Arbitrators Fee Cap Is Rs 30 Lakhs, Ceiling Limit Applicable To Individual Arbitrators, Not Tribunal As A Whole : Supreme Court

The Supreme Court held that the ceiling of Rs 30,00,000 in entry at Serial No 6 of the Fourth Schedule of the Arbitration and Conciliation Act is applicable to the sum of base amount and the variable amount, and not just the variable amount.This means that the highest fee payable shall be Rs 30,00,000, the bench comprising Justices DY Chandrachud, Surya Kant and Sanjiv Khanna observed. The court also held that the ceiling is applicable to each individual arbitrator, and not the arbitral tribunal as a whole, where it consists of three or more arbitrators. The conclusions in this regard in the judgment authored by Justice Chandrachud reads as follows:The ceiling of Rs 30,00,000 in the entry at Serial No 6 of the Fourth Schedule is applicable to the sum of the base amount (of Rs 19,87,500) and the variable amount over and above it. Consequently, the highest fee payable shall be Rs 30,00,000;This ceiling is applicable to each individual arbitrator, and not the arbitral tribunal as a whole, where it consists of three or more arbitrators. Of course, a sole arbitrator shall be paid 25 per cent over and above this amount in accordance with the Note to the Fourth Schedule.Sixth entry of the Fourth Schedule & InterpretationsAs per sixth entry of the Fourth Schedule, when the sum in dispute is above Rs 20,00,00,000, the model fee shall be 'Rs 19,87,500 plus 0.5 per cent of the claim amount over and above Rs 20,00,00,000 with a ceiling of Rs 30,00,000'. This means that (i) For an arbitration with the sum in dispute is Rs 20,00,00,000, the fee would be Rs 19,87,500. This will be referred to as the base amount; (ii) For any increase in the sum in dispute over and above Rs 20,00,00,000, 0.5 per cent of the amount above Rs 20,00,00,000 will be added to the fee. This will be referred to as the variable amount. For instance, if the sum in dispute was Rs 21,00,00,000, the amount above Rs 20,00,00,000 is Rs 1,00,00,000. Hence, 0.5 per cent of Rs 1,00,00,000 will be added as the variable amount; and (iii)There is a ceiling of Rs 30,00,000.On the issue of ceiling, the court noticed that there are two possible interpretations: (i) First, the ceiling is for the sum of the base amount and the variable amount. If this interpretation were to be accepted, the highest possible fee would be Rs 30,00,000; or (ii) Second, the ceiling is for the variable amount only. If this interpretation were to be accepted, the highest possible fee would be Rs 49,87,500.Difference between the English and Hindi translationThe bench, at the outset noticed that there is a difference between the English and Hindi translation of the relevant text of the sixth entry which is the presence of a comma in the Hindi translation, which is absent in the English version."The English version of the entry at Serial No 6 of the Fourth Schedule does not have any comma. Due to its absence, it can be construed that the literal meaning of the provision is that the ceiling should only apply to the variable amount.", the court observed.Legislative Intent to put an end to the practise of arbitrators charging exorbitant feesThe court, referring to Law Commission of India 246th Report , observed that that the legislative intent behind the introduction of the Fourth Schedule was to put an end to the practise of arbitrators charging exorbitant fees from the parties taking their services in ad hoc arbitrations. The court thus observed|:"Consequently, when we have the option of setting the ceiling of the fees in the Fourth Schedule at either Rs 30,00,000 or Rs 49,87,500, we believe that it would be appropriate to choose the lower amount since it would be in keeping with legislative intent. The 2015 Arbitration Amendment Act was clearly enacted with the intent to give effect to the recommendation of the LCI 246th Report on the point. Thus, we hold that the ceiling of Rs 30,00,000 in entry at Serial No 6 of the Fourth Schedule is applicable to the sum of base amount and the variable amount, and not just the variable amount."Ceiling applicable for each individual arbitrator and not the whole arbitral tribunalAnother contention raised was that the ceiling of Rs 30,00,000 prescribed in the entry at Serial No 6 of the Fourth Schedule will be applicable to the cumulative fee paid to the entire arbitral tribunal, i.e., in a three member tribunal, each individual arbitrator would receive a fee of Rs 10,00,000. Rejecting this submission as erroneous, the court observed:"First, there is nothing in the language of the Fourth Schedule to support such an interpretation. The header of the third column states "Model Fee" and does not specify it to be in respect of the whole tribunal. Second, if such an interpretation were to be adopted, it would lead to absurd consequences. For instance, in an arbitration where the sum in dispute is large enough to trigger the ceiling of Rs 30,00,000 and it were to be adjudicated by a three-member tribunal, the maximum fee would have to be divided amongst the...

Arbitrators Fee Cap Is Rs 30 Lakhs, Ceiling Limit Applicable To Individual Arbitrators, Not Tribunal As A Whole : Supreme Court

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