Concept of Arbitration in Law

Introduction

Arbitration is an alternative dispute resolution (ADR) mechanism in which disputing parties

agree to submit their conflict to one or more neutral third parties (arbitrators) instead of resorting
to litigation. It is a legally binding process that provides a private, efficient, and flexible means
of resolving disputes outside the traditional court system. Arbitration is commonly used in
commercial, labor, international, and consumer disputes.

1. Definition and Meaning of Arbitration

Arbitration is a dispute resolution process where parties voluntarily agree to have their dispute
settled by an impartial arbitrator or arbitral tribunal. The decision, known as an arbitral award,
is final and binding, subject to limited grounds for appeal.

According to Black’s Law Dictionary, arbitration is:

"A method of dispute resolution involving one or more neutral third parties who are usually
agreed to by the disputing parties and whose decision is binding."

Under Section 2(1)(a) of the Arbitration and Conciliation Act, 1996 (India), arbitration
means any arbitration, whether or not administered by a permanent arbitral institution.

Black’s Law Dictionary:

"A method of dispute resolution involving one or more neutral third parties who are usually
agreed to by the disputing parties and whose decision is binding."

2. Russell on Arbitration:

"Arbitration is the reference of a dispute or difference between not less than two parties for
determination, after hearing both sides in a judicial manner, by a person or persons other than a
court of competent jurisdiction."

3. Redfern and Hunter on International Arbitration:

"A procedure in which a dispute is submitted, by agreement of the parties, to one or more
arbitrators who make a binding decision on the dispute, in accordance with the rules chosen by
the parties."

4. Halsbury’s Laws of England:

"A process by which a dispute or difference between two or more parties as to their mutual legal
rights and liabilities is referred and determined judicially, with a binding effect, by the
application of law by one or more persons instead of a court of law."

5. Indian Arbitration and Conciliation Act, 1996 (Section 2(1)(a)):

"Arbitration means any arbitration, whether or not administered by a permanent arbitral

institution."

6. Gary Born (Leading Expert in International Arbitration):

"Arbitration is a private dispute resolution mechanism that enables parties to resolve disputes
efficiently, fairly, and with enforceable outcomes, without resorting to national courts."

7. UNCITRAL Model Law on Arbitration (1985):

"Arbitration is a mechanism whereby parties agree to settle disputes outside national courts, with
a binding decision made by one or more independent arbitrators."

2. Key Features of Arbitration

 Voluntary Process: Both parties agree to arbitration through a

contract or post-dispute agreement.
 Neutrality: Arbitrators are impartial and independent.
  Privacy & Confidentiality: Arbitration is conducted in a private
setting, unlike court proceedings.
 Binding Nature: The award is final and enforceable in law.
 Efficiency: It is generally faster and less expensive than litigation.

3. Types of Arbitration

Arbitration can be classified into different types based on jurisdiction, procedure, and
enforceability:

A. Based on Jurisdiction

1. Domestic Arbitration: Both parties are from the same country, and
arbitration is governed by national laws.
2. International Arbitration: When parties belong to different
countries, international arbitration laws such as the UNCITRAL Model
Law apply.

B. Based on Procedure

1. Ad-hoc Arbitration: No institutional involvement; parties decide rules

and appoint arbitrators themselves.
2. Institutional Arbitration: Administered by an arbitration institution
like the International Chamber of Commerce (ICC), London Court
of International Arbitration (LCIA), or the Indian Council of
Arbitration (ICA).

C. Based on Enforceability

1. Binding Arbitration: The decision is final and legally enforceable.

2. Non-binding Arbitration: The decision is advisory and not
enforceable unless parties agree to abide by it.

4. Legal Framework of Arbitration

The legal foundation for arbitration varies by jurisdiction. Some of the key legal frameworks
include:

A. Arbitration and Conciliation Act, 1996 (India)

 Based on the UNCITRAL Model Law on International Commercial

Arbitration (1985).
 Divided into four parts, covering domestic arbitration, international
arbitration, enforcement, and supplementary provisions.
  Section 7 defines an arbitration agreement as a written agreement to
settle disputes through arbitration.

