Litigation 2024 Comparisons

The Indian legal system traces its origins to the English common law system, and is based on codified law and law developed through judicial precedent. Proceedings in Indian courts are adversarial. The process before the court is conducted through both written submissions and oral arguments.

India’s court system has a Supreme Court, High Courts of various states, and district courts that come under the supervisory jurisdiction of the relevant High Courts.

There are 25 High Courts in India exercising jurisdiction over 28 states and eight union territories.

Constitutional Courts

The Constitution of India provides for two sets of constitutional courts: the High Courts and the Supreme Court of India. Both exercise “writ jurisdiction”, which is an extraordinary power in the hands of constitutional courts to undertake judicial review of state action and enforce the fundamental rights of persons. The Supreme Court also has powers to entertain appeals from any High Court exercising its writ jurisdiction.

Appellate Jurisdiction

Both the Supreme Court and the High Courts also have appellate jurisdiction. The Supreme Court can entertain appeals from various statutory tribunals as provided under the relevant legislation, and also has special powers to entertain an appeal against any decision/judgment/order of any court/tribunal in India.

The High Courts exercise appellate jurisdiction in various kinds of “civil” and “criminal” claims, while certain High Courts also exercise “original” jurisdiction – ie, in certain instances, the High Court can be the first court for certain claims of a specific monetary value.

Subject Matter Jurisdiction

India’s system of courts may be broadly classified as “civil” and “criminal” courts, with certain courts such as family courts and small cause courts being concerned with specific classes of subject matter.

Civil courts in India are governed by the procedure set out in the Code of Civil Procedure, 1908 (CPC). Criminal courts are governed by the procedure set out in the Code of Criminal Procedure, 1973.

With the enactment of the Commercial Courts Act, 2015 (CCA), India has an established class of “Commercial Courts” that concern themselves with a specific set of identified claims.

Tribunals

In addition, various tribunals have been constituted by Acts of Parliament to undertake adjudication of cases dealing with specific subject matters, including the National Company Law Tribunal and the National Company Law Appellate Tribunal for matters of company law, the National Green Tribunal for environmental matters, etc.

Court proceedings are open to the public, subject to specific security-related measures being imposed by specific courts, which may restrict entry. For sensitive matters and hearings, parties may seek an exemption from an open court hearing by seeking in camera proceedings.

Judgments and orders of courts in India are a matter of public record, with certain court-imposed restrictions on the disclosure of the names and identities of parties in sensitive matters. However, court filings are not open to public scrutiny.

In India, as per the Advocates Act, 1961, “advocates” are the only class of persons entitled to practise the profession of law, and must be appropriately registered with the State Bar Council.

Foreign Lawyers

Considering the rise in international commercial arbitrations, the Supreme Court of India recently held that foreign lawyers are entitled to give legal advice on foreign law involving diverse international legal issues on “casual” visits to India. Such “casual” visits would not amount to the “practice of law”.

On 10 March 2023, the Bar Council of India notified the Bar Council of India Rules for Registration and Regulation of Foreign Lawyers and Foreign Law Firms in India, 2022, regulating the entry of foreign lawyers and foreign law firms in India on a reciprocal basis. Foreign lawyers or firms can continue to practise law on a “fly in fly out” basis, providing legal advice “regarding foreign law and on diverse international legal issues” if:

• the advice is procured by the client in a foreign country;
• the foreign lawyer or firm does not maintain an office in India; and
• the practice in India does not cumulatively exceed 60 days in any period of 12 months.

A foreign lawyer or firm can practise law in India in non-litigious matters only, subject to exceptions laid down in the Rules. Foreign lawyers will be permitted to represent foreign parties in international commercial arbitrations, but not in domestic arbitrations or in litigation before any Indian court or tribunal.

Third-party funding is not expressly prohibited in India, as held by the Supreme Court of India. In fact, the Bar Council of India has also framed Rules with an intent to regulate and place several restrictions on third-party funding in India.

There are certain states in India that have made specific state-level amendments to the CPC to regulate third-party funding within such states.

Furthermore, third-party funders would be governed as per judicial scrutiny under the Indian Contract Act, 1872, and the grounds for declaring for such agreements as illegal or void would be:

• unconscionability;
• unfairness;
• going against public policy;
• being for the purpose of gambling in litigation; or
• injuring or oppressing others by abetting and encouraging unrighteous claims.

Since there is no specific legislation/statute governing third-party funding, there is no exhaustive list of lawsuits made available for third-party funding. However, third-party funding in India is widely used for arbitration proceedings as they generally tend to be money-intensive mechanisms for dispute and are likely to give investors huge payouts.

There is no law prohibiting third-party funding for either the plaintiff or the defendant.

Indian law is silent on the minimum and maximum amounts of third-party funding.

There is no specific provision governing costs vis-à-vis third-party funders. However, such funding can cover any lawful structuring and may involve legal counsel’s fees, court/tribunal fees, venue costs and other costs for cases such as class action suits, commercial suits, commercial arbitrations, tortious claims, etc.

Contingency fees are not permitted in India, with such arrangements being specifically prohibited on the part of lawyers under Rule 20 of the Bar Council of India Rules, 1961.

There are no applicable statutes/rules regulating third-party funding, so there is no prescribed time limit for obtaining third-party funding.

