In India, arbitration was initiated by the Arbitration Act of 1889, and further, the Arbitration Act of 1940 after that, in 1996, a significant amendment was incorporated into the Arbitration Act. The same followed through in the 2015 and 2019 Amendment Acts. Amends were made to the principal Act by introducing the 2021 (Amendment) Act to match the level of International Arbitration law. The recent draft of the arbitration bill,2024 proposed a series of amendments to the Arbitration Act, of 1996.
The Ministry of Law and Justice requested feedback from the public, including opinion pieces and general comments. Arbitration is favored as a practical means of resolving disputes amicably due to its ability to save money, and procedural time, and avoid sluggish court proceedings. However as per a recent PwC report arbitration position is weakened due to the time taken in arbitrations which is mostly more than what has been mandated in the Arbitration and Conciliation Act, of 1996. It is unable to satisfy the main justification for parties to submit their disputes to arbitration which are arbitration expertise, neutrality on decision, cost and time inputs, and timely resolution of the matter. The main aim of legislature is unclear few modifications strengthen the position of arbitration as a mode of settlement of disputes while other amendments are demotivating arbitration and do not implement the needs of the parties. In this article, you will learn about the amendments proposed in the draft bill, the pros and cons of the amendments, and a general overview of the bill. An expert committee was constituted to propose reforms to the Arbitration and Conciliation Act, of 1996 it suggested a series of amendments to the act.
Proposed amendments and personal comments – The table discusses all of the bill’s main positive and negative aspects.
| Arbitration and Conciliation, 1996 Existing Provision | Arbitration and Conciliation (Amendments), 2024 Proposed Provision | Comments |
| Short title, extent, and commencement – Arbitration and Conciliation, 1996 | The amended Act will be called the Arbitration Act, 1996 as provisions related to conciliation have been incorporated in Mediation Act 2023. | The removal of conciliation provisions could be seen as a step towards simplifying the Act and focusing on arbitration as the primary method of dispute resolution. |
| Section 2 (1) (a)”arbitration” means any arbitration whether or not administered by a permanent arbitral institution. | Section 2(1)(a) of the Act expands the definition of arbitration to explicitly include arbitration conducted through “audio-video electronic means.
Introduction of Section 2(1) (aa) to the Act defines “audio-video electronic means” as the use of any communication device for videoconferencing, filing of pleadings, recording of evidence, transmission of electronic communication, for the purposes of conduct of arbitral proceedings. |
A significant step towards the digital transformation of arbitration in India.
Arbitration in India has been taken with the proposed expansion of Section 2(1)(a) and the inclusion of Section 2(1) (aa). In particular, for cross-border disputes, the revisions improve accessibility and efficiency in arbitral procedures by specifically acknowledging “audio-video electronic means,” such as videoconferencing and electronic files. |
| Section 7 – Arbitration agreement
4) An arbitration agreement is in writing if it is contained in (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams, or other means of telecommunication 1[including communication through electronic means] which provide a record of the agreement; or (c) an exchange of statements of claim and defense in which the existence of the agreement is alleged by one party and not denied by the other. |
The amendment also addresses the increasing use of digital platforms for commercial transactions by proposing an amendment to Section 7(4)(a) of the Act to recognize arbitration agreements executed via digital signatures. | This change acknowledges the growing importance of online dispute resolution, especially in the post-pandemic era. It reflects the reality that virtual hearings can enhance accessibility, reduce costs, and increase efficiency in arbitration proceedings. |
| Section 2 – Definitions
ARBITRATION AND CONCILIATION ACT, 1996 Used place interchangeably with “seat,” leading to jurisdictional ambiguities. |
Introduction of new section –
2A. (1) In case of arbitration other than international commercial arbitration – Where the seat of arbitration has been agreed by the parties or determined by the arbitral tribunal as per Section 20, the court means the court having pecuniary and territorial jurisdiction over the seat of arbitration. In all other cases, the court means the court having pecuniary and territorial jurisdiction to decide the disputes forming the subject matter of the arbitration if the same had been the subject matter of a suit. (2) In case of international commercial arbitration – |
It provides clear guidelines for determining which court has authority, aiming to reduce ambiguity and streamline the arbitration process. |
| Where the seat of arbitration has been agreed by the parties or determined by the arbitral tribunal as per Section 20, the Court means the High Court has territorial jurisdiction over the seat.
