Strengthening Arbitration and its

Enforcement in India – Resolve in India

Background on Dispute Resolution in India:

India has an estimated 31 million cases pending in various courts. As of 31.12.2015 there were
59,272 cases pending in the Supreme Court of India, around 3.8 million cases are pending in the
High Courts and around 27 million pending before the subordinate judiciary. 26% of cases, more
than 8.5 million, are more than 5 years old. It has been estimated that 12 million Indians await
trial in criminal cases throughout the country. On an average it takes twenty years for a real
estate or land dispute to be resolved.

The dispute resolution process has a huge impact on the Indian economy and global perception
on “doing business” in India. This is clearly indicated by World Bank rating on Ease Of Doing
Business 2016 which has ranked India 131 out of 189 countries on how easy it is for private
companies to follow regulations. The study notes that India takes as much as 1,420 days and
39.6% of the claim value for dispute resolution. The table below shows comparative data on both
the time and cost for resolving disputes.

This is higher than that of OECD countries as well as that of South Asia’s regional averages.
Globally, India stands at 178 in the ranking of 189 economies on the ease of enforcing contracts

Glimmer of Hope: Various Forms of Alternate Dispute Resolution The above statistics reiterate
the need for reforms not only in speeding up dispute resolution, but also having a strong in-
country mechanism for out of court dispute resolution. Legally, this process is known and is
practiced in the forms of arbitration, negotiation conciliation and mediation.

The difference between all these “alternate dispute resolution mechanisms” lies in the process
and mode of resolving the dispute. Broadly, in arbitration, the arbitrator hears evidence and
makes a decision. Arbitration is like the court process, where parties provide testimony and give
evidence, as in a trial. However, it is usually less formal. In mediation, on the other hand, the

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Process is a negotiation with the assistance of a neutral third party where mediators do not issue
orders. Instead they help parties reach a share opinion and reach settlement. Conciliation is
another dispute resolution process that involves building a positive relationship between the
parties to the dispute. Conciliation tries to individualize the optimal solution and direct parties
towards a satisfactory common agreement. As per the Merriam Legal Dictionary, conciliation is
“the settlement of a dispute by mutual and friendly agreement with a view to avoid litigation”.
Although this sounds strikingly similar to mediation, the conciliator plays a relatively direct role
in the actual resolution of a dispute and even advises the parties on certain solutions by making
proposals for settlement. The fourth mode of ADR, i.e negotiation, is a process where parties (or
their attorneys) can try to work out a solution that they are both satisfied with, often giving offers
and counter-offers without legal counsel. The present paper focuses on the first and
internationally the largest mode of dispute resolution, that is, Arbitration. However, prior to
looking at how arbitration functions in the country, it would be useful to understand the process
of arbitration.

Process of Arbitration:

Arbitration works as under: while entering into a contract, parties agree that in case of a conflict
the matter would be sought to be resolved by an arbitrator. Often the name of the potential
arbitrator, agreed upon by both the parties, is mentioned in the contract itself. In case a dispute
arises, the first step is issuing of an arbitration notice by either of the parties. This is followed by
response by the other party and subsequently appointment of an arbitrator, decision on rules and
procedures, place of arbitration and language. Once the arbitration proceedings commence, there
are formal hearings and written proceedings. The arbitrator, if the matter so requires, issues
interim reliefs followed by a final award which is binding on both parties. The tricky part arises
if either of the parties, unhappy with the award, challenges it before the court. This can be before
the appellate court or the Supreme Court depending upon the matter.

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Tracing the History of Arbitration in India:

India has had a long tradition of arbitration. The settlement of differences by tribunals chosen by
the parties themselves was well known in ancient India. There were in fact, different grades of
arbitrators with provisions for appeals in certain cases from the award of a lower grade of
arbitrators to arbitrators of the higher grade. Ancient texts of Yajnavalka and Narada refer to
three types of popular courts (Puga, Sreni, Kula). Besides at the village level, Panchayats have
also been a prevalent form of alternate dispute resolution.

