Starting Arbitration in India

The foundation of every arbitration is consent.

Before initiating proceedings, the first question must be whether the parties have actually agreed to resolve their disputes through arbitration.

Section 7 of the Arbitration and Conciliation Act recognises an arbitration agreement contained in a contract, a separate agreement, or an exchange of communications, including electronic communications.

For businesses, missing this deadline can seriously restrict the available remedies.

Section 7(3) expressly provides

“An arbitration agreement shall be in writing.”

Section 7(4) further recognises agreements recorded through signed documents, exchanges of letters or communications, and even pleadings where the existence of an arbitration agreement is asserted by one party and not denied by the other.

Merely mentioning arbitration, however, is not enough.

In Jagdish Chander v. Ramesh Chander, (2007) 5 SCC 719, the Supreme Court held that a clause merely contemplating the possibility of arbitration in the future does not necessarily constitute a binding arbitration agreement. The language must reflect a clear intention of the parties to submit disputes to arbitration and be bound by the arbitrator’s decision.

Accordingly, before issuing any notice, parties should closely examine the wording of the arbitration clause.

 

Determine Whether the Dispute Is Arbitrable

Not every dispute can legally be resolved through arbitration.

Section 2(3) of the Act preserves laws under which certain disputes cannot be submitted to arbitration. Similarly, Section 34(2)(b)(i) permits an arbitral award to be set aside where the subject matter of the dispute is not legally capable of settlement by arbitration.

The Supreme Court provided important guidance in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, where it formulated a four-fold test for determining arbitrability.

Broadly, disputes involving rights in rem, sovereign functions, statutory adjudication or significant public-interest considerations may fall outside arbitration, whereas disputes concerning private commercial rights between parties are ordinarily capable of being arbitrated.

This assessment should ideally be undertaken before proceedings are invoked. Commencing arbitration in respect of a legally non-arbitrable dispute may result in wasted time and costs.

 

Identify the Seat of Arbitration

The seat of arbitration is one of the most important elements of an arbitration clause because it determines the legal jurisdiction supervising the arbitral proceedings.

Section 20(1) permits parties to agree upon the place or seat of arbitration.

Where the arbitration is seated in India, Part I of the Arbitration and Conciliation Act ordinarily applies.

The significance of the seat was firmly established in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 (BALCO), where the Supreme Court recognised the territorial nature of arbitration law.

Later, in BGS SGS SOMA JV v. NHPC Ltd., (2020) 4 SCC 234, the Supreme Court clarified that designation of a seat ordinarily confers exclusive supervisory jurisdiction upon the courts situated at that seat.

Parties should therefore carefully distinguish between the seat of arbitration and the physical venue where hearings may be conducted.

The difference can determine which court has jurisdiction over applications concerning appointment, interim relief and challenges to the award.

 

Check the Limitation Period Before Invoking Arbitration

Limitation applies to arbitration in much the same manner as it applies to court proceedings.

Section 43(1) of the Arbitration and Conciliation Act makes the Limitation Act, 1963 applicable to arbitrations.

Most contractual and commercial claims are subject to a limitation period of three years, depending upon the nature of the cause of action.

Section 43(2), read with Section 21, becomes particularly important because arbitration is generally considered to commence when the respondent receives the request referring the dispute to arbitration.

This means that parties cannot safely wait until the last moment to act.

Two limitation questions may arise:

• Whether the underlying substantive claim itself is within limitation; and
• Whether an application seeking appointment of an arbitrator has been filed within the permissible period.

A delay at the invocation stage may therefore result in an otherwise valid commercial claim becoming time-barred before the tribunal can consider its merits.

 

Issue a Proper Notice Invoking Arbitration

The notice invoking arbitration is the formal step that sets the arbitral process in motion.

Section 21 provides that, unless otherwise agreed by the parties, arbitral proceedings commence when the respondent receives a request that the dispute be referred to arbitration.

The provision states, in substance, that proceedings commence on the date on which:

“a request for that dispute to be referred to arbitration is received by the respondent.”

A properly drafted invocation notice should ordinarily:

• Identify the underlying agreement;
• Reproduce or refer to the arbitration clause;
• Describe the dispute;
• Identify the claims or relief being sought;
• Clearly invoke arbitration;
• Propose appointment of an arbitrator where required; and
• Comply with the contractual mode of service.

