International arbitration is a common method of resolving commercial disputes in India where one party to the contract is a national or habitual resident of any country outside India, or in a dispute between corporate entities where one entity is incorporated outside India.

Several legislative measures and judicial pronouncements, such as the recent amendment which requires completion of the process within 18 months, have contributed to the effective implementation of arbitration in India as a preferred dispute resolution method for commercial transactions.

Recently, the Supreme Court of India has affirmed the concept of “party autonomy”, thereby allowing even two Indian/domestic parties to choose a seat of arbitration outside India. For non-commercial disputes, the traditional mechanism of approaching local courts remains the popular method of dispute resolution. 

Domestic parties in India opt for international arbitration as it is the preferred mode of dispute resolution when the other contracting party is an entity based outside India. International arbitration is also chosen because of the impeccable reputation carried by international arbitration institutions such as the Singapore International Arbitration Centre (SIAC), the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the Hong Kong International Arbitration Centre (HKIAC), etc. They are also chosen because the foreign parties to the agreement prefer to have a neutral venue/seat of arbitration.

Various sectors where international transactions are involved, which have the presence of foreign multinationals, witnessed a surge in international arbitration activities. Oil and gas, construction and infrastructure, telecoms, health and medicine are a few examples that have seen growth. These sectors have contributed to the growth of the economy of the country and witnessed significant investment, leading to an increase in arbitration.

COVID-19 in general has impacted arbitration disputes. Sectors such as hospitality and tourism have seen a significant reduction in arbitration because of a decline in investments, interest and overall business in those sectors.

The ICC, SIAC, the LCIA and HKIAC are the most common arbitral institutions for international arbitrations. It has also been observed that domestic institutions such as the Mumbai Centre for International Arbitration (MCIA), the Delhi International Arbitration Centre (DIAC) and the Indian Council of Arbitration International Arbitration and Mediation Centre (IAMC), Hyderabad, which was established in 2021, are gaining popularity for international arbitrations.

The High Court of the State has exclusive jurisdiction to hear petitions in international arbitration for all purposes, with the exception of a dispute concerning the appointment of an arbitrator, for which only the Supreme Court has the jurisdiction to entertain such petitions. In domestic arbitration, the appointment of the arbitrator is mandatorily decided by the High Court of the respective state.

For domestic arbitration, the pecuniary value of dispute determines the jurisdiction. Under the Commercial Courts Act, 2015, particular commercial courts have been established to hear the disputes.

The Arbitration and Conciliation Act, 1996 (the “Act”) governs international arbitration and is based on the UNCITRAL Model Law. There is no divergence in the law enacted in India when compared with its counterpart; courts in India through various pronouncements have observed parity in order to bring India on a par with international practices in the field.

Amendments have been made to the Act in the recent past to bring it into parity with international practices. Recently, Section 36 of the Act was amended and a proviso was added stating that where the court is satisfied that a prima facie case is made for an award having been induced or effected by fraud or corruption, the award can be stayed by the court unconditionally. Further, the Supreme Court of India has brought clarity to the interpretation of various provisions relating to the Act, which includes clarity over the usage of the terms “venue” and “seat” in an international arbitration and the legal implications thereof, over the eligibility to act as an arbitrator, and over the limited scope of interference with the arbitral award in an international commercial arbitration. The Supreme Court of India also clarified the legal position in respect of the applicability of limitation for enforcement of foreign awards.

There is no pending legislation in relation to arbitration in India.

As per the Act, the following are the statutory requirements for an arbitration agreement.

• The agreement shall be in writing (ie, contained in a document signed by the parties, or in an exchange of written physical or electronic communication or in an exchange of statement of claim and defence).
• The parties shall agree to refer any dispute and/or all disputes (present or future) arising out of a contract to a private tribunal.
• The parties shall agree to be bound by the decision of such arbitral tribunal.
• The intention of the parties to refer the disputes shall be unequivocally indicated.

As a general principle, disputes relating to “rights in rem” are incapable of being referred to arbitration, such as issues in relation to criminal offences involving serious allegations of fraud, matrimonial and guardianship disputes, insolvency disputes, disputes arising out of trust deeds or under the Indian Trusts Act, 1882, testamentary disputes, etc.

To determine the arbitrability of a dispute, courts in India take into consideration the following criteria. 

• Whether the dispute is capable of adjudication and settlement by arbitration under Indian law.
• Whether the dispute is within the scope of the arbitration agreement.
• Disputes affecting third-party rights that require centralised adjudication have been held to be non-arbitrable.
• Disputes relating to sovereign and public interest functions of the state are non-arbitrable.
• Disputes that are expressly or by necessary implication non-arbitrable under a specific statute are non-arbitrable.

The courts in India have repeatedly ruled that parties to an agreement will have to be mandatorily referred to arbitration if the agreement has an arbitration clause. The decision is based on party autonomy, but the parties’ intent to use arbitration remains the deciding element. Most of the time, arbitration agreements are upheld, except for situations when their existence or validity is disputed.

The rule of separability is recognised and applicable to arbitration clauses. In cases where the main contract expires or gets terminated, the courts have held that the arbitration clause still exists and can be resorted to for resolution of disputes between the parties, including a dispute relating to validity of the agreement.