B. The New York Convention (1958)

 Also called the Convention on the Recognition and Enforcement

of Foreign Arbitral Awards.
 Provides a uniform framework for recognizing and enforcing
international arbitral awards in 172 member states.

C. UNCITRAL Model Law on Arbitration

 A model law adopted by many countries to standardize arbitration laws

worldwide.
 Provides principles for arbitration agreements, tribunal composition,
conduct of proceedings, and award enforcement.

5. Arbitration Agreement

An arbitration agreement is a contract in which parties agree to resolve disputes through

arbitration instead of litigation.

Essentials of an Arbitration Agreement

 Written Form: Must be in writing as per Section 7 of the

Arbitration and Conciliation Act, 1996.
 Intent to Arbitrate: Must clearly show parties' consent to arbitration.
 Scope of Disputes: Must specify what types of disputes will be
arbitrated.
 Selection of Arbitrator(s): May specify the process for appointing
arbitrators.

6. Appointment and Role of Arbitrators

A. Appointment of Arbitrators

 Can be appointed by mutual agreement or by an arbitral institution.

 If parties fail to agree, courts or institutions appoint arbitrators.
 Section 11 of the Arbitration and Conciliation Act, 1996 deals
with the appointment process.

B. Role of Arbitrators

 Ensure fair proceedings.

 Interpret contractual terms and apply relevant laws.
  Deliver a reasoned award based on evidence.

7. Arbitration Process
Step 1: Initiation of Arbitration

 A party invokes arbitration by sending a notice of arbitration.

Step 2: Appointment of Arbitrator(s)

 Appointed as per agreement or legal provisions.

Step 3: Preliminary Hearings

 Discuss procedural rules, timelines, and submission of documents.

Step 4: Presentation of Evidence & Arguments

 Each party presents its case through documents, witnesses, and

arguments.

Step 5: Deliberation and Award

 Arbitrator(s) analyze evidence and issue an arbitral award.

Step 6: Enforcement of Award

 Domestic awards are enforced under national law.

 International awards are enforced under the New York Convention.

8. Advantages of Arbitration

1. Speedy Resolution – Faster than court litigation.

2. Cost-Effective – Lower legal fees and administrative costs.
3. Expertise – Arbitrators with industry expertise provide better
adjudication.
4. Confidentiality – Protects business secrets and reputations.
5. Flexibility – Parties can customize procedures.
6. Finality – Limited grounds for appeal ensure closure.

9. Disadvantages of Arbitration

1. Limited Appeals – Errors in law may not be reviewed.

2. High Costs in Complex Cases – Can be expensive in large
commercial disputes.
 3. Risk of Bias – Lack of transparency in some cases.
4. Unequal Bargaining Power – Large corporations may impose
arbitration clauses on weaker parties.

10. Enforcement and Challenges of Arbitral Awards

A. Enforcement of Awards

 Domestic awards are enforced like court judgments under Section 36

of the Arbitration and Conciliation Act, 1996.
 International awards are enforced under the New York Convention.

B. Grounds for Challenging an Award

Under Section 34 of the Arbitration and Conciliation Act, 1996, an arbitral award can be set
aside on grounds such as:

1. Lack of proper notice to one party.

2. Fraud or corruption in the arbitral process.
3. Violation of public policy.
4. Award beyond the scope of arbitration agreement.

Scope of Arbitration

Arbitration is widely used as an alternative dispute resolution (ADR) method in various fields.
Its scope extends to resolving commercial, business, labor, consumer, and international
disputes. The process is legally recognized and governed by arbitration laws in most countries,
making it an effective mechanism for dispute resolution.

1. General Scope of Arbitration

 Dispute Resolution: Arbitration applies to resolving civil disputes

where parties voluntarily agree to settle issues outside court.
 Flexibility: Parties can customize procedures, choose arbitrators, and
set the rules.
 Final and Binding: Arbitral awards are legally enforceable, similar to
court judgments.
 International Recognition: Arbitration is widely accepted under
conventions like the New York Convention (1958), making cross-
border enforcement possible.
2. Scope in Different Areas
A. Commercial and Business Disputes

 Contracts between companies, suppliers, and service providers often

include arbitration clauses.
 Disputes related to breach of contract, partnership issues,
mergers, and acquisitions.
 Arbitration is commonly used in sectors like banking, insurance, and
construction.