In India, certain proceedings require pre-action conduct, as follows:

• the filing of a commercial suit must be preceded by mandatory “pre-institution mediation”, with the only exception being cases wherein some urgent interim relief is being sought);
• in writ proceedings, courts take into consideration whether the petitioner has exhausted local remedies such as approaching the state authority concerned with a representation seeking redressal of grievances, if any such process is prescribed under applicable law;
• for proper institution of a civil action against a government/state authority/public officer (in relation to his or her official conduct) in India, two months' notice, in writing, must be served upon such authority/ government;
• for civil proceedings against a foreign state, the Indian government’s written consent is a pre-condition; and
• in arbitration matters, if pre-arbitral steps are prescribed under a contract, courts require such parties to adhere to such requirement.

In the case of pre-action conduct such as the issuance of a letter/notice to a proposed defendant or mandatory mediation, the party initiating such action can proceed with its claims if the proposed defendant does not respond.

The law on limitation for civil action is provided under the Limitation Act, 1963 (ILA). The limitation period for each specific civil action is to be computed based on the trigger date provided under the relevant category therein.

Limitation periods under the ILA are as follows:

• three years for the institution of a civil suit/claim for recovery of money;
• 12 years for the recovery of possession of an immoveable property; and
• 12 years for the execution of a decree.

A court that has original jurisdiction will have jurisdiction to entertain a claim against a defendant if:

• the defendant habitually resides, carries on business or works for gain within its territorial jurisdiction;
• the cause of action or part of the cause of action has arisen within the territorial limits of such court; and/ or
• the immovable property that is the subject matter of the claim lies within the territorial jurisdiction of the court – this principle is applicable to all courts of original jurisdiction.

Subject matter is also a determinable factor for the jurisdiction of a court. Specific statutes may confer jurisdiction on different courts/tribunals for certain subject matters of dispute. Please see 1.2 Court System.

The jurisdiction of courts is also determined by the pecuniary/monetary value of the claim.

Under the provisions of the CPC, a civil claim/suit is instituted by filing a plaint, which is a statement of claim setting out the facts, the cause of action and the relief sought.

Amendment of the plaint is permitted under the CPC in certain circumstances. Furthermore, judicial precedent has developed over the years that prescribes the conditions where such amendments would be permitted or disallowed.

Rules of service are provided under the CPC. Upon the filing of a suit, the court issues summons to the defendant to appear and answer the claim and file its written statement of defence. Summons can be issued and intimated to the defendant ordinarily by post, and by other means in certain cases, including email and courier. The cost of service of summons (ie, a “process fee”) has to be borne by the plaintiff.

Summons can be served to a defendant outside the territorial jurisdiction of the court. As mentioned in 3.3 Jurisdictional Requirements for a Defendant, if the cause of action or part of the cause of action has arisen within the territorial jurisdiction of the court, the defendant would be amenable to the jurisdiction of such court even if they reside outside the local limits of the court’s jurisdiction.

Service on Defendants Not Residing Within India

India is a signatory of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, so the service of summons to a defendant residing abroad (in a country that is also a member) has to be in accordance with said convention.

If the defendant fails to appear before the court despite proper service of the court summons, the court may order that the suit shall be heard ex parte – ie, in the absence of such defendant. Once the defendant has proceeded against ex parte, the defendant is not entitled to file its written defence unless it is specifically permitted to do so by the court on a subsequent application for setting aside the ex parte order.

The CPC permits the prosecution of a suit by way of representative action (similar to a class action), in order to enable a class of persons having the same interest in a suit to either sue or be sued through a representative. The court in such suit gives notice to all persons interested in the suit, either by personal summons or by public advertisement. A decision in such suit will be binding on all persons who are represented in such suit by a representative.

Some statutes, such as the Companies Act and the Consumer Protection Act, 2019, have codified the law on class actions, providing specific conditions and circumstances under which class action proceedings may be initiated and considered maintainable.

In addition, the constitutional courts in India also have the power to entertain class actions under writ jurisdiction, such as “public interest litigation”. Orders passed in proceedings are generally binding on the class of persons, even if any such persons are not represented in such proceedings.

There is no requirement to provide clients with a cost estimate of potential litigation under Indian law.       

Under the CPC, parties can file interim applications even prior to commencement of trial and substantive hearing of the claim. For instance, parties can file an application seeking:

• rejection of the plaint by the defendant on various grounds;
• return of the plaint to the appropriate/jurisdictional court;
• protection/preservation of the subject matter of the dispute; and
• the appointment of local commissioners/receivers to carry out certain acts in relation to the subject matter of the dispute.

Such applications are not limited to case management; parties can obtain substantive remedies pending final hearing in the matter, including interim relief for maintenance of the status quo, interim injunction, the appointment of local commissioners, the attachment of properties before judgment, judgment on admission, etc.

Parties can seek specific orders from the court on certain issues that would have a final impact on the suit itself, prior to full-fledged adjudication on the merits of the case. Examples of such actions include the following.

Judgment on Admission

Either party is at liberty to seek a judgment prior to the commencement of the trial, or the court on its own motion may pass such judgment, based on any written or oral submission of a counterparty, at any stage of the suit, on admission of a fact.

Framing of Preliminary Issue

At any stage prior to commencement of trial, on application from either party, the court may frame a preliminary issue before trial, which may be determined by the court, impacting the final outcome of the suit, such as an issue regarding lack of jurisdiction, maintainability of the suit on account of lack of cause of action, the claim being barred by limitation, etc.