Under Indian law, there are no limits on the parties’ autonomy to select arbitrators. Parties are free to nominate any person of their choice as an arbitrator. The only condition to the appointment of an arbitrator is that the arbitrator(s) so appointed are independent and impartial. When a person is approached in connection with their possible appointment as an arbitrator, he/she shall disclose in writing in terms of Section 12 of the Act that there is no existence, either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject matter in dispute, whether of a financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to their independence or impartiality. In cases where it is specified, the arbitrator(s) should possess such qualifications as agreed to by the parties.

Further, the parties are free to agree on the number of arbitrators, although this must be an odd number, as prescribed under Section 10 of the Act.

Indian law recognises party autonomy and keeps it in high regard. Under the Indian system, the parties are free to agree the procedure for the appointment of arbitrators; however, if the parties’ chosen method of appointing arbitrators fails, the Act, under Section 11, provides for the appointment of arbitrators. In the case of international commercial arbitrations, the power to appoint an arbitrator is vested with the Supreme Court of India, and in arbitrations other than international commercial arbitrations, the power to appoint an arbitrator is exercised by the High Court only. For the appointment of an arbitrator, a party has to file a petition under Section 11 seeking the appointment of an arbitrator.

A procedure widely adopted by the parties is that each party may nominate its arbitrator and the arbitrators so appointed will then appoint a presiding arbitrator. Otherwise, the parties may opt for a sole arbitrator.

As party autonomy is regarded as the foremost stepping stone under the Arbitration Act, the intervention of the courts in the process of selecting an arbitrator is minimal. Intervention, if any, is seen only in cases where the court has to determine whether the mandate of an arbitrator stands terminated on account of such arbitrator becoming de jure or de facto unable to perform their functions on the touchstone of independence or impartiality under Section 14 when a party challenges the selection/appointment of an arbitrator.

The challenge by a party to selection/appointment must be decided by the arbitral tribunal in the first place. Courts generally show reluctance to entertain a challenge to the appointment of an arbitrator after the arbitral tribunal has considered and dismissed such challenge. However, when it comes to a challenge against an arbitrator based on the grounds mentioned in Schedule VII of the Act, the courts intervene, as these grounds lay down the specific eligibility criteria for a person to be an arbitrator.

Sections 12, 13 and 14 of the Act govern the grounds and procedure for challenge or removal of arbitrators. A party can challenge the appointment of an arbitrator and seek their removal on the following grounds under Section 12.

• Existence of circumstances that give rise to justifiable doubts as to the arbitrator’s impartiality or independence. Such grounds/circumstances are enumerated in Schedule V of the Act.
• Lack of the qualifications agreed between the parties.

The Act also provides that any person whose relationship with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in Schedule VII shall be ineligible to be appointed as an arbitrator.

Under Section 13, a party that intends to challenge the appointment of an arbitrator must submit a written statement of the reasons for the challenge to the arbitral tribunal within 15 days from the date when the party learns the facts and circumstances on which the challenge is based. Unless the arbitrator whose appointment is challenged withdraws from their office, the arbitral tribunal adjudicates and decides the challenge. If the challenge is not successful, the arbitral tribunal continues with the proceedings and makes an award. In such scenario, the party challenging the appointment may make an application before the court for setting aside such an award on the same ground. The mandate of an arbitrator will also terminate if:

• they are de jure or de facto unable to perform their function as an arbitrator;
• they withdraw from office; or
• the parties agree to terminate the mandate of the arbitrator.

The court under Section 14 may entertain an application challenging the appointment of an arbitrator after its dismissal by the arbitral tribunal; however, the courts are reluctant to interfere with the decision of the arbitral tribunal unless the disqualification falls under the category of Schedule VII of the Act.

The Act prescribes a detailed litmus test to ascertain the independence and impartiality of a potential arbitrator. Under the Act (Section 12), all arbitrators are required to disclose at the time of their appointment, and throughout the arbitral proceedings, any circumstances that affect or may affect their impartiality and/or independence.

Schedule V of the Act identifies the circumstances that give rise to justifiable doubts about the independence and/or impartiality of arbitrators. Arbitrators must disclose any:

• personal and/or professional relationship with parties or their counsel;
• relationship with the dispute; or
• interest in the dispute.

Schedule VII of the Act sets out a list of circumstances that render a person ineligible to be appointed as an arbitrator.

Under Indian law, generally, disputes relating to rights in rem (against the world at large) cannot be resolved through arbitration, while disputes relating to rights in personam (against a specific legal person) can be resolved through arbitration. The types of disputes that cannot be resolved by arbitration include the following.

• Criminal offences.
• Matrimonial disputes.
• Guardianship matters.
• Insolvency petitions.
• Testamentary suits.
• Trust disputes.
• Labour and industrial disputes.
• Tenancy and eviction matters governed by rent control statutes.

Indian law recognises the principles of kompetenz-kompetenz. Section 16 of the Act is in alignment with this principle. Section 16 sets out the competence of an arbitral tribunal to decide on its own jurisdiction.

