Arbitration law in India- Overview

Arbitration law in India- Overview- Our Legal World


Arbitration is a powerful opportunity for dispute resolution. It is the forum in which parties by means of a settlement between them choose a forum apart from the court docket of regulation to solve their disputes. The cause behind the evolution of arbitration is to reduce the load from the shoulders of the courtroom of regulation and provide rapid treatment to the parties. Nani Palkhivala discovered that there are sizeable benefits to arbitral lawsuits. In the phrases of Nani Palkhiwala, he stated “If the regulation isn’t always to be a gadget of tyrannical rigidity, however instead to be the green and useful servant of a changing society, it need to from time be adapted and parts of it changed. A court of regulation is like an ancient citadel, constantly below restore. There comes a time whilst it will not pay to patch it up and it’s far better to the hotel to a brand new, compact residence constructed on present-day lines”.

Why arbitration is favoured over the judiciary

Arbitration is an effective discussion board which provides rapid remedy than the judiciary. Matters in arbitration are disposed inside 1 year while in courts the parties to the dispute must anticipate several years relying upon the complexities of their case. Arbitration is also favoured by the events due to the autonomy granted by it and exercised by way of the parties in determining the direction that the proceedings may additionally take.

Types of Alternative Dispute Resolution Methods


Arbitration is a dispute decision process that’s ruled by way of the Arbitration & Conciliation Act, 1996. Parties to the arbitration settlement and the court have the electricity to appoint the arbitral tribunal so one can remedy the disputes between the events. The provisions of Part 1 and Part II of the Arbitration & Conciliation Act, 1996 are relevant to the arbitration complaints. The arbitral tribunal will bypass the arbitral award in an effort to be binding on each events and could be enforceable before the court much like a court decree.


Conciliation is the technique by which events refer their disputes to a conciliator. The conciliator is appointed both with the aid of the parties or by the courtroom on behalf of the events. Part III of the Arbitration & Conciliation Act, 1996 regulates the conciliation complaints. The conciliator isn’t always sure by using the Code of Civil Procedure, 1908 or the Evidence Act, 1872 in the course of conciliation court cases. Conciliator allows the events to attain the final agreement with the aid of formulating the terms of the agreement which they pick out to adopt.


Mediation is a technique in which the mediator is needed to become aware of the troubles which have arisen among the events and make clear any misunderstandings which could have occurred and help the parties to attain agreement. The mediator is simply below a obligation to manual the settlement lawsuits as a way to permit the parties to reach their personal settlement instead of imposing his reviews upon them. Mediation is regulated beneath the Mediation Rules, 2009. The mediator is appointed both through the parties or via the court docket on their behalf. The position of a mediator is greater passive in the agreement of a dispute placed earlier than him as compared to a conciliator or an arbitrator.

Lok Adalat

Lok Adalat is a kingdom authority that is regulated via the Legal Services Authority Act, 1987. It is also called people’s court. The object of a Lok Adalat is to reach a agreement among the parties based on a compromise. The events do no longer ought to pay any courtroom charges in the Lok Adalat and there are no strict procedural requirements that ought to be accompanied. The proceedings in Lok Adalat are commonly presided over via retired judges or legal professionals who will supply their selection in the remember. The events can’t appeal towards the settlement of the Lok Adalat.

History of Arbitration in India

Third-celebration settlement of disputes is a part of historical Indian ethos and subculture. However, the agreement of disputes via the organization of the judiciary is a bit over a century vintage and is a result of British rule in India. Despite the lengthy records of the agreement of disputes via alternative manner in our united states of America, the primary statutory reputation given to domestic arbitration turned into given by way of way of the Indian Arbitration Act, 1940. Retired law professor of Osmania University, Dr. V. Nageswara Rao provided an overview of conciliation court cases underneath the Arbitration and
Conciliation Act,1996 earlier than the Law Commission of India. He stated that the settlement of disputes through connection with a 3rd birthday party has been part of the “volksgeist” or body of customs of India for time immemorial. There are basically types of arbitration lawsuits which can be performed. Domestic arbitration complaints which can be performed between Indians. International industrial arbitration court cases which can be conducted among the parties, in which at the least one of the events is an person who’s a
countrywide of, or habitually resident in, any country apart from India or a employer, or an association, or a frame of individuals whose central control and manage is exercised in any us of a other than India or the government of a foreign u . S . A .

