Alternative Dispute Resolution in India: Delving into its Concerns and Challenges


Arbitration, as defined in the dictionary, refers to facilitating an agreement between two parties with differing views on a particular issue. It is a vital component of the Alternative Dispute Resolution (ADR) process that allows parties to avoid the typically lengthy judicial process for dispute resolution. It is a technique employed for resolving disputes outside of the court system, wherein the involved parties submit their dispute to one or more arbitrators, whose decision, referred to as the “award,” the parties agree to abide by, as it entails a binding effect on dispute resolution through individuals or groups. The initiation of arbitration is only possible if an Arbitration Agreement between the parties exists prior to the arising of any conflict. Such an agreement must be in writing, as per Section 7. The arbitration process is designed to resolve disputes expeditiously, conveniently, cost-effectively, and privately, ensuring that the issues are not subject to future litigation. In 1996, the Arbitration and Conciliation Act identified conciliation as an ADR mechanism. Unlike arbitration, it is neither predicated on nor governed by the existence of an agreement between the parties. However, not all disputes are arbitrable, and some fall outside the scope of arbitration, based on the unanimous decision of the Hon’ble Apex Court in BoozAllen and Hamilton Inc. v SBI Home Finance Ltd. Such disputes include criminal offences, parental issues, bankruptcy and winding-up processes, Probate, letters of administration, succession certificates, and the eviction process patents, trademarks, and copyright, antitrust/competition legislation, and anti-bribery and anti-corruption legislation. In India, arbitration and conciliation are the most widely practiced forms of Alternative Dispute Resolution processes. Mediation, negotiation, and judicial resolution can also be used under Lok Adalat. Apart from arbitration, mediation, and negotiation, which are non-binding and not legally enforceable, negotiators retain control over the outcome and process.

Need for Arbitration in India:-

In order to modernise Indian Arbitration law, incorporate it in accordance with predetermined foreign operations, and establish India as a hub for international arbitration proceedings, the Arbitration and Conciliation Act of 1996 was modelled after the UNCITRAL (United Nations Commission on International Trade Law) legal framework. Performing arbitration only makes up a minor portion of all arbitration. There are currently no organisations in India that can compete with global institutions like the ICC (International Court of Arbitration), LCIA, SIAC, HKIAC, and others. As a result, international businesses negotiating business deals with Indian firms typically choose an international arbitration court. The expansion, trade liberalisation, and global economic integration of regional and international business ties have sparked the creation of a quick, efficient, and advantageous method of settling disputes that do not require the parties to go through the time-consuming and resource-intensive process of the traditional administration of justice. Amazon v. Future Retail Limited, 2021, a significant Supreme Court ruling, brought to light the parties’ choice to settle the dispute through arbitration. Funding sources allow firms to use their scarce resources for productive reasons like product development, capacity growth, etc. as opposed to locking cash to pay expensive litigation. Since third-party financing has no associated cost of capital, it raises both the company’s profitability and valuation. Future potential compensation payoffs from litigation are frequently decreased at an IRR that investors are willing to guarantee, creating a situation where everyone wins. Selling the possibility of a claim for a fixed sum of money, coupled with savings on prospective litigation, is very advantageous to a corporation in India because neither contingent liabilities nor contingent assets are represented in financial statements. Although third-party litigation is not currently covered by Indian law, the Apex Court has outlined the legal applicability of TPF in litigation, stating that “there would seem to be no restriction on third parties (non-lawyers) financing the civil suits and being reimbursed after the outcome of the litigation.”

When rapid remedy is required, the urgent arbitrator provision may be invoked; parties did so during the outbreak. However, there is a lot of ambiguity in Indian law about the execution of emergency awards and decisions in arbitrations with Indian seats. The Law Commission of India suggested in its 246th Report that the concept of an emergency arbitrator be recognised by including emergency arbitrators in the scope of the arbitral tribunal under section 2(d) of the ACA. Reliance on technology is another important aspect, and COVID-19 has already changed how arbitration proceedings are handled globally because we have all seen the outbreak. In India, parties and tribunals have also gotten past their initial qualms and welcomed the technology. It is reasonable to assume that technology will continue to play a significant role even after things return to normal.

