Arbitration and Conciliation Act, 1996: Key Provisions and Recent Amendments

This article is for educational and legal awareness purposes only. It does not constitute legal advice or solicitation. Please consult a qualified advocate for advice on specific legal matters.

Introduction

The Arbitration and Conciliation Act, 1996 (Act No. 26 of 1996) is India’s principal legislation governing arbitration, conciliation, and enforcement of foreign arbitral awards. Enacted to consolidate and modernise the law relating to domestic and international commercial arbitration, the Act replaced the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961. It is modelled substantially on the UNCITRAL Model Law on International Commercial Arbitration, 1985, and the UNCITRAL Conciliation Rules, 1980.

Since its enactment, the Act has been amended three times — in 2015, 2019, and 2021 — each addressing concerns about delays, arbitrator independence, institutional arbitration, and India’s standing as an arbitration-friendly jurisdiction.

Structure of the Act

The Act is divided into four Parts:

Part I (Sections 2–43): Governs domestic arbitration and international commercial arbitration seated in India. It covers the arbitration agreement, composition of the tribunal, conduct of proceedings, making of awards, recourse against awards, and enforcement.
Part II (Sections 44–60): Deals with enforcement of certain foreign awards. Chapter I covers awards under the New York Convention (Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958). Chapter II covers awards under the Geneva Convention (Geneva Protocol on Arbitration Clauses, 1923 and Geneva Convention on the Execution of Foreign Arbitral Awards, 1927).
Part III (Sections 61–81): Contains provisions on conciliation as an alternative dispute resolution mechanism.
Part IV (Sections 82–86): Contains supplementary provisions.

Arbitration Agreement — Section 7

Section 7 defines an “arbitration agreement” as an agreement by the parties to submit to arbitration all or certain disputes that have arisen or may arise between them in respect of a defined legal relationship, whether contractual or not. The agreement must be in writing. It is deemed to be in writing if it is contained in:

A document signed by the parties;
An exchange of letters, telex, telegrams, or other means of telecommunication providing a record of the agreement; or
An exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

A reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement, provided the reference is such as to make that clause part of the contract. The arbitration agreement may be in the form of a separate agreement or a clause within a contract.

Appointment of Arbitrators — Section 11

Section 11 lays down the procedure for appointment of arbitrators. The parties are free to agree on a procedure. Failing any agreement:

In an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within 30 days of a request, the appointment is made by the Supreme Court (in international commercial arbitrations) or the High Court (in domestic arbitrations) or any person or institution designated by such court.
In an arbitration with three arbitrators, each party appoints one arbitrator, and the two appointed arbitrators appoint the third (presiding) arbitrator. If a party fails to appoint within 30 days, or the two arbitrators fail to agree on the third within 30 days, the court makes the appointment.

The 2015 Amendment introduced significant changes to Section 11 by requiring courts to confine their examination to the existence of an arbitration agreement when considering an application for appointment of an arbitrator.

Independence and Impartiality — Section 12 and the Fifth and Seventh Schedules

The 2015 Amendment substantially overhauled Section 12 to strengthen independence and impartiality requirements for arbitrators:

Section 12(1): Requires a prospective arbitrator to disclose in writing any circumstances likely to give rise to justifiable doubts as to their independence or impartiality. This is a continuing obligation throughout the proceedings.
Fifth Schedule: Enumerates grounds giving rise to justifiable doubts about an arbitrator’s independence or impartiality — including past or present relationships with the parties, financial or business interests, and prior involvement in the dispute.
Seventh Schedule: Lists categories of relationships that render a person ineligible to be appointed as arbitrator. Section 12(5) makes this a mandatory disqualification — notwithstanding any prior agreement. Parties may waive this bar only by an express written agreement made after disputes have arisen.

These provisions addressed a longstanding concern in government and PSU contracts where one party (often the employer) unilaterally appointed the arbitrator.