Rejection of the Plaint

A defendant can seek rejection of the plaint/claim in the following circumstances:

• when the plaint does not disclose a clause of action;
• where the relief claimed is undervalued;
• where the plaint is insufficiently stamped and the plaintiff fails to comply with the stamp requirements following the return of the plaint by the court;
• where the plaint is barred by law; and
• where the plaintiff fails to comply with certain specific requirements under the CPC.

Such an application can be filed at any stage of the suit, and may lead to the suit being disposed of prior to commencement of trial.

Return of the Plaint

Parties can seek the return of the plaint on the ground that it has been presented before a court that does not have the proper jurisdiction to adjudicate the claims.

Refer see 4.2 Early Judgment Applications.

A party can seek to be impleaded/added to a suit by way of a formal application. The court would determine whether such a party has a direct interest in the subject matter of the suit, and as such is considered a “necessary party” or “proper party” to the suit. The court may – on its own motion in certain circumstances – direct impleading a party that is not already arrayed as a party in the suit on the same grounds.

Furthermore, if a plaintiff fails to join a “necessary party” to a suit, such suit is liable to be dismissed for the non-joinder of necessary parties. A necessary party is the person who ought to be joined as party to the suit and in whose absence an effective decree cannot be passed by the court.

Under the CPC, at any stage of the suit, either on its own motion or upon application by a defendant, a court may order the plaintiff to give security for the payment of all costs incurred and likely to be incurred by the defendant.

There are no specific rules/provisions in India providing for the costs of interim applications.

There is no specific timeframe provided under the CPC for the disposal of an application/motion. However, in practice, such applications/motions are heard and disposed of as soon as the written and oral submissions by both parties are concluded.

Courts provide timeframes for such written and oral submissions, which are strictly enforced and adhered to, in order to ensure the smooth disposal of such applications/motions.

A party can request urgent disposal of an application/motion by providing reasons for such urgency, which is considered by the court on a case-by-case basis at its own discretion. However, the counterparty is usually given an opportunity to file its written submissions, even if within a short timeframe, before such application/motion is heard and disposed of.

Discovery and Production of Documents

The CPC provides that both the plaintiff and the defendant should file all the documents being relied upon by either of them along with the plaint and the written statement/statement of defence, respectively. Thereafter, any further documents can only be filed with prior permission of the court upon a written application with reasons for non-filing of the document earlier.

The CPC permits parties to file applications for the discovery of documents. Thereafter, the counterparty is given an opportunity to respond to such application. The court then decides on the merits of the discovery application and determines whether such discovery is necessary for the full and final adjudication of the suit.

The court can on its own motion direct a party during the pendency of the suit to produce any document in such party’s possession and/or power relating to any matter in the suit.

Interrogatories

Before commencement of trial, a party can on an application file interrogatories (questions) requiring the counterparty to respond. The interrogatories are required to be delivered with an explanation as to why a specific party is required to respond. The court determines whether such interrogatories are questions that relate to the suit and thereafter directs such party to file its response to the specific interrogatories.

Inspection

A party can serve a direct notice to the other party to inspect certain documents in the other party’s power and possession, referenced in the other party’s pleadings. If a party fails to comply with such notice, an application can be made to the court to direct such inspection.

The law does not provide for any specific cost to be paid by any party for discovery, interrogatories or inspection. The court may impose costs if it finds that such interrogatories or inspection are irrelevant to the suit or vexatious.

A third party can be directed to give evidence or produce documents/objects. Indian courts can issue summons to any person whose attendance is required to give evidence or produce documents, either of their own motion or upon the application of a party.

Please see 5.1 Discovery and Civil Cases.

The general approach to discovery in India is that the parties shall file a list of all documents and photocopies of all documents pertaining to the suit that are in its power, possession, control or custody. If any party believes that the counterparty is in possession of documents that are material to the adjudication of the suit, such party may seek discovery through an application before the court. Upon such application being allowed, the party is required to produce such documents. All rules governing disclosure are provided under the CPC.

The Indian legal system has provisions governing the discovery and inspection of documents, so there are no alternatives to discovery mechanisms.

Indian law recognises the concept of attorney-client privilege, which safeguards written communications and other work product output. The Indian Evidence Act of 1872 (IEA) protects client-advocate professional interactions, with disclosures being made only with the prior consent of the client. This privilege continues even after the engagement has ceased. However, if any communication has been made in the furtherance of any unlawful act and if anything has been observed by a lawyer during the course of their employment that reveals a crime or fraud has been committed since the beginning of said employment, then the privilege under Section 126 will not be applicable. The duty of confidentiality is also applicable to interpreters, clerks and servants of the legal counsel.

“In-house counsels” are not covered under the attorney-client privilege exception under the IEA, as an “advocate” cannot be a full-time salaried employee. However, in certain cases it has been held that if the salaried employees give legal advice to their employers, their advice and communications giving such advice would get the same protection as that of advocates under the IEA.

For a party to be compelled by a court to disclose certain documents, the threshold of “relevancy” for such documents to the adjudication of the plaint has to be satisfied. Only those documents that are necessary for the adjudication of the issues before the court would be required to be disclosed.

