The Arbitration and Conciliation Act, 1996 (India) – An Overview

Introduction

The Arbitration and Conciliation Act, 1996 (“the 1996 Act”) is the cornerstone of India’s legal framework for arbitration and conciliation. It was enacted with the purpose of modernising India’s arbitration law, reducing judicial interference, and aligning domestic practices with international standards. Most importantly, the 1996 Act represents India’s adoption of the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980, thereby situating India within the global discourse on alternative dispute resolution (ADR).

Prior to its enactment, India’s arbitration landscape was widely criticised for being fragmented, rigid, and litigation-prone. The 1996 Act consolidated earlier legislation, introduced greater autonomy for parties, minimised judicial intervention, and ensured the enforceability of arbitral awards both domestic and foreign. Over time, however, concerns regarding delays, excessive court intervention, and arbitrator neutrality led to significant amendments in 2015, 2019, and 2021.

Thus, the 1996 Act is not just a statute but a dynamic framework continuously evolving to make India an arbitration-friendly jurisdiction.

Historical Background

Before the enactment of the 1996 Act, arbitration in India was governed by three separate statutes: the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961. Each of these legislations catered to a narrow segment of disputes — the 1940 Act dealt with domestic arbitration, the 1937 Act implemented the Geneva Protocol (1923) and Geneva Convention (1927), and the 1961 Act gave effect to the New York Convention (1958) for foreign awards.

However, this framework was plagued by inefficiencies. The 1940 Act, in particular, was heavily criticised by the judiciary. In Guru Nanak Foundation v. Rattan Singh (1981), the Supreme Court lamented that the 1940 Act had become “a lawyer’s paradise” where the “proceedings became highly technical and often resulted in protracted litigation.”¹ Instead of reducing the burden on courts, arbitration itself had become a cause of litigation.

To address these issues, India sought to harmonise its arbitration laws with international norms. The United Nations Commission on International Trade Law (UNCITRAL) had already adopted the Model Law on International Commercial Arbitration (1985) and Conciliation Rules (1980), both of which emphasised party autonomy, minimal court intervention, and finality of awards. India, being a member of UNCITRAL, chose to model its new arbitration law on these instruments. This culminated in the enactment of the Arbitration and Conciliation Act, 1996, which repealed earlier laws and consolidated arbitration and conciliation under a single statute.

Structure of the Act

The 1996 Act is divided into four distinct parts, each addressing a specific area of arbitration or conciliation.

• Part I deals with domestic arbitration and international commercial arbitration seated in India. It governs the appointment of arbitrators, conduct of arbitral proceedings, interim measures, and the making and enforcement of awards. Importantly, it recognizes the principle of party autonomy by allowing parties to determine most procedural aspects of the arbitration.

  
  

• Part II is dedicated to the enforcement of foreign arbitral awards. This part incorporates the New York Convention, 1958 and the Geneva Convention, 1927, enabling India to fulfill its international obligations by recognising and enforcing awards made in other contracting states.

  
  

• Part III provides a framework for conciliation, an ADR mechanism distinct from arbitration, where a neutral conciliator assists parties in reaching a voluntary settlement. This part is based directly on the UNCITRAL Conciliation Rules (1980), emphasizing confidentiality and flexibility.

  
  

• Part IV contains supplementary provisions, including rule-making powers of High Courts and the repeal of earlier arbitration laws.

  This structure reflects the legislature’s intent to create a comprehensive, modern, and internationally harmonized framework.

Key Features of the Act

1. One of the most significant contributions of the 1996 Act is the primacy it accords to party autonomy. Parties are free to determine the number of arbitrators, seat of arbitration, language of proceedings, and substantive and procedural rules. This freedom ensures that arbitration remains flexible and tailored to the parties’ needs, in contrast to the rigid procedures of litigation.

   
   

2. Another hallmark is the principle of minimal judicial intervention. Section 5 of the Act provides that “notwithstanding anything contained in any other law, in matters governed by this Part, no judicial authority shall intervene except where so provided.”² This reflects a conscious legislative attempt to move away from the litigation-centric arbitration of the past.

   
   

3. The Act also enshrines the principle of Kompetenz-Kompetenz, granting arbitral tribunals the power to rule on their own jurisdiction under Section 16. This ensures that jurisdictional challenges do not unnecessarily derail proceedings.

