The Law Commission noted that section 16 of the 1996 Act is based
on Art.16 of the Model Law but certain aspects of Art.16 of the Model
Law have been omitted in the 1996 Act. The commission elaborately
discussed the question of inclusion of those aspects in section 16 so
as to bring the section into conformity with Art.16 of the Model Law.
The Model law contained a further sub-clause (3) which reads as
follows and which was absent in section 16 of the Indian Act of 1996.
Clause (3) of Article 16 of the Model law reads as follows:-
“16(3) The arbitral tribunal may rule on a plea referred to in
paragraph (2) of this article either as a preliminary question or in
award on the merits. If the arbitral tribunal rules as a preliminary
question that it has jurisdiction, any party may request, within thirty
days after having received notice of that ruling, the court specified in
article 6 to decide the matter, which decision shall be subject to no
appeal; while such request is pending, the arbitral tribunal may
continue the arbitral proceedings and make an award.”
In view of the possibility of the abuse, if a right of appeal is provided

45
 against interlocutory orders, the Commission has decided not to give
importance to the weighty arguments in favour of a right of appeal
set out above.”

3.15.5 The Law Commission in its 176th Report rejected the proposed
amendment to Section 16. However, with due respect to the Commission’s
views, the Committee is of the opinion that an appeal should be provided on
the lines suggested by the Model Law as the lack of an appeal provision
under section 37 for rejecting the plea referred to in subsections (2) or (3) of
section 16 is one of the major factors for parties not accepting the finality of
the award. The Committee is not inclined to agree with the recommendation
of the 176th Report for not providing an appeal for rejection of plea under the
said subsections (2) and (3) of section 16.

3.15.6 The arbitral tribunal may, in certain circumstances, decide an

application under section 16 immediately or postpone it to a later stage,
maybe even at the stage of final hearing, depending on the questions
involved. An order merely postponing the decision of a section 16 application
may not require an immediate appeal. Hence, it would not be appropriate to
provide for a blanket prohibition against reiterating section 16 grounds in an
application under section 34. The proposed amendment therefore provides
that the party will be permitted to again raise the grounds in an application
to set aside the arbitral award under section 34, subject to the outcome of the
appeal preferred against an order passed by the arbitral tribunal rejecting the
application under section 16.

3.15.7 The Committee feels that tribunals should efficiently adjudicate on the
question of their own jurisdiction under section 16 as expeditiously as
possible. This will ensure that parties are clear as to the jurisdiction of the
tribunal at the earliest stage. In the event the application concerns factual
questions which require evidence to be led, such application should be heard
as expeditiously as possible.

3.15.8 The Committee recommends the inclusion of those aspects in section

16 so as to bring the section into conformity with Art.16 of the Model Law
and recommends the proposed amendments to section 16 and corresponding
amendments to section 37 of the Act.

46
 Recommendation
It is proposed to amend section 16-
(a) sub-section (5) to provide that the arbitral tribunal shall decide on
a plea referred to in sub-section (2) or sub-section (3) as expeditiously as
possible;
(b) sub-section (6) to provide that subject to the outcome of any
appeal under
section 37 preferred against the order passed by the arbitral tribunal under sub-
section
(5) a party aggrieved by an arbitral award may make an application for setting
aside such an arbitral award in accordance with section 34.

3.16 SECTION 17 APPEALS FROM SECTION 9 AND 12B

3.16.1 Section 17 of the Act provides for interim measures which can be
ordered by an arbitral tribunal. In view of the insertion of new section 12B
which provides for the appointment of emergency arbitrators and amendment
to Section 9, it is proposed to empower arbitral tribunals to confirm, modify
or vacate the ad interim measures granted under section 9 or an order made
by an emergency arbitrator under section 12B.

3.16.2 Accordingly, the Committee recommends an amendment to

subsection (1) of section 17 to add a new clause to empower the arbitral
tribunal to confirm, modify or vacate as the case may be ad interim measures
granted under section 9 or an order made by an emergency arbitrator under
section 12B subject to such conditions, if any, as it may deem fit, after
hearing the affected parties.

Recommendation
It is proposed to amend section 17 of the Act to add a new clause (da) in sub-
section
(1) as follows
“(da) confirm, modify or vacate as the case may be, ad interim measures
granted under section 9 or an order made by an emergency arbitrator under section
12B, subject to such conditions, if any, as it may deem fit, after hearing the
affected parties.”.

3.17 THIRD-PARTY FUNDING: REQUIREMENT OF DISCLOSURE UNDER

THE PROPOSED SECTION 18A

3.17.1 Third-party funding (“TPF”), also known as Litigation Funding

Arrangement (LFA), involves a third-party funder providing financial

47
 support to enable individuals or commercial entities to pursue or defend
themselves, either in Court or in arbitration proceedings. It is steadily gaining
traction with Indian parties.

3.17.2 Historically, funding of litigation by unconnected third parties was

prohibited in common law jurisdictions as falling foul of the doctrines of
maintenance and champerty. However, with the global rise of TPF, various
jurisdictions such as England & Wales, Australia, Singapore and Hong Kong
have narrowed or abolished maintenance and champerty and have permitted
TPF. Singapore has also passed amendments to its Civil Law Act legalising
TPF for arbitration and associated proceedings. Similarly, Hong Kong
recently legalised TPF for arbitrations and mediations. The Paris Bar Council
has also indicated its support for TPF.

3.17.3 While TPF is popular in other jurisdictions, India does not have a well-
developed TPF regime. This is because even though TPF is not expressly
prohibited, India does not have any legislation seeking to regulate TPF.

3.17.4 However, there have been some interesting developments in India in

the form of judicial pronouncements recognising of TPF. In Bar Council of India
v. AK Balaji,33 the Hon’ble Supreme Court had observed that there is no
restriction on third parties funding litigation and getting repaid subject to the
outcome of the litigation. In Tomorrow Sales Pvt. Ltd. v. SBS Holdings Inc.
& Ors.34, the Hon’ble High Court of Delhi recently held that TPF is
essential to ensure access to justice and that in the absence of TPF, a person
having a valid claim would be unable to pursue the same for recovery of
amounts that may be legitimately due to it. It was observed that it is essential
for third-party funders to be fully aware of their exposure. The Hon’ble Court
held that third-party funders cannot be mulcted with liability, which they
have neither undertaken nor are aware of, as this would dissuade third-party
funders from funding litigation.

3.17.5 Given that Indian Courts have taken the view that TPF is not
prohibited and is in fact, essential for accessing justice, there is likely to be
an increase in TPF in future. In this regard, the Committee has recommended
substituting Explanation 2 in the Fifth Schedule of the Act to provide that
“the term “affiliate” encompasses all companies in one group of companies,
including the parent company and would include any person bearing the cost
of arbitration under a funding arrangement with one of the parties”. This
would aid in ensuring that, in the process of declaring that there are no past
or present matters which are likely to give rise to justifiable doubts as to an
arbitrators’ independence or impartiality or conflict of interest, arbitrators are
mindful of their relationships with third-party funders involved in an
arbitration where their appointment is sought.

3.17.6 Third Party Funding agreements give rise to concerns when third-
party funders are permitted to interfere with lawsuits in which they have no

33
(2018) 5 SCC 379
34
2023 SCC Online Del 3191

48
 legitimate interest. The Committee is not aware of the extent to which this
practice is prevalent under our legal system and especially in the area of
arbitration.

3.17.7 Under the new ICC Arbitration Rules which entered into force on 1
January 2021, parties must now disclose the existence of any third-party
funding together with the funder's identity (Article 11(7)). This is designed
to assist arbitrators with their disclosure duty, which is ongoing throughout
the case.

3.17.8 Further and in any event, the Committee is of the opinion that in order
to have more transparency in arbitral proceedings, it is necessary to impose a
duty on the party which is the beneficiary of such funding from a third party
to disclose the identity of s u c h third party to the arbitral tribunal and the
Committee thus recommends insertion of a new section 18A.

3.17.9 The Committee is also of the opinion that the larger question of
regulating third party funding should be referred to the Law Commission for
their examination and Report.

Recommendation
It is proposed to insert a new section:
18A. Where a party receives funding for arbitration from any non-party, it
shall disclose the identity of such non-party to the arbitral tribunal.

49
 3.18 PROPOSED INTRODUCTION OF MODEL RULES OF
PROCEDURE UNDER SECTION 19

3.18.1 Section 19 of the Act provides that failing any agreement between the
parties, the Arbitrator may “conduct the proceedings in the manner it
considers appropriate”. The provision in its present form gives a wide
latitude to the arbitrators in ad hoc arbitrations in the matters of procedure,
which sometimes results in strict application of the Code of Civil Procedure
and the Evidence Act as if it were a civil suit, or complete non-application of
even the basic principles of procedure and evidence.

3.18.2 The 246th Report of the Law Commission also observed that
proceedings in arbitrations are becoming a replica of court proceedings,
despite specific provisions in Chapter V of the Act which provide adequate
powers to the arbitral tribunal.

3.18.3 Different arbitrators adopt different procedures, considering that

arbitrators come from different backgrounds and training. While rules of
arbitral institutions normally lay down the procedure that guides the
proceedings, there is no such guidance in case of ad hoc arbitrations.
Uniformization of such standards may be considered, particularly due to the
overwhelming prevalence of ad hoc arbitrations in India. It is important that
the arbitrators lay down at least the important procedural steps along with
timelines at the start of the proceedings and some basic rules that should be
observed.

3.18.4 While section 19(4) of the Act empowers the arbitral tribunal to
determine admissibility, relevance, materiality and weight of any evidence,
it is silent on the manner in which the same has to be done. There exists no
uniform standard or regime at present which governs the grant or non-grant
of ex-parte or preliminary orders, and the specific procedure adopted in each
case is often dependent upon the arbitral tribunal itself, in view of the
flexibility afforded by section 19 of the Act.

3.18.5 Though the provisions of the Code of Civil Procedure and Evidence
Act do not strictly apply to arbitral proceedings under the Act, arbitrators
nevertheless tend to follow them in conducting proceedings, thus rendering
the arbitral proceedings as a replica of a civil suit and not a mode of dispute
resolution under the ADR framework. It was further observed that the
absence of a proper procedure for guidance under the Act compels arbitrators
in an ad-hoc arbitration to often resort to the provisions under the Code of
Civil Procedure and the Evidence Act, leading to delayed proceedings,
complications and giving rise to the tendency referred to as the Due Process
Paranoia (Discussed in detail at para 4.5 of the Report).

3.18.6 Further, the introduction of Model Rules of Procedure shall benefit

specialist arbitrators who are domain experts and not necessarily from a legal
background. Apart from providing assistance to arbitrators, such Model
Rules can curb procedural irregularities which are often agitated by a losing
party as grounds for setting aside the arbitral award.

50
3.18.7 In this regard, the Committee proposes Model Rules of Procedure that
can be used by arbitral tribunals as a guide. This Model Procedure has been
prepared considering the prevalent best practices on procedure. The Model
Procedure also aids the arbitrators and parties to ensure effective case
management, practice directions and to estimate the approximate time
required for the hearings. The application of such Model Procedure is subject
to party autonomy. However, the proposed Model Procedure is also for the
benefit of the arbitral tribunals in order to lay down the procedure to be
followed at the very outset of the arbitral proceedings in the interest of
certainty, for which reference may be made to the best practices.

3.18.8 The object of the Arbitration Act is to facilitate conduct of the

arbitration proceedings effectively and, in a time bound manner. It has been
seen that while the users in other jurisdictions seem to prefer institutional
arbitration, India is still an exception to this rule. Till institutional
arbitration gains momentum, it is necessary to make the ad hoc arbitration
regime more robust and more structured.

3.18.9 The Justice Srikrishna Committee Report also recommended that

Model Rules for ad hoc arbitrations should be prescribed in the Act as a
Schedule. It had observed:
“that the flexibility that ad hoc arbitrations offer, particularly the
flexibility to set rules of procedure and timelines, has been its curse
as well. Arbitral tribunals in ad hoc arbitrations do not usually lay
down clear rules of procedure or timelines for the completion of
arbitral proceedings at the start of an arbitration. This often results
in parties having to address procedural issues during the conduct of
the proceedings or approach courts for deciding procedural issues,
wasting substantial time in the process. Providing for a default
procedure in the ACA will be beneficial for parties and
/ or the arbitral tribunal as they have a pre-determined procedure that
they can follow with modifications. Further, it may also promote
institutional arbitration in an indirect manner — if parties find the
default procedure too strict and detailed to administer, they may have
an incentive to opt for an arbitral institution which can administer
the arbitration.”

3.18.10 The Committee is of the opinion that prescribing a Model Rules of

Procedure has many advantages, especially in ad hoc arbitrations and
arbitrations which are conducted in areas outside the metropolitan cities. This
will go a long way in speeding up arbitral proceedings and would cut costs
and delay. Therefore, the Committee recommends substitution of section
19(3) of the Act and introduction of new sub sections 19(3A), (3B) and (3C)
to be read with the Eighth Schedule specifying Model Rules of Procedure.

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Recommendation
It is proposed to amend section 19 by -
(a) substituting sub-section (3) to provide that in the case of arbitrations
not conducted by arbitral institutions, the arbitral tribunal for more efficient
conduct and timely completion of proceedings may adopt the model Rules of
Procedure specified in the Eighth Schedule with such modifications as it may deem
fit and failing any agreement on the procedure to be followed the arbitral tribunal
may, subject to this Part, conduct the proceedings in the manner it considers
appropriate;
(b) inserting subsection (3A) to provide that the Model Rules of Procedure
shall be, as far as possible, in plain language and avoid strict rules of evidence and
procedure which are applicable to the trial of civil suits;
(c) inserting subsection (3B) to confer power on the Central Government
by notification in the Official Gazette, to amend the Eighth Schedule and thereupon
the Eight Schedule shall be deemed to have been amended accordingly.
(d) inserting new subsection(3C) to provide that a copy of every
notification proposed to be issued under sub-section (1), shall be laid in draft before
each House of Parliament subject to modification.

3.19. ARBITRATIONS IN VIRTUAL MODE: PROPOSED

ADDITION OF SECTION 19A & AMENDMENT OF SECTION
24

3.19.1 The proposed Bill seeks to provide for a framework to recognise and
regulate functionaries who can provide techno-legal services to arbitration
users. The amendment seeks to leverage technology to make the conduct of
arbitration proceedings more transparent, efficient, secure, and neutral.

3.19.2 In practice, it has become increasingly common for arbitration

proceedings to be conducted at expensive venues. In some cases, even when
the proceedings last for a very short duration, the parties end up bearing costs
for the entire day. Expensive venues compound such costs. If the venue is a
five-star hotel, the expense will be heavier. Parties feel embarrassed
objecting when an expensive venue is proposed.

3.19.3 The Committee notes that several cheaper alternatives are available
such as conference rooms of public institutions, as also inexpensive private
venues at reasonable rates. The cost for arrangement of venues results in
significant expenses for parties. This proves particularly burdensome for
parties who do not have enough resources.

3.19.4 The CoVID-19 pandemic led to parties, arbitrators, counsel, and

institutions turning to virtual hearings and video conferencing for the

52
conduct of arbitral proceedings. While the pandemic has receded, some
arbitrators and parties continue to prefer virtual hearings. Parties, too, expect
higher administrative/logistical support for virtual hearings.

3.19.5 In the 2021 International Arbitration Survey, conducted by Queen

Mary University of London, 73% of the participants were found to
sometimes, frequently, or always use virtual hearing rooms, while 63%
participants were found to frequently or always utilise video conferencing in
arbitration. The participants chose the ‘potential for greater availability of
dates for hearings’ (65%), ‘greater efficiency through use of technology’
(58%) and ‘greater procedural and logistical flexibility’ (55%) as the greatest
benefits arising out of virtual hearings. This highlights the need to provide
legal recognition to hearings conducted in virtual or hybrid mode. The 2021
Survey concluded that participants would prefer a ‘mix of in-person and
virtual’ formats for almost all types of interactions, including meetings and
conferences. Wholly virtual formats are narrowly preferred for procedural
hearings, but participants would keep the option of in-person hearings open
for substantive hearings, rather than purely remote participation. This need
to adapt in response to changing circumstances was further underlined by the
fact that there was also a demand for rules to include a ‘provision for
arbitrators to order both virtual and in-person hearings’ (23%).

3.19.6 The 2021 International Arbitration Survey reported that if a hearing

could no longer be held in person, 79% of respondents would choose to
‘proceed at the scheduled time as a virtual hearing’. Only 16% would
‘postpone the hearing until it could be held in person’, while 4% would
‘proceed with a documents-only award’. Strikingly, a quarter of the
respondents (25%) stated that they would be prepared to forego ‘in-person
hearings’ to make arbitrations cheaper and faster. This reflects the increased
level of comfort users have acquired with virtual hearings in recent times.

3.19.7 Further, according to the 2021 International Survey, greater support

for arbitration by local courts and judiciary (56%), and ability of local courts
to deal remotely with arbitration related matters (28%) were identified as key
adaptations that would make any arbitral seat more attractive. The
participants chose administrative/ logistical support for virtual hearings
(38%) and secure electronic filing and document- sharing platforms (23%) as
their top choices for adaptations that would make any arbitration rules or
arbitral institutions more attractive for them.

3.19.8 Interestingly, a 2022 report by the International Council for

Commercial Arbitration (“ICCA”) on ‘parties’ right to a physical hearing in
international arbitration’ found that none of the 78 jurisdictions examined
(including India) expressly guarantee a physical hearing, and that Courts are
unlikely to set aside awards solely based on proceedings having been
conducted virtually.

