Arbitration Procedure in India: A Step-by-Step Guide to Arbitration Process, Legal Framework, and Enforceability – All you need to know about it.

Introduction:-

Arbitration is now applicable beyond just multinational agreements or major companies. It has become essential for addressing various conflicts including those related to infrastructure and intellectual property, as well as shareholder disputes and international trade. Arbitration in civil disputes is also crucial, especially in cases related to private rights, responsibilities, and ownership. Indian legislation allows for the arbitration of civil disputes that pertain to contracts or are otherwise suitable for arbitration. Therefore, Grasping the arbitration process is important not just for legal experts but also for businesses, private parties, and organizations that often face disputes needing a definitive resolution. The effectiveness of arbitration in India relies not only on its legislative advancements but also on its capacity to harmonize the demands of business efficiency with legal conclusiveness, as well as the safeguarding of individual civil liberties with fair procedures.

Meaning :-

ADR stands for Alternative dispute resolution which is accompanied by The arbitration and conciliation Act, 1996. According to sec 2(a), arbitration means any arbitration whether or not administered by permanent arbitral institution.[1] To begin with, an award is characterized as a conclusion or ruling, referring to an act that resolves a disagreement and consequently concludes the matter.  According to the Arbitration and Conciliation Act of 1996, parties have the liberty to decide on the procedures and selection of arbitrators, including their nationality. If there is a dispute or a failure to agree, the Supreme Court or High Court (or their appointed authorities) step in to facilitate prompt and unbiased appointments. The courts must act quickly, ideally within a span of 60 days, and they may establish regulations concerning arbitrator fees in domestic situations.[2]

Definition under section 2(a) includes both

1. Ad hoc arbitration :-  Ad hoc arbitration takes place without the involvement of any arbitral institution. The parties are in charge of overseeing the complete arbitration process, including the selection of arbitrators and the determination of procedural rules.
2. Institutional arbitration :- Institutional arbitration is managed by an arbitration institution that offers a structure of established rules, panels of arbitrators, and administrative assistance during the entire process. Ex. – ICC .

DIFFERENCE BETWEEN ARBITRATION AND LITIGATION?

BASIS	ARBITRATION	LITIGATION
Meaning	In India, the Arbitration and Conciliation Act, 1996 regulates arbitration. Due to its confidentiality, specialized knowledge, and restricted avenues for appeal, arbitration is commonly utilized in commercial disputes.	Litigation is the official procedure for settling disagreements via the court system, in which a judge (and occasionally a jury) makes decisions based on legal standards, evidence, and procedural rules.
Definition	It is defined in section 2(1) (a) of the arbitration and conciliation Act as arbitration means any arbitration whether or not administered by permanent arbitral institution.	It is the legal which is not defined in any code.
Nature	Arbitration is characterized by its private, consensual, and quasi-judicial nature. Although it is a private process, the outcome results in a legally binding arbitration award, which can be enforced in the same manner as a court judgment under the Arbitration and Conciliation Act, 1996.	Litigation is inherently a public, structured, and adjudicative process. It involves a state-managed procedure where conflicts are presented to courts founded on constitutional and statutory laws. The litigation process adheres to a defined hierarchy and set of procedures, with decisions rendered by unbiased judges who are appointed by the state.
Authority	In arbitration, the involved parties have the freedom to choose arbitrators, frequently opting for individuals who possess expertise in the relevant subject matter.	In legal disputes, the state appoints judges, and the involved parties do not participate in choosing the decision-maker.
Privacy	Arbitration processes are private, safeguarding trade secrets.	Litigation is typically transparent, with court proceedings.
Appeal or  Request and Definitiveness	It can be challenged only under section 36.	There are multiple level, The supreme court’s decision is final decision.
Case reference	As said in Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. & Ors.  The Supreme Court differentiated between disputes that can be arbitrated and those that cannot, stating that only disputes related to rights in personam (individual legal rights) are eligible for arbitration.[3]	As said in T.V. Venugopal v. Ushodaya Enterprises Ltd.  This case highlights that courts adhere to established procedures and must ensure that both parties have a complete opportunity to present their case, honoring the principles of natural justice.[4]

IMPORTANCE OF ARBITRATION FOR BUSINESSES AND INDIVIDUALS :-

1. Arbitration offers companies a quicker resolution to conflicts, eliminating the unpredictability that can hinder operations. A Law Blend study indicates that conventional litigation frequently lasts for several years and can incur expenses of ₹10–50 lakh, whereas arbitration usually settles issues within 12–18 months for ₹5–20 lakh—resulting in potential cost reductions of up to 60%. This swiftness and predictability are vital for maintaining business progress.[5]
2. It has become more than just an institution; it is a symbol of hope, where conflicts that may otherwise spiral into crisis are brought to the table for reasoned discussion and resolution.[6]
3. Arbitration, especially in an international context, builds trust among investors and overseas businesses.

