The Indian Legislature, through the Arbitration and Conciliation (Amendment) Act of 2019, has materially altered certain fundamentals of the arbitration process in the country. Among other things, the new legislation provides for the establishment of an Arbitral Institution (further, “AI”) which should be authorised by the Hon’ble Supreme Court or concerned state High Courts. This introduction altered the previously practised procedure wherein the Courts inherited the authority to select and appoint arbitrators as per the original Section 11 of the Arbitration and Conciliation Act, 1996 (further, “The Act). Further, under Section 43B (Part 1A) the Arbitration Council of India should classify the newly constituted AI. However, Part 1A was not officially notified by the Ministry of Law and Justice. As such, the constitution of an AI has not yet been effectively applied and the said notification has been rendered non-effective in its entirety. Owing to the technical lapse, the appointment procedure before the said amendment is still practised in arbitration procedures. However, it is imperative to analyse the legislative intent behind the proposed structure and its consequence in traditional arbitration processes.

Section 2(1) (ca) of the Amendment Act defined AI to be "an institution which is designated by the Supreme Court of the High Court”. However, the Amendment Act constitutes vague parameters on several important factors including the procedure for appointing the arbitrators and other related concerns. The Amendment Act does not provide an exact definition of whether the newly introduced AI consists of a body of persons or is simply one person. By placing complete autonomy on the judicial body by stating that the AI should be designated by the court, the Amendment Act fails to provide clarity on any other guidelines in the constitution of the body. Further, as discussed above, the AI ought to be graded as per Section 43B (Part 1A). Though the intent behind the same is to maximise efficiency in arbitration procedures, the Amendment Act does not provide any further guidelines tone followed by the Arbitration Council of India. 

Another vital flaw in the Amendment Act is the lack of procedural rules and conditions which will guide the AI inefficiently appointing an arbitrator. There has been various judicial pronouncement before the amendment that has analysed and developed the rationale behind the procedure of arbitration and the qualifications of an arbitrator, however, none of these principles have been incorporated within the Amendment Act. One of the primary contested issues on this concern is the enforceability of an arbitration agreement. In the case of  M/S Dharmaratnakara Rai & Other Charities & Ors. Vs M/S Bhaskar Raju & Brothers & Ors, a similar question was raised before the Apex Court. The contention was regarding the validity and applicability of an arbitration agreement which was either unstamped or not appropriately stamped. The court has unanimously held that any agreement which is considered in appointing an arbitrator shall mandatorily be properly stamped. A similar decision was delivered in Garware Wall Ropes Ltd. vs. Coastal Marine Constructions & Engineering Ltd. As such, the Amendment Act ought to ideally incorporate these principles within the introduced statutes after extending due diligence to the principles and mandates laid down by judicial pronouncements. As per the published notification, there exists no clarity on the procedure to deal with such infirmities and the principles which ought to guide any contravention to generally practised and accepted procedures. 

AI is an idealistic alternative inefficiently appointing arbitrators worldwide. However, the Amendment Act is vague and silent in several primary concerns rendering it infructuous. Firstly, the Ministry of Law and Justice has to officially notify the institution of AI. Subsequently, the Council has to adjudicate and decide on the voids of the Act and formulate rules, regulations and procedural mandates to be followed by the AI. Further, the extent of the judicial power of the AI in adjudicating legal issues also has to be ascertained. Therefore, for the efficient functioning of the AI, the present form of the Amendment Act ought to be altered and innovated to ensure reliability, efficiency and effectiveness in the newly proposed arbitration processes.