India: A Dispute Resolution: Arbitration Overview

Introduction

India has moved away from its socialist policies of the 1990s and progressively embraced economic reforms, leading to sustained economic growth and robust foreign investment, with India consistently being among the leading FDI destinations. The World Bank’s 2025 Report on Global Economic Prospects identifies India as having the “fastest growth rate among the world’s largest economies”, and government data shows that FDI in India grew by 14% in FY 2024–25.

Judicial System

India is a vast and diverse jurisdiction in every way imaginable. Politically, India has a quasi-federal structure. The judiciary, however, is unified and broadly has a three-tier structure. Each administrative district (of which there are more than 600) is headed by a district court, and each state by a High Court. There are 25 High Courts in total, with some states sharing a High Court, such as Punjab and Haryana. At the apex is the Supreme Court of India, situated in New Delhi.

The language of all High Courts and the Supreme Court is English. Some High Courts, however, like those in Rajasthan, Madhya Pradesh and Bihar, allow parallel use of Hindi as their official language.

Beside the regular courts, there are a large number of judicial tribunals. The significant ones include the National Company Law Tribunal, the Competition Commission, the Consumer Protection Courts and the Debt Recovery Tribunals (for claims by any bank or financial institution against debtors).

All significant commercial laws are derived from English common law and are applied across India. English common law is routinely referred to and relied upon by the Indian courts.

Judiciary and Judicial Delays

India’s judiciary is robust, independent and unbiased vis-à-vis foreign companies. However, there is a huge problem with judicial delays and poor case management. Court proceedings can be frustratingly long and expensive, compounded by the fact that Indian courts do not grant realistic costs. Therefore, it is of utmost importance to incorporate an arbitration agreement in all commercial contracts.

Indian Arbitration Act

India was a frontline jurisdiction in laying the foundation of modern-day arbitration, as evidenced by it being one of the handful of (six) Asian nations to sign the Geneva Convention of 1927. Later, it was among the ten original signatories to the New York Convention and the fourth to ratify said Convention, in July 1960.

In January 1996, India completely recast its arbitration laws with a new statute. The Indian Arbitration Act, 1996 (the “Arbitration Act”) is based on the 1985 Model Law and the UNCITRAL Rules of 1976, and is therefore in sync with international arbitration jurisprudence. Being mindful of court delays, the Arbitration Act keeps court interventions to a bare minimum. An approach to a court is permitted in a few situations, including for:

• interim or injunctive relief prior to constitution of the tribunal;
• the appointment of an arbitrator (if the parties’ stipulated mechanism fails); or
• court assistance in taking evidence (if so requested by the arbitral tribunal).

Any other court recourse (including a challenge on the ground of bias or lack of jurisdiction) is back-ended to once the award has been rendered.

The Act has two main parts:

• Part I applies if any arbitration is seated in India, irrespective of the parties’ nationality; and
• Part II provides for the enforcement of foreign awards.

Certain provisions of Part I can be resorted to even for a foreign-seated arbitration, including Section 9 (recourse to a court for an injunctive or interim relief) and Section 27 (court assistance in taking evidence at the request of the tribunal).

International arbitration

The Act confers certain advantages on an arbitration considered to be an “international commercial arbitration”. The chief benefit is that the grounds to challenge an award in an international commercial arbitration are narrower than those available for a domestic arbitration. A domestic party’s award is capable of being challenged on the ground of “patent illegality”, but not on the merits of the dispute. This ground is not available in relation to an international commercial arbitration.

However, an arbitration is not considered to be an “international commercial arbitration” merely because a party is owned or controlled from outside India. If the entity is incorporated in India, it is deemed to be an Indian entity, and its arbitration is not an international commercial arbitration. At the same time, if only one party is incorporated outside India or if an individual is a foreign citizen or normally resides outside India, the arbitration qualifies as an international commercial arbitration.

Seat

In India, seat designation is critical, as it determines which court will have jurisdiction in relation to the arbitration.

It is important to specify not only the country (as that can be vague in a large jurisdiction like India) but also the city where the arbitration will be seated. Sometimes, parties unwittingly agree to a seat that is distinctly disadvantaged. For instance, parties may designate a commercially unsophisticated city, or a jurisdiction where the relevant court is the district court (and not the High Court) or where the official language is not English. The seat need not have any connection to the location of the parties or where the cause of action may arise.

Overall, Delhi and Mumbai have a distinctive advantage over others when it comes to selection of the seat.

Recent trends

India is a large and diverse jurisdiction, and the judges are not all uniform in their approach, which has impeded the smooth working of the Act. Legislative intervention was made in 2015 by a comprehensive set of amendments putting some controversial judgments to rest. Further refinements to the Act were made in 2019 and 2021, but some amendments were hasty and have not yet been brought into force (although they remain on the statute book). The government is currently considering a fresh round of amendments to iron out the creases.

Conclusion

There are several factors in India that give comfort to foreign litigants. India has an English-speaking Bar and sophisticated legal talent. Its commercial laws and legal traditions are based on and derived from the English system and are familiar to the international legal community. The courts are independent and robust.

At the same time, India needs to tackle the problem of judicial delays.