ARBITRATION LAW IN INDIA FOR FOREIGN SEATED ARBITRATIONS

ARBITRATION LAW IN INDIA FOR FOREIGN SEATED ARBITRATIONS

Ravi Singhania & Schrachika Kulshrestha


19/11/2018

ARBITRATION LAW IN INDIA FOR FOREIGN SEATED ARBITRATIONS

It was in Bhatia International Vs. Bulk Trading S.A.[1] judgment that the Indian Supreme Court laid down the principle that courts in India would have a right to provide interim relief in foreign seated arbitrations also unless otherwise agreed in writing by the parties. Therefore, earlier the Indian Courts were competent to grant interim relief pending arbitration, set aside arbitral awards etc. even if the arbitration was conducted outside India unless the parties by mutual consent chose expressly or impliedly to exclude the applicability of Part I of the Arbitration and Conciliation Act, 1996. However, this position was overruled following the decision of the Hon’ble Supreme Court in Bharat Aluminium and Co. Vs. Kaiser Aluminium and Co.[2] (“BALCO”) but only prospectively. In the BALCO judgment, a five judge constitutional bench of the Hon’ble Apex Court held that Part I of the Arbitration and Conciliation Act, 1996 was applicable only to all the arbitrations which take place within the territory of India. However, the BALCO judgment was made applicable only for disputes arising out of arbitration agreements and/or arbitration agreements entered into after September 6, 2012.

ARBITRATION AND CONCILIATION (AMENDMENT) ACT 2015 ON INTERIM RELIEF

After the BALCO judgment, there was a lot of clamour as Indian Courts had no jurisdiction to intervene in arbitrations held outside India and therefore, if the assets of one of the parties were located in India and there was a likelihood of alienation of those assets, the other party court not approach Indian Courts for interim relief.  With this objective in mind, the Arbitration and conciliation (Amendment) Act, 2015 (“Amendment Act, 2015”) was passed by the Parliament of India to help build India as a major investor friendly jurisdiction.  In particular, section 2(2) was amended which somewhat restored the principle pronounced by the judgment of Bhatia International by adding a proviso that provided the option of interim relief to a party even if the place of arbitration is outside India unless there was an Agreement to the contrary. Pursuant to the amendment, the courts in India have also duly hailed the legislative intent behind the amended section 2(2) and have held that keeping in mind the object of amended section 2(2), it is open to courts in India to grant interim relief even in respect of arbitral proceedings held outside India and even if the arbitration proceedings are governed by a foreign law[3]. However, the flipside of the amended section 2(2) is that the option of seeking an interim order is not available to two Indian parties who choose to arbitrate outside India. Also, post 2015 amendment the power of the courts to grant interim relief has been restricted to only those matters where arbitral tribunal has not been constituted and once an arbitral tribunal is constituted, the court cannot entertain any interim relief unless the court finds that circumstances exist  which may not render the remedy a provided under section 17 of the Act efficacious.

AMENDED DEFINITION OF COURT

Another key feature of the Arbitration and conciliation (Amendment) Act, 2015 was the amendment to the definition of court as provided under section 2(1)(e). This amendment has provided a clear distinction between the forums which are to be approached in domestic arbitration and in international commercial arbitrations. While the definition of a court with respect to domestic arbitrations has remained unchanged, in case of international commercial arbitrations, the definition of a court has been included to mean all high courts exercising ordinary original civil jurisdiction  and in other cases, a high court having jurisdiction to hear appeals from decrees of courts subordinate to that high court.  This is a fundamental change in building India as a global arbitration hub as it has ensured that foreign parties are not required to approach Principal Civil Courts in remote districts and can approach the concerned high court. This amendment is a primary attraction for foreign parties involved in international commercial arbitrations who can now avoid the legal complexities involved in the Indian Judicial System at the District level. The legislative intent behind this amendment was to ensure that any application and/or petition in international commercial arbitrations, involving a foreign party, would be heard expeditiously and will not only boost confidence of foreign investors  but will also mitigate the risk faced by the government of India from claims by foreign investors under the relevant investment treaty.

