The promise of arbitration: From speedy justice to courtroom labyrinth

The Arbitration and Conciliation Act, 1996 was Parliament's definitive response to India's chronic judicial delays and the imperative need for efficient commercial dispute resolution. Based on the UNCITRAL Model Law on International Commercial Arbitration, the Act embodied a fundamental curial philosophy: minimal judicial intervention, maximum party autonomy and expeditious resolution of commercial disputes.

Twenty-eight years later, empirical evidence reveals an unfortunate shortfall in translating legislative ambition into practical reality. While the Act may have given the appearance of a paradigm shift, Indian arbitration has merely metamorphosed, but its fundamental nature as court-dependent remains largely unchanged.

The arbitration journey begins with Section 8, which mandates that if a valid arbitration agreement exists, courts/tribunals must refer parties to arbitration. The Supreme Court has repeatedly emphasised the peremptory nature of this provision. For instance, in Hindustan Petroleum Corporation Ltd v. Pink City Midway Petroleums, it was held that courts are obligated to refer disputes to arbitration if the prerequisites are met.

In practice, Section 8 becomes the first battleground, with parties contesting the very existence or validity of the arbitration agreement. The Supreme Court's decision in SBP & Co v. Patel Engineering Ltd, which held that the power under Section 11 is judicial rather than merely administrative, had a great deal of influence on Section 8 proceedings, leading to detailed inquiries unworthy of an arbitration-related court proceeding.

Recent jurisprudence, particularly Vidya Drolia and Others v. Durga Trading Corporation, has attempted to restore balance by holding that courts should conduct only a prima facie review at the referral stage, leaving substantive arbitrability issues to the arbitral tribunal. Further the seven-judge bench of the Supreme Court in In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act strongly reiterated the principle of “arbitral autonomy” as a globally recognised arbitration standard. It held that this principle is enshrined under Section 5 of the Arbitration Act. The judgment noted that the main purpose of the Indian Arbitration Act was to provide “speedy and efficient resolution[s]” to disputes between parties in connection with their obligations. Despite this clarification, parties continue to exploit every possible avenue to resist or delay referral to arbitration.

Once the referral hurdle is crossed, the arbitration process faces new court interventions. Parties are entitled to and, thus, frequently approach courts under Section 9 for interim relief, seeking orders to secure assets, maintain the status quo, or prevent frustration of rights before the arbitral tribunal is constituted. While the Supreme Court in Arcelor Mittal Nippon Steel India Ltd v. Essar Bulk Terminal Ltd emphasised that arbitral tribunals should be the primary forum for interim relief under Section 17, parties continue to prefer court orders for their perceived enforceability. The practical effect is that arbitration is often paused while courts adjudicate urgent applications, sometimes resulting in overlapping or conflicting orders between courts and tribunals.

When parties cannot agree on an arbitrator, Section 11 empowers courts to appoint one. This process, originally intended to be merely administrative, evolved into a quasi-judicial function. The Supreme Court's further clarification in National Insurance Co Ltd v. Boghara Polyfab Pvt Ltd regarding the scope of judicial scrutiny under Section 11 has not prevented this process from remaining time-consuming and contentious.

A collateral invocation of Section 27(5) of the Act again poses a procedural hurdle in arbitration despite the 2015 amendment, as it inherently expands court intervention by requiring the arbitral tribunal to seek the court's assistance for enforcing its interim orders through contempt proceedings.

Further, the scope of Section 27(5) was expanded in terms of the judgement of the Supreme Court in Alka Chandewar v. Shamshul Ishrar Khan, whereby it was held that a literal interpretation of Section 27(5) would show that there are different categories of actions which can be referred to a court by a tribunal for contempt proceedings. One of those categories is the general and wide category of “any other default”. Moreover, the Section is not confined to a person being guilty of contempt only when failing to attend in accordance with the process of taking evidence, as the Section specifically states that persons guilty “of any contempt to the Arbitral Tribunal during the conduct of the Arbitral proceedings” shall be subject to contempt proceedings.

