Arbitration And Conciliation (Amendment) Act 2021: An Overview


In the book ‘American Arbitration: Its History, Functions and Achievements’, Frances Kellor, has written that “Of all mankind’s adventures in search of peace and justice, arbitration is amongst the earliest. Long before laws were established, or courts were organized, or judges formulated principles of law, men had resorted to arbitration for the resolving of discord, the adjustment of differences, and the settlement of disputes.” It is fascinating to note that Arbitration can be traced back to the ancient ages. When there was a dispute between Athens and Megara, for the possession of the Island of Salamis, the matter of dispute was referred to five Spartan judges. It is fascinating to know that the Arbitration can not only be traced back to ancient Greece but finds its reference even in Biblical times. It is believed that even King Solomon used a similar process to settle matters. He was considered the first arbitrator when he settled an issue between two women who were claiming maternity of a boy. Some authors are also of the belief that the procedure used by King Solomon was similar to that used in arbitrations today.

History of Arbitration in India

The Indian Arbitration Act, 1899 was the first act of its kind. Its application was restricted to the Presidency Towns of Calcutta, Bombay and Madras. In 1940, a consolidated law related to arbitration called The Arbitration Act, 1940 (“the 1940 Act”) was enacted. It repealed the existing laws related to arbitration. This act received heavy criticism as it failed to achieve the primal objective of arbitration i.e., enabling a speedy and effective dispute resolution mechanism. The Supreme Court in F.C.I. v. Joginderpal Mohinderpal[i] opined that there was a need to make the law of arbitration “simple, less technical and more responsible to the actual realities of the situation”.

Furthermore, the Apex Court in Guru Nanak Foundation v Rattan Singh[ii] placed emphasis on why the act was enacted, its foremost objective and how the 1940 Act was defying its purpose. The court showed its dismay and stated that “Experience shows and law reports bear ample testimony that the proceedings under that Act have become highly technical accompanied by unending prolixity, at every stage providing a legal trap to the unwary. Informal Forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the Court been clothed with ‘legalese’ of unforeseeable complexity.” Due to all the drawbacks of the 1940 Act, The Arbitration and Conciliation Act, 1996(The Act). It was based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980.

Changes in the Arbitration and Conciliation (Amendment) Act, 2021

Recently, the Central Government notified The Arbitration and Conciliation (Amendment Act), 2021. It replaces the Arbitration and Conciliation (Amendment) Ordinance, 2020. The 2021 Amendment has brought about quite a few changes.

1. Section 36(3)

Prior to the 2021 Amendment, Section 34(2)(a)(ii), provided that an award may be set aside if the Court discovered that the arbitration agreement was invalid by law. The said section solely spoke about the arbitration award and not the contract. Further, Section 34(2)(b)(ii), stated that an arbitral award could be set aside if the court discovered that the arbitral award was in conflict with the public policy of India. The insertion of proviso to Section 36(3) has brought about a material change in the manner that applications filed under Section 34 that allege fraud. The Amended section 36 (3) makes it amply clear that the Courts could now have the power to grant an unconditional stay on the enforcement of an arbitral award in cases where the underlying arbitration agreement or “contract” or making of the arbitral award is induced by fraud or corruption. Most people are of the opinion that this section could attract unnecessary attention that would just be a new trick to delay the arbitral process, therefore, defying the purpose of this alternate dispute resolution i.e., to render speedy justice.

The amendment to Section 36(3), would have retrospective effect and apply to all cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings began prior to or after the commencement of the 2015 Amendment. The 2021 Amendment now induces the court to regard the merits of the matter under Section 36 that is in relation to allegations of fraud or corruption, independent of the legal standards in Section 34 which talks about putting a stay on the award considering the merits of the award debtor’s plea for interim relief.

2. Section 43 J

The 2021 Amendment has done away with the Eighth Schedule and replaced the former Section 43J. Section 43J was introduced an amendment to the Act in 2019 by the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment). Section 43 J read as follows:

“The qualifications, experience and norms for accreditation of arbitrators shall be such as specified in the Eighth Schedule:

Provided that the Central Government may, after consultation with the Council, by notification in the Official Gazette, amend the Eighth Schedule and thereupon, the Eighth Schedule shall be deemed to have been amended accordingly.”

