MAHARASTRA

NATIONAL LAW UNIVERSITY,

AURANGABAD
Project
Subject: Clinic-I (Alternate Dispute Resolution)

TOPIC - FUTURE OF ARBITRATION IN INDIA

Course: B.A. LL.B.(Hons.)
Semester: V
Batch:2017-2022

Submitted to: Submitted by:

Ms. Sakshi Gupta Payal Golimar
Assistant Professor- Law Roll No. -13

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 INDEX

INTRODUCTION………………………………………………………….3-4

EVOLUTION……………………………………………………………….5-6

FUTURE…………………………………………………………………….7-9

CONCLUSION………………………………………………………9

BIBLIOGRAPHY……………………………………………..……………..10

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 INTRODUCTION
Recent legal reforms and judgements point towards India gradually developing into an
arbitration-friendly regime. Arbitration in India has come a long way from the enactment of
the Arbitration and Conciliation Act, 1996 to the newly introduced Arbitration Amendment
Bill 2018. The reasons why arbitration clauses are seen in international commercial contracts
is that multinational corporations and governmental entities engaged in international trade
prefer not to litigate in the other party’s ‘home’ court. Parties prefer arbitration as it has certain
advantages like neutrality, speedy resolution of dispute, choice of arbitral panel, etc. Party
autonomy and Indian courts consistently reducing interference in arbitral proceedings have also
pave the way for international commercial arbitration to become the preferred dispute
resolution. Thus, the arbitration is a term of Alternate Dispute Resolution where by two
litigating Parties desire their dispute to be settled outside the court. It hardly needs to be
emphasized that arbitration is an alternate to regular courts, is known to the world in general in
India in particular form ancient period the ADR system is now accepted by the society and the
state.

The Indian courts are increasingly adopting a pro-arbitration approach and enforcing valid
arbitration agreements. The statement of objects and reasons of the Arbitration and Conciliation
Act also recognises the principle of non-intervention by courts in the arbitration process.
However, the Indian courts will refuse to enforce an arbitration agreement where it finds prima
facie that no valid agreement exists or the dispute is not arbitrable

The focus of the present study is to evaluate what are the developments that are taking
place in arbitration in India which will affect the future of arbitration in India. As
arbitration is a vitally important supplement to enhance ease of doing business. It can
greatly alleviate the pressure on courts, thereby reducing pendency, as well as instil
investor confidence, if the dispute-resolution process is efficient, swiftly expedited and
effective.

The enforcement of contracts, as well as the time taken to resolve matters, are likely to
worry potential investors. It is, therefore, vital that institutional arbitration is
implemented across sectors. As of now, a number of arbitral domestic international institution
do exist in India. However, none is of global repute. This is what the NDIAC (New Delhi
International arbitration centre) plans to become. The training of arbitrators, especially for
those not having any judicial background, is needed so that the awards passed by them can

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withstand judicial scrutiny.

Promoting arbitration and, therefore, preventing private players to rush to the courts
without resorting to the relevant provisions of arbitration in the contract, must be a goal.
Over the past four years, legislative and executive changes have been brought about. The
amendments to the Arbitration and Conciliation Act were passed in 2015 to make the
arbitration process user-friendly, cost-effective and ensure speedy disposal. Indian arbitral
institutions must now demonstrate that they are integrated with international institutions, and
can deliver effective arbitration work at lower costs.

India will not have a robust domestic arbitration environment unless institutional
arbitration becomes mandatory. This can only be done if arbitration agreements mention
the specific institution that will conduct arbitral proceedings.

Once domestic arbitration becomes popular through institutional arbitration, it eventually will
lead to international commercial arbitrations being conducted in India. To promote India as
a business and arbitral destination, all government contracts should have a neutral
arbitration institution. And to promote India as a hub, this arbitral institution should be
indigenous. This paper will also try to discuss the various initiatives taken by the
government that will help change the perception of India as a barrier-free destination for
doing business.