The constitutional dimension adds another layer of complexity. Despite the Act's intention to minimise judicial interference, parties frequently invoke the supervisory jurisdiction of High Courts under Article 227 of the Constitution. The Supreme Court's guidance in Deep Industries Limited v. Oil and Natural Gas Corporation Limited and Bhaven Construction v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd that such intervention should be rare and exercised sparingly, has not entirely stemmed this practice.

Further, Article 136, while intended for exceptional cases, often serves as a judicial “backdoor,” enabling further challenges to arbitral proceedings/awards even after exhaustion of statutory remedies. A recent highlight in this concern was the Supreme Court’s curative intervention in Delhi Metro Rail Corporation (DMRC) Ltd v. Delhi Airport Metro Express Pvt Ltd. Invoking its extraordinary jurisdiction under Article 142, the Supreme Court set aside an arbitral award of nearly ₹8,000 crore against DMRC, overturning its earlier decision that had upheld the award. The ruling further unsettles the finality of arbitral awards.

Even after an arbitral award is rendered, the interminable journey through the courts continues. Section 34, which provides for setting aside awards on limited grounds, has become a default arena for parties to have a seemingly final battle on the award. The Supreme Court's initial broad interpretation of "public policy" grounds in ONGC Ltd. v. Saw Pipes Ltd made Section 34 challenges more frequent. However, subsequent decisions have attempted to narrow this scope, but with little success.

The Supreme Court's landmark decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd represents a significant paradigm shift in the balance between judicial oversight and arbitral finality. While the Constitution Bench's majority ruling grants courts limited powers to modify arbitral awards in narrowly defined circumstances such as correcting clerical errors, excising severable invalid portions and adjusting exorbitant interest rates, this development raises fundamental questions about the extent of permissible court interference in arbitration proceedings. The decision, though pragmatic in preserving awards from wholesale annulment due to minor defects, potentially undermines the foundational principle of arbitral finality that parties seek when choosing arbitration over litigation.

The recent events of high-profile disputes illuminate the continuing challenges in Indian arbitration. The Amazon-Future Retail saga, involving multiple proceedings across different forums, is illustrative in this regard.

Recently, former Vice-President Jagdeep Dhankhar had also emphasised that India's arbitral process faces challenges from excessive control and reliance on traditional adjudication, highlighting the need to leverage sector-specific expertise and domain experts, including retired judges, to improve efficiency. He stated that overuse of Supreme Court interventions under Article 136 hampers arbitration and stressed the importance of shifting focus from dispute resolution to amicable settlement and early difference resolution to foster stronger economic partnerships.

Further, Justice Sudhanshu Dhulia described arbitration in India as “rich man’s litigation,” criticising its limited accessibility for the poor. He questioned whether arbitration truly offers quick dispute resolution, citing delays and court interference that prolong cases. Justice Dhulia emphasised the need for reforms to make arbitration faster and more equitable, warning that India’s goal of becoming an international arbitration hub depends on fostering institutional arbitration rather than ad hoc processes.

The Indian arbitration landscape has evolved significantly since 1996, shaped by landmark judgments, legislative amendments and changing commercial practices. The fundamental challenge is sculpting an autonomous alternative dispute resolution mechanism. Indian courts must embrace a philosophy of minimal intervention, interpreting grounds for judicial review narrowly and respecting the autonomy of arbitral tribunals. There is a need for building arbitration expertise through specialised education and training programs for lawyers, judges and arbitrators is essential for creating a competent ecosystem.

The promise of arbitration - swift, efficient and party-driven dispute resolution - remains within reach. However, this promise requires not just legislative reform, but a fundamental reimagining of arbitration's role in the Indian legal ecosystem.

Prafull Bhardwaj is an advocate practicing before the Supreme Court of India.