The legal framework regulating arbitration and conciliation in India comprises the Arbitration and Conciliation Act, 1996 (“Act”) as the primary legislation along with the relevant provisions under the Code of Civil Procedure, 1908 (“CPC”). [1] The Act consolidates the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards. [2] It seeks to minimise court intervention in the arbitral process and ensure fairness, expedition and economy in dispute resolution through arbitration. [3]
The Act is divided into four parts – Part I deals with domestic and international commercial arbitration; Part II deals with enforcement of certain foreign awards under the New York and Geneva Conventions; Part III relates to conciliation; and Part IV contains supplementary provisions on Small Cause Courts and mandatory references by courts to arbitration. [4] Some key aspects governed under the Act include – arbitrability of disputes; composition and jurisdiction of arbitral tribunals; conduct of arbitral proceedings; recourse against arbitral awards; and recognition and enforcement of awards. The Act has seen two important amendments in 2015 and 2019, which have significantly altered the arbitration landscape.
Arbitrability and Validity of Arbitration Agreements
Section 7 of the Act gives statutory recognition to arbitration agreements if they are in writing, and defines “arbitration agreement” to include provisions in a contract recognising an arbitral tribunal’s jurisdiction to resolve the disputes arising out of such contract. [5] Further, Section 8 obligates judicial authorities to refer parties to arbitration if there is an applicable arbitration agreement brought to their notice. The Supreme Court has taken a pro-enforcement approach regarding the validity of arbitration agreements, holding that courts should focus on giving effect to the parties’ commercial understanding rather than adhering to a narrow technical interpretation. [6]
Composition and Jurisdiction of Arbitral Tribunals
The arbitral tribunal ordinarily comprises either a sole arbitrator or three arbitrators, as agreed between the parties under Section 10. [7] Section 11 provides that Supreme Court and High Court judges can appoint arbitrators if there are delays or issues in the nomination process as set out in the arbitration agreement. [8] The qualifications, experience, number and nationality of arbitrators can be agreed in writing by the parties. [9] Section 12 requires arbitrators to be impartial, independent and disclose any circumstances that may affect their ability to devote sufficient time to complete the arbitral process. [10]
Tribunals in India have a wide latitude over the procedure to be followed in adjudicating disputes, subject to principles of natural justice under Section 19. [11] Their jurisdiction is restricted to the subject matter of the disputes referred to arbitration by the parties. Tribunals continue to function during the pendency of any clarificatory or interim application before a court unless such court passes any order restricting its functioning, under the non obstante clause in Section 5. [12]
Conduct of Proceedings
Parties in arbitral proceedings are mandated to submit their statements of claims and defences within the time decided by the tribunal, which is required to treat the parties equally and fairly under Sections 18, 23 and 24. [13] Tribunals have the flexibility to determine the rules on admissibility, relevance and weight of any evidence put forth by parties per Section 19. [14] They can engage experts and legal consultants with the parties’ consent. [15] Tribunals also have powers to award interim measures under Section 17 unless parties have expressly excluded it through contract. [16]
Awards and their Enforcement
Domestic awards can be set aside by courts only on limited grounds like incapacity or invalidity of agreement; improper composition of tribunal; jurisdictional error; or non-compliance with principles of natural justice. [17] Foreign awards are enforced per Part II of the Act in accordance with the New York or Geneva Conventions. Indian courts cannot review an award’s merits in enforcement proceedings except in case of fraud or corruption in procuring the award or if it violates India’s public policy. [18]
Amendments Strengthening the Arbitral Process
The 2015 Amendments introduced new provisions for achieving time-bound disposal of arbitration cases. For instance, Section 29A requires that arbitral tribunals should pass awards within 12 months after their constitution, which may be extended up to 18 months with parties’ consent and subject to Supreme Court guidelines. [19] The Amendments also expanded the definition of “public policy violation” to clarify the grounds for setting aside arbitral awards. [20] Further, the autonomy of the arbitral process has been enhanced by minimizing court intervention through steps like deemed acceleration of arbitral proceedings in case of frivolous court proceedings. [21]
