- within Litigation and Mediation & Arbitration topic(s)
I. Introduction: India’s historic role in International Commercial Arbitration
India had a prime role in laying the foundation of modern-day arbitration. It was amongst the six Asian nations to have signed the Geneva Convention on the Execution of Foreign Arbitral Awards of 19271 As noted jurist, Mr. F.S. Nariman points out – none from the Americas subscribed to it.2 Later, in July 1960, India was amongst the 10 original signatories to the New York Convention and the fourth country to ratify the same. The USA ratified the New York Convention a full 10 years later in 1970 and the UK in 1975. China and Singapore ratified the Convention fairly recently, in the mid-1990s.
India’s role as a founding jurisdiction got lost in the mist of time, chiefly as (till recently) it did not attract sufficient cross border investment and was not a significant player in cross-border commerce.
In the early 1990s, India took a bold decision to shed its socialist policies and embrace economic reforms. A liberalized economy led to unprecedented growth and foreign investment. As part of its endeavors, India needed an efficient dispute resolution mechanism. The following discusses India’s current arbitration regime.
II. A modern arbitration regime
Keen to enact a legislation the global community could relate to, India based its new Arbitration Act on the UNCITRAL Model Law, 1985 and the UNCITRAL Rules, 1976 for both domestic and international arbitrations.
The Arbitration and Conciliation Act (the ‘Act’) came into force in January 1996.
The Statement of Objects and Reasons to the Act declared that there was a need to have an Act, “more responsive to contemporary requirements” and “Our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune.”
Among the main objectives of the Act (set out in its Statement of Objects and Reasons) are “to minimize the supervisory role of Courts in the arbitral process” and “to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court”.
The Act is a composite piece of legislation. Part I contains the provisions for domestic and international commercial arbitration. Any arbitration to be seated in India would be governed by Part I, irrespective of the nationalities of the parties. Part II provides for enforcement of foreign awards.
Part I (by its very nature) is more comprehensive and contains extensive provisions based on the Model Law. It provides, inter alia, for arbitrability of disputes, non-intervention by courts, composition of the arbitral tribunal, jurisdiction of the arbitral tribunal, conduct of the arbitration proceedings, recourse against arbitral awards and enforcement. Part II, on the other hand, is largely restricted to enforcement of foreign awards governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) or the Convention on the Execution of Foreign Arbitral Awards (Geneva Convention).
III. Major Departures from the Model Law
Though the Act is based on the Model Law, it has made some departures. The Indian court system suffers from chronic delays. The Act therefore keeps court intervention out of the arbitral process, even beyond the narrow parameters of the Model Law. The Act envisages recourse to the court only in four situations, namely:
- appointment of arbitrators, where the parties’ envisaged method for the same fails (Section 11);
- ruling on whether the mandate of the arbitrator stands terminated due to inability to perform his functions or failure to proceed without undue delay (Section 14(2));
- provide assistance in taking evidence (Section 27); and
- Extension of time for domestic arbitrations; if the award is delayed beyond the timelines stipulated under Section 29A.3
Section 5 of the Act provides, through a non-obstante clause, that no judicial authority shall interfere for matters provided for under the Act except where so provided for.
Section 8 is a companion section. It states that a “judicial authority” before which an action is brought in a matter which is the subject-matter of an arbitration agreement, shall refer the parties to arbitration. The only condition being that the party objecting to the court proceedings must do so no later than his first statement on the substance of the dispute. In the meanwhile, the arbitration proceedings may commence and continue with and an award rendered.
Two points are noteworthy: The first is that Section 5 (departing from its Model Law counterpart) contains a non-obstante clause. Section 8 also departs from the Model Law. The corresponding provision in the Model Law (Article 8) permits the court to entertain an objection to the effect that the arbitration agreement is “null and void inoperative or incapable of being performed”. These words stand omitted in Section 8 of the Act. The departure is deliberate as becomes evident if Section 8 is compared with Section 45 of the Act which covers the same subject for offshore arbitrations and retains the Model Law language. Section 45 states that a judicial authority when seized of an action in respect of which the parties have an arbitration agreement, shall refer the parties to arbitration- “unless it finds that the said agreement is null and void inoperative or incapable of being performed”.
Hence, the Indian Act empowers the judicial authority to entertain objections as to the validity or otherwise of an arbitration agreement only in the case of offshore arbitrations. In India seated arbitrations, it must refer the parties to arbitration.
