In short. Ad hoc or institutional? The real question is who runs your case once the dispute starts. In ad hoc arbitration, you, the other side and the arbitrator manage everything yourselves. In institutional arbitration, a centre such as DIAC appoints the arbitrator, collects the fees and keeps the file moving under its own rules. Ad hoc tends to suit small, friendly, low-value contracts. An institution usually suits bigger contracts, or a counterparty you expect to drag its feet. Decide before you sign. Changing it later needs the other side's consent, and they won't give it easily.
Is this your situation?
- The draft supply contract on your desk says only that 'disputes shall be referred to arbitration'. Nothing about who, where or how.
- The buyer's lawyers have put an arbitration centre in their draft, and you're wondering whether its fees make sense for a business your size.
- Someone told you ad hoc is cheaper. You'd like to know what it actually costs once a fight starts.
- Your counterparty is a PSU, a big listed company or a foreign buyer, and going by past dealings, they'll delay every step they can.
- You're a Udyam-registered supplier and aren't sure the arbitration clause matters at all, given the MSME Council route.
- You're redoing your standard terms and want one clause that holds up for a small order and a big one alike.
What actually separates ad hoc from institutional arbitration?
Both are arbitration under one law, the Arbitration and Conciliation Act, 1996. Either way, the award is enforced like a court decree. It can be challenged only on the narrow grounds in Section 34, and appeals are just as limited. Section 2(1)(a) defines arbitration as any arbitration 'whether or not administered by permanent arbitral institution'. So the Act has no favourite. What differs is administration. And in our experience, administration is exactly where Indian arbitrations go off the rails.
Ad hoc means there's no centre behind the case. You and the other side agree on an arbitrator, or one of you asks the High Court to appoint one under Section 11. The arbitrator then settles the procedure, the fee, the venue and the timetable, usually after hearing both sides on each. Somebody still has to book a room. Somebody has to find a stenographer, keep the record and keep reminding the parties about deposits. Usually that's the arbitrator, or the claimant's lawyer.
With an institution, the contract names a centre and its rules. For Delhi businesses that's usually the Delhi International Arbitration Centre (DIAC), which sits at the Delhi High Court. Others you'll come across are the Mumbai Centre for International Arbitration, the Indian Council of Arbitration and the India International Arbitration Centre, and for cross-border deals the ICC or SIAC. The centre takes in the request. If the parties can't agree on an arbitrator, it picks one from its panel. It works out fees from a published schedule, collects deposits, gives you a hearing room and chases the timelines. We've described the main centres one by one in our note on the arbitration centres used in India.
So don't ask which route gives a better award. Neither does. Ask which one is likelier to get you to an award at all, at a sensible cost for the money at stake, when the other side would be happy if the case never moved.
The sections of the Arbitration Act that bear on this choice
Section 2(1)(a), Arbitration and Conciliation Act, 1996
Arbitration covers both kinds, institutional and non-institutional (ad hoc). Every protection in the Act, and every limit, applies equally to both.
Section 6
The parties, or the tribunal with their consent, can arrange administrative help from a suitable institution or person. That opens a middle path. You can run an ad hoc case and still use a centre just for rooms, records and fee handling.
Section 11
If you can't agree on an arbitrator, the High Court (for a domestic arbitration) appoints one when asked. In Delhi, the court often sends the parties to DIAC. So a case that started ad hoc can end up being run by DIAC anyway. After In re Interplay (2023) and SBI General Insurance v. Krish Spinning (2024), the court only looks, prima facie, at whether an arbitration agreement exists.
Section 11(14) and the Fourth Schedule
The Fourth Schedule gives model fee scales for arbitrators, and High Courts may frame fee rules with it in view. But in ONGC v. Afcons Gunanusa JV (2022), the Supreme Court said the Schedule isn't binding on its own, and that arbitrators can't fix their own fees unilaterally. In an ad hoc case, the fee is whatever gets agreed. Settle it at the first hearing.