In all other cases, the Court means the High Court has territorial jurisdiction to decide disputes forming the subject matter of arbitration. Replaces “place” with “seat” throughout the Act and provides clear guidelines for determining the seat of arbitration. |
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| Appellate Arbitral Tribunal (AAT):
Section 34 applications heard only by courts |
Section 34 –
New Body – Establishing an Appellate Arbitral Tribunal: To draft called for establishing an appellant body for adjudication of the matters. |
Creating an Appellate Arbitral
The tribunal has its pros and cons. On the plus side, it would offer a specialized place for handling arbitration appeals, which could lead to better and more consistent decisions. This could make the process faster and take some pressure off regular courts, making arbitration outcomes more predictable. However, there are downsides too. Setting up and running a new tribunal could be costly. Adding another layer of appeal might make the process more complicated and take longer. There could also be issues with figuring out the new tribunal’s authority compared to existing courts. So, while this move could improve efficiency and specialization, it also brings concerns about cost, complexity, and jurisdictional conflicts. |
| Section 9 of the Arbitration and Conciliation. | Codifying emergency arbitration provision –
Section 2(1)(a) to the Act, which provides a formal definition of an emergency arbitrator under the newly proposed Section 9-A Section 9-A (1) of the Act, an arbitral institution may appoint an emergency arbitrator before the constitution of the Arbitral Tribunal, specifically to grant interim measures as provided under Section 9 of the Act. This provision grants parties the ability to seek urgent relief without waiting for the formation of the Arbitral Tribunal, providing them with an expedited process for securing interim measures, especially in cases requiring immediate intervention. Orders passed have the same enforceability as those passed by a tribunal. |
This change aims to provide a faster, more efficient way to secure interim measures, especially in situations needing immediate action. |
| Section 2 e) “Court” means–
(i) In the case of arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, includes the High Court in the exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject- |
Court means section 2 a
2A. (1) In case of arbitration other than international commercial arbitration – where the seat of arbitration has been agreed by the parties or determined by the arbitral tribunal as per Section 20, the court means the court having pecuniary and territorial jurisdiction over the seat of arbitration. |
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| Matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;
(ii) in the case of international commercial arbitration, the High Court in the exercise of its ordinary original civil jurisdiction, has jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court. |
In all other cases, the court means the court having pecuniary and territorial jurisdiction to decide the disputes forming the subject matter of the arbitration if the same had been the subject matter of a suit.
(2) In case of international commercial arbitration – Where the seat of arbitration has been agreed by the parties or determined by the arbitral tribunal as per Section 20, the Court means the High Court having territorial jurisdiction over the seat. In all other cases, the Court means the High Court having territorial jurisdiction to decide disputes forming the subject matter of arbitration. |
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| Amendment to Section 9(1) of the Act Section 9(1) – A party may, before, or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court for an interim measure. The earlier provision allows courts to grant interim relief during arbitration proceedings. | Changes proposed –
Limits recourse to Section 9 once arbitration proceedings have commenced, even for interim relief. In cases where a tribunal is seated outside India (foreign tribunal), any interim relief granted by such a tribunal regarding assets located within India, does not have direct enforceability under the Act.10 In such a case, a party has the option to approach the Court under Section 9 of the Act to seek an enforceable interim measure |
The lack of direct enforceability for interim relief granted by foreign tribunals concerning assets in India could complicate matters for international parties, requiring them to seek court intervention under Section 9. |
| Deletion of the Fourth schedule
Schedule 4 – Model fee Up to Rs.5,00,000 Rs.45,000 2. Above Rs.5,00,000 and up to Rs. 20,00,000- Rs. 45,000 plus 3.5 per cent. Of the claim amount over and above Rs.5,00,000. 3. Above Rs.20,00,000 and up to Rs. 1,00,00,000 – Rs.97,500 plus 3 per cent. Of the claim amount over and above Rs.20,00,000. 4. Above Rs.1,00,00,000 and up to Rs. 10,00,00,000- Rs.3,37,500 plus 1 per cent. Of the claim amount over and above Rs.1,00,00,000. 5. Above Rs.10,00,00,000 and up to Rs. 20,00,00,000 Rs.12,37,500 plus 0.75 per cent. Of the claim amount over and above Rs.10,00,00,000. 6. Above Rs. 20,00,00,000 Rs.19,87,500 plus 0.5 per cent. Of the claim amount over and above Rs.20,00,00,000 with a ceiling of Rs.30,00,000. |
