Delhi International Arbitration Centre: On 16-09-2025, the India International Arbitration Centre (‘IIAC’) organised an Oxford Style Debate on the topic “Institutional Arbitration is the Complete Solution to Restore the Faith of PSUs in Arbitration as the Preferred Mode of Dispute Resolution” as a precursor to the awaited Delhi Arbitration Weekend (‘DAW’). The motion was that Institutional Arbitration is the complete solution to restore the faith of Public Sector Undertakings (‘PSU’) in Arbitration as the preferred mode of dispute resolution.
Presided by Justice Devendra Kumar Upadhyaya, Chief Justice, High Court of Delhi; Justice Hemant Gupta, Former Judge, Supreme Court of India; and Dr. Anju Rathi Rana, Law Secretary, the debate had three speakers on each side. Mr. Rajshekhar Rao, Senior Advocate; Mr. Dhyan Chinappa, Senior Advocate; and Ms. Manini Brar, Advocate, spoke for the motion, whereas Mr. Akshay Bhan, Senior Advocate; Mr. Jayant Mehta, Senior Advocate; and Ms. Payal Chawla, Advocate, spoke against the motion.
After welcoming the delegates and dignitaries in his welcome address, Justice Hemant Gupta explained that the issue arose out of the office memorandum dated 03-06-2024 (‘the OM’) issued by the Ministry of Finance. The OM stated that PSUs should not routinely or automatically resolve disputes through arbitration in their contracts, especially in large contracts.
Kicking off the debate, Mr. Dhyan Chinappa, speaking for the motion, presented three case studies in which arbitral tribunals ruled against PSUs in ad hoc arbitrations due to non-payment of fees or granting claims based solely on the arbitrator’s perception of what was fair, without any evidence. Considering that the Government and PSUs accounted for almost 70 per cent of arbitrations in India, they were always at the receiving end of ad-hoc arbitrations. This was why the OM echoed this frustration and demonstrated a hasty retreat from all high-value arbitrations.
Regarding such a retreat from arbitration, Mr. Chinappa underscored the few reasons, such as the inefficiency of ad hoc arbitrations, extended timelines, skyrocketing costs, and shoddy awards that lacked oversight, reasoning, and logic. In his opinion, the issue was not with arbitration but rather how it was run, and this could be solved by having an institution in place.
To substantiate his argument. Mr. Chinappa elaborated upon the aspect of the appointment of an arbitrator. He stated that in an ad-hoc arbitration, parties refuse each other’s nominations and end up in a Section 11 proceeding wherein the Courts usually don’t assess the nature of the dispute, the claims, or the parties. Neither can the Courts examine the previous awards of an arbitrator. However, when an institution appoints an arbitrator, it has the time and resources to examine the dispute and the awards of an arbitrator to determine who should be appointed.
Healso contended that in an institutional arbitration, the costs are known at the beginning, unlike ad-hoc arbitration, where the hearings could go on endlessly with the costs increasing day by day, and no certainty about the timeline. Furthermore, in an institutional arbitration, the arbitrator had to make an application seeking an extension and the justification for it, unlike ad hoc, where the parties had to request an extension. This ensured that the arbitration moved fast,and the timeline was certain.
Thus, he concluded by saying that litigation was not a solution and mediation was seldom final in practice. Several institutions like Mumbai Centre For International Arbitration (‘MCIA’), DIAC, IIAC, etc., could provide for a robust appointment procedure, a fair and comprehensive cost regime, a review of all awards not to alter them, but to use that as an effective mechanism to eliminate arbitrators who do not meet the necessary standard, and effective enforcement in court.
Speaking against the motion, Ms. Payal Chawla traced the OM to illustrate the issues in arbitration for PSUs. At the outset, she reiterated that the reason that PSUs lost faith in arbitration was that it failed to deliver on its core promise of swiftness and cost-effectiveness. She stated that institutional arbitrations were not more cost-effective than ad hoc arbitrations, which created a structural disincentive for the PSUs, which were under a budgetary strain. Furthermore, the evidence that institutional delivery timelines were better than ad hoc arbitrations was anecdotal at best.
