The Arbitration and Conciliation Act, 1996, based on the UNCITRAL Model Law, provides the principal legal framework for domestic and international commercial arbitration in India. Its amendments in 2015, 2019 and 2021 sought to ensure neutrality, time-bound proceedings, minimal judicial intervention and speedy enforcement of awards. However, gaps in implementation and continuing procedural and institutional weaknesses have prevented India from fully realising its ambition of becoming a global arbitration hub.

Arbitration

Arbitration is a quasi-judicial adjudicatory procedure where neutral third parties (arbitrators) are appointed by the parties or the court to decide a dispute
Unlike court proceedings, it is governed by an agreement between the parties and is more flexible and cost-effective
In principle, arbitral awards are final and binding. They can only be challenged before a state court under exceptional circumstances.
- An arbitral award can be challenged in India under Section 34 of the Arbitration and Conciliation Act, 1996.

Arbitration and Conciliation (Amendment) Act, 2016

Provision	Key features of the Act
Time-Bound Proceedings	Under the amended Act, an award shall be made by the arbitral tribunal within 12 months from the date it enters upon reference. This period can be extended for a maximum period of 6 months with the consent of the parties.
Fast-Track Procedure	Parties can opt for a fast-track process where the award must be rendered within six months
No automatic stay on enforcement of award	Merely filing an application under Section 34 to challenge an arbitral award does not result in an automatic stay.
Interim Measures by Arbitral Tribunal	Arbitral tribunals have been empowered to grant interim measures with the same authority as courts, thereby minimizing the need for parties to approach courts for temporary relief.
Public Policy as grounds for challenging an award	Previously the Act permitted the court to set aside an arbitral award if it is in conflict with the public policy of India. This includes awards affected by (i) fraud or corruption, and (ii) those in violation of confidentiality and admissibility of evidence provisions in the Act. The Amendment Act modifies this provision to also include those awards that are (i) in contravention with the fundamental policy of Indian Law or (ii) conflict with the notions of morality or justice, in addition to the grounds already specified in the Act. The amendment restricted the grounds for challenging an award under "public policy" to cases involving fraud, corruption, contravention of the fundamental policy of Indian law or conflict with the notions of morality or justice A significant issue addressed by the Amendment was the tendency of courts to review the entire merits of a dispute under the guise of public policy. The Act now explicitly states that a test for contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute “Patent illegality” is now a ground only for domestic arbitrations.
Neutrality and Independence	Arbitrator Disclosures: When a person is approached in connection with possible appointment of arbitrator, he shall disclose in writing about the existence of any relationship or interest of any kind, which is likely to give rise to justifiable doubts. Further, if a person is having a specified relationship, he shall be ineligible to be appointed as an arbitrator. Independence and Impartiality (Section 12): It introduced the Fifth, Sixth, and Seventh Schedules to guide the disclosure of potential conflicts of interest and define categories of ineligibility for arbitrators
Referral to Arbitration	The Court must refer the parties to arbitration unless it thinks that a valid arbitration agreement does not exist.
Relevant court for domestic and international arbitration matters	Under the Act, the relevant court for all arbitration matters would be a principal civil court or high court with original jurisdiction. The Amendment modifies this to state that in the case of international arbitration, the relevant court would only be the relevant high court.

Arbitration and Conciliation (Amendment) Act, 2019

Provision	Key features of the Act
Arbitration Council of India (ACI)	Establishes the ACI as an independent body for promoting arbitration, mediation, conciliation and other alternative dispute-resolution mechanisms. Its functions include framing policies for grading arbitral institutions and accrediting arbitrators making policies for the establishment, operation and maintenance of uniform professional standards for all alternate dispute redressal matters maintaining a depository of arbitral awards (judgments) made in India and abroad.
Composition of the ACI	The Chairperson may be: (i) a Supreme Court judge; or (ii) a Chief Justice or judge of a High Court; or (iii) an eminent person with expert knowledge of arbitration. Other members will include an eminent arbitration practitioner, an academician with experience in arbitration, and government appointees.
Appointment of arbitrators	Under the 1996 Act, parties could approach the Supreme Court, High Court or an institution designated by such court when they could not agree on an arbitrator. The 2019 Act allows the Supreme Court and High Courts to designate arbitral institutions for making such appointments. Empowered the Supreme Court and High Courts to designate graded institutions for appointing arbitrators. International commercial arbitration: Appointments in international commercial arbitration will be made by an arbitral institution designated by the Supreme Court. Domestic arbitration: Appointments in domestic arbitration will be made by an arbitral institution designated by the concerned High Court. Absence of arbitral institutions: Where no arbitral institution is available, the Chief Justice of the concerned High Court may maintain a panel of arbitrators to perform the functions of an arbitral institution.
Time limit for appointing arbitrators	An application for the appointment of an arbitrator should be disposed of within 30 days.
Relaxation of time limit	The 12-month time limit for making an arbitral award is removed for international commercial arbitration. However, tribunals must endeavour to dispose of international arbitration matters within 12 months.
Completion of written submissions	The statement of claim and defence must be completed within six months from the date on which the arbitrator or all the arbitrators receive notice of their appointment.
Confidentiality of proceedings	All details of arbitration proceedings must remain confidential, except the arbitral award in certain circumstances. Disclosure of an award is permitted where necessary for its implementation or enforcement.

