India: Arbitration In India – The Way Forward


With an increase in cross border transactions and open economic policies acting as a catalyst, commercial disputes have been steadily rising. The Indian judiciary has been criticized for an interventionist approach in arbitration, particularly when it involves a foreign party. Some recent judgments of the Indian courts have created some controversy and confusion on the law governing arbitration. Arbitration in India is plagued inter-alia by unreasonable delays, high costs, and delay in enforcement of the award. Some have even questioned that the very purpose behind enacting the Arbitration and Conciliation Act, 1996 (the "Act"), which was to provide for quick and effective alternative dispute resolution, stands frustrated. The confidence, trust and faith of the parties to resolve disputes through arbitration has eroded significantly over a period of time. Taking note of these developments, the Law Commission of India, led by its Chairman Justice A.P. Shah has submitted its 246th report to the Ministry of Law and Justice (the "Law Commission Report") in August 2014, suggesting sweeping changes to the Act that will have a significant impact on arbitration in India.


Encourages Institutional Arbitration

The Law Commission Report has: (a) suggested the promotion and encouragement of the culture of institutional arbitration in India, which the Commission recognizes as the way forward; (b) recommended that the High Court and the Supreme Court while acting in exercise of jurisdiction under Section 11 of the Act take steps to refer disputes to institutionalized arbitration; and (c) recommended legal sanction to "emergency arbitrator", which is a popular and effective remedy provided for by leading international arbitration institutions.

Expeditious Proceedings

The Law Commission Report has recommended that: (a) an application for appointment of an arbitrator be disposed of within 60 (sixty) days from the date of service of notice on the opposite party; (b) arbitration proceedings shall be commenced within 60 (sixty) days from the day of grant of interim measures failing which the interim measure of protection shall cease to operate; (c) challenges to arbitral awards shall be decided expeditiously and in any event within a period of 1 (one) year from the date of notice to the respondent; (d) arbitrator shall disclose whether he is in a position to finish the arbitration with 24 (twenty four) months and render award within 3 (three) months; and (e) the arbitral tribunal should hold proceedings on continuous days and no adjournments shall be granted unless sufficient cause if made out and costs may be imposed on the party seeking adjournment.

Setting Aside Of Domestic Award & Recognition/Enforcement Of Foreign Awards

The Law Commission Report has recommended that in cases of foreign awards and awards passed arising out of international commercial arbitration in India, a narrower construct be given to "public policy", as so to include only: (i) the fundamental policy of Indian law; and (ii) the most basic notions of justice or morality. With a view to do away with the unintended uncertainties caused by the Supreme Court's judgment in ONGC v. Saw Pipes, (2003) 5 SCC 705, the Law Commission Report has proposed specific provisions dealing with setting aside of the domestic award on grounds of patent illegality. The test of "patent illegality on the face of the award" has been restricted only to domestic awards not resulting from an international commercial arbitration.

Judicial Intervention In Foreign Seated Arbitration

The Law Commission Report has reinforced the judgment of the Supreme Court in Bharat Aluminum and Co. v. Kaiser Aluminum and Co., (2012) 9 SCC 552. The Law Commission Report has recommended that: (a) the Indian courts will have jurisdiction under Part I of the Act, only when the seat of arbitration is within India; (b) certain provisions in Part I of the Act, such as Section 9 (interim relief), Section 27 (court assistance for taking evidence), Section 37(1)(a) and 37(3) (appealable orders), will remain available to parties in a foreign seated arbitration; and (c) legal recognition be accorded to the terms "seat" and "venue", consistent with international usage. The proposed changes will not affect applications pending before any judicial authority, relying upon the law set out by Bhatia International v. Interbulk Trading SA, (2002) 4 SCC 105.

Interim Measures

The Law Commission Report has: (a) recommended that once the arbitral tribunal has been constituted, the Court shall not entertain an application under Section 9 of the Act for interim measures unless circumstances exist making the remedy under Section 17 not efficacious; (b) clarified the wide range of powers of the arbitral tribunal to grant interim measures; and (c) provided teeth to interim orders of the arbitral tribunal in as much as they can be enforced like court orders.

Challenge To An Arbitral Award

The Law Commission Report recommends that in cases of international commercial arbitration the challenge to an arbitral award shall be decided by the High Court even if such High Court does not exercise civil jurisdiction. The challenge to an arbitral award on grounds of patent illegality appearing on the face of the award is restricted to only domestic arbitration and not international commercial arbitration.

