NEW DELHI: India is losing an estimated 1.5-2% of its GDP to a slow and inefficient dispute resolution system, legal experts said at the 9th Mint India Investment Summit in Mumbai last week. Panellists, including senior in-house legal counsels and law firm partners, said weak enforcement sits at the heart of the problem, raising the cost of doing business and deterring investment.
The inability to enforce contracts swiftly and predictably, along with delays, frequent adjournments, procedural hurdles and lack of subject-matter expertise, creates friction for companies and investors. As disputes drag on, capital remains locked up, value erodes, and the broader economy takes a hit.
“There is a study that it has cost us 1.5 to 2% of GDP. That's how significant the failure… the failure to be able to enforce contract swiftly, efficiently, and in a predictable manner,” said Amar Gupta, joint managing partner at JSA.
From an investor’s perspective, the consequences are immediate. “Because we have a complex judiciary system where cases may take a lot of time… the timeliness of dispute resolution goes completely for a toss. From an investor point of view, it becomes more frustrating,” said Amit Bhasin, chief legal officer at Marico.
Investors typically expect disputes to be resolved quickly, at low cost and with predictable outcomes, Bhasin said, adding that in India, prolonged litigation, rising legal costs and uncertainty in judgments often undermine those expectations, while the time value of money continues to erode.
Outside courts
Alternative dispute resolution (ADR), including arbitration, mediation and conciliation, has been positioned as a workaround, offering faster and less formal resolution outside traditional courts. India has strengthened the framework through laws such as the Arbitration and Conciliation Act, 1996 and the Mediation Act, 2023.
Yet delays, court intervention and limited institutional capacity continue to blunt its effectiveness. Gaps are particularly visible in arbitration.
“Institutional arbitration has really not taken off compared to Singapore, London or ICC,” said Debolina Partap, senior vice president (legal) and group general counsel at Wockhardt, pointing to faster and more reliable global alternatives.
Partap also flagged the need for greater domain expertise in arbitral tribunals, noting that reliance on retired judges may not always suit complex commercial disputes. Poorly drafted arbitration clauses, such as single-arbitrator provisions, can lead to deadlocks and court intervention, while three-member tribunals offer more flexibility.
India has over 35 arbitral institutions across the country, including the Mumbai Centre for International Arbitration (MCIA), Delhi International Arbitration Centre (DIAC), and India International Arbitration Centre (IIAC), alongside several industry- and chamber-based bodies.
On mediation, experts said the Mediation Act, 2023 has helped increase adoption, particularly in infrastructure, but is not a universal solution. “Mediation will succeed in certain conditions…where there are fewer players… because the parties have to live together and do business together,” Gupta said, adding that it is less effective in adversarial sectors.
Tech lever
Technology could help address some of these bottlenecks, especially in early procedural stages. Panel members said tasks such as filings and registry work, which currently take months, can be significantly accelerated using AI and digital systems, potentially cutting timelines from over a year to a few months, provided there is policy support.
Contracts themselves are also evolving in response to recent disruptions, including covid-19 and geopolitical conflicts. Companies are moving away from broad, boilerplate clauses to more specific and practical terms.
Bhasin said force majeure provisions were earlier treated as standard clauses and were largely “looked at as an act of God kind of a thing,” but lockdowns exposed gaps as they were “not conceptualized” in contracts.
Post-pandemic, clauses now define clearer triggers and business impact thresholds. “It moved from a situation of absolutely abstract to a situation where there was some specificity,” he said.
The shifts are also expanding the role of general counsels, who are now expected to go beyond legal advisory to manage risk, ensure compliance and safeguard business interests in an increasingly volatile environment. “They can’t lose a case—that is the expectation…the GC has to be a magician,” Partap said.