Arbitrators Cannot Pass Binding And Enforceable Orders Unilaterally Determining Their Fees: Delhi High Court

The Delhi High Court bench of Justice Dinesh Kumar Sharma has affirmed 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, ie., the arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration.Brief FactsDispute having arisen between the parties with respect to the Rural Electrification Works (RE) in Kaimur District of Bihar, under the Government of India Scheme of Rajiv Gandhi Grameen Vidyuktikaran Yojana (RGGVY), an Arbitral Tribunal was constituted.In the preliminary hearing held on 02.08.2018 it was decided that the fees of the Ld. Tribunal shall be paid in accordance with the Fourth Schedule of the of Arbitration and Conciliation Act, 1996 along with an additional 10% of fees to the Presiding Arbitrator for administrative expenses, by both the parties. It was also decided that fee for counter claim and reading fees shall be fixed at a later stage.Thereafter an application under section 29A was filed seeking extension of the mandate of the tribunal along with substitution of the tribunal on the ground that fee was unilaterally enhanced. The extension was granted by the court by an order passed on March 27, 2023 but refused to substitute the arbitrator and directed the petitioner to approach the tribunal for the said relief.However, application filed before the tribunal praying for the same relief was also dismissed along with costs to be paid by the respondents.ContentionsThe petitioner submitted that the Ld. Tribunal unilaterally enhanced the fee by Rs.45,00,000/-, vide order dated 28.10.2022 without consent of the petitioner and that no reasons were given to justify the exorbitant and unilateral enhancement of fees outside the ambit of the 4th Schedule of the Act.It was further submitted that in ONGC v. Afcons Gunanusa JV 2022 the Hon'ble Supreme Court has held that a party who is not agreeable to a unilateral revision of fees demanded by the tribunal in midst of the proceedings has a real apprehension that its refusal may result in an embarrassing consequence, bearing on the substance of the disputeIt was further submitted that in State of Orissa v. Modern Construction Co. 1972 the Supreme Court has held that demand of unreasonable and unconscionable remuneration amounts to misconduct, and the authority of the arbitrator can be superseded on this ground.It was further submitted that the element of bias can be made a basis to terminate the mandate of the learned Arbitrator, under Section 14 if he becomes de jure unable to perform his function, thereby placing reliance on Rashtriya Ispat Nigam Ltd. v. Space Tech Equipments & Structurals Pvt. Ltd &Ors. 2020.Per contra, the respondent submitted that the present application is not maintainable as the allegations made herein, do not satisfy the requisites of Section 14(1)(a) and nor do any of the grounds fall within the 7th Schedule of the Act and bias cannot be attributed merely because an adverse award has been rendered against the Petitioner, by one of the learned Arbitrators herein as held in HRD Corporation v. GAIL (2018) and Chennai Metro Rail Ltd. Administrative Building v. M/S Transtonnelstroy Afcons (JV) & Anr., 2022.It was further submitted that several dates took place before the Ld. Arbitral Tribunal, between 28.10.2022 and filing of the application wherein the petitioner neither objected nor protested against the enhanced fee, moreover it kept on assuring the learned Tribunal that the same shall be paid.Court's AnalysisIn the Supreme Court has 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, ie., the arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration. It is clear from the above observations of the Supreme Court that the unilateral enhancement of fee is not permissible in the eyes of law. The court noted that In the present case, the bare perusal of the order dated 28.10.2022 passed by the learned Tribunal, it is revealed that the direction of enhancement of fees is passed as a binding direction to both parties and without any consent of the parties.It was observed that the plea taken by the learned counsel for the respondent is that since “no objection” was raised by the petitioner before the learned Arbitrator after 28.10.2022 therefore it amounts to consent, cannot be accepted in view of the categorical law laid down by the Apex Court in ONGC(Supra).In fact, the court noted that in the present case, the petitioner filed an application before the learned Arbitral Tribunal being aggrieved of order dated 28.10.2022 and sought for...

Arbitrators Cannot Pass Binding And Enforceable Orders Unilaterally Determining Their Fees: Delhi High Court

Mohd Malik Chauhan

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