Delhi, Mumbai And GIFT City ; India's Search For A Credible Institutional Arbitration Seat?

India's oft-stated ambition is to emerge as a global arbitration hub, competing with Singapore and Hong Kong in the Asian market. To that end, India's arbitration policy has clearly shifted from ad hoc to institutional arbitration.

A High-Level Committee, chaired by Justice (Retd) B.N. Srikrishna, was constituted to review the institutionalisation of arbitration in India and to make it a robust centre domestic and international arbitration. The recommendation in the Committee's 2017 report focused on strengthening and grading arbitral institutions, accrediting arbitrators, creating a specialist arbitration bar and bench, and providing governmental support for institutional arbitration.

The push for institutional arbitration continued with the Draft Arbitration and Conciliation (Amendment) Bill, 2024. While it is yet to become law, the Bill proposes sweeping amendments to the Arbitration and Conciliation Act, 1996, to boost institutional arbitration further, reduce court intervention, and ensure the timely conclusion of arbitral proceedings. It proposes, among other things, recognition of emergency arbitrators, greater use of arbitral institutions in appointment and extension mechanisms, conducting proceedings electronically, and a clearer statutory framework around arbitral institutions.

This pronounced policy shift from ad hoc to institutional arbitration raises an important question: which is the best seat of arbitration in India right now for institutional arbitration?

The present contest to be India's leading institutional arbitration seat is primarily between Delhi and Mumbai. These two cities combine commercial relevance, institutional presence and capacity, and judicial infrastructure in a way that no other Indian city presently does.

Delhi's Case:

Delhi's case to be called India's premier arbitration seat for institutional arbitration rests on the strength of court and legislation-backed arbitral institutions.

The Delhi International Arbitration Centre is annexed to the Delhi High Court and offers institutional rules, hearing infrastructure, administrative facilities, and a high-quality, diverse panel of arbitrators. In terms of infrastructure, the DIAC has hearing rooms, consultation rooms, and video-conferencing facilities, while its rules provide mechanisms such as fast-track arbitration, emergency arbitration, and interim relief. A High Court-annexed arbitration institution provides Delhi with a concrete link between the institution and the supervisory court.

The India International Arbitration Centre (IIAC) further strengthens Delhi's claim to being India's first-choice seat for institutional arbitration, particularly post the India International Arbitration Centre Act, 2019, which declared the IIAC as an institution of national importance.

In institutional arbitration, parties want a supportive ecosystem. With High Court-linked and Central Government-backed arbitration institutions, Delhi offers that ecosystem.

Mumbai's the centre of India's commercial ecosystem with strong links to almost every major industry such as banking and finance, e-commerce, infrastructure, information technology, manufacturing, shipping, and more. This matters because arbitration clauses are drafted at the transaction stage. In high-value commercial contracts, the seat is often determined by where the transaction is negotiated and executed which, in many cases, is and will continue to be Mumbai.

While it does not have a High Court-linked arbitration institution, Mumbai boasts significant strength when it comes to arbitration institutions. The Mumbai Centre for International Arbitration has emerged as one of India's important arbitral institutions. Its rules provide for administered arbitration and include mechanisms aimed at efficiency, such as emergency arbitration and expedited procedures. Alongside institutions such as the Bombay Chamber of Commerce and Industry and the IMC Chamber of Commerce and Industry, Mumbai offers parties access to strong arbitration institutions, a sophisticated bar, and commercial courts. For many contracts with a strong Mumbai connection, Mumbai will remain the natural choice for the seat of arbitration.

Why Delhi Presently Edges Mumbai

The reason Delhi presently has the edge is not that Mumbai lacks institutional capacity, quality, or judicial capability. It is because of a recent change in legislation, namely an amendment to the Maharashtra Stamp Act.

Under Article 12 of the Maharashtra Stamp Act, arbitral awards are now subject to ad valorem stamp duty. For awards pertaining to immovable property, the stamp duty is the same as would be levied on a conveyance in respect of the same property. For awards concerning movable property, the duty is a percentage of the award amount. Previously, the stamp duty on an arbitral award in Maharashtra was Rs. 500.

Stamp duty comes into play at the very stage when the successful party expects to enjoy the fruits of the arbitration process. By the time a party succeeds in arbitration, it has already spent substantial sums on the institution's fees and other legal costs. Imposing an additional stamp duty on top of the costs already incurred materially changes the economics of award enforcement.

Parties choosing institutional arbitration usually do so with greater deliberation. They expect the legal architecture around the seat to support cost and process efficiency. On that count, Delhi presently offers a more predictable and less burdensome framework than Mumbai.

