Oil and Natural Gas Corporation Ltd Versus Afcons Gunanusa JV

Oil and Natural Gas Corporation Ltd Versus Afcons Gunanusa JV

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


1
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL/APPELLATE JURISDICTION
Arbitration Petition (Civil) No. 05 of 2022
Oil and Natural Gas Corporation Ltd. .... Petitioner

Versus
Afcons Gunanusa JV .... Respondent
With
Civil Appeal No 5880 of 2022
With
Civil Appeal No 5879 of 2022
And With
Miscellaneous Application Nos. 1990-1991 of 2019 in Special Leave
Petition (Civil) Nos. 10021-10022 of 2017
2
J U D G M E N T
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
3
(ix) Summary..........................................................................................46
C.1.2 Position in other national jurisdictions...........................................47
(i) England..............................................................................................48
(ii) Italy....................................................................................................50
(iii) Sweden ............................................................................................51
(iv) Germany ..........................................................................................52
(v) Japan ................................................................................................54
(vi) Singapore.........................................................................................54
(vii) United States...................................................................................55
(viii) Summary ........................................................................................56
C.2 Statutory scheme on payment of fees to arbitrators in India...............57
C.2.1 Party autonomy.............................................................................57
C.2.2 Fourth Schedule and regulation of arbitrators‘ fees......................59
C.2.3 Costs and fees: Two different paradigms .....................................70
C.2.4 Directives governing fees of arbitrators in ad hoc arbitrations......92
D Interpretation of ―sum in dispute‖ in the Fourth Schedule .........................97
D.1 Statutory Framework...........................................................................97
D.2 Definition of claim and counter-claim ................................................100
D.2.1 In re arbitration proceedings .......................................................100
(i) Statutory Framework of the Arbitration Act .................................100
(ii) Academic discourse....................................................................105
(iii) Judicial pronouncements ............................................................107
D.2.2 In re civil proceedings .................................................................109
(i) Statutory Framework of CPC ......................................................109
(ii) Academic discourse....................................................................112
4
(iii) Judicial pronouncements ............................................................114
D.3 Analysis.............................................................................................115
E Fee Ceiling in Fourth Schedule...............................................................119
E.1 Difference between the English and Hindi translations.....................121
E.2 Exception to literal interpretation.......................................................124
E.3 Interpretation based on legislative intent ..........................................127
F Ceiling applicable to individual arbitrators...............................................130
G Conclusion...............................................................................................131
G.1 Findings.............................................................................................131
G.2 Directions ..........................................................................................133
PART A
5
A Factual Background
A.1 Facts of Petition for Arbitration (Civil) No 5 of 2022
1 On 29 May 2009, the petitioner, Oil and Natural Gas Corporation Limited1
,
and the respondent, Afcons Gunanusa JV2
, entered into a Lump Sum Turnkey
Contract3
for the construction of an ICP-R Platform. The ICP-R Platform is
alleged to have been completed on 31 October 2012.
2 Due to ongoing disputes and differences, Afcons invoked arbitration on 20
July 2015, in accordance with Clause 1.3 of the LSTK Contract. Afcons appointed
Justice Mukul Mudgal as their arbitrator.
3 The relevant parts of Clause 1.3 of the contract are extracted below:
―1.3 Laws/Arbitration
[…]
1.3.2 Arbitration
Except as otherwise provided elsewhere in the contract, if any
dispute, difference question or disagreement arises between
the parties hereto or their respective representatives or
assignees, in connection with construction, meaning,
operation, effect, Interpretation of the contract or breach
thereof which parties are unable to settle mutually, the same
shall be referred to Arbitration as provided hereunder:
1.3.2.1 A party wishing to commence arbitration proceeding
shall Invoke Arbitration Clause by giving 60 days notice to the
other party. The notice Invoking arbitration shall specify
all the points of disputes with details of the amount claimed
to be referred to arbitration at the time of Invocation of
arbitration and not thereafter. If the claim is in foreign
currency, the claimant shall indicate its value in Indian
Rupee for the purpose of constitution of the arbitral
tribunal.

1
―ONGC‖
2
―Afcons‖
3
―LSTK Contract‖
PART A
6
1.3.2.2 The number of the arbitrators and the appointing
authority will be as under:
Claim amount
(excluding claim
for Interest and
counter claim, if
any)
Number
of
arbitrator
Appointing Authority
Upto Rs. 5 Crore Sole
Arbitrator
ONGC
Above Rs. 5
Crore
3
Arbitrators
One arbitrator by each
party and the 3rd
arbitrator, who shall be the
presiding arbitrator, by the
two arbitrators.
1.3.2.3 The parties agree that they shall appoint only
those persons as arbitrators who accept the conditions
of this arbitration clause. No person shall be appointed
as arbitrator or presiding arbitrator who does not accept
the conditions of this arbitration clause.
[…]
1.3.2.8 Arbitrators shall be paid fees at the following rates.
Amount of Claims
and Counter
Claims (excluding
interest)
Lump sum fees (Including fees for
study of pleadings, case material,
writing of the award, secretarial
charges etc.) payable to each
arbitrator (to be shared equally by the
parties)
Upto Rs. 50 lac Rs. 7,500 per meeting subject to a
ceiling of Rs. 75.000/-
Above Rs. 50 lac
to Rs. 1 crore
Rs. 90,000/- plus Rs. 1,200/- per lac
or a part there of subject to a ceiling
of Rs. 1,50,000/-
Above Rs. 1 Crore
and upto Rs. 5
Crores.
Rs. 1,50,000/- plus Rs. 22,500/- per
crore or a part there of subject to a
ceiling of Rs. 2,40,000/-
Above Rs. 5
Crores and upto
Rs. 10 Crores
Rs. 2,40,000/- plus Rs. 15,000/- per
crore or a part there of subject to a
ceiling of Rs. 3,15,000/-
Above Rs. 10 Rs. 3,15,000/- plus Rs. 12,000/- per
PART A
7
Crores crore or a part there of subject to a
ceiling of Rs. 10,00,000/-
For the disputes above Rs. 50 lacs, the Arbitrators shall
be entitled to an additional amount @ 20% of the fee
payable as per the above fee structure.
1.3.2.9 lf after commencement of Arbitration proceedings, the
parties agree to settle the dispute mutually or refer the
dispute to conciliation, the arbitrators shall put the
proceedings in abeyance until such period as requested by
the parties. Where the proceedings are put in abeyance or
terminated on account of mutual settlement of dispute by the
parties, the fees payable to the arbitrators shall be
determined as under:
I) 25% of the fees if the claimant has not submitted statement
of claim.
II) 50% of the fees if the award is pending.
1.3.2.10 Each party shall pay its share of arbitrator‘s fee in
stages as under:
(I) 25% of the fees on filing of reply to the statement of claims.
(II) 25% of the fees on the competition of evidence.
(III) Balance 50% at the time when award is given to the
parties.
[…]
1.3.2.14 Subject to aforesaid, provisions of the Arbitration and
Conciliation Act, 1996 and any statutory modifications or reenactment thereof shall apply to the arbitration proceedings
under this clause.‖
(emphasis supplied)
4 On 20 August 2015, ONGC responded by appointing Justice Gyan Sudha
Mishra as their arbitrator. The arbitrators appointed Justice GN Ray as the
presiding arbitrator, and the arbitral tribunal was constituted.
5 The arbitral tribunal held a preliminary meeting on 25 November 2015 at
which the members of the tribunal indicated their view that the fee schedule
PART A
8
prescribed in the contract seemed unrealistic. While Afcons was agreeable to a
revision in the fee, ONGC indicated that it may not be agreeable. The arbitral
tribunal directed ONGC to consider a revision of the arbitrators‘ fee. In a letter
dated 28 January 2016 addressed to ONGC, the arbitral tribunal noted that the
Fourth Schedule to the Arbitration and Conciliation Act 19964
recommends the
fee for each arbitrator as Rs 30 lakhs, when the amount in dispute exceeds Rs 20
crore (in the present case, it was Rs 900 crores).
6 On 16 April 2016, the arbitral tribunal informed ONGC that it would no
longer bargain on the amount if ONGC was agreeable to the schedule provided
in the Fourth Schedule to the Arbitration Act, along with a reading fee of Rs 6
lakhs for each arbitrator. However, the letter stated that the ceiling of Rs 30 lakhs
provided in the Fourth Schedule was on the ‗lower side‘ for an arbitration with a
disputed amount of Rs 900 crores, and should be revised. The letter reads thus:
―If the appropriate authority of ONGC is inclined to accept the
ceiling referred to in the schedule of the amendment of
Arbitration and Conciliation Act and offer such remuneration,
the Arbitrators do not intend to enter into any bargaining. We
may only indicate that remuneration of Rs. 30 Lacs is in the
lower side and reasonably deserves upward revision in this
case. The arbitrators also expect that considering the
composition of the arbitral tribunal and huge claim involved
(about Rs. 1000 crore) and extraordinarily voluminous
documents to be taken into consideration it may be only
appropriate that as special case, a reasonable reading/
perusal fee to the tune of about 6 lacs for each arbitrator may
be considered. Such reading fee is prevalent in similar other
cases.‖
7 By its letter dated 22 April 2016, ONGC informed the arbitral tribunal that
the proposal for the application of the Fourth Schedule of the Arbitration Act was