3.19.9 In order to minimise challenges and complexities faced by users on

account of wholly physical hearings, high logistical costs, scheduling
conflicts etc., it is necessary to adapt to emerging technology. This is to

53
ensure a better, more accessible, cost effective, timely and efficient
arbitration ecosystem. By way of virtual hearings, electronic filing of
pleadings and documents, various limitations of physical hearings can be
eliminated.

3.19.10 Virtual arbitration proceedings will help address logistical

challenges and issues arising from physical hearings, while also reducing
costs involved in travel and hospitality arrangements. These costs add to the
overall costs of the arbitration. Introducing tools for document management
and transcription will benefit all stakeholders, augmenting the ease in
conduct of proceedings.

3.19.11 The Committee is of the opinion that the infrastructure for

seamlessly carrying out virtual hearings in a cost effective, secure, and
efficient manner is still not freely available in the market. Once such techno-
legal utilities are widely available, necessary and cost-effective services will
become more accessible.

3.19.12 The Committee further notes that courts are equipped to accept
electronic pleadings and conducting virtual hearings. Several courts have
also permitted filing of evidence virtually, subject to appropriate safeguards.
The Digital India plan of the Government of India has been a tremendous
success, resulting in a digitally empowered society. These services will also
improve the ease of doing business. In this context, it is even more relevant
and important for arbitrations to migrate to virtual platforms.

3.19.13 The shift towards promotion of virtual hearings can also be noticed in
the rules adopted by major arbitral institutions including:
(a) International Chamber of Commerce Arbitration Rules, 2021
(“ICC Rules”): It explicitly permits the use of “video
conference, telephone or similar means of communication” for
case management conferences [Article 24(4)], hearings [Article
26(1)] and emergency arbitration [Appendix V, Article 4(2)];

(b) ICC Rules [Articles 22(2), 26(3)]: The Rules mandate that the
tribunal “shall be in full charge of the hearings” and permits the
tribunal to “adopt such procedural measures as it considers
appropriate” so long as they are not contrary to the parties’
agreement;

(c) LCIA Rules: The Rules allows for any type of hearing to
proceed “virtually by conference call, video conference or using
other communications technology with participants in one or
more geographical places (or in a combined form)” [Article
19.2];

(d) SIAC Rules (Consultation Draft, 7th Edition): These Rules

provide for the conduct of hearings “in-person, in hybrid form,
or by video conference, teleconference or other form of
electronic communication.” [Article 39.2];

54
 (e) Prominent Indian arbitral institutions also permit arbitral
tribunals to specify the mode of hearings, i.e., physical, virtual
or hybrid mode(s), including the International Arbitration and
Mediation Centre, Hyderabad, Arbitration Rules (“IAMC
Rules”) (Article 28.3), MCIA Rules (Article 14.5 for
emergency arbitrations), etc.;

(f) Some arbitral institutions and professional bodies have adopted

the best practices for planning and conducting
videoconferences in international arbitration;

(g) Korean Commercial Arbitration Board’s 2018 Seoul Protocol

on Video Conference in International Arbitration: The protocol
addresses the use of video conference in arbitral proceedings;
discusses best practices for organizing, testing, and performing
video conferencing; and provides practical guidance for users
of international arbitration to consider;

(h) Chartered Institute of Arbitrators Guidelines for Witness

Conferencing in International Arbitration, 2019: These
guidelines provide for witnesses to depose via video
conferencing;

(i) ICC Guidance Note on Possible Measures Aimed at Mitigating

the Effects of the COVID-19 Pandemic, April 2020: The note
details the procedural tools available to parties, counsel, and
tribunals to mitigate the delays generated by the Covid-19
pandemic through greater efficiency; and provides guidance
concerning the organisation of conferences and hearings in light
of Covid-19 considerations;

(j) HKIAC Virtual Hearing Guides: HKIAC has released guides

for the efficient conduct of virtual hearings and to assist
arbitrators and parties, such as a Virtual Hearing Guide for
Arbitrators and Parties;

(k) SIAC Maxwell Virtual ADR Services: SIAC has laid emphasis
on the usage of ‘Maxwell Virtual ADR Services’, which
provides world class infrastructure for virtual hearings and
video conferencing. SIAC has also issued guides on conducting
arbitrations remotely.

3.19.14 Therefore, it is proposed to insert section 19A, to provide for the

procedure for conduct of proceedings in a virtual or hybrid manner, and
empower the Arbitration Council to specify by regulations Model Rules of
Procedure for Virtual Mode. The procedure may be adopted by arbitral
tribunals and they may make use of techno-legal utilities.

55
 3.19.15 It is also proposed to make consequential amendments to section 24,
to add a proviso to permit oral hearings, and presentation of evidence to be
conducted virtually. The insertion of the proviso after the second proviso to
section 24(1) of the Act is aimed at incorporating the evolving technological
standards, and to bring the Act at par with international standards. The
amendment proposed to section 24 grants the arbitral tribunal the power to
choose between physical hearing and virtual hearing. The tribunal can decide
to conduct oral hearings for presentation of evidence ,or for oral arguments.

Recommendation
It is proposed to insert new section 19A:
(a) to provide for the procedure for conduct of proceedings in a
virtual or hybrid manner and empower the Arbitration Council, to specify by-
regulations, Model Rules of Procedure for Virtual Mode to be adopted by
arbitral tribunals and also to make use of techno Legal utilities;
(b) empower the Arbitration Council of India to specify, by
regulations, Model Rules of Procedure for Virtual Mode for adoption by
arbitral tribunals.

It is also proposed to make consequential changes to section 24 to add a proviso

to permit oral hearings and presentation of evidence to be conducted virtually.

3.20 PERIOD FOR COMPLETING THE FILING OF

PLEADINGS IN ARBITRATION-SECTION 23(4)

3.20.1 Section 23(4) of the Act was inserted by 2019 Amendment Act and
provided a fixed timeline for completion of pleadings. Section 23(4) of the
Act provides that statement of claim and defence shall be completed within
6 months from the date the arbitrator(s) receive notice of their appointment
in writing.

3.20.2 However in practice there appears to be a great deal of uncertainty

regarding the operation of timeline of 6 months. This is because the 6 month
timeline has been assumed by some as the minimum time prescribed to file
pleadings.

3.20.3 Therefore, the Committee recommends that theprovision needs to be

substituted to clearly provide 6 months as the maximum timeline under
section 23(4).

56
 Recommendation
It is proposed to substitute sub-section (4) of section 23 to provide that
the pleadings under this section shall be completed expeditiously and, in
any event, not later than a period of six months from the date the
arbitrator or all the arbitrators, as the case may be, received notice, in
writing, of their appointment.”

3.21 TIME LIMIT FOR ARBITRAL AWARD - SECTION 29A

3.21.1 Section 29A of the Act was inserted through the 2015 Amendment
Act to introduce a time limit for delivering the award, in matters other than
international commercial arbitration. The said section 29A (1) fixes a time
limit of 12 months from the date of completion of pleadings for the arbitral
tribunal to make the award in matters other than international commercial
arbitration.

3.21.2 The Committee recommends exclusion of any time spent in the

reconstitution of an arbitral tribunal from the aforementioned time limit of
12 months.

3.21.3 Further, where there is no consensus between the parties under section
29A (3) to approach the Court seeking for an extension in the said time limit,
it is proposed to allow one of the parties to approach the Court through an
application under section 29A (5).

3.21.4 It is further proposed to allow the parties to make an application for

extension of time under section 29A even after the expiry of the specified
time limit, or any extended period thereafter. However, in such an event, the
application shall be filed without undue delay and with sufficient cause.

3.21.5 Consequently, the proposed amendment to section 29A seeks to

introduce the concept of revival of an arbitrator’s mandate while extending
the time period for delivering the award. This is being proposed to cater to
cases where an application was filed after the expiry of the time limit in the
manner specified above.

3.21.6 The Committee recommends amendment of subsections (1), (2) and

(4) of section 29A suitably to give effect to the above proposals.

57
 Recommendation
It is proposed to amend section 29A –
(a) to insert a second proviso in sub section (1) to provide that any
time spent in reconstitution of the Tribunal shall be excluded for
computing the time limit for making of the award.
(b) to amend sub section (3) to provide if there is no consent between
the parties within six months then an application under sub-section (5)
can be made to the Court.
(c) to amend sub-section (4) to provide for revival of the mandate of
the Tribunal while extending the period for the purposes of
termination of the mandate of the arbitrator.
(d) to insert fourth proviso in sub-section (4) to provide that an
application can be filed even after the period specified in sub-section
(1) or the extended period specified under sub-section (3), subject to
the condition that it has been filed without undue delay and with
sufficient cause.

3.22 SPECIAL PROCEDURE FOR SMALL AND MEDIUM

VALUE CLAIMS ADJUDICATION

3.22.1 The 1996 Act was enacted to implement the UNCITRAL Model Law.
It mainly focused on fine-tuning the Indian legal framework to suit the
demands of international trade and commerce. The UNCITRAL Model law
was formulated for international commercial arbitrations which often
involve high value claims.

3.22.2 By way of background, the 76th Report of the Law Commission,

concerning the 1940 Act, inter alia noted that while the scheme of the 1940
Act was by and large sound, some provisions required a relook. The Law
Commission recommended certain amendments, including a proviso to be
inserted in section 28 of the 1940 Act. The proposed amendment forbade any
extension to deliver an award beyond one year, except for special and
adequate reasons. Such reasons were to be recorded in writing.

3.22.3 Some stakeholders have opined that separate legislations for domestic
and international commercial arbitrations would have been ideal.

3.22.4 The UNCITRAL Model Law is based mainly on the experience of

western countries where arbitrations are mostly conducted under the auspices
of arbitral institutions. It cannot be disputed that adequate modifications are
desirable to suit India’s domestic needs.

3.22.5 In order to address the needs of smaller and medium value claims, it
is proposed to include a special procedure, being Chapters VIA and VIB. This
is aimed at enabling arbitral institutions to set up Adjudicating Authorities to

58
decide proceedings relating to small and medium value arbitrations. This will
enhance the efficacy of the arbitral process, particularly in respect of small
value claims. It circumvents the elaborate procedure under the Act, reducing the
cost of arbitration. The determination as to whether an arbitration deals with
small and medium value claims will be on the basis of the value of the claim,
to be prescribed by the Central Government. However, the threshold value
of the claim shall not be higher than Rs. 10 crores.

3.22.6 It is also proposed to specify that Chapter VIA shall apply to all small
and medium value claims arbitration, institutional or otherwise. Parties shall
make their applications under sections 9, 14, 29A or 34 of this Act to any
recognised Adjudicating Authority in accordance with the provisions of this
Chapter and Chapter VIB. However, parties may, subsequent to disputes
having arisen between them, waive the applicability of this Chapter and
Chapter VIB by an express agreement in writing.

3.22.7 It is further provided that arbitral tribunals shall conduct proceedings

under this chapter by following the Fast Track Procedure prescribed under
section 29B, unless the parties agree otherwise. Further, the arbitral tribunal
shall conduct proceedings under this chapter virtually, unless the parties
agree otherwise.

3.22.8 Chapter VIB provides for setting up of Adjudicating Authorities.

Arbitral institutions may, by rules, provide for the establishment of one or
more Adjudicating Authorities for disposal of applications made in
accordance with Chapters VIA and VIB. The Adjudicating Authorities shall
be subject to the recognition by the Arbitration Council of India.

3.22.9 Adjudicating Authorities are aimed as an alternative to courts, which

are presently burdened with various proceedings under the Act. These
include applications under sections 9,14,29A and/or 34 of the 1996 Act.
Under the proposed amendments, eligible parties shall make applications
under section 9, 14, 29A and/or 34 to the Adjudicating Authority, provided
such an authority is recognised by the Arbitration Council of India. Parties
may, however, agree to waive the applicability of these Chapters subsequent
to disputes having arisen between them.

3.22.10 The Adjudicating Authority shall comprise of three members, who

are either retired judges of the Supreme Court, High Courts or a Commercial
Court. It shall meet at such place and follow such procedure as it deems fit.
Sitting fees and other terms and conditions of the members of the
Adjudicating Authority, along with costs for making applications to the
Adjudicating Authority, shall be specified by the relevant arbitral institution.

3.22.11 The jurisdiction of the Adjudicating Authority will be determined on

similar parameters as that of a “Court” as defined under the Act. In the event
there is no recognised Adjudicating Authority available within the
jurisdiction as defined, the relevant provisions for making reference to an
Adjudicating Authority shall not be applicable to such arbitrations.

59
3.22.12 The orders passed by the Adjudicating Authority shall be
enforceable in the same manner as if it were an order of the Court.

3.22.13 The Committee feels that these special provisions for small value
claims will address the long standing demand of trade and commerce for an
effective ADR framework involving low value claims and relieve
substantial burden on the court dockets.

3.22.14 The Committee recommends insertion of new Chapter VIA and VIB:

Recommendation
It is proposed to insert Chapter VIA sections 29C to 29 G as follows
–
(i) Section 29C to provide that Chapter VIA and Chapter
VIB shall apply to small and medium value claims arbitration and
for the purposes of Chapter VI A and Chapter VIB “small and
medium value claims” in relation to an arbitration shall mean claims
having Specified Value not exceeding such amount as may be
notified by the Central Government and no amount exceeding ten
crores shall be notified as Specified Value by the Central
Government;
(ii) Section 29D to provide that the parties to a small and
medium value claims arbitration, institutional or otherwise, shall
make their applications under sections 9, 14, 29A or 34 of this Act
to any recognised Adjudicating Authority in accordance with the
provisions of this Chapter and Chapter VIB. However, the parties
may, subsequent to disputes having arisen between them, waive the
applicability of this Chapter and Chapter VIB by an express
agreement in writing;
(iii) Section 29E to provide that the arbitral tribunal shall
conduct the proceedings under this chapter by following the Fast
Track Procedure prescribed under section 29B unless the parties
otherwise agree;
(iv) Section 29F to provide that the arbitral tribunal shall
conduct proceedings under this chapter in the virtual mode unless
the parties otherwise agree;
(v) Section 29G to provide that save as otherwise provided
in this Chapter or in Chapter VIB other provisions of this Act shall
apply to small and medium value claims arbitration.

60
Recommendation
It is proposed to insert Chapter VIB sections 29H to 29O as follows
–
(i) Section 29H to provide that Arbitral institutions may by
rules provide for the establishment of one or more
Adjudicating Authorities for disposal of applications made in
accordance with this Chapter. Each Adjudicating Authority
will be subject to recognition by the Arbitration Council of
India;
(ii) Section 29I to provide that the Adjudicating Authority
shall consist of a Chairperson and two other members who
shall be retired judges of the Supreme Court; or the High
Court; or a Commercial Court;
(iii) Section 29J to provide that the Adjudicating Authority
shall be independent and impartial in carrying out its functions
and the Arbitration Council of India shall specify by
regulations such criteria as it may deem appropriate for
recognition, independence and impartiality of the
Adjudicating Authority;
(iv) Section 29K to provide that the Adjudicating Authority
shall have the same power for making orders, as the Court has
for the purpose of, and in relation to, any proceedings before
it;
(v) Section 29L to provide that any order made by the
Adjudicating Authority under this chapter shall be deemed to
be an order of the Court for all purposes and shall be
enforceable under the Code of Civil Procedure, 1908 (5 of
1908), in the same manner as if it were an order of the Court;
(vi) Section 29M to provide that for the purposes of
applications made under section 29D and notwithstanding
anything contained in section 2A, Court shall mean a
recognised Adjudicating Authority located in the district of
the seat of arbitration as determined under sub-section (1) or
(2) of section 20 and in the event no seat has been determined,
Court shall mean a recognised Adjudicating Authority located
in the district of the subject-matter of the arbitration if the same
had been the subject- matter of a suit;
(vii) Section 29N to provide that where with respect to a
small and medium value claims arbitration any application
under section 29D has been made in a recognised Adjudicating
Authority, that Adjudicating Authority alone shall have
jurisdiction, and all subsequent applications under section
29D shall be made in that Adjudicating Authority and in no
other Adjudicating Authority;
(viii) Section 29O to provide that section 29D and this
Chapter VIB shall not apply to small and medium value claims
arbitration, institutional or otherwise, if there is no recognized
Adjudicating Authority available within the district of the seat
of arbitration as determined under sub-section (1) or (2) of
section 20 and in the event no seat has been determined, if

61
 there is no recognized Adjudicating Authority available within
the district of the subject-matter of the arbitration if the same
had been the subject-matter of a suit.”

3.23 FORM OF AWARD AND POST AWARD INTEREST

RATE- SECTION 31

3.23.1 Sub-section (1) of section 31 provides that an arbitral award shall be

made in writing and shall be signed by the members of the arbitral tribunal.
There is no requirement as to stamping.

3.23.2 The Law Commission in the 194th Report on Verification of Stamp

Duties and Registration of Arbitral Awards, examined certain difficulties
referred to in a judgement of the Madras High Court.

3.23.3 According to the Report, section 31(5) states that the arbitral tribunal
shall communicate a ‘signed’ copy of the arbitral award to the parties.
Thereafter, the parties are entitled to file applications for setting aside the
award under section 34(1) or for enforcement of the award under section 36,
as the case may be, by annexing the copy of the arbitral award communicated
to them. If only a copy of the award is to be filed along with the said
applications under the Act, the Court will not be in a position to know
whether the original award is duly stamped or, where it requires compulsory
registration, whether it is duly registered.