In civil actions, Indian courts have developed and adopted a three-pronged test for determining whether a party is entitled to injunctive relief:

• establishing a prima facie case – ie, on the face of it, the party must make out a case that is likely to succeed;
• the balance of inconvenience, which is a relative test of which party is likely to face greater inconvenience if an injunction is passed or not passed; and
• a party must demonstrate that grave and irreparable harm will accrue to the party if such an injunction is not granted.

Additional relevant factors include the disclosure of all material information; failure to do so would disentitle a party to equitable relief.

In addition to injunctive actions, Indian courts are also empowered to pass anti-suit injunctions to prevent parallel proceedings in other jurisdictions.

Injunctive relief can be obtained when a party demonstrates grave urgency. Such circumstances may be apprehensions of precipitative action, grave pecuniary loss or any other circumstances which, if urgent injunctive relief is not granted, would result in any lawsuit becoming redundant or infructuous.

While ex parte injunctive relief may be granted by the courts, such powers are exercised with circumspection, and only if an imminent threat of irreparable loss is demonstrated by the party seeking such relief.

There is no specific provision in the CPC in relation to liability for damages suffered by the respondent. However, civil courts have inherent powers under Section 151 of the CPC to pass orders for relief not otherwise specified in the enactment.

Indian courts have recognised worldwide asset freezing orders through precedent.

In certain exceptional circumstances, courts are able to grant injunctions against parties who are not party to the proceedings. However, the general rule is that injunctive relief is not granted against third parties, unless at least an opportunity of hearing is afforded to them.

Wilful disobedience or non-compliance with the order of injunction passed by a court in India has the consequence of making the defaulting party liable for contempt of court. For injunctive orders passed under the CPC specifically, in the case of wilful disobedience of an order of injunction passed by a court under Order XXXIX Rules 1 & 2, it is open to the other party to file an application under Order XXXIX Rule 2A, whereunder a contemnor may be liable to the attachment of property, a fine and/or civil imprisonment, at the discretion of the court. It may be noted that the purpose of Rule 2A is typically to ensure compliance with an order of injunction, and punishment is contemplated only if such default/disobedience is actually wilful.

Trial in courts in India are conducted through a mixture of oral arguments, witness/expert examination at hearings, and the submission of written arguments and evidence. Exemptions from the requirement of examination (ie, a procedure for summary hearing) have been provided for under various statutes in certain circumstances.

Case management hearings are conducted by courts exercising civil jurisdiction. This stage involves the completion of all primary court filings (the equivalent of claims, defence, rebuttal). However, it was not until the enactment of the CCA that a formal concept of “case management hearings” was introduced. The CCA requires the court to hold the first case management hearing no later than four weeks from the date of filing of the affidavit of admissions/denial of documents. The law requires the court to ensure that the arguments are closed no later than six months from the date of the first case management hearing. However, practically, strict adherence to such timeframes is not always possible on account of the huge pendency of cases before the court.

Jury trials have been abolished in India.

Evidence and its admissibility are governed by the IEA, which provides specific rules relating to how evidence can be led in a court of law. Sections 17 to 31 of the IEA deal with admission and confessions. As per Section 17, an “admission” is a “statement, oral or documentary or contained in electronic form, which suggests any inference as to any fact in issue or relevant fact, which is made by any of the persons, and under circumstances, hereinafter mentioned”. Furthermore, Section 31 of the IEA states that admissions are not conclusive proof of the matters admitted but they may operate as estoppels. As per Section 58, facts admitted need not be proved.

Notably, India does not recognise the concept of the “fruit of the poisonous tree”, which gives courts sweeping powers to accept and consider evidence regardless of its source.

Expert evidence is permitted by courts in India, and parties and even the courts are permitted to introduce expert testimony. The IEA deals with the relevancy of opinions of third parties in relation to points of foreign law, art, science, handwriting identification, etc.

Please see 1.3 Court Filings and Proceedings.

In addition, with the advent of technology, court proceedings are also being livestreamed and thus are easily accessible. So far as transcripts of hearings are concerned, this is a fairly new concept for courts in India and is being introduced on case-by-case basis.

As India follows an adversarial rather than an inquisitorial system, the role of judges is typically limited to regulation of the proceedings and adjudication of the dispute on the basis of the facts and evidence adduced before the court. In certain circumstances, judges may take a more active role in the proceedings in the interests of equity and justice by directing pointed questions to the legal representatives.

For procedural orders in the nature of adjournments, recording statements of the parties pertaining to out-of-court settlement and in certain kinds of cases where extensive appreciation of facts, evidence or law is not required, judges generally dictate and pronounce such judgments or orders in open court during the course of the hearing. In other cases, general practice is that the judges reserve the order and then pronounce it in open court on a subsequent date.

Commercial disputes are governed by the CCA, which does not provide any timeframe for the disposal of a commercial suit. However, Order XV-A Rule 3 of the CPC provides that the court shall ensure that the arguments are closed no later than six months from the date of the first case management hearing.

In addition, Section 14 of the CCA requires the commercial appellate courts to endeavour to dispose of appeals within six months. Furthermore, Section 34(6) (which is a directory provision) of the Indian Arbitration Act requires the court to dispose of Section 34 petitions (for setting aside an arbitral award) expeditiously and in any event within one year from the date on which notice is served upon the respondent.

