Authored By: Akanksha Dubey
Amity University, Lucknow
ABSTRACT
India’s view on how arbitration matters are settled has undergone significant changes in recent years. India’s approach to arbitration has undergone a significant transformation over the past few decades. In the earlier period, especially before the 2012 Supreme Court judgment in Bharat Aluminium Co. v. Kaiser Aluminium (BALCO), the Indian legal system was widely seen as interventionist when it came to arbitration. This was mainly due to the influence of the outdated Arbitration Act of 1940, which allowed courts to interfere at nearly every stage of the arbitral process. Even after the enactment of the Arbitration and Conciliation Act, 1996, which was meant to reduce court involvement and bring Indian law in line with international standards, interpretations, particularly in cases like Bhatia International v. Bulk Trading (2002), kept the door open for courts to step in, even in foreign-seated arbitrations. This led to delays, uncertainty, and reduced confidence among international investors and parties choosing arbitration in India1. It was only with the BALCO decision that the Supreme Court took a clear step toward limiting judicial interference by holding that Part I of the 1996 Act does not apply to arbitrations seated outside India. This article revisits that earlier interventionist stance, explores the legal reasoning behind it, and discusses how Indian arbitration law has evolved to become more aligned with global practices.
Keywords: Arbitration in India, BALCO judgment, judicial intervention, Bhatia International case, Arbitration and Conciliation Act 1996, foreign-seated arbitration.
INTRODUCTION
Arbitration has emerged as a widely accepted method of resolving commercial disputes, particularly because of its speed, neutrality, and flexibility. It allows parties to avoid the lengthy procedures often associated with court litigation. Businesses, especially those engaged in cross-border trade, value arbitration for its ability to preserve confidentiality and ensure enforceability of decisions in multiple jurisdictions.
The traditional way of resolving disputes, which is going to court, is a long process that causes unnecessary delays in delivering justice and puts a heavy load on the court system. In this situation, Alternative Dispute Resolution (ADR) methods like arbitration, conciliation, and mediation are very helpful2. These ADR methods are less confrontational and can offer a better alternative to the usual ways of solving disputes.
EVOLUTION OF ARBITRATION AND CONCILIATION ACT IN INDIA
India’s attitude to arbitration has evolved over the years. In the past, particularly the era of the Arbitration Act, 1940, the Indian courts frequently intervened in the arbitrations. Courts were giving their active blessings at virtually every stage of the appointment of arbitrators, the enforcement of awards — and that was creating delay and was defeating the whole purpose. But the act was not could not to show the elements as required its non applicability to the principles of foreign arbitration and most of its clauses are referred to domestic awards and not to foreign award.
In 1996, government structured a new Arbitration and conciliation act, a government of India’s Act to enable domestic as well as international arbitration. The 1985 model code on international commercial arbitration and the 1976 uncitral arbitration rules were referenced3. According to the arbitration and conciliation act,1996 bring about quicker and more effective disputes resolution process. However, it had several shortcoming . One big problem was whether indian courts can interfere in arbitrations which are held outside india, which was not clear. This led to judicial overreach after the bhatia international judgement. The act also allowed for the automatic suspension of awards if they were contested, omitted any timelines for the process, and disallowed the enforcement of arbitrators’ interim orders. Due to these issues, delays occurred, and the goal of arbitration was weakened. In time, subsequent court decisions and updates the process arbitrators’ interim orders are not enforceable. As a result of these issues, there were delays in the arbitration process and weakening of the arbitral objective, which earlier necessitated changes through court decisions, which were subsequently updated.
A key judgment reflecting this earlier approach was Bhatia International v. Bulk Trading S.A. (2002), where the Supreme Court held that ”the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I”.In situations of international business arbitrations held outside of India, the rules in Part I would apply unless the parties, by agreement, either clearly or indirectly, decide to exclude some or all of these rules. In that situation, the laws or rules chosen by the parties would take precedence.Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply4.” This ruling created legal uncertainty and was widely criticized for contradicting the principle of party autonomy.