Concerns & Challenges of Alternate Dispute Resolution in India:-

  • A Handful of Arbitration Attorneys: One of the main problems is the lack of full-time arbitration attorneys. Lawyers routinely schedule arbitrations after trial hours, giving them a lower priority than trial cases. The sessions are brief because they are exhausted from spending a long day in court. Furthermore, if they are in court, they can ask for adjournments and set up arbitration dates if there aren’t any court sessions. A few arbitrators who are also solicitors find it difficult to commit enough knowledge to the arbitration procedures. As a result, there is a need for fully qualified arbitrators and lawyers who can devote a lot of time to the process.
  • Inconsistencies in the Law’s drafting: Before the 2015 amendment, Section 34 of the 1996 Arbitration and Conciliation Act (hereafter “the 1996 Act”) was a challenging invitation since it immediately stopped the implementation of the arbitral ruling when the petition was filed under Section 34. This presented a serious obstacle to enforcing the arbitral decisions. In 2015, the 1996 Act was amended to address this issue. But it took three years to determine whether the Amendment Act applied to pending Section 34 petitions or not since the Amendment Act’s text was so complicated. Even after the BCCI ruling, the parliament passed a new Section 87, which was ultimately struck down in the case of Hindustan Construction Co. Ltd. v. Union of India. A lot of court time was lost in order to clarify these modifications.
  • Standard Practice To Appoint Retired Judges As Arbitrators: It is astounding to learn that the best arbitrators are overworked owing to a lack of options. The reason is, since we forbid the appointment of new arbitrators who are also solicitors, retired judges are frequently chosen. New lawyers should be engaged to arbitrate disputes in order to put an end to this practice. The level of awards will not suffer as a result, making the arbitration process more resilient overall. When there are numerous arbitration hearings, it is typically challenging to maintain the quality of awards. No other government, save for ours, favours choosing only retired judges as arbitrators.
  • Inadequate Legal Protection: The Arbitration and Conciliation (Amendment) Bill of 2021 seeks to amend Section 36 of the 1996 Act and raises a number of concerns, among them the provision for an immediate suspension of the enforcement of the judgement in the event of fraud. This will put us back in the time when arbitral rulings were subject to mandatory stays, which will make it simpler for judgement lenders to avoid their obligations under the verdict. Because the 1996 Act does not define what constitutes fraud or corruption, there is substantial ambiguity. Because of this, a judgement debtor can typically use fraud and corruption to get an unqualified stay of execution on the award. As a result, award compliance will be more challenging, and businesses will find it less convenient to conduct business. Recently, the government has submitted amendment after amendment, proving that issues were not fully addressed and modifications were poorly written. Despite numerous changes, the seat vs. venue conundrum is not resolved by any of the Amendment Acts. Another example is Section 29-A, which violates the rule of limited judicial action enshrined in Section 5 of the Act and can take an appeal more than a year to decide whether to grant a six-month extension.
  • Insufficient Judicial support: Because of the courts’ overburden, we have seen procedural delays. It is impossible to gauge how long a case will take after it enters the Court, which delays the arbitration action. For instance, a Section 34 petition, which deals with a dispute over an arbitral decision, could take a very long time to be resolved. Multiple courts are hearing the petition as an appeal despite unequivocal directives from the Supreme Court that the Court under Section 34 does not sit over as an application and cannot dive into the legitimacy. On numerous occasions, the courts have reconsidered the evidence and given attorneys more time to argue the case’s merits. Another problem is that a number of High Court rulings have been found to have incorrect interpretations. This is due to the impossibility of having a consensus among all Indian courts. In truth, the Supreme Court has made a number of backwards-looking rulings, including ONGC v. Saw Pipes Ltd. As a result, India is portrayed as a nation that is dangerous for capital investments and unfriendly to arbitration.
  • Lack of Understanding of Arbitration Issues: Need for an Arbitration Bar The leaders of the Bar Associations avoid talking about arbitration issues because they are too busy running court cases. It is one of the main reasons why issues with the arbitration process are not brought up or settled. As a result, a Bar is urgently required to address contemporary issues and the difficulties faced by arbitrators.

How can India serve as an Arbitration Centre?

Although opinions about arbitration have changed, we still require a forceful and uplifting approach to arbitration. In order to support the arbitration process and enforce arbitral decisions, courts in particular must take a reasoned approach to “minimal interference and maximal execution.” In order to speed up arbitration and make it even more time-constrained, goal-driven, and professional, the legislature changed the Arbitration Act in 2015 and introduced deadlines. However, significant efforts are needed for India to develop into a “hub.” For instance, Singapore’s legislature has swiftly overturned any contradictory or anti-arbitration decisions within months, sending a clear pro-arbitration message. This offers the certainty, dependability, and security required for a “hub” The government has adopted a similar position, giving substantial focus to improving the economic climate and making India an “arbitration centre.” Therefore, in order to achieve its goal of becoming an “arbitration centre,” it is crucial that the trio of the judiciary, legislative, and administration construct the appropriate location and on-field environment, comparable to cricket. This will demonstrate to the investment community that a strong, efficient, and time-limited dispute resolution procedure is in place. To become an “arbitration hub,” one must preserve awards and respect contract integrity.