3.23.4 The Report noted that after an award is passed by the arbitral tribunal,
the question which arises is whether the original arbitral award passed by the
arbitral tribunal under the Arbitration and Conciliation Act, 1996 has been
duly stamped or duly registered. The reason why the question has arisen is
because the 1996 Act does not require the original award to be filed in Court.
Section 31(5) of the Act merely states that the arbitral tribunal shall
communicate a ‘signed copy’ of the original arbitral award to the parties.
The ‘signed copy’ of the award does not reveal whether or not the original
arbitral award is duly stamped or registered.

3.23.5 To get over this difficulty, the Law Commission recommended the
amendment of sub section (1) of section 31 to provide that an arbitral
award shall be made in writing, duly stamped, and signed by the members
of the arbitral tribunal.

3.23.6 The Committee is in agreement with the view expressed and solution
proposed by the Law Commission. It is therefore proposed to substitute
subsection (1) of section 31 to provide that an arbitral award shall be made in
writing, duly stamped, and signed by the members of the arbitral tribunal.

3.23.7 Sub-section (6) of section 31 provides that the arbitral tribunal may
pass an interim order at any time during the proceedings with respect to any
matter regarding which it may make a final award.

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3.23.8 Interim awards under section 31(6) of the Act can be challenged
separately and independently under section 34 of the Act. This aspect was
considered by the Supreme Court in IFFCO Ltd. v. Bhadra Products where
it held that piecemeal awards lead to “unnecessary delay and additional
expenses” and interim awards shall be consolidated with the final award to
avoid challenges in piecemeal. Therefore, the Supreme Court recommended
that “we are of the view that Parliament may consider amending section 34
of the Act so as to consolidate all interim awards together with the final
arbitral award, so that one challenge under section 34 can be made after
delivery of the final arbitral award”.

3.23.9 It is therefore proposed to amend section 31 to insert a proviso to sub-

section (6) to clarify that the arbitral tribunal, either with consent of the
parties or by giving reasons, may make an interim arbitral award at any time
during the arbitral proceedings. The interim award cannot be challenged
independently and the same shall be challenged along with the challenge to
the final award.

3.23.10 Section 31(7) clause (b) provides that a sum directed to be paid by
an arbitral award shall, unless the award otherwise directs, carry interest at the
rate which is two per cent higher than the current rate of interest prevalent on
the date of award, from the date of award to the date of payment.
Explanation. —The expression "current rate of interest" shall have the same
meaning as assigned to it under clause (b) of section 2 of the Interest Act,
1978.

3.23.11 With reference to the said clause (b) of section 7 the Committee is
also of the view that it would be appropriate to have interest linked to the
repo rate of the Reserve Bank of India so that the interest adequately
compensates a party for not receiving the money due to him in the interim
period. Therefore, the Committee feels that the post award interest rate be
amended to simple interest at the rate of three percent higher than the repo
rate of the Reserve Bank of India prevalent on the date of award, payable till
the period of full payment of interest. This will ensure that default interest
rate is neither excessive nor insufficient.

3.23.12 The Committee recommends substitution of clause (b) of subsection

(7) of section 31 to provide that the post award interest rate be amended to
simple interest at the rate of three percent higher than the repo rate of the
Reserve Bank of India prevalent on the date of award, payable till the period
of full payment of interest.

3.23.13 Several arbitrators in ad hoc arbitrations, including retired Judges of

the Supreme Court and the High Courts, have raised the question as to -
(a) how long they should keep the original award with them,
particularly, if no party files an application under section 34 or
section 36?
(b) How long they should keep the records of the arbitration
proceedings, the pleading, evidence, etc., with them? and

63
 (c) As to the point of time at which they could return the documents
to the respective parties who had filed them. After all, the parties
may require the original title deeds and documents for various
purposes – e.g. raising loan on security or for mortgage of the
property or sale thereof.

3.23.14 These questions were examined by the 176th Report of the Law
Commission and it was recommended that Act should be amended to say that
the original award will be filed by the arbitrators in a Court of law.

3.23.15 However, the Committee is of the view that this will result in undue
burden being cast upon the Courts and the award will be difficult for
interested parties to retrieve when required. With an Arbitration Council in
position, the Committee is of the view that the awards could be filed with the
depositories maintained or recognised by it.

3.23.16 It is therefore proposed to insert a new subsection (9) to provide that a

copy of the award shall be authenticated and filed in the depository
maintained by the Arbitration Council of India.

3.23.17 It is proposed to make amendments to section 31 as follows:

(i) to provide that an arbitral award shall be made in writing, duly
stamped, and signed by the members of the arbitral tribunal;

(ii) to clarify that the arbitral tribunal, either with consent of the
parties or by giving reasons, may make an interim arbitral award
at any time during the arbitral proceedings and also the interim
award cannot be challenged independently and that the same
can be challenged along with the challenge of the final award;

(iii) to provide that the post award interest rate be amended to simple
interest at the rate of three percent higher than the repo rate of
the Reserve Bank of India prevalent on the date of award,
payable till the period of full payment of interest;

(iv) to provide that a copy of the award shall be authenticated and

filed in the depository maintained by the Arbitration Council of
India;

64
Recommendation
It is proposed in section 31
(i) to substitute sub section (1) to provide that an arbitral award shall be made
in writing, duly stamped, and signed by the members of the arbitral tribunal;
(ii) to insert a proviso to sub-section (6) to clarify that the arbitral tribunal,
either with consent of the parties or by giving reasons, may make an interim arbitral
award at any time during the arbitral proceedings and also the interim award cannot be
challenged independently and that the same can be challenged along with the challenge
of the final award;
(iii) substitute clause (b) of subsection (7) to provide that the post award interest
rate be amended to simple interest at the rate of three percent higher than the repo rate
of the Reserve Bank of India prevalent on the date of award, payable till the period of
full payment of interest;
(iv) to insert a new subsection (9) to provide that a copy of the award shall be
authenticated and filed in the depository maintained by the Arbitral Council of India.

3.24 REGIME FOR COSTS - SECTION 31A

3.24.1 Section 31A of the Act presently confers discretion to the Court or the
arbitral tribunal, as the case may be, to determine certain questions
concerning the costs involved in an arbitration. These include whether the
costs are payable by one party to another, the amount of such costs and when
such costs are to be paid. It is proposed to make it mandatory for the
concerned Court or arbitral tribunal to determine the said aspects.

3.24.2 Where an arbitral tribunal denies costs to the successful party, it is also
proposed to make it mandatory for reasons to be provided for such denial.
The Bill further prescribes certain modalities for the award of costs. This
includes the submission of details as to costs incurred by the parties, or by
any person authorised by the party, to the tribunal.

3.24.3 Where such details have not been submitted by the parties, it is
proposed to empower the tribunal to determine the costs as per its best
judgement and having regard to the circumstances under section 31A(3).

3.24.4 It is also sought to clarify that the arbitral tribunal may determine the
costs as part of the arbitral award on merits or pass a separate award on costs
as it may consider appropriate and where the award for costs is a separate
award, the time for making an application under section 34 to set aside the
award for costs shall be calculated from the date of such award for costs.

3.24.5 The Committee recommends amendment of section 31A –

65
(i) to omit the word discretion in subsection (1);

(ii) to provide that in all cases, the arbitral tribunal shall award the
share of the fees and expenses of the arbitrators and share of
administrative fees of the institution supervising the arbitration
paid by the successful party having regard to the circumstances
under sub-section (3) in sub section (6);

(iii) to provide that the arbitral tribunal shall give reasons for denying
other costs to a successful party in new sub section (7);

(iv) to provide that unless otherwise agreed between the parties or

directed by the arbitral tribunal, the parties shall before passing of
the award submit the costs incurred, either by the party itself or
by any person authorized by the party and where the party has not
submitted the details of the costs incurred, the arbitral tribunal
shall determine the same as per its best judgement having regard
to the circumstances specified under sub-section (3) in new
subsection (8);

(v) to provide that the arbitral tribunal may determine the costs as
part of the arbitral award on merits or pass a separate award on
costs as it may consider appropriate and where the award for costs
is a separate award, the time for making an application under
section 34 to set aside the award for costs shall be calculated from
the date of such award for costs in new sub section (9).

66
 Recommendation
It is proposed to amend section 31A –
(a) In sub-section (1) to omit the word “discretion”;
(b) to insert new sub-section (6) to provide that in all cases, the
arbitral tribunal shall award the share of the fees and expenses of the
arbitrators and share of administrative fees of the institution supervising the
arbitration paid by the successful party having regard to the circumstances
under sub-section (3);
(c) to insert sub-section (7) to provide that the arbitral tribunal
shall give reasons for denying other costs to a successful party;
(d) to insert sub-section (8) to provide that unless otherwise
agreed between the parties or directed by the arbitral tribunal, the parties
shall before passing of the award submit the costs incurred, either by the party
itself or by any person authorized by the party and where the party has not
submitted the details of the costs incurred, the arbitral tribunal shall
determine the same as per its best judgement having regard to the
circumstances specified under sub-section (3);
(e) to insert sub-section (9) to provide that the arbitral tribunal may
determine the costs as part of the arbitral award on merits or pass a separate
award on costs as it may consider appropriate and where the award for costs
is a separate award, the time for making an application under section 34 to
set aside the award for costs shall be calculated from the date of such award for
costs.”

3.25 SETTING ASIDE AND/OR VARYING OF AWARDS

UNDER SECTION 34

3.25.1 Section 34 of the Act deals with applications for setting aside an
arbitral award. One of the long-standing issues on this aspect concerns the
power of courts to modify an award in a section 34 proceedings.

3.25.2 Prior to the judgment of the Supreme Court in NHAI v. Hakeem,

(2021) 9 SCC 1, there was divergence of judicial opinion on this aspect. The
Karnataka, Bombay and Delhi High Courts had held that the Courts can only
set aside arbitral awards. On the other hand, Madras, Telangana and Andhra
Pradesh High Courts had held that courts could set aside an arbitral award or
modify it by varying the findings in the arbitral award. In M. Hakeem (supra),
the Supreme Court set the controversy to rest, and held that courts under
section 34 of the Act cannot modify an arbitral award by varying the findings.
It could only set aside awards.

3.25.3 Thus, under the present regime, once an arbitral award is set aside,
parties have to commence fresh arbitration proceedings to resolve their
disputes.

67
 3.25.4 However, in Vedanta Limited v. Shenzhen Shandong Nuclear
Power 35 , certain observations made by the Supreme Court appeared to
suggest that in section 34 proceedings, courts could modify the rate of
interest in the arbitral award. In that matter, the Court was not concerned
with the power of a section 34 Court to modify an arbitral award. Since the
law on this aspect was also not discussed, it could be argued that the Court’s
observations were merely obiter.

3.25.5 Further, courts continue to have the power to “partially” set aside
arbitral awards under section 34 of the Act. The law in this regard had been
succinctly summarized by the Bombay High Court in R S Jiwani v. Ircon
International Limited, 2009 SCC Online Bom 2021.

3.25.6 Recently, a Ld. Single Judge of the Delhi High Court, in National
Highways Authority of India v. Trichy Thanjavur Expressway Limited,36
extensively considered the law on this aspect. It was observed that if an award
is comprised of separate components, each standing separately and
independent of the other, there was no hurdle in adopting the doctrine of
severability to partly set aside an award. The power so wielded would
continue to remain confined to “setting aside”, and would thus constitute a
valid exercise of jurisdiction under section 34 of the Act.

3.25.7 While discussing the judgment in N. Hakeem (supra), the Delhi High
Court held that the term ‘modify’ used in N. Hakeem (supra) meant a
variation or modulation of the ultimate relief that could be accorded by an
arbitral tribunal. However, when a section 34 Court exercised its power to
partially set aside an award, it did not amount to a modification or variation
of the award. Such setting aside is confined to the offending and
unsustainable part of the award coming to be annulled and set aside. It is this
distinction between a modification of an award and its partial setting aside
that must be borne in mind. Therefore, the expression “setting aside” as
employed in section 34 of the Act includes the power to annul a part of an
award, provided it is severable and does not impact or eclipse other
components of the award.

3.25.8 The Committee has examined the proposal to permit courts to modify
or vary an award, while setting aside such an award in exercise of its section
34 jurisdiction. This is proposed to be achieved by amending sub-section (2)
and sub-section (2A) of section 34.

3.25.9 Such orders must, however, be made only in exceptional

circumstances to meet the ends of justice. This will enable a section 34 Court
to provide a quietus to the matter, so as to avoid further litigation. It is
proposed to substitute the words “set aside by the Court” with the words “set
aside in whole or in part by the Court” and add a proviso for partly varying
the award in exceptional circumstances.

35
(2019) 11 SCC 465;
36
2023 SCC OnLine Del 5183;

68
3.25.10 The Committee feels that the proposed amendment will provide relief
to parties in situations where the findings in the arbitral award can be varied,
having regard to the arbitral records. Needless to state, any such modification
to the arbitral award can only be ordered by the Court if the strict parameters
for setting aside the arbitral award under section 34 of the Act are made out,
and there is no need to adduce fresh evidence.

3.25.11 An express provision incorporated in the Act is likely to streamline

the process, saving time, effort, and resources for all the parties involved.
Thus, granting the Courts the authority to modify awards within well-defined
limits would help strike a balance between preserving finality of the arbitral
process and ensuring fairness.

3.25.12 The Committee recommends amendment to sub-sections (2) and

(2A) of section 34 to substitute the words “set aside by the Court”, with the
words “set aside in whole or in part by the Court” and to add the following
proviso, namely “Provided that in cases where the Court sets aside the arbitral
award in whole or in part, the Court may make consequential orders varying
the award only in exceptional circumstances to meet the ends of justice.”.

Recommendation

It is proposed to amend section 34-

(i) to insert a new sub section(1A) to provide that an
application for setting aside an award under sub-section (1) shall be
accompanied by the original award and where the parties have not
been given the original award, they may file a copy of the award
signed by the arbitrators;

(ii) in sub-section (2) -

(a) for the words “An arbitral award may be set
aside by the Court”, the words “An arbitral award may be
set aside in whole or in part by the Court” be substituted;
(b) after clause (b) and before Explanation 1 the
following proviso shall be inserted, namely:-
Provided that in cases where the Court sets
aside the arbitral award in whole or in part, the Court
may make consequential orders varying the award
only in exceptional circumstances to meet the ends
of justice”
(iii)in sub-section (2-A)-
(a) for the words “An arbitral award arising out of
arbitrations other than international commercial
arbitrations, may also be set aside by the court”, the words
“An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside
in whole or in part by the Court” shall be substituted.
(b) after the proviso the following proviso shall be

69
 inserted namely: -
“Provided further that in cases where the Court sets aside the arbitral
award in whole or in part, the Court may make consequential orders
varying the award only in exceptional circumstances to meet the
ends of justice”

3.26 ENFORCEMENT OF AWARDS UNDER SECTION 36

3.26.1 Section 36 of the Act deals with enforcement of awards. By the 2015
Amendment, a proviso to section 36(3) was added. The proviso stated that
“the Court shall, while considering the application for grant of stay in the case
of an arbitral award for payment of money, have due regard to the provisions
for grant of stay of a money decree under the provisions of the Code of Civil
Procedure, 1908.”

3.26.2 In this regard, courts have been guided by the principles enumerated
in Order XLI Rule 5 of CPC. However, no strict parameters have been
enumerated in Order XLI Rule 5 of CPC for furnishing of security.
Accordingly, Courts have been constrained to exercise their discretion while
passing orders for security under section 36(3) of the Act. In the absence of
any guidelines, there is significant variance in the orders passed by different
courts.

3.26.3 Withdrawal of amounts deposited under this provision, and the

requirement of security by the successful party to withdraw such amount, has
been a matter of some debate. Further, some judgments have stated that once
a deposit is made, interest ceases to run on the deposited amount. In the
opinion of the Committee, once a deposit is made, interest on the deposited
amount should cease to run only if the successful party is permitted to
withdraw the deposited amount unconditionally, as only that will amount to
effective compliance of the award.

3.26.4 As an awardholder, the successful party is immediately entitled to the

proceeds of the award. However, it rarely gets its dues in a timely manner.
The status of an award holder continues to be one of an unsecured creditor,
till a deposit is made by the award debtor. The Committee notes that an award
creditor does not have any security as a matter of course during the
arbitration proceedings and prior to the award. Further, by requiring a
security for withdrawal, the award creditor is constrained to incur further
costs which are generally not recoverable by it.

3.26.5 By permitting only a conditional withdrawal upon the award creditor

providing some security, the award debtor is secured as a matter of course,
during the pendency of the section 34 proceedings. This is not appropriate,
since by this time, an award has already been rendered in the arbitration
proceedings which should mutually be final and binding and the award debtor
has lost the arbitration.

3.26.6 Besides affecting the award holder’s legitimate rights, such orders
create further complications in instances where insolvency proceedings are

70
 initiated against either the award holder or the award debtor.

3.26.7 The Committee is of the opinion that a mere deposit of monies into
Court, and further a condition permitting withdrawal of the monies by the
successful party only upon providing some security, would not amount to
compliance with an arbitral award. In such an event, interest on the deposited
amount should continue to run. Only in those instances where the award
holder is permitted to unconditionally withdraw the deposited amount,
should interest cease to run.