In the matter of South Delhi Municipal Corporation v. SMS Limited,  In this ruling, a panel of Justices Surya Kant and N. Kotiswar Singh highlighted the importance of clarity in creating arbitration clauses, recommending that courts eliminate ambiguous language from the beginning and warning legal practitioners that they might incur personal liability or face penalties in severe situations.[7] 

1. The arbitration is not mandatory in regulated disputes allows individuals to assert their statutory rights (such as claims for damages or compensation) without facing legal obstacles. As said in Smt. Manjula & Others v. Shriram Transport Finance Company Ltd. & Others, [8] The court held that The interim orders and arbitration cases (Arb. Cases Nos. 1032/2019 & 1033/2019) were annulled.The court instructed the Director General of Police to designate a senior officer to look into the vehicle confiscations. The Court determined that the writ petition was valid, despite Shriram being a private entity, due to the misuse of legal procedures . A report was to be presented within a period of six weeks. Where as court found that Unilateral nomination breached Sections 21 and 11 of the Arbitration Act. The court by Issuing an order on 12 July prior to the formal appointment constituted jurisdictional overreach and a procedural violation. The court highlighted that simply being named in a Section 21 notice is insufficient; there must be mutual agreement or a formal appointment made under Section 11.

 “An individual named as an Arbitrator  cannot enter the reference and issue orders without consent from the other party, or without a formal order appointing the Arbitrator  under Section 11.”  

LEGAL FRAMEWORK GOVERNING ARBITRATION PROCEDURE IN INDIA

This legislation drew inspiration from the UNCITRAL Model Law on International Commercial Arbitration from 1985, ensuring alignment with international best practices.

Objectives of the Act – The 1996 Act was introduced with the following primary goals:

• To limit judicial involvement in arbitration processes.
• To guarantee the autonomy and adaptability of parties in arbitral procedures.
• To affirm the conclusiveness and enforceability of arbitration awards.
• To enhance India’s reputation as a jurisdiction favourable to arbitration.
• To harmonize Indian legislation with the UNCITRAL Model Law and international agreements.

Provision under the arbitration and conciliation act are as follows:-

The arbitration and conciliation act has been categorised into these parts based on their nature of the working. These parts are as follows:-

Part I – Arbitration and International Commercial Arbitration based in India

Part II –  Implementation of Foreign Arbitral Awards (under the New York & Geneva Conventions)

Part III- Conciliation (non-adjudicatory resolution of disputes through amicable means) 

Part IV –  Various provisions, powers, and authority to create rules

Under Part 1 :-  Arbitration:-

1. Sec 2 defines the definition used under the Act – Some important definition are as follows:-
2. Sec 2 (1) (a)  defines arbitration which means any “ any arbitration, regardless of whether it is managed by a permanent arbitration institution”.
3. Sec 2(1) (d) is defined as arbitral tribunal which means a sole arbitrator or a panel of arbitrators.
4. International commercial arbitration refers to an arbitration process concerning disputes that arise from legal relationships, whether contractual or otherwise, that are deemed commercial according to the prevailing law in India, it is defined in section 2 (1) (f)  of the arbitration and conciliation Act, 1996 which defines the International commercial arbitration, which says that at least one party is
   1. an individual who is a citizen of India or resides in India
   1. a corporate entity that is incorporated outside of India; or
   1. an association or collective of individuals whose primary management and control occurs in any country other than India; or
   1. the government of a foreign nation;

Under Part 2 :- Arbitration Agreement

• Section 7 of the Arbitration and Conciliation Act outlines the definition of an arbitration agreement, which is also described in section (2) (1) (b)

An arbitration agreement refers to a mutual understanding between the parties to resolve all or specific disputes that have arisen or may arise between them concerning a legal relationship, irrespective of whether these disputes are part of a contract. An arbitration agreement can exist as either a clause within a contract or as a standalone agreement.

1. It should be in writing.
2. An arbitration agreement is in writing if it is contained in-
3. a document signed by the parties,
4. an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement,
5. an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
6. The mention of an arbitration clause in a contract.

• Under Section 8 is defined under arbitration and conciliation act, 1996  as Power to refer parties to arbitration where there is an arbitration agreement :

A judicial authority that is handling a case related to an issue governed by an arbitration agreement must, at the request of a party submitted no later than with their initial statement of the dispute, refer the parties to arbitration.

Criteria for application :-

1. acknowledged if it is accompanied by the original arbitration agreement or
   1. A certified duplicate.

Proceedings :-

• Presently before the judicial body,
• Arbitration can still be initiated or continued,
• Arbitral award may still be granted.

1. Under section 9 is defined under arbitration and conciliation act, 1996 Interim measures etc. by Court  :-

A party may request a court, either before or during arbitral proceedings, or anytime after the arbitral award has been made but prior to its enforcement under section 36

1. To Appoint a guardian;
2. For a minor or
3. an individual deemed of unsound mind specifically for the purpose of arbitral proceedings;
4. To Grant an interim protective measure concerning any of the following issues, namely:
5. The preservation, temporary custody, or sale of any goods that are encompassed by the arbitration agreement;
6. Securing the amount at stake in the arbitration;
7. The detention, preservation, or inspection of any property or item that is the focus of the arbitration dispute or allowing for any necessary parties to enter land or buildings currently held by any individual,
8. Permitting samples to be collected, observations to be made, or experiments to be conducted that may be essential for acquiring comprehensive information or evidence;
9. To Issuing an interim injunction or appointing a receiver;
10. Any other interim protective measure that the court deems just and convenient,
11. The same authority to issue orders as it does in relation to any of its proceedings.