Sections 12(5) and the Seventh Schedule
Someone closely tied to a party, like its employee or managing director, can't sit as arbitrator. Nor can one party appoint a sole arbitrator by itself (Perkins Eastman, 2019; CORE v. ECI-SPIC-SMO-MCML, Constitution Bench, 2024). That ended the old ad hoc habit of the stronger side naming its own officer.
Sections 29A and 42A
The award is due within 12 months of the pleadings being completed. The parties can stretch that by six months by consent. After that, only the court can. Section 42A's confidentiality binds the arbitrator, the parties and any institution involved. Both rules apply whichever route you pick.
Ad hoc and institutional arbitration, side by side
| Question | Ad hoc | Institutional |
|---|---|---|
| Who picks the arbitrator | You and the other side, by agreement. If that fails, the High Court under Section 11 (a petition, usually 2 to 9 months) | The centre, under its rules, often within weeks if you can't agree |
| Procedure | Whatever the parties agree, or what the arbitrator lays down in the first procedural order | The centre's published rules, plus the tribunal's own directions |
| Arbitrator's fee | Negotiated. The Fourth Schedule is only a guide (ONGC v. Afcons, 2022) | Set by the centre's schedule according to the amount in dispute. Check the current schedule |
| Admin fee | None. But you'll pay separately for rooms, a stenographer and record keeping | A registration fee and an administrative fee paid to the centre |
| If one side won't pay its deposit | The claimant often pays both shares just to keep the case alive | The rules deal with it. At DIAC, a claim or counterclaim can be terminated for non-payment (Rule 33.5 of the 2023 Rules) |
| Emergency arbitrator | Not available. You go to court under Section 9 | Available under most rules, for instance Rule 14 of the DIAC Rules, 2023 |
| Pace | Depends a great deal on the arbitrator and on whether both sides cooperate | A secretariat chases deadlines, though Section 29A still applies |
| Works well for | Small or mid-sized claims, parties in one city, a relationship both want to keep | Bigger claims, a difficult or much larger counterparty, cross-border deals |
How does each route get an arbitrator appointed, and what if the other side stalls?
Appointment is where an ad hoc clause shows its weak spot, because a typical one says the arbitrator will be 'appointed by mutual consent'. Once the dispute arrives, mutual consent is the one thing nobody has. You send a Section 21 notice proposing three names. Thirty days go by. No reply. Your only option now is a Section 11 petition in the High Court, with its own filing, notice, replies and dates. We've covered that petition in our note on going to court under Section 11 for an arbitrator. Until the court names someone, your actual claim doesn't move an inch.
Under institutional rules, the centre steps in instead. If a party doesn't nominate within the time the rules allow, the centre appoints from its panel. No court petition. No limitation argument over the Section 11 application, and no adjournments because the matter didn't reach on the board that day. If you're a supplier waiting on Rs 60 lakh, shaving four or five months off the start of the case matters more than nearly anything else in the clause.
One more thing. Plenty of older contracts have an ad hoc clause letting the other side's managing director or chief engineer pick the sole arbitrator. That part is now dead. After Perkins Eastman and the 2024 Constitution Bench ruling in CORE, the clause still shows that both sides meant to arbitrate. But the appointment has to be made afresh, by agreement or by the court. If your contracts carry that kind of clause, read our note on why one-sided appointment is invalid before you lean on it.
Which one costs more?
Frankly, ad hoc looks cheaper on paper and often isn't. An institution charges a registration fee and an administrative fee, and its arbitrators are paid on a schedule linked to the sum in dispute. DIAC, for instance, publishes its schedule under the DIAC (Administrative Costs and Arbitrators' Fees) Rules, 2018. Check the current figures there, or see the commercialcourtlawyer.com note on how DIAC works out its fees.
Ad hoc has no administrative fee. But the arbitrator's fee is negotiated, and retired senior judges in Delhi often charge per sitting at rates well above what an institutional schedule would give for a mid-value claim. Then come the costs nobody plans for. A hotel hall or business centre room for every hearing. A stenographer. Photocopies and paper books, and sometimes a secretary to the tribunal. If the other side won't pay its half of the deposit, the claimant usually pays both halves so the case doesn't collapse, and then waits until the very end for a costs order under Section 31A.