   
   

4. The Act provides for interim measures by both courts (Section 9) and arbitral tribunals (Section 17). Initially, tribunal-ordered interim measures were not enforceable, but the 2015 Amendment made them binding as if issued by a court.³

   
   

5. The finality and enforceability of awards is another cornerstone. Under Section 35, an arbitral award is binding on the parties, and challenges under Section 34 are permitted only on limited grounds such as incapacity, invalid agreement, procedural unfairness, or violation of public policy.

Amendments to the Act

Over the years, significant amendments have reshaped the 1996 Act to address practical concerns.

The 2015 Amendment was the most transformative. It introduced time limits for rendering awards in domestic arbitration (12 months from the date of completion of pleadings),⁴ established neutrality standards for arbitrators by inserting the Fifth and Seventh Schedules, and ensured that tribunal-ordered interim measures were enforceable. It also narrowed the scope of “public policy” challenges to prevent courts from excessively interfering with arbitral awards.

The 2019 Amendment sought to promote institutional arbitration in India. It introduced the concept of the Arbitration Council of India (ACI), empowered to grade arbitral institutions and maintain a panel of accredited arbitrators. However, implementation has been slow.

The 2021 Amendment further refined the law by allowing courts to stay enforcement of an arbitral award if it was induced by fraud or corruption. While this aimed at maintaining integrity, critics argue that it risks reintroducing excessive judicial interference.

Judicial Interpretation and Landmark Cases

The evolution of the 1996 Act has been significantly shaped by judicial interpretation.

In Bhatia International v. Bulk Trading SA (2002), the Supreme Court controversially held that Part I of the Act applied even to arbitrations seated outside India unless expressly excluded.⁵ This created uncertainty and led to extensive litigation. The ruling was later overruled in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO) (2012), where the Court clarified that Part I applied only to arbitrations seated in India, thereby bringing Indian law in line with international practice.⁶

Similarly, in ONGC v. Saw Pipes Ltd. (2003), the Court expanded the scope of “public policy” as a ground to set aside awards, including cases of “patent illegality.”⁷ While intended to prevent injustice, this broad interpretation led to frequent challenges. The 2015 Amendment later restricted this ground, limiting judicial review.

More recently, in Ssangyong Engineering & Construction Co. Ltd. v. NHAI (2019), the Supreme Court reaffirmed that the scope of judicial review under Section 34 is narrow, emphasising that courts cannot interfere merely on merits or reappreciation of evidence.⁸

India in the Global Arbitration Framework

India is a signatory to the New York Convention, 1958, one of the most successful international treaties on arbitration. This ensures that arbitral awards made in India are enforceable in over 170 countries, and foreign awards can be enforced in India, subject to reciprocity.

In recent years, India has made concerted efforts to establish itself as a global arbitration hub. The establishment of the Mumbai Centre for International Arbitration (MCIA), coupled with legislative reforms, signals India’s ambition to attract cross-border commercial disputes. While challenges such as delays and inconsistent judicial approaches persist, the trend is unmistakably towards a pro-arbitration regime.

Conclusion

The Arbitration and Conciliation Act, 1996, stands as a landmark in India’s legal history, a statute that not only modernised dispute resolution but also connected India’s legal system with global standards. Its embrace of party autonomy, minimal judicial interference, and international enforceability marked a decisive shift from the inefficiencies of the 1940 Act.

However, arbitration in India is still a work in progress. Despite reforms, challenges remain in the form of excessive court intervention, lack of robust institutional arbitration, and delays in proceedings. The frequent amendments to the Act reflect both its adaptability and the ongoing struggle to achieve a balance between efficiency and fairness.

In its current form, the 1996 Act represents a maturing arbitration regime — one that has evolved from judicial scepticism to judicial support and from ad hoc mechanisms to an emerging institutional framework. Its continued success will depend on consistent judicial interpretation, institutional strengthening, and India’s commitment to fostering an arbitration-friendly ecosystem.

References

1. Guru Nanak Foundation v. Rattan Singh, (1981) 4 SCC 634.

2. Arbitration and Conciliation Act, 1996, Section 5.

3. Arbitration and Conciliation Act, 1996, Section 17 (as amended in 2015).

4. Arbitration and Conciliation Act, 1996, Section 29A.

5. Bhatia International v. Bulk Trading SA, (2002) 4 SCC 105.

6. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO), (2012) 9 SCC 552.

7. ONGC v. Saw Pipes Ltd., (2003) 5 SCC 705.

8. Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131.