Cabinet decisions: Ease of doing business gets a push; government clears two ordinances

Nod to Arbitration & Conciliation Act, and commercial benches in high courts

The Cabinet cleared two ordinances for expeditious settlement of commercial disputes that would improve ease of doing business in the country.

It gave its nod to ordinances to amend the Arbitration and Conciliation Act and bring into force the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015 pending before a Parliamentary standing committee, sources said.

The latter would enable setting up of commercial benches in high courts for expeditious resolution of disputes.

The Department Related Standing Committee on Law and Personnel was to table its report on the Bill in Parliament by end-July. However, it was granted a month's extension till August 30. The panel has now sought a fresh extension till November 30.

After being referred to a Rajya Sabha Select Committee during the United Progressive Alliance's tenure, the Bill was sent to the Law Commission. Based on the law panel's recommendations, the National Democratic Alliance government re-drafted the Bill as part of its ease of doing business initiative.

The ordinance to amend the Arbitration and Conciliation Act is aimed at making India a favourable place to settle disputes through arbitration.

The Cabinet move came amid companies such as Vodafone choosing overseas courts for this purpose.

The amendments include specifying and restricting the term 'Public Policy of India' on whose ground an arbitral award could be challenged. An award would be construed as against the Public Policy of India if it is induced or affected by fraud or corruption, or is in contravention of the fundamental policy of Indian law or is in conflict with the most basic notions of morality or justice.

The amendments, based on the recommendations of the Law Commission, would also put various timelines for order of arbitration panel. For instance, a new provision would be inserted that application to challenge the award is to be disposed of by the panel within one year.

Then, there would be a change in the existing law to the effect that mere filing of an application for challenging the award would not automatically stay execution of the award. The award can only be stayed where the court passed any specific order on an application filed by the party. To ensure neutrality of arbitrators, it was proposed to amend Section 12 of the existing Act.

However, experts believed that much more needs to be done to make India an international hub for arbitration. Sapan Gupta, chief legal officer, Bajaj Finance Ltd said: "It is a start to show motion of confidence to seat arbitration in India, but not the end. Needs many more twists to keep it commercially attractive for talented arbitrators and lawyers."

Gupta said that arbitration can be an effective remedy to resolve debt recovery disputes. "Even if the arbitral award is obtained, execution does not happen seamlessly. To be an effective resolution mechanism, it needs to complete the full circle" Gupta added .