Executive Summary
The Arbitration and Conciliation Act, 1996 has undergone three major amendments to enhance efficiency and align with international best practices:
- 2015 Amendment: Pro-arbitration reforms (BALCO judgment codified)
- 2019 Amendment: Institutional arbitration, costs regime, confidentiality
- 2021 Amendment: Automatic stay removal, qualified arbitrators, pre-2016 awards
- Key reforms: Time limits, limited court intervention, Section 11(6A), costs follow event, confidentiality
- Impact: India's ranking improved in Ease of Doing Business (up from 142 to 63)
- Ongoing evolution: Proposed amendments for emergency arbitrator recognition
This guide examines the key amendments chronologically, their impact, and current state of Indian arbitration law.
1. Pre-Amendment Challenges (Pre-2015)
Problems with Original 1996 Act
| Issue | Impact |
|---|---|
| Extensive court intervention | Prolonged Section 11 hearings (2-3 years) |
| No time limits | Arbitrations dragging for years |
| Automatic stay on filing Section 34 | Delayed enforcement |
| Public policy broadly construed | Awards set aside on merits |
| No costs regime | Frivolous claims/defenses |
| No institutional framework | Lack of arbitration institutions |
Result: India ranked 142/190 in Ease of Doing Business (Enforcing Contracts) in 2014.
2. Arbitration and Conciliation (Amendment) Act, 2015
Key Reforms
| Reform | Provision | Impact |
|---|---|---|
| Limited Section 11 review | Section 11(6A) | Court examines only existence of arbitration agreement |
| Time limits | Section 29A | 12-month timeline for award |
| No automatic stay | Section 36(3) | Filing Section 34 no longer automatically stays enforcement |
| Public policy narrowed | Section 34(2A) Explanation 1 | Patent illegality (domestic only), fundamental policy, justice/morality |
| Fast-track arbitration | Section 29B | 6-month timeline for claims ≤ ₹3 crore |
| Interim measures | Section 17(2) | Tribunal orders enforceable as decrees |
| Fifth and Seventh Schedules | Section 12 | Specific ineligibility and challenge grounds for arbitrators |
Section 11(6A) - Limited Review (2015)
"The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement."
| Pre-2015 | Post-2015 |
|---|---|
| Extensive prima facie review of merits | Only existence of arbitration agreement |
| Arbitrability decided by court | Arbitrability decided by tribunal |
| Section 11 hearings: 1-3 years | Section 11 hearings: 2-3 months |
BALCO Codified: This provision codified the Supreme Court's holding in SBP & Co. v. Patel Engineering (2005).
Section 29A - Time Limit for Award (2015)
| Timeline | Application |
|---|---|
| 12 months | From date tribunal enters upon reference |
| Extension: 6 months | By party agreement |
| Mandate terminates | If award not made within extended period |
Impact: Incentivizes expeditious proceedings; non-compliance results in termination of arbitrator's mandate (though rarely enforced).
Section 36(3) - No Automatic Stay (2015)
Pre-2015: Filing Section 34 automatically stayed enforcement.
Post-2015: "Where the Court is satisfied that a prima facie case is made out that the arbitral award was induced or affected by fraud or corruption, it shall stay the operation of such award."
| Ground | Stay Available? |
|---|---|
| Fraud or corruption | Yes (if prima facie case) |
| Other Section 34 grounds | No automatic stay (court discretion) |
Impact: Awards enforceable immediately unless fraud/corruption or court grants discretionary stay.
Public Policy Narrowed - Section 34(2A) (2015)
Explanation 1 added:
"For the avoidance of doubt, it is clarified that an award is in conflict with the public policy of India, only if:
- (i) the making of the award was induced or affected by fraud or corruption; or
- (ii) it is in contravention of section 75 or section 81; or
- (iii) it is in conflict with the most basic notions of morality or justice."
Explanation 2 (Domestic Awards):
"In the case of domestic awards, where the Court is satisfied that the arbitral award is vitiated by patent illegality appearing on the face of the award, it may set aside the award."
| Pre-2015 | Post-2015 |
|---|---|
| Public policy broadly construed | Public policy narrowed to fraud, Section 75/81 violation, morality/justice |
| Patent illegality for all awards | Patent illegality for domestic awards only |
| De novo review on merits | No review on merits |
Impact: Significantly reduced grounds for setting aside awards; aligned with international practice.
