Section 31A 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 31A gives the Court and the arbitral tribunal the discretion to decide who pays costs, how much and when. The general rule is that the unsuccessful party pays the successful party's costs, but a different order may be made for reasons recorded in writing. A costs agreement made before the dispute is not valid for this purpose.
In any arbitration, or any proceeding under the Act pertaining to arbitration, the Court or arbitral tribunal has the discretion to determine whether costs are payable, the amount and when. If it makes an order, the general rule is that the unsuccessful party pays the costs of the successful party, or it may make a different order for reasons recorded in writing. It must have regard to all the circumstances, including conduct, partial success, a frivolous counterclaim and a refused reasonable settlement offer. An agreement that a party pays the costs in any event is valid only if made after the dispute has arisen. This is as per the India Code consolidated text consulted.
Where section 31A fits
Costs are mentioned in several places. Section 31(8) says the costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A; see section 31. Section 24(1), second proviso, allows costs, including exemplary costs, on a party seeking an adjournment without sufficient cause; see sections 24 and 25. Section 29A(8) allows the Court to impose actual or exemplary costs; see section 29A.
In the India Code consolidated text, section 31A stands in Chapter VI of Part I, "Making of arbitral award and termination of proceedings", directly after section 31. The footnote shows the section as inserted by s. 17 of Act 3 of 2016, with effect from 23-10-2015. Deposits towards costs are a separate subject, dealt with in section 38; see sections 38 and 39. If you are budgeting for an arbitration or want to recover costs, arbitration support can help you plan.
Sub-section (1): the discretion and the meaning of costs
"In relation to any arbitration proceeding or a proceeding under any of the provisions of this Act pertaining to the arbitration, the Court or arbitral tribunal, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), shall have the discretion to determine" three things:
- (a) whether costs are payable by one party to another;
- (b) the amount of such costs; and
- (c) when such costs are to be paid.
The section covers the arbitration itself and court proceedings under the Act that relate to arbitration, for example applications to the Court. It applies "notwithstanding" the Code of Civil Procedure, 1908.
Explanation: what "costs" means. "Costs" means reasonable costs relating to:
| Item | Content |
|---|---|
| (i) | The fees and expenses of the arbitrators, Courts and witnesses |
| (ii) | Legal fees and expenses |
| (iii) | Any administration fees of the institution supervising the arbitration |
| (iv) | Any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award |
The word "reasonable" qualifies all four. The text consulted gives no scale and no cap, and we give none.
Sub-section (2): the general rule
If the Court or arbitral tribunal decides to make an order as to payment of costs:
- (a) the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party; or
- (b) the Court or tribunal may make a different order for reasons to be recorded in writing.
So a party that wins can expect to ask for costs, and a different outcome needs written reasons. The sub-section starts "If the Court or arbitral tribunal decides to make an order", so the choice whether to make an order is within the discretion in sub-section (1).
Sub-section (3): what the Court or tribunal must consider
"In determining the costs, the Court or arbitral tribunal shall have regard to all the circumstances, including":
- (a) the conduct of all the parties;
- (b) whether a party has succeeded partly in the case;
- (c) whether the party had made a frivolous counterclaim leading to delay in the disposal of the arbitral proceedings; and
- (d) whether any reasonable offer to settle the dispute is made by a party and refused by the other party.
Clause (d) rewards a party who made a reasonable settlement offer. For a business, it is a reason to put settlement offers in writing and keep them. For settlement during an arbitration, see section 30. Clause (c) links to the counterclaim in section 23(2A); see section 23.
Sub-section (4): the forms an order can take
The Court or tribunal may make any order under the section, "including the order that a party shall pay":
| Clause | Form of order |
|---|---|
| (a) | A proportion of another party's costs |
| (b) | A stated amount in respect of another party's costs |
| (c) | Costs from or until a certain date only |
| (d) | Costs incurred before proceedings have begun |
| (e) | Costs relating to particular steps taken in the proceedings |
| (f) | Costs relating only to a distinct part of the proceedings |
| (g) | Interest on costs from or until a certain date |
This list is "including", so the Court or tribunal is not limited to it.
Sub-section (5): costs agreements
"An agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event shall be only valid if such agreement is made after the dispute in question has arisen."
So a clause in the original contract such as "the Buyer shall bear all costs of any arbitration, whatever the result" is not valid for that purpose, while a later written agreement made once the dispute exists can be. See our arbitration clause draft for commercial contracts: avoid a fixed cost allocation in the clause.
What the footnotes show about 2015
Two footnotes matter. Section 31A is shown as inserted by s. 17 of Act 3 of 2016, and section 31(8), which says the costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A, is shown as substituted by s. 16 of the same Act, both with effect from 23-10-2015. The footnotes do not reproduce the earlier sub-section (8), so no comparison with it is made here. The text does print, after section 31(8), a separate Explanation of "costs" with four heads that do not mention Courts or Court proceedings; that Explanation is discussed in our section 31 article, and the Explanation to section 31A(1) is the one that applies "for the purpose of this sub-section".
A worked example
Narula Textiles and Prasad Dyes arbitrate an invoice dispute. Narula claims a sum, and Prasad had earlier made a written offer to settle for a smaller amount, which Narula refused. The award gives Narula part of what it claimed, less than Prasad's offer. Narula has succeeded partly, and Prasad's offer was refused. Under sub-section (3)(b) and (d), the tribunal must have regard to both. It decides that each side bears its own costs from the date of the offer and records its reasons in writing under sub-section (2)(b). The costs order is fixed under section 31(8) in accordance with section 31A. Had the contract said that Narula would bear all costs whatever the result, sub-section (5) would make that agreement valid only if made after the dispute arose.
Practical steps
- Keep a record of legal fees, arbitrator fees, institution fees and other expenses, because the Explanation lists them as costs.
- Make settlement offers in writing and keep them.
- Avoid clauses that allocate all costs in advance.
- Ask for a costs order in your submissions; the general rule favours the successful party.
- If you seek a different order, expect to need written reasons.
- Remember that sub-section (1) also covers court proceedings under the Act relating to arbitration.
Need help with costs in an arbitration?
Costs can decide whether a win is worth having. Our arbitration support team can help you record costs, frame settlement offers and present a costs claim to the tribunal.
Key takeaways
- The Court or tribunal has discretion over whether costs are payable, the amount and the timing.
- The general rule: the unsuccessful party pays the costs of the successful party; a different order needs written reasons.
- The Court or tribunal must consider conduct, partial success, frivolous counterclaims and refused reasonable offers to settle.
- A costs agreement that makes a party pay in any event is valid only if made after the dispute has arisen.
- "Costs" means reasonable costs under four heads, including fees of arbitrators, Courts and witnesses, and legal fees.
Read next
- Section 31: form and contents of the award, and interest
- Section 30: settlement and award on agreed terms
- Section 29A: time limit for the award
- Arbitration clause draft for commercial contracts
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.