No court approval is required for a settlement between the parties; parties to a suit can settle the underlying dispute any time. If the parties wish any settlement agreement signed between them to be made into a decree of the court, they can file a compromise petition under Order XXIII Rule 3 of the CPC. The mere filing of the compromise petition will not result in the agreement being enforced: the court has to pass a decree in terms of the agreement or compromise arrived at between the parties, which can then be executed. However, to obtain such a decree, such compromise or agreement cannot be void or voidable under the Contract Act, 1872.

Confidentiality of the Settlement of Lawsuits

The terms of a settlement agreement can remain confidential if the parties so desire. In some cases, settlement agreements are filed in courts under sealed cover. However, if a party to the agreement wishes to make the settlement agreement into a decree of the court, it is likely that the terms of the settlement agreement may form part of the decree, and thus the settlement might not remain confidential.

Confidentiality of Settlement by Arbitration, Conciliation or Mediation

Court-referred mediation settlements are confidential.

However, while arbitration (Section 42A) and conciliation (Section 75) proceedings enjoy confidentiality, the award will require disclosure for enforcement, even if it was arrived at by settlement.

Settlement in Case of a Suit

Parties to a suit can settle the underlying dispute by entering into a settlement agreement. However, in anticipation that the parties may renege on the settlement, the parties to the suit can seek that the settlement agreement be made into a decree of the court (“consent decree”) of which execution can then be sought, in order to ensure enforcement of the settlement. Thereafter, if the settlement agreement is not adhered to, the party seeking to have the consent decree acted upon can file an application for execution of the consent decree.

Settlement in Case of Alternative Dispute Resolution

If the parties to an arbitration settle the dispute, an arbitrator may pass an award, which shall be based on the settlement terms arrived at, and such settlement can be enforced in the same manner as an arbitral award before Indian courts.

In the case of a settlement pursuant to conciliation, the settlement agreement has to be arrived at in the manner and form stipulated, and duly authenticated by the conciliator. Thereafter, such a settlement agreement would be final and binding on the parties, and it shall have the same status and effect as an arbitral award passed by an arbitrator after adjudicating the disputes, including for enforcement.

If parties have privately entered into an out-of-court settlement for the settlement of disputes that have not been the subject matter of a formal arbitration, conciliation or mediation, such a settlement agreement cannot be enforced as an arbitral award.

Section 27 of the Mediation Act, 2023 states that a mediated settlement agreement resulting from a mediation signed by the parties and authenticated by the mediator shall be enforced in accordance with the provisions of the CPC in the same manner as it were a judgment or decree made by a court.

While a consent decree in a suit arising out of a settlement agreement operates as an estoppel by judgment, it can be set aside if the settlement agreement was obtained by fraud, misrepresentation or mistake.

Furthermore, for a challenge to a consent decree on the ground that the decree was not lawful (ie, it was void or voidable), a party has to approach the same court, and a separate suit to challenge the consent decree will not be maintainable.

A settlement agreement that has become an arbitral award by virtue of Section 30 or 74 of the Arbitration Act can be set aside in terms of Section 34 of the Arbitration Act.

Section 28 of the Mediation Act sets out that a mediated settlement agreement can be challenged only on the grounds mentioned therein, which are:

• fraud;
• corruption;
• impersonation; or
• where the mediation was conducted in disputes or matters that are not fit for mediation under Section 6.

Parties to a suit can be awarded a decree granting them contractual, equitable or statutory relief, or any other suitable relief under the inherent powers of the court. Specific performance of a contract may also be granted if such a relief has been requested in the suit.

Specific performance of a contract can also be granted by an arbitral award, and costs and damages can be awarded if requested.

Arbitration proceedings are terminated by the making of a final award by the arbitrator. An interim award can also be made at any time during the arbitral proceedings.

The awarding of damages is covered by Sections 73 and 74 of the Contract Act, 1872. Section 73 requires a party in breach of the contract to reasonably compensate the counterparty by way of damages.

However, damages can only be awarded if loss has occurred, as would naturally and consequently arise due to the breach; such consequence must be one that could have been reasonably foreseen by the parties to arise due to the breach of the contract. The loss alleged to have been suffered cannot be remote. The “but for” test is also applied, under which no loss would have been suffered “but for” the breach by the respondent. The party claiming damages must also be able to show evidence of the loss suffered as a result of the breach.

Section 74 of the Contract Act deals with the granting of liquidated damages if the parties have agreed the payment of such in the event of a breach. Liquidated damages are pre-determined estimates of losses that are payable in the event of loss suffered on account of a breach. However, they cannot be in the nature of a penalty – ie, liquidated damages ought not to be disproportionate to the losses that could result from the breach.

The contract may provide a ceiling for liquidated damages in the form of a maximum amount that can be awarded. However, if the liquidated damages are only specified to be paid in the event of loss suffered due to a specific breach, then that would not prevent a party from claiming damages for losses arising due to a different breach of the contract for which no damages are stipulated.

Pre-judgment interest, if claimed for, can be granted by the court in a suit.

As per Order VII Rule 2A of the CPC, the plaints should specify the basis of any interest being sought, along with the rate, period, total amount, etc. As per the CPC, the court can grant interest for the following periods:

• any period prior to the filing of the suit;
• from the date of the suit to the date of the decree; and
• from the date of the decree to the date of the payment.

Arbitral Proceedings

Interest for the pre-reference and pendente lite period

Unless the parties have agreed to the contrary, the award can provide for interest at any rate deemed reasonable by the arbitrator, and for any period from the date on which the cause of action arose to the date of the award.

