Schedule IV Of Arbitration Act On Fees Of Arbitrator Does Not Mandatorily Apply To International Commercial Arbitrations: Delhi High Court

The Delhi High Court bench of Justice Sachin Datta has observed that in an international commercial arbitration in terms of Section 2(1)(f)(ii) of the Arbitration and Conciliation Act, 1996, the IVth Schedule pertaining to fees of the arbitrator will not apply mandatorily in view of Explanation to Section 11(14) of the Act. Facts The disputes between the parties arose out of the Contract Agreement dated 12.04.2006 for 'four laning of Jhansi-Lakhanadon section KM 297 to KM 351 of the National Highway-26 in Madhya Pradesh. Disputes having arisen between the parties, the Petitioner invoked arbitration on 17.09.2022. The Petitioner was aggrieved by the fact that the Arbitral Tribunal vide order dated 30.10.2023 fixed fees of Rs. 3,00,000/- per arbitrator per sitting. Feeling aggrieved by such fixation of fees, the Petitioner preferred an application dated 16.05.2024 seeking modification of the said order dated 30.10.2023 to the extent of seeking that the Arbitral Tribunal may fix an upper limit of Rs.30,00,000/- on the fees of each Arbitrator as contemplated under IVth Schedule of the Arbitration and Conciliation Act, 1996 (“the Act”) The Arbitral Tribunal vide its order dated 21.10.2024 rejected the aforesaid modification application filed by the Petitioner. While rejecting the said application, it was observed by the Arbitral Tribunal that the present arbitration being an international commercial arbitration in terms of Section 2(1)(f)(ii) of the Act, the IVth Schedule of the Act was not applicable in terms of the explanation to Section 11(14) of the Act. Contentions It was submitted by the Counsel for the Petitioner that in passing the impugned order dated 21.10.2024, the Arbitral Tribunal had ignored the principles of 'party autonomy'. It was further submitted that the Arbitral Tribunal has conducted thirteen hearings till now and the matter is at the stage of arguments on preliminary issues. Going by the alleged amount of fees fixed by the Arbitral Tribunal, total fees of Rs.1,17,00,000/- are to be paid to the Arbitral Tribunal by both the parties. Accordingly, the Petitioner would be required to pay an amount of Rs.58,50,000/- to the Arbitral Tribunal for the hearings conducted till now. The aforesaid amount has surpassed way beyond the upper limit of Rs.30,00,000/- contemplated in terms of the IVth Schedule of the A&C Act. It was submitted that such fixation of fees by the Arbitral Tribunal was highly unreasonable and uncalled for. It was contended that the decision of the Arbitral Tribunal to unilaterally fix fees was against the settled position of law laid down by the Supreme Court in ONGC Ltd. v. Afcons Gunanusa JV (2024) 4 SCC 481, wherein it was observed that the arbitrators do not have power to unilaterally issue binding orders determining their own fees and such unilateral determination of fees violated the principles of party autonomy and the doctrine of the prohibition of in rem suam decisions i.e. the arbitrators cannot be judge of their own private claim against the parties regarding their remuneration. Observations The Court observed that from a perusal of the record, it was evident that the very premise of the petition i.e. that the Arbitral Tribunal had fixed its fees unilaterally, was non-existent. The orders passed by the Arbitral Tribunal revealed that as early as its second sitting, the Tribunal had made it clear that the fees proposed to be charged by it would be Rs. 3,00,000 per arbitrator per sitting which was to be shared equally by both the parties. The Court noted that no objection whatsoever was raised by the Petitioner to the aforementioned order passed by the Arbitral Tribunal or any of the subsequent orders. Further, fees having been fixed, the Arbitral Tribunal directed the partied to clear the arrears of the outstanding fees. Importantly, during the proceedings held on 05.03.2024, the Arbitral Tribunal recorded the assurance of respective counsel for the parties that the arrears of fees would be paid. The Court noted that it was only on 16.05.2024 that an application came to be filed by the Petitioner/claimant for modification of the order dated 30.10.2023. Even the said application did not specifically allege that the fixation of fees by the Arbitral Tribunal was “unilateral”; it only sought modification of the order dated 30.10.2023, whereby the fees was fixed by the Arbitral Tribunal, to the extent that an upper limit of Rs. 30,00,000/- be placed on the fees of the arbitrators. The Court concluded that the assertion by the Petitioner that the fees had been unilaterally fixed by the Arbitral Tribunal was not borne out from the record. Further, reliance placed on of ONGC Ltd. v. Afcons Gunanusa JV in which it has been observed that unilateral determination of fees violates the principle of party autonomy and the doctrine of the prohibition of in rem suam...

Schedule IV Of Arbitration Act On Fees Of Arbitrator Does Not Mandatorily Apply To International Commercial Arbitrations: Delhi High Court

Arpita Pande

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