No Automatic Stay Of The Arbitral Award

The Law Commission Report recommends amendments to do away with the present regime where the mere filing of a challenge petition to the arbitral award under Section 34 of the Act acts as an automatic stay of the award. It has been recommended that an application has to be filed seeking to stay the operation of the award and the court is required to record reasons in writing for grant of such stay. While considering the grant of stay, the provisions for stay of money decree under the provisions of Code of Civil Procedure, 1908 would apply.

Reduces Scope For Objections At The Time Of Appointing Arbitrators Or Referring The Dispute To Arbitration

It has been recommended that questions regarding the existence of an arbitration agreement (that are raised in proceedings under Section 8 and 11 of the Act) shall be referred to arbitration and the arbitral tribunal shall decide such issues.

Parties To Arbitration

In consonance with the judgment of the Supreme Court in Chloro Control India Private Limited v. Severn Trent Water Purification Inc and others, (2013) 1 SCC 641, the definition of the word "party" to an arbitration agreement has been expanded to also include persons claiming through or under such party. Therefore, even non-signatories to the arbitration agreement may be covered in cases involving inter-related contracts or, group companies.

Arbitrability Of Fraud And Complicated Issues Of Fact

The Law Commission Report recommends that questions of fraud, serious questions of fact and law are expressly arbitrable, putting a rest to the confusion created by recent judgments of the Supreme Court.

Disclosure By The Arbitrator

Recognizing that independence and neutrality of the arbitrator is critical to the entire arbitration process, the Law Commission Report has recommended that the Fourth and Fifth Schedule be inserted that set out grounds that give rise to justifiable doubts as to the independence or impartiality of arbitrator, and the conflict of standards based on the IBA guidelines. The arbitrator is required to make certain disclosures to ensure that independence and neutrality standards are met. The arbitrator is also required to disclose if there exist circumstances that are likely to affect his ability to devote sufficient time and to complete the arbitration within 24 (twenty four) months and pass the award within 3 (three) months thereafter. The disclosures also require the arbitrator to disclose his ongoing arbitrations.


The Law Commission Report recommends the loser-pays rule to act as a deterrent to frivolous litigation. It has been recommended that an arbitral tribunal has the discretion to determine the amount of costs including the reasonable costs towards the fees and expenses of the arbitrators, legal fees, and expenses towards conducting arbitration. It has also been recommended that the conduct of parties will be a determining factor in awarding costs including the refusal of a party to unreasonably refuse a reasonable offer of settlement made by the other party.

Cap On The Fees Of The Arbitrator

The Law Commission Report has recommended addition of the Sixth Schedule suggesting model fees in case of domestic ad-hoc arbitration other than international commercial arbitration with a view to ensure that the arbitration process does not become very expensive.

Power Of The Arbitral Tribunal To Award Interest

The Law Commission Report has recommended amendments to Section 31 of the Act to clarify the powers of the arbitral tribunal to grant compound interest as well as to rationalize the rate at which default interest ought to be awarded and move away from the statutory 18% (eighteen percent) interest in the present regime to a market based determination in line with commercial realities.


The Law Commission Report is a step in the right direction to overhaul the system of arbitration in India. If the recommendations are accepted, the systemic malaise and the problems that arbitration faces in India is likely to be redressed and this will go a long way in making India an arbitration hub. However, some concerns still remain. After the Law Commission Report was submitted to the Government, the Supreme Court recently passed a judgment in ONGC v. Western Geco, 2014 (9) SCC 263 ("Western Geco") which has broadened the scope of "fundamental policy of Indian Law" to include the requirement of arbitral tribunals to follow a "judicial approach" and the "wednesbury principle of reasonableness". This would open floodgates for challenge to an arbitral award as review of the award on merits would be permitted. This is not a good development. Keeping this in mind, the Law Commission of India has submitted a Supplementary Report on February 6, 2015 (the "Supplementary Report"), to the Ministry of Law and Justice, seeking to nullify the effect of the Western Geco judgment. However, the Supplementary Report may not be adequate to curtail the applicability of Western Geco. While these events are being watched closely and are being widely perceived as a sign of good things to come, it will be interesting to see to what extent the Government will accept the Law Commission Report and how soon these changes are introduced, and if the amendments stand the scrutiny of the judiciary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.