March 13, 2018
India continues its march towards a model dispute resolution regime
The Union Cabinet recently cleared bills proposing to amend the arbitration law and the jurisdiction of commercial courts in India. Both the bills are in line with India’s aim of becoming a model arbitration friendly jurisdiction and improving the enforceability of contracts in India. The consistency in the steps taken by the Government of India - ranging from the Arbitration and Conciliation (Amendment) Act 2015 (“2015 Amendment”), establishment of commercial courts and constitution of the Srikrishna Committee followed by incorporation of the same in the Bill within a span of just three years, reflects the political will to rapidly reform the dispute resolution landscape of India. We herein discuss the key amendments as reflected in the recent press release.
1. Arbitration and Conciliation (Amendment) Bill, 20181
With the 2015 Amendment being the harbinger in transforming India into a hub of arbitration, the Government of India (“GoI”) has rightfully identified the need to further the pro-arbitration landscape in India. The amendments are principally based on the recommendations of the Report of the High-Level Committee to Review the Institutionalisation of Arbitration Mechanism in India (“Srikrishna Committee Report”)2. Principally the report has made positive recommendations for reforming the arbitration ecosystem. However, caution should be exercised as some suggestions under the Srikrishna Committee Report may merit further consideration.
While the Srikrishna Committee Report has largely made positive suggestions, certain amendments made thereunder deserve further evaluation e.g. amendments proposed to Section 34 of the Arbitration and Conciliation Act 1996.5 Considering that the Bill is based on the Srikrishna Committee Report, it is hoped that further consideration is given to such aspects
2. Commercial Courts, Commercial Division and Commercial Division of High Courts (Amendment) Bill, 2018:
The Union Cabinet has also approved the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill, 2018 for introduction in the Parliament which seeks to amend the pecuniary limit under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (“Commercial Courts Act”), amongst other changes.6 It is proposed to extend the applicability of the Commercial Courts Act, by reducing the specified value of a commercial dispute to INR 3 lakhs from the present limit of INR one crore. This change is backed up by the intention to provide efficient dispute resolution mechanisms even to commercial disputes of lesser value. This is in consonance with the parameters for resolution of commercial disputes as indicated in the Doing Business measures of the World Bank.7 The World Bank in determining the ease of doing business ranking of a country takes into account the enforceability of contracts. To ascertain the level of contract enforcement, it measures (in case of India) cases of value of USD 5,000 or higher. It is from here that the value of INR 3 lakhs is adopted.
The Bill also calls for establishment of Commercial Courts at district Judge level in the cities of Chennai, Delhi, Kolkata, Mumbai and State of Himachal Pradesh (where the High Courts have ordinary original civil jurisdiction), thereby extending the benefits of the Commercial Courts Act to commercial disputes even at the district court level. Pecuniary limits for such commercial court is INR 3 lakhs and above, but not more than the usual pecuniary jurisdiction of the district court in the jurisdiction. Further, with the prospective effect given to the amendments, the present adjudicatory mechanism pertaining to commercial disputes, would remain undisturbed.
1 Press Release available here.
2 For an analysis of the Srikrishna Committee Report, see, Kshama Loya, Ashish Kabra and Vyapak Desai, ‘Arbitration in India: The Srikrishna Report – A Critique’ (2018) 20 (1) Asian Dispute Review 4–11
3 (Singapore) International Arbitration Act – S. 8(2): “The Chairman of the Singapore International Arbitration Centre shall be taken to have been specified as the authority competent to perform the functions under Article 11(3) and (4) of the Model Law.”
4 Arbitration and Conciliation Act 1996, s 29A: “(1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference…(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.”
5 Kshama Loya, Ashish Kabra and Vyapak Desai, ‘Arbitration in India: The Srikrishna Report – A Critique’ (2018) 20 (1) Asian Dispute Review 8
6 Press release available here.
7 Available here.