Arbitration is a form of alternative dispute resolution (ADR) that allows parties to settle their disputes without resorting to litigation. Arbitration is based on the principle of party autonomy, which means that the parties can choose the arbitrator(s), the applicable law, the procedure and the seat of arbitration. Arbitration can be domestic or international, depending on whether the dispute has any foreign element.
In India, arbitration is governed by the Arbitration and Conciliation Act, 1996 (the Arbitration Act), which is based on the UNCITRAL Model Law on International Commercial Arbitration. The Arbitration Act applies to both domestic and international arbitrations seated in India, as well as to the enforcement of foreign arbitral awards in India. The Arbitration Act was amended in 2015 and 2019 to introduce several reforms aimed at making arbitration more efficient, expeditious and cost-effective.
Some of the key provisions and recent developments in arbitration law and practice in India are:
– Time limit for rendering award. The Arbitration Act provides that an arbitral tribunal must render its award within 12 months from the date of its constitution, extendable by another six months with the consent of the parties. If the award is not made within this period, the mandate of the arbitrator(s) may be terminated by the court, unless there is sufficient cause for delay. The court may also impose costs or reduce fees of the arbitrator(s) for delay.
– Institutional arbitration. The Arbitration Act encourages institutional arbitration by providing that the Supreme Court or High Court may designate arbitral institutions for appointment of arbitrators. The 2019 amendment also establishes an independent body called the Arbitration Council of India (ACI), which will grade arbitral institutions and accredit arbitrators based on certain criteria. The ACI will also frame policies and guidelines for promoting and developing arbitration in India.
– Confidentiality and immunity. The Arbitration Act imposes a duty of confidentiality on the parties, arbitrators and arbitral institutions with respect to arbitral proceedings, except for disclosure required by law or for enforcement purposes. The Arbitration Act also grants immunity to arbitrators from any legal proceedings for any act or omission done in good faith in the course of arbitration.
– Interim measures. The Arbitration Act empowers both the arbitral tribunal and the court to grant interim measures for preserving assets, securing evidence, maintaining status quo or restoring balance of convenience. However, a court cannot grant interim measures once the arbitral tribunal has been constituted, unless there are exceptional circumstances. The 2015 amendment also makes interim orders passed by an arbitral tribunal enforceable as court orders.
– Challenge and enforcement of awards. The Arbitration Act allows a party to challenge an arbitral award on limited grounds, such as incapacity of parties, invalidity of arbitration agreement, lack of due process, excess of jurisdiction or contravention of public policy. The challenge must be made within three months from the date of receipt of the award, extendable by another 30 days on sufficient cause. The court cannot set aside an award unless it gives notice to the other party and hears its objections. The court can also refer the parties back to arbitration if it finds that the award can be corrected or interpreted by the arbitral tribunal. An arbitral award is enforceable as a decree of court once it becomes final, that is, when no challenge is pending or when a challenge is dismissed by the court.
– Recent judicial pronouncements. The Supreme Court and High Courts have delivered several landmark judgments on various aspects of arbitration law and practice in India. Some of these are:
– In ONGC v AFCONS GUNANUSA JV (2022), the Supreme Court held that the Fourth Schedule of the Arbitration Act, which prescribes a model fee structure for arbitrators, imposes a ceiling of INR 30 lakh per arbitrator for domestic arbitrations.
– In Perkins Eastman Architects DPC v HSCC (India) Ltd (2019), the Supreme Court held that a person who has an interest in the outcome or decision of a dispute must not have any role in appointing a sole arbitrator.
– In Hindustan Construction Company Ltd v Union of India (2019), the Supreme Court held that an automatic stay on enforcement of an arbitral award does not arise merely by filing a challenge petition under Section 34 of the Arbitration Act.
– In BGS SGS Soma JV v NHPC Ltd (2019), the Supreme Court held that the seat of arbitration is akin to an exclusive jurisdiction clause and that the courts at the seat have the exclusive jurisdiction to deal with all matters relating to arbitration.
– In Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc (2012), the Supreme Court held that Part I of the Arbitration Act, which deals with domestic and international arbitrations seated in India, does not apply to foreign-seated arbitrations, and that Indian courts have no power to grant interim measures or set aside awards in such arbitrations.
Arbitration in India is evolving as a preferred mode of dispute resolution for commercial disputes, especially in the fields of construction, infrastructure, energy, maritime and corporate transactions. The legislative and judicial reforms have sought to align the arbitration law and practice in India with the international standards and best practices. However, there are still some challenges and areas of improvement, such as reducing court intervention, ensuring quality and diversity of arbitrators, promoting institutional arbitration and creating a pro-arbitration culture among the stakeholders.
