Attorney General Mukul Rohatgi has suggested that the existing Arbitration Act could be hampering investments as it is not seen positively by the business community, particularly the foreign ones.
Long delays in the arbitration proceedings and high costs are some of the aspects which have been highlighted as impediments by Rohatgi, sources said.
While suggesting repeal of the 1996 Act, he has said the new law should ensure timely settlement of business disputes and penalty for unnecessary delays by arbitrators.
The AG had been approached for suggestions by the Law Ministry which wanted to amend the Arbitration and Conciliation Act, 1996.
Rohatgi has said that instead of amendments, the law should be scrapped altogether and replaced with a new one that is in tune with the global practices.
This assumes significance since the Narendra Modi government is keen on attracting foreign investments and is opening various sectors to FDI.
The government seeks to remove burden from courts on issues relating to commercial or business disputes by strengthening the arbitration mechanism in the country.
He suggested that a “strict” time limit should be fixed for giving arbitration award (order), say six months.
The AG has also suggested penalty for arbitrators who delay matters either because of personal benefit or otherwise.
He said they should be debarred from taking up fresh arbitrations, say for a period of three years, from the time of the default. .