B. International Trade and Investment Disputes

 Arbitration is used to resolve disputes between multinational

corporations and foreign governments.
 Investor-State Dispute Settlement (ISDS) under Bilateral
Investment Treaties (BITs) uses arbitration.
 Organizations like the International Chamber of Commerce (ICC)
and London Court of International Arbitration (LCIA) handle
international disputes.

C. Labor and Employment Disputes

 Arbitration is used in employment contracts, industrial disputes,

wrongful termination, and wage disputes.
 Many labor unions and companies use arbitration to resolve workplace
conflicts without strikes or litigation.

D. Consumer Disputes

 Some consumer agreements include arbitration clauses for disputes

related to product liability, defective services, and warranty
claims.
 Online businesses and e-commerce platforms often use arbitration for
customer complaints.

E. Construction and Real Estate Disputes

 Used in infrastructure projects, building contracts, and real

estate transactions.
 Disputes over contract breaches, delays, or project financing are
commonly resolved through arbitration.
F. Maritime and Shipping Disputes

 Arbitration is widely used in maritime trade to resolve conflicts related

to shipping contracts, charter agreements, and cargo claims.
 The London Maritime Arbitrators Association (LMAA) is a key
institution handling such disputes.

G. Sports Arbitration

 The Court of Arbitration for Sport (CAS) resolves international

sports disputes, doping cases, and contract disagreements between
athletes and sports organizations.

3. Legal Scope and Limitations of Arbitration

 Arbitration is governed by national and international laws, such as the

Arbitration and Conciliation Act, 1996 (India) and the UNCITRAL
Model Law on International Commercial Arbitration.
 Some matters cannot be arbitrated, such as criminal cases,
matrimonial disputes, and public interest issues (e.g.,
environmental laws).
 Courts can intervene in arbitration only in specific cases, such as
challenging awards on grounds of fraud or procedural irregularities.

Conclusion

Arbitration covers a wide range of disputes across industries and international borders. It is a
preferred dispute resolution method due to its efficiency, flexibility, and enforceability.
However, it has limitations, as certain disputes still require court intervention.

Arbitration Agreement

An arbitration agreement is a legal contract in which two or more parties agree to resolve their
disputes through arbitration instead of going to court. It ensures that any future or existing
dispute between the parties will be settled by a neutral arbitrator or tribunal, whose decision will
be final and binding.

1. Definition of Arbitration Agreement

 Section 7(1) of the Arbitration and Conciliation Act, 1996

(India):
“An arbitration agreement means an agreement by the parties to
submit to arbitration all or certain disputes which have arisen or which
 may arise between them in respect of a defined legal relationship,
whether contractual or not.”
 UNCITRAL Model Law on Arbitration (1985):
"An agreement by the parties to submit disputes to arbitration,
whether contractual or not, which is in writing."

2. Types of Arbitration Agreements

1. Clause in a Contract (Arbitration Clause)

o Included as part of a larger contract.
o Specifies that any future disputes related to the contract will be
resolved through arbitration.
o Example: “All disputes arising from this contract shall be
resolved through arbitration as per ICC rules.”

2. Separate Arbitration Agreement

o A stand-alone contract signed after a dispute has already arisen.
o Common in commercial and international disputes.
o Example: Two business partners sign an agreement to settle an
ongoing dispute via arbitration.

3. Essential Elements of an Arbitration Agreement

To be valid, an arbitration agreement must include:

✔ Written Form – Must be documented (contract, email, or letter).
✔ Intention to Arbitrate – Clear agreement to settle disputes through arbitration.
✔ Scope of Disputes – Defines which disputes will be subject to arbitration.
✔ Number and Appointment of Arbitrators – Specifies the arbitrator(s) selection process.
✔ Governing Law and Venue – Defines applicable arbitration laws and the arbitration seat
(e.g., ICC arbitration in Singapore).

