Running an arbitration from the clause to the challenge

Section 7(1) defines an arbitration agreement as an agreement to submit to arbitration all or certain disputes that have arisen or may arise in respect of a defined legal relationship, whether contractual or not. It may be a clause in a contract or a separate agreement, and section 7(3) requires it to be in writing. Section 7(4) treats it as written if it is in a document signed by the parties, in an exchange of letters or other telecommunication including electronic communication that records the agreement, or in an exchange of statements of claim and defence where one side alleges the agreement and the other does not deny it. Under section 7(5), a contract that refers to a document containing an arbitration clause incorporates it, if the contract is in writing and the reference makes the clause part of the contract.

A party that did not sign can still be bound. The Constitution Bench in Cox and Kings Ltd. v. SAP India Pvt. Ltd. (2024) 4 SCC 1 held that the group of companies doctrine has an independent existence in Indian arbitration law, resting on sections 2(1)(h) and 7, and binds a non-signatory where the mutual intention of the parties shows through conduct and the surrounding circumstances. The referral court makes only a prima facie assessment and leaves the harder joinder questions to the tribunal.

A clause that will work in practice names the seat, the number of arbitrators and how they are appointed, and the rules, if any, of an institution. The guide on seat and institution in this hub covers that choice. A clause that lets one side alone name the sole arbitrator invites an application under section 11 and an objection under section 12(5).

Where one party sues on a matter covered by the arbitration agreement, the other applies under section 8(1) not later than the date of submitting its first statement on the substance of the dispute. The judicial authority shall refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. Section 8(2) requires the application to be accompanied by the original arbitration agreement or a duly certified copy, and the proviso covers the case where the other side holds the original. Section 8(3) lets the arbitration begin or continue, and an award be made, while the application is pending.

Where the agreed appointment procedure fails, section 11 takes over. With three arbitrators, if a party does not appoint within thirty days of a request, or the two appointees cannot agree on the third within thirty days, the appointment is made on request. With a sole arbitrator, the trigger is a failure to agree within thirty days of a request. Section 11(12)(b) sends a domestic arbitration to the High Court within whose local limits the principal civil court lies, and an international commercial arbitration goes to the Supreme Court under section 11(12)(a). Section 11(6A) confines the court to the examination of the existence of an arbitration agreement, and section 11(13) asks for disposal within sixty days from service of notice on the other side.

Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1 held that review at the section 8 and section 11 stage is limited to the existence and prima facie validity of the arbitration agreement, that the tribunal is ordinarily the first authority to decide non-arbitrability, and that the court interferes at the referral stage only where non-arbitrability or non-existence is manifestly clear. SBI General Insurance Co. Ltd. v. Krish Spinning (2024) 12 SCC 1 applied that line to a discharge voucher: a plea of accord and satisfaction does not bar the reference and is for the arbitrator to decide.

Vidya Drolia left one narrow opening for a claim that is already dead. Section 43(1) of the 1996 Act applies the Limitation Act, 1963 to arbitrations as it applies to court proceedings, and under section 21 the proceedings in respect of a particular dispute begin, unless the parties agree otherwise, on the date the request that the dispute be referred to arbitration is received by the respondent, so the ordinary rule is that the tribunal decides limitation on the facts found and the law applicable. The court at the referral stage interferes only where it is manifest that the claims are ex facie time-barred and dead, or that there is no subsisting dispute, and the same approach governs a disputed no-claim certificate or a plea of novation and accord and satisfaction. In Elfit Arabia v. Concept Hotel Barons Ltd., 2024 INSC 536 a three-Judge Bench applied that exception and dismissed a petition under section 11(6) where the notice invoking arbitration was issued eleven years after the cause of action, since a reference would have compelled the parties to arbitrate a deadwood claim.

Section 12(1) requires a person approached for appointment to disclose in writing any past or present relationship with, or interest in, the parties or the subject matter that is likely to give rise to justifiable doubts as to independence or impartiality, and anything likely to affect the ability to complete the arbitration within twelve months. The Fifth Schedule guides whether such doubts exist and the disclosure is made in the form in the Sixth Schedule. Under section 12(3), an arbitrator may be challenged only for justifiable doubts as to independence or impartiality or for lacking the qualifications the parties agreed.

Under section 12(5), a person whose relationship with the parties, counsel or the subject matter falls in a category in the Seventh Schedule is ineligible, notwithstanding any prior agreement, and the only cure is an express agreement in writing made after the dispute has arisen. The Seventh Schedule's categories include an arbitrator who is an employee, consultant or adviser of a party, or who currently represents or advises a party or its affiliate.

In Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) [2024] 11 S.C.R. 2173 the Constitution Bench held that a clause allowing a party with an interest in the dispute to appoint a sole arbitrator unilaterally, or to curate a panel and require the other side to choose from it, is not valid, that equal treatment under section 18 applies at the appointment stage, and that in a public-private contract a unilateral appointment by the government entity violates Article 14. The ruling on three-member tribunals applies to appointments made after the judgment.

Section 9(1) allows a party to apply to the court before or during the arbitral proceedings, or after the award but before it is enforced under section 36, for interim measures: preservation, custody or sale of goods, securing the amount in dispute, detention, preservation or inspection of property, an interim injunction or a receiver, or any other measure the court finds just and convenient. If the court grants a measure before the arbitration begins, section 9(2) requires the arbitral proceedings to be commenced within ninety days from the order or such further time as the court allows. Once the tribunal is constituted, section 9(3) bars the court from entertaining a section 9 application unless the remedy under section 17 may not be efficacious.

