Introduction to Arbitration In India


While the Indian judiciary is known as one of the oldest judicial systems dealing with a wide range of cases, it has also been the cause of a several issues with respect to the access to justice. The judicial system is widespread in terms of jurisdictions both geographical and subject matter; however it has been deficient in handling the bulk of cases it receives on a regular basis. The shortage of judges and judicial staff has been a huge contributor to its current state. The state through its resources alone seems to be ill equipped to handle the volume with which it has to go through disputes. Courts in India are credited for many of its landmark judgments with respect to public policy and welfare, however the spectrum of importance of these cases is wide. The lower end of this spectrum includes extremely petty cases that are of an amount as small as, even 200 rupees. Another feature of people resenting court systems is the delay in deciding a case. There is a large cost associated with hiring lawyers and being in a litigious state. People would like to reduce this cost to a great extent, by using methods that don’t provide the same burdens.
The loss in faith in the judiciary and the inability of the court systems to render the promised justice, people look to alternative mechanisms of dispute resolution. Arbitration is one such mechanism. It is an adversarial procedure the substance functioning of, which can be defined by the parties themselves. This method focuses on party autonomy and is thus a completely voluntary process. They have great freedom to adjudge when adjudication should be held, who should be the judge, (arbitrator in this situation) and also have flexibility in abiding a particular jurisdiction. The process saves a lot of time and money due to the ability to act on the basis of convenience. Further Arbitration does not allow for appeals. The parties must accept the decision of the arbitrator. These are some of the general principles that govern arbitration all around the world.

Arbitration law in India

The British had initially introduced an arbitration act in 1940 specifically for India. This act faced a lot of criticisms and hence was amended to form the 1996 Act. This is the current law on arbitration. This act has four parts:
– Part I sets out the general provisions on domestic arbitration.
– Part II addresses the enforcement of foreign awards ( While Chapter 1 of the act explains the New York – Convention award, Chapter II deals with awards under the 1927 Geneva Convention)
– Part III elucidates the provisions on conciliation
– Part IV elaborates on certain supplementary provisions.

7 schedules are contained in the act, which are as follows:
• The New York Convention
• The 1923 Geneva Protocol
• The 1927 Geneva Convention
• The Model Fee Schedule stated for determining the fees of the arbitrator.
• The Arbitrator Guidelines on ethics
• The Model Form for Arbitrators’ ethical questions
• The grounds for ineligibility in case of an arbitrator’s relationship with the parties or counsel.

The Arbitration and Conciliation framework in India is primarily based on the UNCITRAL model on the 1958 UNCITRAL model. Due to the lack of clarity with respect to arbitral procedures the Arbitration and Conciliation Act, 1996 was enacted.

Further India is a signatory to the New York Convention, which it signed and entered into force on October 11, 1960.

The Act has also undergone a few recent amendments greatly contributing to the clarification of the law within India.
Recently, The Arbitration and Conciliation (Amendment) Act 2015 (published in the Gazette on January 1 2016) was introduced. The legislation was passed by India’s lower house of parliament, the Lok Sabha on December 17, 2015 and the upper house of parliament the, Rajya Sabha on December 23 2015, and received presidential assent on December 31, 2015. It was deemed to have come into force on October 23 2015. These amendments were in turn problematic which lead to the introduction of the Arbitration and Conciliation (Amendment) Bill 2018 on March 7 2018 after approval by the Union Cabinet. This bill seeks to once again amend the Arbitration and Conciliation Act 1996 to fix those ambiguities and uncertainties that arose from the 2015 amendments, as well as bringing in provisions regarding confidentiality of arbitration proceedings and arbitral awards, immunity of arbitrators from civil liability, accreditation of arbitrators and arbitral institutions, among others. The new bill will also be clarifying the scope and application of time limits for issuing arbitral awards, which had been introduced by the 2015 amendments, as well, as to clarify whether the 2015 amendments can be applied retrospectively. This has been a primary matter of contention between different courts. The Srikrishna Committee report , which was submitted to the government in August 2017, was the source of these amendments.

