The President of India, on November 04, 2020, promulgated the Arbitration and Conciliation (Amendment) Ordinance 2020, through which changes have been proposed to Section 36 and 43J of the Arbitration and Conciliation Act.
Section 36 deals with the enforcement of arbitral awards. The ordinance seeks to amend Section 36 of the Arbitration and Conciliation Act, 1996, to introduce a new second proviso to sub-section (3) of Section 36 of the Arbitration Act.
The proviso states, "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 ordinance has been introduced "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."
As per the proposed amendment, if a prima facie case is established that the arbitration agreement or the contract or the making of the award is based on fraud or corruption, then court will grant an unconditional stay during the pendency of the appeal, if it has been challenged under Section 34 of the arbitration law.
The ordinance further clarifies that the newly inserted second proviso to Section 36(3) of the Arbitration Act shall also be applicable to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings have commenced prior to or after the commencement of the 2015 Amendment. Thus, the said provision will come into effect retrospectively from October 23, 2015. Section 43J of the Act states the norms of accreditation of arbitrators. The ordinance seeks to substitute Section 43J of the Arbitration Act by laying down that the qualification, experience, and norms for accreditation of arbitrators shall be such as may be prescribed by the regulations. Consequently, the Eight Schedule of the Arbitration Act has also been omitted.
It is pertinent to note that vide the 2015 amendment to Section 34 (1)(b) of the Arbitration Act, it has already been clarified that an arbitral award would be regarded to be in conflict with the public policy of India if the making of the award was effected by fraud or corruption.
An applicant under Section 36(3) of the Arbitration Act, as on date, is anyway eligible to file an application seeking stay on the enforcement of the arbitral award pleading the grounds already enumerated under Section 34 of the Arbitration Act. The ordinance additionally entitles an applicant to seek an unconditional stay on the enforcement of an arbitral award under Section 36(3), during the pendency of the Section 34 application, by pleading that the contract or arbitration agreement which is the basis of the award was induced by fraud or corruption. Upon implem
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