She underscored that the issue of timeliness was that although reduced formality had made adjudication faster, parties, especially PSUs, indiscriminately pursued statutory remedies under Section 34 and 37 of the Arbitration and Conciliation Act, 1996 (‘the Act’). Furthermore, institutional arbitrations did not provide immunity from Court interference, and institutional rules could not immunize awards from the chronic delay of litigation.
Explaining how India had arrived at this issue despite aiming to be the international hub for arbitration, Ms. Chawla highlighted that the real issues were structural and inherent within the government itself, as PSU officers faced personal risks in accepting adverse awards. Thus, the safest bureaucratic choice was to appeal, regardless of merit. She added that if the faith of PSUs had to be restored, then focus had to be on real reform.
She proposed that the government should view arbitration as an economic driver of growth, address the issue of bad facts and weak legal representation, empower PSU officers to settle unmeritorious claims by providing them with adequate protection and incentives, and expand the Court’s power under Section 34 of the Act. Thus, she concluded by saying that institutional arbitration was not a remedial universality.
“If we truly want best-in-class arbitrators, we must invest in accreditation and training, perhaps through judicial academies with specially drafted courses.”
-Ms. Payal Chawla, Advocate
Thereafter, Ms. Manini Brar, speaking for the motion, exclaimed that, of course, institutional arbitration was not in and of itself a complete solution, and it required certain supporting factors. To substantiate her argument, she cited the example of how the Delhi High Court’s Registry was an institution that managed not just cases and their procedural aspects but also events. It provides logistical support, cost effectiveness, time effectiveness, and essentially brought disputes to a conclusion. Similarly, we needed an institution to support the highly critical PSU disputes. Furthermore, Ms. Brar observed that, as per statistics, foreign investors preferred institutional arbitration as a mode of dispute resolution.
Regarding the issue of timeliness, she stated that the evidence around the length of an arbitration versus the length of a Court proceeding was not anecdotal. While the Courts had 5 Crore pending cases, the MCIA had resolved 91 percent of its pending cases within 18 months last year. Similarly, the International Chamber of Commerce (‘ICC’), which dealt with FIDIC contracts, i.e., technical contracts and largely adopted across PSUs, particularly for big infrastructure projects, delivered 413 awards within an average of 26 months. Only 26 cases exceeded the time by three months, and yet ICC imposed a fee reduction on the arbitrators. Thus, undisputedly, institutional oversight brings matters to a conclusion, follows up with arbitrators, has the mechanism of reduction of fee, and more importantly, has an institutional memory which would aid in fine-tuning the arbitrator selection process.
On the point of expenses, Ms. Brar stated that time is valuable when you calculate money. More importantly, interest liability is compounded in arbitrations. Most big PSU cases involve a serious interest component, which can be curtailed by simply following an institutional format and resolving the arbitration within a small period of time.
“The moment you say that something is expensive without allocating for the fact that it is also time-effective, that proposition does not hold.”
-Ms. Manini Brar, Advocate
Thus, she concluded by stating that institutional arbitration was an effective dispute resolution mechanism, not the only one. So, mediation and court intervention could be wielded in any dispute resolution that was done through institutional arbitration.
Speaking against the motion, Mr. Akshay Bhan highlighted the various issues with arbitration itself and emphasised that the reasons why PSUs were moving towards litigation had to be addressed. These memorandums are coming after a detailed inquiry as regards the functioning of the courts compared to arbitration, which was supposed to be an effective alternative dispute resolution mechanism.
Regarding costs, he stated that they had increased in arbitration and in institutional arbitration, there was an additional cost of the institutional arbitration. Furthermore, the issue of delay was in every field, not being addressed, and proposing institutional arbitration as the only recourse was not the solution.
Mr. Bhan stated that the problem lay not only in the issue, which in fact is huge, but also in the perception of a PSU that it will be protected in a litigation instead of counterparty adjudication. He opined that in a counterparty adjudication, the PSU or individual was at a disadvantage as the recourse was the appellate mechanism, which was so restricted in nature that it was most of the time impossible to succeed. Thus, the detailed litigation was seen as a safeguard of public money and the PSUs.
Proposing mediation as an alternative, he underscored that institutional arbitration was not the only effective mechanism because the issues in the arbitration process itself were not being addressed. PSUs or individuals did not want to pursue litigation because ultimately, they ended up in litigation. Thus, solutions had to be looked it within the arbitration process itself.