Draft Amendment introduces changes to Sections 11(14) and 11-A of the Act noting that in cases of institutional arbitration, arbitrator fees would continue to be determined by the respective institution’s rules. Where no such rules exist, or in ad hoc arbitrations, the fees will be specified by the Council. iii | Removing the Fourth Schedule, which sets a model fee structure for arbitrators, makes the fee determination process simpler. With the new changes to Sections 11(14) and 11-A, fees in institutional arbitration will now follow the institution’s rules. For ad hoc arbitrations or where no rules exist, the Council will decide the fees. This
update aims to make fee determination more flexible and clearer, ensuring that costs are transparent. |
| Earlier under the act appeal under Section 37 of the Act is allowed against orders refusing to refer parties to arbitration under Section 8 of the Act, but no similar provision exists for orders refusing to appoint arbitrators under
Section 11 of the Act |
Section 11 –
It proposed Parties will have the right to appeal against the order of the court refusing the appointment of arbitrators. |
Appeal against refusing to appoint arbitrators under section- 11 |
| Sub-section (4) to Section 8 of the Act, section 8 (4) – | New introduction under section 8 –
Mandates a 60-day timeline for deciding applications under Section 8 of the Act. Previously, there was no. |
The new rule sets a 60-day deadline for deciding applications under Section 8 of the Act. Before this, |
| Refer parties to arbitration when there is an express clause provided in the contract. No time limit for deciding on an application | statutory time-limit, often leading to delays. By introducing such a timeline, the amendment ensures that the referral process is expedited | there was no set time limit, which often caused delays. By adding this timeline, the amendment aims to speed up the referral process and make it more efficient. |
| Section 34 of the Arbitration and Conciliation Act | Section 34 – Patent Illegality Test: Limited to domestic arbitration.
Extends patent illegality test to international commercial arbitration (ICA). |
Increases the effectiveness of setting aside arbitral awards. |
| Section 9 of the arbitration and conciliation act –
Section 9, provides the formation of tribunal from the date of the court’s order as is the case currently. |
Amendment to section 9 –
Provides timeline – the 90-day period for constituting an Arbitral Tribunal from the date of the application for interim relief |
The change to Section 9 of the Arbitration and Conciliation Act introduces a 90-day deadline for forming an Arbitral Tribunal from the date of the application for interim relief. Previously, the tribunal was formed from the date of the court’s order, which could lead to delays. This new timeline aims to speed up the process, ensuring that the tribunal is constituted more quickly and that arbitration proceedings can begin without unnecessary delays. |
| Section 16 – Competence of arbitral tribunal to rule on its own jurisdiction
It does not provide for timeline for the jurisdictional challenge. |
The Draft Amendment introduces 30 days to decide jurisdictional challenges under Section 16(5) of the Act by the Arbitral Tribunal, ensuring that objections to an Arbitral Tribunal’s jurisdiction are resolved promptly. | Introducing a 30-day period for the Arbitral Tribunal to decide on jurisdictional challenges under Section 16(5) is a positive change. It ensures that these challenges are resolved quickly, preventing unnecessary delays and allowing the arbitration process to proceed more smoothly. |
| Section 37 – Appeals- | Introduces Section 37(1-A) to the Act, mandating a 60-day period for filing an appeal under Section 37(1) of the Act ensuring minimal delays in appellate proceedings and allowing the parties to move forward efficiently. | It aims to minimize delays in appellate proceedings, ensuring that appeals are handled promptly. This change helps parties move forward, reducing the overall time spent in the arbitration process which is the main motive of arbitration. |
| Section 2(1)(ca) of the Act.
(ca) “arbitral institution” means an arbitral institution designated by the Supreme Court or a High Court under this Act |
Definition –
As a body or organization that provides for the conduct of arbitration proceedings under its aegis, by an Arbitral Tribunal as per its own rules of procedure or as otherwise agreed by the parties. Broadens the definition of arbitral institutions and confers additional powers to them, including the authority to extend Tribunal mandates and reduce fees for delays. |
Broadens the definition of arbitral institutions and confers additional powers to them, including the authority to extend Tribunal mandates and reduce fees for delays. |
| Section 29 of the arbitration act Relevant Provision –
Sub-section 5 – The extension of the period referred to in subsection (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court. |
The proposed change is to extend the mandate of the Arbitral Tribunal, reduce arbitrators’ fees for delays, and substitute arbitrators whenever necessary.
