Sections 28-29 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 28 tells the tribunal which law to apply to the merits where the place of arbitration is in India, and it adds two overriding rules: no decision ex aequo et bono without express authority, and always regard to the contract and trade usages. Section 29 says how a panel of arbitrators decides: by majority, with procedural questions open to the presiding arbitrator if authorised.
Where the place of arbitration is in India, in a domestic arbitration the tribunal decides in accordance with the substantive law for the time being in force in India. In an international commercial arbitration it applies the rules of law designated by the parties, and, failing designation, the rules of law it considers appropriate. It decides ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it, and in all cases it takes into account the terms of the contract and trade usages. Under section 29, a panel decides by a majority of all its members unless otherwise agreed. This is as per the India Code consolidated text consulted.
Why this section matters to a contract drafter
The law that governs the merits is not always the same as the law of the arbitration. Section 28 deals with the merits, and it applies "where the place of arbitration is situate in India". Place of arbitration is fixed under section 20; see sections 20 and 22. Whether an arbitration is "international commercial" depends on section 2(1)(f); see section 2.
In the India Code consolidated text, sections 28 and 29 open Chapter VI of Part I, "Making of arbitral award and termination of proceedings". In section 28(1)(b)(iii) the official text reads "failing any designation of the law under clause (a) by the parties" (the designation by the parties is described in clause (b), not clause (a); the text is unclear on this cross-reference, so we quote it as printed and flag it here). The footnote shows sub-section (3) as substituted by Act 3 of 2016, s. 14, with effect from 23-10-2015. If your contract has a cross-border element, arbitration support can help you check how the governing-law clause and the arbitration clause fit.
Section 28(1): which law applies
(a) Arbitration other than international commercial arbitration
The tribunal "shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India." There is no room to choose a foreign law in this limb. The text uses "substantive law", which means the law that decides rights and liabilities, as opposed to procedure.
(b) International commercial arbitration
| Clause | Rule |
|---|---|
| (i) | The tribunal decides in accordance with the rules of law designated by the parties as applicable to the substance of the dispute |
| (ii) | A designation of the law or legal system of a given country is construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules |
| (iii) | Failing designation, the tribunal applies the rules of law it considers appropriate given all the circumstances surrounding the dispute |
Clause (ii) matters for drafters. A clause that says "the law of Singapore governs" points to the substantive law of that country, unless the clause says otherwise. It does not point to that country's conflict of laws rules.
Section 28(2): no decision by fairness alone
"The arbitral tribunal shall decide ex aequoet bono or as amiable compositeur only if the parties have expressly authorised it to do so." (The official text prints "ex aequoet bono" with two words run together; the expression is ex aequo et bono.) These Latin and French terms mean a decision on what is fair and good rather than on strict legal rules. The word "expressly" means the parties must say so in terms. A general clause such as "disputes will be settled fairly" would not by itself meet the test as the text is worded.
Section 28(3): the contract and trade usages
As substituted in 2015: "While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction."
On the history, the footnote says only that the sub-section was substituted "for sub-section (3)"; the earlier wording is not reproduced, so no comparison is made here. Three features of the present wording stand out: the duty applies "in all cases", that is, in domestic and international commercial arbitrations alike; the verb is "take into account"; and it covers both the terms of the contract and the trade usages applicable to the transaction.
For a business reader, this means the contract is a central source, together with the usages of the trade that apply to the transaction. For the background on the contract terms most often argued, see our guides on usual clauses in commercial agreements, and, as Contract Act posts and not sections of this Act, on compensation for breach under section 73 of the Indian Contract Act, 1872 and liquidated damages under section 74 of the Indian Contract Act, 1872. The text consulted does not say how those provisions apply in an arbitration, and we add nothing.
Section 29: decision making by a panel
Sub-section (1): majority
"Unless otherwise agreed by the parties, in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members." Note "all its members": the majority is counted out of the whole panel, not just those present. In a panel of three, two must agree.
Sub-section (2): procedural questions
"Notwithstanding sub-section (1), if authorised by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator." This saves time on scheduling and directions. The authority must come from the parties or from all the members.
How the award is signed where there is more than one arbitrator is in section 31(2); see section 31. The number of arbitrators is fixed under section 10; see section 10.
A quick comparison
| Question | Domestic, seat in India | International commercial, seat in India |
|---|---|---|
| Which law on the merits? | Substantive law in force in India | The rules of law the parties designate; failing that, those the tribunal considers appropriate |
| Does a country designation include conflict rules? | Not addressed | No, unless otherwise expressed |
| Fairness-based decision? | Only if expressly authorised | Only if expressly authorised |
| Contract and usages? | Taken into account in all cases | Taken into account in all cases |
| Panel decision? | Majority of all members, unless otherwise agreed | Same |
A worked example
Ahuja Software, an Indian company, and Lindqvist AB, a Swedish company, sign a licence agreement. The clause provides for arbitration with its place in New Delhi and says the agreement is governed by "the laws of Sweden". Because one party is a body corporate incorporated outside India, the arbitration is likely to be international commercial under section 2(1)(f). Under section 28(1)(b)(i) and (ii), the tribunal applies the substantive law of Sweden, not its conflict rules, unless the clause says otherwise. Whatever law applies, section 28(3) requires the tribunal to take the licence terms and applicable trade usages into account. With three arbitrators, two must agree on the award under section 29(1).
Drafting checklist
- State the governing law of the contract in one clear sentence.
- If the arbitration is international, say whether the designation includes or excludes conflict rules.
- If you want a fairness-based decision, say so expressly; otherwise assume it is not available.
- Put in clear terms on price, delivery and remedies, because the tribunal must take them into account.
- Decide whether the presiding arbitrator may decide procedural questions alone.
- See our arbitration clause draft for commercial contracts for a model clause.
Need help with the governing-law and arbitration clauses?
Getting the governing law, the seat and the panel rules to work together avoids disputes about the dispute. Our arbitration support team can review your clauses and suggest wording that fits sections 28 and 29.
Key takeaways
- Domestic arbitration seated in India: the tribunal applies the substantive law in force in India.
- International commercial arbitration seated in India: the tribunal applies the rules of law designated by the parties; a country designation means its substantive law, not its conflict rules, unless otherwise expressed.
- Fairness-based decisions need express authorisation by the parties.
- In all cases, the tribunal takes into account the terms of the contract and trade usages.
- A panel decides by a majority of all its members, unless otherwise agreed; procedural questions may be decided by the presiding arbitrator if authorised.
Read next
- Sections 20 and 22: place of arbitration and language
- Section 31: form and contents of the award, and interest
- Section 10: number of arbitrators
- Export contract drafting: clauses and dispute resolution
Disclaimer: Based on the India Code consolidated text of the Arbitration and Conciliation Act, 1996, whose footnotes show amendments up to Act 3 of 2021 and a latest date of 12 October 2023, as consulted on 2 October 2026. Rules, regulations and notifications under the Act, later amendments and the commencement of the Mediation Act, 2023 should be checked. This article is general information, not legal advice; check the official text before acting.