In the British era, the Bengal Regulation of 1772, 1780, 1781 and the Cornwallis Regulation of
1787 recognised and encouraged arbitration. Thereafter, the Bengal Regulation of 1793, the
Madras Regulation of 1816 and the Bombay Regulation of 1827 provided for arbitration. It was
finally in 1859 that the Civil Code of the courts was codified with provisions for arbitration. This
was followed by Codes for Civil Procedure of 1877 and 1882. However, there was no notable
change in law relating to arbitration in these amendments. Next came the Indian Arbitration Act
of 1899. This did not apply to disputes which were subject matters of suits. It dealt with
arbitration by agreement without the intervention of the court and that too only in Presidency
towns. Further, it did not permit arbitration in disputes which were being adjudicated through a
suit. The Civil Procedure Code was later amended in 1908 removed the limit of arbitration to
only Presidency Towns. In the mid-1920s, the Civil Justice Committee, appointed to report on
the machinery of „civil justice in the country‟, also made suggestions for modification of
arbitration laws. However, owning to anticipation of taking cues from the British Arbitration
Laws which was expected, it was finally in 1938 that the Government of India appointed an
officer to revise the Arbitration Law. As a result the first Arbitration Act of the country was
enacted in 1940. The 1940 Act however, did not deal with enforcement of foreign awards. In fact
a separate law, Foreign Awards (Recognition and Enforcement) Act, 1961 applied to the
enforcement of awards under the Geneva Convention, 1927 and New York Conventions to
which India was a signatory. Over time, the working of this Act was found to be unsatisfactory
due to too much court intervention. In 1977, the functioning of the 1940 Act was questioned and
examined by the Law Commission of India on grounds of delay and hardship caused due to clogs

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that affect smooth arbitral proceedings. The Commission recommended amendment of certain
provisions of the Act rather than reworking the entire framework. Consequently, the Arbitration
and Conciliation Act, 1996, based on the 1985 United Nations International Commission on
International Trade Law (UNICTRAL) model law and rules, was enacted. However, the working
of the 1996 Act also led to various practical problems.

Various Committee reports like the 176th report of the Law Commission (2001), Justice B.P.
Saraf Committee (2004), the report of the Departmental Related Standing Committee On
Personnel, Public Grievances, Law And Justice (2005) and the 246th report of the Law
Commission (2014) highlighted these challenges. Ultimately, in December last year, the
Arbitration and Conciliation (Amendment) Act, 2015 brought in crucial changes to the 1996
statute to overcome the shortcomings.

Key Highlights of Arbitration and Conciliation (Amendment) Act 2015:

The Arbitration and Conciliation (Amendment) Act 2015 brought about certain noteworthy
modifications which would be critical in supporting international arbitration in the country. One
of these is the provision permitting arbitral institutions to create their own rules consistent with
the Act to ensure that arbitrations are swift and effective. Coupled with this is the express
inclusion of “communication through electronic means” for formulating the arbitration
agreement1 and a model fee schedule to curb exorbitant fee of tribunals and arbitrators (however
for international commercial arbitration and institutional arbitration, the fee limit is not
applicable)2 . One of the most widely debated amendments is the fixing of a one year time limit
for resolving arbitral matters3 . This timeline may be extended by a period of six months with the
consent of the parties. Interestingly, timely disposal within six months is incentivised by
increasing the fee of the arbitral tribunal and delay is penalised by up to 5% per month for each
month of delay. The amendment also provides for „fast track proceedings‟ under which parties