Post-award interest

Post-award interest is also payable on the amount directed to be paid by the award at a rate of 2% higher than the prevailing rate on the date of the award. This interest will be payable for the period from the date of the award to the date of payment.

The enforcement of a domestic judgment can be sought by the decree holder under Order XXI of the CPC.

The modes of execution include:

• delivery of the property decreed;
• attachment or sale of the judgment debtor’s property;
• arrest and detention of the judgment debtor;
• the appointment of a receiver;
• recovery by way of garnishee orders – ie, from a third party who may owe amounts to the judgment debtor; and
• any other way as required in terms of the relief granted.

A foreign judgment can be directly enforced under the CPC if it is passed by a court located in a “reciprocating territory” – ie, one that is declared as such by the central government by notification in the official gazette. Such a judgment would be executed in India in the same manner as if it had been passed by an Indian court.

If the judgment is from a court that is not in a “reciprocating territory”, then the decree holder will be required to file a suit against the judgment debtor, where the decree will be used as evidence for substantiating its claim.

Appeal Mechanism

Pursuant to an original decree passed by a court, an aggrieved party can file an appeal against specific kinds of orders, which is considered a “first appeal”. Thereafter, a “second appeal” can also lie in certain cases on a substantial question of law.

A party may also file a special leave petition under Article 136 of the Constitution of India before the Supreme Court, challenging any order/judgment passed.

Reference, Review and Revision

A court can also refer a case pending before it to the High Court for its opinion, if the referring court is satisfied that the pending case involves a question on the validity of a provision, the determination of which is necessary for the disposal of the case, and if the referring court feels that such act is invalid or inoperative but has not been declared so by the High Court or Supreme Court. This is referred to as “reference”.

An aggrieved party can also seek “review” of a decree or order from which no appeal is allowed, or where appeal is allowed but has not been preferred. The review is sought before the same court that passed the decree or order.

High Courts have also been vested with the power of revision. In cases where no appeal is provided for, and a question is raised regarding the improper exercise of jurisdiction by a subordinate court, the High Court can call for the record of such case and pass such orders as it thinks fit.

Please see 10.1 Levels of Appeal or Review to a Litigation.

An appellate court shall have the power to finally determine a case, to remand a case, to frame issues and refer to trial, and to take additional evidence.

An appeal can also be made to the Supreme Court under Section 109 read with Order XLV of the CPC against a judgment, decree or final order passed in a civil proceeding of a High Court. However, an appeal to the Supreme Court will only lie once the High Court certifies that the case involves a substantial question of law of general importance, and if the High Court is of the opinion that the question needs to be decided by the Supreme Court.

Procedure

Appeals are made in the form of a memorandum, which is to be signed by the appellant or their pleader, and must be accompanied by a copy of the challenged decree. It should include the grounds of objection.

If the appeal is against a money decree, the appellant may have to deposit the amount in dispute or furnish security of such amount, as the court may direct.

The mere filing of the appeal does not by itself result in a stay of the operation of the challenged decree. A separate application seeking a stay of the impugned decree has to be made; the appellate court may stay the operation of the decree upon sufficient cause being shown that substantial loss may be caused to the appellant unless the impugned decree is stayed.

Once an appeal is filed, the appellate court shall fix a date for the hearing of the appeal, and the appellant will be required to serve notice on the respondent regarding the appeal and the date fixed for its hearing. A notice of the appeal shall also be sent by the appellate court to the court that passed the impugned decree.

Time Period for Filing an Appeal

Under the ILA, the periods of limitation to file an appeal are as follows:

• 90 days for an appeal from a subordinate court to the High Court;
• 30 days for an appeal to any other court; and
• 30 days for an appeal from the High Court (Single Judge Bench) to the same court (Division Bench).

However, courts have the discretion to condone a delay in filing upon a party showing sufficient cause for their failure to file the appeal within the prescribed time period.

First Appeal

For a first appeal, the court can consider issues of both fact and law. The court can consider whether there is an error of law or fact in the lower court judgment or whether the judgment of the lower court suffers from any procedural irregularities, including violation of the principles of natural justice.

Second Appeal

In the case of a second appeal (ie, against an appellate decree), the High Court has to consider and be satisfied whether the case involves a substantial question of law. The High Court will also have to determine if there is any issue that has not been determined or that has been wrongly determined by the lower appellate court.

Moreover, the CPC permits the production of additional evidence at the appellate stage under certain circumstances, such as:

• the court from whose decree the appeal is preferred has refused to admit evidence that ought to have been admitted;
• the party seeking to produce additional evidence establishes that, notwithstanding the exercise of due diligence, such evidence was not within their knowledge or could not, after the exercise of due diligence, be produced by them at the time when the decree appealed against was passed;
• the appellate court requires any document to be produced or any witness to be examined to enable it to pronounce judgment; or
• for any other substantial cause.

Furthermore, the appellate court has to see if the court whose decree is in appeal has omitted to frame or try issues that in the appellate court’s opinion are essential for arriving at the decision; the appellate court may then frame the issue and refer it to trial to the court whose decree is in appeal.

The court may impose certain conditions before considering an appeal. For instance, the court may require the appellant to deposit the entire sum involved before the appeal is even heard by the appellate court.

