The Alternative Dispute Resolution (ADR) system is regarded as a more effective and expedient method for resolving disputes than traditional courts. Mediation and arbitration are two of ADR’s primary methods for speedy dispute resolution. While the Mediation Bill is currently before Parliament for approval, the 1996 Arbitration and Conciliation Act was amended in 2019 to institutionalise arbitration in India.

Micro, small and medium enterprises (MSMEs) anxiously await the establishment of arbitration institutions and their designation by the nation’s highest courts. According to Section 18(3) of the MSME Act of 2006, if a dispute between MSMEs cannot be resolved through conciliation, the MSME Council must either arbitrate the dispute itself or refer it to an arbitration institution for resolution. The institution then conducts an arbitration and issues a binding award that is equivalent to a court’s decree.

Pending cases

The institutionalisation of arbitration as an ADR mechanism in India remains a non-starter despite widespread publicity. Even after four years of notification, the Arbitration Council of India has not become operational. As rights-based approach to delivering justice acquires prominence on a global scale, bureaucratic procedures suffocate access to justice in India.

Nearly five crore pending cases in Indian courts prompted policymakers to consider bolstering ADR mechanisms. Although the Indian arbitration law has significantly altered its scope, it is still subject to judicial intervention and interference.

In accordance with the 2017 recommendations of the Justice BN Srikrishna committee, the government has amended the Arbitration and Conciliation Act of 1996 in order to institutionalise arbitration in India.

Institutional arbitration presents disputing parties, including MSMEs, with an opportunity to save time, money and relationships. Property, financial, partnership, franchisee, construction, and any other commercial/business disputes can be arbitrated if the parties have a contract specifying arbitration as a means of resolving disputes.

Even if no arbitration agreement exists, parties can initiate arbitration by submitting a mutually signed letter requesting the appointment of an arbitrator to an arbitration institution. The institutions perform the remaining duties as a court would. The institutions of arbitration maintain absolute confidentiality throughout the entire procedure. Small and medium enterprises, the construction industry, civil contractors, families seeking property division among siblings, and others with arbitrable cases can walk into the offices of arbitration institutions and file their cases without the assistance of attorneys or advocates. In accordance with Section 34 of the Act, parties dissatisfied with an arbitrator’s award may petition a court within 90 days to vacate the award.

Institutional arbitration institutions often face the issue of not being recognised as a quasi-judicial body authorised to hear cases without court involvement. Many individuals are oblivious that arbitrators’ decision is legally binding and equivalent to a court order.

The Arbitration Council of India, to authorise and regulate arbitration institutions, isn’t operational even four years after the passage of the law. Some State governments do not support other professionally established arbitration institutions, with the exception of a limited number that are established and funded by well-known law firms.

Thus, there is an imperative need for the Central Government and all the High Courts to take note of the institutions operating in each State and designate them as arbitration institutions in order to alleviate the increasing burden on the courts and create a truly accessible environment for justice.

The writer is former Senior Advisor, United Nations Development Programme