Law of Arbitration in India


Arbitration[1] is defined as a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons which are called as the “arbitrators”, “arbiters” or “arbitral tribunal”, and both the parties agree to bind to that decision. So, we can say that arbitration is a type of settlement between parties, where parties can abstain from settling their dispute in the open prosecution. It is utilized for the most part in resolving disputes emerging out of business matters. Arbitration ought not to be mistaken for mediation. In the arbitration, the arbitrator has the responsibility to determine the dispute by taking the reference of certain rules. They cannot seek compromise like a mediator.

Read – Arbitration And Its Scope

The Arbitration procedures in India are administered by the Arbitration and Conciliation Act, 1996. The Indian Arbitration Act depends on the UNCITRAL Model Law on International Commercial Arbitration 1985 and the UNCITRAL Arbitration Rules 1976. The UNCITRAL Model Law was received in 1985 with the goal to help States in improving and modernizing their laws on arbitral technique to consider the features which were particular and international commercial arbitration needs. In the year 2006, the UNCITRAL Model Law was amended with the object to modernize the form requirement of an arbitration agreement to conform with international contract practices and also with the goal to establish a more comprehensive legal regime. The General Assembly of the United Nations prescribed that all nations should give due thought to the said Model Law, given the attractive quality of consistency of the law of arbitral methodology and the particular needs of international commercial arbitration practice. By taking this suggestion into perspective, the Indian Legislature enacted the Arbitration and Conciliation Act in 1996. The object of this Act was to consolidate and amend the law relating to international commercial arbitration, domestic arbitration, and enforcement of foreign arbitral awards to define the law relating to conciliation and for matters connected therewith.


The Arbitration and Conciliation Act, 1996 is an act regulating domestic arbitration in India. This Act is of consolidating and amending in nature and not exhaustive. It provides for domestic Arbitration and enforcement of foreign arbitral awards. The act was amended in 2015 decided by the Government of India whereby introducing the Arbitration & Conciliation (Amendment) Bill, 2015. The Parliament had given its approval for the amendments taking into consideration the Law Commission’s Report and recommendations to make Arbitration more effective and a preferred mode for settlement of commercial disputes and making India a center for International Commercial Arbitration. This act is much beyond the scope of the 1950 Act.

The Arbitration and Conciliation Act continues on the source of the UN Model Law to make our law concurrence with the law embraced by the United Nations Commission on International Trade Law


The main objective of the act is Liberalization, Privatization and Globalization (LPG). It makes provision for an arbitral procedure fair, efficient and capable of meeting the needs of the specific arbitration. It lays down procedures for the arbitral tribunal and to remain within the limits of the jurisdiction. The arbitral tribunal should use mediation, conciliation or other mechanism during the arbitral proceedings to encourage the settlement of disputes.


  • The arbitration agreement can be in the form of communication by electronic means and treated as the valid arbitration agreement in writing.
  • Appointment of Arbitrators might be made by the Supreme Court or High Courts, as the case might be rather than the Chief Justice of India or Chief Justice of High Court.
  • If there should be an occurrence of international arbitration, the significant court would just be the High Court having original jurisdiction.
  • To guarantee lack of bias of arbitrators, the person should have possible connection with the appointment of the arbitrator and must disclose in writing that there is existence of any kind of relationship or interest.
  • Presently the tribunal should have capacity to grant a wide range of interim measures which the court is engaged to give.
  • The amendment introduces a provision that the arbitral tribunal to make its award within 12 months and may be extended by a 6 months but with certain reasonable restriction (Section 29A).
  • The amendment also allows completing the arbitration proceedings within 6 months with the desire of the parties in a fast track manner (Section 29B).
  • The amendment of the Arbitration & Conciliation Act, 1996 has encouraged in clearing the major lacunae caused by the landmark Supreme Court judgment in the case of Bharat Aluminium Co. v. Kaiser Technical Services Inc. also known as BALCO case[3]wherein there was a limitation on Indian courts from giving interim relief and helping in collecting evidence in the case of International Commercial Arbitration. This glitch has now been settled with the applicability of section 9 and section 27 to International commercial arbitration also. With the revision of the meaning of “courts” to refer just to a High Court on account of International Commercial Arbitration, parties will not have to approach by the lower courts to look forward for relief. By the enactment of the Arbitration and Conciliation (Amendment) Act, 2015 the administration looks to speed up the arbitral procedure and help the legislature to accomplish its objective of making India a seat for International Commercial Arbitration like the other significant business and financial districts of the world. The Act of 2015 will likewise help in recovering the lost certainty of the outside foreign investors in the Indian legal and arbitral framework.