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 EVOLUTION
The Arbitration and Conciliation Act 1996 is the key law governing arbitration in India.
There are no mandatory laws governing arbitration in India, except the Arbitration and
Conciliation Act, which ensures party autonomy in respect of most procedural matters. The
Arbitration and Conciliation Act is broadly based on the 1985 UNCITRAL Model Law
and was enacted to consolidate, define and amend the law in relation to domestic
arbitration, international commercial arbitration and the enforcement of foreign arbitral
awards in India...

The Arbitration and Conciliation (Amendment) Act 2015 amended the Arbitration and
Conciliation Act 1996. On March 7 2018 the Union Cabinet approved the Arbitration and
Conciliation (Amendment) Bill 2018 for introduction in Parliament. This bill seeks to
once again amend the Arbitration and Conciliation Act 1996 to address the ambiguities
and uncertainties resulting from the 2015 amendments, as well as to introduce new
provisions regarding confidentiality of arbitration proceedings and arbitral awards,
immunity of arbitrators from civil liability, accreditation of arbitrators and arbitral
institutions, among others. The bill also aims to clarify the scope and application of time
limits for issuing arbitral awards which had been introduced by the 2015 amendments,
as well as to clarify whether the 2015 amendments can be applied retrospectively – an
issue which has divided various Indian courts and remains as yet unsettled. The proposals
set out in the bill have been drawn from the recommendations made by the Srikrishna
Committee in a report submitted to the government in August 2017.

At present, India has more than 35 arbitral institutions. Some of the prominent Indian arbitral
institutions are the Indian Council of Arbitration (“ICA”), the Delhi International Arbitration
Centre (“DIAC”), the Mumbai Centre for International Arbitration (“MCIA”), and the ICADR
(International centre for Alternate Dispute Resolution). While ICADR was envisaged as a
model arbitral institution, it failed miserably at achieving its objectives, which included
promotion of ADR, providing administrative and logistical support for ADR. Not only did
ICADR fail in keeping pace with the developments in arbitration law worldwide, it was also
unable to market itself as a credible alternative to ad-hoc arbitration. Plagued by inefficiency,
the ICADR had a large and ineffective governing council. However, the biggest cause for
ICADR’s eventual demise was its failure to address and market itself to prospective parties at

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the stage of contract formation. Further, not just private sector entities, but even public sector
bodies were reluctant to submit to ICADR managed arbitrations. The death knell for the
(stillborn) ICADR was finally sounded after more than 23 years of its birth with the passing of
the New Delhi International Arbitration Centre Act, 2019. The 2019 Act has replaced the
ICADR with a modern arbitral institution which shall be called the New Delhi
International Arbitration Centre (“NDIAC”).

While the ICADR is a case in point on how not to run an arbitration institution, there have been
other arbitral institutions which have tasted moderate success and are gradually emerging as
trusted alternatives to ad-hoc arbitration. The DIAC has emerged as a strong institution and has
administered more than 900 cases since its inception. Insofar as international arbitral
institutions are concerned, the Singapore International Arbitration Centre (“SIAC”) maintains
an Indian office in Mumbai since 2013 for the limited purpose of promoting the activities of
SIAC. The London Court of International Arbitration (“LCIA”) closed down its operations in
India due to insufficient case load after operating from 2009 till 2016.

A survey carried out by PWC on Corporate Attitudes and Practices towards Arbitration in India
shows that 61% of the companies surveyed, had a dispute resolution policy and confirmed
inclusion of a dispute resolution clause in their contracts. Ninety-one per cent of the companies
which had a dispute resolution policy, included arbitration for resolution of disputes. The
survey also reveals that institutional arbitration is yet to be widely used by companies in India.
Majority of the companies that experienced arbitration preferred ad-hoc arbitration (47%) over
institutional arbitration (40%) while 12% indicated a neutral approach. The participants in the
survey, when asked to identify the top three factors which make arbitration the preferred
dispute resolution mechanism listed speed, flexibility and confidentiality.

