# OIL AND NATURAL GAS CORPORATION LTD v. AFCONS GUNANUSA JV

- **Citation:** [2022] 10 S.C.R. 660
- **Court:** Supreme Court of India
- **Decided:** 2022-08-30
- **Bench:** Dr. Dhananjaya Y Chandrachud, Sanjiv Khanna, Surya Kant
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/oil-and-natural-gas-corporation-ltd-v-afcons-gunanusa-jv-35625
- **Pages:** 167

## Headnote

Arbitration and Conciliation Act, 1996 - ss. 11, 31, 31A, 38
and 39 - Fourth Schedule - Arbitrators' Fees - Whether the
arbitrator(s) are entitled to unilaterally determine their own fees -
Whether the term "sum in dispute" in the Fourth Schedule to the
Arbitration Act means the cumulative total of the amounts of the
claim and counterclaim - Whether the ceiling of Rs 30,00,000 in
the entry at Serial No 6 of the Fourth Schedule of the Arbitration
Act is applicable only to the variable amount of the fee or the entire
fee amount - Whether the ceiling of Rs 30,00,000 applies as a
cumulative fee payable to the arbitral tribunal or it represents the
fee payable to each arbitrator - Held: 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 - However, the arbitral tribunal has the discretion
to apportion the costs (including arbitrators' fee and expenses)
between the parties in terms of s.31(8) and s.31A and also demand
a deposit (advance on costs) in accordance with s.38 - If while
fixing costs or deposits, the arbitral tribunal makes any finding
relating to arbitrators' fees (in the absence of an agreement between
the parties and arbitrators), it cannot be enforced in favour of the
arbitrators - The arbitral tribunal can only exercise a lien over the
delivery of arbitral award if the payment to it remains outstanding
u/s.39(1) - The party can approach the court to review the fees
demanded by the arbitrators if it believes the fees are unreasonable
u/s.39(2) - The term "sum in dispute" in the Fourth Schedule of the
Arbitration Act refers to the sum in dispute in a claim and counterclaim separately, and not cumulatively - Consequently, arbitrators
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shall be entitled to charge a separate fee for the claim and the
counter-claim in an ad hoc arbitration proceeding, and the fee
ceiling contained in the Fourth Schedule will separately apply to
both, when the fee structure of the Fourth schedule has been made
applicable to the ad hoc arbitration - 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 - A sole arbitrator shall be paid 25 per
cent over and above this amount in accordance with the Note to the
Fourth Schedule.
Arbitration Law - Concepts of costs and fees in arbitration -
Distinguished.
Arbitration Law - Ad hoc arbitration - Direction / guidelines
issued for governing proceedings in ad hoc arbitrations.
In the instant arbitration petition, the following issues in relation to
the arbitrators' fees arose for consideration: (i) Whether the arbitrator
(s) are entitled to unilaterally determine their own fees; (ii) Whether the
term "sum in dispute" in the Fourth Schedule to the Arbitration Act means
the cumulative total of the amounts of the claim and counterclaim;
(iii)Whether the ceiling of Rs 30,00,000 in the entry at Serial No 6 of the
Fourth Schedule of the Arbitration Act is applicable only to the variable
amount of the fee or the entire fee amount; and (iv)Whether the ceiling
of Rs 30,00,000 applies as a cumulative fee payable to the arbitral tribunal
or it represents the fee payable to each arbitrator.
Disposing of the appeals, the Court
HELD:
Per D.Y. Chandrachud, J. [for himself and Surya Kant, J.]
1.1. ARBITRATOR'S FEE: On a review of a few foreign
jurisdictions that either have explicitly recognised an arbitrators'
entitlement to remuneration and/or have de

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[2022] 10 S.C.R. 660
660
OIL AND NATURAL GAS CORPORATION LTD.
v.
AFCONS GUNANUSA JV
(Arbitration Petition (Civil) No. 05 of 2022)
AUGUST 30, 2022
[DR. DHANANJAYA Y CHANDRACHUD, SANJIV KHANNA
AND SURYA KANT, JJ.]
