Arbitration as one of the mechanisms of solving disputes has a long history in India. There has been considerable development in the legislation dealing with the change, which is adaptable to the current dynamics of commerce and society. The Arbitration Act was passed in the year 1940, which laid down the basic framework of arbitration law in independent India and was then replaced by the Arbitration and Conciliation Act of 1996. Its amendments are showering to mark India’s continuous efforts to be an effective and practical substitute to conventional legal proceedings.
THE ARBITRATION ACT, 1940: A BEGINNING
The first major legislation that focused on arbitration in independent India was the Arbitration Act of 1940. Ironically, it was based on the British Arbitration Act of 1934 And was intended to offer a more exhaustive legal framework for arbitration processes. However, the 1940 Act had a few drawbacks, though. It was extremely legalistic, which caused a lot of judicial activism. It didn’t provide any international arbitration mechanisms while globalisation was gradually becoming a reality.
It was in this regard that critics argued that the 1940 Act provided too much fertile ground for interference of the judiciary in arbitration matters. Some instances included the ability of courts the appoint the arbitrators, participation in the constitution of the tribunal, modification of the arbitrators’ awards, and the enforcement of awards.
THE ARBITRATION AND CONCILIATION ACT, 1996: A PARADIGM SHIFT
The existing system of arbitration lacked the efficiency and modern requirements that were necessary to fill this gap. The Arbitration and Conciliation Act, of 1996, was passed. This Act was revolutionary in Indian arbitration law, especially when compared to the 1940 Act. The 1996 Act has been enacted based on the UNCITRAL Model Law on International Commercial Arbitration. To standardize the arbitration procedures around the globe and to foster international business.
One of the most important changes that occurred with the enactment of the 1996 Act was the limitation of judicial intervention in arbitration matters. The Act dwelled on the concept of procrastination of judicial involvement, which ensures that the parties control the arbitration procedure to a large extent. This act also provided measures for the enforcement and recognition of the foreign arbitral award that were beneficial to conform Indian law to international standards.
The 1996 Act also spelt out the availability of conciliation, which acts as a procedure in handling disputes, the promotion of which is known as the alternative to court procedures. New provisions were introduced to give legal recognition of conciliation where disputing parties in conflict have a neutral third party to assist them in the negotiation process to come up with a solution, they agree on in solving their dispute without having to go to the court of law.
AMENDMENTS AND REFORMS: STRENGTHENING THE FRAMEWORK
Some of the changes that have been made to the 1996 Act include the following: There have been other amendments made to the 1996 Act to cater to some of the rising challenges and to enhance the efficiency of arbitration in India. The more recent and perhaps the biggest change that took place was the passing of the Arbitration and Conciliation (Amendment) Act, 2015. This amendment introduced several key changes, including:
- Time-bound Proceedings: The provision was added by the 2015 amendment, which provides that arbitral tribunals shall make the award within twelve months from the date on which the reference was made to the arbitration proceedings. This was intended to minimize delay and facilitate the arbitration process.
- Interim Measures: The amendment enjoined powers to arbitral tribunals to make orders or give directions referred to in Section 44 as regards injunctions, thus allowing the parties to seek most interim measures they require in arbitration without the need to resort to the court.
- Appointment of Arbitrators: The amendment has provided the procedural framework that allows the appointment of arbitrators and minimizes the intervention of the judiciary in favour of institutional arbitration.
- Costs and Fees: The amendment also made provisions to ensure that the costs of arbitration are reasonable and transparent, with a special focus on the fees of the arbitrators that were determined based on the number of hearings and the time they took on the case.
INSTITUTIONAL ARBITRATION: A GROWING TREND
Out of all the various trends that define the development of arbitration in India, the current focus on institutional arbitration could be regarded as one of the most significant. While ad hoc arbitration is conducted without the involvement of a formal arbitration centre, institutional arbitration is based on arbitration institutions like ICA, MCIA, etc.
Several benefits can be had when choosing institutional arbitration, such as the set of clear rules and practices, professional case management, and access to the list of professional arbitrators. Institutional arbitration has been given significant focus by the Indian government, and measures have been initiated to support it apart from the changes in the 1996 Act.
THE FUTURE OF ARBITRATION IN INDIA
As India remains a domicile for arbitration, the prospects of arbitration in India remain positive due to the ongoing development of the country as an arbitration-friendly nation. The measures to support arbitration as an opted way of dispute resolution are evident from the current reforms and also the setting up of institutions such as the ACI and MCIA.
However, challenges remain. There is inadequate knowledge and information relating to arbitration among business people and lawyers. Further, strong control of foreign investors is exercised in the enforcement of the arbitral awards with special concern for the public sector cases. On occasion, courts have annulled arbitral awards on any grounds that are thought to fall outside the parameters of the relatively narrow judicial intervention contemplated by the 1996 Act.
To assuage these issues, there may be the need for further reforms, which may include coming up with mechanisms for enforcing the award promptly and efforts to set a culture of acknowledging the finality of arbitration. Further, persistent attempts to improve institutional arbitration, along with improvements in training and accreditation of arbitrators, will provide essential key points in the further advancement of a more efficient and credible arbitration system.
CONCLUSION
It may be seen from the following evolution of the arbitration law in India: Arbitration Act 1940 to the present period that there has been a major change in the approach towards arbitration in the country. The reform process has been characterized by measures that aim to deregulate the courts and operate mechanically and about the best practices in the world. However, despite the impediments present, arbitration has developed as one of the potential and upcoming centres for India in recent years by implementing necessary reforms. However, the advancements in the legal sector will be directed towards the improvement of credibility, efficiency, and overall appeal of the arbitration process in India.
Author(s) Name: S M Nawaz Ahmad (Chandigarh University, Mohali, Punjab)
