Suspension Of Proceedings By Arbitrator For Non-Payment Of Revised Fees Amounts To Effective Withdrawal From Office: Bombay High Court

The Bombay High Court held that an arbitrator who suspended the proceedings indefinitely on the ground of non-payment of revised fees and thereafter failed to conduct hearings must be deemed to have withdrawn from office under section 15 of the Arbitration and Conciliation Act, 1996 (Arbitration Act). The court further held that the arbitrator's mandate had also expired by efflux of time under section 29A of the Arbitration Act thereby necessitating the appointment of a substitute arbitrator. Justice Somasekhar Sundaresan held that arbitrator may propose fees but cannot enforce unilateral revisions. If the fess are unpaid after commencement, the arbitrator may resign or continue the proceedings and exercise a lien on award under section 39 of the Arbitration Act. It further held that doing nothing would amount to effective withdrawal from office under section 15 of the Arbitration Act. The dispute arose out of a Business Agreement executed between the petitioner (a super stockist for FMCG goods) and the respondent (a consignee agent). The arbitration commenced in which the claimant filed its statement of claims alleging fraud of Rs. 1.05 crore. The arbitrator further granted interim reliefs and froze bank accounts due to repeated non-appearance of the respondents. Subsequently, the arbitrator suspended the proceedings due to non-payment of revised fees. It further directed that proceedings would be resumed only when funds are arranged. The petitioner protested the unilateral enhancement of fees citing the Supreme Court's judgment in ONGC v. Afcons which prohibits arbitrators from revising fees unilaterally. When the petitioner insisted on pushing the proceedings further, the arbitrator demanded an apology and refused to fix further dates. The court observed that the arbitrator's mandate had already expired by the time the statement of defence was filed. It further held that it does not matter whether any decision was taken on accepting or rejecting of the statement of defence. It held that “Even assuming the Statement of Defence were accepted, twelve months from that date would be April 14, 2024 and the mandate would stand expired by reason of Section 29A of the Act. While there may have been an impasse since then, with a war of words between the arbitrator and the Petitioner making matters worse, and the arbitrator neither resigning nor conducting the proceedings, evidently, the mandate stood terminated by operation of law.” The Court relied on the Supreme Court's judgment in ONGC where it was held that “Arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their own fees. A unilateral determination of fees violates the principles of party autonomy and the doctrine of the prohibition of in rem suam decisions, i.e., the arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration.” It held that “the Learned Arbitral Tribunal's unilateral revision of the fees could at best a proposal. When the parties do not accept it, the Learned Arbitral Tribunal could well resign and refuse to entertain the arbitration. To hold on to it and also not conduct it, would inexorably lead to the time ticking under Section 29A to have its eventual inexorable effect.” The court further observed that the arbitrator neither resigned nor continued proceedings. The suspension order put proceedings in sine die limbo. The court held that this amounted to proceed without delay under section 14 and effective withdrawal from office under section 15 of the Arbitration Act. The court allowed the present petition holding that arbitrator may propose fees but cannot enforce unilateral revisions. If the fess are unpaid after commencement, the arbitrator may resign or continue the proceedings and exercise a lien on award under section 39 of the Arbitration Act. It further held that doing nothing triggered sections 14 and 15 of the Arbitration Act. It further held that timelines under section 29A of the Arbitration Act continued regardless of the proceedings and the mandate terminated upon expiry of the time period. Finally, the court held that once mandate ends, the court must appoint a substitute arbitrator. Case Title: S.S. Trading Company Limited Versus S.N.C. Trading Company Case Number: ARBITRATION PETITION NO. 196 OF 2024 Judgment Date: 17/11/2025 Mr. Aliabbas Delhiwala a/w Ms. Ankita Karmokar i/b L.R. & Associates for Petitioner. Mr. Makarand M. Kale for Respondent. Click Here To Read/Download The Order

Suspension Of Proceedings By Arbitrator For Non-Payment Of Revised Fees Amounts To Effective Withdrawal From Office: Bombay High Court

Mohd Malik Chauhan

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Mohd Malik Chauhan

Suspension Of Proceedings By Arbitrator For Non-Payment Of Revised Fees Amounts To Effective Withdrawal From Office: Bombay High Court

Mohd Malik Chauhan

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Mohd Malik Chauhan

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