4
―Arbitration Act‖
PART A
9
under consideration by them but since it did not provide for a reading fee, ONGC
could not agree to it.
8 At its second sitting on 4 August 2016, the arbitral tribunal passed a
procedural order directing the parties to deposit 25 per cent of the arbitrators‘ fee,
which was recorded as Rs 30 lakhs. On 22 May 2018, the arbitral tribunal passed
another procedural order finalising its fee, stating that it had done so after taking
into account the pleadings submitted by the parties, the complexity of the issues
involved, high value of the claim (Rs 679 crores) and counter-claim (Rs 407
crores), and the voluminous nature of the documents. The tribunal fixed a fee of
Rs 1.5 lakhs for each arbitrator for every sitting of a three-hour duration. The
tribunal indicated that it may also charge a reading fee or conference fee (for
conferences between the members), which would be indicated at a later stage.
The procedural order states as follows:
―The first sitting of this arbitration case was held in November,
2015. The remuneration of the members of the arbitral
tribunal could not be finally fixed. The claimant had agreed to
pay such remuneration in its share as would be directed by
the tribunal. But the respondent had requested the tribunal to
fix remuneration later on because appropriate authority was
to be considered. The arbitral tribunal was also not in a
position to assess the extent of claim and counter claim to be
raised by the parties and also the complexity of the arbitration
case at that stage. The respondent's representative, however,
had suggested for the ceiling fee at Rs. 30.00 lakhs for each
of the Arbitrators as mentioned in the fourth schedule of
amended Arbitration and Conciliation Act, 1996. It was
pointed out by the tribunal that the arbitration case arose prior
to amendment of the Act. Therefore, the ceiling fee referred to
in the amended Act was not attracted. It was also pointed out
to the respondent's representative that the Arbitral Tribunal
did not like to assert the remuneration of the members of the
tribunal and it would be only appropriate if fair, pragmatic and
reasonable remuneration would be fixed at the suggestion of
both the parties who were expected to take pragmatic and
realistic approach in suggesting the remuneration of the
PART A
10
arbitrators by taking into consideration of the amount of claim
and counter claim to be made by the parties, the composition
of the arbitral tribunal, the complexities of the issues requiring
adjudication and number of sittings likely to take for
concluding the arbitration case, in suggesting the
remuneration of the arbitrators. However, before finally fixing
the remuneration to be paid to the arbitrators by the parties,
25% of Rs. 30.00 lakhs were directed to be deposited by the
parties by sharing equally.
After pleadings have been filed by the parties by taking
substantially long time, presumably, in view of complex
technical issues involved and large number of documents
intended to be relied on by the parties, the members of the
arbitral tribunal have been able to have a fair idea about the
nature and complexities of the issues for determination and
the time likely to be required for completing the arbitration
case. The arbitral tribunal, therefore, holds that proper
remuneration payable to the members of the arbitral tribunal
should be indicated to the parties for compliance.
It may be indicated here that the claimant has claimed about
Rs. INR 6,79,20,52,999/- crores along with 18% interest per
annum on the said sum. The respondent has made a counter
claim of about Rs. INR 4,07,12,97,603/- crores and has also
claimed interest at 18% per annum on the said sum. Both the
parties have informed the arbitral tribunal that both the parties
will examine their respective witnesses including expert
witnesses. As a matter of fact, the claimant has filed affidavit
of evidence of three expert witnesses. Similarly, the
respondent also intends to examine witnesses including
expert witness. Till date 20 sittings have been held and
examination of first witness of the claimant is estimated to be
completed by holding 26 sittings.
It is, therefore, quite evident that the hearing of this arbitration
case will take fairly long time. Along with the pleadings, both
the parties have filed volumes of documents in support of
their respective case. By now the claimant has filed 68
volumes of their document. Similarly, the respondent has also
filed 24 volumes as its document to be relied on. It is not
unlikely that further documents may be relied on by the
parties in the hearing process.
Considering the amounts of claim and counter claim, the
voluminous documents to be taken into consideration and a
very long hearing to conclude the arbitration case and the
complex technical issues required to be taken into
consideration, the arbitral tribunal has decided that it will be
only appropriate, fair and reasonable to fix remuneration of
each of the arbitrators at Rs. 1.50 lakhs (Rupees one lakh
PART A
11
and fifty thousand) per sitting, each sitting confined to three
hours or part thereof. Perusal fee and inter se conference
amongst the members of the tribunal, may not be indicated
now. Such fee may be indicated later or after the case
proceeds further thereby enabling the tribunal to assess the
extent of exercise called for.‖
9 On 22 June 2018, ONGC filed an application before the arbitral tribunal for
modifying the procedural order dated 22 May 2018 increasing the fee. The
arbitral tribunal issued a procedural order dated 25 July 2019 rejecting ONGC‘s
application. The tribunal observed that:
(i) At the first sitting, the tribunal indicated that the fee specified in the
contract (Rs 12 lakhs per arbitrator) was unrealistic. While Afcons agreed
to a revision of the fee, ONGC was not agreeable. The tribunal granted an
opportunity to ONGC to propose a ‗reasonable and pragmatic‘ fee
schedule;
(ii) While awaiting ONGC‘s response, the tribunal proposed the fee schedule
in the Fourth Schedule to the Arbitration Act ―as an example‖ while noting
that the ceiling of Rs 30 lakhs was also ―too low‖. Since ONGC seemed
agreeable, the tribunal directed the parties to deposit the first tranche of
fee based on Rs 30 lakhs in the interim;
(iii)Since ONGC did not propose a revised fee schedule, the tribunal, after
considering the complexity of the issues involved, the quantum of the
amount in dispute and the voluminous nature of the documents, fixed its
fee by a procedural order dated 22 May 2018;
(iv)ONGC has not refuted the reasons provided by the tribunal for fixing its
fee. It has only contested the revision on the ground that the fee schedule
PART A
12
in the contract was binding. Since ONGC had shown its willingness earlier
to accept the schedule of fees in the Fourth Schedule, ONGC‘s submission
was rejected; and
(v) The ceiling of Rs 30 lakhs in the Fourth Schedule is not applicable to the
present dispute since it arose before the amendment which added the
Schedule.
The tribunal held that the fee was set on the basis of the amount being paid in
arbitrations of such nature. However, it agreed to reduce the fee of each
arbitrator to Rs 1 lakh per sitting. It noted that the reading fee was kept open, and
would be decided at a later stage.
10 By its letter dated 21 August 2020, ONGC informed the arbitral tribunal
that the revised fee was not approved by its ‗higher‘ management. Thereafter,
ONGC filed a petition5
under Section 14 read with Section 15 of the Arbitration
Act before the Bombay High Court for the termination of the mandate of the
arbitral tribunal and the substitution of a fresh set of arbitrators. By its order dated
7 October 2021, the petition was dismissed by the Bombay High Court on the
ground of a lack of jurisdiction since the arbitration was an international
commercial arbitration within the meaning of Section 2(f) of the Arbitration Act.
However, ONGC was granted liberty to approach this Court and all its
contentions were kept open. ONGC then filed the present arbitration petition.