4. Importance of an Arbitration Agreement

✔ Avoids Litigation – Saves time and costs by avoiding lengthy court proceedings.
✔ Ensures Neutrality – Parties can choose a neutral arbitrator instead of relying on one
country’s court system.
✔ Confidentiality – Arbitration is private, unlike court cases.
✔ Global Enforcement – International arbitration awards are enforceable under the New York
Convention (1958).

5. Legal Validity and Enforcement

 Courts enforce arbitration agreements unless there is fraud, duress,

or illegality.
  If one party refuses to arbitrate, the other party can seek court
intervention to compel arbitration.
 Courts can set aside an arbitration agreement if it involves
disputes that are not legally arbitrable (e.g., criminal cases).

Conclusion

An arbitration agreement is a crucial tool for businesses and individuals seeking a fast, fair, and
enforceable dispute resolution mechanism. It ensures that legal conflicts are handled outside
of court by neutral experts, reducing costs and delays.

Who Can Enter into an Arbitration Agreement?

An arbitration agreement is a contract, so only legally competent parties can enter into it. The
following entities and individuals can enter into an arbitration agreement:

1. Individuals

 Any person who is legally capable of entering into a contract can enter
an arbitration agreement.
 The person must be of legal age (18+ in most countries) and
mentally competent.
 Example: Two business partners agreeing to resolve future disputes
through arbitration.

2. Companies and Corporations

 Companies can include arbitration clauses in their contracts with other

businesses, employees, or customers.
 A company representative (such as a director or CEO) must have the
authority to sign the arbitration agreement on behalf of the company.
 Example: A multinational corporation signing an arbitration agreement
for an international trade dispute.

3. Government and Public Entities

 Governments and public sector organizations can enter into arbitration

agreements, especially in commercial and investment disputes.
 Example: A country signing a Bilateral Investment Treaty (BIT) that
includes arbitration for foreign investor disputes.
 However, some disputes involving public policy or sovereign authority
(like criminal cases or constitutional matters) cannot be
arbitrated.
4. Foreign Entities and International Organizations

 Foreign companies, individuals, and international organizations can

enter into arbitration agreements.
 Arbitration is widely used in cross-border commercial contracts
and investment treaties.
 Example: A foreign investor signing an arbitration agreement with a
host country under ICSID (International Centre for Settlement of
Investment Disputes) rules.

5. Partnerships and Firms

 Partnerships can enter into arbitration agreements if authorized by all

partners or as per the partnership agreement.
 Example: A law firm including an arbitration clause in its contracts with
clients.

6. Legal Representatives and Agents

 A person acting on behalf of another (like a guardian, legal heir,

or attorney) can enter into an arbitration agreement if they have
legal authorization.
 Example: A legal guardian signing an arbitration agreement for a minor
in a contract dispute.

Who Cannot Enter into an Arbitration Agreement?

1. Minors (Below 18 years) – Cannot enter a valid contract unless

represented by a guardian.
2. Persons of Unsound Mind – Those legally declared mentally
incompetent cannot enter into an arbitration agreement.
3. Bankrupt Entities – A company or individual declared insolvent may
not have the legal capacity to sign arbitration agreements.
4. Criminal and Constitutional Matters – Criminal cases, matrimonial
disputes (divorce, child custody), and constitutional matters cannot be
arbitrated.

Conclusion

Any individual or entity with legal capacity to contract can enter into an arbitration agreement.
However, restrictions apply to minors, mentally incompetent persons, and cases involving
criminal law or public policy.
Validity of an Arbitration Agreement

An arbitration agreement is legally valid only if it meets certain essential conditions. If any of
these conditions are missing, the agreement may be unenforceable or void.

1. Essential Conditions for a Valid Arbitration Agreement

✔ Written Agreement – The agreement must be in writing (as per Section 7 of the Arbitration
and Conciliation Act, 1996 and the New York Convention, 1958). It can be in the form of:

 A separate agreement.
 A clause within a contract.
 An exchange of emails, letters, or electronic records showing mutual
consent.

✔ Mutual Consent – Both parties must voluntarily agree to arbitration. If one party was
forced, misled, or deceived, the agreement may be invalid.