Why is it that despite the growing number of credible arbitral institutions, Indian entities still
prefer ad-hoc arbitration over institutional arbitration particularly in respect of domestic
disputes? One possible answer is the perception amongst Indian consumers that institutional
arbitration costs more than ad-hoc arbitration. While there is no credible study on arbitration
costs in the Indian context, most lawyers practising in the arbitration space have experienced
that in the long run, ad-hoc arbitrations cost more. The absence of a fee structure and the lack
of overall supervision of the arbitral process often leads to a long drawn out proceeding, with

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arbitrators assuming little accountability. Another misconception about institutional arbitration
is that arbitral institutions are rigid, and their rules take away from party autonomy. This
couldn’t be farther from the truth. Pick up the rules of any arbitral institution and one can find
sufficient flexibility to mold the arbitration process according to the nature of the dispute whilst
respecting party autonomy.

However, the picture is not all rosy. A limited pool of trained and specialized arbitrators on the
panel of arbitral institutions is indeed a worrying sign that not all is in order. Further, despite
their gradually growing numbers, there are still very few arbitral institutions in India that are
seen to be truly credible and trustworthy. Perhaps, India could learn a lesson or two from some
of its Asian neighbours who have successfully set up world class arbitral institutions in a
relatively short span of time. The SIAC (setup in 1991) and the Hong Kong International
Arbitration Centre (“HKIAC”) (setup in 1985) are cases in point.

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 FUTURE

The report of the committee set up by the Central Government under the Chairmanship
of Justice B.N. Srikrishna to review the institutionalization of arbitration in India was the
raison d’etre for two major developments in Indian arbitration viz. The passing of the
Arbitration and Conciliation (Amendment) Bill, 2019, on August 1, 2019, and that of the
New Delhi International Arbitration Centre Bill, 2019, on July 18, 2019, are the first few
firm steps in the long walk ahead of us in terms of making India an international
arbitration hub. Complemented by the NITI Aayog’s ‘National Initiative towards
Strengthening Arbitration and Enforcement in India’ and the central government’s ‘Make in
India’ initiative, these reforms will help the country reach newer heights not only in terms of
arbitration, but also in various allied business fields.
It has been seen quite often that foreign companies entering into business contracts with
Indian companies prefer a foreign arbitration centre for dispute resolution, primarily
due to lack of institutionalised arbitration in India. This newly passed Bill puts India, with
the help of the to-be-established Arbitration Council of India (ACI), at a parallel footing with
big arbitration hubs such as the London Court of International Arbitration (LCIA), the
Singapore International Arbitration Centre (SIAC) and the ICC International Centre for ADR
(ICC).
The ACI has a multitude of functions including framing of policies to grade arbitral institutions
and accredit arbitrators, make and maintain uniform professional standards for ADR matters,
maintain a depository of awards, etc.
The Supreme Court, for international commercial arbitrations, and the respective High Courts,
for domestic arbitrations, may now designate arbitral institutions for appointment of arbitrators.
An application for appointment of the arbitrator is to be disposed of within 30 days. Written
submissions are to be filed within six months of the appointment of arbitrators. Further, Section
42A requires maintenance of confidentiality of arbitration proceedings. These new rules would
invite more and more organisations to prefer an Indian arbitration centre as they make
arbitrations easy, efficient, time-bound and hassle-free, bringing them in tune with global
practices.
In the Kandla Export vs Oci Export Corporation case, the Supreme Court took a pro-
arbitration stand and refused to intervene by holding that the appeals with respect of arbitration
proceedings are exclusively governed by the Arbitration Act and thereby the appeal provision