IMPENDING CHANGES

The Arbitration and Conciliation Amendment Bill, 2018 was passed by the Lok Sabha (House of the People) on August 10th, 2018 with a view to strengthen the arbitration mechanism in Indian.  The Bill is yet to be passed by the Rajya Sabha (Council of States).

Time restriction for conclusion of arbitral proceedings not applicable to international commercial arbitrations

While the inclusion of section 29A by way of the Amendment Act, 2015  paved a way for a more structured and time bound arbitration proceeding which were otherwise marred by significant delays, however, in case of international commercial arbitrations, the time bound procedure as prescribed under section 29A was rather seen as a restriction especially in cases which involve complex questions of facts and law and in which detailed evidence needs to be led. The Arbitration and Conciliation Amendment Bill, 2018 has duly addressed this concern and seeks to exclude the applicability of Section 29A to international commercial arbitrations.

[1] [(2002) 4 SCC 105]

[2] (2012) SCC 9 552

[3] Raffles Design International Vs. Educomp Professional Education

VENTURE CAPITAL FUNDING IN INDIA

VENTURE CAPITAL FUNDING IN INDIA

Venture Capital Fund

Venture Capital Fund (VCF) is a privately pooled investment vehicle. It can be established or incorporated in the form of a trust, a company, a limited liability partnership, or a body corporate which collects funds from investors, for investing in accordance with a defined investment policy for the benefit of its investors.

Current scenario in India

As per the report of Bain and Company[1] “India Private Equity Report 2018”; 2017 was a good year for private equity in India as the country witnessed the highest investment of Private Equity (PE) /Venture Capital (VC) ever, i.e. an investment of around $26 billion.

Securities and Exchange Board of India (SEBI) regulates both domestic and offshore funds by the virtue of various regulations. Domestic VC funds are regulated under SEBI (Alternate Investment Fund) Regulations and offshore VC funds are regulated under SEBI (FVCI) Regulations, 2000.

Instruments

Some of the preferred instruments for a VC fund outside equity are (a) compulsorily convertible preference shares are one such type of instrument as they carry a preferential right over dividend and gives investors a preferential right to recover investment in case the company is wound-up; (b) compulsorily convertible debentures are another, investment instrument that may be considered. It is a debt instrument compulsorily convertible into equity after a specified time period; (c) convertible notes[2] as an investment option is permitted for startup companies with effect from January 10, 2017. A foreign investor is permitted to invest in convertible notes up to twenty five lakh rupees or more in a single tranche.[3]

Documentation

Typically, a VC fund enters into various documents in connection with its investment which includes (a) term sheet: capital financing is initially captured by a term sheet. It covers various important aspects such as valuation of the company, the constitution of the board, the right to veto, exit rights, future funding, right to financial information etc.; (b) Share subscription agreement: it provides for the issue of shares to the investor for subscription money, determined as per the valuation of the company. It provides the purpose for which the money may be used, representations and warranties by the founder pertaining to the startup, provides a safeguard against any liability which the investor may face due to legal, regulatory or tax related liabilities of the startup etc.; (c) Shareholders’ agreement: it provides for the structure of the board of directors, the appointment of the investor’s directors on the board, liability of the founder to provide investor with financial reports from time to time, pre-emptive right, right of first refusal,  the exit route available to the investors etc.

Exit Options/Routes available to the investors are as set out below:

One of the key aspects for a VC fund in connection with its investment is the right to exit the portfolio company. Typically the exit options include (a) initial public offering, (b) buyback of shares, (c) redemption of fully paid-up preference shares / debentures, (d) registration rights: a right of investor to register its securities for sale in case the company lists its securities on a foreign stock exchange, (e) tag along rights: investor can sell its share on the same terms and conditions as the shareholders exiting the company to a third party, (f) drag along rights: investor can compel the other shareholders  to sell their shares on the same terms and conditions as the investor to a third party, (g) put option :investor can sell shares back to the other shareholders at a predetermined price/terms and conditions (h) call option: investor can purchase the shares of another shareholder at a predetermined price/terms and conditions as specified under the shareholders agreement.