The question of receipt is particularly important because it may determine the date on which arbitration legally commences.

Section 3(1)(a) provides that, unless otherwise agreed, written communication is deemed received when delivered personally or at the addressee’s place of business, habitual residence or mailing address.

Parties should therefore preserve proof of delivery and receipt.

A general demand notice that merely threatens legal action without clearly invoking the arbitration clause may not serve the same purpose as a properly framed Section 21 notice.

 

Appoint the Arbitrator in Accordance With the Agreement

The next step is constitution of the arbitral tribunal.

Section 11(2) allows parties to agree upon their own procedure for appointing an arbitrator or arbitral tribunal.

Accordingly, the arbitration clause must first be examined to determine whether it provides for:

• A sole arbitrator;
• A three-member tribunal;
• Nomination by each party;
• Appointment by an institution; or
• Another agreed mechanism.

Where the agreed procedure fails, or the parties are unable to reach agreement within the prescribed period, recourse may be taken under Sections 11(4) to 11(6).

Historically, Section 11(6A) confined the court’s examination primarily to the existence of an arbitration agreement, reflecting the principle that judicial scrutiny at the appointment stage should remain limited and prima facie.

This limited approach was reflected in decisions including Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 and Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1.

 

Independence and Impartiality of the Arbitrator

Appointment is not merely procedural. The arbitrator must also satisfy the requirements of independence and impartiality.

Section 12(5), read with the Seventh Schedule, renders certain categories of persons ineligible to act as arbitrators unless the parties expressly waive the restriction in writing after the dispute has arisen.

The Supreme Court strengthened this principle in TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, holding that a person who is himself legally ineligible to act as an arbitrator cannot nominate another arbitrator.

Similarly, in Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760, the Court held that a party interested in the outcome of the dispute cannot unilaterally appoint a sole arbitrator.

These decisions have significantly shaped the law governing unilateral appointments in India.

 

Consider Interim Relief Where Immediate Protection Is Required

Commercial disputes do not always allow parties to wait until the tribunal is fully constituted.

Assets may be transferred, bank guarantees may be invoked, confidential information may be misused, evidence may disappear, or contractual rights may require immediate protection.

Section 9 allows a party to seek interim measures from the court before or during arbitration, or after the award but before its enforcement.

Such measures may include preservation of assets, securing the amount in dispute, injunctions, preservation of evidence or appointment of a receiver.

Where interim relief is granted before commencement of arbitration, Section 9(2) requires the arbitral proceedings to commence within 90 days, unless the court allows additional time.

Once the tribunal has been constituted, however, Section 9(3) generally restricts court intervention where an effective remedy is available from the tribunal under Section 17.

Section 17 empowers the arbitral tribunal itself to grant interim measures. Section 17(2) gives such tribunal orders enforceability comparable to court orders.

In Amazon.com NV Investment Holdings LLC v. Future Retail Ltd., (2022) 1 SCC 209, the Supreme Court recognised the enforceability of emergency arbitrator orders under Section 17 in the context of India-seated arbitration.

Interim relief can therefore be a crucial strategic consideration at the very beginning of a dispute

 

Understand the Procedural Timeline

Once the tribunal is constituted, the Arbitration and Conciliation Act seeks to ensure that proceedings move within defined timelines.

Under Section 23(4), the statement of claim and statement of defence must ordinarily be completed within six months from the date on which the arbitrator or arbitrators receive notice of their appointment.

For domestic arbitration, Section 29A generally requires the award to be made within twelve months from completion of pleadings.

The parties may, by consent, extend this period by a further six months. Any extension beyond that ordinarily requires intervention of the court.

Timelines should therefore be factored into the dispute strategy from the outset, particularly where the dispute involves extensive evidence, expert testimony or complex commercial documentation.

 

Understand What Happens After the Award

Obtaining an arbitral award does not necessarily mark the end of the dispute.

Section 34 permits an award to be challenged on specified and limited grounds.

Under Section 34(3), an application challenging an award must ordinarily be filed within three months from the date of receipt of the award.

The court may permit a further period of thirty days where sufficient cause is shown, but not beyond that period.