Overview of Arbitration 1940 Act

The Indian Arbitration Act, 1940 dealt completely with the previously uncodified body of regulation concerning home arbitration lawsuits. The goal of the 1940 act become to consolidate and amend the regulation referring to arbitration.

Key Highlights of the Arbitration 1940 Act

• It gave wide discretionary and supervisory powers to the courts letting them regularly interfere in arbitration proceedings.
• It also significantly confined the freedom of the parties to select their preferred manner settlement via imposing a number of rules.
• Section 3 of the 1940 Act, imposes certain implied phrases and situations that have been required to be found in any arbitration settlement until the ones terms were specifically gotten smaller away.
• The 1940 Act, also offers wide electricity to the court in subjects of appointment or elimination of arbitrators and allow the court to regulate or remit the award and additionally pass period in-between orders. From the above highlights, it is clean that the arbitral tribunal constituted under the 1940 Act had no actual powers but as a substitute acts as a proxy for the court.

Overview of the Arbitration 1961 Act

The statutes coping with global commercial arbitration had been the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Convention) Act, 1961. Before the passing of the 1996 Act, the enforcement of overseas awards both awards handed because of global business arbitration lawsuits turned into governed through the two above stated statues.

Origin of the 1937 and 1961 Act

After the destruction of the primary world conflict, the worldwide network began to realise the importance of worldwide change as a method of building a better dating among international locations. In order to facilitate international exchange, it became imperative to broaden a way to clear up business disputes referring to global change in a quick and green manner.

What turned into the first attempt of the global community in the direction of global business arbitration?

The first strive towards worldwide commercial arbitration was made via the League of Nations, beneath whose authority the Protocol on Arbitration Clauses, 1923 turned into concluded. However, 1923, Protocol had some of shortcomings such as it only allowed home awards to be enforced earlier than the country wide courts of member nations.

What moves were taken in order to overcome the shortcomings discovered in 1923 Protocol?

In order to triumph over the shortcomings of the 1923 protocol, the International Convention on the Execution of Foreign Arbitral Awards, 1927, greater typically known as the Geneva Convention become passed. Due to the Geneva convention the Arbitration (Protocol and Convention) Act, 1937 was enacted. However, the goals of the Geneva Convention have been laudable but ensuing 1937 Act became not able to meet the expectancies of rapid dispute decision and enforcement of overseas arbitral awards. Therefore, it became unable to satisfy the necessities for encouraging worldwide exchange.

What are the advantages of arbitration?

  • It minimizes the court intervention.
  • It brings down the fees of dispute settlement.
  • It fixes timelines for expeditious disposal.
  • It ensures the neutrality of arbitrator and enforcement of awards.
  • Having an arbitration regulation encourages foreign investments to a country. Its initiatives as an investor pleasant one having a valid felony framework and simplicity of doing commercial enterprise.
  • Having an arbitration law facilitate effective behaviour of global and home arbitrations raised under diverse agreements.

How Arbitration Act, 1961 enacted?

The International Chamber of Commerce issued a Draft Convention on International Arbitral Award in 1953 in order to accurate the deficiencies under the sooner conventions. The draft become presented to the United Nations Economic and Social Council which organized some other draft in 1953. The Council forwarded its draft to the member states of the United Nations for his or her remarks upon receipt of which a conference become held in New York. As an end result of some of these efforts, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also called New York Convention) became followed on 10 June 1958. The New York Convention gave rise to the Foreign Awards (Recognition and Enforcement) Act, 1961 in India.

Is Arbitration Act, 1937 and Arbitration Act, 1961 is in existence?

No, due to the deficiencies in both the acts, they had been repealed. However, awards made pursuant to agreements concluded pursuant to either the Geneva Convention or New York Convention had been identified underneath Part II of the 1996 Act.

