Despite access to the Commercial Courts Act, 2015, and the Mediation Act, 2023, more companies are opting for arbitration as a preferred dispute resolution mechanism, signalling a clear business preference for arbitration over litigation or mediation to settle commercial disputes.
Promise vs reality: The effectiveness of the Commercial Courts Act, 2015
The Commercial Courts Act, 2015, created special courts for commercial disputes of a certain value. Its goal was to resolve disputes faster through pre-institution mediation, case management hearings, and summary judgment.
Section 12A of the Commercial Courts Act, 2015, makes Pre-Institution Mediation and Settlement (PIMS) mandatory for some commercial disputes. Yet Ministry of Law and Justice data show that PIMS settlement rates are low, at just 1-2%.
Judicial overload is an issue. By December 31, 2025, over 5.39 crore cases were pending across Indian courts, as per data from the National Judicial Data Grid. This included 92,101 in the Supreme Court, 63.66 lakh in High Courts, and 4.76 crore in district and subordinate courts. In district courts alone, pendency grew by 5.84% in three years.
With delays of up to 1,420 days, commercial litigation has become unattractive to businesses, reinforcing why arbitration is increasingly the primary choice for efficient dispute resolution.
While judicial and institutional delays persist, businesses may consider mediation as another alternative, though it too faces challenges.
Mediation has also emerged as an alternative to both litigation and arbitration. The Mediation Act, 2023, introduced a dedicated statutory framework for mediation in India.
In FY 2024-25, just 877 cases were settled out of 59,568 mediation applications, yielding a success rate of approximately 1.47%. In the following year, FY 2025-26 (through September 2025), only 643 of 47,218 mediation applications led to settlement, a rate of about 1.36%. This demonstrates that very few mediation cases actually reach resolution.
The number of mediations that failed to start is also troubling. In FY 2024-25, mediation did not begin in over 52,730 cases. For FY 2025-26, the number was 30,353. This suggests that parties often do not want to participate in or engage with the process.
Reluctance to mediate, especially among government parties, who face institutional and procedural pressures, means businesses need a process that guarantees certainty. Arbitration, with its binding results, clear structure, and finality, emerges as the logical and preferred choice.
Why arbitration remains the preferred mode for commercial disputes
Given the above, arbitration is the preferred alternative for resolving commercial disputes in India, chosen for its speed, certainty, and finality compared with litigation and mediation.
The Arbitration and Conciliation Act, 1996 (as amended in 2015, 2019, and 2021) provides a robust statutory framework that ensures the enforceability of arbitral awards both domestically and internationally.
Arbitration grants the parties a high degree of autonomy. They can select arbitrators with expertise relevant to the disputes subject matter, choose the seat and venue of the proceedings, and agree on procedural rules. This level of flexibility is not available in litigation.
Importantly, Indian courts have consistently adopted a pro-arbitration approach. Courts have time and again held that it cannot substitute an arbitral tribunal’s interpretation of a contract merely because an alternative view exists. This reaffirms the narrow scope of judicial interference under Sections 34 and 37 of the Arbitration & Conciliation Act and strengthens arbitration’s standing as the preferred mechanism for resolving commercial disputes.
Thus, arbitration offers businesses what they value most in alternative dispute resolution: confidentiality, party autonomy, a binding outcome, and procedural flexibility. Until the challenges of litigation and mediation are addressed, arbitration remains the preferred method for resolving commercial disputes.
Gunita Pahwa is Joint Managing Partner and Shobhit Garg is Partner Designate, S&A Law Offices.
The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.