The 2019 Amendments sought to further boost institutional arbitration by establishing an independent body called the Arbitration Council of India (“ACI”) with specialized expertise. [22] The ACI can frame policies for accrediting arbitrators and arbitral institutions, grading them to maintain credibility. [23] For enhancing neutrality of arbitrators, Fifth and Seventh Schedules have been added prescribing the categories of relationships that would make arbitrators ineligible for disputes involving the parties. [24]
Interface Between Arbitration Law and Other Laws
Section 89 of the CPC enables courts to direct settlement of disputes through alternative mechanisms including arbitration, mediation or conciliation if elements of settlement exist and parties consent. [25] There is no provision for appeals against arbitral awards except in case of enforcement challenges on restricted grounds under Section 34 of the Act. [26] Issues like lex arbitri (governing arbitration law) and lex contractus (governing contract law) in the case of foreign-seated arbitrations are complex, especially regarding differing approaches taken by Indian courts pre- and post- the BALCO judgment on foreign award enforceability. [27]
Institutional Arbitration Framework
Out of six major arbitral institutions in India, the Mumbai Centre for International Arbitration (“MCIA”), Delhi International Arbitration Centre (“DIAC”), and Nani Palkhivala Arbitration Centre (“NPAC”) are highly regarded for domain specialization and tested arbitration rules compliant with the UNCITRAL Model Law. [28] For instance, MCICA follows best global practices like requiring exchange of only essential documents between parties initially to enhance efficiency. [29] DIAC provides infrastructure and assistance to foreign lawyers to present their case in India for promoting New Delhi as an arbitration hub. [30] NPAC facilitates expeditious disposal, with majority of arbitrations completed within a year. [31]
International Enforcement of Arbitral Awards
The Act gives effect to India’s obligations under the New York Convention regarding enforcement of foreign arbitral awards, subject to certain exclusions like parties lacking capacity or due representation; award debtor not receiving proper notice of proceedings; and where enforcement contravenes public policy or India’s laws. [32] Indian courts have interpreted these restrictions narrowly to uphold the pro-enforcement ethos of arbitration law. For instance, “public policy” contravention refers specifically to fraud, corruption or violations of treaty commitments based on internationally accepted principles. [33] Over 100 countries have adopted the New York Convention to enable simplified cross-border enforcement of foreign arbitral awards. [34]
Conclusion
India has a robust legal framework concerning arbitration and conciliation reflecting global best practices and standards. Judicial interpretations have reinforced validity, fairness, neutrality and timely resolution as key objectives guiding arbitration law and practice in the country. The Act sets up an effective regime for recognition of arbitration agreements, minimizing court intervention in arbitral proceedings, timely disposal of arbitration and limited grounds for challenging awards. Amendments further strengthen party autonomy and streamline institutional roles in the arbitral process. With strong laws and pro-enforcement courts combined with growth of arbitral institutions, India is now positioned as an arbitration and ADR hub for global businesses.
References:
[1] Code of Civil Procedure 1908, s 89.
[2] Arbitration and Conciliation Act 1996, Preamble.
[3] Ibid.
[4] Supra 2.
[5] Arbitration and Conciliation Act 1996, s 7.
[6] Rashid Raza v Sadaf Akhtar, (2019) 8 SCC 710.
[7] Supra 2, s 10.
[8] Supra 2, s 11.
[9] Ibid, s 11(2).
[10] Supra 2, s 12.
[11] Supra 2, s 19.
[12] Supra 2, s 5.
[13] Supra 2, ss 18, 23, 24.
[14] Supra 2, s 19.
[15] Supra 2, s 26.
[16] Supra 2, s 17.
[17] Supra 2, ss 34(2), 48(2).
[18] Renusagar Power Co Ltd v General Electric Co, (1993) Supp (1) SCC 644.
[19] Supra 2, s 29A.
[20] Supra 2, s 34.
[21] Supra 2, s 5.
[22] Arbitration and Conciliation (Amendment) Act 2019, s 43B.
[23] Ibid, s 43D.
[24] Ibid, Sch 5 & 7.
[25] Supra 1, s 89.
[26] Supra 2, s 37(1)(c).
[27] Bharat Aluminium v Kaiser Aluminium (BALCO), (2012) 9 SCC 552.
[28] ‘Best Practices in Commercial Arbitration’ (Institute of Law Nirma University 2018).
[29] Rules of Arbitration, Mumbai Centre for International Arbitration.
[30] Delhi International Arbitration Centre (Arbitration Rules).
[31] Nani Palkhivala Arbitration Centre (Rules).
[32] Supra 2, ss 44, 48.
[33] Supra 18.
[34] United Nations Commission on International Trade Law, Status: Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York 1958).