V.  Section 11 :- Appointment of arbitrators :

The section 11 of arbitration and conciliation act defines the appointment of arbitrators  The Parties are allowed to determine the process for selecting an arbitrator. In the absence of an agreement:

• 3 arbitrators → each side selects 1; both sides choose the 3^rd.
• 1 arbitrator → requires mutual consent.

If the parties are unable to agree :-

• For domestic arbitration: the High Court makes the appointment.
• For international arbitration: the Supreme Court is responsible for the appointment.

The court merely verifies the existence of the arbitration agreement (Section 11(6A)). It must confirm the arbitrator’s impartiality and qualifications.

VI.  Sec 12:-  Grounds for challenge :

The Section 12 of the Arbitration and Conciliation Act, 1996 specifies the grounds for challenging the appointment of an arbitrator. It mandates that an arbitrator must disclose any circumstances in writing that could raise legitimate concerns about their independence or impartiality, or might affect their ability to complete the proceedings within the designated timeframe (usually 12 months) before they accept the appointment. A party has the right to contest an arbitrator’s appointment if such concerns exist or if the arbitrator lacks the qualifications that both parties have agreed upon.

• The Fifth Schedule of the Act lists the situations that might create such doubts,
• while the Seventh Schedule outlines the criteria that disqualify an individual from serving as an arbitrator. Notably, if a person is categorized under the Seventh Schedule, they are ineligible for appointment as an arbitrator, and any recommendation for another arbitrator by them is considered invalid.

VII. Section 16 : Competence of arbitral tribunal to rule on its jurisdiction :-

Section 16 of the Arbitration and Conciliation Act, 1996 encapsulates the principle of “Kompetenz-Kompetenz,” signifying that the arbitral tribunal is empowered to determine its own jurisdiction. This encompasses the ability to address challenges regarding the existence or validity of the arbitration agreement.

• Any claim that the tribunal lacks jurisdiction must be presented no later than when the statement of defence is submitted,
• Any assertion that the tribunal is overstepping its authority must be made as soon as the issue arises.

Benefit of doubt:-

• Nevertheless, the tribunal may accept a late plea if it finds the delay justified.
• If the tribunal dismisses the plea and proceeds with the case, it retains the authority to issue an award, which can subsequently be contested under Section 34. This rule ensures that arbitration proceedings are not unnecessarily postponed due to jurisdictional challenges and supports the independence of the arbitral process.

VIII.  Section 17:  Interim measures ordered by arbitral tribunal

Section 17 effectively gives the arbitral tribunal significant authority, they can issue interim orders while the case is ongoing. This includes actions like freezing assets, restricting cash flow, ordering someone to refrain from certain actions, or potentially appointing a receiver.

 Since the amendment in 2015, these orders carry the same weight as a court’s decision; they are not merely recommendations. So, the tribunal is actively engaged in maintaining fairness while the parties are in dispute.

IX.  Section 19:- Determination of rules of procedure.

Secton 19 is referred in the chapter 5 which describes the conduct of arbitral proceedings, This provision codes that The arbitral tribunal is not bound to the provisions of the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872 /BSA -2023.

The parties have the liberty to agree on the procedures that the arbitral tribunal will follow during its proceedings. If there is no agreement, the arbitral tribunal  carry out the proceedings in a manner it deems suitable.

The arbitrating tribunal’s power includes the capability

• To determine the admissibility,
• relevance,
• importance, and
•  value of any evidence submitted.

X. Section 23 :- Statement of claim and Defence

This section is also defined in chapter 5^th  where as it describes the statement of claim and Defence in arbitration proceedings . Within the time limits set by the parties or established by the arbitration tribunal, the claimant is responsible for presenting the underlying

• facts of their claim,
• detailing the relevant issues, and
• clarifying the relief or remedy they seek

The respondent must provide their defense concerning these aspects unless the parties have agreed on alternative requirements for these statements.

Elements:-

•  May attach any documents,
•  Relevant to their statements, or
• May refer to evidence or documents they plan to present later.

Amendment into the provision:-

The 2019 Amendment established a deadline of six months for finalizing the pleadings starting from when the arbitrator gets the notice of their appointment. This provision guarantees clarity, organization, and prompt advancement in the arbitration process.

XI.. Section  24 :- Hearing and written Proceedings

This section says that Unless the parties agree to different terms, the arbitral tribunal will decide whether to hold oral hearings for the presentation of evidence or oral arguments, or if the process will rely exclusively on documents and other materials.

• The arbitral tribunal is required to hold oral hearings at a suitable stage in the proceedings,
• If a party requests it, unless the parties have together consented to skip oral
• hearings.

Notice-

This section guarantees that all involved parties receive adequate prior notification of hearings and any examination of documents, goods, or property.