3.26.8 The Committee further notes that the award debtor is not left
remediless. In the event the award debtor succeeds in the section 34
proceedings and the award is set aside, the award holder must be directed to
refund the monies with appropriate interest. Such a course will adequately
compensate the award debtor who succeeds in section 34 proceedings.
Further, if the award debtor seeks to be secured in the facts of a particular
case, appropriate applications may be made to the Court in that behalf.

3.26.9 In order to bring uniformity to pre-conditions for stay of an arbitral

award, the Committee recommends the following amendment to section 36(3).
It is proposed to amend section 36 subsection (3) to insert two provisos,
before the second proviso, as follows, “Provided further that the Court may
grant stay of the arbitral award upon deposit of 50% of the principal amount
awarded and the furnishing of security for the remaining sum awarded, with
interest accrued up to the date of furnishing security” and “provided also that
in the event of deposit being made of such amount as directed by the Court,
or in the event of such higher amount at the option of the party making the
deposit, further interest on the amount so deposited shall cease only in the
event of unconditional withdrawal of the deposited amount by the other
party.

Recommendation
It is proposed to amend sub section (3) of section 36 to insert two provisos before the
second proviso to provide:-
(i) that the Court may grant stay of the arbitral award upon deposit of 50% of the
principal amount awarded and the furnishing of security for the remaining sum
awarded, with interest accrued up to the date of furnishing security.
(ii) that in the event of deposit being made of such amount as directed by the Court,
or in the event of such higher amount at the option of the party making the deposit,
further interest on the amount so deposited shall cease only in the event of
unconditional withdrawal of the deposited amount by the other party.”

3.27 MODIFICATIONS TO PROVISIONS REGARDING

APPEALS UNDER SECTION 37

3.27.1 Section 37 of the Act provides for appealable orders. Under subsection
(1) of section 37, which provides for appealable orders, no time limit has

71
 been prescribed. The Committee is of the opinion that there is a need for
standardisation of the time period for filing an appeal under section 37(1).
This has become necessary because of section 13A of the Commercial Courts
Act, 2015, which states that
“any person aggrieved by the judgment or order of a Commercial
Court at the level of District Judge exercising original civil
jurisdiction or, as the case may be, Commercial Division of a High
Court may appeal to the Commercial Appellate Division of that High
Court within a period of sixty days from the date of the judgment or
order:

Provided that an appeal shall lie from such orders passed by a

Commercial Division or a Commercial Court that are specifically
enumerated under Order XLIII of the Code of Civil Procedure, 1908
(5 of 1908) as amended by this Act and section 37 of the Arbitration
and Conciliation Act, 1996 (26 of 1996).”

3.27.2 In Government of Maharashtra v. Borse Brothers Engineers &

Contractors Pvt. Ltd.37 the Supreme Court held that the limitation to prefer
an appeal under section 37 would differ in the case of appeals covered under
the Commercial Courts Act, and other appeals. If the specified value of the
subject matter is Rs. 3,00,000 or more, then an appeal under section 37 of
the Act must be filed within 60 days from the date of the order as per section
13(1A) of the CCA. However, in those cases when the specified value is for
a sum less than Rs. 3,00,000 then the appeal under section 37 would be
governed by Articles 116 (which provides for 90 days for inter-Court appeal)
and 117 (which provides for 30 days for intra-Court appeal) of the Limitation
Act, 1963, as the case may be.

3.27.3 In order to standardise the time period for filing an appeal under
section 37(1), it is proposed to amend section 37 to insert new sub-section
(1A) which provides that an appeal under section 37(1) should be filed within
60 days from the date of receipt of the order appealed against, but not
thereafter. The proposed insertion would prohibit the Courts from admitting
a section 37 appeal filed after the period of 60 days has lapsed. The time
period of 60 days is in keeping with the provisions of the Commercial Courts
Act.

3.27.4 Further, the time taken to file an appeal should not be extended because
this incentivises delays. The proposed insertion would prohibit the Courts
from admitting appeals under section 37(1) filed after the period of 60 days
has lapsed.

3.27.5 Thus, the Committee recommends addition of a new sub section (1A)
to section 37 to provide “(1A) Notwithstanding anything contained in any
other law, an appeal under sub-section (1) shall be made within 60 days from
the date of receipt of the order appealed against, but not thereafter.”

37
2021 SCC OnLine SC 233;

72
3.27.6 Adopting a similar rationale, it is proposed to add sub section (2A) to
section 37, prohibiting appeals under section 37(2), against orders of an
arbitral tribunal, beyond a period of 30 days, and not permitting appeals to be
filed thereafter. This is also to keep delays in check. A shorter period of 30
days has been provided since these are appeals against an order of arbitral
tribunals when arbitration proceedings are still in progress. Hence, any such
appeal must be promptly filed.

3.27.7 The Committee recommends addition of new subsection (2A) to

section 37 to provide that notwithstanding anything contained in any other
law, an appeal under sub-section (2) shall be made within 30 days, but not
thereafter, from the date of receipt of the order appealed against.”

3.27.8 Subsection (2) of section 37 provides that an appeal shall also lie to a
court from an order of the arbitral tribunal--(a) accepting the plea referred to
in sub-section (2) or sub-section (3) of section 16; or (b) granting or refusing
to grant an interim measure under section 17.

3.27.9 In addition to the above, the Committee suggests providing an appeal

against rejection of an application by the arbitral tribunal under section 13(4),
and the rejection of an application under section 16(5). Section 37(2) will
have to be amended accordingly.

3.27.10 In this background, the Committee further proposes substitution of

section 37(2), to enable appeals against rejection of an application by the
arbitral tribunal under section 13(4), and the rejection of an application under
section 16(5). This will ensure that in instances where an order under section
13(4) or 16(5) is patently incorrect, and deserves to be set aside, parties are
not forced to undergo the entire arbitral process.

3.27.11 It is therefore proposed to substitute sub section (2) of section 37 to

provide that an appeal shall also lie to a Court from an order of the arbitral
tribunal –

(a) Rejecting the plea referred to in sub-section (4) of section 13;

(b) Accepting or rejecting the plea referred to in sub-section (2) or

sub-section (3) of section 16; and

(c) Granting or refusing to granting an interim measure under section

17.

3.27.12 This Amendment is also in consonance with Article 16(3) of the

Model Law.

3.27.13 Accordingly, it is proposed to amend section 37 to insert subsections

(1A) and (2A) and also substitute subsection (2) to provide for appeals from
sections 13(4), 16(3) and section 17.

73
 Recommendation
It is proposed to amend section 37 –
(i) to insert new sub section (1A) to provide that notwithstanding
anything contained in any other law, an appeal under sub-section (1) shall
be made within 60 days from the date of receipt of the order appealed
against, but not thereafter;
(ii) to substitute sub section (2) to provide that an appeal shall also
lie to a Court from an order of the arbitral tribunal –
(a) rejecting the challenge referred to in subsection (4) of section
13;
(b) accepting or rejecting the plea referred to in sub-
section (2) or subsection (3) of section 16;
(c) granting or refusing to granting an interim measure under
section 17;
(iii) to insert new sub section (1A) to provide that notwithstanding
anything contained in any other law, an appeal under sub-section (2) shall
be made within 30 days, but not thereafter, from the date of receipt of the
order appealed against.

3.28 MISCELLANEOUS AND CONSEQUENTIAL

AMENDMENTS

3.28.1 Amendment of section 42 to provide that when any application under

Part I has been made in a Court and the seat of the arbitration has not been
determined under sub-section (1) or sub-section (2) of section 20, then that
Court alone shall have jurisdiction over the arbitral proceedings and all
subsequent applications arising out of that agreement and the arbitral
proceedings shall be made in that Court and in no other Court.

3.28.2 AMENDMENT TO SECTION 43-D

3.28.3 Section 43D provides for the duties and functions of the Arbitration
Council. Under clauses (a) and (c) of subsection (2) the Council may frame
policies governing the grading of arbitral institutions and review the grading
of arbitrations and arbitrators.

3.28.4 The legal sector has witnessed exponential growth, both in India and
abroad. Arbitrators with extensive experience, skill and knowledge have
carved out a name for themselves. A subjective scrutiny of such persons may
not be accurate, if not misplaced. The skill and competence of an arbitrator
is best decided by the market.

3.28.5 Indeed, in the absence of any objective standards, any grading exercise

74
may lead to needless controversy and litigation.

3.28.6 This was a suggestion received by the Committee from various

stakeholders. Hence it is proposed to omit the clauses (a) and (c) of sub
section (2) which confer the Arbitration Council of India with the powers to
frame policies governing the grading of arbitral institutions, and to review the
grading of arbitral institutions and arbitrators respectively.

Recommendation
It is proposed to omit clauses (a) and (c) in sub section (2) of section 43-D.

3.28.7 REVISION OF SECTION 43-I & ADDITION OF SECTION 43-

IA
The Arbitration Council of India shall specify by regulations, criteria
relating to infrastructure, quality and calibre of arbitrators,
performance, and compliance of time limits for disposal of domestic
or international commercial arbitrations and other matters which
arbitral institutions shall satisfy for accreditation with the Council.

Recommendation
It is proposed to insert a new section 43-I to provide that the
Council shall specify by regulations criteria relating to
infrastructure, quality and calibre of arbitrators, performance and
compliance of time limits for disposal of domestic or international
commercial arbitrations and such other matters which arbitral
institutions shall satisfy for accreditation with the Council.

3.28.8 Arbitral institutions shall apply to the Council in such Form as

specified in the regulations for accreditation.

Recommendation
It is proposed to insert new section 43-IA to enable the Arbitral
institutions seeking accreditation to apply to the Council in such Form
specified in the regulations

3.28.9 OMISSION OF FOURTH SCHEDULE

3.28.10 Although section 11A and the Fourth Schedule were incorporated to
provide a framework for determining the fees of arbitrators, its execution was
riddled with several issues. The Supreme Court, in ONGC v. Afcons

75
Gunanusa JV, 2022 SCC OnLine SC 1122, observed that the Fourth
Schedule was to serve as a guide for different High Courts to frame rules for
determining the fees of arbitrators. However, the High Courts had been slow
in framing these rules for the purpose of determination of fees and the
manner of payment to the arbitral tribunal. Apart from the High Courts of
Rajasthan, Kerala and Bombay, other High Courts had not framed rules
under section 11(14) of the Act for the determination of fees. Further, the
rules framed by High Courts of Bombay and Rajasthan only governed
arbitrators appointed by the Courts. Thus, the purpose of section 11(14) for
regulating fees in ad-hoc arbitrations remained unrealised.

3.28.11 The Committee received many recommendations highlighting several

problems with the Fourth Schedule of the Act. It was further highlighted that
ad hoc tribunals did not always follow the prescribed fees under Fourth
Schedule of the Act.

3.28.12 The ceiling on arbitrators’ fees was fixed way back in 2015.
Necessarily, the ceiling requires a relook, and must be periodically reviewed
and revised.

3.28.13 The Schedule should adequately compensate an arbitrator for

adjudicating complex disputes, which require significant devotion of time
and resources. The current system of fee calculation is based entirely on the
quantum of the claim. It is felt that the quantum of the claim may not be the
most appropriate yardstick to determine arbitrators’ fees. The additional
parameter to determine arbitrators’ fees could include providing an
additional percentage of fee if the parties decide to lead oral or expert
evidence. This is in contrast to arbitrations where the dispute is narrow and/or
is being adjudicated on basis of documents.

It is further recommended that a mechanism to determine the fees, in cases

where a dispute is settled and the tribunal’s mandate is terminated, be
devised. Such a mechanism may also consider instances where the tribunal
is reconstituted.

3.28.14 Considering the issues faced by various stakeholders, the Committee

has proposed the omission of section 11-A and the Fourth Schedule from the
Act. Further, it is recommended that the Central Government be empowered
to prescribe the legal framework for fees of arbitrators by framing
appropriate rules by rules.

Recommendation
It is proposed to omit the Fourth Schedule from the Act.

3.28.15 DELETIONS OF ENTRIES IN THE FIFTH SCHEDULE

3.28.16 The Fifth Schedule specifies the grounds which give rise to justifiable

76
doubts as to the independence or impartiality of arbitrators and contains 34
entries under seven categories namely, (a) Arbitrator’s relationship with the
parties or the counsel; (b) Relationship of the Arbitrator to the dispute; (c)
Arbitrator’s direct or indirect interest in the dispute; (d) Previous services for
one of the parties or other involvement in the case; (e) Relationship between
an arbitrator and another arbitrator or counsel; (f) Relationship between
arbitrator and party and others involved in the arbitration.

3.28.17 A cursory reading of entries in the Fifth Schedule and Seventh

Schedule reveals that the entries 1 to 19 find place in both the Schedules.
This has caused confusion. The Supreme Court in HRD Corpn. v. GAIL
(India) Ltd., (2018) 12 SCC 471, held that items 1 to 19 of the Fifth Schedule
are identical with the aforesaid items in the Seventh Schedule. The only
reason that these items appear in the Fifth Schedule is for purpose of
disclosure by the arbitrator, as parties are unaware as to the arbitrator’s
involvement, if any, as regards any of the six categories of the Fifth Schedule
aforementioned, until the arbitrator provides his disclosure in writing as the
factum of such involvement since this is often within the arbitrator’s personal
knowledge.

3.28.18 Since it is proposed to amend the Sixth Schedule to make it more

comprehensive and detailed by inter alia enumerating the said items 1 to 19,
there is no requirement to separately retain items 1 to 19 in the Fifth
Schedule.

3.28.19 Explanation 2 in the Fifth Schedule defines the term “affiliate” which
encompasses all companies in one group of companies including the parent
company. The said definition does not include any person bearing the cost of
arbitration under a funding agreement with one of the parties. Hence, it is
proposed to widen the ambit by adding the requisite language in Explanation.
2.

3.28.20 It is accordingly proposed to substitute Explanation 2 with the

following, “Explanation 2 – The term “affiliate” encompasses all companies
in one group of companies including the parent company and would include
any person bearing the cost of arbitration under a funding agreement with
one of the parties;”.

3.28.21 It is proposed to substitute Explanation 3 with the following,

“Explanation 3 – The grounds stated in the Fifth Schedule are illustrative of
the circumstances that give rise to justifiable doubts as to the independence
or impartiality of an arbitrator.”.

77
 Recommendation
It is proposed to amend the Fifth Schedule
(i) by omitting item nos 1 to 19 and entries relating thereto;
(ii) to substitute Explanation 2 to include any person bearing
the cost of arbitration under a funding agreement with one of the
parties;”
(iii) to substitute Explanation 3 to clarify that the grounds stated
in the Fifth Schedule are illustrative of the circumstances that give rise
to justifiable doubts as to the independence or impartiality of an
arbitrator.”.

3.28.22 SUBSTITUTION OF THE SIXTH SCHEDULE

3.28.23 Section 12 is proposed to be amended to provide for stricter

disclosure norms specified in the Sixth Schedule. This amendment is
proposed to clarify the procedure that the proposed arbitrator must follow
upon appointment.

3.28.24 It is necessary to substitute the Sixth Schedule which would specify

the necessary disclosures to be provided under the form, including the
appointee arbitrator’s statement, acceptance, availability, impartiality, and
independence to ensure immediate steps are taken without delay to constitute
the arbitral tribunal.

3.28.25 The Committee recommends substitution of the Sixth Schedule.

Recommendation
It is proposed to substitute the Sixth Schedule to provide for stricter disclosure
requirements

3.28.26 AMENDMENT OF THE SEVENTH SCHEDULE

3.28.27 In entry 1 of Seventh Schedule, a person who “has any other past
business relationship with the party” is not eligible to act as an arbitrator.
However, this restriction is very wide in its ambit and places a blanket
restriction on a person from acting as an arbitrator if he had any past business
relationship with a party. The Committee is of the view that if the arbitrator has
had a past business relationship with the party over two years ago, would
make any allegation of bias untenable.

3.28.28 Accordingly, it is proposed to add the phrase “who has not completed
the mandatory cooling period of two years from the date of cessation of such
relationship.” in entry 1

78
Recommendation
It is proposed to amend entry 1 of the Seventh Schedule to add the words
“who has not completed the mandatory cooling period of two years from the date of
cessation of such relationship.”

3.28.29 INSERTION OF THE EIGHT SCHEDULE MODEL RULES

OF PROCEDURE

3.28.30 It is important that the arbitrators lay down at least the important
procedural steps with timelines at the start of the proceedings and some
procedural rules that would be observed during the arbitral proceedings. For
that purpose it is proposed to amend section 19(3), inter alia, to provide that
for more efficient conduct of proceedings, the arbitral tribunal may adopt the
Model Rules of Procedure specified in the Eighth Schedule with such
modifications as it may deem fit.

3.28.31 This will discourage arbitrators from following the strict procedural
requirements provided under the Code of Civil Procedure and the Evidence
Act for trial of civil suits.

Recommendation
It is proposed to insert a new Eight Schedule containing a Model Code of
Procedure

3.29 Clause 41 of the Bill clarifies the applicability of the amendments to

pending arbitral and court proceedings.

