13 December 2021


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Arbitration

President Promulgates Arbitration and Conciliation Ordinance, 2020

04.11.2020

President of India has promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2020, through which changes have been made to Section 36 of the Arbitration and Conciliation Act, 1996. The Ordinance provides that, where arbitral awards are found to have been prima facie induced by fraud or corruption, the enforcement of the award shall have to be unconditionally stayed pending the disposal of a challenge against the award under Section 34 of the Arbitration Act. Proviso in Section 36 of the Arbitration Act will come into effect retrospectively from October 23, 2015.

The changes has been made to ensure that, all the stakeholder parties get an opportunity to seek unconditional stay of enforcement of arbitral awards where the underlying arbitration agreement or contract or making of the arbitral award are induced by fraud or corruption. Section 36 of Arbitration Act was amended in 2015 to provide that, if an application has been moved under Section 34 of the Arbitration Act to challenge the arbitral award, the filing of such application itself would not render the award unenforceable unless the Court stays the award for reasons to be recorded in writing.

Further, the 8th Schedule to the principal Act that contained the necessary qualifications for accreditation of arbitrators has been omitted. Proviso in Section 36 of the Arbitration Act shall apply to all Court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or Court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015.

In the past, the Supreme Court in a landmark case of Hindustan Construction Company Ltd vs. Union of India , dealing with the challenge of the constitutionality of Section 87 introduced by the 2019 Amendment Act, while striking down the said amendment observed that, retrospective resurrection of an automatic-stay not only turns the clock backwards contrary to the object of the Arbitration Act, 1996 and the 2015 Amendment Act, but also results in payments already made under the amended Section 36 of Act to award-holders in a situation of no-stay or conditional-stay being reversed by 2019 amendment.

Tags : Ordinance Promulgation Unconditional stay

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