From Alternative to Imitation: Is Arbitration becoming another form of litigation?

Arbitration in India was envisioned as a dynamic alternative to the country’s overburdened judiciary, which carries a pendency of over 50 million cases across all levels (Law Commission of India, 2014). The Arbitration and Conciliation Act, 1996, modelled on the UNCITRAL Model Law, was a legislative effort to align India with international best practices and attract foreign investment by offering a credible dispute resolution mechanism outside the courts. Three decades on, however, it is revealed that Indian arbitration has, in many respects, replicated the delays, costs, and procedural complexity of the very court system it sought to supplement. This article examines the structural and cultural forces behind this drift and evaluates whether recent reforms can restore arbitration’s original promise.

The Arbitration and Conciliation Act, 1996, replaced the Arbitration Act of 1940, which had been widely criticised for enabling rampant judicial interference at every stage of arbitral proceedings. The 1940 Act required court permission even to proceed with an arbitration, rendering it little more than a preliminary step to litigation. The 1996 Act sought to correct this by limiting court intervention, providing for interim relief, and enabling the enforcement of foreign awards under the New York Convention, to which India is a signatory.

The aspirations were considerable. Arbitration was to be the vehicle through which India would become a preferred seat for international commercial arbitration, reducing the burden on High Courts and the Supreme Court and providing parties, particularly foreign investors, with confidence in dispute resolution. Institutions such as the Mumbai Centre for International Arbitration (MCIA) and the Delhi International Arbitration Centre (DIAC) were established to provide institutional frameworks for this vision.

Despite the promise of the 1996 Act, arbitration in India has been progressively encumbered by practices that mirror litigation. The problem manifests on multiple fronts. First, excessive judicial intervention has historically undermined the finality of arbitral awards. Indian courts, particularly before the 2015 and 2019 amendments to the Act, routinely entertained challenges to awards on expansive grounds, including the notoriously broad “public policy” exception under Section 34. The Supreme Court’s decision in ONGC v. SAW Pipes (2003) controversially widened public policy to include “patently illegal” awards, opening a back door for merits review that the Act had expressly sought to close.

Second, the appointment of arbitrators has been a significant flashpoint for court involvement. Before the amendment introduced by the Arbitration and Conciliation (Amendment) Act, 2019, parties frequently resorted to the courts under Section 11 to seek the appointment of arbitrators, thereby generating satellite litigation. The 2019 amendment transferred this function to arbitral institutions, but in practice, institutional arbitration remains a minority of cases; ad hoc arbitration, more susceptible to procedural inefficiency, continues to dominate the Indian landscape.

The cost and time profile of Indian arbitration has increasingly approximated that of domestic litigation. A report by the Vidhi Centre for Legal Policy (2020) found that arbitrations involving government entities routinely last five to ten years when post-award litigation is factored in. The government itself is the single largest litigant in Indian arbitration, and its tendency to challenge adverse awards under Sections 34 and 37 of the Act often as a matter of administrative habit rather than genuine legal merit has crippled the efficiency of the process.

Arbitrator fees have also emerged as a contentious issue. The Fourth Schedule to the 1996 Act provides a model fee schedule, but its application is inconsistent. In large infrastructure and construction disputes, which constitute a significant share of Indian arbitrations, fees for a three-member tribunal can run into crores of rupees, making arbitration inaccessible for mid-sized enterprises. The Law Commission of India in its 246th Report (2014) expressly flagged fee escalation as a structural impediment to the accessibility of arbitration.

A distinction between Indian arbitration and mature arbitration jurisdictions such as Singapore or London is the relative underdevelopment of institutional arbitration. The Singapore International Arbitration Centre (SIAC) and the ICC provide structured procedural frameworks, trained registrars, and effective case management that curtail the scope for procedural manoeuvring. In India, most arbitrations proceed on an ad hoc basis, with no supervising institution to enforce timelines, manage submissions, or resolve procedural disputes efficiently.

This institutional gap creates space for adversarial tactics familiar from court proceedings: repeated adjournments, frivolous interlocutory applications, and delays in filing written submissions. The Supreme Court in BCCI v. Kochi Cricket Pvt. Ltd. (2018) acknowledged the systemic nature of delays in arbitration proceedings and called for a cultural change among practitioners. However, cultural change of this nature requires sustained institutional pressure that ad hoc arbitration structurally cannot provide.

