In a significant commentary on the current state of dispute resolution in India, Supreme Court judge Justice Pankaj Mithal recently voiced concerns over the increasing retreat of government departments from arbitration commitments. Speaking at an event organized by the Rajiv Gandhi National University of Law (RGNUL), Patiala, Justice Mithal shed light on the growing disillusionment with arbitration mechanisms in the country.
This observation comes in the wake of a notable development — the Public Works Department (PWD) of Delhi issued a circular on April 21, 2025, removing arbitration clauses from its general contract terms. Instead, the PWD now mandates that all disputes under future contracts must be resolved exclusively through courts in Delhi.
Justice Mithal’s remarks provide a timely reflection on the challenges facing India’s arbitration framework, highlighting the urgent need for reform and introspection.
Arbitration in India: From Promise to Disillusionment
Justice Mithal explained that while arbitration was initially promoted as a quicker, cost-effective alternative to traditional litigation, it has increasingly become protracted, expensive, and uncertain. Several factors contribute to this erosion of confidence:
- Prolonged timelines in arbitral proceedings
- Frequent judicial interventions that delay finality
- Procedural arbitrariness in the conduct of arbitrations
- Challenges in enforcement of arbitral awards
These issues, according to the judge, have collectively undermined the attractiveness of arbitration, especially for government bodies that were once its staunch advocates.
The PWD’s recent decision is not an isolated move but a “symbol of a broader and growing disillusionment” with arbitration, Justice Mithal observed. Instead of promoting institutional arbitration and strengthening dispute resolution frameworks, government departments are now withdrawing from arbitration clauses altogether.
Historical Perspective: India’s Rich Legacy of Alternative Dispute Resolution
Justice Mithal also offered a fascinating historical perspective, reminding the audience that alternative dispute resolution (ADR) is not a foreign concept for India. Long before formal courts were established, Indian communities, particularly traders, devised their own effective and culturally nuanced methods to resolve disputes.
For instance, in Gujarat, trade disputes were traditionally settled by committees of respected community elders. These early forms of arbitration were swift, fair, and trusted because the decision-makers understood the customs, context, and commercial practices of the parties involved.
However, the judge lamented that modern Indian arbitration law fails to embrace this indigenous tradition. Instead, it overemphasizes foreign models, often creating structures that are misaligned with Indian commercial realities and dispute resolution needs.
“It is too focused on copying foreign models and does not make enough room for Indian ways of doing business,” Justice Mithal said.
Challenges Faced by the Arbitration Mechanism
Justice Mithal’s concerns highlight several deep-rooted challenges that plague arbitration in India today:
1. Judicial Interference
Despite legislative efforts to minimize court intervention, frequent challenges to arbitral awards under the Arbitration and Conciliation Act, 1996 have led to significant judicial scrutiny. Courts often delve into the merits of awards during enforcement proceedings, prolonging the final resolution of disputes.
2. High Costs
Institutional arbitration, while promoted as cost-effective, has become prohibitively expensive, particularly for smaller disputes. High arbitrators’ fees, administrative charges, and legal costs often outweigh the benefits of quicker resolution.
3. Procedural Inefficiencies
Despite clear procedural rules, many arbitrations become bogged down in delays, adjournments, and ineffective case management. Arbitrators sometimes fail to impose strict timelines, leading to arbitration proceedings that are as long — or longer — than court cases.
4. Delays in Enforcement
Winning an arbitral award is often just the first step; enforcement in Indian courts can be a lengthy and uncertain process. Defendants commonly challenge awards on technical or substantive grounds, leading to prolonged litigation.
Impact on Government Contracts
The withdrawal of arbitration clauses from government contracts, as seen in the PWD circular, is a significant development. It signals:
- A loss of faith in arbitration’s efficacy
- A preference for traditional court adjudication, despite its well-known delays
- A potential increase in litigation load on civil courts, particularly in Delhi
This shift could also discourage private contractors from engaging with government projects, fearing lengthy court battles in the event of disputes.
The Way Forward: Reforming Arbitration in India
Justice Mithal’s candid remarks point to an urgent need for reform in India’s arbitration ecosystem. Some possible steps include:
- Revamping institutional arbitration frameworks to ensure faster, cheaper, and more efficient dispute resolution
- Promoting indigenous dispute resolution models, adapted to modern needs
- Strict enforcement of timelines by arbitral tribunals
- Minimizing judicial intervention except in truly exceptional cases
- Training arbitrators in efficient case management and dispute handling
- Simplifying enforcement mechanisms for arbitral awards
Moreover, there is a pressing need to restore confidence among government departments in the arbitration process. Unless this is achieved, arbitration risks losing its relevance as a preferred dispute resolution method in India.
Conclusion
Justice Pankaj Mithal’s speech is a powerful reminder that the success of arbitration in India depends not just on legal reforms but also on changing attitudes — both among government bodies and the broader legal fraternity. Arbitration must evolve to become a truly swift, fair, and affordable alternative to litigation, rooted in India’s rich tradition of consensual dispute resolution.
Unless systemic issues are addressed urgently, India’s arbitration dream may falter — taking with it the broader promise of providing speedy justice outside the conventional court system.
As India aspires to become a hub for international arbitration, meaningful introspection and reform are the need of the hour.