Principle –

 It supports the principles of natural justice and fair hearing in arbitration cases

Case- Sukhbir Singh vs. M/s Hindustan Petroleum Corporation Limited, The Delhi High Court determined that the provision in Section 24(1) indicates a legislative preference for allowing oral hearings at the request of either party, unless there is a prior agreement between the parties that waives the right to demand oral evidence or arguments.[9]

XII. Section 26 defines the appointment of experts..

XIII. Section 28 – Rules applicable to substance of dispute.

This section is defined in chapter 6^th which is Making of arbitral award and termination of proceedings. This section is divided between three parts which are as follows –

1. If the arbitration location is in India,
2. In international commercial arbitration:
3. All cases.

The explanation for the following parts are as follows.

1.  The arbitration location is in India :- For arbitrations that are not international commercial arbitrations, the arbitral tribunal will resolve the dispute presented for arbitration based on the substantive law currently in effect in India.
2. In international commercial arbitration : The tribunal will utilize the legal rules specified by the parties involved. In the absence of such specifications, the tribunal will apply the legal rules it deems suitable, taking into account the specifics of the case. (Section 28(1)(b))
3. All cases :-  The tribunal is required to make a decision based on the contractual terms and consider the trade practices relevant to the transaction. (Section 28(3))

Case law :-

Delhi Airport Metro Express Pvt. Ltd. V. DMRC, The supreme court held that Arbitrators are required to adhere to the explicit terms of the agreement and cannot alter or disregard them.  Under Section 28(3) The tribunal is obligated to follow the contractual terms and the current commercial practices.[10]

XIV.  Section 30 : Settlement:-

1. To promote the settlement by arbitral tribunal –

It is compatible with an arbitration agreement for an arbitral tribunal to promote the resolution of the dispute, and with the consent of the parties, the tribunal may employ mediation, conciliation, or other methods at any point during the arbitral process to facilitate settlement.

• Settlement during Proceedings of the court

If the parties reach a settlement during the arbitral proceedings, the tribunal must conclude the proceedings and, upon the parties’ request and without objection from the tribunal, document the settlement as an arbitral award on agreed terms. An arbitral award on agreed terms shall have the same status.

Section 31 :- Forms and content of arbitration:-

The section 31 are as follows:-

Duly Written and Signed – Section 31(1) and (2) :-

1. An arbitration award must be documented in writing and must be signed by the members of the arbitration panel.
   1. In arbitration cases involving multiple arbitrators, the signatures of the majority of the arbitral tribunal members will suffice, provided that the reason for any missing signature is explained.

Limitation:-

1. Execution and delivery:-

The date on which the signed award is executed and delivered is vital because According to Section 34(3), a party is required to submit a challenge to the award within three months (which can be extended by an additional 30 days) from when they receive a signed version.

• A pronouncement of an award that is either unsigned or made orally does not initiate the time limitation for filing a challenge.
• Grounds for setting aside :-

If the award fails to include reasons and there is no explicit waiver by the parties, it can be subject to dispute under Section 34(2)(a)(iv) (i.e., not compliant with the Act).

• This type of defect must be contested within the specified time frame, which is 3 months from the date of receipt as outlined in Section 34(3).

Reason under Section 31(3) :-

The arbitral award must provide the rationale for its decision, except in cases where (a) the parties have consented to the absence of reasons. Or

(b) the award is an arbitral award made on mutually agreed terms as specified in section 30.

Date, Stamp duty and registration under.  Section 31(4),(5), (6):-

1. Section 31 (4) he award has been granted, a signed version must be provided to each party. The delivery of the signed award is crucial to Initiate the deadline for lodging objections according to Section 34. It Enable parties to commence enforcement as per Section 36.
   1. Sec 31(5) states that While not explicitly stated in this section, Indian law mandates that any award impacting immovable property must be stamped and registered. The Failure to comply may cause the award to be unenforceable until the issue is resolved.
   1. Sec 31(6) states A tribunal can issue interim, partial, or final awards addressing various facets of the dispute.  For instance: A decision on liability can be rendered first, with a subsequent ruling on the amount of damages.

Interest under (7)

This section is the most frequently disputed aspect of Section 31. It outlines the regulations for pre-award and post-award interest.

• Pre-award interest:

The tribunal has the authority to apply interest at a rate it considers reasonable on the entirety or a portion of the amount, for the entire time period from the cause of action to the date of the award.

• Post-award interest:

Unless the tribunal instructs otherwise, the award will accrue interest at a rate 2% above the prevailing interest rate, starting from the date of the award to the date it is paid. For example – The Current rate of interest = as specified in the Interest Act of 1978.

Case law :-  As said in Vedanta Ltd. v. Shenzhen Shandong Nuclear Power, [11] The supreme court established that a tribunal can amend or remove post-award interest according to Section 31(7)(b), and that parties are not entitled to an automatic 18% unless the tribunal does not address it. Furthermore, CCCL v. STPI

Judicial bodies are unable to overturn awards by using an alternative interpretation of the contract, provided that the tribunal’s perspective is within the realm of reasonable possibility[12].

