President promulgates Arbitration and Conciliation Ordinance, 2020: Now, unconditional stay on awards prima facie induced by fraud or corruption

The President of India today promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2020 , through which changes have been made to Section 36 of the Arbitration and Conciliation Act.

. Section 36 deals with the enforcement of arbitral awards.

. Pertinently, the Ordinance provides that where arbitral awards are found to have been prima facie induced by fraud or corruption , the enforcement of the award shall have to be unconditionally stayed pending the disposal of a challenge against the award under Section 34 of the Arbitration Act.

. The Ordinance has been introduced " to ensure that all the stakeholder parties get an opportunity to seek unconditional stay of enforcement of arbitral awards where the underlying arbitration agreement or contract or making of the arbitral award are induced by fraud or corruption ."

. Section 36 was amended in 2015 to provide that if an application has been moved under Section 34 of the Act to challenge the arbitral award, the filing of such application itself would not render the award unenforceable unless the Court stays the award for reasons to be recorded in writing.

. The full provision, as amended in 2015, reads:

. “ 36. (1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court.

(2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.

(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:

Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.”

. Through the Ordinance promulgated today, an addition has been made to Section 36 whereby if the Court is satisfied that a prima facie case is made out that the arbitration agreement or contract which is the basis of the award was induced or effected by fraud or corruption , it shall stay the award unconditionally pending disposal of the challenge made to the award under Section 34.

. The provision has been deemed to be inserted with effect from October 23, 2015 i.e. the same date on which the 2015 amendment was deemed to have come into force.

. Further, it is clarified that the new amendment would apply to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015.

.Breaking: Amended Section 36 of Arbitration Act to apply to Section 34 applications filed before 2015 amendment. An amendment has also been introduced to Section 43J of the Act, which would now read:

" The qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations. "

. The Eighth Schedule to the Act which deals with Qualifications and Experience of Arbitrators has also been omitted.

. Read the Ordinance:

President promulgates Arbitration and Conciliation Ordinance, 2020: Now, unconditional stay on awards prima facie induced by fraud or corruption

Bar & Bench

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