Proceedings under Section 34 are not appeals on the merits of the dispute.

For domestic awards, Section 34(2A) permits an award to be set aside on the ground of patent illegality appearing on the face of the award, but not merely because the court would have interpreted the contract or evidence differently.

In Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, the Supreme Court emphasised the narrow scope of interference with arbitral awards.

Further, filing a Section 34 challenge does not automatically suspend enforcement.

Section 36(2) provides that filing such an application does not:

“by itself render that award unenforceable.”

A separate application seeking stay of enforcement must therefore be made.

Where the statutory circumstances concerning prima facie fraud or corruption are established, Section 36(3) may require an unconditional stay.

 

The Arbitration Roadmap at a Glance

A commercial arbitration in India will ordinarily involve the following sequence:

Arbitration agreement → Arbitrability → Seat → Limitation → Section 21 notice → Appointment of arbitrator → Interim relief, if required → Pleadings and hearing → Award → Enforcement or challenge

Each step affects the next.

A well-drafted arbitration clause can simplify appointment. A correctly identified seat can prevent jurisdictional disputes. A timely Section 21 notice can protect limitation. A legally valid appointment can prevent the proceedings from being challenged later.

This is why arbitration strategy begins much earlier than the first hearing.

 

Conclusion

Starting arbitration is not a single procedural act. It is a carefully connected sequence of legal and strategic decisions.

A party must first establish that a valid arbitration agreement exists, determine whether the dispute can legally be arbitrated, identify the correct seat, ensure that the claim remains within limitation, issue a valid notice invoking arbitration and constitute the tribunal in accordance with law.

Where immediate protection is necessary, interim relief may need to be sought even before the tribunal begins hearing the dispute.

Businesses that consider these issues at the contract-drafting stage—and act promptly once disputes arise—are far better positioned to obtain an efficient and enforceable resolution.

The draft Arbitration and Conciliation (Amendment) Bill, 2024, released for public consultation in October 2024, had not been introduced in Parliament as of mid-2026. Accordingly, the Arbitration and Conciliation Act, 1996, as amended in 2015, 2019 and 2021, continued to govern the arbitration framework reflected in this article.

“A properly started arbitration saves more time than any shortcut taken later.”

 

FREQUENTLY ASKED QUESTIONS

Q1. Is sending a legal notice enough to start arbitration

Not necessarily. A notice must clearly invoke the arbitration mechanism. Under Section 21, proceedings ordinarily commence when:

“a request for that dispute to be referred to arbitration is received by the respondent.”

A general demand notice that does not invoke the arbitration clause may therefore be insufficient.

 

Q2. Can a party directly approach the court for appointment of an arbitrator

Ordinarily, the agreed appointment mechanism should first be followed.

Where the parties fail to appoint the arbitrator in accordance with the agreement, or the prescribed period expires, an application under Section 11 may then be made before the appropriate court.

 

Q3. How long does arbitration take

Section 29A provides a statutory timeline for domestic arbitration. The twelve-month period is generally calculated from:

“the date of completion of pleadings”.

The parties may extend the period by consent for up to six months. Further extension ordinarily requires approval of the court.

Actual timelines may nevertheless vary depending on the complexity of the dispute, evidence, conduct of the parties and procedural requirements.

 

Q4. Can a court protect a party before arbitration begins

Yes. Section 9(1) permits a party to approach the court:

“before or during arbitral proceedings”

for interim measures of protection.

These may include preservation of property, securing the amount in dispute, injunctions, preservation of evidence or appointment of a receiver.

Where relief is granted before arbitration begins, the arbitration must ordinarily commence within ninety days under Section 9(2), unless the court permits additional time.

 

Q5. Can every commercial dispute be referred to arbitration

No. Only disputes legally capable of being resolved through arbitration can be referred.

Section 34(2)(b)(i) recognises this principle where:

“the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force”.

Disputes involving rights in rem, sovereign functions or certain public-interest and statutory matters may fall outside arbitration.

 

Q6. Does challenging an arbitral award automatically stop enforcement

No. Section 36(2) specifically provides that filing a Section 34 challenge does not:

“by itself render that award unenforceable”.

The challenging party must separately seek a stay of enforcement from the court.