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The Supreme Court of India in the matter of Oil & Natural Gas Corporation Ltd. vs. Afcons Gunanusa JV - 2022 SCC OnLine SC 1122 had resolved various issues circling around the Arbitrators’ fee. The Court while dealing with the question of Arbitrator’s fee framed the following issues, which are discussed separately in this article:
(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 counter-claim?
(III) Whether the ceiling of ₹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 ₹30,00,000 applies as a cumulative fee payable to the arbitral tribunal or it represents the fee payable to each arbitrator?
ISSUE NO. 1:
1.1 Whether the Arbitral Tribunal Can Unilaterally determine their own fees
The first question that the Court proceeded to decide was whether an arbitral tribunal has the necessary powers to decide its own fee unilaterally or can it be fixed by the parties to the arbitration agreement. The Court while acknowledging the fact that the above issue has not been exhaustively addressed in India, took into consideration the various rules framed by various institutions across the globe such as United Nations Commission on International Trade, Permanent Court of Arbitration, London Court of International Arbitration, International Chamber of Commerce to name a few and further analysed the statutory scheme enacted in India for payment of fees to arbitrators. The Court also discussed the principle of party autonomy, which is one of the inherent ingredients of arbitrations, besides discussing the provisions contained in the Fourth Schedule of the Arbitration and Conciliation Act (“the Act”), and observed the following:
After concluding the above, the Court proceeded to examine the issue and interpretation of the two very important expressions used in the Act, i.e., “Costs” and “Fees”.
1.2 Interpretation Of The Terms “Costs” And “Fees”
In other words, an arbitral tribunal while deciding the issue of payment of costs by a party to another party, is not entitled to pass any binding orders with respect to its fees. The Court was of the view that this would violate the principle of party autonomy and the doctrine of prohibition of in rem suam decisions, which provides that an arbitrator cannot be the judge of his own claim (fees/ remuneration) against the parties.
1.3 Directives Governing Fees Of Arbitrators In Ad Hoc Arbitrations
The Court while exercising its powers under Article 142 of the Constitution of India, framed certain guidelines in relation to fees payable to arbitrators in ad hoc arbitrations in India, which are discussed in brief here:
ISSUE NO. 2
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 counter-claim
While dealing with this issue, the Court first acknowledged the fact that the terms claim and counter-claim have not been defined anywhere under the Act. Thereafter, the Court analysed various provisions of the Act, where references to claim and counter claim are appearing, such as Section 2(7), Section 28(1), Section 2(9), Section 23(2-A), Section 25 and Section 38. In addition to these provisions, the Court also referred to Order 8 Rule 6 of the Code of Civil Procedure, 1908 and also to the 246th Report of the Law Commission of India and concluded that the object of taking up a counter claim is not because the counter-claim arises due to the claim, but in order to prevent multiplicity of proceedings. The Court further observed the following:
(i) The adjudication on the claim is independent of the proceeding for deciding the counter-claim;
(ii) Different issues may arise before the tribunal while adjudicating on the claim and counter-claim;
(iii) the evidence led in support of the claim may not involve the same material which would be relied upon to decide the counter-claim; and
(iv) the decision on the claim does not necessarily conclude the adjudication of the counter-claim;
With the aforesaid observations, the Court finally concluded that in so far as institutional arbitrations are concerned, parties shall be bound by the respective rules of the institutions and the arbitrator’s fee shall also be payable as per the rules applicable therein. However, in case of an ad hoc arbitration, where Fourth Schedule is applicable, arbitrator’s fee should be calculated separately for a claim and separately for a counter-claim and not on the cumulative value of the two. Even the ceiling appearing in the Fourth schedule shall be applicable separately for both.
Issue No. 3
Whether the ceiling of ₹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
This issue revolves around the interpretation of the sixth entry in the Fourth Schedule, and the controversy before the Court involved the following two possible interpretations:
In dealing with this issue, the Court analysed the 246th Law Commission Report and observed that Fourth schedule was provided in the Act as a means to control the rising fee of arbitrators and thus, the Court held that ceiling of ₹30,00,000 in entry at Serial No. 6 of the Fourth Schedule applies to the sum of base amount and the variable amount, and not just the variable amount. Therefore, the maximum fee payable to the arbitrator shall be ₹ 30,00,000.
Issue No. 4:
Whether the ceiling of ₹30,00,000 applies as a cumulative fee payable to the arbitral tribunal or it represents the fee payable to each arbitrator
This was the final issue placed before the Court so as to determine whether the ceiling of ₹ 30,00,000 as provided at serial no. 6 of fourth schedule would be applicable to the cumulative fee paid to the entire arbitral tribunal, or would the said amount be paid to each arbitrator separately.
The Court rejected the argument that the ceiling of ₹30,00,000/- is applicable to the cumulative fee paid to the entire arbitral tribunal and held that the fee provided in Fourth Schedule is for each individual arbitrator, regardless of whether they are a member of a multi-member tribunal or a sole arbitrator.
The Court also clarified that a sole arbitrator would be paid 25% over and above the ceiling amount in accordance with the note to the fourth schedule.
This judgment settled many important and crucial questions revolving around the arbitrators’ fee and has provided very clear insight on various provisions of the Arbitration & Conciliation Act, 1996 in this respect. The guidelines provided under the judgment shall protect the parties from being forced to accept unilateral and arbitrary fee, if any fixed by the arbitrators and at the same time has granted liberty to an arbitrator to accept or reject any unreasonable or unconscionable fee, which is not commensurate with the efforts required to be made by him while deciding disputes between the parties. This judgment has further paved the way in bringing more clarity and transparency with respect to law governing the arbitrations in India.
 2017 SCC OnLine Del 10285