Is Arbitration a Better Option Than Filing a Suit Before an Indian Court?
In India, the wheels of justice are often slow. Litigation in Indian courts is riddled with procedural delays, a staggering backlog of cases, and a complex system that can take years—or even decades—before a final resolution is reached. Against this backdrop, arbitration has gained prominence as an alternative dispute resolution (ADR) mechanism. But is arbitration truly a better option than filing a suit in Indian courts, especially when considering the practical complexities involved in not just getting an award, but also enforcing it and receiving the awarded sum?
Let’s unpack this question.
Why Arbitration Gained Popularity in India
Arbitration offers a private, time-bound alternative to court litigation. Parties can select their arbitrator(s), avoid procedural formalities, and often reach a decision much faster than through traditional courts. The 1996 Arbitration and Conciliation Act (modeled on the UNCITRAL Model Law) was enacted to promote this mechanism. Reforms in 2015 and 2019 aimed to make arbitration in India more efficient, limiting court interference and promoting institutional arbitration.
Advantages of Arbitration Over Court Litigation
The Indian legal system now limits judicial interference in arbitration proceedings.
Unlike court proceedings, arbitration is private, which is particularly beneficial in commercial disputes.
Parties can select their arbitrators and tailor procedures to their needs.
Arbitral proceedings are intended to be faster. The 2019 amendment mandates a 12-month timeline for completion of arguments after the pleadings are complete.
Arbitrators with domain-specific expertise can be appointed, leading to more informed decisions.
Cost Considerations
While arbitration is often touted as cost-effective, that’s not always the case in India. Arbitrators’ fees, administrative costs, and lawyers’ fees can add up quickly—particularly in high-stakes or multi-arbitrator panels. If enforcement drags on for years, the cumulative cost can rival or even exceed traditional litigation.
The Flip Side: Complexities in Enforcing an Arbitral Award
Despite these advantages, arbitration in India is not a silver bullet. The real challenge often begins after the award is passed—enforcement.
Enforcing an arbitral award in India can be as difficult as litigating the matter in court. The award must be filed in court for enforcement under Section 36 of the Arbitration Act. If the opposing party challenges the award under Section 34, enforcement gets delayed. Although the 2015 amendment prevents automatic stay on enforcement merely upon filing such a challenge, courts still often grant stays based on various grounds.
Unlike in jurisdictions like Singapore or London, institutional arbitration in India is still maturing. Ad-hoc arbitrations—where parties do not rely on a formal arbitration center—are dominant, leading to inconsistent quality and procedural inefficiencies.
Once enforcement proceedings begin, the pace again slows down. Courts may take months to hear even enforcement applications, and securing an actual recovery through attachment of assets is cumbersome.
In India, it is not uncommon for award-debtors to avoid or delay payment through various legal tactics, including appeals, frivolous objections, and even transferring or hiding assets.
When Arbitration Makes More Sense
Despite these challenges, arbitration can be a better option in certain circumstances:
High-value commercial disputes, where parties prefer confidentiality and expert adjudication.
Cross-border disputes, where enforcing an Indian court decree abroad would be harder than enforcing a foreign arbitral award under the New York Convention.
When both parties are willing to respect the process and there’s a reasonable chance of voluntary compliance with the award.
Conclusion: A Qualified “Yes”
So, is arbitration a better option than filing a suit in Indian courts?
The answer is a qualified yes. For parties who value speed, confidentiality, and procedural flexibility—and who anticipate voluntary compliance—arbitration is undoubtedly a superior alternative. However, if enforcement is likely to be contested or if the counterparty is known for delaying tactics, the benefits of arbitration can quickly erode.
In such cases, parties must factor in the end-to-end journey—from initiating arbitration to actually receiving the awarded amount. Only then can they make an informed choice about whether arbitration truly serves their interests better than traditional litigation.
Bottom Line
Arbitration is a promising tool in India’s legal landscape, but without strong enforcement mechanisms and judicial discipline, its potential remains undercut. Until systemic reforms take fuller effect, arbitration remains better in theory—and often in practice—but not without significant caveats.
Rajvinder Singh Ahluwalia
Partner