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Overall this step will Reduce delay in the proceedings |
| Section 11 – Appointment of arbitrators | Adding of new proviso to Sections 11(4), (5) and (6) of the Act – | This disclosure helps the court get a clearer picture of the ongoing |
| Adding new proviso to Sections 11(4), (5), and (6) of the Act, | It will require the applicant to disclose the number of pending arbitration proceedings and awards passed in disputes between the parties to the court | Disputes and the previous arbitration between the parties. It can aid in making more informed decisions regarding the appointment of arbitrators by providing this information upfront, the process becomes more transparent and efficient, potentially reducing delays and misunderstandings |
| No requirement for the stamping of arbitral awards under the Stamping Act, of 1899. | Requires arbitral awards to be stamped as per the Stamp Act, of 1899. | Introduction of a new layer of formality and compliance. |
| Section 31 – Forms and contents of arbitral award | Insert new Section 31(2-A) to the Act –
Which outlines a procedural checklist for arbitral awards. This checklist requires arbitrators to confirm essential elements — such as party capacity, the validity of the arbitration agreement, and notice of arbitration. |
promotes greater consistency and confidence in the arbitration process |
| Section 31 Forms and Contents of arbitral award – (7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
1[(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two percent. Higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment. Explanation- The expression “current rate of interest” shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978). |
Section 31 Forms and Contents of Arbitral Award –
The interest rate would be calculated at 3% above the repo rate, replacing the existing mechanism of 2% above the general rate of interest. |
Increasing the rate for fastening the payment is a positive step. |
| Section 34 – Application for setting aside an arbitral award | Insertion of Section 34(7) provides that when an award is set aside in part, the Tribunal, on the direction of the Court or the Appellate Arbitral Tribunal, will only decide the issues on which the award was set aside, while the non-offending portions remain binding. It specifically clarifies that the tribunal will decide the said issues based on the existing records of the original arbitral award unless the Court or Appellate Arbitral Tribunal directs to the contrary | .The Tribunal will only re-examine the specific issues that were problematic, while the rest of the award remains binding. This approach maintains the integrity of the original award and avoids unnecessary re-litigation of settled matters. |
| Only courts adjudicate challenges to arbitral awards under Section 34 | Introduces an Appellate Arbitral Tribunal to hear challenges to arbitral awards, alongside courts. | It also helps reduce the burden on traditional courts, potentially speeding up the resolution of disputes. By offering an alternative to court adjudication |
| Section 34 2 (a) An arbitral award arising out of arbitration other than international commercial arbitration may also be set aside | Section 34 2 (a) An arbitral award arising out of arbitration other than international commercial arbitration may also be set aside by the court if the | This change will ensure that all arbitral awards, regardless of their origin, are subject to the same |
| by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award | court finds that the award is vitiated by patent illegality appearing on the face of the award
The new amendment Removes the distinction between domestic and international commercial arbitration regarding the grounds of patent illegality. (Section 34(2-A)) Now International commercial arbitration awards can also be set aside if found on the grounds of patent illegality. Scrutiny |
y for patent illegality. This could potentially enhance the credibility and reliability of arbitration as a dispute-resolution mechanism |
To bring India’s arbitration system up to date with global norms and fix long-standing inefficiencies, the Draft Arbitration Bill, 2024, is a major step in that direction. Although the proposed reforms, which include integrating digital procedures, addressing jurisdictional issues, and codifying emergency arbitration, have the potential to streamline arbitration, they also add complexity. For example, the creation of an Appellate Arbitral Tribunal may lower the strain on conventional courts, but it might also result in additional expenses and levels of procedure. All Major Pros and cons of the bill are discussed in the table.
Overall, the draft law takes an active approach, seeking to enhance India’s standing as a major center for international arbitration. However, careful execution, support from all parties involved, and resolving practical obstacles are necessary for its success.
References –
Keeping up with the times: The Government of India proposes new arbitration law reforms, (18 Nov, 2024), https://www.whitecase.com/insight-alert/keeping-times-government-india-proposes-new-arbitration-lawreforms.
Final_Public_Notice.pdf Ministry of legal affair Draft arbitration bill. iFuture of arbitration Future of Arbitration in India: Decoding the Draft Arbitration and Conciliation (Amendment) Bill, 2024 | SCC Times (10 Dec,2024). iGovernment of India invites comments on draft Arbitration and Conciliation (Amendment) Bill, 2024,(28,Oct,2024), Government of India invites comments on draft Arbitration and Conciliation (Amendment) Bill, 2024 | Current Affairs | Vision IAS.
Draft amendment and conciliation bill (24, Oct 2024)Draft Arbitration And Conciliation (Amendment) Bill, 2024: Comments Invited
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