Amended arbitration law to cut down costs, delays: Gowda

Amended arbitration law to cut down costs, delays: Gowda

A string of amendments to the arbitration law to end delays and eliminate high costs in a bid to provide ease of doing business is being worked out by the government which is also finalising a national policy to cut down on litigation.

Initial plans to bring out an ordinance to quicken things was dropped and instead a draft of the amended law could come up shortly before the Cabinet so that it can be taken up in the Monsoon session of Parliament, according to Law Minister D V Sadananda Gowda.


He said the government also wants to shed the tag of being the single biggest litigant in various courts in the country. Law Ministry's informal estimates suggest government is a litigant in 46 per cent of the cases in higher judiciary.

Sending out a signal to international business community that prolonged arbitration proceedings in India will soon become a thing of past, Gowda told PTI in an interview that "stringent" amendments have been proposed to the Arbitration law to end proceedings within a stipulated period and very less intervention by courts.

"Even the fee structure of the (presiding arbitrator) will be decided in the first sitting itself... now everybody apprehends that arbitration case in India will prolong for years... it will go on for a decade.

"So, now we want to see that it should be within the stipulated period and even interference of the courts should be very minimum, only unless there are certain legal problems. Fee structure is an important area because almost all the arbitrators used to prolong the cases simply for no reason. So if the fees is fixed, they will dispose of the case," Gowda said.

The minister said the government wanted to promulgate an ordinance on Arbitration Act. "But we thought this ordinance raj issue (criticism) will come up again. For that reason we kept away."
The Law Ministry has moved the Cabinet note to the Prime Minister's Office. "I hope within the next one or two meetings, it will come up (before Cabinet)," he said.

He rejected suggestions that delay in amending the Arbitration and Conciliation Act, 1996 has sent a wrong message to the global business community.

"I don't think so. Three areas we are traversing -- the amendments to the Arbitration Act, speedy disposal of commercial matters.

"For that Commercial Division of High Courts bill has been moved. The third one is, we are more for mediation and conciliation of several issues which relate to ease of doing business," he said.
Amid talk that some arbitrators were opposed to the amendments proposed in the ordinance, Gowda said the bill will be almost the same.

"In Singapore, the deadline is six months. We have given nine months (to settle the case)...Yes, yes it will be almost the same," he said.

The Union Cabinet had on December 29 last year cleared the ordinance but it was not sent to the President for his approval.

One of the amendments makes it mandatory for a judge presiding over commercial disputes to settle cases within nine months.

According to the amendments, the presiding officer of a commercial dispute will have to clear the case within a nine-month time-frame.

The arbitrator will be free to seek an extension from the high court. But in case of further delays, the high court will be free to debar the arbitrator from taking up fresh cases for a certain period.

This is a crucial amendment to the Arbitration law as many foreign companies are said to be hesitant to do business in India because of long-drawn litigations.


Another amendment puts a cap on fee of arbitrator. The arbitrator will also have to spell out if there is a conflict of interest in the case he or she is taking up.

Responding to a question on the National Litigation Policy, Gowda said an informal group of ministers has finalised it and it will now be placed before the Union Cabinet for approval.

"It will reduce considerably the number of cases because it will go up to the Cabinet Secretary and if he finds that yes there are certain issues that need to be tackled by the courts then only it will go to the court.

"Otherwise, all the cases between various departments and ministries and PSUs will be settled and we should not go to the court. That is the policy," he said.

Soon after the Modi government came to power in May last year, it had identified reducing government litigations as one of its priorities in a bid to streamline the judicial system of the country.

The proposed policy, which seeks to replace the one brought by the previous UPA government, will bring in a mechanism to reduce government litigation and to make it an efficient and responsible litigant.

The UPA government had launched the policy in 2010 but it could not be implemented in totality. The policy will help all the Union ministries and departments define types of cases to be pursued in courts and those which need to be dropped after review.

The policy suggests a mechanism to reduce filing of cases by or against the government. Most of the states have gone ahead with their respective policies based on the 2010 draft of the Law Ministry.

57,179 cases were pending in the Supreme Court and 42,17,903 were pending in the 24 high courts at the end of 2011.

The government has also decided to attach law officers to various central ministries to ensure that courts are only approached as a last resort and cases where chances of winning are lean are not pursued.

They will take a "holistic view of litigation" while filing new cases or defending the pending cases. 

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