Arbitration and Conciliation Act, 1996 - ss. 11, 31, 31A, 38
and 39 - Fourth Schedule - Arbitrators' Fees - Whether the
arbitrator(s) are entitled to unilaterally determine their own fees -
Whether the term "sum in dispute" in the Fourth Schedule to the
Arbitration Act means the cumulative total of the amounts of the
claim and counterclaim - Whether the ceiling of Rs 30,00,000 in
the entry at Serial No 6 of the Fourth Schedule of the Arbitration
Act is applicable only to the variable amount of the fee or the entire
fee amount - Whether the ceiling of Rs 30,00,000 applies as a
cumulative fee payable to the arbitral tribunal or it represents the
fee payable to each arbitrator - Held: 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 - However, the arbitral tribunal has the discretion
to apportion the costs (including arbitrators' fee and expenses)
between the parties in terms of s.31(8) and s.31A and also demand
a deposit (advance on costs) in accordance with s.38 - If while
fixing costs or deposits, the arbitral tribunal makes any finding
relating to arbitrators' fees (in the absence of an agreement between
the parties and arbitrators), it cannot be enforced in favour of the
arbitrators - The arbitral tribunal can only exercise a lien over the
delivery of arbitral award if the payment to it remains outstanding
u/s.39(1) - The party can approach the court to review the fees
demanded by the arbitrators if it believes the fees are unreasonable
u/s.39(2) - The term "sum in dispute" in the Fourth Schedule of the
Arbitration Act refers to the sum in dispute in a claim and counterclaim separately, and not cumulatively - Consequently, arbitrators
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shall be entitled to charge a separate fee for the claim and the
counter-claim in an ad hoc arbitration proceeding, and the fee
ceiling contained in the Fourth Schedule will separately apply to
both, when the fee structure of the Fourth schedule has been made
applicable to the ad hoc arbitration - 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 - A sole arbitrator shall be paid 25 per
cent over and above this amount in accordance with the Note to the
Fourth Schedule.
Arbitration Law - Concepts of costs and fees in arbitration -
Distinguished.
Arbitration Law - Ad hoc arbitration - Direction / guidelines
issued for governing proceedings in ad hoc arbitrations.
In the instant arbitration petition, the following issues in relation to
the arbitrators' fees arose for consideration: (i) Whether the arbitrator
(s) are entitled to unilaterally determine their own fees; (ii) Whether the
term "sum in dispute" in the Fourth Schedule to the Arbitration Act means
the cumulative total of the amounts of the claim and counterclaim;
(iii)Whether the ceiling of Rs 30,00,000 in the entry at Serial No 6 of the
Fourth Schedule of the Arbitration Act is applicable only to the variable
amount of the fee or the entire fee amount; and (iv)Whether the ceiling
of Rs 30,00,000 applies as a cumulative fee payable to the arbitral tribunal
or it represents the fee payable to each arbitrator.
Disposing of the appeals, the Court
HELD:
Per D.Y. Chandrachud, J. [for himself and Surya Kant, J.]
1.1. ARBITRATOR'S FEE: On a review of a few foreign
jurisdictions that either have explicitly recognised an arbitrators'
entitlement to remuneration and/or have dealt with the issue of
arbitrators' power of fixing their own remuneration, it is seen
that although there are jurisdictional differences, the following
broad principles emerge: (i) Typically, the fees payable to
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arbitrator(s) are determined through an agreement between the
parties (of which the arbitrator(s) become aware of when they
take up the assignment) or a separate agreement of the parties
with the arbitrator(s). The arbitrator(s) then become bound by
such contractually agreed fees; and (ii) Certain arbitration
legislations give the arbitrator(s) effective power to determine
their own fees, typically when there is an absence of agreement
between the parties on the subject. However, such determination
of fees is subject to review by the courts who can reduce the fees
if they are not reasonable. Thus, arbitrator(s) do not possess an
absolute or unilateral power to determine their own fees. Parties
are involved in determining the fees of the arbitrator(s) in some
form. It could be by: (i) determining the fees at the threshold in
the arbitration agreement; or (ii) negotiating with the arbitrators
when the dispute arises regarding the fees that are payable; or
(iii) by challenging the fees determined by the tribunal before a
court. [Paras 66 and 67][720-C-F]
1.2 Party autonomy is a cardinal principle of arbitration.
The arbitration agreement constitutes the foundation of the
arbitral process. The arbitral tribunal is required to conduct the
arbitration according to the procedure agreed by the parties. The
procedure may stipulate adherence to institutional rules or ad
hoc rules or a combination of both. [Para 68][721-B]
1.3 (i) In terms of the decision of this Court in Gayatri Jhansi
Roadways Ltd and the cardinal principle of party autonomy, the
Fourth Schedule is not mandatory and it is open to parties by
their agreement to specify the fees payable to the arbitrator(s)
or the modalities for determination of arbitrators' fees; and (ii)
Since most High Courts have not framed rules for determining
arbitrators' fees, taking into consideration Fourth Schedule of
the Arbitration Act, the Fourth Schedule is by itself not mandatory
on court-appointed arbitrators in the absence of rules framed by
the concerned High Court. Moreover, the Fourth Schedule is
not applicable to international commercial arbitrations and
arbitrations where the parties have agreed that the fees are to
be determined in accordance with rules of arbitral institutions.
The failure of many High Courts to notify the rules has led to a
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situation where the purpose of introducing the Fourth Schedule
and sub-Section (14) to Section 11 has been rendered nugatory,
and the court-appointed arbitrator (s) are continuing to impose
unilateral and arbitrary fees on parties. Such a unilateral fixation
of fees goes against the principle of party autonomy which is
central to the resolution of disputes through arbitration. Further,
there is no enabling provision under the Arbitration Act
empowering the arbitrator(s) to unilaterally issue a binding or
enforceable order regarding their fees. [Para 79][730-G-H; 731A-D]
1.4 (i) Arbitration proceedings must be conducted
expeditiously; (ii) Court interference should be minimal; and (iii)
When one or both parties, or the parties and the arbitral tribunal
are unable to reach a consensus, it is open to the arbitral tribunal
to charge the fee as stipulated in the Fourth Schedule, which is
the model fee schedule and can be treated as binding on all.
