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Introduction
India’s arbitration landscape has evolved significantly through legislative reforms and a pro-arbitration judicial approach. The Arbitration and Conciliation Act, 1996 has undergone several amendments in the past three decades to position India as a global arbitration hub. However, a series of developments from 2023-2024 have disrupted India’s trajectory toward becoming a global arbitration hub.
The Reform Decade: Amendments of 2015, 2019 and 2021
While arbitration has long existed in India, including under the Arbitration Acts of 1899 and 1940, the significant break came with the Arbitration and Conciliation Act, 1996, aligned with the UNCITRAL framework, which for the first time gave India a comprehensive, internationally harmonised set of laws premised on party autonomy, finality of awards, and limited judicial intervention. This underscored India’s ambition to participate in the global economy.
Despite the enactment of the 1996 Act, its implementation fell short in practice as courts continued to intervene liberally and delays persisted in enforcement of awards. Accordingly, the Arbitration and Conciliation (Amendment) Act, 2015 was introduced. This amendment has been the most consequential amendment since the original enactment as it mandated time-bound completion of arbitral proceedings, removed automatic stay on awards, and curtailed judicial interference to a large extent.
Thereafter, the 2019 amendment pushed for a shift from ad hoc to institutional arbitration. Accordingly, the Arbitration Council of India was established to act as a statutory regulator empowered to grade institutions and accredit arbitrators. Further, the 2021 Amendment amended Section 36 to enable unconditional stays where fraud or corruption was prima facie established. In the 2021 Amendment, the eligibility of arbitrators has been broadened by deleting the Eighth Schedule and permitting appointment of foreign nationals. Therefore, it is evident in light of the above that India’s legislative effort has always been directed to position India as a credible international arbitration hub.
The Mediation Act, 2023: A Legislative Milestone
Prior to September 2023, there was no specific legislative framework for mediation in India although there were references to mediation under the Code of Civil Procedure, 1908 and the Arbitration and Conciliation Act, 1996. The Mediation Bill, 2021 was passed on 14.09.2023. ‘Mediation’ is defined under Section 3(h) of the Mediation Act, 2023 as a process in which parties attempt to reach an amicable settlement with the assistance of a mediator who does not have the authority to impose a settlement. As specified under Section 3(h) thereof, the Mediation Act, 2023 has consolidated conciliation, online mediation, community mediation and pre-litigation mediation under a single statute. The Mediation Act, 2023 has also amended Part III of the Arbitration and Conciliation Act, 1996 to bring the entire conciliation related framework under its purview.
As per Section 18 of the Mediation Act, 2023, mediation must be concluded within 120 days from the date of the first appearance of the parties before the mediator, which is further extendable by 60 days with mutual consent. Further, a Mediated Settlement Agreement signed by the parties and authenticated by the mediator has the force of a court decree and is enforceable as if it were a judgment of a civil court. Such Settlement Agreement can be challenged only on the limited grounds within a period of 90 days .
However, the Mediation Act, 2023 still has its shortcomings. India’s failure to ratify the United Nations Convention on International Settlement Agreements Resulting from Mediation till date despite having signed it on 07.08.2019 coupled with the fact that no reference has been made thereto in the Mediation Act, 2023, raises questions on enforcement of settlement agreements from international mediations.
The 2024 Policy Shift: From Arbitration to Mediation in Public Procurement
On 03.06.2024, the Department of Expenditure under the Ministry of Finance issued “Guidelines for Arbitration and Mediation in Contracts of Domestic Public Procurement” by way of an Office Memorandum bearing reference no. F. 11212024-PPD (“June 2024 Guidelines”). The June 2024 Guidelines themselves acknowledge in Clause 3 that “recent developments, namely the enactment of the Mediation Act, 2023 and Court decisions, combined with the experience gained over many years have necessitated a re-examination of the Government’s approach towards arbitration vis-à-vis other methods of dispute resolution, such as mediation and litigation”.
While the June 2024 Guidelines do not name any specific decision, the “Court decisions” in the June 2024 Guidelines likely refers to the decision in Delhi Metro Rail Corporation Ltd. vs Delhi Airport Metro Express Pvt. Ltd.[2024 INSC 292] wherein an arbitral award of INR 7,600 crore, after going through multiple levels of scrutiny under various statutory court proceedings, was ultimately set aside at the stage of curative petition. This appears to have prompted the policy makers to once again rethink upon the issue of judicial interference in arbitral proceedings.
Against this backdrop, the June 2024 Guidelines prescribe a new approach to dispute resolution in public procurement. The June 2024 Guidelines have restricted arbitration as a dispute resolution mechanism in government contracts, particularly for high-value disputes and require that the inclusion of arbitration in the dispute resolution mechanism, be a deliberate and reasoned decision rather than a contractual default.
However, it appears that the June 2024 Guidelines have misread the problem. The problems that have been identified only include delayed timelines, high costs, and substantive merits of disputes getting buried under inflated claims and counterclaims. The policy makers failed to realise that these are failures of execution, not of the process. Replacing arbitration altogether rather than remedying the deficiencies through better institutional design and executive discipline, addresses the symptom while leaving the disease untreated.
Pursuant to the June 2024 Guidelines, very recently, MoRT&H by its circular no. H-25011/02/2025-P&P (C. No 262142) dated 12.01.2026, has removed arbitration mechanism for disputes of value above INR 10 crore and has prescribed arbitration by SAROD for disputes of value below INR 10 crore. Such a systemic departure from the longstanding arbitration regime which is globally known for its independence, neutrality and party autonomy, is against the basic principles of Arbitration Act and the dream of making India a preferred jurisdiction for arbitration.
The shift towards mediation is, however, built on uncertain grounds. Mediation is effective only when both parties are willing to compromise. This condition is rarely met in large infrastructure disputes where technical and financial stakes are high and parties need a binding determination of their rights rather than a negotiated middle ground. At best, mediation can serve as a preliminary step before arbitration, not a replacement for it. The real problem was never arbitration itself, but how it has been conducted.
Arbitration Amendment Bill, 2024
Where the June 2024 Guidelines recommends to take a step back from arbitration, at least in government contracts, the Draft Arbitration Amendment Bill, 2024 seeks to further strengthen the arbitration framework in India. The Draft Arbitration Amendment Bill, 2024 has defined emergency arbitration, empowered arbitral institutions to manage timelines and fees, restricted court intervention in interim relief applications, replaced “place” with “seat” and proposed appellate arbitral tribunals for challenges under Section 34 of the Arbitration and Conciliation Act. This will drastically reduce the extent of court intervention in arbitration proceedings. The Draft Arbitration Amendment Bill, 2024 also proposes to drop “Conciliation” from its title. This acknowledges the fact that conciliation now falls within the Mediation Act, 2023. This step will ensure a more clear separation between mediation and arbitration rather than a substitution of one by the other.
Conclusion
India’s dispute resolution landscape currently stands at crossroads. The June 2024 Guidelines, risk overcorrecting problems that solely arise out of implementation failures of arbitration laws by seeking to wholly replace arbitration by mediation. Mediation has an important role to play, particularly as a complementary or pre-arbitration mechanism, but it cannot substitute arbitration in complex, high-value disputes. The confidence of foreign investors in India as a jurisdiction depends, inter alia, on the predictability and efficiency of its dispute resolution mechanisms. This is a consideration that the policy makers must weigh carefully while formulating reforms.
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