Evolution of Arbitration In India

To begin with, answering a simple yet important question i.e what exactly is arbitration? Today, we refer to arbitration as a type of alternate mode of dispute resolution with the Courts being the primary mode of dispute resolution. ADR as a concept was first referred to in ‘Brhararamayaka Upanishad’ by ‘Rishi Yajnavalkya’ dated around 9th to 6th Century B.C. In the recent times, it is evolving and emerging in a more refined form as an alternate judicial system that has become a widely preferred form of dispute resolution mainly due to it’s expeditious nature.

Questions may arise in context of what differentiates Arbitration from usual Court procedure. A basic answer to this question would be that Court procedure is generally much more formal and technical in nature whereas Arbitration is much more litigant/ party convenient. Further, it has been also found that in earlier times when the justice delivery system was not so organised, the disputes were resolved mainly through arbitration. Having briefly figured out the major distinction between the two, we now go on to understand the evolution of arbitration in India.

In ancient India there are believed to exist three dispute resolution systems-
1) Puma: These were the formal courts of the time.
2) Srenis: A particular group of people belonging to the same profession had a designated group of people who resolved their disputes.
3) Kulas: Members concerned with the social matters of a particular group/section or community.
The above stated forms of dispute resolution basically formed the components of Panchayat. Thus, it can be said that Panchayat was the primary dispute resolution system that was present in ancient India.

In modern India, the first reference made to dispute resolution was in the Bengal Regulation Act, 1772. This Act was passed by the British Parliament to help the East India Company in controlling and ruling over the territory of Bengal which constituted of tribunals for dispute resolution. This mechanism proved to be highly successful, thereafter the British Parliament passed two more acts along the similar lines namely- The Bengal Regulation Act, 1772 and The Madras Regulation Act, 1802.

Further, in the year 1899, The Arbitration Act of 1899 was enacted in the Indian territory by the East India Company. This Act was based on The English Arbitration Act, 1899 that was passed by the British Parliament. This Arbitration Act of 1899 was later codified as Schedule II of the Code of Civil Procedure, 1908.

In the year 1940, the State realised that the Schedule II of the CPC was misplaced and thus enacted The Arbitration Act of 1940 that dealt with domestic arbitration solely and also repealed Schedule II of the CPC. With the enactment of the Arbitration Act of 1940, all the prior Arbitration Acts became nullified and the issue was that this Act dealt solely with domestic Arbitration laws, thus, there appeared a void in law regarding foreign arbitration.

In the International context, Arbitration was taking more shape, in the year 1923,  Geneva Protocol on Arbitration Clauses was introduced and further in the year 1927 Geneva Convention on the Execution of Foreign Arbitral Awards was brought about. Since there existed a void with respect to International Arbitration, in the Indian context, Arbitration(protocol and Convention) Act, 1937, was enacted inculcating the Geneva Protocol and Convention.

Comparatively, America also brought about a Convention which was signed in New York in 1958 for the recognition and enforcement of foreign arbitral awards. Further India drawing inspiration from the same included Foreign Awards (Recognition and Enforcement) Act, 1961 within its legal jurisdiction.

The arbitration laws in India prior to 1961 at a glance-

1) Arbitration Act, 1940: This dealt with domestic arbitration laws in India.
2) Arbitration (Protocol and Convention) Act, 1937: For enforceability of Geneva Protocol and Convention in Indian jurisdiction.
3) Foreign Awards (Recognition and Enforcement) Act, 1961: For enforceability of New York Convention in Indian jurisdiction.

The existence of multiplicity of laws and presence of a British Era law for domestic arbitration was an impediment in the field of arbitration in India.

In the year 1991, the Indian government realised the need to be an integral part of the global economy and thus enacted various reforms for the liberalisation of the Indian economy. These reforms in the economy brought a huge influx of businesses, with these businesses also came a need for arbitration.

Thus, the Indian government realised the need to revamp the arbitration mechanism in the country. Furthering this intent, in the year 1996, based on UNCITRAL Model Laws, The Arbitration and Conciliation Act, 1996 came into force.

A unique fact that the author is keen on pointing out is that the first arbitration legislation drafted around the world was by John Locke mainly to help traders resolve their matter in a speedy manner and thereby boosting trade. Post Independence, India too enacted the first comprehensive Arbitration and Conciliation Act, 1996 which post economy liberalisation reforms. So, the inference derived from this observation is that arbitration is generally a tool used for ease of doing business.

India’s Arbitration journey doesn’t end just yet! Post enactment of The Arbitration and Conciliation Act, 1996, various jurists and legal professionals pointed out numerous lacunae in the Act. Acknowledging these lacunae, The Law Commission of India through its 176th Report suggested some amendments in the 1996 Act in the year 2001. Subsequently The Arbitration and Conciliation (Amendment) Bill, 2003 was issued and presented in the Parliament. Further in the year 2004, Justice Saraf Committee was instituted to examine the recommendations submitted by The Law Commission Report. In the year 2005, the 2003 Bill was referred to the Ministry of Law and Justice. The Ministry concluded that the bill was insufficient and thus it was withdrawn.

Thereafter, again in the year 2014, The Law Commission of India via its 246th Report and Supplementary Report recommended amendments in the 1996 Act. In pursuance of the 246th Law Commission Report, the legislature enacted The Arbitration and Conciliation (Amendment) Act, 2015.

Post the 2015 amendment, again in the year 2017, a committee under the chairmanship of retd. Supreme Court Judge Sri Krishna recommended changes to the Act. The committee also laid down certain recommendations for establishing and further boosting the mechanism of institutional arbitration. On basis of the recommendations of Justice Sri Krishna Report in the year 2018, a new Arbitration and Conciliation (Amendment), Bill was introduced in the Parliament.

Having understood and analysed all the different phases in the development of the Arbitration Law in India, the following can be concluded with regards to the status quo-
The Arbitration Law presently in force in India is The Arbitration and Conciliation Act of 1996, along with Arbitration and Conciliation (Amendment) Act of 2015.