Law in a glance series Ep 1: Arbitration in India

Table of contents

What is arbitration?

What is the law regarding arbitration in India?

What kinds of disputes can be arbitrated?

Kinds of Arbitration

How long does arbitration take?

Step-by-step process

What is arbitration?

When you have a legal dispute, you go to court. That is the expected response from any reasonable man in a healthy, accessible judiciary. However, people are reluctant to approach courts due to long waits and high costs. And the courts are clogged with pending cases and pointless disputes. 

Arbitration is part of alternative dispute resolution (ADR) and provides speedy justice outside courts. They resolve disputes faster due to the flexible proceedings and comparatively informal setting. 

Arbitration, in particular, is the most formal form of dispute resolution. The dispute is referred to a third neutral party known as the arbitrator or an arbitral tribunal. The parties enter the process knowing that the arbitrator’s final decision is binding on both parties. 

What is the law regarding arbitration in India?

In India, arbitration is governed by the Arbitration and Conciliation Act 1996 and section 89 of the Code of Civil Procedure 1908.

What kinds of disputes can be arbitrated?

Before understanding arbitrable disputes, let us know what kinds can only be strictly adjudged in courts. In other words, some of the non-arbitrable disputes include 

• Criminal disputes

• Marital disputes, including guardianship issues 

• Disputes that fall under the rent control statutes 

• Disputes that are a matter of public policy 

Now, let us look at the text of the A&C Act to understand what can be arbitrated. According to section 7, any disputes included in a valid arbitration agreement are arbitrable. In the absence of an arbitration agreement, if both parties want to settle through arbitration, they can enter into an ad hoc agreement. Any dispute that the court itself refers to arbitration is arbitrable. 

The Supreme Court clarified the issue in Vidya Drolia v Durga Trading Corporation. They gave the four-fold test to determine NON-ARBITRABLE matters:

1. When the dispute affects rights in rem 

2. When dispute settlement interferes with third-party rights 

3. When the dispute relates to sovereign functions 

4. When the dispute is statutorily non-arbitrable 

If the answer is yes to any of the above four, then that dispute cannot be arbitrated.  

Kinds of Arbitration 

Type of Arbitration	Basis of Classification	Explanation	Example / Notes
Domestic Arbitration	Territorial (Section 2(2), ACA 1996)	Dispute where both parties are Indian, and the arbitration is seated in India.	A contract dispute between two Indian companies in Mumbai.
International Commercial Arbitration (ICA)	Territorial + Party Status (Section 2(1)(f))	At least one party is foreign, and the arbitration is seated in India.	Dispute between an Indian company and a UK-based firm, seated in Delhi.
Ad Hoc Arbitration	Procedural Arrangement	Not administered by an institution; parties manage proceedings themselves.	Common in government contracts or informal commercial disputes.
Institutional Arbitration	Procedural Arrangement	Administered by an arbitral institution with pre-set rules and a panel.	SIAC, ICC, LCIA, MCIA, DIAC, ICADR, etc.
Statutory Arbitration	Source of Arbitration	Mandated under a specific statute; parties have limited freedom.	Arbitration under the Indian Telegraph Act or the Railways Act.
Fast Track Arbitration	Speed of Resolution (Section 29B)	Time-bound arbitration with simplified procedures; award within 6 months.	Parties must agree to fast-track mode in writing.
Online Arbitration	Technology-based Classification	Entire process is conducted virtually via digital platforms.	Increasingly used for MSME disputes and fintech platforms.
Emergency Arbitration	Urgency / Relief Mechanism	Interim relief sought from an emergency arbitrator before tribunal is formed.	Recognised in SIAC, ICC, not explicitly provided in Indian Act.

How long does arbitration take?

It is different in different cases. But let’s see what the A&C Act says! According to section 29A, the arbitral award should be passed within 12 months after the completion of pleadings. An extension of 6 months may be granted by courts if there is a valid reason for the delay. If the court finds out that the delay is uselessly caused by the arbitrator, it can replace the arbitrator. 

Step-by-step process 

Existence of Dispute Between Parties

  ↓

Arbitration Agreement in Writing (Pre-existing or Post-dispute)

  ↓

Notice of Arbitration (One party invokes arbitration by sending a notice)

  ↓

Appointment of Arbitrator(s)

    • Sole Arbitrator (mutual agreement)

    • 3 Arbitrators (each party appoints one, then those two appoint a third)

    • If no agreement → Party may apply to court (Section 11)

  ↓

Preliminary Hearing / Case Management Conference

    • Set timelines

    • Determine rules of procedure (ad hoc/institutional)

  ↓

Statement of Claim & Defence Filed by Both Parties

  ↓

Framing of Issues by Arbitral Tribunal

  ↓

Evidence Stage

    • Witnesses, documents, expert reports

    • Cross-examination (if required)

  ↓

Oral Hearings (if any) OR Written Proceedings

  ↓

Final Arguments / Submissions

  ↓

Arbitral Award Pronounced (within 12 months from pleadings completion; Section 29A)

    • Binding and enforceable

  ↓

Enforcement of Award (Like a court decree; under Section 36)

    • Can be challenged under Section 34 within 3 months (set aside)