5 Commercial Arbitration Petition (Lodging) No 9590 of 2020
PART A
13
A.2 Facts of Special Leave Petition (Civil) No 13426 of 2021
11 This appeal arises from a final judgement and order dated 6 August 2021
of the High Court of Delhi, by which it dismissed the petition6
filed by the
petitioner, NTPC Limited7
.
12 NTPC and the respondent, Afcons-Shetty and Company Private LimitedJV8
, entered into a contract for the construction of a ―desilting arrangement
package for Koldam Hydro Electric Power (Package-3) Project‖. When disputes
arose between the parties, Afcons-Shetty invoked arbitration for a claim of about
Rs 37 crores. An arbitral tribunal was to be constituted in terms of Clause 67.3 of
the contract. Both parties nominated their arbitrators – NTPC nominated Shri
Krishna Mohan Singh and Afcons-Shetty nominated Shri Santanu Basu Rai
Chaudhuri. When the nominated arbitrators failed to appoint a presiding
arbitrator, Afcons-Shetty approached the Delhi High Court under Section 11 of
the Arbitration Act9
, which then appointed Justice Manmohan Sarin as the
presiding arbitrator on 21 May 2018 with the consent of parties.
13 The arbitral tribunal held its first sitting on 12 July 2018, where it decided
that the fees payable to the tribunal shall be in terms of the Fourth Schedule to
the Arbitration Act. The Fourth Schedule was subsequently amended on 12
November 2018.
14 NTPC filed its counter-claim of approximately Rs 19 crores. By a
procedural order dated 13 July 2019, the arbitral tribunal fixed a separate fee for

6 OMP (T) (COMM) 37 of 2021
7
―NTPC‖
8
―Afcons-Shetty‖
9
Arbitration Petition No 375 of 2018
PART A
14
the claim (Rs 28,64,520 per arbitrator) and counter-claim (Rs 19,13,615 per
arbitrator), aggregating to a total fee of Rs 47,78,135 per arbitrator. In support of
its position, the tribunal placed reliance upon the proviso to Section 38(1) of the
Arbitration Act.
15 On 21 September 2019, NTPC filed an application seeking a modification
of the procedural order dated 13 July 2019. By its reply dated 18 October 2019,
Afcons-Shetty opposed the application. By its order dated 8 November 2019, the
arbitral tribunal dismissed NTPC‘s application noting that:
―4. There is merit in Mr. Mukhopadhyay's submission that
claims and counter claims being independent of each other
for which separate fee is to be fixed the same cannot be
combined for purpose of ceiling. Moreover, it cannot also be
lost sight of that the Fourth Schedule of the Act can only
serve as a guiding principle in the absence any rules being
framed by the High Court. In view of the foregoing
discussions the order passed by us does not call for any
modifications or review. The application is accordingly
dismissed.‖
16 On 15 October 2020, NTPC sought a modification of the tribunal‘s orders
dated 13 July 2019 and 8 November 2019, so that the fee fixed in terms of the
Fourth Schedule should include the fee payable for NTPC‘s counter-claim. By its
reply dated 30 October 2020, Afcons-Shetty opposed the application.
17 By its order dated 14 January 2021, the tribunal rejected NTPC‘s position
that the claim and counter-claim have to be cumulated to arrive at the ―sum in
dispute‖ for the purposes of the Fourth Schedule. The tribunal held that:
(i) Section 31(8) of the Arbitration Act allows a tribunal to provide for the costs
of arbitration. The regime for costs is provided under Section 31A. The
PART A
15
explanation to Section 31A(1) provides that costs include those relating to
the fees and expenses of the arbitrators;
(ii) The proviso to Section 38(1) stipulates that separate costs are to be fixed
for claims and counter-claims. The position under proviso to Rule 3 of the
DIAC (Administrative Cost & Arbitrators‘ Fees) Rules 201810 is also similar;
and
(iii)Nothing in the Fourth Schedule or the DIAC Rules imposes a restriction on
separate costs (and thus fees) being fixed for claims and counter-claims by
the tribunal.
18 Subsequently, by its order dated 19 March 2021, the tribunal held that in
case NTPC does not comply with its directions contained in the order dated 14
January 2021 for payment of Rs 2 lakhs per arbitrator, the tribunal would
consider whether NTPC‘s counter-claim should be suspended.
19 NTPC filed a petition under Sections 9 and 14 read with Section 31(8)
before the Delhi High Court, seeking a direction that the tribunal charge a
combined fee under the Fourth Schedule for adjudicating both the claim and the
counter-claim or, in the alternate, for the termination of the mandate of the
tribunal. The petition was opposed by Afcons-Shetty.
20 By a judgment dated 6 August 2021, a Single Judge of the Delhi High
Court dismissed NTPC‘s petition. The Single Judge held that the proviso to
Section 38(1), Section 31(8) and Section 31A are inextricably linked and on a

10 ―DIAC Rules‖
PART A
16
combined reading, a tribunal would have the power to fix a separate fee for
claims and counter-claims. The Single Judge of the Delhi High Court held thus:
―43. …the scheme of 1996 Act is such that the provisions of
Section 38(1), 31(8) and 31A are inextricably interlinked.
These provisions cannot be read in isolation. The proviso to
Section 38(1) clearly states that, where there are claims and
counter-claims before the arbitral tribunal, the Arbitral
Tribunal may fix separate amount of deposits for the claim
and counter-claim. Section 38(1) clarifies that the ―amount of
deposit‖ is to be directed ―as an advance for the costs
referred to in sub-section (8) of Section 31‖. Sub-section (8)
of Section 31 requires the Arbitral Tribunal to fix the costs of
arbitration in accordance with Section 31A. The explanation
to Section 31A(1) clearly states that, for the purposes of
Section 31A(1) the expression ―costs‖ means reasonable
costs relating to, inter alia, ―the fees and expenses of the
arbitrators‖.
[…]
48. The position becomes clear when we view the proviso to
Section 38(1), Section 31(8) and the Explanation to Section
31A(1) in juxtaposition. Section 31(8) mandates that the
arbitral tribunal fix the costs of arbitration, in accordance with
Section 31A. Clause (i) of the Explanation to Section 31A(1)
specifically includes the fees and expenses of the arbitrators
as an integral part of the ―costs‖. Clearly, therefore, the
arbitrator has to fix the fees payable to the arbitral tribunal,
with, needless to say, consent of parties. Section 38(1)
provides for advance, for such ―costs‖ fixed, by way of
―deposit‖. The expressions ―deposit‖, ―costs‖ and ―fees‖ are,
therefore, intertwined by statute, and, as the interpreter
thereof, the Court can hardly extricate them from each other.
The proviso to Section 38(1) provides that, where the arbitral
tribunal is seized of claims and counter-claims, it may fix
separate amount of deposit for each. No doubt, the use of the
word ―may‖ does involve an element of discretion; but, if the
arbitral tribunal does fix separate fees for the claims and
counter-claims, it cannot be held that it has acted irregularly,
or contrary to the statutory mandate.‖
PART A
17
A.3 Facts of Special Leave Petition (Civil) No 10358 of 2020
21 The appeal arises from a final judgement and order dated 10 July 2020 by
which the High Court of Delhi dismissed the petition11 filed by the petitioner, Rail
Vikas Nigam Limited12
.
22 On 28 December 2010, RVNL awarded a contract for the ―construction of a
viaduct and related works for a length of 4.748 kms in the Joka-BBD Bag Corridor
of Kolkata Metro Railway Line‖ to the respondent, Simpex Infrastructures
Limited13
. Disputes having arisen between the parties, Simpex invoked arbitration
by its letter dated 26 December 2017.
23 The parties could not agree upon the appointment of arbitrators. While
Simpex nominated its arbitrator, RVNL contended that Simpex had to nominate
its arbitrator from a panel of five names recommended by RVNL. Since RVNL
refused to nominate their arbitrator, Simpex approached the Delhi High Court
under Section 11 of the Arbitration Act14
. The High Court, by its order dated 11
December 2018, nominated an arbitrator on behalf of RVNL and ordered that ―the
Arbitrator[s] shall be paid fee as per Fourth Schedule to the [Arbitration] Act‖.
RVNL‘s special leave petition15 against the order of the Delhi High Court was
dismissed by this Court on 12 April 2019.
24 Meantime, the arbitrators nominated by the parties appointed a presiding
arbitrator. The arbitral tribunal held its preliminary sitting on 15 January 2019,
where it recorded that its fee shall be in accordance with the Fourth Schedule to

