Businesses often include arbitration clauses in contracts to resolve disputes without going through a conventional court trial. When a payment dispute, breach of contract or disagreement over commercial obligations arises, knowing how to start arbitration proceedings can help parties protect their rights and move towards a binding resolution.
In India, arbitration is primarily governed by the Arbitration and Conciliation Act, 1996. The process usually begins by reviewing the arbitration agreement, identifying the dispute covered by it and sending a formal notice invoking arbitration. The parties then appoint an arbitrator or follow the agreed appointment procedure before presenting their claims and evidence.
However, the correct procedure depends on the wording of the contract, the type of dispute, the agreed rules and whether the other party cooperates. This guide explains the key legal steps, important deadlines, appointment procedures and practical considerations for commencing arbitration in India.
Review the arbitration clause before taking action
The first step is to examine the contract and identify the arbitration agreement. It may appear as a separate clause in a commercial agreement, service contract, shareholders’ agreement, construction contract or purchase order. Section 7 of the Arbitration and Conciliation Act, 1996 sets out the legal requirements for an arbitration agreement.
Read the clause carefully to determine which disputes it covers, whether arbitration is mandatory, whether negotiation or mediation must take place first, and how the arbitrator is to be appointed. Also check whether the agreement specifies an arbitral institution, applicable rules, the seat of arbitration, the language and the number of arbitrators.
These details affect the procedure. For example, a clause may require the parties to attempt negotiation for a specified period before arbitration can begin. Another may provide for a sole arbitrator or a three member tribunal. Skipping a mandatory contractual step can invite objections and delay proceedings.
Confirm who signed the agreement and whether the parties to the proposed arbitration are bound by it. Do not assume every person connected with a business is automatically covered by an arbitration clause.
Send a formal notice invoking arbitration
In many cases, the next step is to send a written notice invoking the arbitration clause. Section 21 provides that, unless the parties have agreed otherwise, arbitral proceedings for a particular dispute commence when the respondent receives a request to refer the dispute to arbitration.
The notice should identify the agreement, describe the dispute, state the contractual basis of the claim and specify the relief sought. Where possible, include the amount claimed, interest calculation and a concise account of the relevant events. If the contract provides a particular method of delivery or notice address, follow it carefully.
The notice should clearly communicate an intention to refer the identified dispute to arbitration. A general payment reminder or a letter expressing dissatisfaction may not be sufficient. Keep a complete copy of the notice and proof of delivery, including the date of receipt.
Timing is important because limitation rules apply to arbitration. Under Section 43 of the Act, the Limitation Act, 1963 applies to arbitration in much the same way as it applies to court proceedings. Do not assume that ongoing settlement discussions or repeated reminders automatically preserve a claim.
Appoint the arbitrator in accordance with the agreement
After invoking arbitration, follow the appointment procedure in the contract. If the agreement provides for a sole arbitrator, the parties should attempt to agree on a suitable candidate in accordance with its terms. If it provides for three arbitrators, each side may appoint one, with the presiding arbitrator selected through the agreed procedure or applicable statutory rules.
The proposed arbitrator should be independent and impartial and must make the disclosures required by the Act. Sections 12 and 13 address disclosures and the procedure for challenging an arbitrator. Section 12(5) also restricts the eligibility of certain persons, subject to the statutory provisions concerning express written waiver after disputes have arisen.
If the other party refuses to cooperate or the agreed appointment procedure fails, a party may seek assistance under Section 11 from the competent court or designated arbitral institution, as applicable under the law in force. The appropriate route depends on the agreement, the type of arbitration and the current statutory framework.
Do not unilaterally appoint an arbitrator in disregard of the contract or the law. A defective appointment can lead to jurisdictional objections and additional proceedings.
What if the other party refuses to participate?
A respondent cannot necessarily prevent arbitration simply by ignoring a valid notice. If the agreed appointment procedure fails, the claimant may seek the appropriate appointment remedy under Section 11. Once the tribunal is properly constituted, the arbitration may proceed under the applicable rules even if a party chooses not to participate, subject to the statutory requirements and the tribunal’s duty to give the parties a fair opportunity to present their cases.
Before approaching a court for appointment, retain evidence of the notice, delivery, response or failure to respond, and any attempts to follow the contractual procedure. The tribunal’s jurisdiction and the validity of the arbitration agreement may still be challenged on legally available grounds.
Consider urgent interim protection if assets or evidence are at risk
Sometimes a claimant cannot wait for the final award. A party may need to preserve disputed goods, protect property, secure the amount in dispute or prevent an action which could undermine the arbitration.
Section 9 allows a party to apply to a competent court for specified interim measures before or during arbitration and, in certain circumstances, after an award but before enforcement. If the court grants a pre commencement interim measure, Section 9(2) generally requires arbitration to commence within 90 days of the order or within further time permitted by the court.