✔ Legal Capacity – The parties must have the legal right to enter into an agreement. This
means:

 Individuals must be adults (18+ years) and of sound mind.

 Companies must have proper authorization (e.g., signed by a director
or authorized representative).

✔ Dispute Must Be Arbitrable – The agreement must relate to a dispute that can be settled
through arbitration. Certain disputes cannot be arbitrated, such as:

 Criminal cases (e.g., theft, fraud, murder).

 Matrimonial disputes (e.g., divorce, child custody).
 Matters of public policy (e.g., taxation, constitutional matters).

✔ Clarity in Terms – The agreement should specify key details, such as:

 The scope of disputes covered.

 The appointment of arbitrators.
 The applicable arbitration rules (e.g., ICC, UNCITRAL).
 The seat and venue of arbitration.

✔ Compliance with Law – The agreement must follow the governing laws of the country where
arbitration is to take place. If an arbitration agreement violates any law, it becomes void.

2. When is an Arbitration Agreement Invalid?

❌ Lack of Free Consent – If one party is forced, tricked, or misled into signing the agreement.
❌ Unclear or Ambiguous Terms – If the arbitration clause is vague or does not clearly mention
arbitration.

❌ Agreement Involving Non-Arbitrable Matters – If the dispute involves criminal offenses,

matrimonial disputes, or public policy matters.

❌ Not in Writing – If the arbitration agreement is only verbal, it may not be enforceable.

❌ Contradictory Clauses – If the main contract and arbitration clause contradict each other,
courts may declare it invalid.

3. Legal Enforcement of Arbitration Agreements

 Courts generally enforce valid arbitration agreements and refer

disputes to arbitration.
 If a party refuses arbitration, the other party can approach the court to
compel arbitration.
 If an agreement is invalid, courts will refuse to enforce it, and the
dispute may proceed through litigation.

Conclusion

A valid arbitration agreement must be in writing, clear, legally enforceable, and involve
arbitrable disputes. If any key legal condition is missing, the agreement may be declared void
or unenforceable by a court.

Legal Enforcement of an Arbitration Agreement

An arbitration agreement is legally enforceable, meaning courts can compel parties to resolve
disputes through arbitration instead of litigation. The enforcement depends on national laws and
international treaties, ensuring arbitration agreements and awards are respected worldwide.

1. Enforcement Under National Laws

A. India: Arbitration and Conciliation Act, 1996

 Section 8: If a valid arbitration agreement exists, courts must refer

the dispute to arbitration if one party tries to file a lawsuit instead.
 Section 11: Courts can appoint an arbitrator if parties fail to do so as
per the agreement.
 Section 34: Courts can only set aside an arbitral award on limited
grounds (e.g., fraud, bias, procedural irregularity).
B. United States: Federal Arbitration Act (FAA), 1925

 Strongly favors arbitration and compels courts to enforce arbitration

agreements.
 Prevents parties from bypassing arbitration by filing lawsuits.

C. United Kingdom: Arbitration Act, 1996

 Courts must stay legal proceedings if a valid arbitration agreement

exists (Section 9).
 Recognizes arbitration awards as binding and enforceable.

D. Other Countries

 Many countries have adopted arbitration laws based on the UNCITRAL

Model Law on International Commercial Arbitration (1985),
ensuring global enforcement.

2. International Enforcement of Arbitration Agreements

A. New York Convention (1958) – 172 Countries

 Requires courts in signatory countries to recognize and enforce

arbitration agreements and awards.
 A party can seek enforcement of an arbitral award in any member
country.
 Courts can refuse enforcement only on limited grounds (e.g., invalid
agreement, procedural unfairness, public policy violations).

B. ICSID Convention (1965) – Investor-State Disputes

 Protects foreign investors by enforcing arbitration agreements between

governments and investors.
 Awards are binding on signatory states without needing further court
approval.

C. UNCITRAL Model Law

 Provides a uniform legal framework for arbitration, adopted by

many countries.
3. How Arbitration Agreements Are Enforced?

✔ Compelling Arbitration: If one party refuses arbitration, the other party can ask the court to
enforce the arbitration clause and stop the lawsuit.