Consequently, when an arbitral tribunal fixes the fee in terms of
the Fourth Schedule, the parties should not be permitted to object
the fee fixation. It is the default fee, which can be changed by
mutual consensus and not otherwise. [Para 105][754-B-D]
INTERPRETATION OF "SUM IN DISPUTE" IN THE
FOURTH SCHEDULE
2.1 On basis of analysis, the following principles emerge:
(i) The Arbitration Act treats claims and counter-claims at par,
and holds them subject to the same procedural timelines and
requirements; (ii) The Arbitration Act allows the arbitral tribunal
to fix a deposit of costs for claims and counter-claims separately,
recognizing that they are distinct proceedings since: (a) the
proceeding for adjudicating on the claim is independent of the
proceeding for deciding the counter-claim; (b) distinct issues may
arise before the tribunal while adjudicating on the claim and
counter-claim; (c) the evidence led in support of the claim may
not be dispositive of the material which would be relied on to
decide the counterclaim; and (d) the decision on the claim does
not necessarily conclude the adjudication of the counter-claim;
and (iii)The Arbitration Act considers claims and counter-claims
to be independent proceedings since the latter is not contingent
upon the former. Rather, it protects the right of any respondent
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to raise a counter-claim in an arbitration proceeding, provided it
arises from the arbitration agreement under dispute. Further, in
the event of a default in the payment of a deposit either for the
claim or counter-claim, it specifically notes that the proceedings
will be terminated only in respect of the claim, or as the case may
be, the counter-claim in respect of which the default has occurred;
(iv)Though a counter-claim may arise from similar facts as a claim,
the counter-claim is not a set off and is not in the nature of a
defence to the claim; and (v) A counter-claim will survive for
independent adjudication even if the claim is dismissed or
withdrawn and the respondent to a claim would be entitled to
pursue their counter-claim regardless of the pursuit of or the
decision on the claim. [Para 117][760-C-H; 761-A]
2.2 On analysis of the statutory framework of the Arbitration
Act and the CPC, related academic discourse and judicial
pronouncements, the following conclusions emerge: (i) Claims
and counter-claims are independent and distinct proceedings; (ii)
A counter-claim is not a defence to a claim and its outcome is not
contingent on the outcome of the claim; (iii) Counter-claims are
independent claims which could have been raised in separate
proceedings but are permitted to be raised in the same
proceeding as a claim to avoid a multiplicity of proceedings; and
(iv)The dismissal of proceedings in relation to the original claim
does not affect the proceedings in relation to the counter-claim.
[Para 135][770-A-D]
2.3 On a combined reading of Section 31(8), Section 31A
and Section 38(1) of the Arbitration Act, it is clear that: (i) separate
deposits are to be made for a claim and counter-claim in an
arbitration proceeding; and (ii) these deposits are in relation to
the costs of arbitration, which includes the fee of the arbitrators.
Therefore, prima facie, the determination of the fee under the
Fourth Schedule should also be calculated separately for a claim
and counter-claim - i.e., the term "sum in dispute" refers to
independent claim amounts for the claim and counterclaim. Such
an interpretation is also supported by the definition of claim and
counter-claim, and by the fact that the latter constitutes
proceedings independent and distinct from the former. [Para 136]
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FEE CEILING IN FOURTH SCHEDULE
3. The Law Commission of India (LCI) 246th Report,
indicates 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. Consequently, when there is a option of setting
the ceiling of the fees in the Fourth Schedule at either Rs
30,00,000 or Rs 49,87,500, 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, 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. [Para 155][782-A-C]
CEILING APPLICABLE TO INDIVIDUAL ARBITRATORS
4. The submission 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, and each individual
arbitrator would receive a fee of Rs 10,00,000 is erroneous, and
hence must be rejected. 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 three
arbitrators. On the other hand, if the same dispute were to be
adjudicated by a sole arbitrator, the sole arbitrator would then
receive the whole amount of the maximum fee, i.e., triple of what
each individual arbitrator would have received in a three-member
tribunal. Such a disparity is inconceivable, regardless of the extra
work a sole arbitrator may have to put in. This is further bolstered
by the Note to the Fourth Schedule, which states that "[i]n the
event the arbitral tribunal is a sole arbitrator, he shall be entitled
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to an additional amount of twenty-five per cent on the fee payable
as per the above". Consequently, the sole arbitrator would not
only receive Rs 30,00,000, but an additional 25 per cent over
and above it. Indeed, it is clear that the Note was added to the
Fourth Schedule to fairly compensate sole arbitrators who
arguably would have to do more work than as a member of a
larger tribunal; which is why they are allowed payment of 25 per
cent of the fee over and above what they would be paid pursuant
to the table given in the Fourth Schedule. The corollary of this is
that the fee provided in Fourth Schedule is for each individual
arbitrator, regardless of whether they are a member of a
multimember tribunal or a sole arbitrator. Finally, this
interpretation of the Fourth Schedule, that the fee provided
therein is applicable for each individual arbitrator and not the
whole arbitral tribunal, has also been fairly conceded before this
Court by the Attorney General. [Para 157][782-E-H; 783-A-B]
CONCLUSION
5. (i) 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.