Sec 34. Application for setting aside arbitral awards.

Section 34 outlines the sole means for contesting an arbitral award in court on specific grounds such as:

• Lack of capacity of a party
• Non-valid arbitration agreement
• Inadequate notice or chance to present one’s case
• Award exceeding the limits of the arbitration agreement
• Breach of India’s public policy

The Judicial power has traditionally been limited to either confirming or annulling the award, with modifications or alterations deemed outside its scope.  The Actions taken under Section 34 are brief and summary, emphasizing procedural legality and fairness instead of the merits of the case. In case of  Gayatri Balasamy versus M/s ISG Novasoft Technologies [13] The supreme court with the ratio of 4:1 majority Contended that the statutory powers outlined in Section 34 do not encompass the authority to alter awards; such modifications jeopardize finality and the autonomy of the parties involved.

Finality

Section 35 – Finality of arbitral awards :-

Section 35 establishes the finality and mandatory nature of arbitral awards, thereby emphasizing that arbitration serves as a definitive and alternate means of resolving disputes. It highlights the legal authority of an arbitral award, guaranteeing its enforceability while restricting additional legal proceedings. The finality of the award is not definitive. It is governed by the stipulations of Part I of the Act, particularly:

• Section 34 – Reasons for contesting an arbitral award on specified grounds.
• Section 37 – Appeal from rulings that annul or deny the annulment of the award.
• Section 36 – Requirements for enforcement.

Therefore, an award becomes genuinely final and enforceable only when No challenge occurs within the designated limitation period, or  A challenge has been initiated and adjudicated without success. The Allahabad High Court, in its ruling in U.P. Jal Nigam (Urban) and Anr v. Spml Infra Ltd., has reiterated that the revised Section 36 of the Arbitration and Conciliation Act, 1996, as implemented by the 2015 amendment, has a prospective application. This indicates that the updated provisions apply solely to arbitration cases that were initiated on or after the date the 2015 amendment took effect.[14]

Section 36 :- Enforcement –

Section 36 regulates the execution of arbitral awards. It specifies that an arbitral award shall be executed as though it were a court decree, with consideration for any ongoing or resolved challenges under Section 34.

• Section 36(1)- If the period for contesting under Section 34 has lapsed without any application being made, the award will be enforced as though it were a decree from a civil court. In the event that a Section 34 petition is submitted and subsequently rejected, the award can also be enforced in a similar manner.
• S. 36(2) – A party disputing the award must submit a distinct application requesting a stay of enforcement. The court has the discretion to grant a stay, with any conditions it considers appropriate (such as a deposit or security).
• Proviso (2019 Amendment): In cases of arbitral awards stemming from contracts related to fraud or corruption, courts are required to issue an unconditional stay upon the establishment of a prima facie case, until the challenge is resolved. As said in Haryana Urban Development Authority v. M/s Mehta Construction Co.,  They Emphasized that submitting a challenge does not automatically halt execution, and judges need to provide a reasoned explanation when issuing any stay.[15] Therefore, Hindustan Construction Company Limited and others v. Union of India and others (Supreme Court)  The Supreme Court determined that submitting an appeal under Section 34 within the prescribed timeframe does not inherently suspend the arbitral award, upholding a pro-arbitration position and reducing judicial interference in the enforcement of awards. [16]

Key features:

• Party Autonomy –  Arbitration is based on the agreement of the parties involved, and their independence should be honored, unless it goes against public policy or compulsory legislation. [17] Party autonomy refers to the ability of the parties involved in an arbitration agreement to tailor the arbitration procedure according to their wishes, as long as they comply with the essential provisions of the Act. The parties have the liberty to choose the
• procedure,
• regulations,
• number of arbitrators,
• location,
•  language,
•  even the governing law.

Principle Originated –

The principle is originated from Lex Mercatoria (Law Merchant). The concept originated from international trade practices in which merchants settled conflicts through informal courts instead of relying on State judicial systems. The Contemporary arbitration is viewed as an extension of lex mercatoria, particularly in the realm of international commercial law.

Application in Specific Types of Arbitration –

•  (Disputes Between Investors and States)

It is Regulated by Bilateral Investment Treaties (BITs) or by investment sections in trade agreements, While there is party autonomy, it is restricted to Investors can initiate arbitration on their own accord. Once states consent to BIT conditions, they lose the right to select arbitrators.

Meaning – Bilateral Investment Treaties (BITs) are agreements made between two countries that It Safeguard foreign investors against discriminatory, unjust, or confiscatory actions.

In contrast to commercial arbitration, where parties typically agree to an arbitration clause, investment arbitration operates a bit differently. Here, the State’s consent is found within the Bilateral Investment Treaty (BIT), which is both general and anticipatory. On the other hand, the investor shows their consent by submitting a Request for Arbitration.  This “dual consent” is what creates the arbitration agreement.

It’s important to strike a balance between being transparent and ensuring public accountability while also allowing for some flexibility in policy, especially in cases where arbitration touches on sensitive areas like taxation, environmental regulations, or human rights.

