5th August 2014 may become a red letter day for the “Arbitrations” in India as the law commission of India submitted its 246th report to the Hon’ble minister for law and justice, Government of India. The report envisages radical amendments to the Act to bridge the loop holes existing in the present act.

The Arbitration and Conciliation Act, 1996 (herein after referred as the act) in its present form has rendered adjudication of disputes between the parties a mere dream than a reality. The act was enacted to consolidate and amend the law relating to domestic arbitration, International Commercial Arbitration and enforcement of foreign arbitral awards etc. The act of 1996 is based on the UNCITRAL (United Nations Commission on International Trade Law) model law on International Commercial Arbitration, 1985 and the UNCITRAL conciliation rules, 1980. It repeals all three earlier laws of 1937,1940 and 1967. Although UNCITRAL model law was intended to provide a model law to deal with International Commercial Arbitrations but the Act has been made applicable to both Domestic and International Arbitrations. However the purpose for which the act was notified has lost its relevance in the various loose ends of the provision and the litigants now pray to avoid the arbitration and prefer litigations instead.

The major deficiencies in the Act relates to appointment of arbitrator, conduct of arbitration proceedings, fees of arbitrators, execution of the award, Judicial Intervention in execution of award in particular foreign awards, credibility of the arbitrators and lack of institutional arbitration.

Amidst various provisions of the act, unclear and ambiguous provisions regarding applicability of the provisions of the civil procedure code, 1908 and the Evidence Act 1872 and plethora of conflicting judgments from various courts in the country, the mediation and conciliation have been completely lost. The arbitration is now used by the litigants as a tool to serve their own purpose rather than adjudication of disputes.

We should not be ashamed to accept that we have lost credibility before the International Community as far as arbitration in our country is concerned. No foreign institution or litigant are interested in submitting to the Indian arbitration. It is painful to hear that even the Indian corporates and litigants who have nothing to do in foreign countries are preferring foreign arbitration laws like SIAC, LCIA etc. And countries like Singapore, London, Switzerland as their choice of arbitration. This clearly demonstrates that our Indian Arbitration Act has failed to live up to the expectations of the corporates, foreign investors, litigants and even judiciary.

With the Indian economy growing up rapidly, government all set to bring reforms in every sector at bullet speed and Foreign Direct Investments (FDI) making its way into the country as never before, its is essential that a effective alternate dispute resolution mechanism is in place in form of “Arbitration” to deal with and resolve the “Commercial Disputes”.

In this backdrop the Law Commission of India examined extensively the various deficiencies noticed while administering the provisions of the present Act and to overcome the same.

The amendment proposed will include clarification by the courts, reinforce the principles led down in various judgments and will also over rule various judgments pronounced by the courts which are against the spirit of the act like Bhatia International case.

It is hoped that the proposed amendments which are pending before the government becomes law immediately and India becomes the most favourite destination for arbitration.