Arbitration and Conciliation (Amendment) Act, 2021

Aspect	Position before the 2021 Amendment	Changes introduced by the 2021 Amendment
Automatic stay on arbitral awards	The 1996 Act allowed a party to file an application to set aside an arbitral award (i.e., the order given in an arbitration proceeding). Courts had interpreted this provision to mean that an automatic stay on an arbitral award was granted the moment an application for setting aside an arbitral award was made before a court. In 2015, the Act was amended to state that an arbitral award would not be automatically stayed merely because an application is made to a court to set aside the arbitral award.	The Arbitration and Conciliation (Amendment) Act, 2021 specifies that a stay on the arbitral award can be provided (even during the pendency of the setting aside of the application) if the court is satisfied that: the relevant arbitration agreement or contract the making of the award, was induced, or effected by fraud or corruption.
Qualifications of arbitrators	The Act contained an Eighth Schedule specifying the qualifications, experience and accreditation norms for arbitrators. The requirements under the schedule include that the arbitrator must be: (i) an advocate under the Advocates Act, 1961 with 10 years of experience, or (ii) an officer of the Indian Legal Service, among others. Further, the general norms applicable to arbitrators include that they must be conversant with the Constitution of India.	The Amendment removed the Eighth Schedule. It states that the qualifications, experience, and norms for accreditation of arbitrations will be specified under the regulations.

Arbitration and Conciliation Act, 1996

Aspect	Key features
Based on UNCITRAL Model Law	The Act is based on the UNCITRAL Model Law on International Commercial Arbitration (1985) and the UNCITRAL Conciliation Rules (1980), aiming to provide a unified legal framework for fair and efficient dispute settlement.
Scope and Applicability	The Act applies to Domestic arbitration, International commercial arbitration, and Conciliation proceedings
Arbitration Agreement	The arbitration agreement must be in writing (including electronic communication). It can be a clause within a contract or a separate agreement. It is the foundation of arbitration jurisdiction.
Party Autonomy	Parties have significant freedom to determine various aspects of the proceedings, including the number of arbitrators (provided it is not an even number), the procedure for appointment, the place of arbitration, and the language to be used. Failing agreement, the Supreme Court or High Courts (or designated arbitral institutions) make the appointment
Competence-Competence	The arbitral tribunal is empowered to rule on its own jurisdiction, including any objections regarding the existence or validity of the arbitration agreement.
Interim Measures	Both the Court (under Section 9) and the arbitral tribunal (under Section 17) have the power to order interim measures of protection, such as the preservation of goods or securing the amount in dispute.
Time-Bound Proceedings	In domestic arbitrations, the award must be made within twelve months from the completion of pleadings, extendable by a further six months by party consent. The Act also provides for a fast track procedure where the award must be made within six months.
Finality and Enforcement	An arbitral award is final and binding on the parties. It is enforced in the same manner as a decree of a civil court once the time for challenging it has expired.
Recourse Against Awards	The grounds for setting aside an arbitral award are strictly limited and specified under Section 34, such as incapacity of a party, invalidity of the agreement, or conflict with the public policy of India.
Arbitration Council of India (ACI)	The Act provides for the establishment of the ACI to promote arbitration, mediation, and conciliation, and to frame policies for the grading of arbitral institutions and accreditation of arbitrators.
Confidentiality	Arbitrators, institutions, and parties are required to maintain the confidentiality of all arbitral proceedings, except where disclosure of the award is necessary for its implementation and enforcement.
Enforcement of Foreign Awards	The Act provides for the enforcement of foreign awards under the New York Convention and the Geneva Convention, ensuring that such awards are treated as binding and enforceable as decrees of an Indian court
Principle of Minimal Judicial Intervention	Courts shall not interfere in the arbitration process, except where expressly provided

