By Sachika Vij

Published On: September 30, 2021 at 14:37 IST


India seems to hold the position of a strategic player in the international market today. It also has emerged as a hub for innumerable companies to join hands and a recipient of investments from the outside world since India has a market that caters to a large and diverse set of populations. Not only this, Business potential in India too is tremendously improving which can be supported by the fact that in the first three months of FY 2021-22 ($17.57 billion), India’s FDI equity inflow increased by 168% compared to the previous year ($6.56 billion)[i].

The Growing influx of big companies into India opens with it a plethora of possibilities of agreements and discussions at times even leading to disagreements and conflicts and such business models demand a need of an efficient dispute redressal mechanism. Alternative Dispute Resolution or ADR opens up the gateway of an effective dispute-solving mechanism.

Though ADR mechanism compromises arbitration, mediation, conciliation, mediation-arbitration, mini-trial, private judging, final offer arbitration, court-annexed ADR, and summary jury trial. This blog is written to address the importance and growing significance of one such Alternative Dispute Mechanism i.e Arbitration.

Knowing Arbitration

Arbitration can be described as a tool through which parties via an agreement (generally predetermined) can choose to solve their dispute without actually moving through the formal apparatus of court proceedings. It is usually called an out-of-court settlement.

One of the eminent jurists Nani Palkhivala had said, “If the law is not to be a system of tyrannical rigidity, but instead to be the efficient and useful servant of a changing society, it must from time be adapted and parts of it replaced. A court of law is like an ancient castle, constantly under repair. There comes a time when it no longer pays to patch it up and it is better to resort to a new, compact house built on modern lines”.

One must also note the reasons why Arbitration is chosen over other judicial methods.

Firstly, cases in the conventional court system go for years and years, therefore through arbitration, the parties can choose to speed up the discovery process, especially in lower-value disputes, and have a hearing within 3-5 months. This gives the process certainty as well as closure.

Secondly, the judge in the judicial system is picked at random. He or she may not have dealt with specific business or real estate issues before. The parties in arbitration can pick who will arbitrate their dispute. This has a variety of benefits.[ii] Arbitration allows the parties to choose an arbitrator who has specialized skill and experience in the area of their disagreement.

Lastly, confidentiality is an important and worthy aspect of the arbitration mechanism. It allows the parties to solve their dispute behind closed doors. The public is welcome to attend court sessions and trials, and most court records are open to the public. It can be beneficial for firms that don’t want to broadcast their disagreements in public.

Arbitration under the realm of Indian Laws

In India, arbitration was at its earliest governed by the Act of 1940 and provided ample opportunities for parties to approach the courts. With time in and around the 1960s, India on the lines of the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration and the Arbitration Rules of the United Nations Commission on International Trade Law 1976 came up with Arbitration Act 1966.

Its core objectives were to fill the loopholes of the existing Act of 1940 and to reduce the function of courts as supervisors in the arbitral process and ensure that every final arbitral decision is enforced as if it were a Court order.

Though the Act of 1966 brought some uniformity in the nation, it came to be replaced by the Arbitration and Conciliation Act 1996[iii] which stipulated speedy recourse to litigants and encompassed international and domestic commercial arbitration and conciliation.

Since its inception, the 1996 Act faced various challenges with the courts revealing what the legislation’s true objective was. Through a series of historic judgments (like the landmark judgment of Bharat Aluminium Co.), the courts have tried to interpret the intent of this Act.

Although the Amendments made in 2015addressed many concerns, others remained in the arbitral process, one of which was the lack of an institutional arbitration culture in the nation, since most arbitrations were ad hoc.

Furthermore, in 2019, the Arbitration Council of India was formulated on the lines of the suggestions of Justice B.N Srikrishna committee. The Amendments introduced in 2019 gave more transparency to the Arbitration Related Laws in India. Its most talked-about feature remains to be that a person shall not be qualified to be an arbitrator unless he is an advocate within the meaning of the Advocates Act, 1961 having ten years of practice experience as an advocate.[iv]

Arbitration and India in the Post Covid Era

The horrendous Covid-19 infection brought with it new-fangled quandaries and established a new-normal virtual setting for the whole world. Like everything, arbitration also shifted to be conducted via the panes of our laptops and mobiles relying on video conferencing as the ultimate door for redressal. The mighty and apex Supreme Court extended the period of limitation in arbitration in all proceedings before any court or any tribunal from March 15, 2020, until further orders were passed.

The advent of the Indian Council of Arbitration promulgated the institution to look into the day-to-day realms of the Arbitration Proceedings. The regulations of ICA deemed to stand abreast with the unwelcomed changes brought by the Covid-19 pandemic which stated that The Arbitral Tribunal has the authority to hold arbitration hearings by video conference, telephone, or other methods of communication[v].

Looking into the bigger picture at hand even the Arbitration Act, 1996 allows the Arbitral Tribunal to determine the case only based on pleadings, papers, and submissions, rather than having to have an oral hearing. Though online video conferencing medium[vi] has its complexities like maintenance of decorum, bulk file transfers, etc but with time even solutions can be sought out and Arbitration in this new social distancing mode can be made more effective and provide fruitful results.


India in my eyes is a nation of intellectual brains. With the Covid-19 pandemic and amidst this social distancing transitioning lives, the establishment of a robust arbitration institution with its own rules, guidelines, and facilities would ensure procedural uniformity and keep the core judiciary out of arbitration issues.

An overarching arbitration council could set up its agencies to manage things like arbitrator nominations, and it could do it faster than the traditional judicial system. Measures should be put in place to limit the number of awards that may be appealed to national courts. This would relieve some of the pressure on an already overburdened judicial system.

Liberalizing the legal services will pave an important step to the growth of Arbitration in India, wherein foreign nationals would also be a part of this regime creating better and quality job opportunities and result in increasing Foreign Direct Investment in return promoting exclusive growth of the economy.

Thus, there can be a long road ahead to set up and expand the Arbitration Regime in our nation. It must be a flexible, lucid, and most importantly a neutral dispute resolution mechanism that can thrive, help and nourish our existing legal system.


This article is written by Sachika Vij , a student, studying at Dr. Ram Manohar Lohiya National Law University, Lucknow. The Author is in her first year and has recently started her law school journey.  She owns a keen interest in understanding and penning down her opinions and has a special interest in getting adept at writing and blogging.

Edited by: Aashima Kakkar, Associate Editor, Law Insider

[i] Welcome to department of commerce, G. of I. (2021, August 31). FDI equity inflow grows by 168% in the first three months of F.Y. 2021-22 (US$ 17.57 billion) compared to the same corresponding period last year (US$ 6.56 billion). (Last Visited on September 29, 2021)

[ii] Mohit Khullar Head of Commercial and Contracts with SMEC & Prachika Agarwal, C. S. lawyer, Future of arbitration: A world view with an Indian perspective and the need for a new normal life (Last Visited on September 29, 2021)

[iii] -, A. V., By, -, Verma, A., & here, P. enter your name. (2020, March 28). Arbitration Law in India with reference to Arbitration Act, 1996. (Last Visited on September 29, 2021)

[iv] The Law Point (TLP). (2020, June 12). Brief History of Arbitration in India. (Last Visited on September 29, 2021)

[v] Alok Jain, D. J. Arbitration in the time of COVID-19. (Last Visited on September 29, 2021)

[vi] Gupta, A. (2021, July 10). Plagued by delays and rising costs, arbitration in India needs urgent attention. (Last Visited on September 29, 2021)

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