When a client brings Advocate B.K. Singh a draft clause, his first question is usually a simple one. If this contract goes bad, what's the biggest amount likely to be in dispute? That number decides a lot. On a Rs 8 lakh claim, an institution's minimum fees can eat a real chunk of whatever you recover. A carefully drafted ad hoc clause with a stated fee basis may be the wiser call there. A Rs 2 crore claim is different. The institution's schedule is usually a small price for an appointment within weeks and a secretariat that keeps both sides to time.
For fees, counsel costs and the smaller expenses all together, see what arbitration costs in India. Your lawyers' fees are separate on either route. They depend on how many hearings there are, not on the route.
Is institutional arbitration quicker?
Usually yes, at the start and in the middle. Not always at the end. The start is quicker because appointment doesn't need a court. The middle is steadier because a secretariat tracks Section 23(4), which wants pleadings finished within six months of the arbitrator's appointment, and nudges the tribunal as the Section 29A deadline of 12 months from completion of pleadings gets close.
The end is down to the arbitrator. No institution can write the award for the tribunal. A busy retired judge who sits on a file for eight months after final arguments will be just as slow inside a centre as outside it. The centre's monitoring helps a little, and so does the fee cut for delay under Section 29A(4). In ad hoc cases, though, the extension petition under Section 29A goes to court, and when both sides have gone quiet the mandate sometimes just lapses. We've seen ad hoc files where nobody noticed the deadline had passed. The losing party raised it later, in its Section 34 petition.
Our note on how long arbitration takes under Section 29A sets out each stage with realistic timelines. Roughly, a well-run domestic arbitration of moderate complexity takes 12 to 24 months from appointment to award on either route. Plan around that. Much of what an institution saves you comes in the months before the arbitrator is even appointed.
What if you need urgent relief, say to stop the other side selling assets?
On this point the two routes really do differ. Most institutional rules let you get an emergency arbitrator within days, before the main tribunal even exists. Under Rule 14 of the DIAC (Arbitration Proceedings) Rules, 2023, the emergency arbitrator has to pass an order within 14 days of appointment. That's quick. That order lasts 90 days unless the tribunal changes it. In Amazon v. Future Retail (2021), the Supreme Court treated an emergency arbitrator's order in an Indian-seated arbitration as enforceable, just like a tribunal's order under Section 17. Our note on emergency arbitration in India explains when and how to use it.
Ad hoc arbitration has no emergency arbitrator at all. Need an injunction before the tribunal is formed? You go to court under Section 9, and then you must start the arbitration within 90 days of the order. That's not a poor remedy. Delhi courts take up urgent Section 9 petitions quickly. Still, it's a separate court case with separate fees, and the other side's lawyers get to argue in open court rather than before one emergency arbitrator. If your business depends on stopping a counterparty fast (from moving goods out of a warehouse, say, or encashing a guarantee), an institutional clause gives you one extra door.
When does ad hoc make sense?
Ad hoc works when the parties are roughly equal, sit in the same city and both want the relationship to outlast the dispute. Think of two Delhi traders who've done business for years and now disagree over a rate revision. That's a good fit. Small contracts fit too, where any institutional fee would be out of proportion to the claim. So do family firms and closely held businesses that already trust a particular retired judge or chartered accountant to decide fairly.
Ad hoc is also more flexible. You can agree on a documents-only hearing, or the fast track under Section 29B with an award within six months. You can fix hearings at times that suit you, or pick an arbitrator with a particular technical background who isn't on any centre's panel. And nothing stops you adopting published rules, like the UNCITRAL Arbitration Rules, to fill procedural gaps without paying anyone to administer the case. That freedom is real.
All of that rests on cooperation, though. Ad hoc rewards parties who behave sensibly. It punishes whoever is owed money when the other side doesn't. If you're the likely claimant (and a supplier or service provider usually is), ad hoc hands the likely defendant extra room to stall.
When should you name an institution?