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of the Commercial Courts Act, 2015, cannot be used be to circumvent the provisions of the
Arbitration Act if no appeal is provided under the provisions of the Arbitration Act.
In the Ravi Arya vs Palmview Investments Overseas case, the Bombay High Court ruled
that when remedies are available to the party seeking an injunction under the Arbitration and
Conciliation Act, 1996, an anti-arbitration injunction cannot be obtained to circumvent
provisions of the Act.
These judgments affirm the fact that Indian courts have taken a pro-arbitration stance
with a strict adherence to the principle of non-interference with arbitral awards, and have
also taken proactive steps to ensure their speedy execution, hence augmenting India’s
credentials as an arbitration-friendly regime that includes minimal intervention by
national courts and speedy resolution of arbitration proceedings.
The potential for arbitrations in India has also changed with the reform in third-party funding,
making the country all set to present itself and compete with other international jurisdictions
as an international arbitration hub. The Supreme Court, in the Bar Council of India vs AK
Balaji case, has clarified that the third parties (i.e. non-lawyers) can fund the litigation
and get repaid after the outcome. This is similarly applicable to arbitration, which would go
a long way in making India an arbitration-friendly jurisdiction. The availability of third-party
funding offers businesses an additional financial and risk management tool, while engaging in
arbitration.
However, how these new laws and rules are implemented is yet to be seen. But thanks to
these new amendments, India stands on a goldmine of opportunities with respect to
international arbitrations. Not only can the country become an international arbitration
hub, but it can also become the most sought-after international arbitration hub. Hence,
the next five years are very significant, especially in terms of policy formulation and
execution. Paraphrasing Robert Frost, India has miles to go before it sleeps. However, the
speed with which the country is progressing, there will be a paradigm shift in its favour, and
sooner rather than later.

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 CRITICAL ANALYSIS

The Indian government, to address the concerns of international community encourages

arbitration as a cost-effective and time-efficient mechanism for the settlement of
commercial dispute, enacted the act based on the UNCITRAL Modal Law. While the act did
not introduce change in the Indian dispute resolution environment, it also saw the rise of
judicial over-reach, uncertainty and decision delay in arbitral time-lines. Some judgements of
the Supreme Courts opened the door and permitted the Indian courts to ‘interfere’ in foreign
seated arbitrations, including permitting them to set aside awards passed by foreign seated
arbitral tribunal under section 34(setting aside of domestic awards) of the Act. There rulings
were heavily criticized by the international community due to extra-territorial application of
domestic laws, which defeated the very purpose and basic concepts of international arbitration.

To remedy the situation, the Supreme Court, in a five judge bench decision in Bharat
Aluminium Co v. Kaiser Aluminium Technical Services (‘BALCO’), overruled Bhatia
International and Venture Global and laid down a new law, amongst other things,
introducing a blanket rule that Part I of the act had no application to arbitrations seated
outside India, irrespective of the fact whether the parties chose to apply the act or not.
however, the Supreme Court making the applicability of BALCO principles prospective
caused scope for more confusion and resulted in the evolution of two parallel streams of
law in India. This led to a situation where there was no ability for parties to approach an
Indian court for any interim relief in aid for a foreign seated arbitration.

In the above discussion alternate dispute resolution in a need both at the national and
international front. Guilty of justice suffers when there is a disproportionate delay in deciding
huge cases. The law and legal system should appeal the reason of people is not a legal principle
but a common sense observation of facts. An ADR technique is useful in dispensing justice
effectively which is the basic pillar of every judicial system. ADR is an appreciable step if
taken with serious concern and proper management. It is the spirit that has led to the
evolution of ADR mechanism for the dispersion of justice with efficiency and stand
fastness. A common man can enjoy number of its advantages from speedily justice, less
expense to secure confidently and final satisfaction. Moreover, jurisprudential certainty
will help foster public confidence in arbitration as a dispute resolution mechanism as
opposed to traditional courts.

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In relation to the success of Indian arbitral institutions, it can be suggested that the
government may focus more on its role as a regulator. Considering the business-model
arbitral institutions adopt worldwide, their establishment and functioning may be left for the
private sector.

India has in place a modern, an efficient Arbitration Act. There have been some decisions
which are not in tune with the letter or spirit of the Act. Hopefully, these would be addressed
by the judiciary in the near future and continuing popularity of arbitrations would be served by
a truly efficient ADR mechanism.

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 BIBLIOGRAPHY

 Book – Madhusudan Saharay

 The Economic Times
 Law Comission of India, Report No.246- Amendment to the arbitration and conciliation
act, 1996.
 http//lawcomissionofindia.nic.in/report/re[orts246.pdf.

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