Judicial pronouncements

The Indian Courts with recent judicial pronouncements are likely to instil more confidence amongst the investor, creating a favourable climate for investments. The Delhi High Court in a recent judgment upheld an international arbitral award passed in favour of foreign investor, and against the promoters, of an India company for having concealed information about proceedings against them by American food and drug department while selling their shares. In another judgment of NTT Docomo v.Tata Sons Limited[4] the court by upheld the arbitral award in favour of Docomo. The court by this decision clearly brought out the need to create a favourable environment for foreign investment by holding the Indian parties liable to their commitments under the contracts disabling them to take defence of the Foreign Exchange laws.

Conclusion

Economic growth in any country depends upon the consistent growth of business and an environment which nurtures investor confidence. Investor confidence can be ensured when investors are able to exit the companies after accruing profits and without suffering any loss due to wilful default or misrepresentation of the other shareholders or promoters. With laudable judicial precedents and liberal laws India is likely to achieve high investment and business growth in the coming years.

[1]https://www.bain.com/insights/india-private-equity-report-2018/; last seen 21.08.2018

[2] Convertible Note’ means an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument.

[3] https://rbi.org.in/scripts/FS_Notification.aspx?Id=11253&fn=5&Mode=0

[4] (2017) 241 DLT 65

FOREIGN INVESTMENT IN RETAIL IN INDIA – RESTRICTIONS AND WAY AROUND

FOREIGN INVESTMENT IN RETAIL IN INDIA – RESTRICTIONS AND WAY AROUND

Foreign Direct Investment (FDI) Policy of India permits foreign investment in India either under ‘automatic route’ or ‘approval route’. Under the ‘approval route’ prior approval of the Government of India is required for any foreign investment in an Indian company carrying on retailing business.

FDI Policy on retail trading classified retail trade as either Single Brand Retail Trading (‘SBRT’) e.g. companies like Marks & Spencer’s, Ikea, Uniqlo, Nike or Apple or Multi Brand Retail Trading (‘MBRT’) for retailers like Walmart, Carrefour or Tesco. Traditionally, there were restrictions in foreign investment in both SBRT and MBRT activities under FDI Policy.

Prior to January 2018 FDI Policy of India allowed 49% FDI in SBRT activities under automatic route and government approval was required for FDI beyond 49% which could go upto 100%. With a view of liberalizing FDI Policy, the Government decided to allow 100% FDI in SBRT activities under automatic route without requiring any government approval effective from January 2018.

The FDI policy for SBRT has laid down the following requirements:

  • Products to be sold should be of a ‘Single Brand’, which are branded during manufacturing.
  • Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.
  • ‘Single Brand’ product-retail trading would cover only products, a non-resident entity, whether owner of the brand or otherwise, for the specific brand, either directly by the brand owner or through a legally tenable agreement executed between the Indian entity undertaking SBRT and the brand owner.
  • In respect of proposals involving foreign investment beyond 51%, sourcing of 30 percent of the value of goods purchased, will be done from India.
  • Such an Indian entity is also allowed to sell through e-commerce platform.

Although government allowed foreign investment in single brand retail a few years ago, but most of the foreign brands still operate in India through local franchises and distributors. For example, Genesis Luxury Fashion Pvt. Ltd., a marketing and distribution company of Reliance Group, has brought several global iconic brands such as Bottega Veneta, Giorgio Armani, Hugo Boss, Emporio Armani, Jimmy Choo, Paul Smith, Tumi, Burberry, etc. in India.

Due to restrictions and various conditions for retail trading under FDI policy, foreign companies were finding it more convenient to enter India through franchise route. Under a franchise or distribution agreement, a global retailer partners with an Indian company. Indian company pays a fee to the brand owner and invests in marketing and launching the brand in India. It was not uncommon that the brand owner would invest in the Indian retailer to expand it’s brand footprint into Indian retail sector rather than expecting to receive brand fees or royalty.  In the recent past Gap Inc., Aeropostale Inc. and Ipanema, are some of the companies who have entered India through franchise agreements.

