This post has been written by Sukhleen Kaur Saluja, a student of Amity University, Chhattisgarh


It has been seen that when two or more people are together for doing something any work or any transaction usually they come into conflict and it must be solved and arbitration is form of “ALTERNATIVE DISPUTE RESOLUTION” where the parties take help of third person and solve the disputes without going to court and which is less expensive and gets your dispute resolved much faster than constant delays in courts. Suppose two parties doing business and in business there is always some kind of misunderstanding or conflicts between the parties which is to be solved faster and court procedure takes time so through arbitration one can solve the dispute much faster.


The process of solving an argument between people by helping them to agree to an acceptable solution. It is a way to settle disputes outside the courts so that there is no waste of time or to save time. It means that two or more parties settle the dispute mutually by the appointment of the third party.


Arbitration was needed for minimization of court intervention; it is favourable and time saving method of resolution of disputes, time consuming and resources exhausting procedure of the traditional justice delivery system.


The development of Arbitration is divided into three phase:

(1) Pre-British period

(2)Commencement of British rule

(3)Position after the act of 1996


The course of arbitration flourished in India since end of 19th century. Arbitration is a long history it is prevalent in India from the Vedic times. Sage Yajnavalkya refer to some arbitral bodies like puga, kula and sreni they were known as Panchayat. As we know that earlier also there were many disputes and to solve these disputes or problem they go to group of wise men of community knows as ‘PANCHAYAT’ and the member were know as ‘panchas’, the decision taken by them are binding on the parties. So, earlier the disputes were solved through “Panchayati Raj system”.



The modern arbitration law was enacted in India as early as 1772 by Bengal Regulation of 1772, during the British rule. Arbitration in India was recognized as dispute resolution and for the first time when India Arbitration Act, 1899 was enacted. It was confined to three presidency town: Madras, Bombay and Calcutta. It recommended to the parties to submit their decision of their cause to arbitration.


For instance Bengal regulation 1781 provided that the judge do recommend and so far as he can without compulsion, prevail upon the parties to submit to arbitration of one person to be mutually agreed upon by the parties.

The Bengal Regulation of 1787, 1793 and 1795 introduced some procedural changes by empowering the court to refer suit to arbitration with the consent of parties and further authorizing the court to promote reference of cases not exceeding more than Rs 200 for dispute relating to debts, partnership accounts and breach of contract.

The Bengal Regulation of 1802, 1814 and 1833 by making diverse procedural changes like Regulation VII of 1827 provided for settlement of civil disputes.


After establishment of the legislative Council of India in, 1834 and then Code of Civil Procedure Act, 1859 was passed with the object of codifying the procedure of civil courts but this code could not serve the purpose as this code was not made applicable to the supreme court (crown court under Royal Character).The Code of 1859 was amended regularly from time to time and was replaced by passing the civil the Civil Procedural Code, 1877. This code of 1877 and 1879 and the third civil procedure code was enacted in 1882, which replaced the previous code.


The Legislative Council enacted the Indian Arbitration Act in the year 1899. It was based on model of English Act of 1899. This act applied to the cases where if subject matter submitted to arbitration were the subject of suit, the suit could whether with leave or otherwise instituted in presidency town.


Then on 1st July, 1940 more specific arbitration act came into force. It applied the whole of India and this act of 1940 has many disputes, many criticisms and lacked in quite a lot of areas when it came to implementation although it brought uniformity in law across the nation. The provision made by the act of 1940 is:

  1. The arbitration act of 1940 made provision for protecting the agreement from being vitiated by the mere presence of same lacuna in it.
  2. It made provision for arbitration without court intervention.
  3. In case of arbitration with court intervention, where suit was actually pending in the court, all the interested parties might agree to refer any matter in dispute to arbitration.

The act of 1940 failed to achieve the desired objective and the entire process there under become litigation-oriented.

The Law commission in India in its report dated 9th November,1978 suggested extensive amendments in the Arbitration act  of 1940.



The Arbitration and Conciliation Act, 1996. The act of 1996 consolidated and amended laws relating to Arbitration. It extent whole of India bit not Jammu and Kashmir. The purpose of the act is to:

  • An act to consolidate and amend the law relating to domestic
  • To define the law relating conciliation.
  • Enforcement of foreign arbitral award.
  • The act of 1996 has advantage over 1940 Act.
  • Where there is arbitration agreement, the curt is required to direct the parties to resort to arbitration per agreement.
  • The ground on which award of arbitrator could be challenged before the court under the 1940 have been severely cut down.
  • The role of arbitral institution in promoting and organizing arbitration has been recognized for the first time in law.
  • Under act of 1940 there was a time limit of four month within which arbitrator had to make award.
  • The importance of transnational commercial arbitration has been recognized and it has been specifically provided that even where the arbitration is held in India the parties would be free to designate the applicable to the subject of dispute.


Arbitration in India is an age old concept, originating in ancient India. Overall, it can be said that arbitration is still in development phase, the law of arbitration in India regarding the matter of settling the disputes. But the present arbitration system need to go under amendment process, so that it could be made more effective in the days to come in the matter of domestic or international commercial arbitration.


 Image from here



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