Instead of looking for ways to get around or ignore the contract, the strategy must be one of adherence and honour. This will also aid India in improving its ranking for business-friendliness, so it’s undoubtedly advantageous. However, a good conflict-resolution strategy is insufficient. Additionally, it is crucial to reduce the number of phoney conflicts. Unnecessary disputes are frequently referred to arbitration, usually by PSUs, where the arbitrator merely urges the parties to adhere to the terms of the contract. In order for India to realise its dream of arbitration, it is imperative that it adopt a mindset oriented at defending the legitimacy of contractual and arbitral procedures and putting an end to them. Domain and sector specialists who are independent, impartial, and qualified to rule on the issue are necessary for arbitration to succeed. This would deliver much-needed business stability, safeguard the award or contract, and enhance the calibre of decision-making. Courts are hesitant to enforce judgements against the government because they are emotionally and irrationally swayed by nationalism. It is crucial to have an objective mindset and a mentality that is focused on adherence, conformity, and regulation. The answer is to encourage a sense of confidence in arbitral decisions so that a victor may personally reap the benefits of victory. The winner would lose if the gift wasn’t as good as an ATM, providing quick cash and compliance. This will promote trust and a robust arbitration culture for resolving commercial disputes.


A number of arbitration institutes have emerged, and the system has improved. These systems’ functions play a significant part in the improvement of arbitration in the country and the dissemination of information to the general public through numerous seminars. However, centres are not simply made by earning a five-star rating or building infrastructure. Making a structure is not only necessary because effective execution is also important, and adding revisions is insufficient. Other business centres towns like Kanpur, Ludhiana, Lucknow, and others require an arbitration culture as well. The focus must extend beyond Delhi and Mumbai. Making any country appealing to investors requires taking into account a number of factors, including the ease of doing business, the clarity of the criteria, and the application of arbitral awards.  In India, having a strong framework in place to handle business issues is necessary. India must take a contrary posture in order to increase market trust internationally. Stakeholders are not required to appeal decisions made by the Panel when they are well-justified. As the court’s agents, solicitors shouldn’t fight arbitration or make fictitious claims against the judgement to stop it from being executed. The advantages of choosing arbitration over litigation are not widely known. This is due to Indian institutions’ inability to successfully host workshops like SIAC and ICC. Additional public awareness campaigns must be started as a result to raise awareness among the populace. Additionally, it is important to train and promote legal professionals, students, and other community members to take on full-fledged arbitration duties. Other than that, little court involvement is required.

Concluding Remarks:-

Without a doubt, the appropriate tone has been set, and a step in the right direction has been done. However, much more work needs to be done before India can win the “arbitration trophy” and become a city such as Singapore or London. It should be kept in mind that becoming an arbitration “hub” takes time. Government action, judicial and legislative support, and—most importantly—a positive company attitude and environment—must serve as the drive. To create a reliable organisational architecture, a well-planned road map is necessary. A robust institutional structure will automatically activate or launch once such an effective mechanism is in place. The arbitration system requires genuine and significant concept plans including entities, the government, clients, specialists, and investors in order to operate properly and within a specific time frame. To make India an “arbitration centre” and to advance the ease of doing business, a solid foundation is needed. This would ensure resiliency and endurance, which is in India’s best interests and might even open the door for India to become a “destination for arbitration.”

  • Arbitration and Conciliation Act, 1996, s 7
  •  Booz Allen and Hamilton Inc. v SBI Home Finance Ltd. (2011) Civil Appeal No. 5440/2002
  •  Amazon v Future Retail (2021) Civil Appeal No. 4493/2021
  •  Law Commission of India, Amendments to the Arbitration and Conciliation Act 1996 (Law Comm. No. 246 August 2014)
  •  Arbitration and Conciliation Act, 1996, s 34
  •  Board of Control for Cricket in India v Kochi Cricket (P) Ltd. (2018) Civil Appeal No. 2880/2018
  •  Arbitration and Conciliation Act, 1996, s 87
  •  Hindustan Construction Co. Ltd. v Union of India (2019) Writ Petition (Civil) No. 1074/2019
  •  Arbitration and Conciliation (Amendment) Act, 2001, s 36
  •  Arbitration and Conciliation Act, 1996, s 29A
  •  Arbitration and Conciliation Act, 1996, s 5
  •  Oil & Natural Gas Corporation Ltd v Saw Pipes Ltd. (2003) Appeal (Civil) No. 7419/2001
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