Two key areas where the court intervention is back ended i.e. to the post award stage are:
- Article 13 of the Model Law: Article 13 of the Model Law provides for a challenge to an arbitrator on the ground of lack of independence or impartiality or lack of qualification. In the first instance, the challenge is to be made to the arbitral tribunal itself. If the Tribunal rejects the challenge, an aggrieved party can approach the court within 30 days. The Indian Legislature did not wish for arbitral proceedings to get entangled with court proceedings. Section 13 of the Indian Act therefore provides that if the arbitral tribunal rejects a challenge, it shall nevertheless continue with the arbitration proceedings and render the award. An aggrieved party can then bring proceedings before the court (at the award set aside stage).
- Article 16 of the Model Law: Article 16, Model Law incorporates the Kompetenz-Kompetenz principle and empowers the tribunal to rule on the existence or validity of the arbitration agreement. If the arbitral tribunal overrules an objection to its jurisdiction, the party aggrieved may approach the court for resolution within 30 days. The Indian Act in contrast does not permit any interim recourse to court. It provides that if the arbitral tribunal rejects an objection to its jurisdiction or relating to the existence or validity of the arbitration agreement, it shall continue with the arbitration and render the award. An aggrieved party may then challenge the jurisdiction/agreement as part of the award challenge proceedings.
IV. Difference between International Arbitration and Domestic Arbitration
As stated, India has a composite Act for domestic as well as international commercial arbitrations. The Act however treats domestic arbitrations differently from international commercial arbitration in at least four aspects:
The first difference is that if there is a failure of the parties’ envisaged mechanism for constitution of the arbitral tribunal, the appointment shall be made for domestic arbitrations, by the High Court, and for international arbitrations, by the Supreme Court of India.
The second difference is in relation to the governing law. In international commercial arbitrations, the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute and, failing any such designation, the rules of law the tribunal considers appropriate given all circumstances. However, in domestic arbitration (between Indian parties), the tribunal can only apply the substantive law for the time being in force in India.
The third difference is that in domestic arbitrations, an additional ground for setting aside the award on “patent illegality” was inserted by the 2015 amendment to the Act. This ground (or a merit based review of an award) is not available for an international commercial arbitration.
The fourth difference is that the time limit of one year (extendable by 6 months by mutual consent) from completion of pleadings, prescribed under Section 29A for making an award does not apply to international commercial arbitrations.4
V. Noteworthy judgments
Below are some landmark judgments by Indian courts under the Arbitration Act.
- Cox & Kings Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1 [Non-signatories being arrayed as parties]
This issue first arose in Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. (2013). The Supreme Court of India was faced with a situation where the parties to a joint venture had entered into several related agreements including some with different entities from amongst their group. These agreements had diverse dispute resolution clauses: some with International Chamber of Commerce (“ICC”) arbitrations seated in London; some with no arbitration clause; and one agreement with an American Arbitration Association (“AAA”) arbitration clause with Pennsylvania (USA) as its seat. The Supreme Court came out with a strong pro-arbitration leaning, stating that the legislative intent is in favour of arbitration and the Act “would have to be construed liberally to achieve that object”. The court held that non-signatory parties could be subjected to arbitration provided that the transactions were within the group of companies and there was a clear intention of the parties to also bind non-signatories. It acknowledged that subjecting non-signatories to arbitration would be in exceptional cases. This would be examined on the touchstone of direct relation of the non-signatory to the signatories; commonality of the subject matter and whether multiple agreements presented a composite transaction or not. The situation should be so composite that performance of the “mother agreement” would not be feasible without the aid, execution and performance of the supplemental or ancillary agreements. On this basis, the Court referred a dispute by a non-signatory to arbitration.
The issue of non-signatories was later referred to a larger five judge bench: (Cox & Kings Ltd. v. Sap India Pvt. Ltd. & Anr.) “to expound on the intricacies of the Group of Companies doctrine” and formalise the scope, ambit and validity of the Chloro Controls judgment. The Supreme Court held that the Act does not prohibit the joinder of a non-signatory as a party to an arbitration, provided there is a defined legal relationship between the non-signatory and the parties to the arbitration agreement, and that the non-signatory has consented to be bound by the arbitration agreement, either expressly or impliedly. The court specified certain factors that must be satisfied before binding a non-signatory to an arbitration agreement, including mutual intent of the parties; relationship of the non-signatory with the signatory; commonality of the subject-matter; composite nature of the transaction and performance of the contract.
- Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1 [Court’s power to modify an award]
The Supreme Court was here concerned with an important issue, namely if in award set aside proceedings it has an inherent power to modify an award (or it can only uphold or set aside an award). By a 4:1 majority the court held that it has power to modify an arbitral award though in limited circumstances:
- When the award is severable, by severing the invalid portion from the valid portion of the award;
- By correcting any clerical, computational or typographical error which appears erroneous on the face of the record, as well as other manifest er-ror, provided that such modification does not necessitate a merits-based evaluation;
- By modifying the post-award interest rate in some circumstances; and
- Under Article 14255 of the Constitution, albeit, this must be exercised with great care and caution and within the limits of the constitutional power.