However, the arbitral tribunal has the discretion to apportion the
costs (including arbitrators' fee and expenses) between the
parties in terms of Section 31(8) and Section 31A of the Arbitration
Act and also demand a deposit (advance on costs) in accordance
with Section 38 of the Arbitration Act. If while fixing costs or
deposits, the arbitral tribunal makes any finding relating to
arbitrators' fees (in the absence of an agreement between the
parties and arbitrators), it cannot be enforced in favour of the
arbitrators. The arbitral tribunal can only exercise a lien over
the delivery of arbitral award if the payment to it remains
outstanding under Section 39(1). The party can approach the court
to review the fees demanded by the arbitrators if it believes the
fees are unreasonable under Section 39(2);
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(ii) Since this judgment holds that the fees of the arbitrators
must be fixed at the inception to avoid unnecessary litigation and
conflicts between the parties and the arbitrators at a later stage,
this Court has issued certain directives to govern proceedings
in ad hoc arbitrations;
(iii)The term "sum in dispute" in the Fourth Schedule of
the Arbitration Act refers to the sum in dispute in a claim and
counter-claim separately, and not cumulatively. Consequently,
arbitrators shall be entitled to charge a separate fee for the claim
and the counter-claim in an ad hoc arbitration proceeding, and
the fee ceiling contained in the Fourth Schedule will separately
apply to both, when the fee structure of the Fourth schedule has
been made applicable to the ad hoc arbitration;
(iv)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; and
(v) 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. [Para 158][783-C-F; 784-A-E]
Bharat Aluminium Co. v. Kaiser Aluminium Technical
Services (2016) 4 SCC 126 : [2016] 1 SCR 364; Copper
Ltd Centrotrade Minerals & Metal Inc. v. Hindustan
(2017) 2 SCC 228 : [2016] 9 SCR 83; Salem Advocate
Bar Assn. (II) v. Union of India (2005) 6 SCC 344 :
[2005] 1 Suppl. SCR 929; Indian Oil Corpn. Ltd. v.
Amritsar Gas Service (1991) 1 SCC 533 : [1990] 3
Suppl. SCR 196; Nityanand Sharma v. State of Bihar
(1996) 3 SCC 576 : [1996] 2 SCR 1; Aswini Kumar
Ghose v. Arabinda Bose 1953 SCR 1 and Indore
Development Authority (LAPSE-5 J.) v. Manoharlal
(2020) 8 SCC 129 : [2020] 3 SCR 1 - followed.
Sanjeev Kumar Jain v. RS Charitable Trust (2012) 1
SCC 455 : [2011] 12 SCR 744; Voestalpine Schienen
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GmbH v. Delhi Metro Rail Corpn. Ltd. (2017) 4 SCC
665 : [2017] 1 SCR 798; State of Goa v. Praveen
Enterprises (2012) 12 SCC 581 : [2011] 10 SCR 1026;
Jag Mohan Chawla v. Dera Radha Swami Satsang
(1996) 4 SCC 699 : [1996] 2 Suppl. SCR 509; Aphali
Pharmaceuticals Ltd. v. State of Maharashtra (1989) 4
SCC 378 : [1989] 1 Suppl. SCR 129; Mohd. Shabir v.
State of Maharashtra (1979) 1 SCC 568 : [1979] 2
SCR 997; Mithilesh Kumari v. Prem Behari Khare (1989)
2 SCC 95 : [1989] 1 SCR 621- relied on.
Assam State Weaving and Manufacturing Co. Ltd. v.
Vinny Engineering Enterprises (P) Ltd. AIR 2010 Cal
52- approved.
NHAI v. Gayatri Jhansi Roadways Ltd. (2020) 17 SCC
626; Union of India v.Singh Builders (2009) 4 SCC
523 : [2009] 3 SCR 563; Dattatraya Govind Mahajan
v. State of Maharashtra (1977) 2 SCC 54; Sanjeev
Kumar Jain v. Raghubir Saran Charitable Trust and
Ors. (2012) 1 SCC 455 : [2011] 12 SCR 744; Triveni
Shankar Saxena v. State of UP & Ors. 1992 Suppl. 1
SCC 524 : [1991] 3 Suppl. SCR 534; Voltas Ltd. v.
Rolta India Ltd. (2014) 4 SCC 516 : [2014] 2 SCR 797;
Rajni Rani v. Khairati Lal (2015) 2 SCC 682 : [2014]
10 SCR 971; Thomas Mathew v. KLDC Ltd. (2018) 12
SCC 560 - referred to.
