India’s Arbitration Overhaul – A Dive Into Key Reforms And Challenges

The Arbitration and Conciliation (Amendment) Bill, 2024 ("the Bill") marks a significant step in India's efforts to streamline arbitration law, enhance institutional arbitration, and reduce judicial intervention. Introduced by the Department of Legal Affairs in October 2024, the Bill proposes critical amendments to the Arbitration and Conciliation Act, 1996 ("the Act"). While the Bill introduces welcome clarifications, certain provisions require reconsideration.

Renaming the Act and Revising the Preamble

One of the key proposed changes is the removal of the term "conciliation" from the title of the Act, renaming it to the Arbitration Act, 1996. This aligns with the enactment of the Mediation Act, 2023, which has already eliminated several conciliation-related provisions from the Act. Additionally, references to the UNCITRAL Conciliation Rules, 1980, are being removed, which will ensure legislative consistency within India and alignment with international standards.

Clarification on Seat vs. Venue of Arbitration

Section 20 of the Act currently uses the term "place of arbitration" for both the legal seat and the venue. The Bill proposes two alternatives: one clearly distinguishing "seat" (which determines jurisdiction) from "venue" (the physical location of proceedings), and another designating the seat of domestic arbitrations as the place where the contract was executed or where the cause of action arose. While the first option provides much-needed clarity, the second raises concerns by limiting party autonomy and failing to establish a mechanism for determining the seat in international commercial arbitration.

Redefining "Court" and Jurisdiction

Currently, the Act defines "court" based on the subject matter of a dispute. The Bill, however, links court jurisdiction to the arbitration seat, aligning it with established principles and the first alternative proposed under Section 20 of the Bill. Additionally, the Bill clarifies that a court will exercise jurisdiction in accordance with its territorial and pecuniary limits. While these amendments enhance legal certainty, they also raise concerns about vesting jurisdiction in subordinate courts, leading to procedural complexities and inconsistent adjudication.

Timelines for Arbitration Applications

The Bill takes a significant step toward expediting arbitration proceedings by introducing specific timelines for key applications.

A 60-day limit is proposed for courts to decide applications under Section 8(1) through the insertion of Section 8(4).

However, while the Bill uses the term "court" in Section 8(4), Section 8(1) refers to "judicial authorities", not just courts.

This distinction may create interpretational issues since Section 8(1) applications are not confined to courts (as defined in the Act, or proposed to be defined in the Bill) but also extend to tribunals.

Similarly, the Bill introduces a 60-day timeline for filing petitions under Section 11 for the appointment of arbitrators.

This addresses concerns highlighted in the Supreme Court’s ruling in Arif Azim v. Aptech Ltd., (2024 (5) SCC 313), where a three-year limitation period—derived from Article 137 of the Limitation Act, 1963—was deemed applicable due to a legislative gap.

While the proposed timeline is a welcome change, its effectiveness hinges on enforceability. Explicit consequences for non-adherence, such as dismissal of delayed petitions or imposition of costs on petitioners, are needed to ensure that parties strictly comply with the reform.

Omission of Section 11(6A)

Perhaps the most contentious change is the omission of Section 11(6A), which currently restricts referral courts from examining anything beyond the existence of an arbitration agreement at the referral stage.

Its removal could signal an expansion of judicial scrutiny, conflicting with settled jurisprudence.

Given that Section 11(6A) has underpinned several landmark Supreme Court judgments, retaining it would provide much-needed legal stability while reinforcing India’s commitment to a pro-arbitration regime.

By setting clearer timelines and addressing procedural bottlenecks, the Bill marks an important shift toward efficiency in arbitration. However, linguistic refinement and consistency will be key to minimizing ambiguities and strengthening reforms.

Appealability of Section 11 Orders

The Bill proposes allowing appeals against Section 11 decisions that refuse the appointment of an arbitrator, reversing the previous position that rendered such decisions final and non-appealable. While the change introduces further scrutiny, it also risks prolonging disputes through frivolous appeals, especially since Section 11 courts are limited to confirming (or denying) the existence of arbitration agreements.

Extension of Arbitral Tribunal’s Mandate

Aligning with judicial precedents that had already adopted this approach, this amendment also allows for the extension of an arbitral tribunal’s mandate in the absence of mutual consent by both parties. Additionally, the power to grant extensions will shift from courts to arbitral institutions, reducing judicial intervention and strengthening institutional arbitration.

Appellate Arbitral Tribunals (AATs): A New Layer of Review

A landmark enhancement in the Bill is the introduction of Appellate Arbitral Tribunals (“AATs”), allowing parties to challenge arbitral awards before an appellate arbitration panel instead of courts.

While AATs may promote expediency, their inclusion under Section 34—which provides for limited judicial review—may be conceptually inconsistent with an AAT’s broader appellate powers. Therefore, a distinction between judicial review and appellate arbitration becomes crucial.

Moreover, the Bill leaves key procedural aspects unaddressed. For instance, it does not specify how an AAT would be constituted when parties fail to reach an agreement, potentially leading to deadlocks and enforcement challenges. A structured framework for the AAT constitution would be necessary for effective implementation.

Insertion of Section 34(7) - Partial Setting Aside of Awards

Another noteworthy insertion is that of Section 34(7), which provides for partial setting aside of awards aligning with the principles laid down by the Delhi High Court in NHAI v. Trichy Thanjavur Expressway Limited, (2023) 304 DLT 357, reinforcing judicial support for structured arbitration reform.

By allowing courts to set aside only the affected portion of an award, rather than annulling it entirely, this provision enhances efficiency and minimizes disruption in arbitration proceedings.

The Bill marks a significant advancement in arbitration law, offering much-needed clarity on the seat-venue distinction, reducing judicial intervention, and implementing strict timelines. However, certain provisions need further refinement to eliminate ambiguities, prevent unnecessary litigation, and uphold party autonomy.

In particular, considering the following aspects could help strengthen its impact:

a) Preserving Party Autonomy – The restriction on choosing the arbitration seat should be reconsidered to prevent unnecessary constraints, especially in cross-border contracts, where flexibility is essential.

b) Clarifying AAT Procedures – Introducing clear and concise procedural rules for constituting Appellate Arbitral Tribunals (AATs) would help eliminate implementation hurdles and ensure smoother adoption.

Fine-tuning these elements can ensure that the Bill not only enhances arbitration in India but also aligns seamlessly with international best practices.

About the authors: Aishwarya Kaushiq is a Partner and Parv Lodha is an Associate at BTG Advaya.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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