Need for Promotion of Arbitration in India

Arbitration Concept

Brief History:

Arbitration and mediation are forms of alternate dispute redressal (hereinafter, ADR) mechanism which have become necessary due to the incredible arrears of cases which have stacked up in traditional courts. Under this, parties settle their dispute through an arbitrator by virtue of an amicable understanding between them without the intervention of the court. Under the Indian laws, the option of ADR mechanism is provided for under section 89 of the Civil Procedure Code, 1908. Later, the Indian Arbitration Act, 1940 was introduced to address the issues, which cannot be sorted out effectively in a time bound manner by the routine court procedures. The Indian Law Commission in its 129th Report and the Malimath Committee both advocated the need for amicable settlement of disputes between parties and also recommended to make it mandatory for courts to refer disputes, after their issues having been framed by courts, for resolution through alternate means rather than litigation/trials. Section 89(2) of the C.P.C, 1908 provides that where a dispute has been referred for Arbitration or Conciliation, the provisions of the Arbitration and Conciliation Act, 1996 would apply.

Position of Arbitration in India:

Out of various forms of ADR including conciliation, mediation and negotiation, arbitration has emerged as one of the most dominant and widely accepted form of ADR. The prime legislation that deals with the arbitration and conciliation procedures is Arbitration & Conciliation Act of 1996. Under this Act, complete power has been conferred on the Arbitral Tribunal constituted under the provisions of the Act. This Act proceeds on the basis of law adopted by United Nations Commission on International Trade Law (UNICITRAL). The recognized arbitral institutions in India are the Chambers of Commerce (organized by either region or trade), the Indian Council of Arbitration (ICA), the Federation of Indian Chamber of Commerce and Industry (FICCI), and the International Centre for Alternate Dispute Resolution (ICADR). The biggest advantage of sorting out disputes through Arbitration over Court litigation is its Neutrality and Mutuality. This may be in respect of – (a) Place of arbitration, (b) Language to be used, (c) Procedure or Rule to be applied, (d) Nationality of Arbitration (in case of international commercial arbitration), (e) Legal representation, (f) Appointment of Arbitrators as per requirement of the nature of dispute, (g) Element of confidentiality.  Further, with the development of intellectual property and the patent regime, fast track arbitration is required in case of disputes such as infringement of patents, copyrights, trademarks, destruction of evidence, activities in violation of patent, trademark laws, construction disputes in time-bound projects, licensing contracts etc.

Need for Arbitration in India:

The Indian judiciary foremost has failed to deliver justice expeditiously. The delay in delivery of justice is in fact the greatest challenge before the Indian judicial system. This problem of delays is not a new one rather it is as old our laws themselves. The problem has escalated to such an alarming proportion that unless it is solved speedily and effectively, it will, in the near future, crush completely the whole edifice of our judicial system. In addition to this, in India, the number of judges to population ratio is profoundly low compared to other developed countries. Currently, the number of judges per million of population is 10.5 judges per million. In the All India Judges Association’s Case, the Supreme Court has expressed its desire that the number of Judges be increased in a phased manner in 5 years so as to raise the Judge-Population ratio to 50 per million. The Judge- Population ratio in India is the lowest in the world. Far worse is the fact that out of existing sanctioned strength of judges, 25-30% of the posts are normally lying vacant on any point of time.

A fundamental problem in the Indian Judicial system is that there is no fixed period for disposal of cases. There is no time limit fixed either by any Act or Code within which the cases must be decided. Consequently, the cases drag on for years together. In order to avoid this problem the judiciary must emphasize on arbitration as a means of dispute settlement, at least in commercial matters. Most importantly, the complex nature of the laws and rigidity of court procedures further amplify the need to focus on ADR mechanism. On the contrary, the lack of formality and absence of procedure makes arbitration between parties easy and hassle free.  Further, the poor infrastructure condition in the courts and absence of computerized records etc highlights the shambolic state of the courts particularly at the district level. Therefore, there is an urgent need for the Indian Judiciary to realise its inefficiencies and pitiful state of affairs and to act upon the same. All these factors in totem clearly establish the need for prompt action of the judiciary to adopt and implement arbitration and other means of alternate dispute resolution.


Author: Chiranjeev Gogoi

Pursuing B.A. LL.B. (Hons.) from National Law University and Judicial Academy, Assam, India.