11 OMP (T) (COMM) 38 of 2020
12 ―RVNL‖
13 ―Simpex‖
14 ARB P 519 of 2018
15 SLP
PART A
18
the Arbitration Act. By its order dated 9 January 2020, the arbitral tribunal
recorded that, in accordance with Fourth Schedule, the fee of each arbitrator
would be Rs 49,87,500.
25 RVNL then filed an application on 27 February 2020 for the recall of the
tribunal‘s order dated 9 January 2020 on the ground that the ceiling on fees for
each arbitrator under the Fourth Schedule is Rs 30,00,000.
26 By its order dated 3 March 2020, the arbitral tribunal rejected RVNL‘s
application. It noted that that the limitation of Rs 30,00,000 in the entry at Serial
No 6 of the Fourth Schedule does not encompass the entire fee, comprising of
the base component of Rs 19,87,500 and the variable component (0.5 per cent of
the claim amount above Rs 20 crores) but was only limited to the variable
component. Hence, the ceiling on fee according to the tribunal, is Rs 49,87,500,
and not Rs 30,00,000.
27 RVNL then filed a petition under Section 14 of the Arbitration Act before
the Delhi High Court, praying for the termination of the mandate of the arbitral
tribunal.
28 By a judgment dated 10 July 2020, a Single Judge of the Delhi High Court
rejected RVNL‘s petition. The Single Judge held that the ceiling of Rs 30,00,000
is applicable only to the variable component of the entry at Serial No 6 of the
Fourth Schedule. It has been held that the use the disjunctive, namely, ‗plus‘
between the fixed base component and the variable component indicates that the
ceiling of Rs 30,00,000 applies only to the latter. According to the judgment, such
an interpretation arises not only from the English version of the Arbitration Act,
PART A
19
but also its Hindi version. Finally, the court held that while this interpretation was
based on the text of the entry at Serial No 6 of the Fourth Schedule, it is also
supported by the 246th Report of the Law Commission (which recommended the
changes to the Fourth Schedule) and the DIAC Rules Model Fee (on the basis of
which the Schedule Four was crafted).
A.4 Facts of Miscellaneous Application Nos 1990-1991 of 2019
29 The miscellaneous application has been filed by the respondent, RVNL, in
relation to an order dated 16 January 2018 of a two-Judge Bench of this Court in
the main SLP. By its order dated 16 January 2018, this Court appointed Justice
Vikramjit Sen as the sole arbitrator with the consent of the parties, to decide their
disputes. The order of this Court recognised that ―[t]he learned Arbitrator is at
liberty to fix his remuneration‖.
30 By a procedural order dated 24 February 2018, the sole arbitrator, with the
consent of the parties, decided that arbitral fee shall be payable in accordance
with the Fourth Schedule to the Arbitration Act. On 25 March 2019, the sole
arbitrator raised separate invoices for the payment of fee for claims and counterclaims.
31 RVNL filed an application on 18 May 2019 raising an objection to the sole
arbitrator raising separate invoices for payment of a fee for claims and counter
PART B
20
claims. By an email dated 20 May 2019, the petitioner HCIL-Adhikarya-Arss
(JV)16
, agreed to RVNL‘s application and for it to be allowed.
32 The sole arbitrator dismissed RVNL‘s application on 20 May 2019, holding
that in terms of the proviso to Section 38(1) of the Arbitration Act and Order VIII
Rule 6A of the Civil Procedure Code 190817, claims and counter-claims have to
be treated separately. Further, the sole arbitrator noted that since he had been
appointed by this Court in an ad hoc arbitration with liberty to fix his own fee, a
separate fee could be charged for the claim (Rs 325,89,48,831) and counterclaim (Rs 21,59,56,092).
33 RVNL has filed a miscellaneous application before this Court, seeking a
determination of whether a fee can be charged separately by the arbitral tribunal
for the claim and counter-claim and whether the tribunal was justified in doing so
after fixing its fee in terms of the Fourth schedule.
B Submissions of Counsel
34 We have heard Mr KK Venugopal the learned Attorney General, and Mr
Tushar Mehta, learned Solicitor General, on behalf of the petitioners. Dr Abhishek
Manu Singhvi led the arguments on behalf of the respondents. Mr Manu
Sheshadri and Mr K. Parmeshwar addressed the court for the intervenors. Mr
Huzefa Ahmadi, has rendered objective assistance to this Court as amicus
curiae.

16 ―HCIL‖
17 ―CPC‖
PART B
21
B.1 Submissions on behalf of the petitioners
35 On behalf of the various public sector undertakings that have instituted
proceedings before this Court, the following submissions have been made by the
Attorney General and the Solicitor General:
(i) The arbitration clause of a contract is binding on the parties and the
arbitrators. Once the fee payable to the arbitrators has been specified in
the agreement between the parties, the arbitrators must either accept their
appointment on the terms agreed in the contract between the parties or
refuse the arbitration if they are not agreeable to accept the assignment on
the fee which has been fixed by parties in their agreement. In NHAI v.
Gayatri Jhansi Roadways Ltd.18
, this Court has held that the fee fixed in
the agreement is binding. In Russell on Arbitration19 (24th Edition) it has
been noted that the appointment of arbitrators is a matter of contract
subject to the mandatory provisions of the governing law. Arbitrators
cannot increase their fees and expenses unless their agreement with the
parties entitles them to do so. Gary Born in his treatise titled International
Commercial Arbitration20 has observed that arbitrators, in principle, should
not be permitted to unilaterally determine their own fee in the absence of
any agreement between the parties since that violates the principle that
one cannot be the judge of their own cause;
(ii) If either one party or both parties are not willing to pay the fees desired by
the arbitrators or if the arbitrators deviate from the fees stipulated under

