September,29,2015: The Union Finance Minister Shri Arun Jaitley today said that the Government was working on a slew of sectoral reforms, including a new law on fast track arbitration, in a bid to address the stressed areas of the banking sector.
Speaking at the 68th Annual General Meeting of the Indian Banks’ Association (IBA) in Mumbai today, the Finance Minister Shri Jaitley said the Government was aware of the challenges faced by the Public Sector Banks (PSBs) and measures were being taken to address each one of them.
The Finance Minister said sectors such as steel, power, highways and discoms were mainly responsible for the stress in Public Sector Banks (PSBs).
In a stern message to the State power utilities, the Finance Minister said that the banks cannot be expected to bail out the defaulters. He observed that very few States had carried-out power sector reforms and the situation would not improve unless the users were made to pay for the electricity consumed. Mr. Jaitley informed that the Reserve Bank of India has already put four State Governments’ on notice. The combined debt of discoms is estimated to be more than Rs 3 lakh crores leading to acute financial stress in the banking sector.
The Finance Minister Shri Jaitley described the problems of the steel sector to be on account of external factors, where cheap imports are hurting the domestic industry. He said much progress had been made in the highway sector and the projects were being implemented without major bottlenecks. Mr. Jaitley informed that the review of the stalled projects was now being done at the Prime Minister’s Office level and road blocks were being specifically addressed. The Finance Minister asserted that the number of stalled projects has decreased considerably.
Faster arbitration, dispute resolution
The Finance Minister Shri Jaitley further said that the Government has made considerable progress in addressing the issue of ease of doing business. He said an Exit Policy is in final stages of preparation and the draft will be put out for deliberations early next month. He also said the proposed new Arbitration Law provides for Fast Track Arbitration with one member Arbitration Board, with a mandate to complete the entire process within six months. Shri Jaitley also said the Dispute Resolution Tribunals (DRTs)’s working was being speeded up by moving most of the transactions online.
Operational freedom for PSUs
The Finance Minister Shri Jaitley reiterated the Government’s commitment to give operational freedom for the PSU banks. “The Public Sector Banks (PSBs) have to be given a lot of independence. Of course, they will be carrying-out the developmental agenda of the Government, but their administration has to be based purely on banking considerations” the Finance Minister Shri Jaitley added.
The Finance Minister said the Government may consider reducing its stake in Public Sector Banks (PSBs) to 52 per cent, giving additional financial strength to banks themselves. “We have come-up with a re-capitalization programme for the next four years and hopefully this would induct capital strength in to the banks and improve their capacity”, Mr. Jaitley added.
The Finance Minister Shri Jaitley also informed that a high level committee headed by Justice A P Shah, former Chairperson, Law Commission was looking into the options available for Public Sector Banks (PSBs) to recruit the best talent from the market. He said “efforts are on to give shape to the Banking Bureau and to professionalize all personnel issues”. Mr Jaitley however opined that the brick and morter branches may probably lose some relevance in future with alternative internet based channels emerging.
Earlier, Ms. Chanda Kocher, CEO, ICICI Bank spoke about the challenges being faced by the banking sector in the country.
Amendments to the Arbitration and Conciliation Bill, 2015
The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, gave its approval for amendments to the Arbitration and Conciliation Bill, 2015 taking into consideration the Law Commission's recommendations, and suggestions received from stake holders. The Government of India has decided to amend the Arbitration and Conciliation Act, 1996 by introducing the Arbitration and Conciliation (Amendment) Bill, 2015 in the Parliament.
The salient features of the amendments are as under:
(i) In order to ensure neutrality of arbitrators, it is proposed to amend Section 12 to the effect that when a person is approached in connection with possible appointment of arbitrator, he shall disclose in writing about existence of any relationship or interest of any kind, which is likely to give rise to justifiable doubts. Further, if a person is having specified relationship, he shall be ineligible to be appointed as an arbitrator.
(ii) Insertion of a new provision that the Arbitral Tribunal shall make its award within a period of 12 months. Parties may extend such period up to six months. Thereafter, it can only be extended by the Court, on sufficient cause. The Court while extending the period may also order reduction of fees of arbitrator(s) not exceeding five percent for each month of delay, if the court finds that the proceedings have been delayed for reasons attributable to the arbitral tribunal. If the award is made within a period of six months, arbitrator may get additional fees if the parties may agree.
(iii) It is proposed to insert a provision for fast track procedure for conducting arbitration. Parties to the dispute may agree that their dispute be resolved through fast track procedure. Award in such cases shall be given in six months period.
(iv) Amendment of Section 34 relating to grounds for challenge of an arbitral award, to restrict the term 'Public Policy of India" (as a ground for challenging the award) by explaining that only where making of award was induced or affected by fraud or corruption, or it is in contravention with the fundamental policy of Indian Law or is in conflict with the most basic notions of morality or justice, the award shall be treated as against the Public Policy of India.
(v) A new provision to provide that application to challenge the award is to be disposed of by the Court within one year.
(vi) Amendment to Section 36 to the effect that mere filing of an application for challenging the award would not automatically stay execution of the award. Award can only be stayed where the Court passed any specific order on an application filed by the party.
(vii) A new sub-section in Section 11 to be added to the effect that an application for appointment of an Arbitrator shall be disposed of by the High Court or Supreme Court as expeditiously as possible and an endeavour should be made to dispose of the matter within 60 days.
(viii) A new Section 31A is to be added for providing comprehensive provisions for costs regime. It is applicable both to arbitrators as well as related litigation in Court. It will avoid frivolous and meritless litigation/arbitration.
(ix) Section 17 is to be amended for empowering the Arbitral tribunal to grant all kinds of interim measures which the Court is empowered to grant, under Section 9 and such order shall be 'enforceable in the same manner as if it is an order of Court.
Apart from above, amendments in Sections 2(1)(e) , 2(1)(f)(iii), 7(4)(b), 8(1) and (2), 9, 11, 14(1), 23, 24, 25, 28(3), 31(7)(b), 34 (2A) 37, 48, 56 and in Section 57 are also proposed for making the arbitration process more effective.
The Government of India has under its consideration proposals for making Arbitration a preferred mode for settlement of commercial disputes by making it more user-friendly and cost effective. This will lead to expeditious disposal of cases. The Govt. of India is committed to improve its legal framework relating to Arbitration. The Law Commission of India in its 246th Report has recommended various amendments in the Arbitration and Conciliation Act, 1996, so that India may become a hub of International Commercial Arbitration. The Law Commission has also submitted a Supplementary to Report No. 246 on “Amendments to the Arbitration Act, 1996 on ‘Public Policy’- Developments post Report 246", wherein the Law Commission taking into account subsequent decisions of the Supreme Court has recommended reformulation of amendment in Section 34(2)(b) of the Act.
7.8.2015 – Union Cabinet strengthens Alternative Dispute Resolution by clearing amendments to Arbitration and Conciliation Act,1996 READ MORE…
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