Whenever any matter is referred to arbitration by the arbitral council, the first point that can be challenged, if exists, is that of the jurisdiction of the arbitral court. One of the aspects of the jurisdiction of the arbitral court is that in the agreement between the parties to the contract there exists a  clause that is related to the arbitration and in the greater part of the agreements it might be expressed as: ‘At the time of any dispute or differences arising under this agreement or in connection with this agreement(except the matter or decision provided under this agreement), the same shall be referred to the sole arbitration…” or the arbitration clause commenced with the words “except where otherwise’ provided in the contract” or “The decision of the engineer shall be final” or with similar words attaching finality to the decisions of the concerned authorities. Unless a choice on the issue of ‘excepted matters’ is concluded, if the arbitral council goes with the settling of the disputes, it will be a purposeless exercise and ultimately in regard of those cases that go under excepted matters,  the award passed by the arbitral tribunal will be set aside.


Arbitration agreement is  defined by UNCITRAL Model Law as “an agreement by the parties to submit to arbitration all or certain questions which have emerged or which may emerge between them in regard of a defined legal relationship, regardless of whether contractual or not.” This means that parties agrees to settle their disputes through arbitration process rather than to go to court.

Section 7 of the act gives meaning to the Arbitration Agreement. The basic elements of an Arbitration Agreement are:

  • Agreement must be in writing.
  • It must be signed by both the parties.
  • Understanding between the parties to submit to arbitration all or certain dispute.
  • In respect of a defined legal relationship dispute must have arisen in
  • It may or may not be a contractual.
  • Agreement can be in form of arbitration clause or a separate agreement.

The arbitration agreement characterizes the extent of jurisdiction of the arbitral tribunal. The arbitral council does not have jurisdiction over the issues which are not secured by the arbitration agreement made by the parties. In other words, if the parties have consented to settle particular sorts of questions in the arbitration, the court has no jurisdiction over other matter.


The issue of choosing the law governing the arbitration proceedings relies upon the reality of whether the arbitration agreement refers a matter to the permanent arbitration institution or the ad hoc arbitration.

If the matter is referred to as the permanent arbitral establishment, proceedings are held as per the principles of said establishments. For instance, if the dispute is referred to the ICC International Court of Arbitration, the proceedings will be conducted according to their principles.

Read – Recent Amendments In The Arbitration Act

In ad hoc tribunals, the law administering the arbitration procedures is determined from the seat of arbitration, implying that the governing law for this situation is the law of the seat of arbitration. On the off chance that the parties have not assigned the seat of arbitration, the proceedings are governed by the express decision of law of the merits of the dispute.


According to the Act the essential elements of an Arbitral award are–

  • It shall be in writing;
  • Date and place of arbitration;
  • It shall be signed by members of Arbitral Tribunal;
  • Shall state the reasons of the basis of award;
  • A signed copy of the Award shall be delivered to each party after the award is passed. The Tribunal can also pass an interim arbitral award if it is required.

Section 33 of the Act of Arbitration deals with the correction and interpretation of Arbitral award. It says that the Tribunal may correct the award within 30 days from the receipt of award. Tribunal can also increase the time period if it thinks as necessary.


  • If the party is not competent enough to look after his interests and also not represented properly, then the award will not have any binding effect on the parties and may be set aside. For example, minor or an unsound person.
  • If the clause mentioned in the contract is invalid in nature, then the arbitration clause will be invalid automatically.
  • Notice should be given to the parties, if any ex-parte award given by the arbitrator will be considered as invalid and to be set aside.
  • The arbitrator must pass the award within the jurisdiction, if he exceeds the limit the award stands invalid and the extra part need to be set aside.
  • Section 34(2) (a) (v) also provides that the composition of the tribunal can be challenged and award can be set aside. If the composition is not accordance with the agreement, then the procedure followed in the proceedings cannot be valid.


Doing the work of arbitration today adds up to making a contribution to articulation of “another new civil procedure and, if fortune continues to smile, maybe the elaboration of another civil code as well. The volume and consistency of the legal choices on arbitration leave little question that something new is hatching that has profound implications for the practice and the traditional character of law.

The path for International Commercial Arbitration in India in practical sense is not simple. It is still in the early stage with lot of lacuna that mainly hinders the progress of successful method of Arbitration in India. It needs multiple effective strategies to fulfill the interest of the public.

The change that it has brought to for the legal proceeding is huge and prone to be lasting. Arbitration is neither a vestigial relic of legal history nor a peripheral specialty. It is becoming the chief vehicle for accomplishing the ends of civil litigation.

Read – Two Tier Arbitration in India: Good or Not !!



[3] Bharat Aluminium Co. v. Kaiser Technical Services Inc., (2012) 9 SCC 552.


This article is authored by Priya Pandey, student of B.Sc LL.B at New Law College Bharati Vidyapeeth University

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