The power of the courts to intervene in arbitration matters is very limited. A plea as regards lack of jurisdiction of the tribunal mandatorily has to be raised before the arbitral tribunal under Section 16 of the Act. If such plea raised by the party is rejected, the aggrieved party can make an application before the court for setting aside such award. However, if such plea is allowed under Section 16, the aggrieved party can file an appeal against such order under Section 37 of the Act.

Once the plea of jurisdiction is heard and rejected by the tribunal, the court rarely interferes with the award on the ground of jurisdiction.

Section 16 (2) of the Act lays down that any objections to the jurisdiction of the tribunal must be raised before the filing of the Statement of Defence.

If the arbitral tribunal rules that it does not have jurisdiction, the ruling can be challenged by way of appeal before a court under Section 37 of the Act. However, if the arbitral tribunal rules that it has jurisdiction, no immediate appeal or challenge is available and the only option is to challenge the final award made by the arbitral tribunal on the grounds of lack of jurisdiction.

The judicial review of decisions made by arbitral tribunals is, by and large, very limited. Courts, on the issue of jurisdiction/admissibility, mostly do not interfere unless the decision is arbitrary, patently erroneous or in complete disregard of the law.

There is a general reluctance to entertain court proceedings lodged by a party to an agreement that contains an arbitration clause. The courts only look for the existence of the arbitration agreement, and if the arbitration agreement does exist then the court, applying the principle of minimum court intervention, refers the parties to arbitration under the terms of Section 8 of the Act.

If court proceedings are initiated in breach of an arbitration agreement, the aggrieved party may make an application under Section 8, seeking referral of the dispute to arbitration. However, a party challenging the initiation of a court proceeding must object no later than the filing of its first statement on the substance of the dispute; failure to do so would be deemed a waiver of the arbitration agreement.

The primary drivers in arbitration proceedings are party autonomy and consent, and it is a fundamental principle that an agreement providing for arbitration as a dispute resolution method between the parties is binding only on the parties to the agreement.

A party that is not a signatory to an arbitration agreement cannot be subject to the arbitration.

In exceptional circumstances, courts in India have given recognition to the “group of companies” doctrine under which an arbitration agreement entered into by a company within a group of corporate entities can in some circumstances bind non-signatory affiliates. Under this doctrine, a non-signatory party could be subject to arbitration provided these transactions were with a group of companies and there was a clear intention of the parties to bind the non-signatory as well as the signatory parties.

Furthermore, the Supreme Court in the case of Chloro Controls (I) Pvt. Ltd. v Severn Trent Water Purification Inc. and Ors (2013) 1 SCC 641 also took the view that parties involved in a composite transaction executed through several agreements may be subject to the arbitration agreement under the main or the parent agreement.

An arbitral tribunal in India is empowered to award interim relief during the arbitral proceedings. The power to grant interim relief has been expressly provided under Section 17 (1) of the Act, which provides for interim measures ordered by an arbitral tribunal during arbitral proceedings. The interim relief ordered by the arbitral tribunal is binding in nature in terms of Section 17 (2), which states that an interim order passed by the arbitral tribunal shall be enforceable as if it were an order of a court. A party may, during the arbitral proceedings, apply to the arbitral tribunal and seek the following kinds of interim relief.

• The appointment of a guardian for a minor or person of unsound mind for the purpose of arbitral proceedings.
• Interim measure of protection such as preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement.
• Securing the amount in dispute in the arbitration.
• Detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration.
• Interim injunction or the appointment of a receiver.
• Such other interim measures of protection as may appear to the arbitral tribunal to be just and convenient.

The courts in India are empowered to grant interim relief as provided in Section 9 of the Act, which sets out the interim measures that may be applied by a court. Although the power of an arbitral tribunal under Section 17 of the Act is mostly on a par with that of a court under Section 9, meaning that the power to issue different interim orders or protection or relief in Section 17 is mostly the same as in Section 9, there is, however, one distinction.

While the tribunal under Section 17 can grant interim relief during arbitral proceedings, the court under Section 9 can grant the same not only before or during the proceedings but at any point after the making of the arbitral award before it is enforced in terms of Section 36 of the Act.

In so far as the interim relief sought by a party before the commencement of arbitral proceedings is concerned, if the court orders the interim relief/interim protection before the commencement of the arbitral proceedings, the arbitral proceedings shall be commenced within a period of 90 days from the date of such order or within an extended timeframe as determined by the court.

If a party seeks interim relief from a court after the arbitral tribunal is constituted, then the court shall not entertain an application seeking interim relief unless the court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious.

In addition to granting interim relief under Section 9, courts also possess appellate jurisdiction under Section 37 of the Act. This section outlines the appealable orders – ie, those orders subject to appeal – and it empowers the courts to hear an appeal against an order of an arbitral tribunal granting or refusing interim relief under Section 17.

The courts in India can grant interim relief under Section 9 in aid of foreign-seated arbitrations. Section 2 (2), Part 1 of the Act confers the right upon the parties in an international commercial arbitration to approach the Indian courts for interim relief and measures even when the place of arbitration is outside India, unless there is an existing agreement to the contrary between the parties.

Therefore, if the parties mutually agree, the applicability of Part 1 of the Act can be waived. If there is no such agreement, the courts can grant the interim reliefs enumerated in Section 9 in a foreign-seated arbitration. 