Post January 2018, Indian entities of global retailers having FDI of more than 51% have been exempted from the requirement of local sourcing, for up to three years from commencement of the business if it is undertaking SBRT of products having ‘state-of-art’ and ‘cutting-edge’ technology, and where local sourcing is not possible, such as Apple. This requirement of local sourcing was challenging for entities trading in hi-tech products. There are brands which engage in manufacturing and trading of products which are produced from goods not sourced in India due to various factors and constraints. Whether a product will qualify as having ‘state-of-art’ and ‘cutting-edge’ technology, will be examined by a Committee formed by the government in this regard.

Further, there is no explanation of what constitutes ‘state-of-art’ and ‘cutting edge’, which creates ambiguity. The relaxation given is only for a period of 3 years, after which the SBRT entity would be required to meet the 30% sourcing norm. All these factors pose challenges for the foreign investor engaged in trading of such products.

Apart from franchise model, a way around the requirement of mandatory sourcing norm is to keep FDI upto 51% and find a local partner to hold the balance 49%. Under this structure the requirement of local sourcing is not applicable to the Indian entity in which FDI is being made by the foreign brand owner.

As far as multi brand retail trading is concerned, FDI is limited to 51%, with prior government approval. No automatic route of FDI is available in case of MBRT. Moreover, retail trading in any form by means of e-commerce would not be permissible for companies with FDI engaged in the activity of multi-brand retail trading. In the past Indian Government has frowned upon creative joint venture models to circumvent majority foreign ownership in MBRT.

There is another significant issue relating to retail trading which needs clarification – whether ‘sub-brands’ constitute a single brand. For example, Marks & Spencer (‘M&S’) sell goods under sub-brands such as M&S Women, Autograph etc. under the M&S Parent brand. So, it becomes important form the perspective of restrictions under FDI Policy whether these sub-brands can be treated as a single brand or will fall under MBRT.

To conclude, there are certain key areas such as sourcing norms in case of hi-tech products retailers, as well as the question of sub-brands, which need to be addressed. Till then foreign brands would prefer the franchise or distribution route to sell their products in India.

FUNDING OF INDIAN SUBSIDIARIES

FUNDING OF INDIAN SUBSIDIARIES

Liberalisation in India has resulted in significant inbound foreign investment. As Indian operations of foreign businesses grow, foreign shareholders grapple with the best ways to finance these operations and repatriate some of the profits – partly due to the Indian regulatory system, which strictly regulates capital account transactions. This article examines some key ways of financing Indian operations of foreign shareholders. But it will depend on the specific circumstances in each case to determine which option is best suited for a particular Indian subsidiary.

Investment through shares and convertible instruments. Foreign companies can finance their subsidiary’s operations through investment in shares and convertible instruments. The law allows investment through equity shares, compulsory convertible preference shares, compulsory convertible debentures and warrants.

The investment in the aforesaid instruments is treated as capital investment by the foreign investment law of India, but such capital investment is subject to certain conditions including: (1) Restrictions on the level of capital investment in specified sectors, e.g. permissible capital investment in multi-brand retail is up to 50%; (2) the need to specify the manner of pricing the instrument to ensure that the instrument is not issued/transferred at a lower price than its fair market value (pricing compliance); (3) a specified time for the allotment of such instruments; (4) reporting such capital investment within a specified timeline.

For example, when a foreign shareholder wants to fund its subsidiary for working capital needs, the foreign shareholder may want to evaluate, prior to the capital investment, the pricing compliance. Considering the pricing compliance mandates that the instrument be not issued at a price lower than its fair market value, the foreign shareholder will need to evaluate whether such pricing compliance will result in the capital investment being much more than what is needed.

However, there are some exceptions to the pricing compliance for a private company or a public unlisted company, e.g. issuing the instrument through a rights issue. Instruments issued through a rights issue can be issued at a price similar to the price offered to an Indian shareholder. For wholly owned subsidiary of a foreign shareholder, however, this exception may need to be examined given that the subsidiary may not have an Indian shareholder.

Considering the above, capital investments may not always be the optimum method for funding as foreign shareholders may not want to lock in huge capital for inordinately long periods. Further, repatriation of profits from such subsidiaries has certain restrictions under applicable law and is coupled with attendant tax leakages.

