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Report No. 246

Amendment of Section 12

8. In section 12,

(i) In sub-section (1), after the words "writing any circumstances" add "-" and delete the words "likely to give rise to justifiable doubts as to his independence or impartiality"and insert sub-clause " (a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and"

(ii) In sub-section (1), after sub-clause (a), insert sub-clause "(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to finish the entire arbitration within 24 months and render an award within 3 months from such date;"

(iii) In sub-section (1), after sub-clause (b), add "Explanation 1: The contents of the Fourth Schedule shall be treated as a guide in relation to determining whether circumstances exists which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.

Explanation 2. The disclosure shall be made by such person in the form set out in the Seventh Schedule of the Act."

[Note: This amendment is intended to further goals of independence and impartiality in arbitrations, and only gives legislative colour to the phrase "independence or impartiality" as it is used in the Act. The contents of the Fourth Schedule incorporate the Red and Orange lists of the International Bar Association Guidelines on Conflicts of Interest in International Arbitration. While Mr. Malhotra was of the view that the said provisions should not apply to the public sector, excluding the public sector will render the provision susceptible to a challenge under article 19 of the Constitution of India.]

(iv) after sub-section (4), insert sub-section "(5) Notwithstanding any prior agreement to the contrary, any person whose relationship with the parties, Counsel or the subject matter of the dispute falls under one of the categories set out in the Fifth Schedule shall be ineligible to be appointed as an arbitrator."

(v) after sub-section, insert "Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this provision by an express agreement in writing;"

(vi) After the first proviso, add the second proviso as follows:

"Provided further that the instant sub-section shall not apply to cases where an arbitrator has already been appointed prior to the effective date of the instant amendment;"

[Note: This amendment is in consonance with the principles of natural justice, that an interested person cannot be an adjudicator. The Fifth Schedule incorporates the provisions of the Waivable and Non-waivable Red List of the IBA Guidelines on Conflict of Interest. However, given that this clause would be applicable to arbitrations in all contexts (including in family settings), it is advisable to make this provision waivable, provided that parties specifically agree to do so after the disputes have arisen between them.]

Amendments to the Arbitration and Conciliation Act, 1996 Back

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