India has undertaken significant legislative reform in an attempt to address these pathologies. The Arbitration and Conciliation (Amendment) Act, 2015 introduced a twelve-month timeline for completion of arbitral proceedings (extendable by six months with party consent, and thereafter by court order), imposed a twelve-month limit on Section 34 challenges, and amended the public policy test to narrow its scope in line with the BALCO judgment (Bharat Aluminium Co. v. Kaiser Aluminium, 2012). The 2019 Amendment further created the Arbitration Council of India (ACI) to grade arbitral institutions and arbitrators, and mandated that Section 11 applications be decided within sixty days.

Yet the reforms have not fully delivered on their promise. The ACI had not become fully operational as of 2023, limiting its impact on institutional quality. Courts have continued to issue stay orders on arbitral awards under Section 36, often without adequate scrutiny of the conditions for stay, effectively enabling award-debtors, frequently public sector undertakings, to delay enforcement for years (Vidhi Centre for Legal Policy, 2020). The twelve-month timeline for proceedings, though well-intentioned, is widely regarded as aspirational rather than enforceable in complex cases.

For India to develop a genuine arbitration culture distinct from litigation, reform must operate on multiple levels. At the institutional level, the full operationalisation of the ACI and the promotion of institutional over ad hoc arbitration are essential. At the judicial level, a disciplined and consistent approach to the enforcement of the “minimal intervention” principle under Section 5 of the Act is necessary. The Supreme Court’s judgment in Patel Engineering Ltd. v. North Eastern Electric Power Corporation (2020) signals a more restrained judicial posture, but consistency across High Courts remains uneven.

Equally important is the reform of government arbitration policy. A dedicated framework limiting the right of public sector entities to challenge arbitral awards without substantive legal grounds, along the lines recommended by the Justice B.N. Srikrishna High Level Committee (2017), would reduce the volume of post-award litigation that is the primary driver of arbitration’s delayed timelines. Cultivating a new generation of trained arbitration practitioners, as envisioned under the ACI’s accreditation mandate, will also be essential to shift practitioner culture away from litigation habits. India’s arbitration future depends not on legislative intent, but on whether its practice ever matches its promise. 

From Alternative to Imitation: Is Arbitration becoming another form of litigation?

Arbitration in India was envisioned as a dynamic alternative to the country’s overburdened judiciary, which carries a pendency of over 50 million cases across all levels (Law Commission of India, 2014). The Arbitration and Conciliation Act, 1996, modelled on the UNCITRAL Model Law, was a legislative effort to align India with international best practices and attract foreign investment by offering a credible dispute resolution mechanism outside the courts. Three decades on, however, it is revealed that Indian arbitration has, in many respects, replicated the delays, costs, and procedural complexity of the very court system it sought to supplement. This article examines the structural and cultural forces behind this drift and evaluates whether recent reforms can restore arbitration’s original promise.

The Arbitration and Conciliation Act, 1996, replaced the Arbitration Act of 1940, which had been widely criticised for enabling rampant judicial interference at every stage of arbitral proceedings. The 1940 Act required court permission even to proceed with an arbitration, rendering it little more than a preliminary step to litigation. The 1996 Act sought to correct this by limiting court intervention, providing for interim relief, and enabling the enforcement of foreign awards under the New York Convention, to which India is a signatory.

The aspirations were considerable. Arbitration was to be the vehicle through which India would become a preferred seat for international commercial arbitration, reducing the burden on High Courts and the Supreme Court and providing parties, particularly foreign investors, with confidence in dispute resolution. Institutions such as the Mumbai Centre for International Arbitration (MCIA) and the Delhi International Arbitration Centre (DIAC) were established to provide institutional frameworks for this vision.

Despite the promise of the 1996 Act, arbitration in India has been progressively encumbered by practices that mirror litigation. The problem manifests on multiple fronts. First, excessive judicial intervention has historically undermined the finality of arbitral awards. Indian courts, particularly before the 2015 and 2019 amendments to the Act, routinely entertained challenges to awards on expansive grounds, including the notoriously broad “public policy” exception under Section 34. The Supreme Court’s decision in ONGC v. SAW Pipes (2003) controversially widened public policy to include “patently illegal” awards, opening a back door for merits review that the Act had expressly sought to close.

