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The Arbitration and Conciliation Act, 1996, is the primary law governing arbitration and conciliation in India. It provides a framework for dispute resolution outside the courtroom. The Act was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, and the enforcement of foreign arbitral awards. Additionally, it defines the law pertaining to conciliation and related or incidental matters.
In this article, we will explore the key provisions of the Act, highlight significant case laws that have shaped its interpretation, and discuss notable amendments that have refined its application over the years.
Both arbitration and conciliation are types of Alternative Dispute Resolution (ADR). This means they are methods to resolve disputes outside the courtroom.
Arbitration is a procedure wherein two parties agree to settle their dispute by bringing it to an arbitrator or a panel of arbitrators. These arbitrators listen to both the parties before making a decision that both the parties have to follow. So, basically, it is a way of resolving things in a private manner, without going to the court, and whatever decision is taken by the arbitrator is final and binding.
Conciliation is a bit different from arbitration. It is a procedure wherein parties agree to bring their issue to a neutral third party called a conciliator. But instead of making a final decision like an arbitrator, the conciliator assists both the parties to communicate and work through their differences to find a common ground that works for all. It is not binding, so whatever is agreed upon is not enforced by law. Conciliation is more about helping the parties reach an amicable settlement without heading to the courtroom.
Arbitration has deep historical roots in India. In ancient times, local disputes were often settled by village headmen, whose position was either hereditary or elected. In some villages, rather than a single headman, a council would resolve disputes. This council, known as the Panchayat, still exists today.
When the British established the East India Company in Bengal, they set up their colonial administration and system of governance. They introduced their own methods of dispute resolution.
The Bengal Regulation of 1772 was a specific law enacted by the British to organize Bengal’s judicial system. One of its provisions required that all disputes and legal matters should be sent to arbitration, rather than being resolved in court right away.
Under this regulation, disputes would have to be resolved through arbitration, which meant that the third party (arbitrator) would decide the outcome. The decision/award made by the arbitrator was treated as though it were a decision made by a formal court of law. Basically, the arbitration outcome had the same legal standing as if a court had decided the matter.
Over the course of the next few years, as disputes were referred to arbitration, several inconsistencies and issues surfaced regarding the nature of the disputes, the time limits for awarding decisions, the role of village panchayats, and various reforms were introduced to address these problems.
Three major Presidency towns Bombay, Madras, and Calcutta each had their own set of regulations governing arbitration procedures, but these were eventually replaced by the introduction of the Code of Civil Procedure in 1859. This Act allowed parties involved in a suit to refer the matter to arbitration by applying to the Court.
However, inconsistencies within this Act soon became apparent, leading to the passage of a specific law focused on arbitration: The Indian Arbitration Act of 1899. This Act, modeled after the then-existing English Law, provided for agreements to refer future disputes to arbitration and allowed for arbitration without court intervention. Although the Act applied across India, it was primarily effective in the Presidency Towns.
The next significant development was the enactment of the Code of Civil Procedure in 1908, which replaced the previous version. The updated Code included detailed provisions on arbitration in Sections 89 and 104 of the Second Schedule, taking into account the Indian Arbitration Act of 1899, which was more specific. However, with the passing of the English Arbitration Act of 1934 based on the recommendations of the MacKinnon Committee, the Government of India deemed it necessary to pass the Arbitration Act of 1940.
When the Arbitration Act 1940 came into force, many individuals were uncertain about its technicalities and its abuse of the arbitration procedure. In the landmark Guru Nanak Foundation vs. Rattan Singh & Sons (AIR 1981 SC 2075), the Supreme Court criticized the Arbitration Act 1940 for its efficiency and frequent challenges to arbitration proceedings. Due to numerous complaints against the 1940 Act, the Government of India ultimately referred the matter to the Law Commission of India. The Commission in its 76th Report, under the chairmanship of H.R. Khanna recommended that this Act must be amended.
During the tenure of Prime Minister P.V. Narasimha Rao, on December 4, 1993, a conference chaired by him was held where the Government of India deliberated on international models like the United Nations Commission on International Trade Law (UNCITRAL) Model on Commercial International Arbitration. This discussion focused on the future of arbitration in India. The Arbitration and Conciliation Act, 1996 was passed into law as a result of this conference.
The Arbitration and Conciliation Act, 1996 is a detailed code containing a total of 86 sections. Its primary aim is to consolidate and amend existing laws related to domestic arbitration, define conciliation, and incorporate the principles of UNCITRAL. The Act seeks to establish a uniform regulatory framework for arbitration and conciliation by providing a unified legal structure to ensure fair and effective dispute resolution for all parties involved.