- Vidya Drolia v. Durga Trading Corpn. (2021) 2 SCC 1 [Non arbitrability of disputes]
The Supreme Court here propounded a four-fold test for determining if the subject matter of a dispute is arbitrable or not. It is not arbitrable when the cause of action and subject matter of the dispute: (i) relates to actions in rem (that do not pertain to subordinate rights in personam which arise from rights in rem); (ii) affect third party rights (where mutual adjudication would not be appropriate and enforceable); (iii) relates to inalienable sovereign and public interest functions of the State; and (iv) are expressly or by necessary implication non-arbitrable as per mandatory laws (for instance by-passing the insolvency law regime).
VI. India and BITs
Most major jurisdictions (about 165 in all) are parties to the ICSID Convention.6 India is amongst the handful of countries which are not.7 India’s non-accession to the ICSID Convention rests on its view that the supremacy of its courts cannot be compromised by allowing an ICSID arbitral tribunal’s decision finality and immunity from challenge.8
In an effort to attract foreign investment and beginning from 19949 India entered into 83 BITs (which makes it one of the largest portfolio globally). Additionally, India has four comprehensive economic co-operation agreements with investment protection provisions. Soon, India was faced with Investment disputes. Some major disputes which India came to face are described below:
The White Industries award: White Industries (White), an Australian Company had an ICC award in its favour against an Indian Public Sector Under-taking (PSU) called Coal India. White had been trying to enforce the award in Indian courts. However the matter got embroiled on a jurisdictional issue (relating to an Indian court’s power to set aside a foreign award), which ended up and remained unresolved in the Supreme Court.10 In December 2009 White invoked the Australia – India BIT arbitration inter alia contending that it was denied “effective means of asserting claims and enforcing rights” – an obligation contained in the Kuwait – India BIT, which White (though an Australian Company) contended it could take advantage of relying on the most favoured nation (MFN) clause in the bilateral investment treaty be-tween Australia and India. Controversially, the White Tribunal held that the ICC award (in White’s favour) would qualify as an “investment” under the BIT. It held that the Indian judicial system’s inability to deal with a challenge to White’s award for over nine years amounted to an undue delay and constituted a breach of India’s obligation to provide White with “effective means of asserting claims and enforcing rights”. On this basis the BIT Tribunal awarded White damages (representing the sums awarded to it under the ICC award along with costs). Essentially India had to suffer due to its judicial court delays (even though it was not guilty of any specific act or omission in relation to White as an ‘investor’).
The Vodafone dispute: The Vodafone Group had purchased shares in a Mauritius based entity, which in turn held 66 % interest in an Indian tele-com company. The transaction took place offshore at the holding company level, without any Indian stock transaction. The Indian Government however sought to impose a capital gains tax on the transaction. The sums involved were large (over US$ 2 billion). The High Court of Bombay held the trans-action to be taxable but the Supreme Court ruled in Vodafone’s favour and held it to be non-taxable. The government did not accept this as the final word and introduced a retrospective legislation in Parliament, sidestepping the Supreme Court ruling and holding Vodafone liable to capital gains tax. This provoked a sharp reaction not only from Vodafone but from the political and international business community. Vodafone commenced an investment arbitration in 2014 under the India-Netherlands BIT, asserting that India had breached the promised protection to investors under the Treaty. In 2020, a PCA tribunal unanimously ruled in favour of Vodafone holding that India had breached the Treaty and the fair and equitable treatment guarantee therein. In 2021, the Government of India notified the Taxation Laws (Amendment) Act, 2021 which allows for settlement of tax disputes that arose from the retrospective enactment introduced in 2012, aiming to settle inter alia the Vodafone dispute. Pursuant thereto, the Vodafone dispute was mutually settled.
The 2G dispute: Another high profile dispute arose out of the 2G licensing controversy. The Government of India in 2008 allotted 2G spectrum licenses to 122 Indian and foreign telecom companies. The allocation of licences was based on a policy decision taken by the government that it would not maximise profits it could reap but instead attract a larger number of players by allocating licenses on a fixed license fee on a ‘first come-first-serve’ basis.
The policy was endorsed by the Attorney General of India, the Telecom Regulator as well as the office of the Prime Minister. However, the Supreme Court of India struck it down holding that the government could not have given away precious natural resources on an arbitrary and non-transparent basis. The court held that the licenses should have been allocated through public auction. As a corollary, the Supreme Court struck down all 122 licenses granted under the impugned policy. While the Indian telecom companies had no legal remedy against the decision of the Supreme Court, the foreign investors invoked arbitration under the investment treaties.