1
Section 7(4)(b) ibid
2
See Fourth Schedule ibid
3
See section 29A ibid

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can consent for resolving the dispute within six months with only written pleadings and without
any oral hearing or technical formalities4 . Further, an arbitrator has to be appointed within six
months and a challenge to an award has to be iwithin one year. The costs for the proceedings are
to be determined on the basis of the parties conduct and other facets5 . This would play an
important role in dis-incentivising dilatory tactics. The tribunal has been now empowered to
impose a higher rate of post award interest and to hold day to day hearings as far as possible6.
The arbitrator can confer high costs in case a party seeks unreasonable adjournments. With
respect to the involvement of courts, the amendment provides that an arbitration tribunal can be
constituted within 90 days of interim protection of the court and has limited the powers of the
court once the tribunal has been constituted7. Even the tribunal has been given powers similar to
those of the court in granting interim protection8. So far as regulating the arbitrator is concerned,
the amendments has built inclusions to ensure that the arbitrator has sufficient time for
arbitrations that they take up9 . Another significant amendment is inclusion of neutrality in
promoting proceedings. This has been done through prescribing International Bar Association
guidelines (Under fifth and seventh schedule) on conflict of interest as a schedule to the Act.
Under this employees of a party to the case cannot be appointed as an arbitrator.

Making India the Global Arbitration Hub:

With growing international commercial trade and agreements, international arbitration is

growing manifold. One key reason for this is that parties from different jurisdictions and
countries are reluctant to subject themselves to jurisdiction of other countries. To develop India
as a global hub for international arbitration it is important that we open ourselves to the outside
world and incorporate best practices for creating word class Institutional and legal procedure.
Recently, NITI Aayog, along with other supporting institutions, organised a three day Global

4
See section 29B ibid
5
See section 31A ibid
6
See section 24(1) ibid
7
See section 9(3) ibid
8
See section 17 ibid
9
See Section 12(1)(b), Fourth Schedule and Sixth Schedule ibid

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Conference on “National Initiative towards Strengthening Arbitration and Enforcement in India”.
The following section on ways to making Indian the Global Arbitration hub draws largely upon
the takeaways from this conference. In the backdrop of evolution of arbitration along with the
present legislative and institutional framework in the country, there are three fronts on which
intervention is needed: first, streamlining the governance framework for arbitration. Under
governance, restructuring would be needed on legislative, executive and judicial fronts. Once the
governance related aspects are resolved, the next step would be to create a suitable positive
infrastructure to promote arbitration. This would include both physical infrastructure as well as
human capital. Having resolved the above, the last step would be promoting both domestic
arbitration and making India as preferred international Arbitration venue. Within each of these,
measures are needed on several individual fronts. These are discussed in the following sections.

RESTRUCTURIING ARBITRAL INSTITUTIONS:

The restructuring of arbitral institutions can be broken down into several steps. Though these are
listed step wise, the intent is not to say that one has to precede two.

Step I: Institutional Setup

Setting up of arbitration institutions with international standard with hearing centres on widened
jurisdiction of India is one of the foremost challenges. The decision to be made is whether
arbitration across the nation has to be governed through a single centre or should there be
multiple centres across cities. For instance, China has 230 arbitral institutions while other
countries such as Singapore have only one institution. In case having centres across the country
are preferred, then choice of cities and the criteria for their selection becomes critical. During the
course of above discussed conference, the unanimous suggestion was India needs to have one
central arbitral institution with regional offices in key commercial cities such as Mumbai, Delhi,
Bangalore, Hyderabad etc. Further another aspect which needs deliberation is whether the

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centres should be government funded or be private. The Singapore International Arbitration
Centre (SIAC) was set up as a not for profit non-governmental organisation in 1991. Though it
was funded by the Singapore government at its inception, SIAC is now entirely financially
selfsufficient. The Hong Kong International Arbitration Centre (HKIAC), on the other hand was
established in 1985 by a group of leading businesspeople and professionals with funding support
from the Hong Kong Government. It now operates as a company limited by guarantee and a non-
profit organisation. International Chamber of Commerce (ICC) based in Paris was founded in
1919 and is operating as a non-profit Chamber and the London Court of International Arbitration
(LCIA) was set up in 1883. Like all other institutes it is also a private, not-for-profit company
not linked to, or associated with, the government of any jurisdiction. In India a number of arbitral
institutions are operation. Foremost amongst there is the International Centre for Alternative
Dispute Resolution (ICADR) which was founded as a society in 1995. It is an autonomous
organization working under the aegis of the Ministry of Law & Justice, Govt. of India. ICADR
has its head office in Delhi and two regional offices in Hyderabad and Bangalore. In Southern
India, the Nani Palkhiwala Arbitration Centre in Chennai is a private institution incorporated as a
Company. Another institution is the Indian Council for Arbitration (ICA) which was set up in
1965 at the national level under the initiatives of the Govt. of India and apex business
organizations like FICCI. Recently, the Government of Maharashtra and the domestic and
international business and legal communities have set up a nonprofit centre called the Mumbai
Centre for International Arbitration (MCIA). International Institutions, SIAC, LCIA, ICC and
KLRCA also have set ups in India. SIAC has a liaison office in Mumbai and ICC in Delhi. LCIA
did start a facility in India but recently its closure was announced. There are other micro level
institutions as well functioning to promote arbitration. However there is no single arbitral seat or
institution in the country which is a centre with global repute.