A significant shift occurred in 2012 with the judgment in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO), where the Supreme Court held that “the provisions of Part I of the Act would also apply to international commercial arbitrations seated outside India, unless the parties had expressly or impliedly agreed to exclude its application”5. This decision marked a turning point, aligning Indian arbitration law more closely with international practices and reaffirming the principle of minimal judicial interference and paved the way to for the 2015 Amendment, which aimed to streamline the Act in line with BALCO principles..The BALCO judgment of 2012 (Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.) marked a much-needed turning point in Indian arbitration law. By holding that Part I of the Arbitration and Conciliation Act, 1996 would apply only to arbitrations seated in India, the Supreme Court embraced the territoriality principle, in line with international practice under the UNCITRAL Model Law.
But while BALCO6clarified a lot, it also brought to light certain practical difficulties. For instance, after BALCO, parties involved in foreign-seated arbitrations could no longer seek interim relief from Indian courts, even if assets or witnesses were located in India. This raised concerns, especially for parties needing urgent protection or cooperation from Indian courts while arbitrating abroad. To address this gap and build on BALCO’s pro-arbitration foundation, the Indian Parliament introduced the Arbitration and Conciliation (Amendment) Act, 20157.The most important changes introduced by the Arbitration and Conciliation (Amendment) Act, 2015 were fixing a time limit of 12 months for completion of arbitral proceedings, as provided under Section 29A.8 This timeline could be extended for an additional six months with the mutual consent of both parties, aiming to promote the timely disposal of disputes and avoid unnecessary delays. Along with the other changes, the 2015 amendment also clarified how parties can seek urgent protection during arbitration. Once the arbitration panel is formed, parties are expected to approach the panel itself for any temporary relief, instead of going to court. This helps reduce delays and makes the process more efficient. Another helpful change was the introduction of a fast-track option for simpler cases. If both parties agree, their dispute can be handled in a quicker and more streamlined way, saving both time and cost.
Moreover, the amendment redefined the role of courts under Section 11, stating that the appointment of arbitrators is a judicial function rather than an administrative one, and should be completed within 60 days from the date of filing of the application. This was in line with the Supreme Court’s earlier observation in SBP & Co. v. Patel Engineering Ltd. 9
A new cost regime through Section 31A was introduced to deter frivolous claims and tactics to delay proceedings. This allowed tribunals to make various cost awards, dependent upon a reasonable and well-structured methodology. The amendment further rendered enforceable the interim orders passed by arbitral tribunals in accordance with Section 17 by placing them at par with the orders passed by courts in this regard. This was essential to ensure that tribunals could grant the necessary relief on an urgent basis and were self-sufficient in doing the same. The changes were viewed as a effort to make India a more arbitration-friendly place, improve delays, and align its framework with international arbitration norms. The amendment tried to strike a healthy balance. It maintained the principle of minimal court interference. However, it also offered flexibility for parties which are trans-border. The shift was suggested to strengthen the autonomy of the arbitral process. Further, it was also aimed at minimizing judicial interference. However, when the above-mentioned suitable amendment was put into practice, it had various problems. In many instances, how and when the new rules would apply wasn’t clear, the strict timelines were often unrealistic in complex cases and the courts still played a central role in many aspects of this process. Also, it lacked an emphasis on enhancing arbitration institutions and automatic enforcement of awards of the tribunals. Although these shortcomings were indeed present within the amendment, it was nevertheless a key point which went on to highlight the weaknesses present and set the stage for reforms in 2019.