18 (2020) 17 SCC 626 (―Gayatri Jhansi Roadways Ltd‖)
19 David St John Sutton, Judith Gill and Matthew Gearing, Russell on Arbitration (24th edition, 2015) (―Russell on
Arbitration‖)
20 Gary B Born, International Commercial Arbitration (2nd edition, 2014)
PART B
22
the agreement, the mandate of the arbitral tribunal would have to be
terminated in its entirety;
(iii)Section 11(14) of the Arbitration Act provides that the ―High Court may
frame such rules [for determination of fees] as may be necessary, after
taking into consideration the rate specified in the Fourth Schedule‖.
Therefore, the Fourth Schedule should serve as a template or a guide for
the High Courts in fixing fees for the arbitrators;
(iv)Sub-Section (3A) of Section 11, inserted by the Arbitration and Conciliation
(Amendment) Act 201921
, also stipulates that the arbitrator appointed by a
party shall be entitled to the fees at the rates specified in the Fourth
Schedule;
(v) Conflicting views have emerged from the High Courts as regards the
nature of the Fourth Schedule to the Arbitration Act. Typically, it is
considered suggestive in cases where arbitrators are appointed by parties
and mandatory when arbitrators are appointed by the court;
(vi)The entry at Serial No 6 of the Fourth Schedule to the Arbitration Act
provides a cap on the fees payable to the arbitral tribunal. There is an
apparent mismatch between the English and Hindi versions, since a
comma which is present in the Hindi version is absent in the English
version, before the phrase ―with a ceiling of Rs 30,00,000‖. The comma
disjoins the phrase "with a ceiling of Rs.30,00,000‖ from the words
preceding the comma, "Rs. 19,87,500 plus 0.5 % of the claim amount over
and above Rs. 20 Cr." The use of the comma in the Hindi version suggests

21 ―Arbitration Amendment Act 2019‖
PART B
23
that the ceiling is applicable to the entire clause. Thus, the total fees
payable to the arbitrators cannot exceed Rs 30,00,000;
(vii) The omission of the comma in the English version is an inadvertent
grammatical mistake. Commas have a crucial role to play in interpretation
and due regard must be given to it when multiple interpretations are
possible;
(viii)If the comma is not given its due effect, the upper limit on the fees can be
interpreted to mean Rs 49,87,500 [19,87,500 + 30,00,000]. Such an
interpretation would be contrary to the legislative intent of making
arbitration cost-effective and economical;
(ix)The Fourth Schedule is based on the Delhi International Arbitration
Centre22 fees‘ schedule which contains a comma like the Hindi version,
which disjoints the applicable fees and establishes a ceiling of Rs
30,00,000 towards arbitrators‘ fees. This ceiling applies to the aggregate
amount of the claim and counter-claim;
(x) Section 2(9) of the Arbitration Act provides that wherever Part - I of the
Arbitration Act refers to a claim, it shall be applicable to a counter-claim
and where it refers to defence, it shall include a reference to the defence of
a counter-claim;
(xi)The legislative intent behind using the phrase ―sum in dispute‖ in the
Fourth Schedule of the Arbitration Act was to refer to the cumulative sum
of the claim and counter-claim. If the legislative intent was to charge

22 ―DIAC‖
PART B
24
separate fees for both the claim and counter-claim, it would have been
explicitly stated;
(xii) The plain English meaning of the term ―sum‖ means aggregate and of the
term ―dispute‖ means the totality of all the claims and counter-claims. The
term ―sum‖ or ―dispute‖ cannot be bifurcated through legal interpretation to
refer to claims and counter-claims as separate concepts;
(xiii)The rules of various institutions in India and abroad that conduct
arbitration proceedings also fortify the position that the ―sum in dispute‖
includes the claim and counter-claim;
(xiv)In Union of India v. Singh Builders23 and Sanjeev Kumar Jain v. RS
Charitable Trust24
, this Court observed that arbitrators are charging
exorbitant fees, without any ceilings. The Law Commission of India in its
246th Report25 identified the above mischief and recommended the
introduction of the Fourth Schedule to address this issue;
(xv) It is evident from the LCI 246th Report (supra) that the Fourth Schedule
was introduced to make arbitration a cost-effective solution for dispute
resolution domestically by providing some mechanism to rationalise the fee
structure for arbitration. The Law Commission stated that the model
schedule of fees recommended by it is based on the fee set by DIAC. The
fee schedule set by DIAC specifically provides that the ―sum in dispute‖
includes the counter-claim made by any party. Thus, the interpretation that
the ―sum in dispute‖ includes the counter-claim would be in tandem with

23 (2009) 4 SCC 523 (―Singh Builders‖)
24 (2012) 1 SCC 455
25 Law Commission of India, ‗Amendments to the Arbitration and Conciliation Act 1996‘ (246th Report, August
2014) available at <https://lawcommissionofindia.nic.in/reports/report246.pdf> accessed on 29 June 2022 (―LCI
246th Report‖)
PART B
25
the legislative intent and the object that was sought to be achieved with the
introduction of the Fourth Schedule;
(xvi)The proviso to Section 38(1) of the Arbitration Act, providing for a
separate ―deposit‖ for claim and counter-claim as an advance for the costs
referred to in Section 31(8), cannot be construed to include arbitrators‘
fees because that would negate the requirement of the Fourth Schedule
framed either under Section 11(14) or Section 11(3A) of the Arbitration Act,
as the case may be. This can be harmoniously reconciled by excluding
―fees‖ from the ambit of ―costs‖;
(xvii) Fees and costs are completely distinct. Fees are a return or
consideration for professional services rendered, where there is an
element of quid pro quo. Fees can be fixed by agreement between the
parties in an ad hoc arbitration or by rules in an institutional arbitration. On
the other hand, costs are expenses incurred in the facilitation of the
arbitration, which include expenses for the venue of arbitration,
transportations costs and secretarial expenses;
(xviii) Section 31(8) of the Arbitration Act states that the cost of arbitration is
fixed by the arbitral tribunal in accordance with Section 31A. There is no
involvement of party autonomy in the determination of costs, unlike the
concept of fees which is based on party autonomy;
(xix)Sub-Sections (3) and (4) of Section 31A of the Arbitration Act enumerate
the circumstances which may be taken into account by the arbitral tribunal
to determine costs. None of these circumstances make any references to
PART B
26
arbitrators‘ fees but refer to expenses incurred in the process of facilitating
the arbitration proceedings;
(xx) In Gayatri Jhansi Roadways Ltd (supra), this Court held that while
arbitrators‘ fees may be a component of costs to be paid but it is a far cry
to state that Section 31(8) and 31A would directly govern contracts in
which the fee structure has already been laid down. Section 31(8) read
with Section 31A deals with costs generally but not with arbitrator(s) fees;
(xxi)The Explanation to Section 31A(1) of the Arbitration Act states for the
purpose of this sub-Section, ―costs‖ means reasonable costs relating to the
―fees‖ and expenses of the arbitrator. The Explanation takes away the
effect of the legislative intent enshrined in Sections 11(14) read with the
Fourth Schedule and Section 38(1) of the Arbitration Act. In Dattatraya
Govind Mahajan v. State of Maharashtra26
, this Court has held that the
intention of the legislature is paramount;
(xxii) Further, the Explanation to Section 31A(1) which provides that costs
include the ―fees and expenses of arbitrators, Courts and witnesses‖ has to
be read in conjunction with Section 31A(1)(a) which provides that the
arbitral tribunal has the discretion to determine ―whether costs are payable
by one party to another‖. The implication of the above is that when costs
are awarded to the successful party, it would recoup the entirety of the
amount that has been spent on arbitration, including fees and expenses of
the arbitrators, court and witnesses as compensation for the arbitration
which has failed against it. This does not refer to a new determination of

26 (1977) 2 SCC 54
PART B
27
fees by the arbitrators; they are only entitled to what the agreement states.
It would be extraordinary to state that the arbitrators can stipulate a new
fee at the final stage of determining costs under Section 31A;
(xxiii) The Fourth Schedule uses the phrase ―sum in dispute‖ and there is no
mention of this phrase in the Arbitration Act. On the other hand, Section 38
pertains to deposits and that too at a preliminary stage as an advance for
costs as referred to in Section 31(8). These provisions cannot be used to
interpret the term ―sum in dispute‖. If the language of the enacting part is
ambiguous, then the Schedule should be referred to for understanding the
intent of the legislature. Thus, the Fourth Schedule would supersede the
provisions of Section 38 on the basis of which, it can be concluded that
arbitral fee refers to a cumulative amount of claim and counter-claim;
(xxiv) The Fourth Schedule was introduced by the Arbitration and Conciliation
(Amendment) Act 201527. The legislature was aware of the terminology
used in Section 38(1) and could have used the terms ―costs‖ or ―deposits‖
but yet it still chose to use the term ―sum in dispute‖; and
(xxv) Public sector undertakings, unlike private companies, cannot afford the
high fees that are charged by the arbitrators. A failure to pay the hefty fees
being charged by arbitrators could lead to a situation where the arbitral
tribunal forms a bias against such public sector undertakings.