External commercial borrowings. A foreign shareholder can also fund through debt. However, third party loans are costly in India compared to borrowing overseas and are not easily available. But there are some viable debt alternatives which foreign parents can explore to finance their Indian subsidiaries, earn some interest and recover the money in due course.

Under the applicable law, an Indian subsidiary can raise debt from its foreign shareholder by way of external commercial borrowings (ECBs). In this context, a direct foreign equity holder with minimum 25% direct equity holding in the Indian subsidiary, an indirect equity holder with minimum indirect equity holding of 51% in the Indian subsidiary, or a group company with a common overseas parent, is permitted to provide an ECB to its Indian affiliate. The borrowings may fall under any of the three categories – either with or without approval of the central bank (RBI) – depending on the business of the Indian subsidiary, the end use of the ECB proceeds, the currency of borrowing and the average tenure of the ECB. Further, the applicable law stipulates that the Indian subsidiary is to maintain a debt equity ratio of 7:1. However, this ratio is not applicable if the total of all ECBs raised by an Indian entity is up to US$5 million or equivalent.

While the applicable law requires RBI approval for ECBs not satisfying certain conditions set out under the relevant regulation, such approval may be time consuming and may not meet the immediate needs of the Indian subsidiary.

Masala bonds. In September 2015, RBI permitted Indian corporates to issue rupee-denominated bonds (nicknamed as Masala bonds) under the ECB regime. The Masala bonds regime is more liberal than the ECB one. The pool of lenders is increased and any person from a Financial Action Task Force compliant jurisdiction can subscribe to such bonds. The requirement of holding a minimum equity percentage as per the ECB guidelines for foreign equity holders is not applicable, and an equity holder with less than 25% equity in the Indian company would also be eligible to subscribe to such bonds.

Non-convertible debentures. Another avenue available is the corporate debt market. A group company of a foreign shareholder can register as a foreign portfolio investor (FPI) under the Securities and Exchange Board of India’s prescribed regulations. The registration process is straightforward and typically an FPI registration can be completed within a few weeks. An FPI is permitted to invest in listed or unlisted non-convertible debentures (NCDs). The minimum residual maturity of such NCD’s should be 1-year subject to certain conditions set out under the applicable law. The NCDs can be secured or unsecured. The issuer has considerable flexibility on how to use the proceeds and the amount of interest or redemption premium to be paid on such instruments.

This route has been used amply, especially by foreign funds, to finance Indian portfolio companies. This option provides more flexibility than the ECB option in raising funds from foreign shareholders. However, there would be certain disclosure requirements that need to be considered.

By way of business arrangements. Today a good number of Indian subsidiaries, commonly in the IT sector, have been set up to provide services only to its foreign shareholder based in a jurisdiction outside India. These Indian subsidiaries enter into service arrangements with its foreign shareholder and receive funds as part of their business income for providing services to such shareholder. The applicable law does not stipulate a cap on funds received from a foreign shareholder as part of a service contract between the Indian subsidiary and the foreign shareholder. Therefore a foreign shareholder can raise funds for his subsidiary through such an option. However, certain tax implications, such as transfer pricing, may need to be examined.

DECLARATION BY SIGNIFICANT BENEFICIAL OWNER UNDER THE COMPANIES ACT, 2013 – PITFALLS FOR CORPORATE SHAREHOLDERS

DECLARATION BY SIGNIFICANT BENEFICIAL OWNER UNDER THE COMPANIES ACT, 2013 – PITFALLS FOR CORPORATE SHAREHOLDERS

Ministry of Corporate Affairs (“MCA”) has recently notified certain provisions relating to disclosure of significant beneficial owner in the Companies Act, 2013 (“Act”) through Companies (Amendment) Act, 2017 and simultaneously notified relevant rules in this regard. Notification of the said new provisions has not only raised concerns amongst the stakeholders but also caused a lot of confusion due to certain likely conflicts in the provisions of the Act vis-à-vis rules as mentioned above. The new provisions, requiring disclosure by significant beneficial owner, has been notified by substituting section 90 of the Act with a completely new section.

It may be pertinent to note that the Act already had the provisions relating to disclosure by beneficial owner under section 89. The said section requires declaration to be made by a person entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares. Similarly, the person who holds or acquires a beneficial interest in share of a company is also required to make a declaration to the company in a prescribed form.