Objective of UNCITRAL Model Law

UNCITRAL stands for United Nations Commission on International Trade Law. It followed the UNCITRAL Model Law on International Commercial Arbitration on 21 June 1985. The objective of the Model Law to provide a fixed of guidelines which would facilitate the agreement of global business disputes by means of bringing approximately uniformity inside the legal guidelines of member nations in reforming and modernising their countrywide laws on arbitration.

Key Highlights of the Model Law

It covers each degree inside the arbitration technique as-

• starting from the recognition of the want to curtail judicial intervention to the formation of the arbitration settlement.
• appointment of the arbitral tribunal
• any challenges to such appointment
• primary policies of conduct of arbitration court cases
• termination of complaints by the making of the award
• finality of awards and grounds on which the arbitral award challenged earlier than the national courts.

The Model Law additionally forms the premise for the Arbitration & Conciliation Act 1996 in step with India’s International obligations.

Critical analysis of some key provisions of the 2019 Amendment- The designation and grading of arbitral establishments The 2019 Amendment introduces Section 11(3A) to the Act wherein the Supreme Court of India and the High Courts shall have the strength to designate arbitral establishments, which have been graded by the Arbitration Council of India (“ACI”) under Section 43-I (also added via the 2019 Amendment). The underlying concept is that instead of the courtroom stepping in to rent arbitrator(s) in instances in which parties can’t reach an settlement, the courts will designate graded arbitral institutions to carry out that mission (in keeping with Sections 11(four)–(6) of the Act, as amended through the 2019 Amendment). The designation issue has already been discussed and criticized on this blog. However, it is the grading component which I intend to deal with some element.

The 2019 Amendment introduces Part 1A to the Act, that is titled as ‘Arbitration Council of India’ (Sections 43A to 43M) and which empowers the Central Government to establish the ACI by an authentic gazette notification (Section 43B). The ACI will be composed of (i) a retired Supreme Court or High Court judge, appointed via the Central Government in session with the Chief Justice of India, as its Chairperson, (ii) an eminent arbitration practitioner nominated because the Central Government Member, (iii) an eminent
academician having studies and teaching enjoy within the area of arbitration, appointed by using the Central Government in session with the Chairperson, because the Chairperson-Member, (iv) Secretary to the Central Government inside the Department of Legal Affairs, Ministry of Law and Justice and (v) Secretary to the Central Government in the Department of Expenditure, Ministry of Finance – both as ex officio individuals, (vi) one consultant of a known frame of commerce and industry, chosen on rotational basis with the aid of
the Central Government, as a part-time member, and (vii) Chief Executive Officer-Member-Secretary, ex officio (Section 43C(1)(a)–(f)). The ACI is inter alia entrusted with grading of arbitral establishments on the premise of standards regarding infrastructure, pleasant and calibre of arbitrators, overall performance and compliance of cut-off dates for disposal of home or worldwide industrial arbitrations (Section 43I). The essential downside of this scheme is that it limits party autonomy in global arbitration thru governmental and court interference. The ACI is a central authority frame which shall alter the institutionalization of arbitration in India and frame the coverage for grading of arbitral establishments. The truth stays that the court docket’s preference in designating an arbitral group may be constrained via the alternatives provided to it by way of the ACI. Consequently, the choice of an overseas party performing earlier than the Supreme Court and looking for appointment of an arbitrator will be restrained to establishments that have ACI accreditation and to such arbitrators who may be at the panel of such arbitral
institutions. The court docket could be equally handicapped in designating an ungraded institution – which has a global popularity for its facilities and high-quality of offerings and which desires to truely establish its neighbourhood workplace in India, without going via the executive hurdles of being graded by way of the ACI.

The 2019 Amendment, albeit geared toward institutionalizing the arbitration scene in India, leaves the discretion in the arms of courts and executive to determine who gets to be part of this reform. Another problem related to this governmental manipulate over the institutionalization procedure is the (feasible) nepotism, crimson-tapism, loss of objectivity and lack of transparency within the grading method. In my revel in, a foreign celebration frequently prefers to live far away from an arbitration regime with sizable degree of court docket or governmental interference.