✔ Appointment of Arbitrators: If the agreement does not specify an arbitrator, courts can step
in and appoint one.

✔ Enforcing Arbitral Awards: Once arbitration is completed, the award can be enforced in
national or international courts if the losing party does not comply.

✔ **Challenging an Award

Legal Enforcement of an Arbitration Agreement in India

In India, arbitration agreements and awards are legally enforceable under the Arbitration and
Conciliation Act, 1996 (amended in 2015, 2019, and 2021). The law is based on the
UNCITRAL Model Law and ensures that arbitration agreements are upheld and arbitral awards
are binding.

1. Enforcement of Arbitration Agreements in India

A. Section 8 – Compulsory Referral to Arbitration

 If a valid arbitration agreement exists and one party files a lawsuit, the
court must refer the dispute to arbitration.
 The party seeking arbitration must request the referral before
submitting its first statement in court.
 The court cannot refuse arbitration unless the agreement is null, void,
inoperative, or incapable of being performed.

B. Section 11 – Appointment of Arbitrators

 If parties fail to appoint an arbitrator as per their agreement, the

Supreme Court (for international arbitration) or High Court (for
domestic arbitration) can appoint arbitrators.

C. Section 45 – Enforcement in International Arbitration

 If an arbitration agreement falls under the New York Convention

(1958), Indian courts must enforce it unless the agreement is
invalid or incapable of being performed.
2. Enforcement of Arbitral Awards in India

Once an arbitral award is passed, it must be enforced like a court judgment.

A. Domestic Arbitral Awards (Section 36)

 Domestic awards are enforced like decrees of a civil court under the
Civil Procedure Code (CPC), 1908.
 The winning party can file for execution of the award in court.
 The losing party cannot challenge the award except on limited
grounds under Section 34 (e.g., fraud, bias, violation of natural
justice).

B. Foreign Arbitral Awards (Section 44-49 – New York Convention & Section
53-60 – Geneva Convention)

 Foreign arbitral awards under the New York Convention (1958) or

Geneva Convention (1927) are enforceable in India.
 The winning party must apply to a High Court for enforcement.
 The award can only be refused enforcement if:
1. The arbitration agreement was invalid.
2. The award was not binding on the parties.
3. The arbitration was conducted without proper notice to one
party.
4. The award violates Indian public policy (e.g., fraud, corruption,
fundamental unfairness).

3. Judicial Support and Limited Court Intervention

 Courts in India support arbitration by enforcing agreements and awards, with minimal
interference.
 However, under Section 34, courts can set aside an arbitral award only on specific
grounds, such as:
o Lack of proper notice to a party.
o Violation of public policy.
o Arbitrator bias.

 The Supreme Court of India has emphasized in multiple cases (e.g., BALCO v. Kaiser
Aluminium, Amazon v. Future Group) that arbitration should be respected and
enforced strictly.
4. Challenges in Enforcement

 Delays in Indian courts during enforcement proceedings.

 Some awards are challenged under public policy grounds, leading to
litigation.
 The need for better awareness and efficiency in enforcement
mechanisms.

5. Conclusion

India has a strong legal framework for enforcing arbitration agreements and awards. Courts are
required to refer disputes to arbitration and enforce awards, whether domestic or international.
While challenges exist, India continues to evolve as a pro-arbitration jurisdiction.

Reference to Arbitration in India

In India, courts are required to refer disputes to arbitration when there is a valid arbitration
agreement. This principle is upheld under the Arbitration and Conciliation Act, 1996 and the
Civil Procedure Code, 1908 (CPC).

1. Reference to Arbitration Under the Arbitration and

Conciliation Act, 1996
A. Reference to Arbitration in Domestic Disputes – Section 8

✔ Mandatory Reference by Courts

 If a dispute arises in a case where the parties have a valid arbitration

agreement, the court must refer the matter to arbitration.
 The reference must be made before the first statement on the
substance of the dispute is filed in court.
 Courts cannot refuse reference unless the arbitration agreement is
null, void, inoperative, or incapable of being performed.

