Supreme Court Seeks Response from Centre on Six-Year Delay in Setting Up Arbitration Council of India

The Bench of Justices JK Maheshwari and Atul S Chandurkar issued notice returnable in six weeks.

The petitioner has also sought suspension of arbitrations conducted by trade associations under allegedly arbitrary and member-favouring rules, contending that such proceedings violate Articles 14 and 19(1)(g) of the Constitution until uniform regulatory standards are put in place.

According to the petition, filed through AoR Jeetender Gupta, the failure of the Centre to establish the ACI, despite statutory provisions under Sections 43A and 43B of the A&C Act and repeated amendments since 2019, has led to an unregulated arbitration ecosystem. It is argued that this regulatory vacuum has allowed several arbitral institutions to impose unfair procedures, biased appointment mechanisms and compulsory membership conditions, undermining party autonomy and equal treatment of parties.

The plea highlights that the Eighth Schedule to the A&C Act, which earlier prescribed arbitrator qualifications, has since been omitted, making the need for a functional ACI even more urgent. Despite draft notifications issued in 2020 and enforcement of amendments in 2023, the ACI has not been constituted for over six years, the petitioner claims.

Raising specific concerns about institutional arbitration conducted by trade bodies, the petition points to the Cotton Association of India (CAI) as a key example. It alleges that CAI’s Arbitration Rules override both party agreements and the provisions of the A&C Act, violating settled principles of party autonomy and statutory supremacy.

The petitioner, who is engaged in the cotton trade and is a member of CAI, contends that inclusion of CAI’s arbitration clause is imposed as a pre-condition for trading, effectively forcing members to submit to arbitrary rules in order to continue their business. This, the plea argues, amounts to an unreasonable restriction on the freedom to carry on trade under Article 19(1)(g).

The petition also challenges CAI’s internal appellate mechanisms, alleging that they are inconsistent with the limited statutory remedies available under Sections 34 and 37 of the A&C Act and have led to conflicting judicial interpretations by different High Courts, thereby weakening the guarantee of equal protection under Article 14.

It is further argued that the absence of uniform standards has resulted in deterioration in the quality of arbitral awards, increased litigation, and instances where legal representation or application of settled legal principles has been curtailed by institutional rules.

Seeking declaratory relief, the petitioner has urged the Court to declare the Arbitration Rules of the Cotton Association of India dated April 26, 2024 as unconstitutional and violative of the A&C Act. The plea also relies on recommendations made by the Justice B.N. Srikrishna-led High-Level Committee in 2017 and the Expert Committee on Arbitration Law in 2024, both of which emphasised the need for a strong regulatory body to institutionalise arbitration in India.

The petitioner has stated that a representation was made to the Union of India in May 2025, but no response has been received for over six months. It has also drawn attention to a Bombay High Court order dated September 24, 2025, restraining the petitioner from initiating action against CAI.

The petition has sought directions to examine whether the Union’s inaction in constituting the ACI violates statutory and constitutional obligations, and whether trade association-led arbitrations operating without regulatory oversight can continue in their present form.