To date, the Act remains the primary arbitration and conciliation law in India, with periodic amendments to keep its relevance and address emerging challenges.
The salient features of the Arbitration and Conciliation Act are as follows:
The Act provides two alternative dispute resolution methods: arbitration and conciliation.
The parties involved have the flexibility to choose their own procedures and arbitrators, which makes the process more convenient and adaptable for everyone involved.
Confidentiality is a fundamental aspect of the process, especially in business disputes where sensitive information needs to be protected at all costs.
Arbitration awards are legally binding and can be enforced by courts, meaning the parties must follow them.
While arbitration awards are legally binding, courts step in in certain situations, such as appointing arbitrators when parties fail to agree, or ensuring enforcement of awards.
The Act aligns with the United Nations Commission on International Trade Law (UNCITRAL) Model Law. This makes it compatible with international arbitration practices.
The 1996 Act has been divided into a total of four parts. Part I deals with domestic arbitration as well as international commercial arbitration within India. Part II is concerned with the enforcement of certain foreign awards. Part III covers conciliation, while Part IV contains supplementary provisions.
All the four parts of the Act are described herein:
Part I of the Act begins from Section 2 and goes up to Section 43. It outlines the framework for arbitration agreements, the composition of the arbitration tribunal, the conduct of arbitral proceedings, and the enforcement of arbitral awards.
Some key features of Part I are as follows:
Section 7 - Arbitral Agreement: The arbitration agreement must be in writing. It can either be in the form of an arbitration clause within a contract or a separate, standalone agreement.
Sections 10 - 15 - Arbitration Tribunal Composition: The parties can determine the number of arbitrators. The tribunal shall consist of a sole arbitrator in the absence of an agreement.
Sections 18 - 27 - Conduct of Arbitral Proceedings: The tribunal has the authority to manage the proceedings in a manner it considers appropriate to ensure that all parties are treated fairly and equally.
Sections 28 - 34 - Arbitral Award: The tribunal must issue its award in accordance with the substantive law. Awards are binding and enforceable unless a court sets them aside.
Part II focuses on the enforcement of foreign awards under the New York Convention and the Geneva Convention. Sections 44 to 60 outline the procedures for recognizing and enforcing these awards, subject to specific conditions.
Part III of the Act, which covers sections 61 to 81, talks about the conciliation process. It offers a way to resolve disputes without binding decisions, where the parties involved ask a conciliator to help them settle things in an amicable manner.
Part IV, covering sections 82 to 86, deals with various miscellaneous provisions. These include the powers of the High Court, details on appeals, and transitional provisions. Section 82 empowers the HC to create rules related to any of the Act’s provisions. Section 83 gives the Central Government the authority to remove any difficulties in the Act’s implementation. For carrying out the purposes of the Act, Section 84 empowers the Central Government to make rules.
The Arbitration and Conciliation Act 1996 has undergone multiple amendments in order to improve its effectiveness and ensure its alignment with the international standards.
This amendment introduced provisions to ensure that arbitrators maintained neutrality. It imposed a time limit of 12 months for completing arbitral proceedings, which can be extended by an additional 6 months. Additionally, it made interim orders issued by arbitral tribunals enforceable.
The 2019 amendment established the Arbitration Council of India for promotion and development of institutional arbitration. It specified the experience and qualifications necessary for arbitrators. Also, it introduced a time frame for completion of statement of claim and defence.
The 2021 Amendment to the Act removed the Eighth Schedule, which detailed the qualifications and experience required for arbitrators, and introduced provisions for the automatic stay of awards in cases involving fraud or corruption.
The Arbitration and Conciliation Act 1996 contains provisions for resolving disputes in India. It offers a detailed legal framework for arbitration and conciliation procedures. These procedures allow parties to resolve disputes amicably, outside of the courtroom. To improve the dispute resolution process, the Act has been refined continuously through amendments in 2015, 2019 and 2021.
Disclaimer: This blog post is for educational purposes only. Laws are subject to change over time, and we cannot be held responsible for any inaccuracies or outdated information. The content of this article does not constitute legal advice. For legal concerns/assistance, please consult with a qualified legal professional.
Q1. What was the first arbitration law in India?
A. The first formal arbitration legislation in India was the Bengal Regulation of 1722.
Q2. As of 2025, which law primarily governs arbitration in India?
A. As of 2025, the primary law governing arbitration in India is the Arbitration and Conciliation Act, 1996.
Q3. When was the Arbitration Act last amended?
A. The most recent amendment to the Arbitration and Conciliation Act 1996 was the Arbitration and Conciliation Amendment Act 2021, which was enacted in March 2021.
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