Arbitration Clause in Your Contract: Appointing an Arbitrator and Challenging the Award

Most commercial contracts in India, from builder-buyer agreements to vendor and franchise contracts, contain an arbitration clause. Arbitration can be faster than a civil suit, but only if the process is started and run correctly.

What makes an arbitration clause valid?

The agreement must be in writing (Section 7). It can be a clause in the contract, a separate agreement, or even an exchange of emails or letters. A clause that is insufficiently stamped is not void; the stamp issue is dealt with later, not at the appointment stage (In re Interplay between Arbitration Agreements and the Indian Stamp Act, 2023, seven-judge bench).

How do you start arbitration?

Send a written notice to the other party invoking the arbitration clause, setting out the dispute and proposing an arbitrator or the procedure in the clause (Section 21). The arbitration formally begins on the date the other party receives this notice, which also matters for limitation.

How is the arbitrator appointed if the other side does not cooperate?

If the parties cannot agree within 30 days, file an application under Section 11 before the High Court (for domestic arbitration) or the Supreme Court (for international commercial arbitration). The court only checks whether an arbitration agreement exists prima facie (SBI General Insurance v. Krish Spinning, 2024). The application should be filed within three years of the refusal to appoint.

Can one party choose the arbitrator alone?

No. In Perkins Eastman Architects v. HSCC (India) Ltd., (2020) 20 SCC 760, the Supreme Court held that a party with an interest in the outcome cannot unilaterally appoint a sole arbitrator. In Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) (8 November 2024), a Constitution Bench held that unilateral appointment clauses in public-private contracts violate equality, and that a party cannot be forced to pick from a narrow panel controlled by the other side. Arbitrators must also disclose conflicts and are ineligible if they fall within the Seventh Schedule (Section 12(5)).

Can you get urgent interim relief?

Yes. Before or during arbitration, the court can grant interim measures such as injunctions, deposits or preservation of property under Section 9. Once the tribunal is constituted, it can grant similar relief under Section 17, and its orders are enforceable like court orders.

How long does arbitration take?

Pleadings must be completed within six months of the arbitrator’s appointment (Section 23(4)), and the award should be made within 12 months after that. Parties can extend by six months by consent. Any further extension needs the court’s approval (Section 29A).

How can an award be challenged?

1. File a petition under Section 34 within three months of receiving the award. The court can condone a further delay of up to 30 days, but no more.
2. Grounds are narrow: incapacity, invalid agreement, lack of proper notice, matters beyond the reference, improper composition of the tribunal, conflict with public policy, or, in domestic arbitration, patent illegality on the face of the award. The court does not re-examine the evidence.
3. Filing a challenge does not automatically stay the award (Section 36). The court may require a deposit as a condition of stay.
4. In Gayatri Balasamy v. ISG Novasoft Technologies (30 April 2025), a Constitution Bench held that courts can modify an award in limited situations: where the invalid part is severable, to correct clerical or computational errors, and in some cases post-award interest.
5. An appeal lies under Section 37.

For commercial disputes, the Section 34 petition goes to the Commercial Court or the High Court’s commercial division, depending on value and jurisdiction.

Need help?

We draft arbitration clauses and act in arbitrations, Section 9, 11 and 34 proceedings in Delhi NCR. Speak to our commercial arbitration lawyer in Noida, see our commercial law practice, or contact us. Founders can also read our startup legal checklist, and creditors 5 legal ways to recover money.

Frequently asked questions

What if the other party ignores my arbitration notice?

If no arbitrator is agreed within 30 days, apply to the High Court under Section 11, and the court will appoint an independent arbitrator.

Is a clause allowing the company to appoint the sole arbitrator valid?

No. The Supreme Court has held that a party interested in the dispute cannot unilaterally appoint a sole arbitrator, and the Constitution Bench in CORE (2024) confirmed this.

How long do I have to challenge an arbitral award?

Three months from receiving the award, with a further 30 days only if the court is satisfied there was sufficient cause. No later challenge is allowed.

Can a court change the amount of an arbitral award?

Only in limited cases. After Gayatri Balasamy (2025), courts can modify severable parts, correct clerical or computational errors and adjust post-award interest in some cases.

Sources

• Arbitration and Conciliation Act, 1996 — Sections 7, 9, 11, 12(5), 17, 21, 23(4), 29A, 34, 36 and 37; Seventh Schedule
• Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760
• Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), 2024 INSC 857
• In re Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, 2023 INSC 1066
• SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 INSC 532
• Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605

This article is general legal information, not legal advice for your specific case. Law and procedure change; please consult an advocate before acting.