Challenges associated with Arbitration and Conciliation Act

Excessive judicial intervention
- Although the Act seeks minimal court interference, parties frequently approach courts regarding:
  - Appointment and jurisdiction of arbitrators
  - Interim measures
  - Extension of the tribunal’s mandate
  - Challenge and enforcement of awards
Unconditional stay on allegations of fraud
- The 2021 Amendment permits courts to grant an unconditional stay on enforcement where the arbitration agreement, contract or award is prima facie induced or affected by fraud or corruption.
- It is expected that losing parties will frequently contend that a contract or award is vitiated by fraud simply to secure a stay of execution
Appointment delays
- Where parties fail to appoint arbitrators, they must approach courts. Heavy judicial workload and procedural objections can delay the constitution of the tribunal itself.
High cost of arbitration
- Arbitrator fees, institutional charges, legal expenses and venue costs make arbitration unaffordable for MSMEs and individual parties.
Weak institutional arbitration
- India continues to rely significantly on ad hoc arbitration. Uneven quality of arbitral institutions, absence of uniform procedural standards and limited professional case management reduce efficiency.
Repeated challenges on “public policy”
- Despite legislative attempts to narrow the meaning of public policy, parties continue to invoke it while challenging awards.
- Despite the 2015 Amendment’s attempt to narrow it, Courts have interpreted “public policy” broadly to review the merits of an award.
Procedural Timelines and Substantive Justice
- Case Complexity: The 12-month limit for rendering an award is unique to India and may interfere with justice in lengthy or complicated cases that naturally require more time for resolution.
- Procedural “Weaponization”: Statutory timelines can become a “weapon” for losing parties, who may use a minor procedural lapse—such as the expiry of a mandate—to challenge the entire arbitral process
Non-constitution of the Arbitration Council of India
- The Arbitration and Conciliation (Amendment) Act, 2019, mandated the establishment of the Arbitration Council of India,a body for framing policies governing the grading of arbitral institutions, recognizing professional institutes providing accreditation of arbitrators and holding training, workshops and courses in the area of arbitration. However, the Arbitration Council of India has not yet been established.
Delay in Enforcement of Awards
- Even after an award is passed, enforcement is stalled by parallel Section 34(Application for setting aside arbitral award) challenges and multiple appellate rounds, defeating the core promise of arbitration i.e speed and pushing timelines closer to, or beyond, ordinary civil litigation.
Shortage of Trained Arbitrators and Institutional Infrastructure
- India continues to rely heavily on retired judges as arbitrators rather than specialized professionals, and institutional arbitration (as opposed to ad hoc) remains underdeveloped compared to hubs like Singapore or London.
  - Arbitrators who are retired judges usually carry “litigation-style” habits (like frequent adjournments) into the arbitration room, slowing down the process.
Government as a Reluctant Litigant
- Public sector undertakings and government departments frequently challenge arbitration awards in court to avoid paying or to delay decisions. This practice creates a huge backlog of court cases.
Enforcement Difficulties in Foreign Awards
- While the Act gives effect to the New York and Geneva Conventions, enforcement of foreign awards in India is still contested on procedural and public-policy grounds, affecting India’s image as an arbitration-friendly jurisdiction
Multiplicity of Amendments Creating Transitional Uncertainty
- Frequent amendments (2015, 2019, 2021) while each aimed at reform, have created interpretational disputes over their prospective/retrospective applicability to pending arbitrations, adding a layer of litigation over the law’s own scope.
Absence of a robust emergency arbitrator framework
- When urgent protection is required before the regular arbitral tribunal is constituted, such as preventing the transfer of assets or preserving disputed property, the Act does not expressly provide for an emergency arbitrator. Parties may therefore have to approach courts for interim relief, increasing judicial intervention and allowing irreversible actions to occur before relief is granted.
  - In the Amazon.com NV Investment Holdings LLC v. Future Retail Ltd., the Supreme Court of India ruled that an emergency arbitrator’s award or interim order is legally valid and fully enforceable under Section 17(1) of the Arbitration and Conciliation Act, 1996.

