The Arbitration and Conciliation Act, 19961 (the Act) underwent amendments in 20152 with the aim of improving the efficiency, cost-effectiveness, and impartiality of the arbitration process. Further, in recognition of the importance of institutional arbitration, Parliament made further amendments to the Act in 20193 to promote and streamline institutional arbitration through the establishment of an independent body known as the Arbitration Council of India (ACI). Although this initiative is commendable, its implementation has been marred by delays as the ACI is yet to be constituted.
Clause 10 of the 2019 Amendment introduces new sections, viz. Sections 43-A to 43-M4, which provides for the establishment of the ACI. According to Section 43-D(1)5, it is the responsibility of the ACI to undertake all necessary measures to advance and support the use of arbitration, mediation, conciliation, and other forms of alternative dispute resolution (ADR). In order to achieve this objective, the ACI is tasked with developing policies and guidelines for establishing, operating, and maintaining consistent professional standards for all aspects of ADR.
Section 43-D(2) empowers the ACI to develop policies and guidelines governing the grading of arbitral institutions and the recognition of professional institutes for providing accreditation of arbitrators. The ACI is also authorised to review and update norms to ensure quality arbitration and conciliation services and act as a forum for the exchange of views and techniques for establishing India as a leading center for domestic and international arbitration and conciliation.
In addition, the ACI is responsible for recommending various measures to the Central Government to facilitate the easy resolution of commercial disputes and promote institutional arbitration by strengthening arbitral institutions. The ACI is also responsible for conducting examinations, training, and certifications on various subjects relating to arbitration and conciliation, establishing and maintaining a depository of arbitral awards made in India, and making recommendations regarding personnel, training, and infrastructure of arbitral institutions.6
Overall, the duties and responsibilities outlined in Section 43-D(2) demonstrate the crucial role that the ACI will play in ensuring the effective administration and promotion of arbitration in India. However, despite the passage of more than three years since the amendment to the Act in 2019, the establishment of the ACI remains elusive. The rules regarding the qualifications, appointments, salary, and allowances of the CEO and Chairperson and members of the ACI, have been notified. However, the ACI itself is yet to be fully constituted.
This ongoing delay has contributed to the growing backlog of applications, such as those submitted under Section 117, where the petitioners must wait for years for the mere appointment of an arbitrator. Currently, the responsibility for such appointments falls upon the already overburdened courts. The Supreme Court of India recognised the issue of delays in the disposition of applications under Section 11 of the Act, noting numerous outstanding applications dating back to 2006. The Court emphasised that failure to decide on such applications within a reasonable period, particularly within a year of filing, would defeat the objectives of the Act.8
If the ACI had been established, this burden would have been eased as the authority to appoint arbitrators in ad hoc arbitrations would have been shifted to the arbitral institutions which would have been designated by the Supreme Court or the High Court and graded by the ACI.9 These institutions would have been able to efficiently and effectively handle the appointment of arbitrators and resolve commercial disputes in a timely manner. Reports from the High-Level Committee10 and the Law Commission11, which are based on extensive research and analysis, have emphasised the importance of institutionalising arbitration processes to ensure greater efficiency in the resolution of disputes.
Furthermore, the ACI’s authority to grade arbitral institutions would have opened opportunities for the recognition and accreditation of online dispute resolution (ODR) institutions. These institutions specialise in resolving small claims disputes by employing and leveraging technologies like digital communication, case management tools, audio-video conferencing, and digital signing and stamping, and advanced tools like natural language processing, machine learning, artificial intelligence for automation, transcriptions, and translation. These enable them to resolve disputes at scale from diverse geographies and demographics within just 60-90 days at a fraction of the costs otherwise expended, thereby bringing greater inclusivity and access.
The full potential of these ODR institutions should be leveraged to bring about a transformation and revolution in the administration of justice. With an alarming backlog of almost five crore pending cases, blending technology and justice delivery has become inevitable. Therefore, it is proposed that the expertise of ODR institutions must be fully exploited to help reduce the burden on the court system and bring about much-needed efficiency in the ADR ecosystem.
The delayed establishment of the ACI undermines the intent of the 2015 and 2019 Amendments to the Act, which aimed to streamline and improve the process of ADR in India. It is imperative that action is taken for the urgent constitution of the ACI and recognition and grading of ADR and ODR institutions, to ensure that the benefits of an efficient, cost-effective, and timely dispute resolution mechanism are realised.
In the meantime, transitional provisions can be notified to enable disputing parties to seek assistance and services from recognised ADR and ODR institutions12 until such time as the ACI is fully operational and functional. This will help alleviate the burden on courts and ensure a smooth transition until the ACI is fully established. Failure to act now would only prolong the existing problems of pendency in the system and dent the efforts to make India an international hub for arbitration.
†Retired District Judge with 25 years of judicial experience and over 10 years of experience as an arbitrator. Author can be reached at odrarifmadani@gmail.com.
1. Arbitration and Conciliation Act, 1996.
2. Arbitration and Conciliation (Amendment) Act, 2015.
3. Arbitration and Conciliation (Amendment) Act, 2019.
4. Arbitration and Conciliation Act, 1996, Ss. 43-A to 43-M.
5. Arbitration and Conciliation Act, 1996, S. 43-D(1).
6. Arbitration and Conciliation Act, 1996, S. 43-D(2).
7. Arbitration and Conciliation Act, 1996, S. 11.
8. Shree Vishnu Constructions v. Engineer-in-Chief, SLP(C) No. 5306 of 2022, order dated 19-5-2022 (SC) (Pending).
9. Arbitration and Conciliation (Amendment) Act, 2019, S. 3.
10. Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, 2017.
11. Law Commission of India, Report No. 246 on Amendments to the Arbitration and Conciliation Act, 1996 (August 2014).
12. Notification bearing F. No. A-60011/97/2018-Admn.III (LA) dated 18-9-2020.
It is more than four years now. The much talked about the Arbitration Council of India (ACI) has not been established so far. The institutionalization of arbitration in India is directly linked to the establishment and operationalization of ACI. The Sector 11(3A) of the Arbitration and Conciliation Act 1996 empowers the Supreme Court and High Courts to designate Arbitration Institutions in the country. But there is a catch. It says that the Arbitration Institutions graded by ACI shall be designated by the Supreme Court and High Courts. Thus, Section 11(3A) though notified in 2019 has become non-functional for want of the Arbitration Institutions to be graded by ACI. In the absence of such a designation, it has become difficult for the Arbitration Institutions in the country to take up cases for Arbitration. Therefore, there is an urgent need to establish ACI, and simultaneously allow the Supreme Court of India, and High courts to collect the data and designate Arbitration Institutions functioning in the country without waiting for the establishment and functioning of ACI. This will help reduce the burden on courts.