Step II: Upgrading Institutional Infrastructure

Establishing a stable and vibrant eco-system for the arbitral institution is the next significant
consideration. The institutions in themselves should be credible, independent, efficient and
transparent which is a challenge in India looking at its diversity. Further, the leadership of the
institution should be vibrant and should be supported by well-trained support staff for qualitative

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arbitration and library apart from physical and technological infrastructure. Effective use of
Technology such as e-filing, creating database of cases, big data analytics, Online Dispute
Resolution, video conferencing needs to be scaled up and be put to extensive use in the process
of arbitration. One example being video conferencing as no adjournment would be required,
cases can be registered on line, voluminous papers can be instantly transmitted, and testimony of
experts can be recorded through video conferencing. Having strong and credible arbitral
institution is essential since institutes serve as centres of learning for establishing a culture think-
tank for discussion. This would be useful for students, professionals and perhaps even for the
judiciary to discuss and deliberate on the subject through seminars, journals and case-law. This
in turn would help in developing journals on the subject, on creation of a bar, evolution of best
practices and honing of rules on the subject –all of which would contribute to the “soft law”

Step III: Scaling Human Capital

Creation of physical infrastructure in itself would be insufficient without a pool of professional

arbitrators who are able, conflict free and above all, non-partisan. The arbitrators should be
competent, technically sound and specialized in their field. Therefore arbitrators who serve on a
tribunal, in effect as a party‟s counsel should be avoided and their partial views should be
ignored. As on date, Indians fare extremely poorly in appointment as international arbitrators. As
per LCIA data for 2015, out of 449 appointment of arbitrators last year, there were no Indians.
Similarly, even though most Indian arbitrations are seated in Singapore, SIAC report for 2015
records that out of 126 arbitrator appointments, only 3% were Indians. This is a clear case in
point showing that Indians are excluded from the system of international arbitration In order to
develop a pool of arbitrators focus on five aspects would be crucial: one, training of the
arbitrators especially for the ones not having any judicial background so that the awards passed
by them can withstand judicial scrutiny; two, developing a system of blacklisting of arbitrators
who try to overstretch the process and delve upon those issues on which they do not have
expertise, three setting up of dedicated arbitral bar, four setting up of designated and specialized
Arbitral Tribunals in the same manner as commercial benches and courts, at High Courts and

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District level and five having designated institutions in place to appoint arbitrators as is done in
Hong Kong and U.S.A. For instance, in California there is an arrangement where every Court
has a panel of Arbitrators attached with it. India can follow the above model or alternatively
judicial academies in India can maintain a panel of trained arbitrators that can work at grass root
level with the Courts.

Experts of appropriate fields may be made Member of the Arbitral Tribunal besides the Judicial
Member. In the context of Singapore the competitive environment that has made the arbitral
institution performs even better. There are mostly young lawyers and case managers from
different countries who are part of SIAC exposing them to cross cultural inputs and experiences
and it is they who are the front line soldiers.