27 ―Arbitration Amendment Act 2015‖
PART B
28
B.2 Submissions on behalf of the respondents
36 On behalf of the respondents, the following submissions have been urged
by Dr Abhishek Manu Singhvi, Senior Counsel:
(i) If the parties have prescribed a fee schedule and the arbitral tribunal
agrees to be bound by it unconditionally, without any caveat, then the
agreed schedule would apply. However, there is nothing in the Arbitration
Act to indicate what is to be done in a circumstance where the parties are
unable to agree to a fee schedule. The question then arises if the arbitral
tribunal can fix its own fees;
(ii) The issue of fee fixation is dealt with as a part of ―costs‖ under Section
31(8) (prior to the Arbitration Amendment Act 2015) or Section 31(8) read
with Section 31A (after the Arbitration Amendment Act 2015);
(iii)Sections 31(8) and 31A are part of Chapter VI titled ―Making of Arbitral
Award and Termination of Proceedings‖, which implies that the issue of
fees remains open to determination till the award is made. A similar
practice is followed under the English Arbitration Act 1996, UNICITRAL
Rules and International Chamber of Commerce Rules. Therefore, if there
is no agreement between the parties regarding the fees of the arbitrators
and the arbitration has proceeded, the arbitral tribunal would be entitled to
its right to remuneration, which is crystallized as a part of ―reasonable
costs‖ as provided under the Explanation to Section 31A(1);
(iv)It has been suggested that this Court may provide guidelines where three
case management hearings can be conducted at the initial stage of
PART B
29
arbitration leading to the fixation of the fee of the arbitrators, which shall
not be changed except under extraordinary circumstances;
(v) Arbitrator(s) may demand an increase in fees if there is an undue delay in
the completion of the arbitration proceedings;
(vi)The right to remuneration of the arbitrator(s) is secured by empowering the
arbitral tribunal to fix an amount of deposit or supplementary deposit in
advance under Section 38(1) of the Arbitration Act, which is a part of final
accounting upon the termination of arbitral proceedings under Section
38(3). The enforcement of this right is ensured by empowering the arbitral
tribunal to exercise a lien on the award under Section 39(1);
(vii) Section 39(1) of the Arbitration Act permits a party to approach the court
to resolve the issue of costs (including fees) as the court ―may consider
reasonable‖. The arbitral tribunal‘s right to fix reasonable costs (including
its final determination of fee) is judicially reviewable under Section 39 read
with Section 31A of the Arbitration Act;
(viii)Section 31(8) of the Arbitration Act provides that the costs of arbitration
shall be fixed in terms of Section 31A of the Act. The Explanation to
Section 31A(1) provides that ―costs‖ shall mean reasonable costs relating
to the fees and expenses of arbitrators;
(ix)The proviso to Section 38(1) of the Arbitration Act in clear and
unambiguous terms provides that a separate amount may be fixed for
deposit towards the claim and the counter-claim, if any counter-claim is
preferred apart from the claim;
PART B
30
(x) The fees of arbitrators are an integral part of the costs to be fixed by the
arbitral tribunal under Section 31(8) towards deposits, for which the arbitral
tribunal is empowered to fix separate amounts for claims and counterclaims;
(xi)The phrase ―sum in dispute‖ mentioned in the Fourth Schedule has to be
interpreted in the above context;
(xii) Any reliance on the inconsistency between the Hindi and English versions
of the Arbitration Act with respect to the entry at Serial 6 of the table in the
Fourth Schedule is in the teeth of Article 348(1)(b)(ii) of the Constitution,
which provides that the Act passed by Parliament in the English language
shall be the authoritative text. Further, Article 348(1) begins with a nonobstante clause which has an overriding effect over other provisions;
(xiii)If the legislature wanted to indicate that the maximum cap on fees
payable to an arbitrator is Rs 30,00,000, it would have simply stated so.
There was no need to provide in the entry at Serial 6 that the fixed amount
of Rs 19,87,500% + 0.5% of the claim amount over and above Rs
20,00,00,000 with a ceiling of Rs 30,00,000 would be the upper ceiling;
(xiv)Counter-claims arise from a distinct dispute, separate from the dispute
pertaining to the claim and mostly in regard to an independent cause of
action. Even if the main suit fails, a counter-claim may survive and
continue. Thus, a separate court fee (where a suit is filed in a court) is
required to be paid on the amount of counter-claim. A counter-claim is
different from a set-off, which arises from the same dispute and can be
PART B
31
claimed as an adjustment in the main suit, without requiring the payment of
court fees;
(xv) The Arbitration Act refers to claims and counter- claims distinctly in
various provisions such as Section 2 (9), Section 23 (2A), Section 31A and
Section 38;
(xvi)Section 2(9) of the Arbitration Act, which states any reference to a claim
in Part - I also applies to a counter-claim, has to be read in tandem with the
proviso to Section 38(1), Section 31A and Section 31(8); and
(xvii) Bias is not an appropriate ground to challenge the increase in fees of
arbitrators.
B.3 Submissions on behalf of the amicus curiae
37 Mr Huzefa Ahmadi, learned Senior Counsel, assisting this Court as amicus
curiae made the following submissions:
(i) Party autonomy is the overarching principle of arbitration and is crystallised
in Section 2(6) of the Arbitration Act. It allows parties to determine the
relevant law and procedure that will govern the arbitration and limits court
intervention. The principle of party autonomy extends to parties‘ freedom to
decide the fees payable to the arbitrator(s);
(ii) Prior to the amendment of the Arbitration Act in 2015, the issue of
arbitrators‘ fees would have been a subject of agreement between the
parties and the arbitrators. However, this Court in Singh Builders (supra)
noted that the arbitrators have been unilaterally, arbitrarily and
disproportionately fixing their fees. This observation was made in the
PART B
32
context of court-appointed arbitrators where this Court was concerned with
the fact that parties were being sent for arbitration by courts and were
being forced to pay the fees fixed by such arbitrators. This Court noted that
institutional arbitration has already remedied this problem since the arbitral
institution fixes the fees and not the arbitrators in terms of the rules of the
institution;
(iii)In the above backdrop, the Law Commission recognised that the issue of
arbitrator fees in ad hoc arbitration must be resolved by the introduction of
a mechanism to rationalise the fee structure. A model schedule of fees, the
Fourth Schedule, was added to the Arbitration Act through the Arbitration
Amendment Act 2015, which was to serve as a guide for High Courts to
frame rules governing the fixation of fees payable to the arbitrators. This
model schedule of fees was based on the schedule of fees developed by
DIAC and was suitably revised;
(iv)The Fourth Schedule is to be read along with provisions for appointment of
arbitrators under Section 11. It does not apply to international commercial
arbitration and is not applicable when the parties have agreed to the fees
in terms of the rules of an arbitral institution;
(v) The High Courts have been slow in framing rules for the determination of
fees payable to arbitrator(s);
(vi)Some High Courts have been of the view that the Fourth Schedule is
merely suggestive and not mandatory, while others have held that it is
mandatory. Thus, there is an uncertainty regarding the nature of the Fourth
Schedule. In Gayatri Jhansi Roadways Ltd (supra), this Court held that if
PART B
33
the fee schedule is fixed by the parties in an agreement, they would not be
bound by the Fourth Schedule. Pursuant to this decision, many High
Courts have proceeded to hold that the Fourth Schedule is only applicable
to court-appointed arbitrators if stated expressly or if the parties and
arbitrators have agreed to its applicability;
(vii) Section 11 has been further amended by the Arbitration Amendment Act
2019. Sub-Section (14) of Section 11 now reads that ―[t]he arbitral
institution shall determine the fees of the arbitral tribunal and the manner of
its payment to the arbitral tribunal subject to the rates specified in the
Fourth Schedule‖. The amended Section 11 has not been brought into
force and is subject to two exceptions. Crucially, once the amendment
comes into force, the fee of the arbitral tribunal would be fixed by the
arbitral institution appointing the arbitrator. This Court‘s interpretation
regarding the nature of the Fourth Schedule would also have an impact on
the amended Section 11 when it is brought into force;
(viii)To determine if the term ―sum in dispute‖ refers to both the claim and
counter-claim, it has to be considered whether a counter=claim can be
treated as an independent claim for which a legal proceeding may be
instituted. Section 23 of the Arbitration Act provides the basis on which a
counter-claim is to be adjudicated. Section 23 does not stipulate that the
counter-claim must be linked or related to the claim; rather it only states
that the counter-claim must come within the scope of the arbitration
agreement;
PART B
34
(ix)The independent nature of the counter-claim is recognised under Sections
38(1) and 38(2) of the Arbitration Act in the following terms, where the
arbitral tribunal is empowered to:
(a) Determine separate amount of deposits on a claim and counter-claim;
and
(b) Suspend or terminate the proceedings in respect of the claim or
counter-claim, in the event, the deposit directed to be paid by the
tribunal is not paid by the parties;
(x) Claims and counter-claims are treated separately under the analogous
provisions of Order VIII of the CPC;
(xi)Proceedings relating to a counter-claim can survive even if the
proceedings relating to a claim are terminated;
(xii) Section 2(9) only provides that provisions of the Arbitration Act relating to
a claim would mutatis mutandis apply to a counter-claim. It is not a
definition clause but it is intended to apply to only procedural aspects. In
fact, it fortifies the argument that the ―claim amount‖ under the Fourth
Schedule would mutatis mutandis apply to counter-claims and is not an
aggregate of claims and counter-claims;
(xiii)An arbitral tribunal is not restrained from deciding its fees under the
Fourth Schedule for claims and counter-claims separately;
(xiv)The Fourth Schedule does not explicitly state that the ―sum in dispute‖
includes a counter-claim;
(xv) Until the amendment to Section 11 is notified, the court appointing
arbitrators should ensure that the parties are made aware of the terms on
PART B
35
which the appointment is made and specifically whether or not the Fourth
Schedule is applicable. The court should also ensure that the parties have
clarity on the fees and expenses payable to the arbitrator(s);
(xvi)This Court may recommend that either prior to or at the time of notifying
the amendments to Section 11, the rates specified in the Fourth Schedule
may be revised to reflect the rates that are realistic in present times;
(xvii) None of the provisions of the Arbitration Act entitle the arbitrators to fix
their own fees. The scheme of the Act indicates that the arbitral tribunal is
only empowered to apportion costs (including the arbitrators‘ fee) incurred
during the arbitration as between the parties at the time of passing the
award;
(xviii) Remuneration of arbitrators is subject to direct negotiation and
agreement between the arbitrators and the parties and ought to be
determined at the inception of the proceedings. The fee that has been
agreed upon between the parties and the arbitrators is apportioned as a
part of the costs at the time when the award is passed. This view is
supported by the decision of this Court in Gayatri Jhansi Roadways Ltd
(supra), where it was observed that ―…it is true that the arbitrator‘s fees
may be a component of costs to be paid but it is a far cry thereafter to state
that section 31(8) and 31A would directly govern contracts in which a fee
structure has already been laid down‖;
(xix)Section 39 of the Arbitration Act also empowers the arbitral tribunal to
only hold the award from the parties for any unpaid costs of arbitration.
PART B
36
These unpaid costs could include arbitrators‘ fees previously agreed upon
between the parties and not paid;
(xx) Any deviation from the fees agreed between the parties and the
arbitrator(s) would require the consent of the parties. It would be
unreasonable and unfair to the parties if the arbitral tribunal is allowed to
alter its fees at a later stage of the arbitration proceedings. At an advanced
stage, parties may be apprehensive to disagree with the arbitral tribunal
and may agree to an unreasonable and arbitrary fee sought by it;
(xxi)The fee payable under the Fourth Schedule would be applicable to each
member of the arbitral tribunal. It cannot be considered as a lump sum to
be split among the members. The Note to the Fourth Schedule provides
that where the tribunal consists of a sole arbitrator, they would be entitled
to 25 per cent over and above the fee payable under the Fourth Schedule.
It would be absurd if the sole arbitrator would be entitled to 25 per cent
over and above the stipulated sum under the Fourth Schedule but in the
case of an arbitral tribunal consisting of three or more members, the entire
fee would have to split;
(xxii) Under Section 10 of the Arbitration Act, parties are free to determine the
number of arbitrators. If there is no agreement, then the default rule is of
appointing a sole arbitrator. Parties can always appoint a sole arbitrator,
but if there are unwilling to derogate from the agreement which provides
for appointment of three or more arbitrators, then they would have to bear
the costs accordingly;
PART B
37
(xxiii) The ceiling of Rs 30,00,000 in the Fourth Schedule is only applicable to
the sum of 0.5% of the claim amount over and above Rs 20 crores. The
expression ―+‖ that appears after Rs 19,87,500 is disjunctive; and
(xxiv) The Fourth Schedule was introduced in English while the Hindi version
was the translation. Thus, precedence must be given to the English
version. A comma is not conclusive for determining the meaning of a
statutory provision.
38 Mr Ahmadi also urged the court to issue certain directives for governing ad
hoc arbitrations in India. These are reproduced below:
―1. In cases where the arbitrator(s) are appointed by
parties in the manner set out in the arbitration agreement,
upon constitution of the arbitral tribunal, the parties and the
arbitral tribunal shall hold a preliminary hearing amongst
themselves to finalise the terms of reference (the ―Terms of
Reference‖) of the arbitral tribunal. The arbitral tribunal must
set out the components of its fee in the Terms of Reference
which would serve as a tripartite agreement between the
parties and the arbitral tribunal. Once the Terms of Reference
have been finalised and issued, it would not be open for the
arbitral tribunal to vary either the fee fixed or the heads under
which the fee may be charged.
2. The parties and the arbitral tribunal may make a carve
out in the Terms of Reference that the fee fixed therein may
be analysed upon completion of pleadings. The parties and
the arbitral tribunal may hold another meeting to ascertain the
number of sittings that may be required for the final
adjudication of the dispute which number may then be
incorporated the Terms of Reference as an additional term.
3. In cases where the arbitrator(s) are appointed by the
Court, the order of the Court should ideally expressly stipulate
the fee that arbitral tribunal would be entitled to charge.
However, where the Court leaves this determination to the
arbitral tribunal in its appointment order, the arbitral tribunal
and the parties should agree upon the Terms of Reference as
specified in the manner set out in draft practice direction (1)
above.
PART C
38
4. There can be no unilateral deviation from the Terms
of Reference. The Terms of Reference being a tripartite
agreement between the parties and the arbitral tribunal, any
amendments, revisions, additions or modifications may only
be made to it with the consent of the parties.
5. All High Courts shall frame the rules for arbitrator fee
for the purposes of Section 11(14) of the Arbitration and
Conciliation Act, 1996.‖
39 On the basis of these submissions, this Court has now been called to
determine the following issues in relation to the arbitrators‘ fees:
(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.
C Determination of arbitrators’ fee
C.1 Comparative outlook
40 The issue whether the remuneration of arbitrators has to be decided by the
parties or by the arbitrator(s) on their own has not been exhaustively addressed
PART C
39
in India. People and businesses across the world have increasingly become
interconnected with the advent of globalisation. Hence, it will be useful to look at
the practices adopted by international organisations and in national jurisdictions
on the determination of arbitrators‘ fees. We must at the outset distinguish
between arbitrations administered by institutions and ad hoc arbitrations.
Typically, when an arbitration is conducted under the aegis of an arbitral
institution, the fees payable to the arbitrators is fixed by the institution, sometimes
independently or in consultation with the sole or presiding arbitrator. The parties
are not involved in negotiations with the arbitrator(s) to decide the fees. However,
in ad hoc arbitrations, parties enter into their own arrangements with the
arbitrators regarding their remuneration28
.
C.1.1 Position of international organisations
(i) United National Commission on International Trade29
41 The UNCITRAL adopted a model law on International Commercial
Arbitration on 21 June 1985. It was hoped that states would give due
consideration to the model law while framing their own domestic legislation. The
Arbitration Act has also been enacted taking into account the UNCITRAL Model
Law. The Preamble to the Act states:
―WHEREAS the United Nations Commission on International
Trade Law (UNCITRAL) has adopted the UNCITRAL Model
Law on International commercial Arbitration in 1985:

