India’s arbitration landscape is at a pivotal juncture, grappling with outdated legislation while striving to align with contemporary global practices. Arbitration in the country is currently governed by three primary statutes: the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961.
Among these, the 1940 Act, which lays out the general framework for arbitration, is widely regarded as obsolete. Experts, including the Law Commission of India and various trade and industry bodies, have called for amendments to modernise the Act. They argue that without such reforms, India’s ongoing economic liberalisation efforts may not fully materialise, as the legal system for resolving domestic and international commercial disputes remains misaligned with global standards.
Arbitration and conciliation are gaining global traction as effective mechanisms for dispute resolution. However, India lacks comprehensive legislation on conciliation, leaving a gap in its legal framework. During a panel discussion, Counsel and arbitrator Mamta Tiwari emphasised that while the Arbitration Act of 1996 sought to consolidate domestic and international arbitration, its practical implementation requires significant improvement. She referenced a high-powered committee led by former Law Secretary TK Vishwanathan, which proposed amendments to the Act, though its report remains unreleased. Tiwari also stressed the importance of making arbitration more accessible and cost-effective, particularly for small businesses that often struggle with the financial burden of arbitration proceedings.
Vaibhav Gaggar, a senior lawyer, acknowledged the inefficiencies that plagued the system in the past, including widespread misuse of appellate mechanisms, which undermined the Arbitration Act's purpose of expeditious and cost-effective dispute resolution. However, Gaggar noted positive developments in recent years, particularly in the Delhi High Court. He pointed out that stays on arbitral awards are no longer granted automatically, and stricter timelines are being enforced.
Whereas, Kanika Arora, founder of Nirka Law Advisory, highlighted the practical difficulties faced by clients, especially in the construction and infrastructure sectors, where disputes are common. She noted that while the arbitration landscape has improved over the past five years, significant hurdles remain, particularly in providing clients with clear timelines for dispute resolution.
Arora emphasised the need for continued reforms to make India a stable arbitration economy, capable of attracting international clients.
On the other hand, Eshna Kumar, founder of Chambers of Eshna Kumar, proposed third-party litigation funding as a potential solution to the cost-related challenges of arbitration. She cited examples of successful cases where such funding facilitated effective dispute resolution, allowing parties to pursue legitimate claims without bearing the full financial burden.
Ranjeet Mathew Jacob, Assistant Professor, Alliance School of Law, representing the academic sector, pointed to a gap in legal education. He argued that law schools focus heavily on theoretical knowledge while neglecting practical skills such as drafting arbitration agreements and understanding key legal distinctions. Matthew suggested that integrating practical training into academic curricula could empower young lawyers to contribute more effectively to arbitration proceedings, thereby strengthening the system overall.
Senior Advocate Arvind Nayar addressed the enforcement of arbitration awards, which remains a significant challenge. He highlighted the delays caused by the appeal mechanisms under Sections 34 and 37 of the Arbitration Act, despite the Supreme Court’s efforts to narrow their scope. Nayar suggested establishing specialized courts to handle arbitration-related disputes, similar to intellectual property benches, to expedite the process. He argued that aligning India’s arbitration enforcement mechanisms with global standards requires drastic reductions in the time taken for awards to become final.
Overall, it is well understood the need for a holistic overhaul of India’s arbitration framework. While progress has been made, much remains to be done to position India as a global arbitration hub. Stakeholders from various sectors agree that modernising the legal framework, improving practical training for lawyers and addressing cost and timeline challenges are essential steps toward achieving this goal. With the right reforms and a collective effort from the judiciary, legal professionals and academia, India can transform its arbitration landscape to meet the demands of a rapidly evolving global economy.
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