However, it’s far nonetheless a welcome circulate by way of the authorities to acknowledge that institutional arbitration is the most effective manner ahead to draw overseas events to encompass India as the seat in their arbitration agreements. Timely conduct of complaints As according to the newly introduced Section 23(4), the statement of declare and defence will be completed inside a duration of six months from the date of appointment of the arbitrator(s) and as in line with Proviso to the amended Section 29(1), the award within the count of international commercial arbitration may be made as expeditiously as feasible with an endeavour to deliver it within one year from the date crowning glory of pleadings beneath Section 23(4) Whilst it’s miles a welcome step – definitely with the proper purpose – it is able to lead to conflicts with the rules of an arbitral group as it overlooks the procedural factors inherent to a complex international arbitration.

In international arbitration, the arbitrators mechanically keep a case control listening to, and after session with the parties, difficulty an order on the procedural timetable for of entirety of pleadings, behaviour of hearings and many others. (e.g., see Rule 24 of the 2017 ICC Arbitration Rules). However, if Section 23(4) restricts a tribunal from being on top of things of its proceedings, then it is able to be impossible to successfully behaviour complicated multi-birthday party arbitrations concerning big documents, in which it can be nearly impossible to complete pleadings in six months. Similarly, the autonomy of events to determine on an extra flexible procedural agenda can be seriously limited. Most importantly, the events will continually be cautious of the fate of an award where the time necessities of Section 23(4) aren’t strictly abided.


As in keeping with the newly introduced Section 42A, the arbitrator, the arbitral group and the events to the arbitration agreement shall keep confidentiality of all arbitral proceedings except award, in which its disclosure is necessary for implementation and enforcement of award. The ICC currently released updates to its Note to Parties and Arbitral Tribunals at the Conduct of Arbitration beneath the ICC Rules of Arbitration, effective 1 January 2019 wherein it stated that all awards made as from 1 January 2019 can be posted, no much less than two years after their notification, based totally on an choose-out technique. Per the decide-out technique, any birthday party can also at any time item to publication of an award, or request that the award be sanitized or redacted. In one of these cases, the award will either not be posted or be sanitized or redacted according with the parties’ settlement. This suggests at the outset that India’s exercise in publishing the award is in line with globally mounted arbitral establishments. However, by no longer incorporating an
choose-out scheme in Section 42A, the legislature ignored the opportunity to convey readability to the destiny of an award in terms of its e-book.

Who will decide that the disclosure of an award is vital for its implementation?

Will it mean full disclosure, or will events be allowed to agree on a redacted award? These
uncertainties, in my opinion, best upload to the suspense. Qualification of arbitrators
The ACI is likewise entrusted with the feature of reviewing the grading of arbitrators (Section 43D(2)(c)). The qualifications, revel in and norms for accreditation of arbitrators will be which include targeted inside the Eighth Schedule, as brought by way of the 2019 Amendment (Section 43J). The Eighth Schedule stipulates nine categories of folks (consisting of an Indian suggest or fee accountant or organisation secretary with certain degree of experience or a government officer in positive cases inter alia) and only the ones are certified to be an arbitrator. Thus, a foreign pupil or foreign-registered lawyer or a retired overseas officer is outrightly disqualified to be an arbitrator below the 2019 Amendment. For apparent reasons, foreign parties can be discouraged to opt for Indian institutional arbitration in which the choice of applicants as their capability arbitrators is confined via nationality, probability of lack of revel in and specialization – both academic and professional – in managing global arbitrations.

Arbitration & Conciliation Act 1996

The Arbitration & Conciliation Act, 1996 repeals the Arbitration Act, 1940; the Arbitration (Protocol and Convention) Act, 1937; and the Foreign Awards (Recognition and Enforcement) Act, 1961 and reformulates the regulation in a single consolidated statue. It also seeks to amend and consolidate the regulation relating to domestic arbitration, international arbitration and the enforcement of foreign arbitral awards.