28 Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on International
Arbitration (6th Edition, 2015), Chapter 4, Paragraph 4.203 (―Redfern and Hunter on International Arbitration‖)
29 ―UNCITRAL‖
PART C
40
AND WHEREAS the General Assembly of the United Nations
has recommended that all countries give due consideration to
the said Model Law, in view of the desirability of uniformity of
the law of arbitral procedures and the specific needs of
international commercial arbitration practice;
AND WHEREAS the UNCITRAL has adopted the UNCITRAL
Conciliation Rules in 1980;
AND WHEREAS the General Assembly of the United Nations
has recommended the use of the said Rules in cases where a
dispute arises in the context of international commercial
relations and the parties seek an amicable settlement of that
dispute by recourse to conciliation;
AND WHEREAS the said Model Law and Rules make
significant contribution to the establishment of a unified legal
framework for the fair and efficient settlement of disputes
arising in international commercial relations;
AND WHEREAS it is expedient to make law respecting
arbitration and conciliation, taking into account the aforesaid
Model Law and Rules;
BE it enacted by Parliament in the forty-seventh Year of the
Republic of India as follows:-‖
42 The UNCITRAL Model Law does not explicitly recognise the right of
remuneration of arbitrator(s). However, arbitrators must be compensated for their
services. This flows from the contractual relationship between the parties and the
arbitrator and customary practice30
.
43 The original UNCITRAL Rules introduced in 1976 could be used to govern
ad hoc arbitrations as well as arbitrations where an arbitral institution was
involved. The 1976 Rules allowed the arbitrator(s) to determine their own fees,
which were to be reasonable taking into account the sum in dispute and the
complexity of the dispute31. The UNCITRAL rules also required the arbitrator(s) to

