In a legal opinion to the Law Ministry, Attorney General Mukul Rohatgi has recommended the repeal of an 18-year-old law on arbitration procedures in tune with the government’s larger push to provide a business-friendly environment for foreign investors.
The country’s top law officer, whose opinion was sought by the Ministry on the Arbitration and Conciliation Act 1996, advised replacement of the present law with a new one stressing timely settlement of business disputes and fixing greater onus on arbitrators against delay.
The AG’s opinion comes shortly after Union Law Minister D.V. Sadananda Gowda, in his Law Day speech at the Supreme Court, said changing the 1996 law was a top priority for the government’s ‘Make in India’ policy to attract foreign investments. He also said at that time that the Act would see amendments, which would make India a “global arbitration hub”.
Mr. Gowda had recently informed the Lok Sabha that the government was primarily moving away from entering into adversarial litigation in inter-ministerial and departmental matters. In fact, in August, the Law Secretary had written to all ministry Secretaries to “desist” from going to courts, and instead resolve discords through alternative dispute resolution mechanism like arbitration.
To strengthen the arbitration mechanism framework, the AG suggested statutory measures like a “strict” time limit of probably six months for giving the arbitration award in a dispute. The AG also recommended penalty for arbitrators who delay matters.
Mr. Rohatgi has suggested a ceiling for arbitration fee and expenses. In case of challenge to an arbitration award, a provision should be introduced in the statute, whereby a stay is granted after hearing both parties. In August, the Law Commission came out with recommendations to amend the Arbitration Act, saying that high costs and delays were crippling its efficacy.
