Law ministry set to plug procedural gaps in arbitration law, as directed by SC-OxBig News Network

The top court’s direction will be followed, one person said, adding that legal research into the judgement will begin in the current week. 

This comes as the ministry works on the Arbitration and Conciliation (Amendment) Bill, 2024, the draft of which was published in October 2024 for comments and feedback. The bill is aimed at boosting institutional arbitration, reducing court interventions in arbitration and ensuring timely conclusion of arbitration proceedings.

“The law ministry receives continuous feedback on the bills that it is working on. Public consultations were held for the Arbitration and Conciliation (Amendment) Bill, too. Now, the honourable Supreme Court has directed the ministry towards an issue and work on it will start immediately,” the person said, requesting anonymity. 

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The top court urged the ministry to address gaps in procedure where the law is completely absent. This was part of a judgement regarding the powers of an arbitral tribunal to include non-signatories to an arbitration agreement in the dispute proceedings. 

In the case ASF Buildtech Pvt Ltd v. Shapoorji Pallonji and Company Pvt Ltd, the bench of justices JB Pardiwala and R Mahadevan said that the lacunae had persisted in the domestic arbitration law despite decades of practice under the 1996 Arbitration and Conciliation Act.

“It is indeed very sad to note that even after these many years, procedural issues such as the one involved in the case at hand have continued to plague the arbitration regime of India,” Justice Pardiwala said in the judgement.

‘Anathema to business’

“What is expressly missing in the Act… is still missing in the Arbitration and Conciliation Bill, 2024, despite a catena of decisions of this Court as well as the various High Courts, highlighting the need for statutory recognition of such power in order to obviate all possibilities of confusion,” the top court said.

The Supreme Court also said it had highlighted in last week’s judgement on modifying arbitral awards that any uncertainty in the law of arbitration would be “an anathema to business and commerce.” 

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However, policy experts indicated that amending the arbitration law to fill all such lacunae would only increase intervention from the judiciary.

“The need for an Arbitration and Conciliation Act itself is very limited. Arbitration is supposed to involve limited judicial intervention, and the law on arbitration can only help out in procedural matters related to court — in appointment of arbitrators, or in appealing an arbitral award,” said Alok Prasanna, co-founder, Vidhi Centre for Legal Policy. “The issue that the Supreme Court has highlighted is an issue of general procedural law. But the arbitration law, that is the legislation, in the country cannot address all such problems of procedural law because arbitration should happen according to the procedure set by the parties in the arbitration agreement and applied by the arbitrator, and not by following one complete code on procedure.”

The 1996 Arbitration and Conciliation Act has been India’s most crucial arbitration law for decades. It was amended in 2015, 2019 and 2021. Under the 2019 amendment, the government aimed to create an Arbitration Council of India (ACI) to formulate standard rules of procedure and also a regulatory framework for arbitrators and arbitration institutions. However, the ACI has not been constituted.

In February 2024, a high-level committee on arbitration reforms chaired by former law secretary TK Viswanathan concluded that massive reforms were required in the domain. The panel proposed techno-legal reforms in arbitration, which were implemented to some degree in the draft 2024 amendment. For instance, allowing arbitration via electronic means, which had no legislative backing previously. 

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However, key proposals on the appointment of arbitrators and disclosures to be made by them have not found any legislative presence. The Viswanathan committee proposed that arbitrators should disclose the number of arbitration matters they were handling, which should not exceed 15.

The committee also floated the idea of a uniform model rules of procedure for arbitration in an effort to aid arbitrators who were technical experts and did not have a background in law.