Arbitration in India 2026 — The Arbitration and Conciliation Act, 1996 Explained

Arbitration is the resolution of a dispute by one or more arbitrators chosen by, or for, the parties under an agreement to arbitrate. It may be ad hoc, where the parties and the tribunal run the proceedings themselves, or institutional, where an arbitral institution administers it under its rules (for example, the Delhi International Arbitration Centre attached to the Delhi High Court). An arbitration is “international commercial arbitration” where at least one party is a foreign national, body corporate or government; otherwise it is domestic.

The 1996 Act is in parts: Part I deals with arbitrations seated in India, Part II with enforcement of certain foreign awards, and Part III with conciliation. The Act was substantially amended by Act 3 of 2016 (in force from 23.10.2015) and Act 33 of 2019 (from 30.08.2019), which introduced timelines and stronger rules on the independence of arbitrators.

An arbitration agreement is an agreement to submit to arbitration all or certain disputes arising in respect of a defined legal relationship, whether contractual or not. It may be a clause in a contract or a separate agreement, and it must be in writing. It is in writing if it is contained in a document signed by the parties, in an exchange of letters or other means of telecommunication “including communication through electronic means” which provide a record of the agreement, or in an exchange of statements of claim and defence in which one party alleges it and the other does not deny it. A reference in a contract to a document containing an arbitration clause also constitutes an arbitration agreement if the reference makes that clause part of the contract.

When a suit is filed despite an arbitration clause, Section 8 obliges the court to refer the parties to arbitration if a party applies not later than the date of submitting his first statement on the substance of the dispute, unless it finds that prima facie no valid arbitration agreement exists. The application must be accompanied by the original agreement or a certified copy.

The parties are free to agree on the procedure for appointment. If they cannot — for example, where one party fails to appoint within thirty days of a request, or the parties fail to agree on a sole arbitrator within thirty days — the appointment is made, on request, by the High Court (or the Supreme Court in international commercial arbitration) or any person or institution designated by such Court. At this stage the Court confines itself to examining the existence of an arbitration agreement.

Before appointment, a prospective arbitrator must disclose in writing any circumstances likely to give rise to justifiable doubts about independence or impartiality, and his ability to complete the arbitration within twelve months (Section 12(1)). The Fifth Schedule guides that assessment; persons falling within the Seventh Schedule are ineligible unless the parties, after disputes arise, waive it by an express written agreement. The Supreme Court has held that a party interested in the outcome cannot unilaterally appoint a sole arbitrator (Perkins Eastman, 2019), and a Constitution Bench in CORE v. ECI-SPIC-SMO-MCML (2024) held unilateral appointment clauses in public-private contracts violative of Article 14, applying its ruling prospectively to appointments made after 8 November 2024.

A party may apply to the Court under Section 9 before or during arbitral proceedings, or after the award but before it is enforced, for interim measures such as preservation or sale of goods, securing the amount in dispute, detention or inspection of property, an interim injunction or the appointment of a receiver. Once the tribunal is constituted, the Court ordinarily does not entertain a Section 9 application unless the remedy before the tribunal would not be efficacious.

The arbitral tribunal itself can grant similar interim measures under Section 17 during the proceedings, and its orders are enforceable as if they were orders of the Court. In practice, urgent pre-arbitration relief is sought from the Court, and later relief from the tribunal.

Statements of claim and defence must be completed within six months from the date the arbitrator (or all the arbitrators) received written notice of appointment (Section 23(4)). In matters other than international commercial arbitration, the award must be made within twelve months from the completion of pleadings (Section 29A(1)). The parties may by consent extend this by up to six months; any further extension can only be granted by the Court for sufficient cause, failing which the arbitrator’s mandate terminates. Where delay is attributable to the tribunal, the Court may reduce the arbitrator’s fees by up to five per cent for each month of delay.

Under Section 29B, parties may agree in writing to a fast-track procedure, in which the tribunal (which the parties may agree shall be a sole arbitrator) decides the dispute on written pleadings, documents and submissions without an oral hearing unless needed, and makes the award within six months of entering upon the reference.

An award can be set aside only on the grounds in Section 34: incapacity of a party; invalid arbitration agreement; lack of proper notice or inability to present one’s case; the award dealing with matters beyond the submission; improper composition of the tribunal or procedure; non-arbitrable subject matter; or conflict with the public policy of India. In domestic arbitration, an award may also be set aside for patent illegality appearing on the face of the award, but not merely for an erroneous application of law or by re-appreciating evidence. The application must be filed within three months of receiving the award, extendable by thirty days, but not thereafter.

Filing a Section 34 petition does not by itself stay the award (Section 36(2)); a separate application for stay must be made, and for money awards the Court has regard to the CPC provisions on stay of money decrees — usually requiring a deposit or security. Once the time for challenge expires, the award is enforced under the CPC as if it were a decree. Appeals lie only against the orders listed in Section 37. In Gayatri Balasamy v. ISG Novasoft (2025), a Constitution Bench held that courts have a limited power to modify an award — by severing an invalid part, correcting clerical or computational errors, modifying post-award interest in some circumstances, and under Article 142 with great caution.