The concept of arbitration in India is not a new concept. India has had a long tradition of arbitration. In ancient India, in case any dispute arose, people chose to settle the matter on their own. In fact, there were different grades of arbitrators with provisions for appeals in certain cases from the award of a lower grade of arbitrators to arbitrators of the higher grade.
The history of arbitration law in India a quite amusing one.
- Ancient texts of Yajnavalka and Narada refer to three types of popular courts Puga, Sreni, Kula.
- In villages, till date the disputes are settled by Panchayats as a form of alternative dispute resolution.
Evolution of Arbitration Law in India
Before Arbitration was recognized by the Code of Civil Procedure, it was encouraged as a mode of settlement of disputes by the Bengal Regulation of 1772, 1780, 1781 and the Cornwallis Regulation of 1787. Thereafter, the Bengal Regulation of 1793, the Madras Regulation of 1816 and the Bombay Regulation of 1827 provided for arbitration. Again in the years 1877 and 1882, the concept of arbitration was found in Codes for Civil Procedure. However, there was no notable change in the law relating to arbitration in these amendments.
In the year 1899, the Indian Arbitration Act came into force which specifically dealt with laws relating to Arbitration, but, the Act did not apply to disputes which were a subject matter of suits. The scope of this Act was only limited to arbitration agreements and that too only in Presidency towns. In the year 1908, the Civil Procedure Code was amended and pursuant to the amendment the limit of arbitration to only Presidency Towns was removed.
In the mid-1920s, the Civil Justice Committee was appointed to report on the machinery of “civil justice in the country” which made suggestions for modification of arbitration laws. However, owing to anticipation of taking cues from the British Arbitration Laws, it was finally in 1938 that the Government of India appointed an officer to revise the Arbitration Law. As a result, the first Arbitration Act of the country was enacted in 1940.
The scope of the 1940 Act remained silent on the execution of foreign awards. In fact a separate law and Foreign Awards (Recognition and Enforcement) Act, 1961 was applied to the enforcement of awards under the Geneva Convention, 1927 and New York Conventions to which India was a signatory. Over time, the working of the 1940 Act was found to be unsatisfactory due to too much court intervention.
In 1977, the functioning of the 1940 Act was questioned and examined by the Law Commission of India on grounds of delay and hardship caused due to clogs that affect smooth arbitral proceedings. The Commission instead of reworking the entire framework of the Act recommended amendment of the provisions, consequent to it. The Arbitration and Conciliation Act, 1996, was enacted by keeping in mind the 1985 United Nations International Commission on International Trade Law (UNICTRAL) model law and rules.
Reports Highlighting Challenges of Amendment Act 1996
The amendment Act of 1996, did not solve the main purpose to remove the practical problems. Various Committee reports highlighted these challenges, which are as follows:
- The 176th report of the Law Commission (2001).
- Justice B.P. Saraf Committee (2004).
- The reports of the Departmental Related Standing Committee On Personnel, Public Grievances.
- Law And Justice (2005).
- The 246th report of the Law Commission (2014)
Ultimately the Arbitration and Conciliation (Amendment) Act, 2015 brought in crucial changes to the 1996 statute to overcome the shortcomings.
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