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 PART IV

4. CONCLUSIONS AND THE WAY FORWARD

4.1 SUGGESTIONS FOR BUILDING AN ECOSYSTEM FOR

INDIA TO EMERGE AS A HUB OF INTERNATIONAL
COMMERCIAL ARBITRATION

4.1.1 Trade, industry, commerce and investment can only thrive

in a conducive business environment. This includes a robust
dispute resolution mechanism This Report has proposed
several statutory amendments to the current arbitration regime
in India. The 1996 Act has already been amended on several
occasions, in 2015, 2019 and 2021, to keep pace with global and
current developments in arbitration. The proposed
amendments are further aimed at promoting institutional
arbitration, and updating the law to reflect best global
practices. They further aim to resolve ambiguities and
establish an arbitration ecosystem where arbitral institutions
can flourish. They attempt to trigger a paradigm shift for
ensuring timely conclusion of arbitration proceedings,
minimize judicial intervention in the arbitral process, and
enforcement of arbitral awards.

4.1.2 The Committee has considered the amendments made to the

UNCITRAL Model Law in 2006 and, in particular, the
amendment to Article 7 and various amendments made to
Aticle 17. The Committee recommends that the Government
may consider appropriate amendments to the Act in the light of
the 2006 amednments.

4.1.3 However, statutory amendments to the Act alone will not

suffice in meeting these goals. Legal reform is a never ending
process, and requires active co-operation of all stakeholders.
Specific steps and actions, catering to the needs of various
stakeholders are required for a holistic evolution of the
arbitration landscape in India. In particular, there is a need for
more reliable arbitral institutions and adoption of technology.
These steps are expected to reduce the cost and time required
to conclude arbitrations.

4.1.4 In this regard, a multipronged approach must be adopted,

including: (i) implementation of the existing and proposed
amendments to the Act; (ii) continuous monitoring by the
Ministry of Law and the Arbitration Council of the working
of the Arbitration Act, (iii) collection of data which will
enable the Government to study the effectiveness of the
amendments to the Act and (iv) attitudinal changes by all
stakeholders.

80
 4.1.5 With these objectives the Committee suggests the following
measures as the way forward for making arbitration an
effective means of ADR to solve disputes and also to make
India as a hub of international commercial arbitration.

4.2 REVITALISING PARTY AUTONOMY

4.2.1 The Indian judiciary has consistently upheld the principle of

party autonomy, which is integral for arbitration to succeed in
India. The Hon’ble Supreme Court has referred to party
autonomy as “the backbone”, “grundnorm”, and “the
brooding and guiding spirit” of arbitrations.

4.2.2 Party autonomy comes into play when parties to an

arbitration agreement invoke the agreement. The parties have
the right to choose (a) the arbitrators, (b) their fees (c) venue
(d) and procedure to be followed by the arbitral tribunal.
However, in reality, in many instances the parties are left with
little to no choice in choosing the arbitrator or the procedure
or the fees or the venue.

4.2.3 Companies and firms routinely insert arbitration clauses into

their contracts with customers. Such clauses may appear to be
innocuous, or even beneficial to customers, but in practice,
they often cause unprecedented hardship to unwary
customers, specifically in cases where the sum in dispute is of
small value. The manner and mode of obtaining the consent
of the customer requires closer introspection. In most cases,
consent is obtained in a routine manner where the parties
agree to contracts containing arbitration clauses without fully
understanding the consequence of such acceptance. The
problem is exacerbated in a digital marketplace where
consent is often obtained at the click of a button. Prevailing
practices of contracting in the context of digital platforms
often denude consent of its meaning, rendering it as an empty
construct. Such practices are not only normatively futile, but
also positively harmful. The intervention of the courts and
regulators is limited to voluntariness and disclosure
requirements. Such a narrow view fails to account for the
context and the systemically unjust background conditions in
which individual acts of consent take place. 38

4.2.4 Party Autonomy must thus begin even before the parties sign
the arbitration agreement, by enforcing the requirement of
informed consent, where parties are aware of the approximate
expenses, costs and timelines that are likely to be involved in
38
Consent as a Free Pass: Platform Power and the Limits of the Consent as a Free Pass: Platform Power
and the Limits of the Informational Turn - Elettra Bietti, 40 Pace L. Rev. 310 (2020) DOI:
https://doi.org/10.58948/2331-3528.2013;

81
 an arbitration. Also, there is a need to be provided with an
opt-out mechanism and an option to choose other modes of
resolution such as mediation or other means of settlement.

4.2.5 Informed consent assumes greater significance in cases of

arbitrations involving Governments and PSUs because their
budget is publicly funded and is subject to advance financial
budget allocation and legislative scrutiny.

4.2.6 Arbitration agreements should clearly spell out the likely

expenditure, arbitrator fees, venue, process and timelines etc.,
and parties should give their informed consent. This will give
an opportunity to parties to weigh other less expensive modes
of dispute settlements like mediation, etc.

4.3 INSTITUTIONAL ARBITRATION AS A PREFERRED

MODEL FOR HIGH VALUE CLAIMS

4.3.1 When compared to ad hoc arbitration, institutional arbitration

offers several benefits without compromising on party
autonomy. These include: (i) clarity of procedure and time
periods; (ii) model arbitration clauses; (iii) administrative and
infrastructural support; (iv) specialised panels of arbitrators
and streamlined procedures for appointment; (v) a framework
for challenging arbitrators; (vi) a demarcated and well-
established costs regime and cost calculators; (vii) procedural
mechanisms such as joinder, consolidation, emergency
arbitration, expedited procedure, early dismissal; and (viii)
scrutiny of awards, etc.

4.3.2 As arbitral institutions in India grow increasingly

sophisticated and myths surrounding institutional
arbitration39 are steadily dispelled, parties and counsel must
seek to resolve their disputes through institutional
mechanisms. Doing so will not only improve the quality of
arbitration but also ensure awards that are more likely to be
enforced on account of institutional oversight.

4.3.3 Arbitral institutions should invest in technology and

infrastructure facilities, like acoustically treated hearing
rooms, seamless high-definition video connectivity, virtual
hearing managers, evidence presentation operators, e-
bundling support, e-hearing suite for remote connection,
exclusive state-of-the-art waiting lounges for arbitrators and
fully updated digital libraries, etc.

4.3.4 Arbitral institutions should periodically take cognizance of

39
Myths surrounding institutional arbitration include high costs, rigid internal processes, lack of party
autonomy, etc.

82
 the best practices in arbitration by publishing pamphlets and
also update their websites like leading arbitral institutions like
ICC etc. In this context, it is worth referring to the ICC
Commission on Arbitration document entitled "Techniques
for Controlling Time and Cost in Arbitration" 40 , The IBA
Rules on the Taking of Evidence in International Arbitration41
and the Indian Arbitration Forum Guidelines for conduct of
Arbitrations Version 2.0 February 2020.

4.3.5 Other features of arbitral institutions which will greatly help

the arbitral ecosystem have also been captured by the High-
Power Committee Report headed by Justice Srikrishna.
Transparency in the administrative process and decisions of
these arbitral institutions would instil considerable confidence
in the parties to the arbitration. Extensive case management
provisions will also assist in expediting the effective disposal
of arbitral proceedings. In addition to the conduct of
arbitration proceedings physically, virtually as well as in
hybrid mode when necessary, it would also be necessary for
such institutions to have adequate technology for inter alia
recording evidence and hearing matters. Adequate
technology necessarily encompasses sufficient technology to
ensure data protection and cyber security.

4.3.6 The Government should provide incentives for creation of

arbitral institutions of excellence, which can rival forigen
institutions currently occupying the international arbitration
market. Law firms, trade associations and the Bar should
encourage and contribute to creation of such arbitral
institutions. There must be a concentrated endeavour to
ensure easy access to these institutions by users in any part of
India including non-urban towns. In its 246th Report, the Law
Commission also recommended that in order to further
encourage and establish the culture of institutional arbitration
in India, it is important for trade bodies and commerce
chambers to start new arbitration centres with their own rules.
These centres, it suggested, could be modelled on the rules of
the more established centres.

4.3.7 With excellent information technology infrastructure and

competent human resources available arbitral institutions
can make a foray into the global markets to service
international commercial arbitration for developing countries.

40
ICC Commission on Arbitration, Techniques for Controlling Time and Costs in
Arbitration (ICC2007) ;https://iccwbo.org/news-publications/arbitration-adr-rules-and-tools/icc-
arbitration-commission- report-on-techniques-for-controlling-time-and-costs-in-arbitration/
41
Adopted by a resolution of the IBA Council 17
December 2020; https://www.ibanet.org/MediaHandler?id=def0807b-9fec-43ef-b624-
f2cb2af7cf7b

83
 4.4 TECHNO LEGAL UTILITIES AS DRIVERS OF CHANGE

4.4.1 The emergence and use of various technological services via

digital platforms for arbitral proceedings facilitates in a cost-
effective and time bound completion of the proceedings. As a
result, there is an emerging class of techno-legal service
providers specializing in this arena.

The proposed amendment to section 6A provides an

indicative list of techno-legal services that provide the
necessary technological infrastructure such as secure online
platforms for efficient document sharing, management and
collaboration for the conduct of arbitration proceedings;
technology support for transcription/recordings and for
virtual court rooms; communication tools; depository of
records; cybersecurity, etc.

4.4.2 There are many advantages in adopting the latest

technological advancements in arbitrations. By way of an
example, the time taken by lawyers for manual search and
referencing to documents and material evidence during
hearings can be cut down to a large extent by utilizing the
facility of document automation. The time saved translates to
reduction of costs, since manually locating and referencing a
document consumes a lot of time, which is factored into the
cost of engaging legal experts. 42 The techniques of machine
learning, big data and predictive analytics are steadily making
inroads into the discipline of law. Some have argued that the
legal profession historically has been reluctant to embrace
new technologies because the hours reduced on account of
automation implies reduction in billing revenue. 43

4.4.3 The emergence oftechnological advancements can play a

crucial role in analysing document sets and summarization or
extraction of key provisions of documents. Further, the use of
Blockchain technology for document sharing renders it
virtually impossible to change or falsify a document as no
single person or authority is in control of the document. 44

4.4.4 A spillover effect of the development of techno-legal utilities

can be observed in the emergence of start-up companies
providing such techno-legal services. As the adoption of these
utilities for arbitral proceedings increases, the sector will
attract considerable investments. According to the London

42
Richard Susskind -Tomorrows Lawyers-An Introduction to Your Future (OUP) Kindle 3rd Edition p
65;
43
See, e.g., William G. Ross, The Ethics of Hourly Billing by Attorneys, 44 RUTGERS L. REV. 1, 30
(1991)
44
Susskind ibid p 72;

84
 Financial Times report, Law-Tech companies have tapped
billions of dollars in venture capital investment and the sector
is poised for fast growth.45 Governments across the globe are
taking up active interest in law-technology start-ups. For
example, “the Law Technology UK” is a government-funded
initiative by the Government of the United Kingdom that
promotes greater intake of technology in legal process.
Similarly, the Future Law Innovation Program “FLIP” is an
initiative by the Singapore Government for incubation and
acceleration of law-tech start-ups.
`
4.4.5 A proactive policy approach towards the growth of law-tech
startups will ensure that arbitral institutions and ad hoc
arbitrations can avail such services with relative ease from
service providers at competitive prices, as opposed to
investing into such utilities from the institution’s own
financial resources.

4.4.6 Techno legal utilities will facilitate migration of ad hoc

arbitrations to the institutional arbitrations in the long run.

4.5 ARBITRATORS AND DUE PROCESS PARANOIA

4.5.1 Though the provisions of the Code of Civil Procedure and

Evidence Act do not apply to arbitral proceedings under the
Arbitration Act, arbitrators often tend to follow them in
conducting the proceedings. This results in arbitral
proceedings becoming a replica of a civil suit and not a mode
of alternative dispute resolution. Arbitrators prefer to err on
the side of caution by adopting due process requirements due
to the abuse of due process rights by parties which resort to
dilatory or guerilla tactics. The methods by which such abuse
takes place involve advancing of numerous or late procedural
applications or raising due process objections which threaten
the arbitral tribunal with a likely annulment of its award in the
event of non-compliance. Such tactics force the arbitrators to
adopt the formal procedure followed in the trial of suits to
ensure due process, leading to significant delays and costs that
follow from prolonged proceedings and interlocutory
interventions.

4.5.2 This phenomenon is increasingly attracting attention.46 In the

2015 Queen Mary International Arbitration Survey”47 one of
the many interesting findings was the apparent growing

45
Susskind ibid p123;
46
K P Berger, J O Jensen, Due process paranoia and the procedural judgment rule: a safe harbour for
procedural management decisions by international arbitrators, Arbitration International, Volume 32, Issue
3, September 2016, Pages 415–435.
47
https://arbitrationblog.kluwerarbitration.com/2016/06/06/due-process-paranoia/ Due Process
Paranoia - Remy Gerbay (Hughes Hubbard LLP)/June 6, 2016 /]

85
 concern of some users of arbitration with what can be termed
“due process paranoia” which has been defined as -“a
perceived reluctance by [arbitral] tribunals to act decisively
in certain situations for fear of the award being challenged on
the basis of a party not having had the chance to present its
case fully”.

4.5.3 However, Courts have always shown deference to the

arbitrator’s discretion in arbitral proceedings. Recently the
Supreme Court of Singapore has clearly explained the legal
position regarding the arbitrator’s dilemma in following strict
procedural rules in the case of China Machine New Energy
Corporation v Jaguar Energy Guatemala LLC and
another.48 The Singapore Court of Appeal expressed concern
at the cynical misuse of due process and natural justice
complaints in the context of arbitration proceedings. In order
to address this issue and to reduce the opportunity for abuse,
the Court of Appeal provided guidance on the balance to be
struck between genuine due process concerns and the
tribunal’s legitimate duty to ensure a prompt and efficient
resolution of the dispute at hand. 49 It worth recalling the
observations of the Court.

4.5.4 The Court at para 104 observed as follows:

“104 The foregoing discussion of the applicable principles
may be summarised as follows:
(a) The parties’ right to be heard in arbitral proceedings
finds expression in Art 18 of the Model Law, which provides
that each party shall have a “full opportunity” of presenting
its case. An award obtained in proceedings conducted in
breach of Art 18 is susceptible to annulment under Art
34(2)(a)(ii) of the Model Law and/or s 24(b) of the IAA.
(b) The Art 18 right to a “full opportunity” of presenting
one’s case is not an unlimited one. It is impliedly limited by
considerations of reasonableness and fairness.
(c) What constitutes a “full opportunity” is a contextual
inquiry that can only be meaningfully answered within the
specific context of the particular facts and circumstances of
each case. The overarching inquiry is whether the
proceedings were conducted in a manner which was fair, and
the proper approach a court should take is to ask itself if what
the tribunal did (or decided not to do) falls within the range of
what a reasonable and fair-minded tribunal in those
circumstances might have done.
(d) In undertaking this exercise, the court must put itself
in the shoes of the tribunal. This means that: (i) the tribunal’s

48
[2020] SGCA 12; Civil Appeal No 94 of 2018 28 February 2020;
49
https://www.globalarbitrationnews.com/2020/06/18/due-process-paranoia-in-international-
arbitration- singapore-court-of-appeal-provides-useful-guidance-to-tribunals/

86
 decisions can only be assessed by reference to what was
known to the tribunal at the time, and it follows from this that
the alleged breach of natural justice must have been brought
to the attention of the tribunal at the material time; and (ii)
the court will accord a margin of deference to the tribunal
in matters of procedure and will not intervene simply
because it might have done things differently.”50

4.5.5 The Malaysian High Court has also endorsed arbitrator

discretion when writing reasons in arbitration awards. In
Allianz General Insurance Company Malaysia Berhad v
Virginia Surety Company Labuan Branch, (Originating
Summons No. WA-24NCC(ARB)-13-03/2018), the Court
dismissed an application to set aside a majority arbitration
award under Section 37 of the Malaysian Arbitration Act
2005 (MAA) for alleged breaches of natural justice
predicated on the drafting of the arbitrators’ reasoning.51

4.5.6 To deal with this problem of arbitrators resorting to Code

of Civil Procedure and the Evidence Act formalities, Justice
Srikrishna Committee Report recommended that a Model
Rules of Procedure should be inserted in the Arbitration Act
as a Schedule which parties can adapt with modifications.
This suggestion has been given effect in the present
Amendment Bill which incorporates a Model Riles of
Procedure as Eighth Schedule to the Act.

4.5.7 Adoption of the Model Rules of Procedure by arbitral

tribunals will go a long way in speeding up the arbitral
proceedings and cut costs and delay.

4.6 SPECIALISED ARBITRATION DIVISION AND BAR

4.6.1 There is a need for specialised arbitration benches as the

Indian judiciary is burdened with mounting arrears of cases
and exploding dockets. According to the data from the
National Judicial Data Grid, as on 17 June 2023, there were
60,88,579 cases pending before the High Courts and
4,38,46,440 cases pending before the District and Taluka
Courts of India. Support from a specialised judiciary has been
instrumental in the growth of arbitration and arbitral
institutions in jurisdictions such as Singapore, Hong Kong
and the UK. In these jurisdictions, it has been observed that
the judiciary is mindful of the independence of the arbitral
process while, at the same time providing support for the
arbitral process where required.

50
Supra para 104;
51
https://arbitrationblog.kluwerarbitration.com/2020/06/16/judicial-support-against-due-process-
paranoia-in- international-arbitration/?output=pdf;

87
4.6.2 Dedicated benches exclusively for hearing arbitration matters
must be set up in Courts across India and must consistently
abide by the Act’s goal of minimal judicial interference.
Further, arbitration would also have to be supported by a
dedicated bar comprising professionals competent to conduct
such arbitration.

