The Arbitration Law Of India: A Critical Analysis

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The Arbitration Law Of India: A Critical Analysis

Article by Sumeet Kachwaha*?

This is a updated version of Article first published in AIAJ Vol 1. No. 2 2005

India opened a fresh chapter in its laws in 1996 when it enacted the Arbitration & Conciliation Act (Act). This article presents salient features of the Act and analyses its working in its near one decade of existence.

A. THE PRE-1996 POSITION

Prior to 1996, the arbitration law of the country was governed by a 1940 Act. This Act was largely premised on mistrust of the arbitral process and afforded multiple opportunities to litigants to approach the court for intervention. Coupled with a sluggish judicial system, this led to delays rendering arbitrations inefficient and unattractive. A telling comment on the working of the old Act can be found in a 1981 judgment of the Supreme Court where the Judge (Justice D.A. Desai) in anguish remarked "the way in which the proceedings under the (1940) Act are conducted and without an exception challenged in Courts, has made lawyers laugh and legal philosophers weep ."1

B. A NEW ACT .. A NEW BEGINNING

India, (in the good company of several other nations) enacted its new Arbitration Act based on the UNCITRAL Model Law (1985) and the UNCITRAL Rules (1976). This was in January 1996. The Statement of Objects and Reasons to the Act made no bones of the inefficiency of the old legislation. It said that the same had "become outdated" and there was need to have an Act, more responsive to contemporary requirements." It added: "Our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune."

Amongst the main objectives of the new Act (set out in the Statement of Objects and Reasons) are .to minimize the supervisory role of courts in the arbitral process. and "to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court."

This is how the Supreme Court dwelled on the new Act:

"To attract the confidence of International Mercantile community and the growing volume of India.s trade and commercial relationship with the rest of the world after the new liberalization policy of the Government, Indian Parliament was persuaded to enact the Arbitration & Conciliation Act of 1996 in UNCITRAL model and therefore in interpreting any provisions of the 1996 Act Courts must not ignore the objects and purpose of the enactment of 1996. A bare comparison of different provisions of the Arbitration Act of 1940 with the provisions of Arbitration & Conciliatio...

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