The Act does not provide for the use of emergency arbitrators. However, in the case of Amazon.com Investment Holdings LLC v Future Retail Limited & Other, the Supreme Court of India held that an “award” delivered by an emergency arbitrator under the SIAC Arbitration Rules constitutes an order under section 17(1) of the Arbitration and Conciliation Act 1996 (the “Act”) and would be enforceable as such. Further, if a party needs urgent interim relief before the constitution of an arbitral tribunal, it can apply to the court for urgent interim relief under Section 9. Thereafter, the party can initiate arbitral proceedings within 90 days from the date of the order or within an extended timeframe as determined by the court.

The Act does not allow courts or arbitral tribunals to order security for costs; however, Section 31A of the Act allows discretionary powers to courts and tribunals to determine (i) whether costs are payable by one party to another, (ii) the amount of such costs, and (iii) when such costs are to be paid. The general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party.

In Oil And Natural Gas Corporation v Afcons Gunanusa, the Supreme Court of India held that “costs”  encompass all reasonable expenses incurred in relation to the arbitration, which are to be apportioned between the parties following an evaluation by either the arbitral tribunal or the court.

In India, parties to arbitration are governed by rules prescribed under the Act in respect of pleadings, trial and completion of arbitration proceedings.

The Act, however, gives full autonomy to the parties to mutually agree and adopt any other rules for conducting proceedings. In the case of any disagreement, the arbitral tribunal has the power to decide the rules and procedures to be followed for conducting proceedings except fixing the timeline for publishing the arbitral award.

Civil proceedings in India are governed by the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872; however, an arbitral tribunal is not bound by the same, strictly. Parties can choose to adopt rules specified by arbitration institutions such as the ICC, the LCIA, etc, as long as they are not in contravention of the non-derogable rules prescribed under the Act.

The arbitral tribunal is also empowered to pass necessary interim orders and interim awards as well as injunctions in respect of the subject matter of arbitration. Besides this, they can also determine the relevancy and admissibility of any documentary or oral evidence led by the parties. The arbitral tribunal shall be bound by the principles of natural justice and follow the established principles of law of evidence.

The Act prescribes that arbitration can be initiated only by way of a notice invoking arbitration. The arbitral proceeding is deemed to have commenced on the date when the notice invoking arbitration for adjudication of a dispute is received by the other party. A party is also bound to follow every step or procedure including any pre-arbitration steps specified in the arbitration clause. However, the Supreme Court of India in the case of M.K. Shah Engineers & Contractors v State of M.P. (1999) 2 SCC 594 held that the steps preceding the coming into effect of the arbitration clause, though essential, are capable of being waived and if one party by its own conduct or by the conduct of its officials prevented such steps from being taken, it will be deemed that the procedural prerequisites were waived.

Parties are free to determine the number of arbitrators who will constitute the arbitral tribunal; however, the tribunal has to consist of an odd number of arbitrators.

Further, if the arbitration clause provides for the constitution of a three-member arbitral tribunal, unless the manner of appointing the arbitrators is provided in the arbitration agreement, both parties are required to appoint their respective nominee arbitrators, who in turn have to appoint the third arbitrator. Where the arbitration agreement provides for the appointment of a sole arbitrator, or the agreement is silent as to the number of arbitrators, the parties have to appoint a sole arbitrator by mutual consent. If either of the parties fails to act in the manner provided in the agreement for the appointment of an arbitrator(s) or avoids doing this, the aggrieved party can either approach an institution, if the arbitration agreement provides for the same, or the High Court (in the case of domestic arbitration) or the Supreme Court of India (in the case of international commercial arbitration), to appoint the arbitrator(s). Although there is a call for the powers of the High Courts and the Supreme Court to appoint the arbitrator(s) to be conferred on arbitral institutes designated by the High Courts and Supreme Court, such provisions have not yet been implemented.

In the case of death, recusal or termination of an arbitrator, the substitute arbitrator is to be appointed as per the rules applicable to the appointment of the arbitrator being replaced. The arbitration proceedings, in the absence of an agreement to the contrary, shall resume from a point determined at the tribunal’s discretion. Normally, in a tribunal consisting of three arbitrators, in the case of the replacement of one or more of the arbitrators, proceedings resume from the stage where they were paused.

Following the amendments to the Act introduced in 2015 and 2019, in a domestic arbitration, the pleadings have to be completed within a maximum period of six months from the date of receipt of notice of appointment by the arbitrator. In the case of a three-member tribunal, a six-month period for completion of pleadings shall be calculated from the date of receipt of the notice by the third arbitrator.

The arbitral tribunal, upon completion of the pleadings, shall proceed to trial in the matter, and the parties shall be allowed to lead their respective witnesses, of whom cross-examination is allowed. However, conducting a trial is not a mandatory procedure, as an arbitral tribunal is not bound by the Indian Evidence Act, 1872 (Section 19 (1) of the Act). Parties may agree not to file any witness statements and straightaway proceed to oral submissions/arguments in the matter based on the pleadings and documentary evidence filed along with their pleadings. An arbitral tribunal thereafter shall proceed to hear oral submissions in the matter.