4.6.3 In this context it is worth recalling that the Arbitration and

Conciliation (Amendment) Bill 2003 introduced in Rajya
Sabha on December 2003 contained a separate Chapter on
setting up of Arbitration Divisions in the High Courts. The
said “CHAPTER IX A contained new sections 37A to 37E,
which provided for the creation of arbitration division,
jurisdiction and special procedure in the High Courts. Section
37A of the said Bill inter alia provided as follows :
“37A. (1) Every High Court shall, as soon as may be after the
commencement of the Arbitration and Conciliation
(Amendment) Act, 2003, constitute an Arbitration Division
within the High Court.

(2) The Judges of the Arbitration Division shall be such

of the Judges of the High Court as the Chief Justice of that
High Court may, from time to time, nominate.
Explanation.— For the purposes of this sub-section, “Judges”
shall include Judges appointed under article 224A of the
Constitution.

(3) Without prejudice to the provisions of section 37F, the

Arbitration Division shall consist of one or more Division
Benches of the High Court, as may be constituted by the Chief
Justice of the High Court and such Bench or Benches shall
dispose of every application, appeal or proceeding allocated
to it.”

4.6.4 However, the said Bill was not enacted into law so the
proposal was not given effect. Establishment of separate
Arbitration Division in every High Court may be difficult due
to financial constraints. Though section 10 of the Commercial
Courts Act, 2015 confers limited jurisdiction in respect of
arbitration matters it is not an exclusive court and arbitration
cases are clubbed with other commercial cases and do not get
any priority in disposal.

4.6.5 In view thereof it would ideal if a separate Arbitration

Division is created if not in every High Court or at least in
select High Courts and the Government may earmark separate
funds for creation of a exclusive Arbitration Division in select
High Courts having heavy pendency of arbitration cases.
Judges could periodically be appointed under article 224A to

88
 clear the backlogs on priority basis. It may be worth revisiting
the documentedproposals for speedy disposal of arbitration
cases. This will address the problem of delay in arbitration
cases.

4.6.6 In this context the Committee feels the Government should

consider utilising the services of retired Judges of the High
Court who are willing to work till health permits solely to man
these Arbitration Divisions.

4.7 EMPIRICAL RESEARCH AND A VIABLE ECOSYSTEM

- PRELUDE TO LAW REFORM

4.7.1 Attempts to reform Arbitration Act are handicapped by lack

of empirical data on the functioning of the Act and impact
analysis upon the users. Two pre- requisites for effective law
reform are: (a) study of the impact and effectiveness of the
Acts of legislatures in operation and the study of empirical
data on the impact of judicial decisions; 52 and (b) a rich
ecosystem accompanying the legislation. The first requisite
necessitates law-in-action studies and empirical research for
collection of data, whereas the second requisite necessitates a
machinery to monitor the progress of law. However, the need
for studying the effectiveness of Acts of legislatures is yet to
be realised.

4.7.2 Advances in digital technology make the collection of data

easy. This is due to the availability of computer resources,
data storage, applications through cloud and mobile
technology etc., which have led to tremendous growth in
digital data. Through internet-searches, social networking
platforms, various other channels and methods, raw data is, in
most instances, freely available or is purchasable from data
aggregators, intermediaries or from selected operators either
in consideration for money or in consideration for some type
of service.

4.7.3 Big data invites lawyers to make a fundamental change in

their approach to law itself by looking to statistical patterns,
predictors, and correlations, in addition to the legal rules that
purportedly control outcomes – case law, statutory law,
procedural rules, and administrative regulations. 53 New

52
Professor Upendra Baxi, “Who Bothers About the Supreme Court-The Problem of Impact 24 Journal
Of the Indian Law Institute p 854;
53
Dru Stevenson and Nicholas J. Wagoner- Bargaining in the Shadow of Big Data, 67 Fla. L. Rev.
1337 (2016) p 19;
http://scholarship.law.ufl.edu/flr/vol67/iss4?utm_source=scholarship.law.ufl.edu%2Fflr%2Fvol67%2Fiss4
%2F 1&utm_medium=PDF&utm_campaign=PDFCoverPages

89
 techniques combined with traditional statistics and computer
science make it increasingly feasible to test and analyse large
sets of data. These techniques and algorithms developed by
statisticians and computer scientists have the potential to
provide a wealth of useful information if we can develop ways
to extract it. 54 In this context datafication can provide Big
Data to Government to measure the impact and shortcomings
of the working of Acts of Parliaments instead of depending
on anecdotal evidence and on that basis undertake law reform.

4.7.4 Datafication refers to transforming words into data, and it not

merely the digitisation of information from analog to digital
medium. Datafication of a phenomenon is to put it in a
quantified format so that it may be tabulated and analysed.55
To capture quantifiable information, we need to know how to
measure and how to record what we measure. This requires
the right set of tools and also necessitates a desire to quantify
and to record. There exists a large amount of legal literature
available on methods of data collection, scaling techniques in
socio-legal research, analysis of aggregate data and
interpretation of data which facilitates measuring the impact
of law and legislation.56

As is the case with medical statistics, judicial statistics57 by

use of data analytics is emerging as a separate discipline,
bolstered by advances in information processing tools, which
can provide great impetus to law reform. For example, data
analytics can be used to determine the costs, risks, and
ultimate outcome of arbitration proceedings.58

4.7.5 This will give rise to the need for a new breed of legal data
experts since with the growing significance in law of machine
54
Dru Stevenson and Nicholas J. Wagoner, ibid p 20;.
55
Mayer-Schönberger, Viktor; Cukier, Kenneth. Big Data: A Revolution That Will Transform How
We Live, Work, and Think (p. 78). Houghton Mifflin Harcourt. Kindle Edition.
56
Gangrade, K. D. “Methods of Data Collection: Questionnaire and Schedule.” Journal of the Indian
Law Institute, vol. 24, no. 4, 1982, pp. 713–722. JSTOR, www.jstor.org/stable/43950835. Accessed 20
June 2021.; Ghosh, B.N. “Scaling Techniques in Socio-legal Research.” Journal of the Indian Law
Institute, vol. 24, no. 4, 1982, pp. 739–750. JSTOR, www.jstor.org/stable/43950838. Accessed 20 June
2021; Shukla, K. S. “Analysis of Aggregate Data.” Journal of the Indian Law Institute, vol. 24, no. 4,
1982, pp. 756–762. JSTOR, www.jstor.org/stable/43950840. Accessed 20 June 2021; Raj, Hans.
“Interpretation of Data.” Journal of the Indian Law Institute, vol. 24, no. 4, 1982, pp. 763–771. JSTOR,
www.jstor.org/stable/43950841. Accessed 20 June 2021; Agrawala, Rajkumari. “Experiments of a Law
Teacher in Empirical Research.” Journal of the Indian Law Institute, vol. 24, no. 4, 1982, pp. 863–874.
JSTOR, www.jstor.org/stable/43950846. Accessed 20 June 2021; Ghosh, B. N. “Collection and
Analysis of Data.” Journal of the Indian Law Institute, vol. 24, no. 4, 1982, pp. 785– 836. JSTOR,
www.jstor.org/stable/43950843. Accessed 20 June 2021.
57
Thiel, Orin S. “Judicial Statistics.” The Annals of the American Academy of Political and Social Science,
vol. 328, 1960, pp. 94–104. JSTOR, www.jstor.org/stable/1032725. Accessed 20 June 2021.
58
Benjamin Davies, Arbitral Analytics: How Moneyball Based Litigation/Judicial Analytics Can Be
Used to Predict Arbitration Claims and Outcomes, 22 Pepp. Disp. Resol. L.J. 321 (2022) p 7; Available
at: https://digitalcommons.pepperdine.edu/drlj/vol22/iss2/2; Kevin D. Ashley, Artificial Intelligence
and Legal Analytics- New Tools for Law Practice in the Digital Age,, Cambridge University Press);

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 learning and predictive analytics, there will be a corresponding
need for data experts who are masters of tools and techniques that
are required to capture, analyse and manipulate great quantities
of information. The legal data scientists will seek to identify and
correlate trends, patterns and insights both in legal areas and in
non-legal materials.59

4.7.6 The Insolvency and Bankruptcy Code, 2016 (“IBC”) has shown
the way by providing for a rich ecosystem which facilitates the
measuring of IBC’s effectiveness on a real-time basis by all
stakeholders.

4.7.7 Until the 2019 amendment, the Arbitration Act, lacked such an
ecosystem. The Arbitration Council entrusted with statutory
functions to supplement the working of the to the Arbitration Act
has been established. The Arbitration Council should take a
proactive role in collecting data about pending arbitrations,
timelines taken for conclusion, delays in enforcement of awards
etc., so as to enable the Government to receive feedback and
respond appropriately.

4.7.8 The Committee also recommends that there be a periodic and

institutionalised, data- driven review of the Arbitration and
Conciliation Act, 1996 and its amendments (including the
amendments suggested along with this report). Ad hoc or
multiple revisions of this important statute are to be avoided. Yet,
it is imperative to recognise that a responsive and dynamic
approach to law making is critical to build and maintain an
internationally acclaimed arbitral ecosystem.

4.8 STAMP ACT AND UNIFORM E-STAMPING PROCESS

4.8.1 In India, there is a dearth of uniformity and standardisation

for e-stamping processes. At present, 30 States/Union
Territories have adopted the Stamp Act while the remaining
6 States/ Union Territories have their own Stamp Acts.
Recently, in Splendor Landbase Ltd v. Aparna Ashram
Society & Anr.,60 the Hon’ble High Court of Delhi provided
an elaborate procedure and modalities for dealing with an
unstamped agreement in arbitral proceedings. Further, relying
on the Hon’ble Supreme Court’s judgment in New Central
Jute Mills Co. Ltd. v. State of W.B.,61 the Hon’ble High Court
held that an agreement needs to be stamped in accordance
with the laws of the state in which it is executed.

4.8.2 The Committee feels that E-stamping is the need of the

hour. There is a need for uniformity in the process of e-
59
Susskund ibid p197;
60
SCC OnLine Del 5148.
61
AIR 1963 SC 1307.

91
 stamping and improving technology to ensure that e-stamping
can be done with a few clicks. Although several states and
union territories have implemented the digital e-stamping
process by either amending the applicable Stamp Acts/rules,
or by issuing necessary orders, there is no uniformity in the
same, thus creating issues of compliance in dispute resolution
processes.

4.8.3 While the Committee has suggested amendments to the Act

to ensure that concerns regarding stamping of agreements do
not create obstacles to the arbitration process, such
amendments alone will not solve the problem. A holistic
approach of bringing about amendments to the Stamp Act is
crucial to further facilitate EODB in India.

4.8.4 Recently, the Government in its cabinet note circulated to

various ministries reportedly62 stated that “in order to enable
digital e-Stamping, it is desirable to clearly provide in the Act
for e-Stamps, for a digital process for payment and
acquisition of e-Stamp and for its affixation on a digital
instrument”. Further, it was stated that “… to ensure a more
robust basis for digital e-stamping in the country, the Indian
Stamp Act, 1899, is required to be amended by introducing
necessary amendments to certain definitions in the Act”.

4.8.5 The Government is already deliberating on bringing about the

requisite amendments in the Stamp Act. However, to elevate
EODB in India, it is imperative that the Government takes
prompt steps to expedite the process of effecting these
amendments. These amendments will bring in uniformity
in the process of e stamping and have a direct impact on
dispute resolution processes including arbitration.

4.8.6 Therefore, while the necessary statutory amendments to

resolve stamping issues in the arbitration landscape have
already been recommended in the present Bill, holistically, a
proper resolution of the issue demands that the proposed
amendments to the Stamp Act are brought to fruition.

4.9 NEED FOR A SEPARATE ACT FOR DOMESTIC

ARBITRATION AND INTERNATIONAL COMMERCIAL
ARBITRATION

4.9.1 Apparently when the UNCITRAL Model Law was adopted

in 1996 the option of having two different legal framework
for purely domestic and international commercial arbitrations

62
‘India proposes changes to Indian Stamp Act to include options relating to e-Stamping’ by The Hindu
Businessline, accessible at https://www.thehindubusinessline.com/news/india-proposes-changes-to-
indian- stamp-act-to-include-options-relating-to-e-stamping/article67053714.ece

92
 was considered, as was followed in certain jurisdictions such
as South Africa and the U.K. However, at the time, it was
decided to have a single law governing both international
commercial arbitrations as well as for domestic arbitrations.

4.9.2 While it would have been ideal to have adopted the

UNCITRAL Model Law specifically for international
commercial arbitrations and leave the domestic arbitrations to
be governed by a separate legislation based on the experience
derived from the Arbitration & Conciliation Act, 1940 which
was in force at the time, amendments were made to the 1996
Act to make the provisions of the new Arbitration Act suitable
for domestic arbitrations as well.

4.9.3 However, as per the suggestions and recommendations

received from stakeholders, it is understood that stakeholders
think it would be advisable that India has a distinct law for
international commercial arbitration which could be a mere
adoption of the UNCITRAL Model Law without much
modification. Should this be followed through, then arbitral
institutions should also adopt the UNCITRAL Rules of
Arbitration.

4.9.4 Reasons –
(i) First, an international arbitration law based on the
UNCITRAL Model Law 1985, as modified by
subsequent changes introduced in 2006, would cater
to the request of the international business community
at large, leading to increase in the level of confidence
that would encourage them to arbitrate in India.

(ii) Second, there are many features associated with

international arbitrations that are quite distinct and
different from purely domestic arbitrations.

4.9.5 However, the Committee is of the opinion that at present it is

not necessary to enact a separate law for international
commercial arbitrations and the present 1996 Act can be
further amended to incorporate the changes in the
UNCITRAL Model Law introduced in 2006, as suggested by
Shri A.K Ganguly, Sr Advocate after due consultation with all
the stakeholders.

4.9.6 The Committee is nevertheless of the opinion that in the

longer term a separate law for domestic arbitration is
necessary which can be finalised after consultation with all
stakeholders.

4.9.7 Reasons for separate Arbitration Act for domestic users –

- The UNCITRAL Model Law is based mainly on the

93
 experience of western countries where arbitrations are
conducted under the auspices of arbitral institutions.
Thus, doctrines of competence-competence which
empower arbitrators to decide allegations against
themselves are based on the western practice where an
internal review system is in place to deal with bias of
individual arbitrators in India. When the 1996 Arbitration
Act was introduced, we did not have arbitral institutions
to suggest the new dispensation. Sole Arbitrators deciding
allegations of bias against themselves has not been well
received and has led to endless litigations, clogging the
Court dockets.

- Further, “party autonomy” in purely domestic arbitrations

is often compromised in practice actual practice comes
into play. An unwary party who has signed a contract
containing an arbitration clause is told the bear the cost of
arbitration, including arbitrator’s fees. In this regard, it is
necessary to mandate by law, a standard form contract in
appropriate cases that should seek informed consent from
the parties for accepting the arbitration clause. The parties
should be aware of the costs and timeline involved before
signing the contract and should also have the option to opt
for mediation rather than arbitration.

4.9.8 Also, given the varied forms of domestic arbitrations and

awards, as a matter of policy greater supervision by the Courts
is required.

4.9.9 A separate domestic law will be necessary to address India

specific concerns.

4.10 A SEPARATE LEGAL FRAMEWORK FOR INVESTOR

STATE DISPUTE SETTLEMENT

4.10.1 The Delhi High Court has repeatedly held that arbitral
awards arising from Bilateral Investment Treaties (“BIT”)
are not “commercial” within the meaning of section 44 of
the Arbitration Act, thereby negating the applicability of the
Arbitration Act to the enforcement of BIT arbitral awards.
India not being a party to the Convention on the Settlement
of Investment Disputes between States and Nationals of
Other States (“ICSID Convention”), parties cannot directly
enforce a BIT arbitral award in India. Hence, BIT
arbitrations require a special legal framework to strike a
balance between investor protection and national interests.

4.10.2 Principles which govern commercial arbitration may not fit

into BIT legal framework and therefore requires to be
addressed through a special enactment. In particular, the

94
 question of Third Party Funding (TPF) /Litigation
Funding Arrangement (LFA) in BIT arbitrations raises
important questions affecting national interests.

4.10.3 Another important feature of Investor-state arbitration is

need for transparency. In recent years, the trend is to
respond to the demand for transparency. The UNCITRAL
Rules on Transparency in Treaty-based Investor-State
Arbitration 63 provides inter alia that at the commencement
of arbitral proceeding, publication of the following
documents which shall be made available to the public
namely, the notice of arbitration, the response to the notice
of arbitration, the statement of claim, the statement of
defence and above all hearings for the presentation of
evidence or for oral argument shall be public.

4.10.4 However, where there is a need to protect confidential

information or the integrity of the arbitral process pursuant
to article 7, the arbitral tribunal shall make arrangements to
hold in private such part of the hearing that which requires
confidentiality. The arbitral tribunal shall make logistical
arrangements to facilitate the public access to hearings
(including where appropriate by organizing attendance
through video links or such other means as it deems
appropriate.)