Step IV: Institutionalizing Arbitration

Presently in the Indian context, arbitrations are not conducted in a structured matter. The Law
Commission of India has in its 246 the Report has noted that ad hoc arbitrations usually devolve
into the format of a court hearing with the result that adjournments are granted regularly and
lawyers too prefer to appear in court rather than completing the arbitration proceeding. What is
therefore recommends is that India needs to promote institutional arbitration where a specialized
institution with a permanent character aids and administers the arbitral process. Such institutions
may also provide qualified arbitrators empanelled with the institution, lay down the fee payable
and the mode of submission of documents. This would entail a perception of autonomy (i.e.
freedom from government control) with the end users with sources of income to sustain their
autonomy. In all the set ups it is not that the arbitral institution is totally immune from
government control and there are government institutions and Boards to be dealt with. However,
the institution should enjoy some immunities and privileges. The operational funding is to be
provided by an agency at the outset and thereafter, the institution should operate so as to self-
generate the development funding. Another crucial aspect on institutionalizing arbitration is
whether one institution or more than one institutions are to be established and with what
objective i.e. undertaking domestic arbitration or international arbitration. Looking at the size of

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the country that is India domestic arbitration in itself would be huge. Apart from this,
international arbitration that is going outside India should also be brought to be held in India. For
instance, in Hong Kong the arbitral mechanism is installed by the business houses whereas in
Singapore it is a government initiative and in Malaysia it is an international body.

Step V: Setting up a Dedicated Bar

Institutionalizing arbitration would also have to be supported by a dedicated bar comprising of

professionals competent to conduct arbitration in accordance with the rules of the institutions and
provide competent, viable services. Rules of the dedicated arbitration bar would help it adhere to
timelines and not mirror court proceedings. The body of qualified arbitrators would also help
strengthen the arbitral institutions and help institutionalize arbitration. One example of such a bar
is the International Bar Association Arbitration Committee (the IBA Committee) which focuses
on laws, practice and procedures relating to arbitration of transnational disputes. In the Indian
context, the recently enacted Insolvency and Bankruptcy Code, 2016 also provides for
“Insolvency Professionals” and “Insolvency Professional Agencies” who are enrolled with the
Board. Taking cur from the IBA Committee and the „insolvency professional‟ what is perhaps a
must for strengthening arbitration in India is promoting a similar cadre of “arbitrators”

This would help in not only having specialized professionals but would also ensure that
arbitration does not take a back seat as compared to litigation in court.

Step VI: Awareness Generation

Strengthening of arbitration in the country would have to be coupled with promoting arbitration
as a mode for dispute resolution. This would include preventing tendency of private players to
rush to the courts without resorting to the relevant provisions of arbitration in the contract

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whereby the commencement/continuation of the work was stalled. This can be done through
creating awareness as to better understanding of commercial matters and an eco-system wherein
the awards were passed by neutral umpires to ensure that it is a win-win situation for all the stake
holders leaving a limited scope of the award being challenged under Section 34 of the
Arbitration Act, 1996.

ADDRESSING POLICY ISSUES:

In addition to restructuring the arbitration setup as discussed above, there are a few issues that
need to be addressed at the policy level. Foremost amongst these is ensuring disposal of
proceedings in time and ensuring that the project under dispute should not stall as a consequence
of the difference. It has often been observed that work under contract gets stalled due to disputes
particularly in government infrastructure projects. Two main reasons for this are lack of decision
making strength with officials in resolving the arbitration proceedings and apprehension that they
may be hauled up or may face the vigilance proceedings. In such cases not only the disputes
needed to be nipped in bud considering the money value over time but also the proceedings
should not be allowed to linger on any account. One suggested way of fast tracking of disputes in
case of government contracts is having an independent settlement committee consisting of a
retired High Court Judge, Secretary of the concerned Ministry and another member which could
be approached by the stake holders at any stage of proceedings for resolution of disputes.

The second issue is converging between the legal regimes for international arbitration and
domestic arbitration. The domestic regime for arbitration should follow the principles of the
international regime and equal standards should be applied to both the regimes.

