Commercial Arbitration in India – Process, Timelines & Cost.

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Introduction:

“Peaceful resolution is the highest justice.”

One of the most popular ways to settle business disputes in India is through commercial arbitration.  Compared to traditional court litigation, it provides flexibility, speed, and confidetiality.  The Arbitration and Conciliation Act of 1996 gives businesses a dependable framework for resolving disputes in light of the rise in cross-border commerce and commercial activities.

Legal Framework

In India, arbitration is governed under the Arbitration and Conciliation Act, 1996, which is modelled after the UNCITRAL Model Law.  Over time, it has been modified to make arbitration more transparent, time-bound, and business-friendly (most notably in 2015, 2019, and 2021).

Arbitration Process in India

Step 1: Creating the Arbitration Agreement and Implementing It

An arbitration agreement is the first step in the arbitration process.  Either a separate contract or a provision in the primary contract stating that arbitration will be used to settle disputes.

Legal Implementation:

  1. In compliance with Section 7 of the 1996 Arbitration and Conciliation Act, the agreement must be in writing.
  2. It must be signed by both parties, or it must be supported by communication like letters or emails.
  3. In the event that one party rejects, the other party may use Section 11 to request the appointment of an arbitrator or arbitrators from the High Court or Supreme Court.
  4. Always include clear arbitration provisions that specify the parameters of the procedures, including the number of arbitrators, the governing laws, the seat (place), and the language.

Step 2: Appointment of Arbitrator(s)

Once a disagreement has emerged, the parties must choose an arbitrator or arbitrators. This might be presided over by a panel of three arbitrators or by one arbitrator.

Legal Implementation:

  1. If both sides cannot agree on an arbitrator, they may approach the High Court or Supreme Court under Section 11 of the Act to appoint one.
  2. Section 12 mandates that arbitrators be impartial and independent.
  3. To gain a better understanding of technical issues, choose arbitrators with relevant experience.

Step 3: Preliminary Meeting & Timelines

To determine process, scheduling, and evidence rules, the arbitral panel has a preliminary hearing upon appointment.

Legal Implementation:

  1. Statements of claim and defence may be submitted by any party under Section 23.
  2. The arbitration award must be issued within 12 months of the conclusion of the pleadings, as required by Section 29A (extendable by 6 months with assent, further only by court).
  3. Because arbitration has a deadline, keep all correspondence, contracts, invoices, and emails organised.

Step 4: Hearings & Evidence Presentation

During this stage of the trial, the parties submit their arguments, witnesses, and supporting documentation.

Legal Implementation:

  1. Hearings for oral arguments, witness examinations, and submissions are permitted under Section 24.
  2. Section 19 gives arbitration greater flexibility by stating that it is not constrained by the Indian Evidence Act or the Code of Civil Procedure (CPC).
  3. To prevent delays, prepare witness testimonies in advance and keep both hard and electronic copies of all documents.

Step 5: Passing of the Arbitral Award

The arbitrator issues a written ruling (award) following hearings.

Legal Implementation:

  1. The award must be in writing, signed, and justified in accordance with Section 31.
  2. Interest on awarded monies is permitted under Section 31(7).
  3. Pay attention to deadlines once the award is given; appeals and challenges must be submitted within ninety days (Section 34).

Step 6: Enforcement of the Award

According to Section 35, the arbitral ruling is final, enforceable, and enforceable like a court order.  Implementation of the Award:  According to Section 36 of the Arbitration and Conciliation Act, 1996, an arbitral ruling in India has the same legal weight as a court order.

Legal Implementation:

When the losing party possesses assets, enforcement is carried out by submitting an execution petition to the civil court.

  1. Waiting Period/Challenge Window: The losing party has 3 months (plus a possible 30-day extension) to challenge the award under Section 34. If no challenge is filed, the award becomes final and can be enforced like a court decree.
  2. Execution Petition: The award holder may submit an Execution Petition to the relevant civil court, which is the location of the losing party’s assets. According to the Code of Civil Procedure, 1908 (CPC), the award is regarded as a decree.
  3. The Court’s Role: The court does not re-examine merits; instead, it makes sure that legal procedures are followed.   To execute the award, courts may order the sale of assets, the freezing of bank accounts, or the attachment of property.
  4. Foreign Awards: In accordance with the New York Convention or Geneva Convention, Part II of the Act makes foreign arbitral awards enforceable.   They are regarded as domestic decrees after being approved by an Indian High Court.
  5. Timeline: Depending on the parties’ cooperation, enforcement might take three to six months.  After a challenge is filed, amendments now guarantee that automatic stays are not granted; instead, a special stay order is needed.
  6. Always verify the whereabouts of the other party’s assets prior to starting arbitration.  When asset information are known and recorded, enforcement goes more smoothly.

Timelines of Arbitration

  1. Claims and defence filing: 30 to 90 days.
  2. Pleadings must be finished within six months following the appointment.
  3. Award passing: 12 months after pleadings are finished (Section 29A).
  4. Court approval is required for extensions longer than 18 months.

Cost of Arbitration

  1. Arbitrator fees are usually fixed under institutional rules or as per the Fourth Schedule of the Arbitration Act.
  2. The cost of a lawyer varies according to intricacy.
  3. Administrative expenses, such as translation, stenography, and venue fees.
  4. Other: expert witness costs for technical disagreements.

Advantages of Arbitration

  1. Quicker than conventional legal proceedings.
  2. Private and confidential.
  3. Adaptability in process.
  4. The arbitrators’ experience in the industry.

Challenges in Arbitration

  1. Expensive for little conflicts.
  2. The court may still be needed to help enforcement.
  3. Postponements if parties don’t cooperate.

Conclusion

In India, arbitration provides companies with a strong, enforceable, and time-bound solution to business conflicts.  It guarantees that companies may settle disputes without becoming entangled in protracted legal proceedings by providing court assistance, robust enforcement mechanisms, and procedural clarity.  To fully profit from this system, however, a detailed arbitration clause and well-prepared documents are essential.

FAQs

Q1: Can an arbitration award be challenged in court?

Yes, under Section 34, within 90 days, but only on limited grounds such as fraud, bias, or violation of public policy.

Q2: How long does arbitration usually take in India?

On average, 12–18 months, depending on complexity and cooperation of parties.

Q3: Is an arbitral award final and binding?

Yes, under Section 35, it is final and binding on parties once the challenge period lapses.

Q4: Can foreign arbitration awards be enforced in India?

Yes, under Part II of the Act, if they are from a country that is a signatory to the New York or Geneva Convention.