4.10.5 In 2022, ICSID amended its arbitration rules and

introduced a chapter dedicated to transparency. The key
change, Rule 62, now provides that ‘awards, supplementary
decisions on an award, and rectification, interpretation, and
revision of an award, and decisions on annulment’ are to be
published automatically unless a party objects in writing
within 60 days. This is the opposite of the previous position,
which required all parties to give consent for the publication
of awards and decisions. In addition, Rules 63 and 64
provide for default publication of procedural orders, party
submissions and supporting documents. New Rule 65 also
includes a presumption that hearings will be open to the
public, unless a party objects.64

4.10.6 The Arbitration Act was amended in 2021 to deal with

awards procured by corrupt means. Viewed in this context,
if TPF/LFA in BIT arbitrations is recognised under the
present law, it may facilitate the assignment of awards won
by corrupt means by the successful party to the third-party

63
https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/rules-on-transparency-
e.pdf
64
https://www.freshfields.com/493257/globalassets/noindex/international-arbitration-top-trends-
2023.pdf

95
 funders. This will result in successful parties walking
away with their ill-gotten gains, leaving the
65
government to engage in litigation against third-party
funders.

4.10.7 Another important factor which requires the attention of the

Government is that in most BIT arbitrations, the pool
arbitrators are drawn from developed countries and advised
by foreign law firms controlling what has been referred to
as the “Invisible College” of the global international
arbitration community. The lack of diversity undermines
the legitimacy of the ISDS regime. As observed by
UNCITRAL Working Group III on (Investor-State Dispute
Settlement Reform) appropriate diversity, such as
geographical, gender and linguistic diversity as well as
equitable representation of the different legal systems and
cultures would be of essence in the ISDS system which is
currently lacking in the present ISDS set up.66

4.10.8 ICSID, which has jurisdiction over cases arising under

certain commercial contracts, national investment law, and
investment treaties, publishes a biannual summary of
ICSID tribunals and ad hoc committees. By the end of
2013, there were 459 registered cases. ICSID provides
information by region and country. ICSID arbitrators,
conciliators, and ad hoc committee members came from
seventy-seven different states; forty-nine percent were
European nationals, twenty-two percent were from North
America, thirteen percent were from Central or South
America, ten percent were from Asia or the Pacific, and six
percent were from Africa or the Middle East.25 The most
frequently appointed nationalities were the United States
(163 appointments), France (155), the United Kingdom
(133), Canada (97), Switzerland (93), Spain (52), and
Australia (50).26 Waibel and Wu also identified the
dominance of developed country arbitrators at ICSID.
Specifically, for the 341 ICSID arbitrators sitting between
1978 and 2011, they identified sixty-six percent of ICSID
arbitrators as nationals of OECD states.67

65
International Law as a Profession , J. D'Aspremont, T. Gazzini, A. Nollkaemper, & W. Werner
(Eds.) Chapter 12 .Professionals of International justice -From the Shadow of State Diplomacy to the
Pull of the Market For Commercial Arbitration; Cambridge University Press (2017);
66
Susan D. Franck et al., International Arbitration: Demographics, Precision and Justice, in
INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION, LEGITIMACY: MYTHS,
REALITIES, CHALLENGES, ICCA Congress Series No. 18, at 33–122; Susan D. Franck, et al The
Diversity Challenge: Exploring the "Invisible College" of International Arbitration, 53 Colum. J.
Transnat'l L. 429 (2015).

67
ibid

96
 4.10.9 In investment treaty arbitration (ITA), scholars have begun
identifying arbitrator demographics. A study of 102 ITA
arbitration awards rendered before 2007 identified a pool of
145 ITA arbitrators: of that group, 75% were from OECD
states and 3.5% percent were women. Expanded research
from 252 ITA awards rendered by January 2012 identified
a pool of 247 different arbitrators wherein 80.6% were from
OECD states and 3.6% were women. Given repeated
appointments of certain female arbitrators, at least one
woman was present in 18.3% of the ITA awards. Tribunals
exclusively containing men constituted the majority
(81.7%) of awards. Other research replicates the general
lack of female arbitrators in ITA, 3and Rubins and Sinclair
suggested in 2006 that, “data supports the view that ICSID
belongs primarily to gentlemen.68

4.10.10 Despite having a good pool of arbitrators in our country,

none of these names appear to figure as arbitrators in BIT
arbitrations. Foreign law firms aggressively lobby for a
select few arbitrators drawn mainly from developed
countries who dominate the investment arbitration sector.
As a result, India is heavily dependent on foreign law firms
to contest BIT arbitrations, which is a huge cost on the
country. These deficiencies need to be addressed urgently
and the Government should take steps to promote our
arbitrators and law firms in foreign seated arbitrations.

4.10.11 BITs were popular during the 90s when nations signed a
multitude of BIT with varying provisions giving effect to
what has been termed as the “Noodle Bowl effect” with
different countries to attract foreign investment. However,
after a massive wave of investor claims raised in the late
1990s, the climate changed. Certain major criticisms
levelled against in investment treaty arbitration are as
follows:69
(a) The closed nature of the world of investment treaty
arbitrations – excessive specialisation that creates a
narrow field which is removed both from commercial
arbitration and from public international law;

(b) An alleged lack of democratic accountability and lack

of sensitivity to allegations of corruption;

(c) Lack of diversity, e.g. the dominance of male

arbitrators from developed countries and the lack of

68
Ibid
69
Why Europe Should Reconsider its Anti-arbitration Policy in Investment Disputes- Alan Uzelac Prof.
Dr., Full Professor of Law, Head of Department for Civil Procedure, Faculty of Law, University of
Zagreb;https://ajee-journal.com/upload/attaches/att_1551341965.pdf;

97
 female arbitrators;

(d) Insufficient space for balancing the regulatory

policies of the state against the interests of the private
investors;

(e) Built-in bias in favour of investors, often connected

with problems regarding the impartiality of
arbitrators who appear in the role of counsel in other
arbitrations (double-hatting) or other forms of
conflicts of interest;

(f) Absence of transparency and appeal options; no

uniform case law;

(g) Lack of symmetry in procedure, forum shopping and

possible parallel proceedings;

4.10.12 The anti-ISDS wave has resulted from a backlash against

investment arbitration in western jurisdictions particularly
in the EU and US. It became a controversial issue during the
beginning of negotiations in the EU-US trade agreement in
the TTIP negotiations, which started in July 2013 when
many European politicians and NGOs moved against
inclusion of ISDS in the treaty and in the next stage of
negotiations, the draft text of the TTIP proposed by the EU
excluded ISDS provisions and included provisions on a
special, hybrid body for investor-state dispute resolution –
a standing investment tribunal that would be established
under the treaty once it came into effect.

4.10.13 Similarly in the EU trade agreement with Canada, CETA

(Comprehensive Economic and Trade Agreement), the
policy of moving away from arbitration materialised in its
dispute resolution provisions, which are based on a new
investment court system. This system, according to official
announcements, enshrines the right of governments to
regulate in the public interest, but also introduces a system
which is public, professional, and transparent.

4.10.14 In its Concept Paper of 5 May 2015 on ‘Investment in TTIP

– the path beyond 70 , the Commission also indicated that
work should start on setting up a multilateral system for
resolving international investment disputes. This work
would be carried out in parallel to the reform process
undertaken in bilateral EU negotiations.

70
https://policy.trade.ec.europa.eu/enforcement-and-protection/multilateral-investment-court-
project_en

98
 4.10.15 The salient features of the Multilateral Investment Court
are as follows. The Court would:
(i) have a first instance tribunal;
(ii) have an appeal tribunal;
(iii) have tenured, highly qualified judges, obliged to adhere
to the strictest ethical standards, and a dedicated
secretariat;
(iv) be a permanent body;
(v) work transparently;
(vi) rule on disputes arising under future and existing
investment treaties;
(vii) only apply where an investment treaty already explicitly
allows an investor to bring a dispute against a state;
(viii) would not create new possibilities for an investor to
bring a dispute against a state;
(ix) prevent disputing parties from choosing which judges
rule on their case;
(x) provide for effective enforcement of its decisions; and
(xi) be open to all interested countries to join.

4.10.16 In t h e EU, the overall objective for creating a Multilateral

Investment Court is to set up a permanent body to decide
investment disputes. It would build on the EU's
groundbreaking approach to its bilateral FTAs and be a
major departure from the system of investor-to-state dispute
settlement (ISDS) based on ad hoc commercial arbitration.
For the EU, the Multilateral Investment Court would
replace the bilateral investment court systems included in
EU trade and investment agreement.

4.10.17 In the American continent the rejection of ISDS has already

been confirmed in the agreement that will replace NAFTA
and its Chapter 11 ISDS mechanism. Under the USMCA28
the US investors in Canada and Canadian investors in the
United States will only find recourse in national courts.

4.10.18 Apart from the developments in treaty negotiations the

decision of the Court of Justice of the European Union
(CJEU) issued on 6th March 2018, in a case initiated by the
highest German court, the Federal Court of Justice (BGH),
which had submitted a request for a preliminary ruling in
proceedings between the Slovak Republic and the Dutch
company Achmea BV71 had added momentum to this anti
ISDS wave. T h e CJEU overruled its Advocate General
and found that the arbitral provision from the Dutch-Slovak
BIT (Art 8) has an adverse effect on the autonomy of EU
law since the only bodies authorised to interpret EU law are
71
https://curia.europa.eu/juris/document/document.jsf;jsessionid=A02C4F06951C7BD8D1A91D968
AD65635?text=&docid=194583&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&c
id=2791563;

99
 EU bodies (and the Luxembourg Court itself) and that the
arbitral clauses contained in the ‘intra-EU BITs’ (bilateral
treaties for protection of investments concluded between
two EU Member States) are ‘not applicable’ (unanwendbar),
thereby leading to the same consequences as if the arbitral
agreement was inexistent or invalid.

4.10.19 This judgment addressed the compatibility of the bilateral

investment treaty concluded between the Netherlands and
the Slovak Republic with European Union (EU) law. The
ECJ ultimately held that the treaty’s dispute settlement
provisions infringe EU law. Although the ECJ only
addressed this particular bilateral investment treaty, the
judgment is widely considered to be a landmark decision
with far-reaching implications.72

4.10.20 The decision sparked a debate amongst scholars, politicians

and practitioners as to the impact of the judgment, focussing
in particular on whether Achmea puts an End to (intra-EU)
Investor-state dispute settlement (ISDS) as a whole.

4.10.21 Currently UNCITRAL Working Group III on (Investor-

State Dispute Settlement Reform) is deliberating on the
possible reform of investor-State dispute settlement (ISDS)
and pertinent elements of selected permanent international
courts and tribunals.73 Working Group III of UNCITRAL
at its thirty-sixth session, the concluded that the
development of reforms was desirable to address concerns
related to the lack or apparent lack of independence and
impartiality of decision makers in ISDS (A/CN.9/964, para.
83); the question of the adequacy, effectiveness and
transparency of the disclosure and challenge mechanisms
available under many existing treaties and arbitration rules
(A/CN.9/964, para. 90); the lack of appropriate diversity
among decision makers in ISDS (A/CN.9/964, para. 98);
and the mechanisms for constituting ISDS tribunals
(A/CN.9/964, para. 108).

4.10.22 Recent trends indicate that countries are inclined to shift

away from t h e ISDS system currently followed for
settling investment disputes which provide for the
appointment of arbitrators on a case-by-case basis by the
investor and the State involved in the dispute towards a
Multilateral Investment Court system in which, on the

72
Janssen, Andre & Wahnschaffe, Christian. (2020). For Whom the Bell Tolls: Any Hope Left for
Investment Arbitration After Achmea?. 10.1007/978-3-030-42974-4_12; See Pinna, Andrea. (2018).
The Incompatibility of Intra-EU BITs with European Union Law, Annotation Following ECJ, 6 March
2018, Case 284/16, Slovak Republic v Achmea BV, Paris Journal of International Arbitration, Cahiers
de l'arbitrage, 2018(1) pp. 73-95;
73
https://uncitral.un.org/en/multilateralpermanentinvestmentcourt

100
 contrary, the courts’ members (subject to strict
independence and impartiality requirements) would be
appointed in advance by a joint committee of the States
party to the treaty. The decisions of such court would be
subject to appeal before an appellate body.74

4.10.23 While drafting a separate law for BIT Arbitrations the

Committee feels that the Government may explore the
possibility of setting up an Investment Court to settle
investment disputes which is gaining currency in
international practice. With GIFT city holding the promise
of becoming a hub of international commercial arbitration,
setting up an International Investment Court in GIFT city
could be a big leap forward in making India a hub of
International arbitration.

4.10.24 The Committee also feels that it is necessary to take note of

the current wave of anti-BIT sentiment against
incorporating arbitration clauses in trade treaty negotiations
which has come to the fore in the recent past in the EU and
US and opting for a permanent standing body viz an Investment
Court.

4.10.25 These matters require further examination, and the

Committee recommends that a decision on the new law on
investor state disputes may be taken after deliberations at
the highest level in Government.

4.11 ARBITRATION IN SEZs / GIFT CITIES

4.11.1 A new form of arbitration has developed in Special

Economic Zones in other countries known as “free-zone
arbitration”. 75 Free-zone arbitration, being managed by
zone-specific institutions, is distinct from onshore
arbitration.76 It also follows zone-specific arbitration rules.
The formation of foreign arbitral institutions in the zones
and the variety of ways to arbitrate in the zones are the two
characteristics that make free-zone arbitration unique.77

4.11.2 Special Economic Zones (“SEZs”) are areas with special

privileges established by a particular country to attract

74
https://jusmundi.com/en/document/publication/en-investment-court-system
75
Gordon Blanke, ‘Free Zone Arbitration in the United Arab Emirates: DIFC v. ADGM: (Part I)’, 35
Journal of International Arbitration 541 (2018).
76
Jie (Jeanne) Huang, ‘Recent Developments of Institutional Arbitration in China: Specialization,
Digitalization and Internationalization’, in Julien Chaisse and Jiaxiang Hu (eds), International Economic
Law and the Challenges of the Free Zones (Kluwer, 2019).
77
Georgios Dimitropoulos, International Commercial Courts in the ‘Modern Law of Nature’:
Adjudicatory Unilateralism in Special Economic Zones, Journal of International Economic Law,
Volume 24, Issue 2, June 2021, Pages 361–379, accessible at: https://doi.org/10.1093/jiel/jgab017

101
 foreign investment into the country and boost trade.78 SEZs
form separate jurisdictions within the countries in which
they are present. SEZs themselves have investor-friendly
policies that invite cross-border trade. Traditionally, these
zones have separate rules for dispute resolution within the
zone.

Viewed in this context, and with a view to promote

India as a hub of international arbitration, the Special
Economic Zones Act 2005 may be suitability examined.

4.11.3 To understand the position under Indian law, it is necessary

to examine the provisions of the Special Economic
Zones Act 2005. A Special Economic Zone (SEZ) is a
specifically delineated duty-free enclave and is deemed to
be foreign territory for the purposes of trade operations and
duties and tariffs. In order words, SEZ is a geographical
region that has economic laws different from a country's
typical economic laws. Usually the goal is to increase
foreign investments. The Act provides for setting up of
international financial Service centers in SEZ Zones which
are regulated by a separate legal regime. The following
provisions of the Special Economic Zones Act, 2005,
which provide for setting up of International Financial
Centers in SEZ are worth recalling.

4.11.4 Section 18 of the SEZ Act provides for setting up of an

International Financial Centre in each SEZ which satisfies
the conditions prescribed by the Central Government. The
section provides as follows:
“Setting up of International Financial Services
Centre
18.(1) The Central Government may approve the
setting up of an International Financial Services
Centre in a Special Economic Zone and prescribe
the requirements for setting up and operation of
such Centre :
Provided that the Central Government shall
approve only one International Financial Services
Centre in a Special Economic Zone.
(2) The Central Government may, subject to such
guidelines as may be framed by the Reserve Bank,
the Securities and Exchange Board of India, the
Insurance Regulatory and Development Authority
and such other concerned authorities, as it deems
fit, prescribe the requirements for setting up and the

78
P. Pakdeenurit, N. Suthikarnnarunai, and W. Rattanawong, ‘Special Economic Zone: Facts, Roles,
and Opportunities of Investment’. Proceedings of the International MultiConference of Engineers and
Computer Scienctists, 2014 Vol II, IMECS.

102
 terms and conditions of the operation of Units in an
International Financial Services Centre.”

4.11.5 Section 49 of the SEZ Act empowers the Central

Government by notification,
a) to modify provisions of the Special Economic Zones Act
2005;
b) or other enactments in relation to Special Economic
Zones to the effect that such enactment s shall not
apply or apply subject to such modifications as may
be specified in the said notification.

4.11.6 Section 53 of the SEZ Act provides that a Special

Economic Zone shall, on and from the appointed day, be
deemed to be a territory outside the customs territory of
India for the purposes of undertaking the authorized
operations. Subsection (2) of the said section provides that
a Special Economic Zone shall, with effect from such date
as the Central Government may notify, be deemed to be a
port, airport, inland container depot, land station and land
customs stations, as the case may be, under Section 7 of the
Customs Act, 1962.

4.11.7 Section 56 of the SEZ Act amends the Banking Regulation

Act, 1949 the Insurance Act, 1938 to exempt the off shore
banking companies and Insurance companies operating in
SEZ area from the provisions of the said Acts.

4.11.8 Limiting the applicability of other enactments in SEZ areas,

and introducing a special arbitration regime in such areas
could be explored. Designatedarbitral institutions could be
the seat of the arbitration unless specified otherwise by
the parties. This seat would be distinct from an Indian
seat, which in turn is governed by the provisions of the
prevailing Arbitration and Conciliation Act, 1996. The
Government could also consider having specialized
arbitration courts designated under the SEZ Act, which will
have limited supervisory jurisdiction over arbitrations
conducted by the arbitral institutions in the SEZ areas, and
to execute orders and awards rendered by them.

