Challenges and Prospective of Commercial Arbitration in India
Challenges and Prospects of Commercial Arbitration in India
1. Introduction to Commercial Arbitration
Arbitration is an alternative dispute resolution (ADR) mechanism where parties agree to resolve disputes outside courts.
Governed mainly by the Arbitration and Conciliation Act, 1996, based on the UNCITRAL Model Law.
Commercial arbitration is widely used to resolve business and contractual disputes.
2. Challenges in Commercial Arbitration in India
a) Judicial Intervention and Delay
Courts sometimes intervene excessively during arbitration, defeating the purpose of a speedy resolution.
Section 34 (challenge to arbitral awards) is often used to delay enforcement.
Case: Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc. (2012) 9 SCC 552
The Supreme Court emphasized minimal judicial interference and upheld the finality of arbitral awards.
Despite this, courts continue to intervene, causing delays.
b) Enforcement of Foreign Awards
Enforcement of foreign arbitral awards is governed by the New York Convention, but procedural hurdles and local laws delay enforcement.
Case: Renusagar Power Co. Ltd. v. General Electric Co. (1994) 1 SCC 644
The Court recognized enforcement subject to Indian laws but noted the need for simplification.
c) Lack of Skilled Arbitrators
There is a shortage of experienced and neutral arbitrators with commercial expertise.
Parties sometimes choose arbitrators without adequate qualifications, affecting the quality of awards.
d) Cost and Time Factors
Arbitration can be expensive due to arbitrators’ fees and institutional charges.
Delays occur due to procedural complexities and adjournments.
e) Limited Awareness and Acceptance
Many businesses, especially SMEs, lack awareness about arbitration benefits.
There is also reluctance to waive judicial jurisdiction.
3. Prospects of Commercial Arbitration in India
a) Pro-Arbitration Judicial Approach
Supreme Court rulings favor arbitration and discourage frivolous challenges.
Landmark case: Sundaram Finance Ltd. v. NEPC India Ltd. (1999) 2 SCC 479
Courts must respect party autonomy and arbitration agreements.
b) Amendments to Arbitration Law
The Arbitration and Conciliation (Amendment) Act, 2015 & 2019 introduced:
Time-bound disposal of challenges (6 months for Section 34).
Reduced court interference.
Introduction of fast-track procedures.
These reforms aim to boost efficiency.
c) Growing Institutional Arbitration
Rise of institutions like NALSAR Arbitration Centre, MCIA (Mumbai Centre for International Arbitration), SIAC India.
These institutions offer professional support, better rules, and transparency.
d) International Arbitration Hub Ambitions
India aims to be a global arbitration hub.
Development of infrastructure and streamlined laws supports this goal.
4. Important Case Laws
| Case Name | Summary |
|---|---|
| Bharat Aluminium Co. v. Kaiser Aluminium | Minimal judicial interference; enforce arbitration awards promptly. |
| Sundaram Finance Ltd. v. NEPC India Ltd. | Respect arbitration agreement; avoid unnecessary court intervention. |
| Renusagar Power Co. Ltd. v. GE | Enforcement of foreign awards with due regard to Indian law. |
| Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (2019) 16 SCC 691 | Courts cannot refuse enforcement of awards on the basis of alleged patent illegality unless it shocks the conscience. |
5. Summary
| Challenges | Prospects |
|---|---|
| Excessive judicial intervention | Pro-arbitration Supreme Court rulings |
| Delay in enforcement | Legislative reforms for faster dispute resolution |
| Enforcement hurdles for foreign awards | Growth of professional arbitration institutions |
| Lack of qualified arbitrators | India’s ambition as a global arbitration hub |
| Cost and procedural delays | Adoption of fast-track procedures and technological tools |
Conclusion
While commercial arbitration in India faces challenges like judicial delays, enforcement issues, and limited expertise, recent judicial pronouncements and legislative reforms offer hope for a more efficient, business-friendly arbitration regime. With continued improvements, India is well on its way to becoming a preferred arbitration destination globally.
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