Arbitrator's Fee : Claim & Counter-Claim Have To Be Bundled Up Together, With Rs.30 lakhs Ceiling, Says Supreme Court During Hearing

The Supreme Court on Wednesday resumed the hearing on the issue of fixation of standards for fees for arbitrators.The bench of Justices D. Y. Chandrachud, Sanjiv Khanna and Surya Kant was hearing the plea by the ONGC on the issue of the mandatory nature of the 'model' fee scale for arbitrators prescribed under the Fourth Schedule of the Arbitration and Conciliation Act 1996.During the hearing, the bench orally observed that the claim and the counter-claim have to be bundled together with a ceiling of Rupees 30 lakhs for the determination of fees as per the 4th Schedule of the Arbitration Act.The bench was hearing Solicitor General of India Tushar Mehta on whether the ceiling of 30 lakhs in the sixth item in Schedule IV (which says that for sums in dispute of Rs. 20 crores and above, the fee will be 19,87,500 + 0.5% of claim amount over and above 20 crores subject to the ceiling of 30 lakhs), is only referable to the second part or to the total. "The dispute which your lordships may consider adjudicating is this that the view taken in the case of Rail Vikas (one of the impugned decisions) is that 19,87,500 is the base fee and we add 0.5% on every additional amount over and above the 20 crores. 30 lakhs is the ceiling and therefore the maximum fee payable would be 49,87,500. The view taken by the tribunal is that the 30,00,000 ceiling is only for the 0.5% fee part- so 19,87,500 is the base and then you keep adding 0.5% on the balance more than 20 crores and you stop at 30 lakhs. So the maximum fees that an arbitrator would get is 19 lakhs + 30 lakhs. Our case is that it applies for both, that 30 lakhs is the outer limit for both", the SG told the bench.Further, the SG made submissions on whether the model fee corresponding to the various slabs of the 'sum in dispute', as stipulated in Schedule IV of the 1996 Arbitration Act, would be for the whole arbitral tribunal or for each arbitrator. "There can be a sole arbitrator, three arbitrators but there is no prohibition for having five arbitrators. It is only said the number should not be even, it should be odd. The question is whether the amount mentioned in the schedule would be for the tribunal or for each arbitrator. Because in one of the matters of Rail Vikas Nigam Ltd., the view taken is that not only the 30,00,000 ceiling is applicable to the second part but that is per arbitrator. That will be another dimension", the SG advanced."The amount payable under the fourth schedule is per arbitrator- it has to be per arbitrator and not for the whole Tribunal. We must take a view which makes Arbitration workable", said Justice Chandrachud.Justice Chandrachud: "In the Schedule 4, the calculated maximum for any slab of fees corresponds to the base of the next slab. What would have been the object of putting this cap (of 30 lakhs in the 6th item)? The purpose was that though in the slabs for items 1 to 5, the maximum which is payable is necessarily fixed because of the fact that the maximum payable is dependent on the maximum quantum of the sum in dispute, but for the last item it would be open ended. The purpose was that the variable component does not become unwieldy. The object of putting a ceiling is that the sum in dispute is above 20 crores, there is no upper end of the sum in dispute- it could be 21 crores or 21,000 crores. So when they are adding a percentage of the amount above the base, the base being 20 crores, they did not want that additional, variable component to be absolutely uncertain or indefinite. The purpose of introducing the cap of 30 lakhs was that since there is no upper limit to the sum in dispute, there should be a cap as to what the variable component can be. The object was not so much to cap the arbitrator fee as much to ensure that the variable component should not be so indefinite as to be a proportion of the upper limit of the fees. They felt it should not be more than 30 lakhs. The object was not to cap the overall fee of the arbitrator at 30 lakhs but to make sure that the variable component does not become such an unruly horse that if the claim is 20,000 crores, the variable will become 0.5% of this 20,000 crores"SG: "The payment or money or quantum has nothing to do with quality. Like Your lordships are doing service- your lordships are not doing service commensurate to any salary, Your lordships are doing immense service. So to say that the more expensive the arbitrator, the better the adjudication you get is conceptually faulty. Those who really want to earn out of it may not accept institutional arbitration, they will go for ad hoc arbitration where their fees are accepted. Those who have to do it for service will accept the fourth schedule. Fourth schedule is not a mandate, it is a mandate for institutional arbitration"Justice Khanna: "Whether it is 30 lakhs or 49 lakhs, whether it has to be paid to 3 arbitrators or one arbitrator, the real problem comes in claims which are core of the litigation in India, which will be less...

Arbitrator's Fee : Claim & Counter-Claim Have To Be Bundled Up Together, With Rs.30 lakhs Ceiling, Says Supreme Court During Hearing

Mehal Jain

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