The economic liberalisation in the early 1990s saw the advent of huge foreign investments in India. The 1940 Act was not an effective mode to settle domestic and international commercial disputes. The Arbitration and Conciliation Act, 1996, was enacted as a comprehensive modern legislation on arbitration in India on the lines of the ‘Model Law’ of the UNCITRAL (United Nations Commission on International Trade Law). The intention of the Act was to make arbitration process responsive to contemporary commercial requirements.
After 17 years in practice, the Act has fallen way behind the intent for which it was enacted. An ‘out-of-court’ process should have ideally ensured quick resolution of disputes, but a peep into the law-at-work vis-a-vis the Act reveals just the contrary. While arbitration proceedings should be result-oriented, in practice, the end is never in sight for the disputing parties.
The Indian system is highly litigatious and dispute ridden. It requires a quick and time-bound resolution process, outside the traditional court system. Arbitration offered an effective alternate dispute redressal system where the end was in sight. The reality has been somewhat different. Arbitrations, much like television serials and ordinary suits, drag for years with no outer limit.
In fact, recent examples have shown that initiation of arbitration itself can take over two years—the dispute between Reliance and the government is one such instance, where the initiation of arbitration was in November 2011 and the Arbitral Tribunal was constituted in March 2014—the Supreme Court has now withdrawn the name of James Spigelman as the presiding arbitrator and has promised to appoint a new arbitrator in his place soon.
No institutional set-up
The Arbitration Act itself is tailor-made for disputes; while the old Act was overhauled to resolve disputes, the 1996 Act appears to have actually created disputes. Some of the troubled spots are in the design of the Act and the lack of an institutional set-up/system is a major area of concern.
India has not yet developed the system of an institutional arbitration where there is a laid down procedure that restricts timelines monitored by an effective secretariat and where the choice of arbitrators depends upon the subject matter of disputes. Universally-applicable timelines should be stipulated within which pleadings should be completed, hearings should commence and awards be passed. Experienced and qualified experts should be appointed as arbitrators to strengthen the quality of decision-making and to ensure faster determination.
Excessive judicial intervention
At first instance, the arbitration process gives