History of Arbitration in India: From the 1899 Act to the Present Law

What is Alternative Dispute Resolution (ADR)?

Alternative Dispute Resolution refers to legally recognised processes for resolving disputes outside the ordinary course of a full civil trial. Depending on the mechanism and the governing law, ADR may include arbitration, mediation, conciliation, Lok Adalat, judicial settlement and negotiation.

ADR does not mean that every dispute can be taken outside the courts. Arbitrability depends on the nature of the right and the governing statute. Certain disputes involving sovereign functions, criminal liability, status rights or matters reserved by law to public fora may not be capable of private arbitration, even though settlement or mediation may still be possible in limited contexts.

Arbitration is a consensual adjudicatory process in which disputes covered by an arbitration agreement are referred to one or more arbitrators. The tribunal hears the parties and issues an arbitral award, which is binding subject to the statutory challenge and enforcement provisions.

Historical development of arbitration law in India

Why the Arbitration and Conciliation Act, 1996 was enacted

The 1996 Act was enacted to modernise Indian arbitration law and to consolidate the legal framework for domestic arbitration, international commercial arbitration and enforcement of foreign awards. Its legislative design took into account the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980.

The earlier statement that India was legally "bound" merely because it was a "signatory" to the UNCITRAL Model Law is inaccurate. The Model Law is a model legislative text, not a treaty requiring ratification. India chose to enact domestic legislation substantially influenced by that international framework.

Main objectives of the 1996 framework

Major amendments to the Arbitration and Conciliation Act

2015 Amendment

The 2015 reforms strengthened requirements concerning arbitrator independence and impartiality, introduced a statutory time framework for making awards, broadened and clarified interim-relief provisions, narrowed the effect of challenges on enforcement and sought to reduce delay in court-assisted arbitration.

The amendment also introduced section 29B for fast-track arbitration and significantly reworked sections 9, 11, 12, 29A, 34 and 36.

2019 Amendment

The 2019 amendment promoted institutional arbitration and inserted Part IA, providing for the Arbitration Council of India. It also amended the timelines connected with pleadings and awards, introduced confidentiality protection through section 42A and immunity for good-faith acts of arbitrators under section 42B.

Some institutional-arbitration provisions require notifications or institutional arrangements before they become operational in practice, so the bare text must be read with commencement notifications and current Government status.

2021 Amendment

The 2021 amendment added a mechanism requiring an unconditional stay of enforcement where the court is prima facie satisfied that the arbitration agreement, underlying contract or making of the award was induced or affected by fraud or corruption, while the challenge is pending. It also omitted the Eighth Schedule, which had prescribed qualifications and experience norms for arbitrators.

Mediation Act, 2023 and the change to conciliation law

The Mediation Act, 2023 created a separate statutory framework for mediation, including pre-litigation mediation, institutional mediation, online mediation, mediated settlement agreements, confidentiality and the Mediation Council of India.

Importantly for arbitration history, section 61 of the Mediation Act amends the Arbitration and Conciliation Act, 1996 through the Sixth Schedule. It provides that statutory references to conciliation under the 1996 framework are to be construed as references to mediation under the Mediation Act, 2023. Pending conciliation proceedings commenced under the earlier sections 61 to 81 are protected by a savings provision and continue under the prior law.

Arbitration Council of India - status in 2026

This distinction is important: the 2019 amendment created the statutory framework for the Council, but its existence in the Act should not be confused with actual constitution and operationalisation of the body.

Draft Arbitration and Conciliation (Amendment) Bill, 2024

In October 2024, the Department of Legal Affairs invited public comments on a draft amendment Bill intended to strengthen institutional arbitration, reduce court intervention and support timely conclusion of proceedings.

The draft included substantial proposals affecting the structure of the 1996 Act. Because it was issued for consultation, those proposals should be clearly distinguished from the law currently in force. Until Parliament enacts further changes and the relevant provisions are brought into force, practitioners should rely on the operative text of the 1996 Act and notified amendments.