Summary
A batch of disputes over arbitrators' fees in ad hoc arbitrations, led by ONGC's plea to replace a tribunal that had raised its fee above the contract rate. The majority (Chandrachud and Surya Kant JJ.) held that arbitrators cannot unilaterally make binding orders fixing their own fees. Fees must be agreed at the outset in tripartite Terms of Reference, and the Court issued Article 142 guidelines. Under the Fourth Schedule of the Arbitration and Conciliation Act, 1996, the 'sum in dispute' is computed separately for the claim and the counter-claim. The Rs. 30 lakh ceiling in entry 6 caps the whole fee and applies to each arbitrator. Khanna J. agreed on the ceiling and the per-arbitrator fee. He would let a tribunal fix a reasonable fee, open to challenge under Section 39, and would aggregate claim and counter-claim.
Issues
- Whether arbitrators in an ad hoc arbitration may unilaterally determine their own fees, and how fees are to be fixed
- Whether the 'sum in dispute' in the Fourth Schedule of the Arbitration and Conciliation Act, 1996 is the aggregate of the claim and counter-claim or is computed separately for each
- Whether the Rs. 30 lakh ceiling in entry 6 of the Fourth Schedule applies to the whole fee or only to the variable component, and whether it applies per arbitrator or to the tribunal as a whole
Provisions considered
- Sections 31(8), 31A, 38 and 39, Arbitration and Conciliation Act, 1996Majority: a tribunal may apportion costs and call for provisional deposits but cannot make a binding order on its own fees. A party may seek review of fees demanded under Section 39(2). (¶¶ 91, 95, 96, 98, 99, 158)
- Fourth Schedule, read with Section 11(14) and 11(3A), Arbitration and Conciliation Act, 1996Majority: the Schedule is not mandatory where the parties agree a fee, but is the default fee a tribunal may charge absent consensus. Its fee is computed separately for claim and counter-claim, and entry 6 is capped at Rs. 30 lakh per arbitrator. (¶¶ 79, 105, 140, 155, 157, 158)
- Articles 142 and 348(1)(b), Constitution of IndiaArticle 142 supported guidelines for fixing fees in ad hoc arbitrations and a new tribunal for ONGC. Under Article 348 the English text of the Schedule prevails over the Hindi translation. (¶¶ 104, 144, 159)
Held
- The relationship between the parties and the arbitrators is contractual, and party autonomy governs fees. Arbitrators cannot issue binding, enforceable orders fixing their own fees, because that would make them judges in their own cause. Any fee finding made while fixing costs or deposits cannot be enforced in their favour, and a party may seek court review of fees demanded under Section 39(2). (¶¶ 88, 96, 98, 99, 158)
- Under Article 142, fees must be settled at preliminary hearings, capped at four, and recorded in tripartite Terms of Reference. Any revision after a stated number of sittings must be agreed there, and there can be no unilateral deviation later. Where a contract fee is unacceptable and no consensus is reached, the arbitrator should decline. Courts appointing arbitrators should fix the fee, High Courts must frame Section 11(14) rules, and the Union must revise the Fourth Schedule at least every three years. (¶¶ 102, 103, 104)
- Absent consensus, a tribunal may charge the Fourth Schedule fee as the default, and parties cannot object to it. The Schedule is otherwise not mandatory where the parties have agreed a fee, or on court-appointed arbitrators without High Court rules. (¶¶ 79, 105)
- Claims and counter-claims are independent proceedings. Read with the proviso to Section 38(1), the 'sum in dispute' is assessed separately for each, so a separate fee and ceiling apply to the claim and to the counter-claim. (¶¶ 117, 135, 136, 137, 140, 158)
- The English text governs over the Hindi translation. Given the legislative intent to curb excessive fees, the Rs. 30 lakh ceiling in entry 6 caps the base Rs. 19,87,500 plus the variable amount, so the maximum is Rs. 30 lakh. The ceiling applies to each arbitrator, with a sole arbitrator receiving 25% more. (¶¶ 144, 151, 155, 157, 158)
- Khanna J. (separate opinion) held that, absent agreement or a court order, a tribunal may fix a fair and reasonable fee, challengeable under Section 39(3), with the Fourth Schedule treated as per se reasonable. He read the 'sum in dispute' as the aggregate of claim and counter-claim, concurring on the ceiling and the per-arbitrator fee.
Result
In ONGC v. Afcons, a new tribunal was directed under Article 142, with the earlier tribunal's fee limited to the Fourth Schedule and excess fees already paid not recoverable. NTPC's appeal was dismissed (separate fees for claim and counter-claim upheld), RVNL's appeal against the Rs. 49,87,500 fee was allowed, and the miscellaneous applications were dismissed.