Speaking at the first session of the 2nd NLIU SBA Law Conclave, organised by the Student Bar Association of National Law Institute University, Bhopal, Mr. Justice Sanjay Karol of the Supreme Court of India delivered a characteristically incisive address that went beyond the legal technicalities of arbitration reform to ask a far more fundamental question, “Does India’s arbitration framework truly belong to India?”
The sub-theme for the session was “Strengthening India’s Arbitration Framework: Revisiting and Reforming the Arbitration & Conciliation Act, 1996”. Justice Karol addressed a large gathering of legal professionals, faculty members and students. He opened the address by placing arbitration in its historical context, drawing a striking comparison between India’s economic standing at the time of the Arbitration Act of 1940 and the present day, when India stands as the fifth largest economy in the world. He traced the journey from the 1940 Act to the enactment of the Arbitration & Conciliation Act, 1996. He noted that arbitration is a piece of legislation that was introduced alongside the liberalisation of the Indian economy, almost as if it had been imposed rather than organically developed. He opined that the system was not serving the purpose for which it was enacted because this Act is in a sense, foreign to us.
Justice Karol’s central thesis was that the 1996 Act, modelled on the UNCITRAL Model Law on International Commercial Arbitration of 1985 and shaped by the imperatives of attracting foreign investment was designed with an external audience in mind. India and Pakistan were born together as nations, he reflected, and both found ways to progress, yet the arbitration frameworks grafted onto them did not always suit their soil. From the landmark decisions in Renusagar (1994), Saw Pipes (2003) and BALCO (2012), the jurisprudence that emerged, he suggested, left behind a trail of confusion and uncertainty rather than the clarity and consistency that effective dispute resolution demands.
Justice Karol pointed to two fundamental objects that the 1996 Act was meant to achieve- certainty of outcome and time. “People come to invest and generate money,” he said plainly. “There cannot be any situation of uncertainty.” Against this benchmark, he questioned whether all these years of amendments, from 2015 to 2019 and beyond, had delivered the consistency the law promised.
Drawing on his own experience as Advocate General, Justice Karol recounted that he had once suggested doing away with arbitration clauses in government contracts altogether, precisely because they were generating more commercial uncertainty than they were resolving. The story was illustrative of a deeper concern, that arbitration, in the context of public works contracts and specialised disputes, may require not just legislative tinkering but institutional reimagining.
He also pointed to the global dimension of the problem. The world, he observed, is gravitating towards Singapore as a seat of arbitration not because of the sophistication of its legal arguments, but because of the certainty it offers regarding the enforcement of awards. For India to compete and to fulfil the ambitions of a growing economy, this certainty must be built into the very architecture of its arbitration law. Justice Karol concluded with a thought that wove together law, economics, and constitutional purpose: the preamble to the Constitution, the economy’s growth, and the speed and consistency of the legal system are not separate concerns, they are one. He culminated his address by stating, “The economy of this nation has to grow”.
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