• Limited court intervention –

Section 5 of the Act – Extent of judicial intervention :- It States that Despite anything stated in any other law currently in effect, no judicial authority shall intervene unless explicitly allowed in this Part. This provision is inspired by Article 5 of the UNCITRAL Model Law and serves as a key element of arbitration-friendly legislation in India.

1. Balco Doctrine – In foreign-seated arbitrations, Part I of the Arbitration Act doesn’t come into play unless the parties involved specifically agree to it. There’s no interim relief and no way to challenge the award under Section 34  Indian courts can’t step in except when it comes to enforcement under Part II.This limitation on the jurisdiction of Indian courts helps maintain the integrity of international arbitration.
2. When parties opt for institutional arbitration (like MCIA, SIAC, or ICC), they hand over certain powers, such as appointing arbitrators, seeking interim relief, and setting procedures.(Sec.5) It’s important to note that judicial respect for institutional autonomy is key to ensuring limited intervention.

Arbitration Process in India :-

Step 1: Arbitration agreement (Section 7)

An arbitration agreement serves as the cornerstone of the arbitration process. According to Section 7, it’s essentially a written pact between the parties involved, agreeing to resolve current or future disputes through arbitration.

• To be valid, it must be documented, whether that’s in a contract, through letters, emails, or any other form of communication record.
• It should clearly express the intention to resolve disputes through arbitration.
• This can either be included as a clause in a contract or exist as a standalone agreement.
• If a document contains an arbitration clause and is referenced, that reference is considered valid as long as the document is incorporated by reference.

Types of Arbitration Agreements :-

• Clause-based: This is part of a bigger contract, like those used in construction or partnerships.
• Submission agreement: This is a separate arbitration agreement that comes into play after a dispute has already occurred.

The Role of Intention –

When it comes to arbitration clauses, the choice of words really matters. If you use non-binding terms like “may” or “can,” those clauses won’t hold up in court. . In the case of K.K. Modi v. K.N. Modi (1998), the court emphasized that an arbitration agreement must clearly indicate the intention to keep the courts out of the picture

Stamping and Registration –

An arbitration agreement without proper stamping or with insufficient stamps has no legal effect. The Seat vs Venue of Arbitration

A carefully written clause should specify:

• Seat (legal jurisdiction and curial law)
• Venue (physical location of hearings)

Similarly as said in Ameet Lalchand Shah & Ors. v. Rishabh Enterprises & Anr.[18] The Supreme Court agreed to hear the case and reversed the Delhi High Court’s decision. Now, all four involved parties, even those without the arbitration clause, must go to arbitration.

Step 2 :- Notice of arbitration  :- This step is really important because it officially starts the arbitration process. According to Section 21, unless both parties decide otherwise, the arbitration for a specific issue begins when the respondent gets the request to move forward with arbitration.

When you’re putting together a notice of arbitration, you should include a few key points.

• First, mention the arbitration agreement itself, whether it’s a specific clause or a separate document.
• Next, provide a brief overview of the facts that led to the conflict. Be clear about the nature of the dispute and what rights are being claimed or violated.
• Also, specify what outcomes you’re looking for. If you’re allowed to appoint an arbitrator by yourself, include their name.
• Don’t forget to set a deadline for responses and request that the matter go to arbitration.
• Article 21 [date = commencing date of arbitration].

If the notice is not given on time, the claim may be time-barred, even if the arbitration occurs at a later date. It May be physically, emailed or whatever method agreed at both ends. If no response has been received after 30 days or if the other side declines, the initiating party can proceed under section 11 (court appointment of arbitrator).

Steps 3: Appointment of Arbitrator(s) to constitute the Arbitral-

Once a Notice of Arbitration has been validly filed (Step 2), the following step is to appoint the arbitrator(s) that will constitute the Arbitral Tribunal. This is governed by Clause 10 – No of arbitrator.,

• Section 11– How representatives are appointed
• Default Procedure (if no agreement)

Default Procedure (if no agreement)

• If Sole Arbitration: If emergence is not possible – Any party may request the appointment from the court or the arbitral institution.
  • If Three-Member Tribunal: Each party appoints one arbitrator. The two arbitrators thus selected appoint a third (presiding) arbitrator. The Failure of One Party to Appoint Within 30. The aggrieved party may approach High Court (Domestic Arbitration). The Supreme Court (International Commercial Arbitration Section 11(4), (5) and (6) which provide for avenues to avoid a stalemate in making appointment..