Gammon Engineers and Contractors Pvt. Ltd. v. NHAI
2018 SCC OnLine Del 10183 and NHAI v. Gayatri
Jhansi Roadways Ltd. 2017 SCC OnLine Del 10285 -
referred to.
 KS Norjarl AS v. Hyundai Heavy Indus. Co., [1992] 1
QB 863, 884; Compagnie Européenne de Céréales SA
v. Tradax Exp. SA [1986] 2 Lloyd's Rep. 301 (QB);
Jivraj v. Hashwani [2011] UKSC 40; Taylor v. Caribou
102 Me 401 : 67 A 2 (1907); Hussmann (Europe) Ltd
v. Al Ameen Development & Trade, [2000] 2 Lloyd's
Rep. 83 Queen's Bench Division (Commercial Court)
- referred to.
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P St J Langan, Maxwell on The Interpretation of Statutes
(N M Tripathi Private Ltd, 1976 David St John Sutton,
Judith Gill and Matthew Gearing); Russell on
Arbitration (24th edition, 2015) ("Russell on
Arbitration"); Gary B Born, International Commercial
Arbitration (2nd edition, 2014) Loukas A Mistelis (ed),
Concise International Arbitration (2nd edition, 2015)
Chapter 23 ("Mistelis on Arbitration"); Halsbury's
Laws of India (Civil Procedure) (2 nd edition);
Zuckermann on Civil Procedure (Sweet & Maxwell,
4th edition) Justice GP Singh, Principles of Statutory
Interpretation (14th edition, Lexis Nexis); Diggory
Bailey and Luke Norbury, Bennion on Statutory
Interpretation (7th edition, Lexis Nexis)- referred to.
Per Sanjiv Khanna, J.
HELD : 1.1. While I am entirely in agreement with the
considered view expressed by D.Y. Chandrachud, J. that -(a)
party autonomy and arbitration agreement are the foundation of
the arbitral process, and therefore, when the parties fix the fee
payable to the arbitral tribunal, the law does not permit the arbitral
tribunal to derogate and ask for additional or higher fee; (b) where
the court while appointing an arbitrator fixes the fee, the arbitral
tribunal cannot ask for supplementary or higher fee; and (c) in
both cases, the fee payable to the arbitral tribunal may be
enhanced either by a written agreement between the parties or
by a court order. However, I am unable to concur that in the
absence of any agreement between the parties, or the parties
and the arbitral tribunal, or a court order fixing the fee, the arbitral
tribunal is not entitled to fix the fee, as I am of the opinion that by
the implied terms of the contract and as per the provisions of the
Arbitration and Conciliation Act, 1996, an arbitral tribunal can fix
a reasonable fee, which an aggrieved party, who is not a signatory
to the written agreement, can question under sub-section (3) of
Section 39 of the A&C Act during the pendency of the arbitration
proceedings, or in case the arbitral tribunal claims lien on the
award in terms of sub-section (2) to Section 39 of the A&C Act.
At the same time, I respectfully agree with D.Y. Chandrachud,
J., that when an arbitral tribunal, even in the absence of consent
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of the parties, fixes the fee in terms of the Fourth Schedule, the
parties should not be permitted to object the fee fixation. The
Fourth Schedule is the default fee, declared by the legislature as
fair and reasonable, which can be changed by mutual consensus,
and not otherwise. Further, post the enforcement of the
Arbitration Amendment Act, 2019 vide Act 33 of 2019 on 30th
August 2019, and insertion of sub-section (3A) to Section 11, the
proviso to the sub-section states that the fee prescribed in the
Fourth Schedule is mandatory and applies to all arbitrations
including ad hoc arbitrations, albeit in case of institutional
arbitrations, as per sub-section (14) to Section 11 of the A&C
Act, the fee fixed by the institution "subject to the rates specified
in the Fourth Schedule" would be payable. [Para 2][786-F-H; 787A-D]
1.2. On interpretation of the Fourth Schedule, I respectfully
agree with the view expressed by D.Y. Chandrachud J. on
interpretation of Serial No.6 and that the fee prescribed is for
each member of the arbitral tribunal, with a note providing for an
additional amount of twenty five percent in case of a sole/single
member arbitral tribunal. Even so, on these aspects I would like
to give a separate reasoning, as also point anomalies in the Fourth
Schedule. However, in my opinion, the expression "sum in
dispute" means the sum total of both the claims and counter
claims. [Para 3][787-E-F]
2. Sub-section (8) to Section 31, as originally enacted before
its substitution by Act No. 3 of 2016, had stipulated that unless
otherwise agreed by the parties, the arbitral tribunal shall fix the
cost of arbitration. The explanation to this Section clarified that
the expression 'costs', for the purpose of the sub-section, means
reasonable costs relating to the fees and expenses of the
arbitrator and the witnesses. The sub-section emphasised that
the agreement between the parties is paramount and binding.
