Chapter 1: Historical Overview
Brief History of Arbitration in India
Arbitration in India has its roots in traditional dispute resolution mechanisms like village elders and ‘panchayats.’ The formal codification of arbitration law in India began under British rule with the Indian Arbitration Act of 1899, which was limited to the Presidency Towns of Calcutta, Bombay, and Madras. The Code of Civil Procedure, 1908 (Second Schedule) extended the law to other states.
The Arbitration Act of 1940 was a significant milestone, consolidating domestic arbitration law. It was based on the English Arbitration Act of 1934. The Act was criticized for being outdated and not in tune with the changing business environment, leading to the enactment of the Arbitration and Conciliation Act, 1996. This Act was modeled after the UNCITRAL Model Law on International Commercial Arbitration, 1985, and aimed to make arbitration a more effective method of dispute resolution.
In this context, the Supreme Court in BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, emphasized the significance of the 1996 Act in bringing Indian arbitration law in line with international standards1.
Changes in the Regime
The Arbitration and Conciliation Act, 1996, underwent several amendments to adapt to the changing business environment and global standards. The Act was initially lauded for its modern approach but soon faced criticism for not keeping pace with international standards. Indian courts were often criticized for excessive intervention in arbitration matters.
The Supreme Court in Reliance Industries v. Union of India, AIR 2014 SC 3218, highlighted the need for minimal judicial intervention, which was further emphasized by the Arbitration and Conciliation (Amendment) Act, 20152, and the Arbitration and Conciliation (Amendment) Act, 20193.
Difference between 1940 and 1996 Acts
The Arbitration Act of 1940 was primarily focused on domestic arbitration and was based on the English Arbitration Act of 1934. The Arbitration and Conciliation Act, 1996, on the other hand, is more comprehensive and is modeled after the UNCITRAL Model Law. It not only covers domestic arbitration but also international commercial arbitration and conciliation.
The landmark judgment of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 5521, drew a clear distinction between the two Acts, stating that the 1996 Act is more aligned with international arbitration norms.