Step 4: Preliminary hearing and submission of claims

It is Governed by Section 23 (Statement of Claim and Defence), Section 19 (Procedure) and Section 24 (Hearings). Once the tribunal is constituted (Step 3), the next phase is:

1. Preliminary hearings
   1. Filing of written pleadings (claims, defences, counterclaims)
   1. Fixing of timelines
   1. Deciding on oral hearings, venue and method This step formalises the arbitration.
2. Preliminary hearings:- The first procedural meeting  in person or virtually  is called by the tribunal to Set the procedural timetable. It Confirm the seat/venue of arbitration. It is Decide on language of proceedings. The Fix deadlines for: Statement of Claim (Section 23), Defence, Interim applications (Section 17), Evidence and final submissions. This is often referred to as the Case Management Conference (CMC) in institutional arbitration (e.g., MCIA, SIAC).
3. Filing of written pleadings (claims, defences, counterclaims) :- Statement of Claim – Section 23(1) The claimant submits the Statement of Claim which includes the Factual background of the dispute Legal basis and causes of action Reliefs sought (e.g. damages, injunctions, performance) List of supporting documents and witnesses Jurisdiction and procedural basis for arbitration.
4. Statement of Defence – Section 23(2) : The respondent files the Statement of Defence which includes Paragraph by paragraph response to the Statement of Claim, Jurisdictional objections (if any) Additional facts and law. Counter-claims (if any). A counter-claim is treated as a separate claim and the claimant is given time to reply.
5. Timelines for Filing (Post-2019 Amendment)- The Claim Defence Counterclaim Reply All pleadings shall be filed within a period of six months from the date of constitution of the tribunal.
6. Adjudicating Procedural Rules – sec 19. The parties may settle on procedural rules (e.g., ICA Rules, UNCITRAL Rules). If no agreement → Tribunal may proceed in such manner as it considers proper, but subject to Equal treatment
7. Key Procedural Issues Resolved at This Stage is Interim reliefs (under Section 17), Language of proceedings, Format of the hearing (in person, multilateral or virtual). The Confidentiality measures, Timeline for discovery or disclosure Expert appointments (if needed under Section 26) and Full opportunity to present case

Step 5: Evidence, hearings, and final arguments :-

It is Primarily governed by the Section 24 – Hearings and written process, Section 19 – Practice (not bound by CPC/Evidence Act), Section 26 – Expert evidence, 27 Assistance of court in taking evidence. The Final arguments may be Oral (in physical/virtual hearing), or Written submissions with rejoinders, The tribunal may Request that facts or the law be explained Seek expert clarification and Have the parties submit written summaries of their case before you finalize the award.

Step 6: Passing of the arbitral award :-

Having heard the parties (orally or in writing), the arbitral tribunal decides the dispute based on the evidence presented in the court and arguments of the parties, and delivers an award (in writing).

This award is conclusive, final and binding as a judgment of a court of law, and is subject to only such challenges as are permitted by law.

Types of Awards

• Final Decision – Decides all questions of the dispute
• Interim Award – Determining some part of the dispute (for instance liability, but nothing about quantum)
• Consent award under section 30
• Other Awards – Omitted claim
• Correction/Interpretation Award – For arithmetical or clerical errors (sec. 33).

Enforceability of Arbitral Awards in India

The Timeframe for award enforcement under Section 36.

 The Post-2015 Regime (after amendment): The Submitting a petition under Section 34 to set aside the award does NOT automatically postpone enforcement of the award. The Separate application for stay is needed, which must be granted by the court. If there is no challenge filed within the stipulated time (3 months + an additional 30 days), the award is treated as final and executable akin to a decree issued by a civil court under CPC.

By the issuance date of the final arbitral award (which is referred to as Day 0), the party who opposes the award may decide to file the challenge as per Provision 34 of the Act.

In this case, the challenge needs to be brought up within 3 months from the time of the award’s reception, with an option of a 30-day prolongation. if the court finds that the party has shown the cause sufficiently. Otherwise, without the challenge being filed during the due time, the award will stand as definitive, binding, and can be enforced as a decree of the civil court according to Section 36, most likely, after about 120 days have passed from the award’s date.

On the contrary, in case the Section 34 petition is submitted, and after that, it is extinguished, the arbitral award will be operative immediately from the date when the rejection took place, except that the court has given a particular enforcement stay. This regimen, especially the one after the 2015 amendment, emphasizes the importance of the finality and the immediate execution of arbitral awards. There is no automatic stay upon a challenge being filed.

Domestic Vs. Foreign Awards

In India, enforcing domestic and foreign awards is under different legal frameworks in the Arbitration and Conciliation Act, 1996.

1. The domestic awards that are obtained from India fall under Part I, in particular Section 36, which not only recognizes them as equivalent to civil court decrees at the expiry of the limitation period for challenging the award under Section 34 but also allows them to be executed. On the contrary, foreign awards are the subject of Part II of the Act and are to be enforced in India according to the choice of either the New York Convention (Sections 44-52) or the Geneva Convention (Sections 53-60) depending on their source.
2.  Domestic awards only need compliance with procedural requirements for them to become enforceable whereas foreign awards before brought into effect will have to undergo the process of recognition and enforcement which is stipulated under Chapter I of Part II, i.e., the Indian courts examine the awards under Section 48 and confirm that all the conditions on which the awards are based exist such as the existence of a valid agreement, the proper procedure being followed, and the public policy compliance still being valid of the awards. Moreover, foreign awards, if found to be recognized, get the status and are carried out as if they were issued by an Indian court. The main difference is that the exclusive enforceability test is applicable only to foreign awards, while domestic awards are liable to post-award challenges apart from that, they are immediately executable.