Upon the conclusion of oral hearings, the arbitral tribunal is obliged to make an award on the disputes between the parties. In a domestic arbitration (where parties are Indian entities), it is obligatory for the arbitrator to make the award within a period of 12 months from the date of completion of pleadings for making the award. In case the arbitral tribunal cannot make the award within the prescribed period of 12 months, the time may be extended by mutual consent of the parties for a period of six months. For any further extension, parties will have to approach the competent court. However, the time limits for completing pleadings and making an award are not mandatory in the case of an international commercial arbitration where one or more parties are foreign entities, even if the arbitration proceedings take place in India.

During the time that an application seeking extension of time is pending, the mandate of the arbitrator(s) shall not terminate.

The powers of an arbitrator are as follows.

• The arbitrator is empowered to decide their own jurisdiction to conduct the arbitration proceedings (principle of kompetenz-kompetenz).
• The arbitrator can fix the cost of the arbitration proceedings unless there is an agreed fee between the parties in the arbitration agreement.
• The arbitrator can also decide any objection of a party challenging the validity and/or existence of the arbitration clause in a contract.
• The arbitrator is empowered to grant any interim measure or protection to a party to secure the subject matter of the arbitration proceedings. (Section 17 of the Act).
• An interim protection or injunction granted by the arbitrator can be enforced as a decree under the Code of Civil Procedure, 1908.
• In the case of non-compliance of any order passed by the arbitrator, the aggrieved party may approach the competent court seeking to initiate contempt proceedings against the defaulting party.
• In the case of disagreement between the parties regarding the venue or seat of arbitration, the arbitrator is empowered to decide the venue or seat of arbitration.
• If there is no agreement between the parties, the arbitrator is empowered to decide the manner of conducting the arbitration proceedings including the manner in which the parties have to lead the evidence.
• The arbitrator on their own, or a party to the arbitration, may approach a court seeking assistance in recording evidence of a person or production of a document that relates to the subject matter of the arbitration proceedings.
• The arbitrator, unless agreed between the parties, can decide the rate of interest and period for which interest is to be paid on the awarded amount, till the date of making the award. Future interest is payable at the rate prescribed under the Act, in the absence of any direction by the tribunal as regards future interest.
• The arbitrator can make an interim award at any time during the arbitration proceedings or even an additional award in certain circumstances after the making of the main award.
• The arbitrator, on their own or upon an application by a party, can correct any miscalculation or typographical error in the award. With the consent of both parties, the arbitrator can also modify an award by giving an interpretation to a part of the award.
• The arbitrator also has a lien on the award against any unpaid cost of the arbitration.
• The arbitrator can terminate the proceedings in the event that neither party pays their fee or no claim is preferred by any party or it becomes impossible to continue with the arbitration proceedings for any reason.

The duties of the arbitral tribunal are as follows.

• Each arbitrator is obliged to give a declaration in writing in terms of Section 12 of the Act read with the Fifth and Seventh Schedules to the Act, thereby disclosing the existence of any direct or indirect relationship with any of the parties or vested interests in any of the parties which may lead to justifiable doubts concerning the independence and impartiality of such arbitrator.
• Each arbitrator is bound to give equal treatment and full opportunity to all the parties to the arbitration proceedings and remain impartial throughout the arbitration proceedings.
• Each arbitrator is bound to decide the disputes between the parties, taking into account the terms of the contract and trade usages applicable to the transaction.
• Each arbitrator is obliged to decide the dispute as per the law of the land in the case of domestic arbitration and as per the law chosen by the parties in the case of international commercial arbitration.
• The tribunal is bound to act without any undue delay.

There is no qualification prescribed in Indian law for appearing before an arbitral tribunal. However, ordinarily, advocates registered in India or experts from the field to which the arbitration relates appear as legal representatives of the parties. In some of the international arbitrations, legal practitioners or experts from other countries also represent parties.

In India, parties file all the relevant documents along with their respective pleadings. In India, an arbitral tribunal is not bound by the Indian Evidence Act, 1872 (which governs the rules of evidence in India). Instead, parties have been given full autonomy to decide the procedures and rules that govern the collection and submission of evidence.

The arbitral tribunal is completely free and independent to decide the relevance, admissibility, materiality and weight of the evidence, whether oral or documentary, filed before it. If the parties agree or are directed by the arbitral tribunal to lead witnesses, the parties file evidence by way of affidavits of their witnesses, who are permitted to be cross-examined. The established principles of the Indian Evidence Act, 1872 are required to be followed. For seeking discovery of documents, parties usually follow the basic principles of the Code of Civil Procedure, 1908, in spirit though they are not bound to follow them in letter.

In domestic arbitration, generally parties tend to adopt the same procedure for collection and submission of evidence as is followed for a civil suit. It involves three steps, which are as follows.

• The first step is examination-in-chief of a witness. This is done by the submission of evidence by way of affidavit of a witness who is well-versed and conversant with the facts and circumstances of the case.
• The second step is the cross-examination of the witness by the advocate/authorised legal representative of the opposite party on the basis of the pleadings and documents filed before the arbitral tribunal.
• The third step is re-examination of the witness by the party producing the said witness.