3. Arbitration and Conciliation (Amendment) Act, 2019
Key Reforms
| Reform | Provision | Impact |
|---|---|---|
| Arbitration Council of India | Section 43A-43O | Institutional framework (not yet operationalized) |
| Eighth Schedule | Arbitrator qualifications | Qualified arbitrators for institutional appointments |
| Costs regime | Section 31A | Costs follow event; penalty for frivolous claims (₹10 lakh) |
| Confidentiality | Section 42A | Arbitration proceedings confidential |
| Unconditional stay waiver | Section 36(3) proviso | Unconditional and specific waiver of stay post-award |
Section 31A - Costs Regime (2019)
"The costs of the arbitration shall be fixed by the arbitral tribunal, and shall follow the event..."
Section 31A(2): "If the arbitral tribunal is of the opinion that the claim or counter-claim of a party is frivolous or vexatious, it shall award such costs not exceeding ten lakh rupees..."**
| Feature | Application |
|---|---|
| Costs follow event | Unsuccessful party pays costs |
| Frivolous claim penalty | Up to ₹10 lakh penalty for frivolous claims/defenses |
| Deterrence | Discourages vexatious litigation tactics |
Impact: Aligned India with international cost practices; incentivized realistic claims.
Section 42A - Confidentiality (2019)
"Notwithstanding anything contained in any other law for the time being in force, the parties to the arbitration agreement, arbitral tribunal and the arbitral institution shall maintain confidentiality of all arbitral proceedings..."
| Protection | Scope |
|---|---|
| Arbitral proceedings | Hearings, evidence, submissions confidential |
| Award | Confidential unless disclosure required for enforcement |
| Exceptions | Disclosure for enforcement, legal obligations, public interest |
Impact: Brought India in line with international arbitration practice (London, Singapore confidential by default).
Eighth Schedule - Arbitrator Qualifications (2019)
For institutional arbitrations with claim value ≥ ₹1 crore:
| Qualification | Requirement |
|---|---|
| Advocates | 10 years' standing |
| Civil servants | Joint Secretary rank or above (retired) |
| Other professionals | 15 years' experience + expertise in arbitration |
Impact: Ensures qualified arbitrators for high-value disputes.
4. Arbitration and Conciliation (Amendment) Act, 2021
Key Reforms
| Reform | Provision | Impact |
|---|---|---|
| Automatic stay removal clarified | Section 36 | Unconditional, specific waiver required for stay post-award |
| Qualification conditions relaxed | Eighth Schedule proviso | Parties can appoint arbitrators not meeting Eighth Schedule if agreed |
| Retrospective applicability clarified | Section 87 | 2015/2019 amendments apply to arbitrations commenced post-23.10.2015 |
| Pre-2016 awards | Section 26 of Amendment Act 2015 | Challenged awards pending as of 23.10.2015 to be disposed expeditiously |
Section 36 - Automatic Stay Removal (2021)
Section 36(3) Proviso added:
"Provided further that where the Court is satisfied that a prima facie case is made out that:
- (a) the arbitration agreement or contract which is the basis of the award; or
- (b) the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award."
Second Proviso (2021):
"Provided also that where the Court is satisfied that a prima facie case is made out that the arbitration agreement or contract which is the basis of the award or the making of the award was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge..."
Third Proviso (2021 - critical):
"Provided also that the Court, while granting a stay of the award in cases other than those referred to in the second proviso, shall ensure that any deposit ordered is not furnished unconditionally, and shall not exceed:
- (a) where the total value of the award does not exceed Rs. 1 crore - Rs. 50 lakh;
- (b) where the total value of the award exceeds Rs. 1 crore - 50% of the award amount."
| Ground | Stay Available? | Deposit Required? |
|---|---|---|
| Fraud/corruption | Yes (unconditional stay) | No deposit |
| Other Section 34 grounds | Discretionary | Yes, capped (₹50 lakh or 50% of award) |
Impact: Balanced approach; prevents automatic stay while protecting against frivolous enforcement.
Eighth Schedule Proviso (2021)
"Provided that parties may, notwithstanding the criteria specified in this Schedule, appoint an arbitrator by name, mutually."
| Pre-2021 | Post-2021 |
|---|---|
| Eighth Schedule mandatory for all institutional arbitrations ≥ ₹1 crore | Parties can opt out and appoint arbitrator by name mutually |
Impact: Restored party autonomy while maintaining default quality standards.