4.11.9 With sufficient financial incentives to arbitral institutions,

it will also be a good idea to promote such arbitral
institutions as a neutral seat for foreign arbitrations, where
neither party is Indian. This would benefit Indian lawyers
and arbitrators, and also provide employment, in addition to
benefiting the arbitral institutions. Further, international
arbitrators and lawyers can also fly in and fly out, as
permitted under law.

103
 4.11.10 Provisions of robust arbitral institutions that cater to
disputes in the SEZ area, would also greatly improve the
confidence of foreign investors and this would in turn
promote business. Further, a package of incentives to set up
a state- of-the-art arbitral institution in an SEZ area will also
facilitate the institution’s functioning itself. This will not
only reduce the institutional fees but also be consistent with
administrative assistance in terms of Section 6 of the
Arbitration and Conciliation Act, 1996.

4.11.11 The Dubai International Financial Centre (“DIFC”), an SEZ

in the Gulf region has an extensive arbitration ecosystem.
Parties may choose the DIFC as their seat of arbitration
which will be governed by the DIFC Arbitration Law. 79
Further, the Arbitration Institute has been given a separate
legal identity, making it functionally and financially
independent from the DIFC Courts and the DIFC.80

4.11.12 In India, the Gujarat International Finance Tec (“GIFT”)

City was set up in 2008, with a vision of creating a world
class finance zone to provide services globally.

4.11.13 It would therefore be beneficial in promoting the setting

up of arbitral institutions and resolving dispute through
arbitration in GIFT City. The Hon’ble Finance Minister,
while presenting the 2022-2023 Union Budget, announced
the setting up of an International Arbitration Centre in GIFT
City.81 Its creation would ensure swift case resolution and
prevent frivilous appeals.

4.11.14 For such arbitrations, it is also necessary for foreign

arbitrators to receive visas and reference letters from the
concerned arbitral institutions promptly. Foreign lawyers
hesitate to come to India to participate in arbitration as the
process of issuance of visas is time-consuming. 82
Singapore, to expedite the arbitration process, does not
impose visa requirements for non-resident arbitrators. It is
sufficient for them to have a short-term Visit Pass, issued at
the immigration checkpoint and valid for a maximum
duration of 60 days. 83 The provision of arbitration and
mediation services is designated as a Work Pass Exempt

79
DIFC Law No. 1 of 2008 (Arbitration Law)
80
Article 8 (Third: Arbitration Institute) (2) and (3) of Dubai Law No. (9) of 2004.
81
‘International Arbitration Centre to be set-up in GIFT city’, SCC Blog, (April 5, 2022)
https://www.scconline.com/blog/post/2022/04/05/international-arbitration-centre-to-be-set-up-in-gift-
city/
82
Justice B.N. Srikrishna, Report of the High Level Committee to Review the Institutionalisation of
Arbitration Mechanism in India (2017), accessible at:
https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf
83
Id.

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 Activity. 84 Additionally, Singapore also offers tax breaks
and incentives on increased revenue from legal services, as
well as tax exemptions for non-resident arbitrators.

4.11.15 Therefore, to ensure that international lawyers and

arbitrators have easy access to the country, the government
may take into consideration a speedy visa facilitation
system and/or a specific category of multiple-entry visas.
This, coupled with the creation of an arbitration ecosystem
in SEZs such as the GIFT City, will further contribute to
improving the arbitration infrastructure in India.

4.11.16 To capitalise on the advantages under the SEZ Act, the

Committee recommends arbitral institutions should set up
facilities in SEZs to cater to global markets.

4.12 ODR SERVICE PROVIDERS

4.12.1 The Digital Revolution has given birth to e-commerce,

and is also challenging the traditional methods of
resolving disputes through intervention of courts or
arbitrations conducted in-person. Arbitrations and judicial
hearings are also gradually adapting themselves to conduct
proceedings virtually.

4.12.2 The emerging global electronic marketplace, where

producers, intermediaries and consumers interact
electronically, and enter into legal relations, the resultant
internet economy presents substantial challenges as well as
opportunities for speedy dispute resolution settlement.

4.12.3 As e-commerce progresses and more businesses migrate to

the cyberspace, disputes are bound to occur. However,
since cyberspace is an environment characterised by inter-
connection and dematerialisation, it is only logical that such
disputes should be resolved virtually. such as online
arbitration.

4.12.4 These developments have led to the emergence of a new

breed of service providers, who provide Online Dispute
Resolution (ODR) in the market, giving rise to demand for
statutory recognition for ODR Services.

4.12.5 For instance, in the United Kingdom, low value civil claims
can be resolved through online dispute resolution. While
ODR has been recognised in the United Kingdom and other

84
‘Eligible activities for a work pass exemption’, Ministry of Manpower, Singapore Government,
available at accessible at: http://www.mom.gov.sg/passes-and-permits/work-pass-exempt-
activities/eligible-activities.

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 jurisdictions, the Committee is of the view that we should
at present wait for and evaluate the effect of migration of
arbitrations to virtual mode. One must also learn from the
experience of Online Mediation which has been granted
statutory recognition under the recently enacted Mediation
Act, 2023. This is necessary to provide a separate legal
frame work to address the legal issues involved in the ODR
process.

4.13 USE OF ARTIFICIAL INTELLIGENCE IN ARBITRATIONS

4.13.1 Artificial Intelligence (AI) technologies, especially

machine learning and natural language processing, are
already impacting and gaining traction within the legal
sector. With the development of technology in recent years,
AI is changing the way lawyers think, conduct business, and
interact with clients.85

4.13.2 While the international arbitration community has been

open to adopting technological innovations, the adoption of
artificial intelligence (“AI”) continues to lag behind other
technological tools in arbitration. As noted in the 2021
International Arbitration Survey, 35% of the respondent
groups stated that they had ‘never’ used AI, while 24%
stated that they had used AI rarely. Only 15% declared that
they used AI ‘frequently’ or ‘always’.86

4.13.3 AI`s utility lies in its ability to streamline administrative

tasks, while freeing up arbitrators and lawyers to focus on
the parts of the process that require the greatest amounts of
human judgment: assessing the facts, constructing
arguments and deliberating to determine outcomes.87 AI in
arbitration can help in the management of massive amounts
of documentation due to an ever-growing demand for speed
and efficiency. AI can make the arbitral process swifter and
more efficient and could be increasingly used for handling
and reviewing documents, especially during discovery,.
Another field where AI’s use is highly recommended is
speech recognition, where AI can successfully identify
different accents and languages, and voices of particular
individuals with precision. This may help in: (i)
transcription – AI would record the hearing via

85

http://www.abajournal.com/magazine/article/how_artificial_intelligence_is_transforming_the_legal_p
rofession
86
2021 International Arbitration Survey at Pg. 21, accessible at
https://arbitration.qmul.ac.uk/media/arbitration/docs/LON0320037-QMUL-International-Arbitration-
Survey- 2021_19_WEB.pdf.
87
The Future of International Arbitration May Not Be AI Megan Turchi;
https://thinksetmag.com/insights/ia-future-ai

106
 microphones and provide a real-time transcript with speaker
identification; (ii) translation - AI can translate thousands of
documents in seconds with very high accuracy, including
scanned, hand-written or annotated documents; and (iii)
interpretation – parties may need to present witnesses,
requiring assistance of interpreters.

4.13.4 Use of AI in law, especially in judicial and arbitral

proceedings, has generated a lot of academic literature on
the subject. Scholars have not been able to come to any
agreement on its potentially substituting it for human
intelligence, 88 or replace human arbitrators. 89 AI can also
be deployed in the appointment of arbitrators by analysing
arbitrators’ views in similar disputes and issues in the past,
their manner of conducting arbitral proceedings, their
emotive capabilities, behavioural patterns and general likes
and dislikes in the arbitral process.

4.13.5 Some US judges have issued standing orders while trying

to grapple with this problem, requiring disclosure if AI has
been used in drafting pleadings and certification that their
accuracy has been verified (see orders issued in and by
Texas and Pennsylvanian courts). Other US courts have
issued requiring disclosure of the tool and manner of use of
AI in legal research and in drafting any documents for
filing. Canadian courts have also issued general practice
directions requiring disclosure of the use of AI, and the
manner of its use in any drafting or legal research.

4.13.6 In US and Canadian courts, case management powers have

so far been sufficient to regulate and sanction lawyers’ use
of AI. However, such regulation does not seem to have
affected arbitration practice yet. There is no soft law on the
use of AI, and the one is not aware of any procedural orders
dealing with AI. The US/Canadian court orders and practice
directions are very wide, requiring disclosure of all uses of
AI in research or court filing.90

4.13.7 It is certain that in the future, AI will create highly

supportive systems which will remove bottlenecks in the
dispute resolution frameworks. However, over-reliance on
AI systems would be detrimental, as it may adversely affect
88
Daniel Ben-Ari, Yael Frish, Adam Lazovski, Uriel Eldan, & Dov Greenbaum, “Danger, Will
Robinson”? Artificial Intelligence in the Practice of Law: An Analysis and Proof of Concept
Experiment, 23 Rich. J.L. & Tech. 3 (2017),
http://jolt.richmond.edu/index.php/volume23_issue2_greenbaum/
89
Gizem Kasap, Can Artificial Intelligence ("AI") Replace Human Arbitrators? Technological
Concerns and Legal Implications, 2021 J. DISP. RESOL. 209, 237–40 (2021).
90
https://www.ciarb.org/news/the-use-of-ai-in-international-arbitration-thoughts-from-the-coalface/

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 access to justice. Further, it is important to regulate the use
of AI to ensure that arbitration remains an effective remedy.
While AI is a tool for ensuring effectiveness and efficiency
in arbitration, it cannot be allowed to replace human
arbitrators and counsel.

4.13.8 The U.S Executive Order on the Safe, Secure, and

Trustworthy Development and Use of Artificial Intelligence
issued by the President Joe Biden requires Artificial
Intelligence (AI) developers to share safety results with the
US Government. It has also created the United States AI
Safety Institute: inside NIST which will operationalize
NIST’s AI Risk Management Framework by creating
guidelines, tools, benchmarks, and best practices for
evaluating and mitigating dangerous capabilities and
conducting evaluations including red-teaming to identify
and mitigate AI risk.91

4.13.9 The U.K convened an international AI safety summit,

which was attended by leaders from 27 governments
around the world, as well as the heads of top artificial
intelligence companies. The world’s first AI Safety Summit
“Bletchley Declaration” on AI, was signed by 28 countries,
including the U.S., U.K., China, and India, as well as the
European Union.92

4.13.10 Since the subject matter is evolving at a rapid pace,

Governments across the world are setting up Committees to
study the likely impact of AI on various areas of
Governance and decision making including in the judicial
process. The Committee is of the view that India may await
further developments in this regard.

4.14 DIVERSITY IN ARBITRAL APPOINTMENTS AND

GENDER DIVERSITY

4.14.1 The lack of diversity, including gender diversity, amongst

international arbitrators has been a persistent issue in
international arbitration. However, arbitral institutions have
spearheaded significant improvement on the aspect of
gender diversity in recent years. For example, of the 179
arbitrators appointed by SIAC in 2021, 64 (or 35.8%) were
female.93 Further, according to the Cross-Institutional Task
Force on Gender Diversity in Arbitral Appointments and

91
https://www.whitehouse.gov/briefing-room/presidential-actions/2023/10/30/executive-order-on-the-
safe- secure-and-trustworthy-development-and-use-of-artificial-intelligence
92
https://www.gov.uk/government/publications/ai-safety-summit-2023-the-bletchley-declaration/the-
bletchley- declaration-by-countries-attending-the-ai-safety-summit-1-2-november-2023
93
SIAC Annual Report 2021 at Pg. 24, accessible at https://siac.org.sg/wp-
content/uploads/2022/06/SIAC- AR2021-FinalFA.pdf.

108
 Proceedings Report 2022, at least a quarter of all
appointments by arbitral institutions between 2015 to 2020
have been women, increasing from 24.9% in 2015 to 37.9%
in 2021.94

4.14.2 However, as confirmed by the 2021 International

Arbitration Survey, less than a third of participants
believe there has been progress in respect of geographic,
age, cultural and, particularly, ethnic diversity. Over half of
the participants (56%) stated that diversity across an arbitral
tribunal has a positive effect on their perception of the
arbitrators’ independence and impartiality. Lastly, 59% of
participants emphasised the role of appointing authorities
and arbitral institutions in promoting diversity, including
through the adoption of express policies of suggesting and
appointing diverse candidates as arbitrators.

4.14.3 To empower women in public life, Government has

enacted the Constitution (One Hundred and Eighth
Amendment) Act, 2023 to provide for reservation of seats
to women in Parliament and state legislatures. Logically, it
follows that even in other spheres of public space, women
should be given due representation. Hon’ble Chief Justice
of India Dr Justice DY. Chandrachud, at the UNCITRAL
seminar in New Delhi, stated that it is imperative that steps
are taken to improve gender diversity amongst arbitrators.

4.14.4 The Committee notes the role of Arbitral Women, 95 an

international non-governmental organisation which has
existed informally since 1993, actively since 2000, and
officially as a non-profit organization since 2005 which is
working for advancing the interests women in Arbitration
practice and in the alternative dispute resolution (ADR) in
appointment of arbitrators and raise awareness about the
role of women and diversity in arbitration.

4.14.5 The Committee also notes that aCross-Institutional Task

Force on Gender Diversity in Arbitral Appointments and
Proceedings was established in 2019 by 17 international
arbitral institutions, law firms and diversity initiatives. It
aimed at gathering statistics and making recommendations,
to promote and improve diversity in the international
arbitration community. On 20 September 2022, it launched
the 2022 Update of its Report on Gender Diversity in
Arbitral Appointments and Proceedings at the International

94
Cross-Institutional Task Force on Gender Diversity in Arbitral Appointments and Proceedings Report
2022 by International Council For Commercial Arbitration at Pg. 6, accessible at https://cdn.arbitration-
icca.org/s3fs- public/document/media_document/ICCA-Report-8u2-electronic3.pdf.
95
https://www.arbitralwomen.org/aw-outline/

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 Council for Commercial Arbitration (“ICCA”) in
Edinburgh.

4.14.6 There is greater awareness on the lack of gender diversity

in International arbitrations, and there is strong case for
striving to enhance the number of women in arbitrations.
Therefore, the Committee strongly recommends that
arbitral Institutions must strive to empanel and appoint
significantly more women arbitrators to arbitral panels.

4.15 TRAINING FOR ARBITRATORS

4.15.1 Many stakeholders perceive the poor quality of some

domestic arbitrators, and the lack of professionalism
amongst certain arbitrators as a key problem affecting the
growth of arbitration in India. This results in Indian parties
preferring foreign seated arbitration.

4.15.2 It is imperative for lawyers and arbitrators to constantly

keep themselves abreast of the legal and technical
developments across the globe. This is particularly in light
of rapid globalisation.

4.15.3 Arbitral institutions could organise online seminar and

workshops to familiarise potential arbitrators about the
latest developments in arbitration. In addition, arbitral
institutions should subscribe to online digital libraries with
access to international arbitration reports which should be
made available to arbitrators.

4.16 ARBITRATION AND JURISCONSULTS

4.16.1 Development of any branch of jurisprudence depends upon

the the law laid down by courts. Both the conclusions and
the reasoning provided by the courts, are relevant.

4.16.2 According to Maitland, the foundation for the Common law

of England was laid down by the first published records of
Bracton`s Notebook: A collection of cases decided in the
King’s Court96 and his Pipe Rolls which contained reports
of decided cases.

4.16.3 Publication of summaries of arbitral awards, particularly

highlighting the legal principles involved in them (while
maintaining confidentiality) would enable greater
transparency in the arbitral process. It will also open the
reasoning adopted by arbitrators to scrutiny by a larger
96
1887, Maitland ed., v.1, v.2, v.3/

110
 audience. This is likely to ensure uniformity and
consistency in arbitral awards.

4.16.4 This will also help parties have greater knowledge about the
arbitrators’ previous awards, enable them to know more
about their approach to procedural and substantive issues,
and have a clear picture of their availability to take on new
cases.97

4.16.5 In this context, it is worth emulating the private initiative

undertaken by the website -
www.swissarbitrationdecisions.com operated jointly by
Dr. Charles Poncet and Dr. Despina Mavromati. The site
features 337 translations of the opinions of the Swiss
Supreme Court (Federal Tribunal) in international
arbitration since 2008. The originals are in French, German
or Italian. Readers may download and use the translations
as they wish at no charge. Moreover, the parties identities
are masked and confidentiality is assured. This initiative
was taken as a service to the international arbitration
community.

4.16.6 Arbitral institutions should take the lead from this website
and publish awards while ensuring that confidentiality of
the parties is maintained. By doing so, on the one hand the
parties are assured of confidentiality, while the reasoning
adduced by the arbitrators to reach the conclusion is made
available to younger generation of lawyers who lack the
means of tapping the wisdom of senior legal practitioners.

4.16.7 Many arbitrators are eminent judges of the Supreme Court

and various High Courts who have devoted their entire
lifetime to law. Denial of such wisdom to future generations
will be an injustice to the future lawyers. Roman Law was
product of Jurisconsults who were private lawyers of
eminence, whose opinions even Roman courts accepted as
binding. Publication and citation of the reasoning in arbitral
awards will be a small but significant step forward for
development of arbitration jurisprudence in our country.

END OF THE REPORT

97
https://arbitration.qmul.ac.uk/research/2018/

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