The third is the scope of challenging the arbitration award before courts. Under Section 34 of
the Indian Arbitration and Conciliation Act, 1996 (the Act) an award would be considered to be
in conflict with the public policy in India only of “(i) the making of the award was induced or

11
affected by fraud or corruption or was in violation of section 75 or section 81 or (ii) it is in
contravention with the fundamental policy of Indian law or (iii) it is in conflict with the most
basic notions of morality or justice, the test as to whether there is a contravention with the
fundamental policy of Indian law shall not entail a review on the merits of the dispute.
Challenging arbitral awards on grounds of „public policy‟ has become an Achilles heel for
arbitration in India: a means by which losing parties can attack arbitral awards, on much broader
grounds than are permitted in other countries.

This has been a source of conflicting opinion between the Law Commission and interpretation by
the Supreme Court on what constitutes public policy. When considering the enforcement of
foreign awards, the courts have adopted a narrower approach10 and as far as domestic awards are
concerned, the courts have upheld a broad view of public policy. In 2003, the Supreme Court in
ONGC v Saw Pipes11 upheld reviewing the merits of an arbitral awards on grounds that a
tribunal had made an error in applying Indian law. In 2014, this was confirmed two other
Supreme Court decisions. In ONGC –v- Western Geco12 , the Supreme Court upheld the above
approach and directed that a court could assess whether a tribunal: (i) has applied a "judicial
approach" i.e. has not acted in an arbitrary manner; (ii) has acted in accordance with the
principles of natural justice, including applying its mind to the relevant facts; and (iii) has
avoided reaching a decision which is so perverse or irrational that no reasonable person would
have arrived at it. Subsequently, in Associate Builders -v- DDA13, the Supreme Court stated that
section 34 does not normally permit the courts to review findings of fact made by arbitrators. It
therefore restored the arbitral award. However, the Supreme Court only clarified, and did not
restrict, the law concerning public policy. In particular, the Supreme Court said an award can be
set aside if it is contrary to the fundamental policy of Indian law, contrary to the interest of India,
contrary to justice and/or morality or patently illegal. The decisions of the Supreme Court were
reconsidered by the Law Commission in its 246th Report and it recommended restricting of the

10
Shri Lal Mahal Ltd -v- Progeto Grano Spa (Civil Appeal No. 5085 of 2013)
11
ONGC Ltd. –v- Saw Pipes Ltd. 2003 (5) SCC 705
12
ONGC Ltd. –v- Western Geco International Ltd. 2014 (9) SCC 263
13
Associate Builders –v- Delhi Development Authority 2014 (4) ARBLR 307

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definition of public policy by Courts. It held that an award can be set aside on public policy
grounds only if it is opposed to the “fundamental policy of Indian law” or it is in conflict with
“most basic notions of morality or justice”.

Accordingly, amendments made in 2015 to Section 34 have added explanations as to what would
be public policy. In the present context, the interpretation of the recent amendments by Court is
critical for ensuring that challenges to arbitral awards are not admitted by Court on grounds of
being against public policy. Until and unless there is a prima facie case justifying the need for an
elaborate argument on the objection petition, there should be a provision of their dismissal at the
inception stage.

A circular has been issued by the Government of India whereby 75% of the amount was required
to be deposited as a guarantee for the purpose of enforcement of award while the same was under
challenge before the courts of law under Section 34 of the Arbitration Act. Further, as a matter of
policy, Government of India is not challenging arbitral awards, passed on sound grounds unless a
legal advice to the contrary is given. It is claimed that objections are being filed only in around
20% of the arbitral awards while rest 80% are finally disposed at the arbitration stage alone.

However, what remains a cause of concern is the time taken to resolve challenges filed under
section 34 of the 1996 Act. A study has estimated that it takes 24 months to resolve challenges
under section 34 at the in lower courts, 12 months in High Courts and 48 months in Supreme
Court. In all it takes around 2508 days on an average to decide applications filed under Section
34.