5. Comparative Table: Pre-2015 vs. Post-2021
| Aspect | Pre-2015 | Post-2021 |
|---|---|---|
| Section 11 scope | Extensive prima facie review | Only existence of agreement (11(6A)) |
| Time limit for award | None | 12 months (+6 extension) |
| Automatic stay on Section 34 | Yes | No (except fraud/corruption or discretionary with deposit) |
| Public policy scope | Broad | Narrow (fraud, fundamental policy, justice/morality) |
| Patent illegality | All awards | Domestic awards only |
| Costs regime | None | Costs follow event (Section 31A) |
| Confidentiality | Not explicit | Mandatory (Section 42A) |
| Arbitrator qualifications | None | Eighth Schedule (opt-out possible) |
| Fast-track | None | Section 29B (6 months for ≤ ₹3 crore) |
| Tribunal interim orders | Not enforceable as decrees | Enforceable as decrees (Section 17(2)) |
6. Impact on India's Arbitration Ecosystem
Ease of Doing Business Ranking
| Year | Rank (Enforcing Contracts) | Change |
|---|---|---|
| 2014 | 142 / 190 | Baseline |
| 2020 | 63 / 190 | +79 positions |
Attribution: 2015, 2019 amendments credited with significant improvement.
Growth of Institutional Arbitration
| Institution | Pre-2015 Cases | Post-2019 Cases | Growth |
|---|---|---|---|
| DIAC | ~50/year | ~300/year | 6x |
| MCIA | ~30/year | ~150/year | 5x |
Reason: Reforms improved arbitration attractiveness; institutional confidence increased.
7. Pending Issues and Proposed Reforms
Emergency Arbitrator Enforceability
Issue: HSBC v. Avitel (2022) held emergency arbitrator orders not enforceable.
Proposed: Legislative amendment to recognize and enforce emergency arbitrator orders.
Arbitration Council of India (Not Operationalized)
2019 Amendment created: Arbitration Council of India (Sections 43A-43O)
Status: Not yet operationalized; no notification issued.
Purpose: Grade arbitral institutions, accredit arbitrators, promote arbitration culture.
8. Key Takeaways for Practitioners
2015 Amendment - Pro-Arbitration: Limited court intervention (Section 11(6A)), time limits (Section 29A), no automatic stay (Section 36(3)).
Public Policy Narrowed: Patent illegality for domestic awards only; public policy limited to fraud, fundamental policy, justice/morality.
2019 Amendment - Institutional Focus: Costs regime (Section 31A), confidentiality (Section 42A), arbitrator qualifications (Eighth Schedule).
2021 Amendment - Balanced Enforcement: Stay on Section 34 conditional on deposit (₹50 lakh or 50% cap); party autonomy on arbitrator selection.
Impact Proven: India's ranking in Ease of Doing Business improved significantly (142 to 63).
Ongoing Evolution: Emergency arbitrator recognition, Arbitration Council operationalization pending.
Practitioner Adaptation: Reforms require practitioners to adapt to stricter timelines, costs awareness, and confidentiality obligations.
9. Compliance Checklist
For All Arbitrations Post-2021
- Section 11 applications: Focus on existence of agreement only (not merits)
- Timeline compliance: 12-month award timeline (Section 29A)
- Costs documentation: Maintain detailed cost records for Section 31A
- Confidentiality: Comply with Section 42A (proceedings confidential)
- Arbitrator qualifications: Check Eighth Schedule for institutional arbitrations ≥ ₹1 crore (or parties opt out)
- Section 34 strategy: If filing Section 34, anticipate deposit requirement (unless fraud/corruption)
- Enforcement: Enforce awards promptly post-Section 34 timeline (no automatic stay)
10. Conclusion
The 2015, 2019, and 2021 amendments transformed Indian arbitration from a slow, court-heavy process to a pro-arbitration, time-bound, and cost-conscious regime aligned with international best practices. Key reforms—limited court intervention (Section 11(6A)), time limits (Section 29A), no automatic stay (Section 36), costs regime (Section 31A), and confidentiality (Section 42A)—have significantly enhanced India's arbitration ecosystem. India's dramatic improvement in the Ease of Doing Business ranking (142 to 63) validates the reforms' success. Practitioners must adapt to stricter timelines, costs awareness, and confidentiality obligations. While challenges remain (emergency arbitrator enforceability, Arbitration Council operationalization), India's arbitration landscape is firmly on an upward trajectory, positioning it as a competitive arbitration seat regionally and globally.