When a fresh Lok Sabha is constituted, the Bills pending in the dissolved House automatically lapse. But those that happened to be introduced in the Rajya Sabha remain alive. This vagary of our parliamentary democracy often lands the new government in a predicament. A case in point is the Arbitration and Conciliation (Amendment) Bill, 2003, introduced in the Rajya Sabha by the NDA government seeking to overhaul the law on arbitration, the most important alternative mode of resolving high-stake commercial disputes. Much as it is a reform that urgently needs to be carried out, the UPA Government is unsure whether it should adopt this legislative legacy of the NDA. Law minister H.R. Bhardwaj has appointed a committee headed by a retired high court chief justice to ‘‘study the implications’’ of the Bill even though it is already under the scanner of a standing committee of Parliament.The parallel committee set up by Bhardwaj is, in effect, studying whether a law he had piloted in his earlier stint as law minister in ’96 should be amended and, if so, in what manner. For, the Bill in question seeks to make extensive amendments to his ’96 Act. As it happens, Bhardwaj is closely associated with arbitration even otherwise. He is the founder and head of an arbitration centre set up about a decade ago to build India as a venue for arbitrating disputes between Indian and foreign parties. Bhardwaj does not need to set up a committee now to appreciate the import of the Bill introduced last year by then law minister, Arun Jaitley.It would be a pity if Bhardwaj lets any personal or political considerations cloud his judgment in the matter. There is no need for him to be defensive about the ’96 Act, which was a big leap forward in its time. With the experience garnered since then, it is now time to make the next big leap by enacting the ’03 Bill. The major change that the ’96 Act had brought about was the introduction of the UN model of international arbitration in order to instil greater confidence among foreign investors in India’s capability to deal efficiently with commercial disputes.But, unfortunately, the Act failed to fulfil its primary objective of expediting arbitration. While conferring greater autonomy on arbitrators and insulating them from judicial interference, the ’96 Act did not fix any time limit for completion of the proceedings. That was not an oversight but a conscious decision to remove a time limit fixed in the earlier law of 1940. The presumption made in ’96 was that judicial interference was the root cause of delays in arbitration and that the problem would get solved once the arbitrators were given greater autonomy. In reality, things did not quite work out that way. The arbitrators, who are mostly retired Supreme Court and high court judges, have used the newfound freedom to revert to the habit they would have acquired in the courts of giving adjournments liberally and for long periods. This meant that arbitral proceedings often held in five-star hotels dragged on for years, defeating the whole point of seeking to resolve the dispute outside the judicial framework. Since the payment to arbitrators goes up to Rs 30,000 per sitting, they have developed a vested interest in prolonging the proceedings.It was was to plug this and other such loopholes in the ’96 Act that the Law Commission came up with a report three years ago recommending sweeping amendments to the law. And it was on the basis of the Law Commission’s draft that Jaitley introduced the Bill last year. Not suprisingly, the Bill restores the pre-1996 situation in which there was a time limit to completion of arbitral arbitrators. But since the deadline of four months set by the ’40 Act was often found to be unrealistic, the 2003 Bill provides that arbitration should normally be wrapped up in one year. If that does not prove sufficient, the Bill says that the proceedings could, with the consent of all concerned, be stretched to a maximum of another year.The really astute part of the Bill is the embarrassment the arbitrators are liable to face if they do not finish their job even in two years. The proceedings will stand suspended in such a situation and the parties concerned or the abitrators themselves will have to apply to the court for a further extension of time. The Bill requires the court to decide the application for extension only after taking into account a host of factors, including ‘‘the manner in which proceedings were conducted’’ by the arbitrators and ‘‘the amount of money already spent by the parties towards fee and expenses of arbitration’’. The prospect of such embarrassing details coming out in the open may well deter the arbitrators from behaving in an arbitrary manner. Rather than setting up another committee, Bhardwaj should be urging the standing committee to release the Bill urgently.