Go with an institution when the contract is big, when your counterparty is bigger than you or fights every step, and when the deal crosses borders. Any one of these tilts it. A foreign buyer will accept a clause naming SIAC, the ICC or a known Indian centre far more readily than one leaving everything to mutual consent. And an award from a recognised centre carries some practical weight when you take it abroad for enforcement under the New York Convention.
Institutions also help when there are many parties or several linked agreements, because their rules usually allow joinder and consolidation. Take a construction project with a main contractor, subcontractors and a guarantee, where a centre's procedure for bringing everyone into one case saves a lot of argument later. Whether a company that never signed can be pulled in is a separate question. It's covered in our note on non-signatories and arbitration clauses.
For Delhi businesses, DIAC is the usual institutional pick for domestic contracts. It runs under the Delhi High Court's supervision, holds hearings in the High Court premises and by video conference, and has a panel of retired judges, senior advocates and technical members. The commercialcourtlawyer.com guide comparing DIAC with ad hoc arbitration walks through DIAC's own procedure in detail.
What to weigh before you pick
- How big a dispute could get. Think about the largest unpaid bill or damages claim this contract could realistically throw up, not the total contract value. If it's small, look at ad hoc or fast track. If it's large, name an institution.
- Who'll probably be the claimant. If you're usually the one waiting for money, you need a clause that gets an arbitrator in place without the other side's help. That points to an institution.
- What the other side is like. A PSU, a listed company or a foreign buyer with a big legal department can sit out delay far longer than you can.
- Where everyone is based. Parties in different states or countries are better off with a neutral centre, a fixed seat and video hearings. Two firms in the same city can manage ad hoc more easily.
- Whether you might need urgent relief. If goods, assets or a bank guarantee could vanish, an emergency arbitrator is worth having. If not, Section 9 in court covers you.
- Your MSME registration. A registered micro or small supplier can go to the MSME Facilitation Council under Section 18 of the MSMED Act whatever the clause says. For its payment claims, the clause matters less.
- Knowing the cost upfront. With an institutional schedule you can estimate fees before anything goes wrong. Ad hoc fees get negotiated with the arbitrator after the dispute has already begun.
- The record. Section 42A confidentiality applies either way. But a centre keeps a formal record, and that's useful if the award gets challenged later.
Does it change for MSME suppliers, government contracts or consumers?
If you're a micro or small enterprise registered on Udyam, the choice matters less for delayed payments than people think. In Gujarat State Civil Supplies Corporation v. Mahakali Foods (2022), the Supreme Court held that Section 18 of the MSMED Act overrides a private arbitration clause. You can go to the MSME Facilitation Council, which first tries conciliation and then arbitrates. Our note on how the MSME Facilitation Council works explains that route. The MSMED (Amendment) Act, 2026 rewrites Sections 18 and 19, but we couldn't find those changes notified as of late October 2026. Check the current position before you file. The arbitration clause still governs disputes outside Chapter V of the MSMED Act, like a buyer's claim for defective goods. So get it right anyway.
Government and PSU contracts follow their own pattern. A Ministry of Finance office memorandum dated 3 June 2024 told ministries and public sector bodies not to put arbitration into procurement contracts as a matter of routine. Where they do use it, it's to be kept to disputes under Rs 10 crore unless a senior officer approves otherwise, and institutional arbitration is preferred. A small contractor rarely gets to negotiate any of this. Read it carefully before you bid all the same.
Consumer contracts are different again. A builder or service provider can't use an arbitration clause to keep a consumer out of the consumer commission. The Supreme Court said so in Emaar MGF Land v. Aftab Singh (2018). Some disputes can't go to arbitration at all, and our note on arbitrability in India lists them.
Deciding, and putting the choice into your contract
When a client sends us a draft with a blank or shaky dispute clause, this is roughly the order we work in.
Put a number on the likely dispute
Write down what could go wrong. Unpaid invoices, delay damages, defective work, termination. Then put a rough rupee figure on the worst claim that's realistic. Everything else follows from that number.
Work out who'll be claiming
Ask who'll usually be owed money. Suppliers, contractors and service providers are normally the claimants. They gain the most from a clause that works without the other side's cooperation.