Role of courts in setting aside arbitral awards :-

Indian courts play a small but very important role in the arbitral process which is in respect of setting aside awards under Section 34 of the Arbitration and Conciliation Act of 1996. This section allows a party to challenge an award on very specific grounds like a party’s incapacity, voidness of the arbitration agreement, denial of a fair hearing, or the award going against the public policy of India.

Also it is made clear that courts are not to relook into the merit of the case or revaluate the evidence. Their job is that of supervision which is to see that the arbitration was conducted fairly within the legal structure, and free of procedural impropriety or fraud. Post 2015 we saw a great change which was the removal of the automatic stay on enforcement during the pending of a Section 34 challenge which in turn reinforced the autonomy and finality of arbitration. However courts do have the power to grant a stay via a separate application. This balanced approach is put in to preserve the integrity of arbitral awards at the same time also to provide the minimal but very much needed judicial oversight for justice and public interest

Advantages :-.

1. Rapid and Timely Resolution

Arbitration aims to provide a swifter alternative for the dispute resolution process than typical litigation. Now, due to Section 29A through the 2015 amendment, arbitral tribunals must render a final award within 12 months of the pleadings being completed (can also be extended by an additional 6 months with the parties’ consent). Certainly, there is more certainty and a discouragement of the various delay tactics within the arbitration process.

• Affordable and adaptable

Arbitration is often cheaper than litigation in court, especially with intricate commercial disputes. The parties exercise greater discretion to manage procedures, arbitrators and locations which lowers formal costs. Even though fees are higher in institutional arbitration, ad-hoc arbitration in India remains affordable for many parties.

Inhibitions and Obstacles for Arbitration in India

1.  Questionable impartiality of Arbitrators and Appointments

The impartiality of arbitrators is questioned in the backdrop of government contracts where the contract clause specifically allows one party (virtually the State) to appoint arbitrators without the ability to appoint anyone for the other party.

• Hindrances in Enforcement

While Section 36 eliminates an automatic stay upon filing a Section 34 challenge, in reality, enforcement of arbitral awards often meets barriers in the course of enforcement procedures, especially when public sector bodies or uncooperative debtors are involved. Delays in the attachment of assets or obtaining stay orders can hamper timely relief.

Conclusion:-

Arbitration in India in its hurry now, promising prospects ahead but also obvious obstacles in the path. Yet, questions remain around topics such as bias in arbitral forums, inconsistency in ad hoc processes, and bottlenecks in enforcement suggesting once again all is not well. If arbitration is to be regarded as an efficient, neutral, and enforceable mechanism, India must build a stronger institutional framework, hold the arbitral community to account for its conduct and ideally to provide judicial restraint to uphold the integrity of arbitral awards. If these conditions can be achieved, arbitration will not just remain an option, but become the default mechanism to resolve disputes within a contemporary, investor-friendly India.

About Author

Mansha is a law student in her final year who has just finished her examinations in the Department of Legal Studies at Desh Bhagat University in Mandi Gobindgarh, Punjab. She strongly believes that research is the essence of law—without effective research abilities, a lawyer lacks the means to make a significant difference.

With a strong interest in Intellectual Property Rights and Human Rights, Mansha distinguishes herself through her analytical mindset and dedication to addressing socially relevant and often contentious topics. She is especially attracted to issues that impact not only the legal framework but also the daily lives of citizens throughout the country.

References –

Arbitration and conciliation act.

---

[1] Arbitration and conciliation Act, 1996 available at https://www.indiacode.nic.in/handle/123456789/1978?view_type=browse last visited 24 June, 2025.

[2] Appointment of Arbitrators under section 11 of the said act available at https://www.indiacode.nic.in/handle/123456789/1978?view_type=browse last visited 24 June 2025.

[3] (2011) 5 SCC 532 

[4] (2011) 4 SCC 85.

[5] Arbitration,  available at https://lawblend.com/articles/economic-impact-of-arbitration-in-india/ last visited 26 june 2025.

[6] Utkarsh Anand, a judge at the Supreme Court, emphasizes the significance of arbitration in settling disputes, Hindustan Times (Sept. 16, 2024), available at https://www.hindustantimes.com/india-news/top-court-judge-notes-role-of-arbitration-for-resolution-of-disputes-101726425846802.html. Last visited 26 june 2025.

[7] 2025 SCC Online SC 1138.

[8] W.P. No. 10493 of 2020, (Karnataka High Court, May 27, 2025).

[9] Sukhbir Singh vs. Hindustan Petroleum Corp. Ltd., O.M.P. No. 1118 of 2014 (Delhi High Court, January 16, 2020). Available at https://indiankanoon.org/doc/86294741/  last visited 28 June, 2025

[10] 2022) 1 SCC 131

[11] (2021) 2 SCC 1

[12] (2025 INSC 574, Apr 29, 2025)

[13]  2025 INSC 605.

[14] [2025:AHC:20224]

[15] 2022 SCC OnLine P&H 2040

[16] (2020) 17 SCC 324

[17] Chief Justice of India in Gayatri Balasamy v. ISG Novasoft (2025)

[18] AIR 2018 SC 3041