The Eight Schedule in the 2019 Amendment dealt with the qualifications and experience of an Arbitrator. The Eight schedules being a comprehensive and all-encompassing schedule, enunciated on when a person would not qualify as an arbitrator and the general laws applicable to the arbitrator. The professional qualifications laid down in Eight Schedule include an advocate, a Chartered Accountant, a Company secretary, a Cost Accountant, a person who has served as an officer of Indian Legal Service, an officer possessing a law degree having ten years of experience in the legal matters in the Government, Autonomous Body, Public Sector Undertaking or at a senior level managerial position in the private sector, a person having an educational qualification at degree level with ten years of experience in a scientific or technical stream in the fields of telecom, information technology, Intellectual Property Rights or other specialized areas in the Government, Autonomous Body, Public Sector Undertaking or a senior-level managerial position in a private sector, as the case may be.

The second part of the schedule talks about the general norms concerning an arbitrator. For instance, a part of the Eight Schedule concerning general norms requires the arbitrator to be a person of fairness, integrity and capable to apply objectivity in arriving at a settlement of disputes and be impartial and neutral. As it can be seen, the Eight schedules were quite exhaustive and lengthy. The prescribed qualifications impose a kind of restriction on the parties to the arbitration to choose an arbitrator of their choice. According to the 2019 Amendment, if the parties wanted to choose a foreign qualified professional to be appointed in an India seated arbitration, they couldn’t do so. Due to the drawbacks in the said 2019 amendment, the 2021 Amendment got rid of the Eight Schedule and section 43 J has now been substituted with section 3 of the 2021 Amendment. It reads as follows:

For section 43J of the principal Act, the following section shall be substituted, namely:– “43J. The qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations.”.

Consequently, the Eight schedules also got omitted as laid down in Section 4 of the 2021 amendment.

3. Retrospective Applicability

Section 2 of the 2021 Amendment made it possible for the parties to make an application under Section 36(2) of the Act on the grounds of fraud or corruption envisaged under the additional proviso to Section 36(3) of the Act in all court cases arising out of or in relation to arbitral proceedings, regardless of whether the arbitral or court proceedings had begun before or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015. This might give rise to frivolous practices on part of either of the parties by filing for an unconditional stay on grounds of fraud. The parties could easily find their way around the 2021 amendment and may move an application to withdraw their pending application under Section 36(2) application with leave to file a fresh Section 36(2) application that may possibly give the parties an opportunity to incorporate the grounds of fraud and make use of the 2021 Amendment. These are just two of the hundreds of other ways the parties to an arbitration may try to exploit the 2021 Amendment.

4. Other Ambiguities

Section 34 undoubtedly lays down the foremost criteria to invoke the grounds of the said section as the parties could set aside the arbitral award only on the basis of the record of the arbitral tribunal. On the contrary, the 2021 Amendment lays down no standard on which fraud or corruption could be assessed unlike Section 34 which lays emphasis on “the record of the arbitral tribunal”. Since it is well established that importance would be laid on the record of the tribunal, it is noteworthy that the 2021 Amendment does not explicitly state anything about adducing additional evidence apart from the record of the tribunal to prove the fraud or corruption. This may make it difficult for the courts to “prima facie” satisfy itself that the arbitration agreement or contract which is the basis of the award or the making of the award, is induced by fraud or corruption.


The latest amendment is being viewed very critically. The aforesaid amendments could be misused by the award debtor in a vengeful attempt to come back at the other party to the arbitration. The major repercussion to these amendments could be the considerable increase in the delay of enforcing arbitral awards which would defeat the purpose of the arbitration. This could discourage people from resorting to arbitration and this mechanism of Alternate Dispute Resolution could be set back hundreds of years. Notwithstanding the fact that the courts would be overburdened if the people stop resorting to arbitration, it may also affect the ease of doing business in India.






5. Arbitration and Conciliation Act, 1996

6. Arbitration and Conciliation (Amendment) Act, 2015

7. Arbitration and Conciliation (Amendment) Act, 2021

[i]1989 AIR 1263

[ii]1981 AIR 2075

This article has been written by Aayushi Mittra, 5 Years BLS LLB student at Pravin Gandhi College of Law.

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