Law Minister Clarifies the New Arbitration & Conciliation (Amendment) Bill, 2015 Would Operate Prospectively

Today, the Lok Sabha passed the Arbitration and Conciliation (Amendment) Bill, 2015 in substance. However, the Minister added a new clause 25A to the Bill. The said clause deals with retrospectivity of the aforesaid amendments. It specifically provides that the amendments would not apply to arbitrations commenced before 23.10.2015. The said clause reads as below":

"25A. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.”

This, thus, puts to rest all the debates surrounding retrospective applicability of the 1996 Act. But the crucial question remains regarding the retrospectivity of the 2015 Ordinance amending the said Act, which would, in all possibility, be interpreted in the same lines as the above clause. If not, then it would lead to an anomalous situation where the Ordinance leading to the Amendment Act would apply retrospectively but the Amendment Act would apply prospectively. Another question would be regarding the effect of repeal of the Ordinance by the Amendment Act. Hence, it is possible that the courts would take the stand that the Ordinance would also apply prospectively. 

Today's Lok Sabha debates on the Arbitration and Conciliation (Amendment) Act, 2015 can be accessed from here.

Lok Sabha Debates the Bill to Amend the Indian Arbitration Law

The Lok Sabha today debated the Arbitration and Conciliation (Amendment) Bill, 2015 to amend the Indian Arbitration Law. The debate began between 1700- 1800 hrs today (16.12.2015) and is likely to continue tomorrow. Prior to the debate on the aforesaid enactment, the Lok Sabha also debated the Commercial Divisions Bill. Minor amendments were moved and were accepted. Check out the Lok Sabha debates page. 

I am also surpised how the recent decision of the Delhi High Court reading down Commercial Appellate Divisions as Commercial Division did not come up in the debate at all. This clearly shows the disconnect between our Parliamentarians and our courts. (See, Ascot Estates v Bon Vivant, dt. 10.12.2015 where the Delhi High Court read down ‘Commercial Appellate Division’ as ‘Commercial Division’ in Section 10 of the Ordinance) 

The Lok Sabha debates on the Commercial Divisions Bill and the Arbitration Bill can be accessed from here.

RTI Act Overrides Arbitration & Conciliation Act but Conciliation Proceedings Are Confidential: CIC

The Chief Information Commission passed an order dt. 08.08.2015 in Rama Aggarwal v. Delhi State Legal Services Authority holding that notwithstanding that the Right to Information Act, 2005 overrode the provisions of the Arbitration and Conciliation Act, 1996, conciliation proceedings were confidential in nature and that the Public Information Officer was not bound to disclose information relating to, or pertaining to, conciliation proceedings in view of Sections 8(1)(e) and 8(1)(j) of the Right to Information Act, 2005.

Factual Background:

Anil and Rama Aggarwal had marital issues and were referred to the Delhi State Legal Services Authority for counselling and conciliation. Later, Rama Aggarwal filed proceedings under the Protection of Women from Domestic Violence Act, 2005 and for divorce. Rama Aggarwal filed an RTI application seeking, among other things, information pertaining to the conciliation proceedings before the Delhi State Legal Services Authority. The PIO of the Delhi State Legal Services Authority and the First Appellate Authority rejected the application (in respect of those queries on the conciliation proceedings).

Question before the CIC: 

On appeal, the CIC had to decide whether the PIO and the First Appellate Authority were wrong in denying information on conciliation-related proceedings. 

Decision of the CIC:

The CIC took into consideration the relevant provisions under the Hindu Marriage Act, 1955, the UNCITRAL Conciliation Rules (Article 14), the Arbitration and Conciliation Act, 1996 (Sections 70, 75 & 81), the (Delhi) Mediation & Conciliation Rules, 2004 (Rules 20 and 21) and the decisions of the Supreme Court in Haresh Dayaram Thakur v Maharashtra AIR 2000 SC 2281 and Moti Ram v. Ashok Kumar.

The CIC, after discussing Section 75 of the Arbitration & Conciliation Act, 1996 (1996 Act) which provides that notwithstanding anything to the contrary, the parties shall keep all matters relating to the conciliation proceedings confidential, stated that the RTI Act will definitely override the 1996 Act (irrespective of the non-obstante clause).

At the same time, the CIC held that conciliation proceedings would be exempt from disclosure on the ground that information in conciliation proceedings were made available in conciliation proceedings owing to the fiduciary capacity of the conciliator (and the institution administering conciliation). The CIC held:

"As per the traditional definition, a ‘fiduciary’ is a person who occupies a position of trust in relation to someone else, therefore requiring him to act for the latter's benefit within the scope of that relationship. Anything given and taken in confidence expecting confidentiality to be maintained will be information available to a person in fiduciary capacity. Therefore communication made during conciliation proceeding between the parties and also communication between mediator and other parties, qualifies to be made in fiduciary capacity."

Hence, the Court held that the PIO could refuse disclosure of information under Section 8(1)(a) of the RTI Act, which exempts disclosure on the ground that the information was made available to a person in his fiduciary relationship. 