For discovery of documents, the party seeking such discovery is required to file an application before the arbitral tribunal specifying the documents sought to be discovered.

Arbitral tribunals are not bound by any rules of evidence; however, they have to follow the established principles of natural justice and basic principles of law of evidence followed in civil proceedings in India.

The arbitral tribunal is empowered to approach a court in order to seek assistance concerning the appearance of any person or a witness or expert witness. It can also seek production of any document necessary and relevant for the proper adjudication.

Assistance can be sought from a court to summon a non-party as a witness or to produce a document in possession of such a witness.

The non-compliance by a witness with an order could even lead to the initiation of contempt proceedings against him/her.

In terms of Section 42A of the Act, it is mandatory for the parties to the arbitral proceedings, the arbitral tribunal and the arbitration institution to keep the arbitral proceedings, including pleadings, documents, etc, confidential. However, such confidentiality would not apply in the case of an award being required to be disclosed for the purpose of challenging or enforcing the arbitral award.

In India, an arbitral award must comply with the following legal requirements.

• An arbitral award must be in writing and signed by each member of the tribunal, or by the majority of the tribunal with reasons for any omitted signatures.
• An arbitral award must contain the reasoning on which it is based.
• An arbitral award must state the date on which it is made and the place where it is published.
• A signed copy of the arbitral award must be delivered to each party.
• Appropriate stamp duty must be paid on the arbitral award before seeking enforcement thereof in a court of law.

In domestic arbitrations commenced after 23 October 2015, the time limit for making an arbitral award is 12 months from the date of completion of pleadings as specified under the Act, which can be mutually extended by the parties for another six months.

The mandate of the arbitral tribunal will be terminated unless the period for making an award is further extended by a court.

The court, upon a request made by one of the parties for an extension, can extend the time limit to make the award. The mandate of the arbitral tribunal will continue till the disposal of the said application by the court.

In international commercial arbitrations, there is no specific time limit for the making of an arbitral award; however, the Act provides that an endeavour may be made to dispose of the matter within a period of 12 months from the date of completion of pleadings.

The Act does not provide any specific limits on the remedies that an arbitral tribunal may award. Arbitral tribunals are bound to publish the award only in respect of the subject matter of the dispute.

Overall, arbitral tribunals are competent to decide disputes between two or more parties in personam – ie, between parties (which are considered as arbitrable), and not disputes in rem – ie, against the world at large (which are considered non-arbitrable).

However, an arbitral tribunal has the power to make an award granting specific performance, declaration, injunctions or payment of money besides interest and cost. However, damages can only be compensatory in nature, and punitive damages for breach of contract are not permitted in India. Also, it is not allowed to make awards in respect of disputes which have been specifically held to be non-arbitrable.

Non-arbitrable disputes are those which bind the world at large (disputes in rem) and which a tribunal has no jurisdiction to adjudicate upon. Refer to 5.1 Matters Excluded From Arbitration.

Interest

The Act empowers the arbitral tribunal to award interest on the whole or any part of the sum awarded, unless otherwise agreed by the parties. Such interest can be awarded for the whole or part of the period between the date on which the cause of action arose and the date on which the award is made. However, this discretion of awarding pendente lite interest is not available to the arbitral tribunal if there is an agreement between the parties barring payment of interest, in which case the arbitral tribunal will have to be guided by the agreement executed between the parties, as has been held by the Supreme Court of India in the case of Delhi Airport Metro Express Private Limited v Delhi Metro Rail Corporation (2022) 1 SCC 131. This decision reinforces the principle of party autonomy omnipresent throughout the Act.

An arbitral tribunal, at its sole discretion, may also award future interest payable from the date of the award until the date of payment. The Act also provides that an arbitral award shall carry interest at the rate of 2% higher than the current rate of interest prevalent on the date of the award, unless the award directs otherwise.

The Supreme Court of India in the case of Indian Oil Corporation Ltd. v U.B. Engineering Ltd. & Anr. (C.A. Nos 2921-2922 of 2022 decided on 12 April 2022) reinforced the established legal interpretation that the word “sum” appearing in Section 31 (7)(a) of the Act includes the principal amount and pendente lite interest (if any), as awarded by the tribunal, and that any future interest awarded on the said sum would not amount to granting interest on interest.

Legal Cost

An arbitral tribunal is empowered to award legal costs in favour of the successful party, for costs incurred during the pendency of the arbitration proceedings, including the arbitrator(s)’ fees, administrative expenses and any other expenses that the party may have incurred.

The tribunal can also decide the amount, time and manner in which such costs are to be paid by the unsuccessful party to the successful one.

While determining the legal costs, the tribunal is required to keep in mind factors such as the conduct of the parties and delays on account of frivolous claims, etc.

Due to the lack of a uniform practice, some tribunals award costs in favour of the successful party, while others adopt the principle of parties sharing the cost of arbitration irrespective of the result of the proceedings. Under the amendment to the Act of 2015, the general rule is “costs follow the event” or “loser pays”. The arbitral tribunal may, however, for reasons to be recorded in writing, make a different order on costs. An agreement that provides that a party has to pay the whole or part of costs of arbitration shall be valid only if such agreement is made after disputes have arisen.