Conduct of Arbitral Proceedings — Sections 18–27

Part I, Chapter V sets out the framework for conducting arbitral proceedings:

Section 18: Parties must be treated with equality, and each party must be given a full opportunity to present its case.
Section 19: The tribunal is not bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872 (now Bharatiya Sakshya Adhiniyam, 2023). The parties are free to agree on the procedure, and failing agreement, the tribunal may conduct proceedings as it considers appropriate.
Section 20: Parties are free to agree on the place (seat) of arbitration. Failing agreement, the tribunal determines it having regard to the circumstances including convenience of the parties.
Section 24: Unless otherwise agreed, the tribunal decides whether to hold oral hearings or conduct proceedings on the basis of documents and other materials.
Section 27: The tribunal or a party (with the tribunal’s approval) may apply to the court for assistance in taking evidence.

Arbitral Award — Section 31

Section 31 prescribes the requirements for an arbitral award:

The award must be made by a majority of the members of the tribunal.
It must state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is on agreed terms.
It must state its date and the place (seat) of arbitration.
The tribunal may make an interim award on any matter with respect to which it may make a final award.
The tribunal may award interest at such rate as it considers reasonable on the whole or any part of the money ordered, for the whole or any part of the period between the date on which the cause of action arose and the date of the award.

Grounds for Setting Aside — Section 34

Section 34 provides an exhaustive list of grounds on which an arbitral award may be set aside by a court. An application must be filed within three months from the date of receipt of the award (extendable by a further 30 days for sufficient cause). The grounds under Section 34(2) include:

A party was under some incapacity, or the arbitration agreement was not valid under the applicable law;
The party making the application was not given proper notice of appointment of an arbitrator or of the proceedings, or was otherwise unable to present its case;
The award deals with a dispute not contemplated by or falling outside the terms of the submission to arbitration;
The composition of the tribunal or the procedure was not in accordance with the agreement of the parties;
The subject-matter of the dispute is not capable of settlement by arbitration under Indian law; or
The award is in conflict with the public policy of India — which includes fraud or corruption, contravention of the fundamental policy of Indian law, or conflict with the most basic notions of morality or justice.

The 2015 Amendment added Section 34(2A), providing an additional ground for setting aside domestic awards: patent illegality appearing on the face of the award. However, a mere erroneous application of law or re-appreciation of evidence does not amount to patent illegality.

Enforcement of Awards — Section 36

Under Section 36, once the period for filing a Section 34 application has expired without a challenge, or where such an application has been finally rejected, the award is enforced as a decree of the court under the Code of Civil Procedure, 1908.

The 2015 Amendment clarified that the mere filing of a challenge under Section 34 does not automatically stay enforcement. A party must specifically apply for and obtain a stay from the court. The court may impose conditions (such as deposit of the award amount) while granting a stay.

The 2015 Amendment Act — Key Changes

The Arbitration and Conciliation (Amendment) Act, 2015 (effective 23 October 2015) introduced several reforms:

Section 29A — Imposed a time limit of 12 months for completion of domestic arbitration (extendable by 6 months with consent of the parties, and further by the court with fee reduction for the arbitrators).
Section 12, Fifth and Seventh Schedules — Strengthened arbitrator independence requirements as discussed above.
Section 34(2A) — Introduced patent illegality as a ground for setting aside domestic awards.
Section 36 — Removed automatic stay of enforcement upon filing of a Section 34 challenge.
Section 17 — Expanded the power of the arbitral tribunal to grant interim measures, making such orders enforceable as court orders.

The 2019 Amendment Act

The Arbitration and Conciliation (Amendment) Act, 2019 (Act No. 33 of 2019) introduced further changes:

Arbitration Council of India (Sections 43A–43M): Established a body for promotion of institutional arbitration, grading arbitral institutions, and accreditation of arbitrators. (As of March 2026, the Council has not yet been constituted.)
Section 42A — Confidentiality: Mandated that the arbitrator, the arbitral institution, and the parties shall maintain confidentiality of all arbitral proceedings, except that the award may be disclosed where necessary for its implementation and enforcement.
Section 29A — Revised timelines: The 12-month period was amended to run from the date of completion of pleadings (not from the date of reference). International commercial arbitrations were exempted from the strict timeline, with the tribunal required to make the award “as expeditiously as possible.”
Section 87: Sought to make the 2015 Amendment’s reforms prospective only — applying to arbitral proceedings commenced on or after 23 October 2015. The Supreme Court in Hindustan Construction Company Ltd. v. Union of India (2020) 17 SCC 304 struck down Section 87 as manifestly arbitrary and violative of Article 14 of the Constitution.

