On 4 November 2020, the Government of India issued an ordinance to amend the Arbitration and Conciliation Act, 1996. The amendments are 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.”
The ordinance also omits the Eight Schedule of the Act due to criticism faced in the past. It was believed that the conditions prescribed under the Eight Schedule came in the way of India benefitting from the presence of foreign arbitrators. According to some government functionaries, this impression was false in nature, and still to do away with any such misconceptions the Schedule is now omitted. According to the latest Ordinance, the qualifications based on which the arbitrators will be accredited will now be prescribed under the regulations framed by the Arbitration Council.
According to Section 36 of the Act, an arbitration award was enforceable even if an appeal was filed against it. However, the court is empowered to grant a stay on an award based on the conditions and reasons as it deems fit. The effect of the new amendments brought in through the ordinance will be that if the award is being given on the basis of an agreement based on fraud or corruption, then the court will not impose a condition to stay the award and grant an unconditional stay during the pendency of the appeal if it has been challenged under Section 34 of the arbitration law.
To put this into action under Section 36 of the Act, sub-section (3) is inserted after the proviso which states that
“Provided further that where the Court is satisfied that a prima facie case is made
out,-—
(a) that the arbitration agreement or contract which is the basis of the
award; or
(b) the making of the award,
was induced or effected by fraud or corruption, it shall stay the award unconditionally
pending disposal of the challenge under section 34 to the award.”
The provision will be applicable in a retrospective manner effective from 23 October 2015 according to the Ordinance.