Recourse Against Domestic Arbitral Award

In India, the courts have adopted a pro-arbitral award approach, treating awards made by arbitral tribunals as final and binding. However, parties can challenge an arbitral award on very restricted grounds under Section 34 of the Act by making a setting aside application under the Act. These grounds are as follows:

• a party was under some incapacity;
• the arbitration agreement is invalid under the law to which the parties have subjected it;
• the party making the challenge was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was unable to present their case;
• the award dealt with a dispute and contained a decision that was beyond the scope of the arbitration;
• the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement between the parties, or in the absence of such agreement, was not in accordance with applicable provisions of the Act;
• the subject matter of the dispute cannot be settled by arbitration;
• an award may be set aside on the grounds of patent illegality; however, an award cannot be set aside by the court merely on the grounds of an erroneous application of the law or reassessment of evidence (note that an award made in an international commercial arbitration held outside India cannot be set aside on this basis); or
• the arbitral award is in conflict with the public policy of India, which means that:
1. the making of the award was induced or affected by fraud or corruption or was in violation of principles of confidentiality to conciliation proceedings;
2. the award is in contravention of the fundamental policy of Indian Law; or
3. the award is in conflict with the most basic notions of morality and justice.

A party challenging the award under Section 34 is required to serve a prior notice on the opposite party. The Act prescribes that courts should endeavour to resolve setting aside applications promptly, or within a period of one year from the date on which the notice was served on the opposite party. However, this requirement is advisory rather than mandatory.

In a recent judgment, the Hon’ble Delhi High Court in the case of National Highways Authority of India v IRB Pathankot Amritsar Toll Road Ltd. held that a court’s examination in deciding an award challenge must not be perfunctory. In this case, Ld. Arbitral Tribunal failed to conduct an independent evaluation as to whether the government department was in “material breach of contract”, which in the contract was a prerequisite for imposing liability to compensate the contractor on the government department. The Ld. Tribunal accepted the Independent Engineer’s finding that the contractor was entitled to an extension of 518 days as an absolute fact, and equated it with the government department’s “material breach of contract”, without any evidence of independent consideration from the Tribunal. The Court overturned the award, citing its patent illegality.

Limitation Period in the Case of an Award

An application for setting aside a domestic award passed in an arbitration proceeding or an international commercial award passed in arbitration proceedings held in India must be made within three months from the receipt of the award from the arbitral tribunal.

The same time limit is applicable for requests made by any party under Section 33 of the Act for correction of typographical errors, for interpretation of an award or for passing of an additional award, and the three-month period would start from the date on which that request has been resolved by the arbitral tribunal.

However, if a party satisfies the court that there was a sufficient reason for delay in filing such an application, the period may be extended by a maximum of 30 days.

Recourse Against a Foreign Award in India

Part II of the Act deals with the provisions relating to enforcement of certain foreign awards. The Act does not provide for any appeal or challenge to a foreign award in India. However, a foreign award cannot be enforced in India it falls within the grounds mentioned in Section 48 of the Act.

Under the Act, the scope to raise an objection for setting aside an arbitral award is very limited. The Act does not allow the parties to exclude or expand the grounds for challenging an arbitral award, and they are bound by the provisions of the Act.

The Supreme Court of India in the case of Government of Maharashtra (Water Resources Department) represented by Executive Engineer v Borse Brothers Engineers and Contractors Private Limited (2021) 6 SCC 460 held that an appeal against the order of the court rejecting or upholding the arbitral award should be filed within 60 days, and the said limit can only be allowed in exceptional circumstances,  thereby underlining the emphasis on the swift resolution of arbitration disputes.

While reviewing the challenge to an arbitral award, the courts in this jurisdiction are strictly prohibited from reviewing and re-examining the merits of a case or substituting their own views for those of the arbitral tribunal. The courts are also not permitted to interfere in the findings of facts by the arbitral tribunal as the arbitrator is considered the master of facts.

The courts in our jurisdiction can set aside an arbitral award only on the grounds prescribed under Section 34 of the Act, as explained in 11.1 Grounds for Appeal. Further, the courts can either set aside or uphold an award, but cannot modify it, as  confirmed by the Supreme Court of India in Project Director, National Highway Authority of India v M. Hakeem & Anr. (2021 SCC Online SC 473). However, there is an exception to this rule where the award in respect of certain disputes is severable from the award made in relation to other disputes. In such cases, the courts can set aside only that part of the award which is liable to be set aside (per Section 34 of the Act).

India is a signatory to the New York Convention, 1958, which it ratified on 13 July 1960. The provisions relating to the enforcement of certain foreign awards under the aforesaid Convention are given under Part II of the Act, where Chapter I deals with the provisions relating to New York Convention Awards and Chapter II with the provisions relating to Geneva Convention Awards. In practice, only awards relating to the New York Convention are sought to be enforced in India.

While ratifying these Conventions, India made the reservations that the arbitral award would be enforceable in India only if a party receives a binding award from a country that is a party to the New York Convention and Geneva Convention, and the award was made in a territory which has been recognised as a Convention country by India.