The arbitral tribunal is entitled to fix costs of arbitration, which
includes the fee and expenses of the arbitrator, if the agreement
between the parties is wordless and silent as to the fee payable
to the arbitral tribunal. The word 'cost', it is argued, is different
from the arbitrator's fee and therefore, the arbitral tribunal is not
competent or authorised to fix its own fee on the principle of
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nemo judex in causa sua, that is, 'no one should be judge in their
own cause'. The principle would apply where the parties have
fixed the fee payable to the arbitral tribunal, either as a term in
the arbitration agreement or otherwise by an agreement, either
before or after the appointment of the arbitral tribunal. This
principle will apply equally where the court fixes the fee as a
term of appointment. However, this principle will have no
application where the parties or the court has left it to the arbitral
tribunal to fix its own fee. In other words when the arbitration
agreement is silent and the parties have not agreed on the
quantum of fee payable to the arbitral tribunal, or the court order
does not fix the fee, the arbitral tribunal has the right and power
to fix its own fee. [Paras 15 and 23][797-D-E; 798-A-B; 805-D-F]
3. It will be appropriate to summarize the legal position as
under:
(a)The arbitral tribunal is bound by the fee or remuneration
fixed by the parties in the arbitration agreement, or by mutual
consent, whether before or after the disputes have arisen. (b)
Where the court refers disputes to an arbitral tribunal, in the
absence of any agreement between the parties fixing the fee
payable to the arbitral tribunal, it should fix the fee so payable.
The fee fixed by the court is binding on the arbitral tribunal. (c) It
is desirable that the parties/court should ascertain the fee
structure from the prospective arbitrators before an arbitrator is
nominated/appointed. (d) In the absence of a written agreement
or a court order fixing the fee of the arbitral tribunal, the arbitral
tribunal is entitled to 'fair and reasonable fee', which should be
done in a transparent manner and in consultation with the parties.
This exercise should be undertaken at the initial/preliminary
stage. However, lack of consensus, would not bar an arbitral
tribunal from fixing 'fair and reasonable fee'. An aggrieved party
would be entitled to question the fee fixed by the arbitral tribunal
in terms of Section 39 of the A&C Act. On a challenge being
raised, the court would examine the question of reasonableness
of fee with reference to the factors stated above and in particular
with reference to the Fourth Schedule of the A&C Act. The fee
structure mentioned in the Fourth Schedule or by the respective
High Courts would be per se treated and regarded as 'fair and
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reasonable fee'. (e)
Fee once fixed cannot be increased or
enhanced except with the consent of all the parties or by an order
of the court. (f) Post the enactment and enforcement of Act No.
33 of 2019, and in terms of the first proviso to sub-section (3A)
of Section 11 of the A&C Act, the arbitral tribunal is entitled to
the fee at the rate specified in the Fourth Schedule. Consequently,
the arbitral tribunal is not entitled to deviate and fix a higher fee.
Similarly, arbitral institutions, in terms of Section 11(14), are bound
to follow the fee structure mentioned in the Fourth Schedule.
However, sub-sections (3A) and (14) of Section 11 do not bar or
prohibit the ad hoc arbitral tribunal or the arbitral institution to
charge arbitration fee which is less or lower than what is stipulated
in the Fourth Schedule. Sub-sections (3A) and (14) of Section 11
are binding on the parties and the arbitral tribunal. [Para 35][814G-H; 815-A-H]
4. High cost of arbitration is one of the prime reasons for
the reluctance of the litigants to accept arbitration as an alternative
to court litigation. Arbitration, as a process of justice delivery, is
substitutional in character, would remain unattractive unless it is
affordable and a lower cost alternative to litigation. This being
the objective of the scheme of the provisions of the A&C Act in
general, and Sections 2(1)(d), 2(9), 7, 8, 9, 11, 17 and 23, it would
be appropriate to hold that arbitral tribunal, as statutorily
conceived, is to examine and adjudicate all disputes arising from
the contract and, therefore, the Fourth Schedule mindfully uses
the expression "sum in dispute". Any contrary interpretation
conceiving separate fee for claim and counter-claim, which, it is
apparent, would substantially enhance the cost of arbitration, and
dissuade the litigants from resorting to arbitration. The heading
"sum in dispute" will mean the aggregate of all the amounts in
dispute without any bifurcation and separate application of the
fee schedule with reference to the amount subject matter of the
claim(s), and the amount subject matter of the counter-claim(s).
The aforesaid dictum would not apply in cases where there is an
umbrella arbitration clause, which applies to different/distinct
contracts, in which case each contract would be treated as a
separate arbitration proceeding viz. the claim, counter-claim and
set-off relating to that contract. [Paras 46, 47 and 48][822-A-C,
F-G; 823-A]
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5. The model fee mentioned in the third column of the
Fourth Schedule would be the fee payable to each member of the
arbitral tribunal, and in cases where the arbitral tribunal consists
of a sole arbitrator, he shall be entitled to an additional amount of
25% above the amount specified in the model fee. It is apparent
that this interpretation has been accepted and followed by several
arbitral tribunals since introduction of the Fourth Schedule. This
interpretation has gained acceptance. To interpret it differently
would lead to confusion and chaos which must be avoided, even
if the other interpretation is plausible. However, in view of the
above interpretation, the Fourth Schedule does require
modification and moderation. For example, where the sum in
dispute is Rs.5,00,000/-, in case of the sole arbitrator, the amount
payable to him would be Rs.56,250/-, that is, Rs.45,000/- plus
25% (Rs.11,250) of Rs.45,000/-.In case of an arbitral tribunal of
three arbitrators, the fee payable would be Rs.1,50,000/-. This
fee is too high and would be unacceptable to most of the litigants
as they would be liable to pay minimum arbitration fee of nearly
11% in case of sole arbitrator and nearly 30% in case of an arbitral
tribunal consisting of three members. [Paras 53 and 54][825-BE]
National Highways Authority of India v. Gayatri Jhansi
Roadways Limited (2020) 17 SCC 626 - relied on.