In 2019, the shortcomings of the previous acts were addressed, and the major concerns from 2015 were the confusion regarding the applicability of its provisions, especially whether they applied to pending cases. This ambiguity led to inconsistent court decisions until the 2019 Amendment clarified, through Section 8710, that the 2015 changes would apply only to arbitration proceedings initiated on or after 23 October 2015, effectively overturning the Supreme Court’s earlier ruling in BCCI v. Kochi Cricket Pvt. Ltd. [(2018) 6 SCC 287]11. Another issue was the arbitration timeline, which was unrealistic under Section 29A12, which previously began from the date the tribunal was formed. The 2019 Amendment corrected this by stating that the 12-month deadline for making the award would start after completion of pleadings, offering a more practical timeframe and easing pressure on arbitrators. The 2015 Amendment13 also failed to promote institutional arbitration in a meaningful way, relying heavily on courts for appointments. To address this issue, the 2019 Amendment amended Section 1114 and introduced a system where appointments would be made by arbitral institutions15designated by the Supreme Court or High Courts, thereby reducing judicial workload and promoting alternative dispute mechanisms.
Furthermore, the amendment attempted to ensure fairness and accountability in arbitration by introducing the Arbitration Council of India (ACI) under Part IA, tasked with grading institutions and accrediting arbitrators. This was aimed at addressing the lack of uniform standards in the quality of arbitrators and arbitral institutions in India.
The 2019 Amendment16 focused on encouraging institutional arbitration and reducing the role of courts in the process. However, it didn’t address some important concerns, like what happens when an arbitral award is obtained through fraud or corruption, or the overly strict eligibility rules for arbitrators that excluded many foreign experts. To fix these issues, the 2021 Amendment was brought in. It allowed courts to pause the enforcement of awards that appeared to be tainted by fraud and also removed the rigid arbitrator qualification rules, making India’s arbitration system more open, fair, and globally aligned.
After the reforms brought in by the 2015 and 2019 Amendments to the Arbitration and Conciliation Act, arbitration in India became more structured and efficient.
However, some practical and legal gaps still existed, which led to further amendments in 2021, which include the enforcement of fraudulent or corrupt arbitral awards, greater flexibility in appointing arbitrators, etc, which were addressed in 2021 amendment.
The 2021 Amendment17 in the Arbitration and Conciliation Act was introduced to fix a few pressing issues that earlier reforms hadn’t fully addressed. One major change allowed courts to stop the enforcement of an arbitration award if there was clear evidence that it was influenced by fraud or corruption, even before the whole case is reviewed. This was crucial to safeguard public money and ensure fairness. Another significant change was the removal of the strict qualifications for arbitrators, which had limited the appointment of experienced foreign professionals. By doing this, the amendment allowed parties more freedom to select their arbitrators and brought India closer to being a preferred destination for international arbitration.
PRESENT CONDITION OF ARBITRATION IN INDIA – 2025
Arbitration in India is at a crucial crossroads today. Over the years, and notably after the 2015, 2019 and 2021 changes, the country has demonstrated an undeniable dedication to improving arbitration by making it more efficient, transparent, and consistent with international standards. The Courts have also become more friendly to the process of arbitration, largely by doing less by way of unnecessary interference with the process of arbitration, and encouraging the parties to stay with arbitration as opposed to going to court.
Legal overhauls have helped bring more structure, especially in terms of timelines, enforcement powers, and flexibility intended for appointing arbitrators, including foreigners, to the Indian system recently. These steps have made India more approachable for international commercial arbitration. Institutions like the Mumbai Centre for International Arbitration (MCIA)18 and Delhi International Arbitration Centre (DIAC)19 are slowly gaining recognition and trust.
That said, several practical challenges continue to affect the system. Ad hoc arbitration still dominates, leading to inconsistent procedures and delays. Lack of awareness, limited infrastructure, and a shortage of well-trained arbitrators and institutional staff—especially outside major cities—hold back the full potential of arbitration. The Arbitration Council of India (ACI), though envisioned as a regulatory body, is still not fully operational, and concerns remain about how independent such institutions will truly be from government influence.