The CIC also held that the proceedings of mediation related to personal information and the disclosure of the same would cause unwarranted invasion of the privacy of the individual concerned, which is a ground for refusing information under Section 8(1)(j) of the RTI Act. 

The CIC also recognised that disclosure of such information on account of larger public interest was allowed but held that it was in larger public interest that alternative dispute resolution (including mediation) proceedings are kept confidential. The CIC held that if mediation proceedings are allowed to be disclosed under the RTI Act, this would result in the parties not adopting such mechanisms thereby resulting in the burdening of the courts. The CIC also held that conciliation proceedings would also include counselling proceedings between spouses. 

On the basis of the above reasoning, the CIC rejected the appeal.

Key Takings:

The decision is correct in holding that mediation proceedings between private persons cannot be disclosed under the RTI Act as this would result in invasion of privacy and persons choosing court based dispute resolution. One of the chief reasons for choosing mediation and other ADR mechanisms is confidentiality. However, question arises whether mediation proceedings between the State and a private person could be afforded the same protection. The question is complicated and requires consideration but this blawgger would lean in favour of disclosure at least after the resolution of the dispute between the State and the private person.

Secondly, Section 22 of the RTI contains a non-obstante clause; so does Section 75 of the 1996 Act. Despite the conflict, the CIC did not provide justification(s) why the RTI Act overrode Section 75 of the 1996 Act. Nevertheless, the decision of the CIC is correct. Perhaps, it could have justified the same by referring to the ratione of the RTI Act and that the RTI Act was a later law.

The CIC has rightly balanced the need for confidentiality of mediation proceedings and the requirement of disclosure under the RTI Act. 

[A subsidiary point is that the CIC has stated that conciliation and mediation are interchangeable expressions thereby adding another authority on the vexing distinction between conciliation and mediation in Section 89 of the Code of Civil Procedure, 1908.]

Rajasthan High Court Interprets and Applies the Arbitration & Conciliation (Amendment) Ordinance, 2015

Union of India & Anr v. Rajasthan Micro & Small Enterprises Facilitation Council & Anr decided by the High Court of Rajasthan at Jaipur could be one of the earliest decisions interpreting and applying the the Arbitration & Conciliation (Amendment) Ordinance, 2015.

The second Respondent in this case had filed an application before the Rajasthan MSMEFC (Micro & Small Enterprises Facilitation Council) claiming certain amounts before the MSEFC. Union of India- Railways filed a Writ Petition in 2013 before a Single Bench of the Rajasthan High Court arguing that the MSEFC had no jurisdiction since there was an arbitration clause in the Agreement between the parties and that the appropriate remedy for the second Respondent was invoking arbitration under the Arbitration & Conciliation Act, 1996. The Single Judge rejected the contention of the Writ Petitioner and dismissed the Writ Petition.

Against the dismissal, the Petitioner appealed to a Division Bench of the High Court. The Division Bench rejected the Writ Appeal on two grounds. The first ground was that the MSEFC had jurisdiction to entertain such an Application by the Second Respondent. The second ground was on the basis of the Arbitration and Conciliation (Amendment), Ordinance, 2015. 

The Court took support from the amendment Section 12(5) of the Arbitration and Conciliation Act, 1996 which reads as below:

"Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator."

The Court also quoted Item 1 of the Seventh Schedule (newly inserted by the Ordinance) which reads: "The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party."

Based on the above provisions, the court held that the second Respondent cannot be directed to seek remedy under the amended 1996 Act since the arbitration clause provided for appointment of an employee of the Appellant as the arbitrator and such employee would be ineligible to be appointed as arbitrator.

The aforesaid decision is perhaps one of the earliest decisions on the applicability of the 2015 Ordinance. The following points are noteworthy in this regard:

• The approach of the Court in stating that the MSEFC per se had jurisdiction is correct. 
• However, the reliance on the second ground is not correct: In principle, merely because the arbitration clause provides for appointment of the employee of a party as arbitrator would not make the entire clause unenforceable. The decision of the High Court should not be read as holding that the arbitration clause itself was unenforceable.
• A court which is faced with the question of enforceability of such a clause (post the amendments) should take an approach similar to the one taken in  Denel Prorpietory Limited v. Ministry of Defence. The court should sever the portion of the clause referring the parties to arbitration from the portion of the clause appointing a party's  employee as arbitrator. An alternative, approach would be to apply such a method to arbitration clauses entered into after 23 October 2015. The former approach seems a better one considering that appointment of a neutral arbitrator would only make the process fair, which is the intent of the amendments and is the approach taken by the High Court as well (in applying the Ordinance to an arbitral clause which was agreed upon much prior to the Ordinance. 
• It is likely that the phrase "business relationship" is proposed to be given an ejusdem generis construction. In other words, it could be argued that the scope of "business relationship" is restricted by the use of the phrase "employee, consultant, advisor". However, considering the intent and spirit behind the provision (in making the arbitral process fair), "business relationship" should be given the meaning: "occupation, profession, or trade".