Section 17(1) gives the tribunal the same list of measures during the proceedings, with the same power for making orders as the court has. Section 17(2) deems the tribunal's order to be an order of the court for all purposes, enforceable under the Code of Civil Procedure, 1908, subject to an appeal under section 37. The interim relief guide in this hub explains how the court tests an application for an injunction.

Section 16(1) lets the tribunal rule on its own jurisdiction, including objections to the existence or validity of the arbitration agreement, and treats the arbitration clause as independent of the rest of the contract. A plea that the tribunal lacks jurisdiction must be raised not later than the statement of defence, and a plea that it is exceeding its authority as soon as the matter is raised, though the tribunal may admit a later plea if the delay is justified. If the tribunal rejects the plea, section 16(5) requires it to continue and make an award, and section 16(6) leaves the aggrieved party to raise the point under section 34. If it accepts the plea, section 37(2)(a) gives an appeal to the court.

Section 18 requires the parties to be treated with equality and each to be given a full opportunity to present its case. Section 19(1) frees the tribunal from the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872. The Evidence Act has since been repealed by section 170 of the Bharatiya Sakshya Adhiniyam, 2023, and section 1(2) of the Adhiniyam says it does not apply to proceedings before an arbitrator, so the position is the same under the new law. Subject to Part I, the parties may agree on procedure, and failing that the tribunal conducts the proceedings as it thinks appropriate, including deciding admissibility, relevance, materiality and weight of evidence.

Section 29A(1) requires the award in an arbitration other than an international commercial arbitration to be made within twelve months from the date of completion of pleadings under section 23(4); in an international commercial arbitration the tribunal endeavours to finish within the same period. The parties may by consent extend that by not more than six months, which is why the provision and the cases speak of twelve or eighteen months. Section 29A(4) terminates the mandate if the award is not made within the specified period unless the court has extended the period either before or after its expiry, on an application under section 29A(5) and only for sufficient cause. In Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd., 2024 INSC 686 the Court held that the termination is conditional on no extension application being made, that the court may extend after the twelve or eighteen months have run out, and that the mandate continues while an application under section 29A(5) is pending. While extending, the court may reduce the arbitrator's fees by up to five per cent for each month of delay attributable to the tribunal, after hearing the arbitrator, and may substitute one or all of the arbitrators; section 29A(9) asks for the application to be disposed of within sixty days from service of notice on the other side.

Section 31 requires the award to be in writing and signed, with the majority's signatures sufficing if the reason for any omitted signature is stated. It must state its reasons unless the parties agreed otherwise or it is an award on agreed terms, and it must state its date and the place of arbitration. A signed copy goes to each party, and the date of receipt matters because the limitation for a challenge runs from it. Section 31(7) governs interest on the sum awarded, which the costs and interest guide in this hub covers.

Section 34(2)(a) lets the court set aside an award if the applicant establishes, on the record of the tribunal, incapacity, an invalid agreement, lack of proper notice or inability to present its case, an award beyond the scope of the submission, or a composition or procedure not in accordance with the agreement. Under section 34(2)(b) the court may also set aside an award on a non-arbitrable subject matter or one in conflict with the public policy of India, which Explanation 1 limits to fraud or corruption, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of morality or justice. Explanation 2 says the fundamental policy test does not entail a review on the merits. Section 34(2A) adds patent illegality appearing on the face of the award, for awards other than in international commercial arbitrations, but an erroneous application of the law or reappreciation of evidence is not enough.

Ssangyong Construction Co. Ltd. v. National Highways Authority of India (2019) 15 SCC 131 set aside a majority award that applied a circular unilaterally and substituted a new price adjustment formula for the one in the contract, holding that this created a new contract without consent and that the appellant had been unable to present its case. Gayatri Balasamy v. ISG Novasoft Technologies Ltd. [2025] 4 S.C.R. 2080 held that a court under section 34 or section 37 cannot modify an award except to correct clerical, computational or typographical errors, though it may sever the invalid part.

The perversity cases turn on their own facts. In Anglo American Metallurgical Coal Pty Ltd. v. MMTC Ltd., 2020 SCC OnLine SC 944 the Court restored a majority award it found to be a possible view on the correspondence between the parties, and said of Ssangyong and the other decisions in that line that each was an application of the Associate Builders test to the facts of that case.

Section 34(3) fixes three months from receipt of the award, or from disposal of a section 33 request for correction, extendable by thirty days for sufficient cause and not thereafter. Section 34(5) requires prior notice to the other party with an affidavit of compliance, and section 34(6) asks for disposal within one year from service of that notice. Under section 36(2) the filing of the application does not by itself make the award unenforceable; a separate stay application is needed, and section 36(3) has the court apply the Code's rules on staying a money decree. Where the court finds a prima facie case that the agreement or the award was induced by fraud or corruption, it shall stay the award unconditionally. Section 37 lists the orders that can be appealed, and no second appeal lies.

Part III of the 1996 Act, sections 61 to 81, has provided for conciliation. The Sixth Schedule to the Mediation Act, 2023 substitutes those sections so that a reference to conciliation in any enactment, and conciliation under the 1996 Act and the Code of Civil Procedure, is construed as mediation under the 2023 Act, with a saving for conciliation proceedings already begun. A party that wants a negotiated outcome before or alongside the reference should look at the mediation provisions, and for a commercial dispute of Specified Value at section 12A of the Commercial Courts Act, covered in the commercial suits guide in this hub.