✔ Key Case Law:

 Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. (2011) – The
Supreme Court ruled that courts must refer disputes to arbitration if
they are covered by a valid arbitration agreement.
  Vidya Drolia v. Durga Trading Corporation (2020) – Supreme Court
clarified that the courts have a limited role in deciding the validity of
an arbitration agreement at the reference stage.

B. Reference to Arbitration in International Disputes – Section 45

✔ When Does Section 45 Apply?

 When an arbitration agreement falls under the New York Convention

(1958).
 The Indian courts must refer the matter to arbitration unless the
agreement is invalid, incapable of performance, or void.

✔ Key Case Law:

 Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. (2005) – The

Supreme Court ruled that courts should only refuse reference in
international arbitration if the agreement is clearly invalid.

2. Reference to Arbitration Under Section 89 of CPC, 1908

✔ Court’s Power to Refer Disputes for Alternative Dispute Resolution (ADR)

 Even when there is no pre-existing arbitration agreement, the court

can refer the parties to arbitration if both parties agree under Section
89 of the CPC.
 This applies mainly in commercial disputes and civil matters
where parties are open to arbitration as a resolution method.

✔ Key Case Law:

 Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (2010) –

The Supreme Court held that courts can encourage arbitration but
cannot force parties into arbitration without consent under Section 89
CPC.

3. When Courts Will Not Refer to Arbitration

Even if an arbitration agreement exists, courts will not refer a dispute to arbitration if:
❌ The dispute is non-arbitrable

 Criminal cases (e.g., fraud, theft, murder).

 Matrimonial disputes (e.g., divorce, child custody).
 Insolvency or bankruptcy cases.
 Public policy issues (e.g., taxation, environmental law).

❌ The arbitration agreement is invalid

 If the agreement is fraudulent, unclear, or forged, courts will not

enforce it.

❌ One party has already accepted the court’s jurisdiction

 If a party actively participates in the court proceedings without

invoking the arbitration clause, they may lose the right to arbitration.

4. Conclusion
 Section 8 of the Arbitration and Conciliation Act makes it
mandatory for courts to refer disputes to arbitration in domestic cases.
 Section 45 enforces the same rule for international arbitration
agreements under the New York Convention.
 Courts can also refer disputes under Section 89 of the CPC, but only
if both parties agree.
 Non-arbitrable disputes (criminal, matrimonial, insolvency, public
policy) cannot be referred to arbitration.

Interim Measures by Indian Courts in Arbitration

Introduction

Interim measures are temporary reliefs granted by courts or arbitral tribunals to protect the
rights and interests of parties before the final resolution of the dispute. In India, interim
measures in arbitration are governed by the Arbitration and Conciliation Act, 1996 (as
amended in 2015 and 2019).

This document provides a detailed 10-page discussion on the interim measures granted by
Indian courts in arbitration, covering legal provisions, case laws, and practical applications.
1. Meaning and Importance of Interim Measures
A. Meaning of Interim Measures

Interim measures are temporary reliefs that aim to:

 Preserve assets.
 Maintain the status quo.
 Prevent injustice before the final arbitral award is passed.

B. Importance of Interim Measures

 Protects the interests of parties during the arbitration process.

 Prevents one party from taking unfair advantage (e.g., selling disputed
property).
 Ensures effective enforcement of the final award.

2. Legal Provisions for Interim Measures by Indian Courts

The Arbitration and Conciliation Act, 1996 provides for interim measures under:

A. Section 9 – Interim Measures by Courts

 Before the start of arbitration.

 During the arbitration process.
 After the arbitral award, but before its enforcement.

B. Section 17 – Interim Measures by Arbitral Tribunals

 The arbitral tribunal can grant interim relief after arbitration has
begun.
 The scope of Section 17 is similar to Section 9.

C. Section 27 – Court Assistance in Taking Evidence

 Courts can assist the arbitral tribunal in obtaining evidence or witness

testimony.
3. Types of Interim Measures Under Section 9
Indian courts can grant the following types of interim reliefs:

A. Securing the Amount in Dispute

 If a party fears that the other party may hide or transfer assets, the
court can direct the deposit of money to secure the claim.
 Example: If a contractor claims ₹5 crore in arbitration, the court may
order the other party to deposit ₹5 crore as security.