Pick ad hoc, institutional or tiered
For small claims, a tight ad hoc clause with a fast-track option may do. For bigger ones, name an institution. Some contracts use a value cut-off, with ad hoc or fast track below a figure and an institution above it.
Get the centre's name and rules exactly right
Use the institution's exact name and current rules, and start from its model clause. Name a centre that doesn't exist, or mix one centre's rules with another's administration, and you've bought yourself a court fight.
Fix the seat, number of arbitrators and language
State the seat (New Delhi, for example). Say one arbitrator unless the value justifies three. Name the language. The seat decides which court supervises the case.
Spell out how an ad hoc arbitrator gets chosen
Give a method that doesn't rely on goodwill. For instance, each side proposes names within 15 days, and if there's no agreement, a named institution appoints as appointing authority.
Deal with fees
In an ad hoc clause, say fees will follow the Fourth Schedule or a named centre's schedule. It heads off a fee fight at the very first hearing.
Read it against the rest of the contract
Check that the jurisdiction clause, any negotiation step before arbitration and the notices clause don't contradict the arbitration clause.
When Advocate B.K. Singh revises a client's standard terms, he keeps the arbitration clause short. He starts from an institution's published model clause and adds only the seat, the number of arbitrators and the language. Every bit of improvisation gives the other side one more way to argue the clause doesn't mean what it says. We'd rather not hand them that.
Keep these in front of you before choosing
- The full draft contract. Not just the arbitration clause, but the jurisdiction, notices and termination clauses too.
- Your honest guess at the largest realistic dispute, both under this contract and across its whole term.
- Your Udyam certificate and the date on it, if you're a micro or small enterprise.
- Who the other side really is. A government body? A PSU, a listed company, a foreign entity?
- The current rules and fee schedule of any centre you're considering, downloaded fresh from its website.
- Older contracts with the same party and their dispute clauses, so the new one doesn't clash with them.
- Where the work or supply actually happens and where each party sits. You'll need that to choose the seat.
- Details of any bank guarantee or security, because that affects whether you might need urgent relief.
An invented example: one Noida packaging unit, two very different buyers
This is a made-up example, not a client. A packaging unit in Sector 63, Noida signs two contracts in the same month. One is with a sweet shop chain in East Delhi, for boxes worth about Rs 4 lakh a quarter. The owners know each other well. Any fight would be over a few lakh rupees at most. The other is a three-year supply deal with a national FMCG company headquartered in Gurugram, worth Rs 3 crore a year. One bad quarter there could leave Rs 70 lakh unpaid.
For the sweet shop, the unit's lawyer suggests a short ad hoc clause. Sole arbitrator, seat at New Delhi, a documents-only fast track under Section 29B where both agree, and fees as per the Fourth Schedule. Nothing fancy. If they can't agree on a name within 15 days, DIAC appoints, acting only as appointing authority. An institutional admin fee on a Rs 3 lakh claim would have been hard to defend.
The FMCG company's draft says 'disputes to be referred to a sole arbitrator appointed by the Company'. That can't survive CORE and Perkins Eastman. Leaving it in would just mean a Section 11 petition later. So the unit proposes DIAC arbitration under its rules, with a sole arbitrator below Rs 5 crore and three above. The FMCG company agrees. It wants predictable fees too. And since the unit is Udyam-registered as a small enterprise, it keeps the MSME Council route open for unpaid invoices whatever the clause says.
Can you switch routes once a dispute has started?
Yes, if both sides agree in writing. An arbitration agreement is a contract, and you can amend a contract whenever you like, even after the dispute has started. A short email exchange agreeing to send the dispute to DIAC under its rules is a valid arbitration agreement under Section 7. We've seen parties who began ad hoc move to a centre after their agreed arbitrator withdrew, simply because nobody wanted another round of arguing over names.
Without agreement, you're stuck with what the contract says. Neither side can force an institution on the other. There's one practical exception in Delhi. When the High Court decides a Section 11 petition in an ad hoc case, it often appoints someone from DIAC's panel and directs that DIAC's rules apply. That's the court's choice, not yours. Don't draft a clause assuming it'll happen.
