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Law panel, AG differ on arbitration Act, govt set to revisit its clauses

Law panel chief opposes amendment asking arbitrators to decide commercial disputes in 9 months.

Written by Maneesh Chhibber | New Delhi |
May 18, 2015 1:50:14 am

With many retired judges, including Law Commission chairperson Justice (retd) A P Shah, taking strong exception to the central government’s move to amend the Arbitration and Conciliation Act, 1996, to make it mandatory for arbitrators in a commercial dispute to decide the case within nine months — among other clauses termed “unacceptable” by some retired judges — the government is all set to revisit the clauses. It is also likely to hold consultations with Justice Shah and some other eminent jurists.

The government’s move comes even as Attorney General Mukul Rohatgi, in a written opinion, termed the current arbitration Act a “complete failure”, adding that the process of arbitration in the country had “become a joke”.


“I find, with my experience over the last several years, that the Arbitration and Conciliation Act, 1996 is a complete failure. Firstly, arbitration itself has become a joke in this country. Arbitration proceedings are unduly prolonged since mostly retired judges are appointed as arbitrators and they view arbitration just like a case in court. The procedure is as elaborate as that of court. It is normal to have 50-100 sittings in arbitration, whether by a single member or a multi-member arbitration,” the AG said.

Rohatgi pointed out that arbitration has become “extremely expensive”, adding, “costs in some arbitrations with three retired judges of the high court or Supreme Court often run into crores of rupees.”

Citing the lengthy procedure that often delays the arbitration process in India, he said, “The idea of having arbitration as a speedier and inexpensive alternative remedy has totally failed”.

In his opinion, Rohatgi, while recommending repeal of the current arbitration Act, also suggested some clauses that should be part of the new Act. Apart from a “strict time limit for rendering an award i.e say six months”, the AG favoured penalising arbitrators who delay matters “because of personal benefit or otherwise”. He also recommended a ceiling on the total fees and expenses that arbitrators could get.

All these clauses were part of the ordinance that the central government cleared on December 29. The ordinance, however, was not sent to the President for his assent.
While the government was sitting on the ordinance, Justice Shah sent a strongly-worded letter to Prime Minister Narendra Modi. Sources in the Law Commission told The Indian Express the panel was of the view that the ordinance as cleared by the cabinet was “unacceptable”.

In his letter, the former Delhi High Court Chief Justice raised serious questions about some of the key clauses, particularly the clauses that were incorporated on the basis of the AG’s opinion.

Since the ordinance was loosely based on the recommendations made by the Law Commission in its 246th report submitted in August last year, Justice Shah was upset that many of the recommendations had either been ignored or twisted.

He took serious exception to the proposal to make it mandatory for arbitrators in a commercial dispute to decide the case within nine months, with only the high court given the power to grant extension. The ordinance also had a clause empowering the high court to debar an arbitrator from taking up fresh cases for a certain period in case of a long delay on his part in settling an arbitration. The ordinance also put a cap on the maximum fee that the arbitrator could charge.

Sources in the Law Commission said it has now been indicated to Justice Shah that the government would hold “wider consultations” with him and others — one reason why the government didn’t push the amendment Bill in the recently-concluded Budget Session.

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