To attract investment, govt amends law on arbitration

Amid its keenness to attract the maximum foreign investment, the government has sent out a signal to international business community by amending the Arbitration Act to make it mandatory for a judge presiding over commerial disputes to settle cases within nine months.

The amendments to the Arbitration and Conciliation Act, 1996, in the form of an Ordinance, are aimed at giving a message that settling commercial disputes in India will no longer be a time-consuming affair, a senior government official said today. The government had to take the Ordinance route as it wanted the amendments to be put in place at the earliest, the official said.

The Ordinance has been sent to President Pranab Mukherjee for assent, after which it will come into force. 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.

The move comes amidst the government's keenness to attract maximum foreign investment by projecting the 'ease of doing business' in India which is being highlighted by Prime Minister Narendra Modi.

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. "Most of the recommendations of the Law Commission have been accepted. While some have been incorporated in the law itself, some of the recommendations will be used while framing rules," the official said.