Going the other way, from institutional to ad hoc, is rarer. It usually happens when the amount in dispute turns out small and both sides want to save the centre's fees. Again, you need both signatures.
Where businesses usually go wrong
The commonest mistake is not choosing at all. The clause just says 'arbitration', with no mechanism, no seat and no rules. It's valid. It also more or less guarantees you a Section 11 petition. Next comes lifting an institution's name from some other contract without checking its rules, or writing a hybrid like 'arbitration under the ICC Rules administered by DIAC', which neither centre is set up to do. A third is the stronger party keeping the right to appoint the arbitrator. The law doesn't allow that any more.
Some businesses pick an institution for a contract where the fee schedule dwarfs any likely claim. When the dispute comes, they drop a perfectly good claim because the deposit is too steep. It happens. Others pick ad hoc to save money and then spend more on court petitions (to appoint, extend and replace arbitrators) than a centre would ever have charged. Our note on the ten commonest arbitration clause mistakes goes through defective clauses one by one. For actual wording, see the guide on drafting an arbitration clause for Indian contracts.
What you can do this week
Pull out the contracts your cash flow depends on most and read the dispute clause in each. Does it name an institution? Does it let one side appoint the arbitrator? Is there a seat, and is the fee basis clear? For new contracts, put a rough figure on the worst realistic dispute and let that decide between ad hoc and institutional. If a dispute has already begun, the first step is usually a proper notice under Section 21. The arbitrationlawyer.in home page lists our guides on each stage after that.
If you'd like a draft contract or your existing dispute clauses checked before you sign or act, or want to hear when arbitration law changes, send them to Advocate B.K. Singh's team through the contact page.
Frequently asked questions
Is an ad hoc award any less valid than an institutional one?
No. Both are arbitral awards under the Arbitration and Conciliation Act, 1996, both are enforced like a decree under Section 36, and both can be challenged only under Section 34. The difference lies in how the case is run, not in what the award is worth in law.
Can I name DIAC only to appoint the arbitrator and keep the rest ad hoc?
Yes. Plenty of clauses name an institution as appointing authority if the parties can't agree within a set time, and leave the rest to the arbitrator. Check what the centre currently does, and charges, for acting only as appointing authority.
Which institution should a Delhi business name for a domestic contract?
Usually DIAC. Most Delhi businesses name the Delhi International Arbitration Centre at the Delhi High Court, because it's local, it's supervised by the court and its panel is wide. Other Indian centres get used too, especially when the other side is based in Mumbai or has its own preference.
Does the Fourth Schedule fix the arbitrator's fee in an ad hoc case?
Not automatically. In ONGC v. Afcons Gunanusa JV (2022), the Supreme Court said the Fourth Schedule is a model and that arbitrators can't fix fees on their own. Agree the fee basis in the clause itself, or at the first hearing.
Can a foreign party insist on SIAC or ICC arbitration?
It can ask. In cross-border deals, Indian businesses often accept a foreign institution in return for a neutral seat or Indian law. Do look at the fee schedules first. For mid-value disputes these centres usually cost more than Indian ones.
My contract says ad hoc. Can I still get an emergency arbitrator?
Not unless both sides agree to adopt institutional rules that provide one. In an ad hoc case, you go to court under Section 9 for urgent interim relief, and then you have to start the arbitration within 90 days of the order.
Does choosing an institution make the arbitration confidential?
Confidentiality comes from Section 42A, which covers every arbitration seated in India, ad hoc or institutional. What a centre adds is a formal record and controlled access to the file. That's all.
Does a tiered clause, ad hoc below a value and institutional above it, actually work?
Yes, as long as the threshold and the way of calculating claim value are clear (for example, claim and counterclaim added together). Vague thresholds breed arguments. Write the figure and the method into the clause itself.
Advocate B.K. Singh
Founder of B.K. Singh & Associates. MCA, LL.B., LL.M. More than twenty years in practice before the Supreme Court, the Delhi High Court, district and commercial courts in Delhi NCR, and tribunals.
This guide explains the law in general terms and is not legal advice. For advice on your own papers, contact the team.