Aphali Pharmaceuticals Ltd.v. State of Maharashtra &
Ors. (1989) 4 SCC 378 : [1989] 1 Suppl. SCR 129 -
held inapplicable.
Union of India v. Singh Builders Syndicate (2009) 4
SCC 523 : [2009] 3 SCR 563; Sanjeev Kumar Jain v.
Raghubir Saran Charitable Trust and Others. (2012) 1
SCC 455 : [2011] 12 SCR 744; Orissa Mining
Corporation Ltd. v. Prannath (1997) 3 SCC 535 -
referred to.
K/S Norjarl A/S v. Hyundai Heavy Industries Co. Ltd.
(1991) 3 All ER 211- referred to.
Julian D.M. Lew, Loukas A. Mistelis, et
al., Comparative International Commercial Arbitration,
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'Chapter 12 Rights and Duties of Arbitrators and
Parties' Russell on Arbitration (24th Edition).; Robert
Merkin QC, LLD,"Arbitration Law", Service Issue
No.83, November 2019; Datuk Professor Sundra
Rajoo, Law, Practice and Procedure of Arbitration
(Second Edition), 2016; Michael Mcilwrath and John
Savage, International Arbitration and Mediation: A
Practical Guide, (2010); Russell on Arbitration, 24th
Edition; International Commercial Arbitration', 2nd
Edition, 2914; Julian D.M. Lew, Loukas A. Mistelis,
et al., Comparative International Commercial
Arbitration, 'Chapter 12 Rights and Duties of
Arbitrators and Parties'; Redfern and Hunter on
International Arbitration, Oxford University Press, 6th
Edn., 2015; Russell on Arbitration, 24th Edition under
the heading 'Determination of the recovery of costs
of the arbitration'; Datuk Professor Sundra Rajoo,
Law, Practice and Procedure of Arbitration (Second
Edition), 2016. Chapter 24 in the said book refers to
Gary Born, International Commercial Arbitration;
Tackaberry, and Marriott, Bernstein's Handbook of
Arbitration and Dispute Resolution Practice (4th Edn.,
2003); Mustill and Boyd, The Law and Practice of
Commercial Arbitration in England, (2nd Edn., 1989);
Datuk Professor Sundra Rajoo, Law, Practice and
Procedure of Arbitration (Second Edition), 2016;
'India's Grand Advocates: A Legal Elite Flourishing in
the Era of Globalization', by Marc Galanter and Nick
Robinson, published by the Harvard Law School, and
'Litigation Expenses: High Cost of Justice', by Usha
Rani Das; Earl T. Crawford, The Construction of
Statutes, 3rd Edition; J. G. Sutherland, Statutes and
Statutory Construction, 3rd Edition, Vol.3, pp. 410-412;
Earl T. Crawford, The Construction of Statutes, 3rd
Edition; Professor Sundra Rajoo, Law, Practice and
Procedure of Arbitration (Second Edition), 2016 -
referred to.
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Case Law Reference
In the judgment of DR. DHANANJAYA Y CHANDRACHUD, J.
(2020) 17 SCC 626
referred to
Para 35 (i)
[2009] 3 SCR 563
referred to
Para 35 (xiv)
[2011] 12 SCR 744
referred to
Para 35 (xiv)
(1977) 2 SCC 54
referred to
Para 35 (xxi)
[2016] 1 SCR 364
followed
Para 69
[2016] 9 SCR 83
followed
Para 69
[2011] 12 SCR 744
relied on
Para 72
[2017] 1 SCR 798
relied on
Para 87
[2005] 1 Suppl. SCR 929
followed
Para 89
[1991] 3 Suppl. SCR 534
referred to
Para 97
[1990] 3 Suppl. SCR 196
followed
Para 123
[2011] 10 SCR 1026
relied on
Para 124
[2014] 2 SCR 797
referred to
Para 124
[1996] 2 Suppl. SCR 509
relied on
Para 132
[2014] 10 SCR 971
referred to
Para 133
(2018) 12 SCC 560
referred to
Para 134
[1989] 1 Suppl. SCR 129
relied on
Para 138
[1996] 2 SCR 1
followed
Para 145
1953 SCR 1
followed
Para 149
[2020] 3 SCR 1
followed
Para 150
[1979] 2 SCR 997
relied on
Para 150
[1989] 1 SCR 621
relied on
Para 154
In the judgment of SANJIV KHANNA, J.