The last speaker for the motion, Mr. Rajshekhar Rao, took the floor to reiterate that, despite the State expressing that it wanted to make India the global hub of arbitration, arbitration had lost the confidence of one of the most important arms of the State. He explained that the mechanism of arbitration, both ad hoc and institutional were established to provide an alternative for litigants to choose from if they were uncomfortable with the Courts. Additionally, he remarked that institutional arbitration was not being posed as the only solution to the entire problem, but rather just for the restoration of the faith that was lost, and it might be a slightly better process than ad hoc arbitration.
Thereafter, he highlighted the issues with the PSUs as a party, such as it was bogged down by the weight of its own expectations, there was an abject lack of willingness to take responsibility, and if someone did take responsibility, then they faced vigilance consequences, and lastly, the problems in the decision-making process. Unlike courts, which treated the State differently even on basic issues like limitation, institutional arbitration takes the fundamental headaches out of the equation from a PSU’s internal administrative processes. He explained that, firstly, an institute aided the PSU in focusing on the core issue of how and with whom to fight the dispute. Secondly, it took away the entire gamut of responsibility that a PSU officer faces in decision-making. Thus, he expressed that the institution helped the parties focus on the dispute by dealing with the other aspects of the process, generated institutional memory, and its credibility would attract people.
“Institutions help build processes. Those processes help tailor conduct. That conduct which leads to consistent conduct leads to confidence.”
– Mr. Rajashekhar Rao, Senior Advocate
Lastly, he concluded by stating that it was time to build institutions that inspired confidence, as the crisis was one of confidence. In his opinion, institutional arbitration of course had its failings but it had demonstrated that there was a way of conducing a process that eliminated some of the pains suffered during the process of arbitration. It helped the PSUs discharge their fundamental responsibility of the doctrine of public trust and add credibility and consistency to the process. Thus, institutions must be utilised to restore the lost faith.
Concluding the arguments against the motion, Mr. Jayant Mehta took the floor as the last speaker. At the outset, he questioned how institutional arbitration was better at appointing an arbitrator, better equipped to deal with the process than ad hoc arbitration which had a set procedure under the Act, whether institutional award was better than an ad hoc award, or that institutional arbitration awards had been challenged lesser. He remarked that no data had been presented by the opposition on these aspects.
“What we know from our experience as lawyers and as arbitrators is that an award is as good as the arbitral tribunal. An institution could also appoint a bad tribunal to write a bad award. An ad hoc tribunal could be equally bad or good and write a good or a bad award.”
– Mr. Jayant Mehta, Senior Advocate
Regarding the OM, Mr. Mehta stated that the Government and PSUs were the biggest litigators and the OM was borne from genuine experiences. He explained that to ensure that the arbitration was effective and efficient, the parties had to present their case in the best manner possible. This required a say in the appointment of the arbitrator and in the arbitration process. In ad hoc arbitration, parties had the autonomy of selecting any rules of arbitration as well as the arbitrator. This purpose was not better served in an institutional mechanism.
“While there is a bit of hand-holding by an institution, that does not mean that that hand-holding is so fundamental to the process that without it the process would be dysfunctional.”
– Mr. Jayant Mehta, Senior Advocate
He concluded by stating that institutional arbitration was not the only solution; it was not a one-size-fits-all solution.
After the rebuttal process, wherein both sides submitted their closing remarks addressing the points raised by either side, an audience vote was taken yet again by a show of hands. Before the debate, the audience leaned in favour of the motion; however, the verdict was split after the debate.
Thereafter, the three jury members took the dais to congratulate the speakers on their effective debating skills, present their observations and remarks, and thank the audience for their presence.
Among the jury, Justice Gupta elaborated upon why he supported the motion. He stated that the prevalent mode of arbitration, i.e., ad hoc arbitration, was not inspiring confidence or yielding the desired result. He recounted some personal experiences on the issue of pendency and how the IIAC appointed arbitrators from different parts of the country due to party preference, without the jurisdictional bar of ad hoc arbitration.
Concluding the event, Mr. Naveen Kumar Singh, CEO, IIAC, delivered the vote of thanks.