Procedure for Arbitration under the Arbitration and Conciliation Act, 1996

The arbitration is initiated with the filing of a statement of claim which is a written document filed in the tribunal for judicial determination, that specifies the relevant facts and remedies. The applicant files the application and has the arbitration agreement attached to it.
A copy of this document is also sent to the defendant; here the claimant describes the facts of his case and the remedy he seeks to claim.
Following this much like that of civil proceedings in a court of law, the respondent is given the opportunity to reply to the statement of claim. His statement consists of relevant facts and defenses claimed by the respondent.
The next step is unique to the process of arbitration. Here the parties select their own arbitrators. They are provided with a list of arbitrators from which they are expected to select a panel to hear the case. In this manner, parties in arbitration pick their own adjudicators.
There is hearing called the ‘discovery’ for which information useful as evidence is exchanged between the parties.
The above-mentioned proceedings are all the written stages; the hearing between the parties will start after the completion of these stages after the parties have presented arguments and evidences for their respective sides.
Finally, the parties present their witnesses and evidences which is examined by the parties after which the tribunal gives an ‘award’ which is not subject to appeal.
In the event of non-compliance with the arbitral award, the same can also be enforced within a court of law.

This is more of a general structure of how a typical arbitration would function. However the specifics of each proceeding depends on the arbitration agreement between the parties. Timeline of the arbitration is one such example.

Frequently Asked Questions

1. If the parties wish to communicate with the tribunal what is the procedure for the same?

The parties only have two options to do so, through oral and written means. There is no formal procedure established for the same in the Arbitration and Conciliation Act. However in practice most communications happen through writing. The parties can agree on a particular language to be used in the tribunal. In certain cases where there are fast track cases, the parties can also opt out of holding oral hearings and restrict themselves to written submissions, subject to the approval of the tribunal.

2. What kind of disputes can be referred to arbitration?

All commercial disputes are usually arbitrable however some disputes fall outside its purview. They are namely:
• Disputes that are non-arbitrable include:
• Disputes relating to rights and liabilities, which arise out of criminal offences; matrimonial disputes (relating to divorce, judicial separation, restitution of conjugal rights and child custody);
• Guardianship matters;
• Insolvency and winding-up matters;
• Matters relating to public charities or public charitable trusts under the Public Trusts Act;
• Testamentary matters (grant of probate, letters of administration and succession certificate); and eviction or tenancy matters

3. Are there any limitation periods for commencing proceedings?

The limitation Act 1963 will also be applicable to the Arbitration and Conciliation Act, 1996. It applies to the same extent as that in Indian courts, except when the Arbitration Act itself restricts it. The standard limitation of 3 years after the occurrence of the dispute is also applicable to arbitration proceedings.

4. What kind of procedure are the arbitrators bound by?

Here too the parties have the discretion of picking a procedure they would like to follow. In the event that the parties fail to do so the tribunal can pick their own mechanism. The CPC or the Evidence Act does not bind the tribunal.

5. Do courts have any role in arbitration?

Courts have the power to refer parties to arbitration. They can further issue interim orders or order for evidence to be presented to the appointed arbitrators.
The courts further have the power to appoint arbitrators for the parties. This can happen in the event that the parties cannot reach a consensus on who the arbitrators should be or who should be the chairperson of the tribunal.

6. Are there ex-parte provisions for arbitration as well?

If the respondent fails to respond to the notice and participate in the arbitral proceedings, the tribunal is conferred with the power to adjourn the proceedings or allow the claimant to proceed ex parte.

7. How relevant are third parties to arbitrations?

For the purposes of collection of evidence subpoenas can be issued to third parties by the tribunal to appear before them and assist them. If such an appearance is not made as per requirements of the tribunal, the party can be subjected to the same penalties as that of a violation of a court order.
Nothing in the Arbitration and Conciliation Act binds parties to be included in pending arbitration proceedings. Non-signatories to an agreement have to be specifically bound by the agreement through the principle of ‘group of companies’ doctrine where there is a clear intent to bind such parties.

8. Can arbitral awards be challenged at all?

They can be within the first three months of the receipt of the arbitral award. In the event that the court rejects the application that is the only chance that the parties have. There is no second right to appeal provided to the parties. The last resort can however be to file a special leave petition under the Constitution of India . It is however the Supreme Court’s discretion to accept the case or not. It will only do so if there is an important question of law that must be answered.

Edited by Shuvneek Hayer

Approved & Published – Sakshi Raje