The Arbitration and Conciliation Act, 1996 is a central Act of the Indian Parliament that consolidates and amends the law relating to domestic arbitration, international commercial arbitration, and the enforcement of foreign arbitral awards, while also defining the law on conciliation. It was enacted to replace the outdated Arbitration Act, 1940, which was criticized for excessive judicial intervention and long delays, making arbitration as slow as litigation. The 1996 Act came into force on January 25, 1996, and was modeled on the UNCITRAL Model Law on International Commercial Arbitration (1985) to align India's framework with international standards and promote alternative dispute resolution (ADR).
The Act works by providing a legal mechanism for dispute resolution outside the courts, emphasizing party autonomy and limited judicial oversight. Key provisions include Section 7, which mandates a written arbitration agreement, and Section 11, which governs the appointment of arbitrators. The arbitral award, once made, is legally binding and enforceable as if it were a decree of a court under Section 36. The Act also covers conciliation in Part III, where a neutral conciliator assists parties in reaching a voluntary, non-binding settlement.
The Act is connected to the New York Convention and the Geneva Convention, as it provides for the recognition and enforcement of foreign arbitral awards in India. It has undergone significant changes through amendments in 2015, 2019, and 2021 to enhance efficiency and reduce court interference. The Arbitration and Conciliation (Amendment) Act, 2015, introduced a time limit of 12 months for making an award under Section 29A and limited the scope of judicial intervention under Section 5. The 2021 Amendment modified Section 36 to allow a court to grant an unconditional stay on the enforcement of an award if a prima facie case of fraud or corruption is made out. The 2019 Amendment established the Arbitration Council of India (ACI) to grade arbitral institutions and accredit arbitrators.