[2009] 3 SCR 563
referred to
Para 4
[2011] 12 SCR 744
referred to
Para 4
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[2022] 10 S.C.R.
(2020) 17 SCC 626
relied on
Para 20
(1997) 3 SCC 535
referred to
Para 42
[1989] 1 Suppl. SCR 129
held inapplicable
Para 45
CIVIL ORIGINAL/APPELLATE JURISDICTION: Arbitration
Petition (Civil) No. 05 of 2022.
Petition Under Section 11(6) read with Section 14 and Section 15
of the Arbitration and Conciliation Act, 1996 for Termination of the
Mandate of the Present Arbitral Tribunal and Appointment of a Substitute
Arbitral Tribunal.
With
SLP (C) No.10358 of 2020, 13426 of 2021, SLP (C) Diary No.8494
of 2022, Civil Appeal Nos. 5880, 5879 of 2022 and Miscellaneous
Application Nos.1990-1991 of 2019 in SLP (C) Nos. 10021-10022 of
2017.
Tushar Mehta, SG, K.K. Venugopal, AG, Huzefa Ahmadi, Sr. Adv.
(A.C.), S.B. Upadhyay, Rajeev Sharma, Dr. Abhishek Manu Singhvi,
Anish Dayal, Sr. Advs., Pradhuman Gohil, Ms. Taruna Singh Gohil, Ms.
Ranu Purohit, R. Vishnu Kumar, Alapati Sahithya Krishna, Ms. Anushka
Shah, Ms. Nooreen Sharma, Rohan Sharma, Ms. Sharukh Alam,
Abhishek Gupta, Gunnam Venkateswara Rao, Ms. Ikshita Singh, Ms.
Chinmayee Chandra, Kapil Raghav, Dishant Bhati, Tarkeshwar Natha,
Nishant Kumar, Harshit Singh, Lalit Mohan, Rameshwar Prasad Goyal,
Udit Seth, Anil Seth, C. Kannan, Ravi Shankar, Mayank Kshirsagar,
Suyash Gupta, Abhishek Birthray, Sumit R. Sharma, Tanmay Nandi,
Somya Budholia, Prateek Seth, Adeem Ahmed, Ms. Sonali Jaitely Bakshi,
Jaiyesh Bakhshi, Ms. Rini Badoni, Ms. Sanjana Bakshi, Ms. Manmilan
Sidhu, Ankit Tyagi, Ms. Radhika Malik, Ms. Sudiksha Saini, Ms. Ashima
Chauhan, Ms. Anwesha Chaudhary, Gaurav Mishra, Tanmoy Nandi,
P.V. Yogeswaran, Manu Seshadri, Aveak Ganguly, Abhijit Lal, Ms. Pallavi
Anand, Mithu Jain, S.D. Singh, Rahul Kumar Singh, Ms. Meenu Singh,
Dhiraj Kumar, Ram Kripal Singh, Ms. Shweta Sinha, Ms. Bharti Tyagi,
Santosh Kumar - I, R. Chandrachud, D. Venkata Krishna, Santosh
Kumar, K. Parameshwar, Kailas Bajirao Autade, Ms. Sregurupriya, Ms.
Sheetal Patil, Advs. for the appearing parties.
# Ed. Note: There are two seperate judgments in the matter. One judgment was delivered
by Hon'ble Dr. Justic D. Y. Chandrachud for himself and for Hon'ble Mr. Justice Surya
Kant. The other judgment was delivered by Hon'ble Mr. Justice Sanjiv Khanna.
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The Judgments# of the Court were delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
This judgment has been divided into sections to facilitate analysis.
They are:
A
Factual Background....................................................5*
A.1
Facts of Petition for Arbitration (Civil) No 5 of 2022..5*
A.2
Facts of Special Leave Petition (Civil) No 13426 of
2021..................................................................13*
A.3
Facts of Special Leave Petition (Civil) No 10358 of
2020.................................................................17*
A.4
Facts of Miscellaneous Application Nos 1990-1991
of 2019.............................................................19*
B
Submissions of Counsel..............................................20*
B.1
Submissions on behalf of the petitioners..............21*
B.2
Submissions on behalf of the respondents.............28*
B.3
Submissions on behalf of the amicus curiae........31*
C
Determination of arbitrators' fee...................................38*
C.1
Comparative outlook.........................................38*
C.1.1 Position of international organisations.........39*
(i)
United National Commission on International
Trade......................................................39*
(ii)
Permanent Court of Arbitration..............42*
(iii)
London Court of International Arbitration...43*
(iv)
International Centre for Dispute Resolution..44*
(v)
International Chamber of Commerce.........44*
(vi)
Singapore International Arbitration Centre..45*
(vii)
Hong Kong International Arbitration Centre..45*
(viii) International Centre for Settlement of
Investment Disputes.................................46*
(ix)
Summary..............................................46*
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS
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* Ed.