After the tribunal is constituted, Section 17 provides for interim measures by the tribunal. Under Section 9(3), the court generally will not entertain a fresh application once the tribunal exists unless the statutory exception applies because the remedy under Section 17 would not be efficacious.
Interim relief is not automatic. The applicant must establish a proper legal basis and support the request with evidence of the risk and the need for protection.
Prepare your claim and evidence
Once the tribunal is appointed, the parties submit their claims and responses under the Act and any applicable institutional rules. Section 23 addresses statements of claim and defence. The claimant should set out the material facts, contractual obligations, alleged breaches and relief sought in a clear and organised manner.
Evidence may include the contract, invoices, correspondence, delivery records, meeting minutes, payment records, expert reports and witness statements. In technical or construction disputes, expert evidence may be needed to establish defects, delays or the value of disputed work. In financial disputes, a clear calculation of principal, interest and other claimed losses is often essential.
Keep documents organised by date and issue. The claim should distinguish established facts from allegations and explain how the evidence supports each requested remedy.
Understand the arbitration timeline and final award
The duration of arbitration depends on the complexity of the dispute, the tribunal’s schedule, the parties’ cooperation and any applicable institutional rules. Section 29A provides statutory timelines for making awards in certain domestic arbitrations, subject to its terms and applicable extensions. International commercial arbitration is treated differently under the section.
The tribunal may conduct hearings, manage written submissions and determine how evidence is presented. Parties should comply with procedural directions and avoid unnecessary delays.
At the end of the proceedings, the tribunal issues an arbitral award. Under Section 35, an award is generally final and binding on the parties and persons claiming under them, subject to the Act. A party seeking to challenge an award must rely on the limited grounds and applicable time limits under Section 34. Enforcement is governed by Section 36 and related provisions.
Common mistakes when starting arbitration
A frequent mistake is invoking arbitration without checking the exact clause or completing a mandatory pre arbitration step. Others include failing to identify the particular dispute, sending the notice to an incorrect address, overlooking limitation periods, appointing an arbitrator contrary to the agreed procedure or presenting an unsupported claim amount.
Parties should also consider whether arbitration is commercially proportionate. The cost of the tribunal, legal representation and administration may be significant. For smaller disputes, negotiation or another appropriate recovery route may be more efficient, depending on the contract and legal position.
Businesses seeking advice from arbitration specialist lawyers can have the arbitration clause, notice, appointment process and supporting evidence reviewed before taking the next step. Where the dispute involves wider contractual obligations, corporate transactions or governance issues, corporate law lawyers may also help assess the underlying rights and available remedies.
Conclusion
Starting arbitration proceedings in India requires careful attention to the arbitration agreement, the notice invoking arbitration, the appointment procedure and the applicable limitation period. A well prepared claim with clear evidence can reduce procedural disputes and help the arbitration progress efficiently. Before issuing a notice, confirm the contractual requirements, identify the precise dispute and assess whether interim protection is needed. Where the other party refuses to cooperate, the Arbitration and Conciliation Act, 1996 provides mechanisms to address appointment failures and conduct the proceedings. Early legal advice can help ensure the chosen route is appropriate and the claim is presented effectively.
Frequently Asked Questions
How do I start arbitration proceedings in India?
Review the arbitration agreement, comply with any required pre arbitration steps, send a clear notice invoking arbitration and follow the agreed procedure for appointing the arbitrator. Preserve proof of delivery and check limitation deadlines.
Is a legal notice compulsory before arbitration?
A formal request invoking arbitration is generally important under Section 21, unless the parties have agreed otherwise. The contract may also require a separate demand notice, negotiation period or other step before arbitration can begin.
What happens if the other party does not appoint an arbitrator?
If the agreed appointment procedure fails, the claimant may seek appointment assistance under Section 11 through the competent court or designated institution, as applicable. The proper route depends on the agreement and current law.
Can arbitration begin without a written contract?
An arbitration agreement does not always need to appear in a standalone signed contract. Section 7 recognises certain written forms of agreement, including qualifying exchanges of communications. However, the evidence must establish a valid arbitration agreement between the relevant parties.
Can I approach a court during arbitration?
Yes, in defined circumstances. Section 9 provides for court ordered interim measures, while Section 17 empowers the arbitral tribunal to grant interim measures. Court intervention is subject to statutory restrictions, particularly after the tribunal has been constituted.
How long does arbitration take in India?
There is no single timeline for every case. The applicable statutory provisions, complexity, procedural directions and cooperation of the parties all affect duration. Section 29A provides timelines for certain domestic arbitrations, subject to the Act.
