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1899 - 1996 : tracing the course of codification of arbitration law in India

Arbitration existed in the most informal manner in the Indian rural societies in the form of Khap Panchayats where village elderlies, as adjudicators, resolved the disputes between the disputing parties. A formal codification of resolving disputes by an alternative fora was only done in 1899 when the Indian Arbitration Act, 1899 ( which was based on the English Abitration Act, 1899 ) was enacted. However the Act only extended to the three presidency towns of Madras, Bombay and Calcutta lacking all India status. Therefore, the Act had to further codified into section 89 of the Cod of Civil Procedure, 1908 whereby arbitration was accorded an all India status. Considering the inefficiency of the previous legislations, the Indian Arbitration Act, 1940 was on a similar model as that of the English Arbitration Act, 1940. The other remaining fragments of arbitration were dealt with in the other legislations - the Arbitration ( Protocol and Convention ) Act, 1937 ; the Foreign Awards ( Recognition and Enforcement ) Act, 1961 ( both under the Geneva Protocol and Convention and the New York Convention, respectively ). However, 1940 Act lacked a comprehensive approach and its working  was far from being satisfactory. It wasseverely criticised its ineffectiveness was from being unknown.At the time when the Indian economywas opening its gates to economic liberalisation and globalisation, in 1991, the Arbitration and Conciliation Act, 1996 proved to be a boon in the scenario of arbitration in India, though not without criticims in its later stages. The 1996 Act was based on the UNCITRAL Model Law on International Commercial Arbitration Act, 1985 and brought both domestic and international arbitration within its domain. A controversy arose as to whether Part I of the Act was applicable to Part II and this issue was addressed in the case of Bharat Aluminium and Co. vs Kaiser Aluminium and Co. ( 2012 ) 9 SCC 522, where it was laid down that courts in India could not entertain arbitrationsseated outside India. The Act was alos criticised for laying the maximum time limit to dispose of the case. The White Industries case acted as an asualt to injury when the Indian arbitration scenario was accussed of inordinate delays in Indian courts to enforce the arbitration award violating the Indian Austratlian BIT. This was the not the end of it. The Act also drew severe criticisms on being unable to check the interventionist activity of Indian. The criricism was also on the grounds that neither could the Act provide a possible solution to the endemic delays in the Indian judicial system nor could the Act make India an international arbitration hub. These criticisma further led to the formation of the 20th Law Commission which proposed for amendments in the Act and the 2015 and 2019 amendments to the Act followed.

  • existence of informal arbitration in Indian rural life
  • enactment of Arbitration Act, 1940
  • enactment of the Arbitration and Conciliation Act, 1996

BY : Mekhla Chakraborty

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