Second, the appointment of arbitrators has been a significant flashpoint for court involvement. Before the amendment introduced by the Arbitration and Conciliation (Amendment) Act, 2019, parties frequently resorted to the courts under Section 11 to seek the appointment of arbitrators, thereby generating satellite litigation. The 2019 amendment transferred this function to arbitral institutions, but in practice, institutional arbitration remains a minority of cases; ad hoc arbitration, more susceptible to procedural inefficiency, continues to dominate the Indian landscape.

The cost and time profile of Indian arbitration has increasingly approximated that of domestic litigation. A report by the Vidhi Centre for Legal Policy (2020) found that arbitrations involving government entities routinely last five to ten years when post-award litigation is factored in. The government itself is the single largest litigant in Indian arbitration, and its tendency to challenge adverse awards under Sections 34 and 37 of the Act often as a matter of administrative habit rather than genuine legal merit has crippled the efficiency of the process.

Arbitrator fees have also emerged as a contentious issue. The Fourth Schedule to the 1996 Act provides a model fee schedule, but its application is inconsistent. In large infrastructure and construction disputes, which constitute a significant share of Indian arbitrations, fees for a three-member tribunal can run into crores of rupees, making arbitration inaccessible for mid-sized enterprises. The Law Commission of India in its 246th Report (2014) expressly flagged fee escalation as a structural impediment to the accessibility of arbitration.

A distinction between Indian arbitration and mature arbitration jurisdictions such as Singapore or London is the relative underdevelopment of institutional arbitration. The Singapore International Arbitration Centre (SIAC) and the ICC provide structured procedural frameworks, trained registrars, and effective case management that curtail the scope for procedural manoeuvring. In India, most arbitrations proceed on an ad hoc basis, with no supervising institution to enforce timelines, manage submissions, or resolve procedural disputes efficiently.

This institutional gap creates space for adversarial tactics familiar from court proceedings: repeated adjournments, frivolous interlocutory applications, and delays in filing written submissions. The Supreme Court in BCCI v. Kochi Cricket Pvt. Ltd. (2018) acknowledged the systemic nature of delays in arbitration proceedings and called for a cultural change among practitioners. However, cultural change of this nature requires sustained institutional pressure that ad hoc arbitration structurally cannot provide.

India has undertaken significant legislative reform in an attempt to address these pathologies. The Arbitration and Conciliation (Amendment) Act, 2015 introduced a twelve-month timeline for completion of arbitral proceedings (extendable by six months with party consent, and thereafter by court order), imposed a twelve-month limit on Section 34 challenges, and amended the public policy test to narrow its scope in line with the BALCO judgment (Bharat Aluminium Co. v. Kaiser Aluminium, 2012). The 2019 Amendment further created the Arbitration Council of India (ACI) to grade arbitral institutions and arbitrators, and mandated that Section 11 applications be decided within sixty days.

Yet the reforms have not fully delivered on their promise. The ACI had not become fully operational as of 2023, limiting its impact on institutional quality. Courts have continued to issue stay orders on arbitral awards under Section 36, often without adequate scrutiny of the conditions for stay, effectively enabling award-debtors, frequently public sector undertakings, to delay enforcement for years (Vidhi Centre for Legal Policy, 2020). The twelve-month timeline for proceedings, though well-intentioned, is widely regarded as aspirational rather than enforceable in complex cases.

For India to develop a genuine arbitration culture distinct from litigation, reform must operate on multiple levels. At the institutional level, the full operationalisation of the ACI and the promotion of institutional over ad hoc arbitration are essential. At the judicial level, a disciplined and consistent approach to the enforcement of the “minimal intervention” principle under Section 5 of the Act is necessary. The Supreme Court’s judgment in Patel Engineering Ltd. v. North Eastern Electric Power Corporation (2020) signals a more restrained judicial posture, but consistency across High Courts remains uneven.

Equally important is the reform of government arbitration policy. A dedicated framework limiting the right of public sector entities to challenge arbitral awards without substantive legal grounds, along the lines recommended by the Justice B.N. Srikrishna High Level Committee (2017), would reduce the volume of post-award litigation that is the primary driver of arbitration’s delayed timelines. Cultivating a new generation of trained arbitration practitioners, as envisioned under the ACI’s accreditation mandate, will also be essential to shift practitioner culture away from litigation habits. India’s arbitration future depends not on legislative intent, but on whether its practice ever matches its promise. 

Article Written by
Anushka
BALLB, 4th Semester
Army institute of Law