What is Beneficial Interest in shares?

Presently, the Act does not define ‘beneficial interest”. However, through the Companies Amendment Act, 2017 it is proposed to add the following definition of ‘beneficial interest” in sub-section (10) of the section 89 of the Act:

“beneficial interest in a share includes, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to-

(i)         exercise or cause to be exercised any or all of the rights attached to such share; or

(ii)        receive or participate in any dividend or other distribution in respect of such share.”

As the above definition is not exhaustive so the ambit of definition can be much wider.

Who is a significant beneficial owner?

With the amendment of section 90 through the Companies Amendment Act, 2017, MCA has introduced the concept of significant beneficial owner. MCA further notified Companies (Significant Beneficial Owners) Rules, 2018 (“Rules”) on 13th June, 2018. The term “Significant Beneficial Owner” has been defined both under the said section 90 as well as under the Rules.

Section 90 refers to an individual as “significant beneficial owner” who holds (alone or together, or through one or more persons or trust) beneficial interests of not less than 25% per cent or such other percentage as may be prescribed, in the shares of a company or the right to exercise, or the actual exercising of significant influence or control as defined under section 2(27) of the Act, over the company. Whereas Rules while defining the term “significant beneficial owner” refers to an individual as referred to in section 90 holding ‘ultimate’ beneficial interest of not less than 10%, but whose name is not entered in the register of members of a company as the holder of such shares.

The Rules further provides that where no natural person is identified, the significant beneficial owner is the relevant natural person who holds the position of senior managing official. The Rules, however, does not make it clear senior managing official of which entity should be treated as significant beneficial owner where there are more than one entity in the chain of shareholding structure of the registered shareholder. Further, the term senior managing official has not been defined and is left open for interpretation.

Applicability of the provisions where registered and beneficial owner is a company or a corporate

After reading provisions of section 90 and the Rules, a question arises ‘whether there is a requirement to make disclosure under the said provisions where shares are held by a corporate entity in its own name as a beneficial owner’. In other words, whether there be a requirement to find individual(s) who is ultimate beneficial owner of the shares, so held by a corporate, as beneficial owner of those shares.

The answer to above appears to be “yes”. Provisions under section 89 already deals with disclosure by a nominee as well as the person holding beneficial interest in shares irrespective of the percentage of shares so held. The object of section 90 appears to be to go beyond the corporate entities who are registered as beneficial owner of those shares and identify natural person(s) holding ultimate beneficial interest in the shares through those corporate entities.

There is another school of thought which interprets that provisions of section 90 will be applicable only to those cases where disclosure has already been made under section 89. In that case it can be a point of argument that if a disclosure has already been made under section 89 then why there is a need to make another disclosure under section 90 of the Act.

In light of above discussion, it may reasonably be interpreted that the provisions of both section 89 and 90 of the Act are independent of each other and will accordingly require disclosures under respective sections, as applicable. There may be a situation, where filings will be required under both section 89 as well as section 90 in respect of same shareholding.

The wordings of the section and Rules could have been better to obviate the scope for different interpretations. Now, MCA has done away with form BEN-1 as notified initially and will be coming out with a new form soon. It is expected that there will be more clarify on the applicability once the said new form is notified.

JUDICIAL INTERPRETATION OF 2015 AMENDMENTS TO INDIAN ARBITRATION & CONCILIATION ACT

JUDICIAL INTERPRETATION OF 2015 AMENDMENTS TO INDIAN ARBITRATION & CONCILIATION ACT

2015 amendment to Arbitration & Conciliation Act (“Act”) brought about serious overhaul to the justice delivery system through arbitration. Indian Courts have interpreted the amendments in the same spirit and have brought about clarity to the objective of the amendments. This Article focuses on the recent developments and the judicial interpretation thereof.