In summary, India has made important moves in the right direction, but to become a real global arbitration centre, there is an urgent need to improve institutional ability, invest in training, and build trust in the system through steady and clear practices.
CONCLUSION
The development of arbitration law in India has been largely inspired by the increasing demand for a more efficient, informal, and practical method of resolving disputes. When the Arbitration and Conciliation Act was enacted in 1996, its primary aim was to modernize outdated legal structures and align Indian law with international standards, notably the UNCITRAL Model Law.However, the implementation faced significant challenges, including excessive court interference, jurisdictional disputes, and general delays in processes.
Key court judgments, such as Bhatia International and BALCO, redefined the role of Indian courts in foreign arbitrations and instigated essential amendments in 2015, 2019, and 2021. These reforms introduced crucial changes like strict timelines for arbitration completion, enforceability of interim measures ordered by tribunals, the removal of automatic stays on awards, and a push towards institutional arbitration. These measures have been instrumental in advancing India’s arbitration landscape towards a more robust and reliable system.
Despite these positive legislative initiatives, the real success is contingent on consistent application by courts, legal practitioners, and arbitration institutions. The ongoing reliance on ad hoc arbitration and the incomplete operationalization of the Arbitration Council of India highlight the need for further institutional development.
Nevertheless, India is steadily evolving into a more arbitration-friendly environment. With heightened awareness, improved judicial discipline, and supportive policies, arbitration is transforming from a secondary dispute resolution method into a preferred choice for addressing complex commercial disputes, both within the country and internationally.
Presently, arbitration is recognized as an effective mechanism for resolving commercial conflicts in India, backed by progressive legal amendments and a judiciary that emphasizes party autonomy. This shift from a court-centric legal framework to a more arbitration oriented approach underscores India’s commitment to fostering a more efficient and investment-friendly legal landscape.
REFERENCE(S)
1 Avtar Singh, Law of Arbitration and Conciliation (11th edn, Eastern Book Company 2018).
2 SCC Online Blog, ‘The Evolution of Arbitration Law in India’(2020) https://www.scconline.com/ accessed by 1 July 2025.
3 United Nations Commission on International Trade Law, UNCITRAL Model Law on International Commercial Arbitration 1985 https://uncitral.un.org/en/texts/arbitration/modellaw/commercial_arbitration accessed 6 July 2025.
4 Bhatia International v Bulk Trading S.A (2002) 4 SCC 105
5 Bharat Aluminium Co. v Kaiser Aluminium Technical Services Inc (2012) 9 SCC 552. 6 LiveLaw, ‘BALCO Judgment: Explained’(2020) https://www.livelaw.in/top-stories/balco-judgment-explained 2020 accessed by 3 July 2025
7 Law Commission of India, Report No 246: Amendments to the Arbitration and Conciliation Act 1996 (August 2014) https://lawcommissionofindia.nic.in/reports/report246.pdf
8 Arbitration and Conciliation (Amendment) Act 2015 (India).
9 SBP & Co. v. Patel Engineering Ltd (2005) SCC 618
10 Arbitration and Conciliation Act 1996, s 87
11 Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd (2018) 6 SCC 287
12 Arbitration and Conciliation Act 1996,s 29(a)
13 Arbitration and Conciliation (Amendment) Act 2015 (India)
14 Arbitration and Conciliation Act 1996,s 11
15 Ministry of Law and Justice, Report of the High-Level Committee to Review the Institutionalisation of Arbitration Mechanism in India (2017) https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf accessed 6 July 2025.
16 Arbitration and Conciliation (Amendment) Act 2015 (India)
17 Arbitration and Conciliation (Amendment) Act 2021 (India)
18 Mumbai Centre for International Arbitration, ‘Rules and Reports’(MCIA rules 3rd edition, 1 May 2025 )https://mcia.org.in/ accessed on 3 July 2025
19 Delhi International Arbitration Centre, Case Management and Rules https://dhcdiac.nic.in/ accessed on 3 July 2025