After 12 years, the Tribunal recently rendered an award unanimously rejecting all claims raised by the investors.11
The Devas Dispute: In 2005, Antrix (a commercial arm of the Indian Government) and Devas (an Indian company, partly owned by Deutsche Telekom and others) entered into an agreement concerning utilization of satellite spectrum to be provided by Antrix, for high-speed internet services.
The Indian Government terminated the Agreement in 2011 for security reasons. This prompted the Devas investors to initiate investment arbitration under the India – Mauritius BIT. Soon thereafter, in 2014, Deutsche Telekom (the German investor in Devas) initiated arbitration against India under the India – Germany BIT.
The India – Mauritius Tribunal rendered its Award in 2016 holding that India had breached its obligation to accord fair and equitable treatment to Devas’ foreign investors and awarding compensation to the tune of USD 160 million plus interest as damages. In May 2020, the Indian – German Tribunal also concluded that India had breached the treaty by terminating the Agreement entered into between Antrix and Devas and awarded USD 132 Million as compensation to the investors.
In the meanwhile, in 2012 (soon after India terminated the Antrix – Devas Agreement) the Comptroller and Auditor General of India found the Antrix – Devas Agreement to be riddled with favouritism and fraudulent in nature. Criminal investigations were initiated but strangely these matters were not brought before either of the two Tribunals hearing the matter.
When these matters were brought to the notice of the Tribunals, they declined to interfere. The merits hearing had already concluded and the timing was found to be inappropriate.
India has refused to acknowledge the validity of the awards and is battling globally in various jurisdictions to resist enforcement. In the meanwhile, the awarded sums with interest have well exceeded a billion USD, proving to be the costliest award against India so far.
India’s recast Investment treaty disputes regime: The aforesaid (and a few other high profile BIT disputes) drove India to reevaluate its BIT regime. In 2015, India declared a new BIT template for future treaties. Inter alia, India’s Model BIT requires the investor to first explore the domestic redressal avenues before approaching the investment arbitral tribunals. If the dispute remains unresolved after five years, the investors may invoke the dispute resolution mechanism under the Treaty. In parallel (from 2016 onwards) India has terminated 77 BITs (due to efflux of time or otherwise). New BITs between India and UK and India and UAE are in the pipeline. Based on its 2015 Model BIT,12 India has signed or agreed upon “Joint Interpretative Statements” with four countries to clarify contentious issues. Attempts are underway to sign similar Statements with other countries.13
India has thus completely recast its investment dispute regime.
VII. Conclusion
India is a large and commercially vibrant jurisdiction, steeped in democratic traditions and the Rule of Law. Its judiciary has historically been independent and routinely rules in favour of foreign litigants or against the government (as warranted).
India is a robust player in international commercial arbitration. Published statistics show India as amongst the top contributors to the workload of leading arbitral institutions. At the same time the Indian Bar is not sufficiently engaged with the international arbitration community and consequently Indians rarely get appointed as arbitrators in international arbitrations.
The Indian Government is working towards India to be recognized as a major arbitration jurisdiction and is keeping the Indian statute updated, in line with the expectations of the global arbitration community. While the Indian legal regime is at par with the best international practices, India needs to tackle the problem of judicial delays for stakeholders to have greater confidence in the jurisdiction.
India has some distance to cover to come at par with the leading arbitration jurisdictions but is earnestly working towards it.
Footnotes
1 The other five nations being Japan, New Zealand, Pakistan, Thailand and Hong Kong.
2 F.S. Nariman: “East Meets West: Tradition, Globalisation and the Future of Arbitration”, LCIA Arbitration International, Vol. 20, Issue 2, page 123.
3 Under Section 29A, a domestic arbitration award is required to be rendered within 1 year of completion of the pleadings (extendable by another 6 months by mutual consent) failing which the time is extendable by the Court upon application by any party. No time-lines are stipulated for an international arbitration.
4 See supra, footnote 3.
5 Article 142 of the Constitution of India reads as follows:
“(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or order so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament and, until pro-vision in that behalf is so made, in such manner as the President may by order prescribe…”
6 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Washington Convention, 18 March 1965).
7 Amongst the major jurisdictions which have not acceded to ICSID are: Brazil and South Africa.
8 India is also not a party to the Energy Charter Treaty.
9 In 1994, India signed its first BIT with UK i.e. the India – UK BIT.
10 The chief reason for delay was that the Supreme Court felt that the matter raised an important issue which should be decided by a Five Judge (Constitution) Bench and it took time for the Court to constitute a Five Judge Bench. In the meanwhile White felt that the delay was unreasonable and invoked the Australia – India BIT.
11 Award rendered on 19th September 2025. Not yet in public realm.
12 Model BIT 2015: (https://dea.gov.in/files/other_reports_documents/ModelTextIndia_BIT.pdf).
13 For further information, please see the Government website: (http://dea.gov.in/bipa).
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