LEGISLATIVE CONCERNS:

Updated arbitral legislation with certainty and flexibility are key aspects that help parties in
deciding upon the seat in an international arbitration. While the recent 2015 amendments have
made the requisite, on the legislative front, Indian is in a position to be a preferred seat for

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international arbitration. However, there is one key aspect of settling arbitration proceedings
within twelve months under Section 29-A of the Arbitration Act which has been subject to
debate and varying viewpoints particularly in complex international cases where the arbitral
proceedings become lengthy. It has been argued that though routine matters can be completed
within the prescribed time frame, the question of extension may be considered in cases of
international arbitration. On the other hand it has also been argued that the introduction of this
provision has brought in accountability in arbitrators which in turn brings discipline and
accountability in lawyers as well as litigants. Though both arguments for and against making
delivery of arbitral awards time bound are valid, it is important that that efforts to abide by this
amendment are undertaken and only after passage of a reasonable period of time if it is felt that
12 months is too short a period that legislative changes to this may be sought. In the meanwhile
institutions should take over the management of time limit and the case management of the
arbitration proceedings and should evolve techniques to control the arbitration proceedings
which would make the entire system more transparent. While deciding the time limit, due regard
should be given to the number of witnesses, number and complexity of issues involved, volume
of record, the stakes involved and the number of arbitrators. Further, guidelines can be framed
for providing time slabs for deciding the matters, keeping in view the considerations given
above. Perhaps, the consent for extension of time by further six months as provided in Section 29
B should also be taken from the parties at the start of the arbitration proceedings.

NEED FOR JUDICIAL SUPPORT:

In addition to the local legislation of a country which guides the arbitration process therein, the
courts of that jurisdiction play a pivotal role in exercising supervisory jurisdiction over
arbitration and in marking an arbitral institution into a “good seat”. Though Arbitration involves
parties‟ autonomy, but judicial co-operation is vital to give effect to the law of arbitration.
Therefore, an effort is to be made to identify those steps which would make good balance
between judiciary and arbitration, at pre, during and post arbitral proceedings. This would entail

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court intervention in upholding/restraining arbitral awards, providing timely court assistance
when needed, recognising party autonomy in the arbitral process.

In the Indian context, interference by courts was identified as one of the major reasons for delay
in arbitrations. An award in White Industries Vs. Republic of India in 2011, is a case in point. In
this matter, an Australian company successfully claimed compensation, equivalent to the amount
of award, from the Indian government on account of judicial delay. There are two issues that
emerge from the above award: one is interference by courts and two delay in arbitration. With
respect to interference by courts, it is well debated and agreed that judiciary should minimize its
intervention into the arbitration, as is being done in various other jurisdictions. In China for
instance, the Supreme Court alone can interfere in arbitration matters. This helps in lowering and
limiting the impediments in arbitral awards.

Another issue that has been recognised as a cause of concern is lack of consistency in decisions
by Indian judiciary on arbitration and decisions taken by arbitral authorities. Judicial supervision
lacks uniformity in so far as owing to the federal structure of States and Central relations in India
and each State having its own Judiciary, the perspective of individual Courts to the objections
filed under Section 34 of Arbitration and Conciliation Act varies as per local conditions. This
calls for action on the part of judicial academies which should be asked to impart training to
judges on how to deal with cases challenging and seeking setting aside of arbitral award and
other related issues, besides ensuring that frequent transfer of judges holding such courts should
be avoided.

Heavy reliance on retired judges as arbitrators has also been identified as being problematic. This
affects the proceedings in two ways. One, it is believed that with retired judicial members as
arbitrators, the case acquires a rather languid pace, with traditional hierarchy taking precedence
in the matter. Coupled with this is the exorbitant fee charge for arbitration by retired judges
which is seen to have a discouraging impact on the parties. It has been suggested that of fixing a
lump sum fees for the Arbitrators instead of provision of per hearing remuneration would
perhaps be a solution to this issue. Presently, the law is silent on this issue as to who can be
appointed arbitrator, generally arbitrators are being appointed from judicial background. There is

15
a need to expand the base of arbitration not only from judiciary but members of Bar should also
be got involved in this field.

