SC asks Ministry of Law and Justice to take a serious look at the arbitration regime prevailing in India

The Supreme Court on Friday called on the Ministry of Law and Justice to take a serious look at the arbitration regime prevailing in India and bring about necessary changes while the Arbitration and Conciliation Bill 2024 is still being considered.

It said that it is indeed very “sad” to note that even after so many years, procedural issues with regard to the Arbitration and Conciliation Act, 1996, have continued to plague the arbitration regime of India.

While expressing strong disapproval over the continued absence of statutory clarity on the power of arbitral tribunals to implead non-signatories to the arbitration agreements, it said what is expressly missing in the Arbitration and Conciliation Act 1996 is still missing in the 2024 Bill, despite a catena of decisions by the apex court and various high courts, a Bench comprising a bench of Justices J.B. Pardiwala and R. Mahadevan said.


"Unfortunately, even the new Bill has taken no steps whatsoever, for ameliorating the position of law as regards the power of impleadment or joinder of an arbitral tribunal,” it said while highlighting the need for statutory recognition of such power in order to obviate all possibilities of confusion.”

The court noted the Arbitration Act was the first legislative enactment that dealt with arbitration that came into force in 1940.

Fifty years, later, this legislation was replaced by the Arbitration and Conciliation Act, 1996. It has been almost, thirty-years, since the Act, 1996 has remained in force. Various amendments to the Act, 1996 have been made over the years so as to ensure that arbitration proceedings are conducted and concluded expeditiously.
“For arbitration to remain a viable and effectively alternative mechanism for dispute resolution, it is imperative to ensure that commercial reality does not outgrow this mechanism. The mechanisms of arbitration must be sufficiently elastic to accommodate the complexities of multi-party and multi-contract arrangements without compromising foundational principles such as consent and party autonomy," the bench said.

The approach of courts and arbitral tribunal in particular must be responsive to the emerging commercial practices and expectations of the parties who submit themselves to it, the bench added.

The observations were made in a judgment which dismissed a party’s appeal to implead it as a party in the arbitral proceedings despite it being a non-signatory to the arbitration agreement.