The mere filing of the appeal does not by itself result in a stay of the operation of the challenged decree. A separate application seeking a stay of the impugned decree has to be made; the appellate court may stay the operation of the decree, subject to conditions, upon sufficient cause being shown that substantial loss may be caused to the appellant unless the impugned decree is stayed.

In the case of arbitral awards, there is no prerequisite for the awarded amount to be deposited in order to file an application seeking to set aside an arbitral award. However, if an application is filed for a stay of the operation of the award, the court may grant such a stay for reasons to be recorded in writing, subject to such conditions as it may deem fit.

The appellate court has the power to:

• decide and determine a case by setting aside or upholding the judgment;
• remand the case back to the lower court;
• frame issues and refer them for trial; or
• take or require additional evidence to be taken.

If the appellate court decides and determines the case, it may confirm, vary or reverse the decree against which the appeal is referred.

Regarding arbitral awards, please see 13.3 Circumstances to Challenge an Arbitral Award.

Court Fees

At the time of the institution of a suit, the court fee is borne by the plaintiff, and is computed on the basis of the reliefs sought.

If a suit is settled before the trial commences between the parties, the plaintiff can request a refund of the court fees, which can be granted by the court at its discretion for either the entire amount or a part thereof.

During the pendency of the litigation, the parties bear their own costs, but the court can award the costs of the litigation to the successful party when passing its final judgment and decree.

Costs

Costs awarded have to be reasonable and can include the court fees and expenses incurred in filing the suit, the production of witnesses, legal fees and expenses, and any other expenses incurred that were incidental to the suit.

A court has further powers to award compensatory costs in the case of false and vexatious claims or defences, but such costs are capped at INR3,000 or the limit of the pecuniary jurisdiction of the relevant court, whichever is lower. Further costs can also be awarded if any delay is caused by any party in the hearing of the suit.

At any time during the pendency of a suit, a court can also require the plaintiff to furnish security for the payment of costs incurred or likely to be incurred by the defendant. If the plaintiff fails to furnish the security, the court can even pass an order dismissing the suit.

Costs can also be awarded by an arbitrator in the arbitral award. Similar to suits, the general rule in arbitration is also that the unsuccessful party shall pay costs to the successful party, and that costs follow the event.

Please see 11.1 Responsibility for Paying the Costs of Litigation.

In commercial disputes, the court has to consider the following while awarding costs:

• whether costs are payable by one party to another;
• the quantum thereof; and
• the time when such costs are to be paid.

While awarding costs in arbitral proceedings, the arbitrator has to consider:

• whether costs are payable by one party to another;
• the quantum thereof;
• the time when such costs are to be paid;
• the conduct of the parties;
• whether a party has succeeded in its case;
• whether a frivolous counterclaim was made, resulting in a delay in disposal of the arbitral proceedings; and
• whether any reasonable offer to settle the dispute was made by one party and refused by the other party.

In suits and arbitral proceedings, interest on costs can be awarded from or until a certain date.

The CPC envisages five types of ADR:

• arbitration;
• conciliation;
• mediation;
• judicial settlement; and
• Lok Adalat settlement.

Arbitration and conciliation require the consent of the parties since the decision therein is binding and enforceable. However, parties can be referred to mediation, judicial settlement and Lok Adalat settlement without their consent, since a settlement arrived at through these processes has to be placed before the court for recording and disposal.

ADR is viewed as an efficient and necessary process for effecting speedy and effective relief to litigants, while also reducing the pendency of cases in courts. In fact, courts have explicitly held that arbitration should not be treated as an inferior adjudication procedure. The endeavour has been to promote arbitration as a transparent, fair and just alternative to court adjudication.

The Mediation Act, 2023 came into force on 15 September 2023, in order to:

• promote and facilitate mediation, especially institutional mediation, for the resolution of disputes, commercial or otherwise;
• enforce mediated settlement agreements;
• provide for a body for the registration of mediators;
• encourage community mediation; and
• make online mediation an acceptable and cost-effective process.

Under the CPC and the Indian Arbitration Act, courts are obliged to refer parties to arbitration and/or appoint an arbitrator if there is an arbitration clause.

Furthermore, Section 12A of the CCA makes it mandatory for the disputing parties to attempt mediation before initiating a suit. However, while parties may be granted an exemption from pre-suit mediation in cases of urgency, the Supreme Court of India recently clarified that commercial courts are required to inquire into whether a party is attempting to circumvent pre-institution mediation.

In India, institutional arbitration can be conducted under the following institutions, among others:

• the Delhi International Arbitration Centre (DIAC) – New Delhi;
• the Mumbai Centre for International Arbitration;
• the Hyderabad Arbitration Centre;
• the Nani Palkhivala Arbitration Centre, Chennai; and
• the Indian Council of Arbitration (ICA) – New Delhi.

These institutions are well organised and offer an advantage in terms of having their own rules that provide certainty on procedural issues, the expeditious appointment of arbitrators, a challenge to the appointment of arbitrators, the joinder of parties, interim relief through the emergency arbitration process (if provided for in the rules), administrative support, and greater clarity and certainty in arbitrators’ fees.

Arbitrations in India are governed by the provisions of the Indian Arbitration Act, which provides for domestic, foreign and international commercial arbitrations. It regulates the conduct of arbitrators and the recognition and enforcement of domestic and foreign awards.

The Arbitration Act is based on the UNCITRAL Model Law and the Arbitration (Protocol & Convention) Act, 1937 (the Geneva Convention). Part I of the Arbitration Act deals with domestic arbitrations and Part II provides guidelines for the enforcement of foreign awards.