Also Read: Rupan Deol Bajaj and Anr vs. Kanwar Pal Singh Gill and Anr

The Arbitration & Conciliation Act, 1996 is split into three components as-

• Part I of the act is a reproduction of the Model Law which deals with guidelines regarding practice and system earlier than the arbitral tribunal.
• Part II offers with the recognition and enforcement of foreign awards. Part II is split into chapters.
O Chapter I issues award made pursuant to agreements below the New York Convention.
O Chapter II deals with the enforcement of foreign awards below the Geneva Convention.
• Part III deals with conciliation complaints.

Process of Arbitration in India

Following are the stages of arbitration or arbitration process step by step:

  • Arbitration Clause – An agreement or the clause specifically stating that if the dispute arises between the parties, they will resolve it through the process of arbitration.
  • Arbitration notice – In case a dispute has arisen, and the party has opted to follow the procedure of arbitration then the party against whom the default has been committed will send an arbitration notice for invoking arbitration process steps between the parties.
  • Appointment of Arbitrator- After receiving the notice by other parties both the parties will appoint the arbitrators in the manner as specified in the arbitration agreement or arbitration clause.
  • Statement of Claim- Next step in an arbitration proceeding in India is to draft a statement of claim.
  • Statement of claim contains the dispute between the parties, events which lead to the dispute and the compensation claimed from the defaulting party. The other party can file a statement of counterclaim along with reply to the statement of claim. Get your statement of claim, reply to the statement of claim or counterclaim through top arbitration lawyers.
  • Hearing of Parties – Arbitral tribunal will hear both the parties and their evidence.
  • Award – After hearing the parties, the arbitral tribunal will pass the decision. The decision of the tribunal is known as ‘Award’ and is binding on the parties. However, an appeal against the arbitral award can be filed before the High Court.
  • Execution of Award – Once the award has been passed by the tribunal it has to be executed. The party in whose favour the award has been passed has to file for execution or enforcement of award with the help of a good arbitration lawyer.

Arbitration process in India does not follow the procedure of the Civil Procedure Code and the arbitrator also the arbitration proceeding does not need to follow the procedures enlisted in the Civil Procedure Code, 1908.

Arbitrator in India, however, has the following powers:
  • To make awards
  • To take assistance
  • To rule on its jurisdiction
  • To pass interim relief
  • To determine procedures
  • To decide on the official language of the proceedings
  • To appoint an expert
  • To seek the court’s assistance for evidence
  • To terminate proceedings
  • To impose interest and deposits
  • Other than the above powers, the arbitrator has also given certain powers of civil court as under the Civil Procedure Code:
  • To administer the oath to parties and witnesses appearing before him.
  • To state a special case for the opinion of the court on any question of law or state the award in the form of a special case for the opinion of the court.
  • To make the award conditional or in the alternative.
  • To correct in an award any clerical mistake or error arising from any accidental slip or omission.
  • To administer any party interrogatories

The Limitation Act 1963 applies to all proceedings under the Arbitration and Conciliation Act, just as it applies to proceedings in the Indian courts, except to the extent expressly excluded by the Arbitration and Conciliation Act. Any arbitration proceedings commenced after the limitation period (three years from the date on which the cause of action arose) will be time-barred. Local courts can intervene in domestic arbitration proceedings. This includes the power to issue interim orders and appoints arbitrators. While arbitrators cannot compel third parties to appear before them, the tribunal or a party, with the tribunal’s approval, may apply to the court for assistance in taking evidence. The court may make an order requiring third parties to provide evidence directly to the tribunal. If a person fails to attend in accordance with such order of the court, it is subject to the same penalties and punishments as it may have incurred during court proceedings.


As Nani Palkhiwala said a court of law is like an ancient castle, constantly under repair. There comes a time when it no longer pays to patch it up and it is better to resort to a new, compact house built on modern lines”. The law of arbitration is continuously evolving and improving day by day in order to provide people with an effective body to resolve their dispute effectively and efficiently and by reducing the burden from the shoulders of the judiciary by introducing latest amendments to the act accordingly as per the need of the



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