What is History of Arbitration in India

What is the history of arbitration?

The United States and Great Britain were pioneers in the use of arbitration to resolve their differences.At the First International Conference of American States in 1890, a plan for systematic arbitration was developed, but not accepted. The Hague Peace Conference of 1899, saw the major world powers agreed to a system of arbitration and the creation of a Permanent Court of Arbitration. Arbitration was widely discussed among diplomats and elites in the 1890–1914 era.

New York Convention, 1958 and United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 paved way for international cooperation in execution of Awards. UNCITRAL Model Law on International Commercial Arbitration, 1985 prompted Member Nations to amend and legislate Laws to bring uniformity on International Arbitration and execution of International Awards. 

History of Arbitration can be understood in Three Phases in India-

Arbitration during Ancient India period

As per the Hindu Law, one of the earliest known treatise that mentions about arbitration is "Brhadaranayaka Upanishad". Arbitration is prevalent in India right from the Vedic era. Rishi Yajnavalkya has refered to some Arbitration bodies like Sreni, Puga and Kula and they were known as Panchayat. Many disputes were refered to a small group of wise men of community known as ‘PANCHAYAT’ and the senior most is named as Sarpanch, Member are know as ‘Panchas’, the decision taken by them are binding on the parties. So, earlier the disputes were solved through “Panchayati Raj system”.

The disputes which were referred to the Panchayats were well recognized and received belief in the awards passed by them. The Privy Council in the case of Vytla Sitanna vs. Marivada Viranna, AIR 1934 PC 105 recognised them.

Arbitration at the commencement of British rule

 The relatively modern and first Arbitration law was enacted in India in as early as 1772 by Bengal Regulation of 1772, during the British rule. Thereafter Arbitration in India was recognized as dispute resolution and for the first time when India Arbitration Act, 1899 was enacted which applied to only Three presidency town: Madras, Bombay and Calcutta.

Bengal regulation 1781 provided that the judge can recommend to the parties to submit to arbitration of one person to be mutually agreed upon by the parties. However there was no compulsion.

The Bengal Regulation of 1787, 1793 and 1795 thereagter introduced some procedural changes by empowering the court to refer suit to arbitration with the mutual consent of parties. It was extended via Bombay Regulations Act of 1799 and the Madras Regulation Act of 1802.

Bengal Regulation of 1802, 1814 and 1833 also brought further changes in the applicable procedure. The 1st Legislative Council for India was formed in 1834.

The Legislative Council of India, 1834 and then Code of Civil Procedure Act, 1859 were passed with the object of introducing the procedure of civil courts but this code was not made applicable to the supreme court. This 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.

Legislative Council enacted the Indian Arbitration Act, 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.

Arbitration Act, 1940 applied the whole of India brought uniformity in law across the nation but the Awards were not given finality and left to scrutiny of Civil Court before they acquire finality by way of Rule of Court.

Arbitration under The Arbitration and Conciliation Act, 1996 

Arbitration under The Arbitration and Conciliation Act, 1996 adopted the UNCITRAL Model of United Nations. It also recognised International Arbitration. Apart from minimising Court interference it also provided finality to the Arbitral Awards and made them akin to a Civil Court Decree. Subdequent amendments like Section 29A fixed time duration to complete an Arbitration to One Year after completion of pleadings.

When was arbitration first used in India?

Although the term Arbitration might not find any specific reference in our History books but India has been using Arbitration Method of dispute resolution sicce ancient times. 

As per the Hindu Law, one of the earliest known treatise that mentions about arbitration is "Brhadaranayaka Upanishad". Arbitration is prevalent in India right from the Vedic era. Rishi Yajnavalkya has refered to some Arbitration bodies like Sreni, Puga and Kula and they were known as Panchayat.

Who is the founder of arbitration?

Arbitration is prevalent in India right from the Vedic era and hence this method of dispute resolution is founded in India.

Why was arbitration created?

Growth in International Trade and Commerce catalysed the need of a universally acceptable quick dispute resolution mechanism. Arbitration, by its concept, gives parties sufficient autonomy to decide which Substantive Law to follow and what Procedure to adopt. It allows roping in of Domain Experts and best international legal brains for tefficient dispute resolution.