Therefore, it is not that Delhi's arbitration infrastructure is superior to Mumbai's. A state-level fiscal policy decision undermines Mumbai's claim to be India's most efficient institutional arbitration seat. If the Maharashtra Government reconsiders the issue, Mumbai's case would become significantly stronger.

GIFT City: The Future Disruptor?

While Delhi and Mumbai are the two obvious choices for institutional arbitration today, GIFT City may force itself into the conversation with an entirely different value proposition. While Delhi and Mumbai have inherited their arbitration infrastructure, the GIFT City project aims to design its arbitration infrastructure from the ground up.

The legislative ambition for GIFT City is evident. The Union Budget 2022-23 announced that an International Arbitration Centre would be set up in GIFT City to facilitate the timely settlement of disputes in accordance with international jurisprudence. Subsequently, the International Financial Services Centre Authority (IFCSA) constituted an expert committee to draft the rules and operating framework for the proposed institution. The IFSCA expert committee report addresses not only institutional arbitral rules but also a broader alternative dispute resolution framework, including a specialised judicial structure for disputes arising under the IFSC.

The IFSCA report proceeds on the basis that simply replicating the framework of an existing international arbitration centre or an Indian arbitral institution may not be suitable for GIFT-IFSC. Instead, the Committee proposes a broader Alternative Dispute Resolution Centre that would offer arbitration, mediation, hybrid mechanisms, online and offline dispute-resolution infrastructure, and assisted online processes. The proposed model is built around party autonomy, freedom to choose Indian or foreign governing law, technology-enabled procedures, third-party funding, foreign representation, a real-time case database, and a professionally managed institutional structure.

The report also proposes a notable change to the post-award challenge mechanism for IFSC-seated arbitrations. It recommends doing away with the appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996. A party could still challenge an award under Section 34. However, if dissatisfied with the result of that challenge, the party would have to approach the Supreme Court under Article 136 by way of a Special Leave Petition, rather than file an appeal under Section 37(1)(c). The report also proposes that arbitrations seated at an IFSC be international commercial arbitrations under the Arbitration Act. This would narrow the grounds for challenge since the patent illegality ground under Section 34(2A) is not available against international commercial arbitration awards. These recommendations are significant because one of the recurring criticisms of arbitration in India is that the post-award stage often becomes a second round of litigation. By compressing the appellate structure and narrowing the scope of challenge for IFSC-seated arbitrations, the report seeks to give GIFT City-seated arbitrations a competitive advantage over other Indian seats.

Most significantly, unlike Delhi and Mumbai, whose institutions operate within their cities' existing judicial infrastructure, the report recommends creating dedicated judicial infrastructure for IFSC-related ADR. Phase I contemplates a designated Bench of the Gujarat High Court for ADR matters arising out of GIFT City. In Phase II, the report proposes a separate High Court-level court, named the IFSC International Court. This court would have all the powers of a High Court, except writ and criminal jurisdiction, and would act as the court of first instance and court of appeal for IFSC-related ADR matters. In Phase III, the report contemplates permitting international judges to sit in the IFSC International Court, drawing from models followed in jurisdictions such as Singapore and Dubai.

The IFSCA Committee report recognises that the GIFT City project cannot succeed merely through institutional rules. It contemplates statutory amendments and also acknowledges that the later phases of the proposed court architecture may require constitutional amendments. Delhi and Mumbai's institutional arbitration frameworks are built on existing institutional and judicial infrastructure. GIFT City, by contrast, seeks to build the institution and the supporting judicial framework together.

The GIFT City project therefore envisions a purpose-built institutional arbitration framework with tailored rules and processes, dedicated ADR infrastructure, a specialised court system, faster enforcement mechanisms, and reduced appellate friction. Its present strength is still conceptual rather than operational. However, if the proposed statutory, institutional, and judicial architecture is implemented, GIFT City could offer a more integrated arbitration ecosystem than Delhi or Mumbai can presently. That is why it has the potential to disrupt the Delhi-Mumbai duopoly.

India's arbitration policy is moving decisively towards institutional arbitration. The choice of seat for parties today is between Delhi and Mumbai. While Mumbai remains important, Delhi presently is the better choice, especially given Mumbai's stamp duty burden on arbitral awards.

GIFT City, however, has the potential to change the answer. It may eventually become India's best-designed arbitration ecosystem. If the recommendations in the IFSCA Committee report are implemented effectively, it may supersede Delhi and Mumbai as India's premier seat for institutional arbitration.

Author is a Lawyer Practicing at Mumbai. Views are personal.