India's relationship with arbitration has been a complex one — marked by initial promise, decades of judicial intervention, and a renewed legislative push toward making the country a credible seat for both domestic and international dispute resolution. Over the past decade, a series of amendments, institutional reforms, and landmark judicial pronouncements have reshaped the contours of arbitration law in the country.
The Legislative Framework: From 1996 to Present
The Arbitration and Conciliation Act, 1996, modelled on the UNCITRAL Model Law, was enacted to provide a comprehensive framework for arbitration in India. While the Act was progressive for its time, its implementation was plagued by excessive judicial intervention, particularly through liberal interpretation of the "public policy" ground under Section 34 for setting aside arbitral awards.
The 2015 Amendment Act sought to address many of these shortcomings. Key changes included narrowing the scope of judicial interference in setting aside awards, introducing time limits for arbitral proceedings (twelve months for domestic arbitrations), and establishing provisions for the appointment of arbitrators through designated arbitral institutions. The amendment also clarified the applicability of Part I of the Act to international commercial arbitrations seated outside India — a question that had generated considerable judicial debate.
The 2019 Amendment Act took the reform agenda further by establishing the Arbitration Council of India (ACI) as the regulatory body for arbitral institutions, introducing a grading system for arbitral institutions, and creating a framework for accreditation of arbitrators. It also facilitated the creation of the India International Arbitration Centre (now the International Arbitration Centre at New Delhi).
Judicial Trends: Balancing Autonomy and Oversight
The Indian judiciary's approach to arbitration has undergone a noteworthy evolution. The Supreme Court's decision in BALCO v. Kaiser Aluminium (2012) was a watershed moment, establishing that Part I of the Arbitration Act would not apply to foreign-seated arbitrations. This was followed by a line of decisions that progressively limited the scope of judicial interference with arbitral awards.
"The court does not sit in appeal over the arbitral award and may interfere only on narrow grounds specified in the statute. The merits of the dispute are the domain of the arbitral tribunal."
More recently, courts have grappled with questions around the enforceability of unstamped arbitration agreements, the scope of the group of companies doctrine in binding non-signatories to arbitration, and the interplay between arbitration and insolvency proceedings under the IBC.
Institutional Arbitration: The Way Forward
One of the persistent challenges in India has been the dominance of ad hoc arbitrations over institutional arbitration. While institutions like the Mumbai Centre for International Arbitration (MCIA) and the Delhi International Arbitration Centre (DIAC) have made strides, Indian parties still overwhelmingly prefer ad hoc proceedings — often resulting in longer timelines and less predictable procedures.
The government's push to strengthen institutional arbitration is a welcome development. The accreditation framework under the 2019 amendments, combined with the upgrading of physical infrastructure at arbitration centres, signals a clear policy direction. However, the success of these initiatives will ultimately depend on the quality of arbitrators on institutional panels, the efficiency of case management, and competitive fee structures.
Persistent Challenges
Despite the progress, several challenges remain. The average time for enforcement of arbitral awards in India continues to be significantly higher than in leading arbitration jurisdictions. The courts, while generally more supportive of arbitration, still entertain challenges that would be summarily dismissed in jurisdictions like Singapore or London.
The question of arbitrability continues to evolve. While the Supreme Court in Vidya Drolia v. Durga Trading Corporation (2021) laid down a comprehensive test for determining arbitrability, the boundaries remain contested in areas such as consumer disputes, tenancy matters, and certain categories of fraud allegations.
Third-party funding in arbitration is another area awaiting regulatory clarity. While not expressly prohibited, the absence of a clear framework creates uncertainty for parties and funders alike.
Looking Ahead
India's ambition to become a preferred seat for international arbitration is achievable, but it requires sustained commitment on multiple fronts: further legislative refinement, judicial restraint in interfering with arbitral proceedings, development of world-class arbitral institutions, and a larger pool of trained arbitrators with specialised domain expertise.
The legal community, arbitral institutions, and the judiciary each have a role to play. The trajectory is encouraging, but the journey is far from complete.