Another aspect of concern is the low support of civil courts in referring matters for arbitration.
Section 89 of the Civil Procedure Code (CPC) provides: “Where it appears to the court that there
exist elements of a settlement which may be acceptable to the parties, the court shall formulate
the terms of settlement and give them to the parties for their observations and after receiving the
observations of the parties, the court may reformulate the terms of a possible settlement and refer
the same for – arbitration, conciliation, judicial settlement including settlement through Lok
Adalat; or mediation”. There is a need to sensitise judges to refer civil disputes for arbitration on
one hand and upholding the arbitral awards/their implementation.

Assistance of Court is needed during arbitration proceedings particularly for enforcement of

awards within a time frame and for initiation of contempt proceedings in case of non-compliance
of interim arbitration orders. This would include that arbitral orders under section 17(2) may be
treated as court orders and recourse may be taken to the provisions Section 25 (5) of the Act
along with Order 39 Rule 2-A of CPC.

Clearly, there is a need to sensitize the judges and the consumers of justice that the parties should
be bound by arbitration and there is need to enforce trust in arbitrators. The fact that the petition
is termed as a “suit” in various states in the country, necessarily implies that the proceedings are
continued as a suit thus resulting in delay. The court should interfere only in rare cases and the
concept of public policy under section 34 of the Act should not be interpreted too broadly. When
it comes to enforcing an arbitration agreement, courts must hold parties to their agreement to
resolve issues through the agreed mode of dispute resolution –arbitration. For instance, in U.K.,
there are only two narrow grounds for challenging the arbitration award: (a) whether arbitration
tribunal lacked jurisdiction and the very constitution of arbitration tribunal was not valid and (b)
injustice caused by serious irregularity or a situation where arbitrator has gone so wrong. Clearly,
though the ground of „public policy‟ is also recognized in UK, but courts there have been given
very restricted interpretation to it.

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The judiciary and the arbitration proceedings should be supportive roles to each other- when the
arbitrator decides the merits of a case, the court should support the decision and its
implementation. Broadly, the courts should support arbitration in the following ways: Where it is
mandatory to refer the matter to the arbitration; in case of interim measures, which assume
importance in absence of any provision for appointment of emergency arbitrators and the role of
the court becomes all the more important; in case of application under Section 11 reference may
be made to designated institutions rather than individual arbitrators; court may ensure effective
arbitration by constituting special/designated benches.

CONCLUSION:

MAKING INDIA THE PREFERRED INTERNATIONAL ARBITRATION SEAT:

India has diverse and useful human resources in law as well as other disciplines which can help
support and sustain the domestic arbitration ecosystem in India. Legal reforms are certainly a
step in the right direction to strengthen the arbitration. However it also needs further support on
few other fronts. First amongst these is the need to decentralise dispute resolution mechanism as
a private market based solution. Parties can resolve privately through constituted tribunals
without reaching out to courts. This would need a vibrant arbitration bar as well respected pool
of the seasoned arbitrators who build enough confidence amongst the „potentially litigant‟
community that they seek resolution through arbitration rather than judiciary.

It would also need an administrative mechanism to ensure that arbitration matters would have to
handle separately and efficiently. For this, the government would need to create an enabling
framework for institutional arbitration including arbitration events, training and conferences. In
addition there is a call for demonstrating to the world that Indian arbitral institutions are

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homogenized with the world and can deliver an effective arbitration work at lower cost. Major
Indian cities have the necessary Infrastructures like communication with other facilities to help
international arbitrators. Taking a cue from the exponential growth of SIAC, what is needed to
make India the global hub of international arbitration is ensuring that arbitration in India be less
time consuming and more cost effective as compared to arbitration elsewhere across the globe. It
also needs a commitment by institutions to accord primacy to the agreement to arbitrate. This
includes primacy not only to conduct arbitration but also to implement the arbitral award without
interference, except on public interest considerations.

India is on the track of establishing confidence in its legal system which is the fundamental
condition for any country to become an international arbitration venue. Needless to say that
regular amendment in the Arbitration laws to keep abreast with economic changes would be
needed. However, given that India has already done the needful in this regard recently, the
present need is reforms in the implementation of the legislative changes by the judiciary along
with building of institutional capacity in the country. Only then would we be able to “resolve in
India”.

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