ARBITRATION IN INDIA (Syllabus: GS Paper 2 – Polity)

News-CRUX-10     8th June 2024        

Context: The Chief Justice of India recently emphasized that arbitration has become a preferred method of dispute resolution in commercial justice, underscoring its pivotal role.

Arbitration in India

  • Statutory recognition: Arbitration in India was statutorily recognized as a form of dispute resolution for the first time when Indian Arbitration Act, 1899 was enacted.

oIt was confined to the three presidency towns only i.e. Madras, Bombay and Calcutta. 

  • Codification: It was further codified in Section 89 and Schedule II of the Code of Civil Procedure, 1908, where provisions of arbitration were extended to different regions of British India to which the Act of 1899 was not extended. 
  • Arbitration Act, 1940: It repealed the Act of 1899 along with the relevant provisions of the Code of Civil Procedure, 1908. 

oThe Act of 1940 was a reflection of the English Arbitration Act, 1934 and was a comprehensive legislation on the subject but it had no provisions to deal with enforcement of foreign awards and hence, dealt only with domestic arbitrations. 

  • Arbitration and Conciliation Act, 1996: It repealed the Act of 1940 and was based on UNCITRAL Model Law on International Commercial Arbitration, 1985 and covered both domestic and international arbitration. 
  • Arbitration and Conciliation (Amendment) Act, 2015: The amendment of 2015 imposed a time limit in a strict sense for concluding the process of arbitration. 

oThe time period was fixed at 12 months which could be extended for an extra time period of 6 months for which the arbitration tribunal will take extra fees for the purpose.

  • Arbitration and Conciliation (Amendment) Act, 2019: It seeks to encourage Arbitration, Mediation, Conciliation and other methods of ADR with the establishment of the ACI that will ensure professional and uniform standards that meet the global expectation.

Constitutional provisions

  • Fundamental rights: Alternative Dispute resolution in India was founded on the constitutional basis of Article 14 (Equality before law) and Article 21 (right to life and personal liberty). 
  • Directive Principles of State Policy

oArticle 39A: It states that the state shall make a principle of state policy relating to equal justices and free legal aid. 

oArticle 40: It gives a directive to the state to take steps to organise village panchayats and endow them with such power and authority as may be necessary to enable them to function as units of self -government.