B. Preservation of Property

 Courts can order that disputed property or assets cannot be sold,

transferred, or destroyed until the arbitration is over.
 Example: If land ownership is disputed, the court may freeze its sale.

C. Injunctions (Restraining Orders)

 Courts can restrain a party from taking actions that could affect the
arbitration.
 Example: Preventing a company from terminating a contract unfairly.

D. Appointment of a Receiver

 If necessary, the court may appoint a receiver or administrator to

manage disputed assets.
 Example: In a company dispute, the court may appoint a temporary
manager to oversee operations.

E. Other Protective Measures

 Any other relief necessary to protect the arbitration process.

4. When Can Courts Grant Interim Measures?

The Supreme Court has laid down key principles for granting interim relief:

✔ Urgency – The applicant must prove that without interim relief, irreparable harm will occur.
✔ Balance of Convenience – The court will compare the hardships faced by both parties.
✔ Prima Facie Case – The applicant must show that they have a strong legal claim.
✔ Irreparable Injury – If monetary compensation cannot fix the harm, the court may grant
relief.

✔ Key Case Law: Sundaram Finance Ltd. v. NEPC India Ltd. (1999)

 The Supreme Court ruled that Section 9 interim measures can be

granted even before arbitration begins if the dispute is genuine.

5. Difference Between Section 9 and Section 17 Interim

Measures
✔ Key Case Law: Alka Chandewar v. Shamshul Ishrar Khan (2017)

 The Supreme Court ruled that Section 17 orders by arbitral

tribunals are enforceable like court orders.

6. Enforcement of Interim Orders in India

After the 2015 amendment, orders under Section 17 (by arbitral tribunals) are enforceable like
court orders. However, before the amendment, parties had to approach the courts separately for
enforcement.

✔ Key Case Law: Avitel Post Studioz Ltd. v. HSBC PI Holdings (2020)

 The Supreme Court held that interim measures help protect

arbitration and prevent misuse by dishonest parties.

7. Interim Measures in Foreign Seated Arbitration

For arbitrations conducted outside India:

 Before the 2015 amendment: Indian courts could grant interim

relief under Section 9.
 After the 2015 amendment: Indian courts cannot grant interim
relief unless the arbitration agreement specifically allows it.

✔ Key Case Law: Bhatia International v. Bulk Trading SA (2002)

 Allowed Section 9 relief in foreign-seated arbitration.

✔ Key Case Law: BALCO v. Kaiser Aluminium (2012)

 Overruled Bhatia International, stating that Indian courts do not

have jurisdiction over foreign-seated arbitrations unless
explicitly mentioned in the contract.

8. Challenges in Granting Interim Relief

 Misuse of Section 9: Some parties file unnecessary applications to
delay arbitration.
 Delays in Court Proceedings: Even though arbitration is meant to
be fast, courts take time to grant relief.
 Enforcement Issues: Despite legal provisions, enforcement of arbitral
tribunal orders can be problematic.

✔ Suggested Reforms:

 Establish dedicated arbitration courts for faster interim relief.

 Strict penalties for misuse of Section 9 applications.

9. Conclusion
 Section 9 allows courts to grant interim relief before, during, and
after arbitration.
 Section 17 gives the arbitral tribunal similar powers, which are now
enforceable like court orders.
 Indian courts have played a crucial role in protecting arbitration by
granting timely interim relief.
 Recent amendments and judgments have strengthened arbitration in
India, ensuring faster and more effective dispute resolution.

Final Thought

Interim measures play a vital role in arbitration by ensuring fairness, protecting assets, and
preventing injustice. The Indian judiciary continues to evolve in its approach, making
arbitration a stronger and more reliable dispute resolution mechanism.
Conclusion

 Arbitration is an effective mechanism for dispute resolution that offers speed,

confidentiality, and expertise while reducing the burden on courts. It is widely used in
commercial, labor, and international disputes. However, it also has challenges like high
costs and limited appeal rights. Countries worldwide continue to refine arbitration laws to
enhance fairness, efficiency, and enforceability.