Emergency Arbitration

Emergency Arbitration refers to a process where a party to an arbitration agreement requests urgent interim relief from an emergency arbitrator, appointed before the formal arbitral tribunal is constituted. Typically appointed under the procedural rules of an arbitral institution chosen by the parties, the emergency arbitrator is empowered to grant interim measures to protect the parties' interests or prevent irreparable harm. This mechanism proves particularly useful in commercial disputes involving time-sensitive matters such as preservation of assets, injunctions, or maintaining the status quo which, if unaddressed, could undermine the effectiveness of any final award by the arbitral tribunal

Way forward

Judicial Self-Discipline and Minimal Intervention
- A primary recommendation is for the judiciary to adopt a more self-disciplined approach. While amendments have aimed to limit court interference, judges must continue to interpret provisions like “public policy” and “arbitrability” narrowly to avoid overreaching into the merits of arbitral disputes. This ensures that arbitration remains a swift and final alternative to litigation rather than a preliminary step to court battles
Constitute the Arbitration Council of India
- Operationalise the ACI without further delay so that it can grade arbitral institutions, promote professional standards, facilitate accreditation and strengthen institutional arbitration
Strengthening Infrastructure
- Developing a robust institutional infrastructure is essential to support the reforms intended by recent legislations
Clearly define “public policy”
- Replace the open-textured phrase with a precise, enumerated definition covering only fraud, corruption, contravention of fundamental policy, and conflict with basic notions of morality/justice This will prevent courts from using the term to reconsider the merits of arbitral awards{Courts sometimes interpret broad expressions such as “fundamental policy of Indian law” and “basic notions of morality or justice” expansively. }
Rationalise arbitral timelines
- Retain time discipline while permitting flexibility in complex disputes. Extensions should be decided promptly without unnecessary judicial supervision of the merits of proceedings.
Ensure timely enforcement
- Strict statutory timelines should be introduced for enforcement of arbitral awards.
- Applications challenging awards should be decided within strict timelines. Adjournments and unconditional stays should be granted only in exceptional cases.
Strengthen the emergency-arbitration framework
- Expressly recognise emergency arbitrators and provide for the direct enforcement of their interim orders
  - Amend the Act to explicitly define and enforce emergency arbitrator orders as interim measures under Section 17
Stability Through Prospective-Only Amendments
- Avoid frequent and retrospective amendments. Future reforms should follow wide stakeholder consultation and remain aligned with the UNCITRAL Model Law and internationally accepted arbitration practices.
Make arbitration affordable
- Develop transparent fee structures, low-cost institutional procedures and expedited arbitration for MSMEs and lower-value disputes.
- Arbitrator fees should remain proportionate to the value and complexity of the dispute.
- Rationalizing Costs via the Fourth Schedule
  - Make the fee schedule binding (not merely indicative) across institutional and ad hoc arbitrations
Reform government arbitration
- Government departments should avoid routine challenges to adverse awards, empower officials to settle genuine disputes and fix accountability for unnecessary appeals and contractual breaches.
Build professional capacity
- Expand specialised training for arbitrators, judges and lawyers to build a professional cadre of subject-matter arbitrators.

The Arbitration and Conciliation Act and its successive amendments have strengthened neutrality, time discipline and enforceability in Indian arbitration. However, delayed institutional reforms, high costs, and continued challenges to awards prevent arbitration from fully achieving its purpose. The way forward lies not in frequent legislative amendments, but in stable rules, strong arbitral institutions, minimal judicial interference and timely enforcement, enabling arbitration to function as a credible and efficient alternative to litigation.

Sample Mains Question

1.Despite successive amendments to the Arbitration and Conciliation Act, 1996, India continues to face challenges in developing an efficient arbitration ecosystem. Examine the major challenges and suggest measures to strengthen institutional arbitration in India.
[15 Marks/250 Words]

Trending Today

✍️ Curated by InclusiveIAS Editorial Team

At InclusiveIAS, our editorial team is led by experts who have successfully cleared multiple stages of the UPSC Civil Services Examination, including Mains and Interview. With deep insights into the demands of the exam, we focus on crafting content that is accurate, exam-relevant, and easy to grasp.

Whether it’s Polity, Current Affairs, GS papers, or Optional subjects, our notes are designed to:

Break down complex topics into simple, structured points
Align strictly with the UPSC syllabus and PYQ trends
Save your time by offering crisp yet comprehensive coverage
Help you score more with smart presentation, keywords, and examples

🟢 Every article, note, and test is not just written—but carefully edited to ensure it helps you study faster, revise better, and write answers like a topper.