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Commercial Arbitration in India
The judicial system is, and has been for some time, backed up and burdened with a massive number of cases, in India, especially given the ever-increasing population. Due to this backlog of cases, parties to a dispute usually wait for years before an effective resolution can be reached and are forced to wait longer if the order is appealed. As a result, it is becoming a standard practice for parties to include arbitration clauses in all large transactions and agreements, making commercial arbitration the preferred mode of dispute resolution for complex commercial disputes[1]. Most government entities and public sector undertakings even include arbitration clauses in their standard form contracts and certain statutes also mandate arbitration as a dispute resolution method for contracts with government entities[2]. Since the enactment of the Arbitration and Conciliation Act, 1996, India has seen the conceptualisation and evolution of arbitration law in order to make it what it is today[3] – an effective tool to make India a hub for commercial arbitration. The Arbitration and Conciliation Act, 1996, as it stands today, has been amended twice – once in 2015 and once in 2019. The two amendments to the Act have sought to improve speed and efficiency of arbitration by:
- Imposing time limits
- Encouraging institutional arbitration
- Reducing the scope for court intervention
- Discouraging the filing of frivolous applications challenging arbitral awards
- Discouraging delays by introducing a more realistic cost regime
Courts have begun instilling faith in the arbitration process by referring matters to arbitration and reducing the scope of judicial interference in these proceedings, especially with regard to awards made by the arbitrator[4]. The executive in India, following the courts’ lead, have sought to bring about efficiency in arbitration involving government entities by encouraging ministries to comply with arbitration awards, pending any proposed challenge, in the interests of ensuring cashflow, particularly in relation to large infrastructure disputes.
Since arbitration is a cost-effective and efficient process, an alternative to the traditional long-drawn judicial process, and one that has been codified and amended to correct flaws and resolve lacunae, many contractual agreements and business partnerships are now equipped with an arbitration clause that refers all future or existing conflicts to arbitration. Certain statutes in the country have also provided for mandatory arbitration if the subject matter pertains to electricity law, stock market disputes and industrial disputes, while other statutes preclude the reference of certain disputes like consumer disputes, real estate disputes, and disputes related to work contracts to arbitration as the law provides special tribunals for their resolution[5].
Prior to the 2005 Amendment to the Arbitration and Conciliation Act, 1996, most international commercial arbitration, even among parties residing in India, would take place in countries like Singapore, United Kingdom and France[6]. So, the amendments made to the Act in and after 2005 have been focused at making India a recognized Centre for international commercial arbitration by setting up the Arbitration Council of India[7]. The Council is tasked with policy making with regard to grading arbitral institutions, accrediting arbitrators, establishment, operation, and maintenance of uniform professional standards for all ADR matters, and maintenance of a record of arbitral awards made in India; the most important function being setting uniform standards that are in line with global expectations[8].
[1] Vikas Goel, Insight into the Arbitration and Conciliation (Amendment) Act, 2019, Singhania&Partners, (Aug. 27, 2019, 8:08 PM), https://singhania.in/insight-to-the-arbitration-and-conciliation-amendment-act-2019/.
[2] Pardeep Nayak, Arbitration Procedures and practice in India: overview, Thomson Reuters, (Oct. 1, 2019, 4:17 PM), https://uk.practicallaw.thomsonreuters.com/9-502-0625?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1.
[3] Editor, The Arbitration and Conciliation Act, 1996 – An Analytical Outlook, Shodhganga, (Apr. 10, 2020, 2:56 PM), https://shodhganga.inflibnet.ac.in/bitstream/10603/201576/10/10_chapter%204.pdf.
[4] Bijoylashmi Das, Commercial Arbitration in India – An Update, Mondaq, (Jan. 6, 2014, 1:12 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/284570/commercial-arbitration-in-india--an-update.
[5] Supra note 2.
[6] Vikas Goel, International Commercial Arbitration, Singhania, (Mar. 27, 2017, 7:56 PM), https://singhania.in/international-commercial-arbitration/.
[7] Ministry of Law and Justice, Arbitration and Conciliation (Amendment) Bill, 2019, PRSIndia, (Sep. 2, 2019, 7:17 PM), https://www.prsindia.org/billtrack/arbitration-and-conciliation-amendment-bill-2019.
[8] Ahlawat&Associates, Arbitration and Conciliation (Amendment) Act, 2019 notified, InsightSuccess, (Aug. 10, 2019, 3:53 PM), https://www.insightssuccess.in/arbitration-conciliation-amendment-act-2019-notified/.
- Arbitration
- Commercial arbitration
- Arbitration in India