Certain other statutes also provide for the resolution of disputes by arbitration – eg, the Micro, Small & Medium Enterprises Development Act, 2006 and the Electricity Act, 2003. In case of conflict between the provisions of the statute concerned and the Arbitration Act, the provisions of the statute concerned will prevail, being a special act.

Generally, disputes of a civil and commercial nature are arbitrable. The following types of disputes are not arbitrable, and thus cannot be referred to arbitration:

• disputes pertaining to actions in rem (eg, insolvency or intracompany disputes, matters pertaining to probate, testamentary, consumer disputes);
• disputes affecting third-party rights (eg, disputes pertaining to intellectual property rights);
• disputes pertaining to inalienable sovereign and public interest functions of the state (eg, violations of criminal law, matrimonial disputes); and
• disputes arising under particular statutes that mandate disputes arising thereunder as being non-arbitrable (disputes arising under the DRT Act, rent control legislation, etc).

Disputes involving fraud were previously held to be non-arbitrable. However, with the evolution of jurisprudence, cases involving non-serious allegations of fraud that do not affect the making of the contract, and that are not criminal in nature or have no implication in the public domain, can now be referred to arbitration.

While hearing a challenge to an arbitral award, the court seized of such challenge can exercise limited jurisdiction and does not sit in appeal over the award. It can only set aside or uphold the award, or remand the award to the arbitrator for a fresh decision on certain matters, and only if such an application is made by the parties under Section 34(4) of the Arbitration Act. The courts have no power to modify an arbitral award.

Under the Indian Arbitration Act, a domestic arbitral award can be challenged on the following narrow grounds:

• the parties to the agreement are under some incapacity;
• the agreement is void;
• the award contains decisions on matters beyond the scope of the arbitration agreement;
• the composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration agreement;
• the award has been set aside or suspended by a competent authority of the country in which it was made;
• the subject matter of dispute cannot be settled by arbitration under Indian law; or
• the enforcement of the award would be contrary to Indian public policy.

Furthermore, a domestic award shall be construed to be in conflict with the public policy of India if:

• the making of the award was induced or affected by fraud or in violation of confidentiality provisions of the Act or provisions relating to the admissibility of evidence of conciliation proceedings;
• the award is in contravention of the fundamental policy of Indian law;
• the award is in conflict with the basic notions of morality and justice; or
• the award is vitiated by patent illegality appearing on the face of the award.

An application for setting aside a domestic award shall be made within three months of the receipt of the arbitral award, unless sufficient cause is shown by the applicant for an extension of this period by a further period of 30 days.

Domestic Arbitral Award

The enforcement of domestic arbitral awards is provided for under Section 36 of the Arbitration Act, and an award has to be enforced in accordance with the provisions of the CPC, in the same manner as a decree of the court. An arbitral award can be enforced once the time provided for challenging the award has expired. However, appropriate stamp duty has to be paid for the enforcement of a domestic arbitral award.

The mere filing of a challenge to the award will not stay the operation of the award and render it unenforceable. A separate application seeking stay has to be made, which will only be stayed subject to the party challenging the award depositing the amount awarded with the court before which such challenge is pending.

Foreign Arbitral Award

The enforcement of foreign awards is provided for in Part II of the Arbitration Act. A foreign award that would be enforceable under the Arbitration Act would be binding on the parties and can be relied upon by them in any legal proceedings in India. Once a court is satisfied that a foreign award is enforceable, such award will be deemed to be a decree of that court as per Section 49 of the Arbitration Act. A petition seeking the enforcement of a foreign award has to be made within three years from the date when the right to apply accrues.

There is no provision for challenging a foreign award. However, the enforcement of a foreign award may be refused on the following limited grounds:

• the award debtor was under some incapacity, or the underlying agreement is not valid under the applicable law;
• the award debtor did not have proper notice of the arbitrator’s appointment or was unable to present its case;
• the award deal with a subject that is beyond the terms of referral to arbitration;
• the composition of the arbitral tribunal was contrary to the agreement or the law of country where the arbitration took place; or
• the award is not yet binding or has been set aside/suspended in the country in which it was made.

The enforcement of a foreign award may also be refused if the court finds that:

• the subject matter of the dispute is not capable of settlement by arbitration under the law of India; or
• the enforcement of the award would be contrary to the public policy of India.

An appeal can only filed if a court refuses to enforce a foreign award. However, if the court dismisses the objections against enforcement of the foreign award, no statutory right to appeal exists, but the aggrieved party may challenge said order before the Supreme Court by way of a special leave petition filed under Article 136 of the Constitution of India.

Constitution of an Expert Committee

The government of India set up an Expert Committee in June 2023 to suggest changes to enhance the arbitration process, with the aim of:

• making India a hub for international arbitration;
• reducing court intervention;
• improving cost-effectiveness; and
• ensuring speedy resolution.

The committee is also considering the feasibility of enacting separate statutes for domestic and international arbitration, the creation of an arbitration bar, and the enforcement of emergency orders passed by an arbitrator.

These recommendations, if accepted, would result in an amendment of the Arbitration Act, and possibly the enactment of another statute (in the event of a recommendation for enacting separate statutes for domestic and international arbitration, and if the same were to be accepted). The Report of the Expert Committee is expected in November 2023.