• In India, an arbitral award, unless it has been set aside by the competent court or unless the time period for challenging the award has expired or unless a stay on execution of the same is granted, can be executed/enforced like a decree by making an application under Section 36(1) of the Act. Before making such application before the competent court, the party seeking enforcement must pay the requisite stamp duty on the award. Stamp duty varies from state to state.
• An award that has been set aside by the court at the place of the seat of arbitration cannot be enforced in India.
• There is no sovereign immunity available to the state or a state entity against enforcement of an arbitral award. 

Enforcement of Foreign Awards

New York Convention

In India, a foreign award can be enforced by filing an application under Section 47 of the Act before the competent court having jurisdiction. Such application must be accompanied by the original award or a copy duly authenticated in the manner required by the country where it is made, and the original agreement for arbitration or a duly certified copy thereof or any other evidence. If the award or the agreement is in a foreign language, the party seeking enforcement of the award must produce an English translation duly certified as correct in the manner provided in the Act.

Once an action for enforcement of a foreign award is initiated, the opposite party can only resist the enforcement of the award on the grounds specified under Section 48 of the Act. The court may refuse to enforce a foreign award in India if it is satisfied that:

• the parties were under some incapacity, or the arbitration agreement is invalid under the law applicable to it;
• no proper notice of appointment of an arbitrator was given to the other party, or such party was unable to present their case;
• the decision was made beyond the scope of the arbitration;
• the composition of the arbitral tribunal was not in accordance with the agreement between the parties;
• the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which it was made; or
• the award is in conflict with the public policy of India, or the subject matter of the dispute is not capable of being settled by arbitration.

Indian courts generally adopt a pro-arbitration approach, even when the award is subject to a challenge by the parties. Unless the award is such that it could shock the conscience of the court or violate public policy in India, courts would be reluctant to interfere. Courts ordinarily do not grant an unconditional stay on the enforcement of an arbitral award unless it is prima facie of the view that the arbitration agreement or the making of the award was induced by fraud or corruption.

In other cases, the court may impose conditions on the stay of enforcement of an arbitral award while the challenge to the award is pending.

Indian courts have clarified that the courts can refuse to enforce foreign awards if they find that the award was induced or affected by fraud or corruption, or if the award is in contravention of the fundamental policy of Indian law. Indian courts do not entertain pleas of violation of the public policy of a foreign country.

The Act does not provide for class arbitration or group arbitration. However, in certain cases, such as matters relating to payment of compensation by the government for land acquisition, cases of arbitration invoked by the landowners are clubbed together for adjudication and a common arbitral award is passed by the arbitral tribunal. Such arbitrations can be loosely considered as class arbitration. However, in relation to multi-party disputes, there are no specific provisions in the Act.

In India, all lawyers are required to follow the rules of professional standards prescribed by the Bar Council of India, such as refusing to act in an illegal manner towards the opposition, refusing to represent clients who insist on unfair means, refusing to appear in front of relations, not suppressing material or evidence, not negotiating directly with the opposing party, not advertising or soliciting work, etc.

Each arbitrator is required to make a declaration in terms of Section 12 read with Schedules V and VII of the Act about their independence and impartiality. They should have sufficient time to conduct the arbitration and should act without any undue delay so as to avoid causing any inconvenience to the parties.

In India, there are no laws that provide for third-party funding in litigation. As per the ruling of the Supreme Court of India in Bar Council of India v AK Balaji [(2018) 5 SCC 379], advocates in India cannot fund litigation on behalf of their clients. Therefore, third-party funding by advocates is not permissible in India due to the Bar Council of India’s rules of professional conduct.

However, there is no restriction on third parties who are non-lawyers from funding the litigation and being repaid after the outcome of the same. In a recent case of Tomorrow Sales Agency Private Limited v SBS Holdings, Inc. & Ors., the Delhi High Court held that a third-party funding company that finances a party to arbitral proceedings is not a party to the arbitral proceedings and cannot be held liable for the costs awarded in an arbitral award. The court further held that it is essential for the third-party funders to be fully aware of their exposure. They cannot be mulcted with liability, which they have neither undertaken nor are aware of. Permitting enforcement of an arbitral award against a non-party which has not accepted any such risk, is neither desirable nor permissible.

The arbitral tribunal does not have any power to consolidate separate arbitral proceedings, even if the parties are the same. However, the Supreme Court of India in P.R. Shah v BHH Securities [(2012) 1 SCC 594] allowed the consolidation of arbitral proceedings if the contracts under question have arbitration agreements. Also, in a few judgments it has been held that if the parties are the same in different agreements, the parties can agree to appoint the same person as arbitrator for deciding the disputes arising out of all such contracts despite the fact that all contracts are separate and independent of each other. In such a situation, either separate awards can be made in respect of each contract or a common award can be made. However, making separate awards for each reference is preferable to a common award.

The Act does not specifically provide that a third party or non-signatory can also be bound in arbitration proceedings. However, over time, the Supreme Court of India, in a catena of judgments, has concluded that in certain circumstances even a non-signatory can be said to be bound by the arbitration agreement.

The Act allows a third party, including a foreign entity, that is a non-signatory to the arbitration agreement, to apply for the referral of arbitration proceedings before a competent court, provided that such a third party establishes that it is acting “through”, “under” or on behalf of a party to the arbitration agreement.