A very interesting recent development is that while referring the disputes to arbitration the Courts in India are now required, only to make a prima facie assessment as to the existence of the arbitration clause. This change has been brought by the recent Amendment to the Act[1]. This new development reduces the time required by Court to apply its judicial mind before the disputes can travel to arbitration and gives primacy to the principle of kompetenz kompetenz recognized globally. An example of how readily courts are now referring disputes to arbitration is a recent judgment of the Supreme Court of India, where even a non-party to arbitration, in the peculiar circumstances of the case, could be referred to arbitration, owing to the presence of an umbrella contract containing the arbitration clause[2].

To ensure impartiality and transparency in the arbitration proceedings, another important development is the manner of appointment of arbitrators. It is now mandatory for every arbitrator to disclose all such information, which establishes existence of any relationship or interest of any kind which is likely to affect his neutrality or ability to complete the proceedings within the specified time.[3] There are descriptive schedules to the Act, which specify such relationships which would automatically create a bar or likelihood of bias such as present or past employment, advisory services etc.

Another important development is increasing the enforceability and efficaciousness of an interim order passed by the tribunal. Under the amended Act, the lacunae of making the order of the arbitral tribunal being un-enforceable has been removed and now arbitral tribunal has the same powers that are available to a court under Section 9 and that the interim order passed by an arbitral tribunal would be enforceable as if it is an order of a court.[4]  The new amendment also adds that if an arbitral tribunal is constituted, the Courts should not entertain applications for injunction under Section 9 unless it thinks that the remedy by arbitral tribunal is not efficacious.[5] Hence, after 2015, the arbitral tribunal has more autonomy with respect to the cases filed before it than before.

Another fear of parties coming to India for dispute resolution is the time taken to resolve disputes. In order to make the arbitration process quicker the 2015 Amendment Act has added Section 29A and Section 29B. Section 29A makes it mandatory to complete the proceedings within 12 months (additional 6 months, in some circumstances) from the date arbitral tribunal enters upon the reference. Section 29B, on the other hand allows parties to agree on a fast track procedure to dispose off the proceedings within 6 months.

Another extremely relevant development is the availability of an interim measure, even where the seat of arbitration is outside India[6]. This resolves the dilemma which various foreign parties face, that if the seat of arbitration is outside India, then how can one secure assets of a party located in India, in case there is a fear of disposal. It is of course, open to parties to agree to exclude the provisions of interim relief in India[7].

To expedite enforcement of awards and to discourage parties from prospective litigations, the automatic stay on execution of awards, on mere filing of an objection petition has also been discontinued[8]. Indian Courts post 2015 amendment require the award debtor to first satisfy that a stay on enforcement is warrantied and which is now usually granted on deposit of the award amount or a substantial portion of it. This has greatly reduced unnecessary challenge to awards and given even more authority to the award of an arbitrator. However, this provision has been held to be prospective in nature[9].

Party autonomy has also gained lot of importance for selection of seat of arbitration, wherein earlier, there were a string of judgments that in case of two Indian parties, they were not permitted to have a foreign seat. Indian courts have now held that even where there were two Indian parties, they could have a for their dispute resolution.

All of these developments point to the fact that India has embraced arbitration as the primary mode for settlement of commercial disputes. Foreign investment is being boosted greatly by projecting India as an investor friendly country having a sound legal framework and ease of doing business. Although foreign law firms are still not permitted to practice in India[10], it definitely points to great cooperation between Indian firms and foreign firms, especially in arbitrations seated in India, or at least those, where the substantive law of contract is India.

[1] The Arbitration and Conciliation Amendment Act, 2015, amendments in Section 8 and Section 11.

[2] Ameetlal Chand Shah v. Rishabh Enterprises

[3] Section 12 of the Arbitration  and Conciliation Act, 1996.

[4] Section 17 of the Arbitration and Conciliation Act, 1996.

[5] Section9.

[6] Section 2(2) of the Arbitration and conciliation Act, 1996.

[7] Aircon Beibars FZE v. Heligo Charters Pvt. Ltd. 2017 SCC OnLine Bom 631

[8] Section 36 of the Arbitration and Conciliation Act, 1996.

[9] Anuradha Bhatia v. M/s Ardee Infrastructure Ltd. (2017) 1 HCC (Del) 137

[10] Bar Council of India v. AK Balaji & Ors. (2018) 5 SCC 379