The 2021 Amendment

The Arbitration and Conciliation (Amendment) Act, 2021 (effective 11 March 2021) made a targeted but important change:

Deletion of the Eighth Schedule: The Eighth Schedule, inserted by the 2019 Amendment, had prescribed qualifications and experience for arbitrators — limiting appointments to advocates, chartered accountants, company secretaries, and certain other professionals with specified years of experience. This schedule was widely criticised for effectively barring foreign nationals and experts from non-legal fields from serving as arbitrators in India-seated arbitrations, undermining India’s pro-arbitration outlook.
Substitution of Section 43J: The qualifications, experience, and norms for accreditation of arbitrators are now to be specified by regulations (yet to be framed).
Unconditional stay provisions: The Amendment introduced a proviso to Section 36 specifying that an unconditional stay shall be granted where the court is satisfied that the arbitration agreement or the making of the award was induced by fraud or corruption. This was also introduced in Section 34 through a new proviso.

Key Supreme Court Decisions

Several decisions of the Supreme Court of India have shaped the interpretation of the Act:

Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO) (2012) 9 SCC 552 — A Constitution Bench held that Part I of the Act applies only to arbitrations seated in India. When parties choose a foreign seat, Indian courts have no supervisory jurisdiction under Part I. This overruled the earlier position in Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105.
Ssangyong Engineering & Construction Co. Ltd. v. NHAI (2019) 15 SCC 131 — The Court clarified the scope of “patent illegality” under Section 34(2A) of the amended Act: it must go to the root of the matter and cannot mean mere erroneous application of the law. It also held that “fundamental policy of Indian law” is confined to contravention of a statute protecting national interest, disregard of orders of superior courts, and breach of principles of natural justice.
Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2020) 20 SCC 760 — The Court held that a party who has an interest in the outcome of the dispute cannot unilaterally appoint a sole arbitrator. A person ineligible to be an arbitrator under Section 12(5) read with the Seventh Schedule is also ineligible to appoint an arbitrator.
Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. (2021) — The Court recognised that an emergency arbitrator’s order is an “order” within the meaning of Section 17(1) of the Act and is therefore enforceable under Section 17(2). This affirmed the validity of emergency arbitration proceedings under institutional rules.
Hindustan Construction Company Ltd. v. Union of India (2020) 17 SCC 304 — The Court struck down Section 87 (inserted by the 2019 Amendment) as unconstitutional for attempting to retrospectively undo the 2015 Amendment’s reform removing automatic stay on enforcement under Section 36.

Arbitration, Conciliation, and Mediation — Key Differences

While all three are forms of alternative dispute resolution (ADR), they differ in important respects:

Feature	Arbitration	Conciliation	Mediation
Governing law	Arbitration and Conciliation Act, 1996 (Parts I & II)	Arbitration and Conciliation Act, 1996 (Part III)	Mediation Act, 2023
Role of neutral	Arbitrator decides the dispute	Conciliator proposes settlement terms actively	Mediator facilitates communication; does not suggest terms
Binding nature	Award is binding and enforceable as a court decree	Settlement agreement, when signed, is binding and has the status of an arbitral award (Section 74)	Mediated settlement agreement is enforceable if registered
Formality	Quasi-judicial; structured proceedings	Less formal; flexible	Informal; party-driven
Pre-existing agreement	Requires a written arbitration agreement	May be initiated without a prior agreement	May be initiated voluntarily or by court referral
Appeal	Limited recourse under Section 34	No appeal against a settlement; challenge similar to Section 34	Limited grounds for challenge under the Mediation Act, 2023

Disclaimer

This article provides a general overview of the Arbitration and Conciliation Act, 1996 and its amendments for educational and legal awareness purposes. It does not constitute legal advice, advertisement, or solicitation. The law discussed is subject to legislative amendments and judicial interpretation. Readers are advised to consult a qualified legal professional before taking any action based on the information provided herein.