30 Gary B Born, International Commercial Arbitration (3nd edition, 2021), Chapter 13 (―Gary Born on
Arbitration‖)
31 Article 38(a) read with Article 39(1), UNCITRAL Rules 1976
PART C
41
take into account the schedule of fees that has been issued or provided by an
appointing authority, if designated by the parties32. In the absence of such a fee
schedule, the arbitral tribunal could fix its fees only after consulting with the
appointing authority if a party has requested the appointing authority to furnish a
statement for determining the fees and the appointing authority has consented to
providing such a statement33. However, the appointing authority did not have the
power to alter the decision of the tribunal regarding remuneration payable to
arbitrators. The arbitrators had the final authority to determine their
remuneration34. Commentators have noted that this was an ―unusual approach‖
for establishing the fees of arbitrators and was subject to criticism because it
granted arbitrator(s) undue authority to determine their compensation35
.
44 The UNCITRAL Rules were revised in 2010. The Rules continue to grant a
substantial role to the arbitrators in deciding their own fees but the appointing
authorities, if designated by the parties, or the Permanent Court of Arbitration36
,
have greater control over such determination. Article 40(2)(a) read with Article 41
of the UNCITRAL Rules 2010 empowers the arbitral tribunal to fix their fees
subject to the same reasonableness requirement and the other criteria prescribed
under the 1976 Rules37. The arbitral tribunal is required to inform the parties as to
―how it proposes to determine its fees and expenses, including any rates it
intends to apply‖ promptly after its constitution38. It is noted that this makes the

32 Article 39(2)-(3), UNCITRAL Rules 1976
33 Article 39(3)-(4), UNCITRAL Rules 1976
34 D Caron and L Caplan, The UNCITRAL Arbitration Rules: A Commentary (2nd edition, 2013), page 863
35 Supra at note 30
36 ―PCA‖
37 Article 41(1) reads: ―The fees and expenses of the arbitrators shall be reasonable in amount, taking into
account the amount in dispute, the complexity of the subject matter, the time spent by the arbitrators and any
other relevant circumstances of the case.‖
38 Article 41(3), UNCITRAL Rules 2010
PART C
42
process of determining fees more transparent39. The fees set by the arbitrators
can be reviewed they are not reasonable. Under Articles 41(3)40 and 41(4)(b) 41 of
the UNCITRAL Rules 2010, within 15 days of receiving the arbitral tribunal‘s
determination of fees, the parties can refer the fees determined by the arbitral
tribunal to the appointing authority for review and if no such authority has been
designated, then the review will be undertaken by the Secretary-General of the
PCA. If the Secretary-General of the PCA or the appointing authority (if
designated) finds that the fee proposed to be charged is excessive, then it can
make necessary adjustments in terms of Article 41(4)(c)42. The fees so revised
are binding on the tribunal43
.
(ii) Permanent Court of Arbitration
45 The PCA Rules have been formulated on the basis of the UNCITRAL
Rules 2010. A mandatory automatic review of the fees and expenses determined
by the arbitral tribunal is carried out by Secretary General of the PCA (as the
appointing authority under the PCA Rules) at the conclusion of each case44. The
process of review of fees set by the arbitral tribunal is not automatic under the

39 Supra at note 34
40 Article 41(3) reads: ―Within 15 days of receiving that proposal, any party may refer the proposal to the
appointing authority for review. If, within 45 days of receipt of such a referral, the appointing authority finds that
the proposal of the arbitral tribunal is inconsistent with paragraph 1, it shall make any necessary adjustments
thereto, which shall be binding upon the arbitral tribunal.‖
41 Article 41(4)(b) reads: ―Within 15 days of receiving the arbitral tribunal‘s determination of fees and expenses,
any party may refer for review such determination to the appointing authority. If no appointing authority has been
agreed upon or designated, or if the appointing authority fails to act within the time specified in these Rules, then
the review shall be made by the Secretary-General of the PCA;‖
42 Article 41(4)(c) reads: ―If the appointing authority or the Secretary-General of the PCA finds that the arbitral
tribunal‘s determination is inconsistent with the arbitral tribunal‘s proposal (and any adjustment thereto) under
paragraph 3 or is otherwise manifestly excessive, it shall, within 45 days of receiving such a referral, make any
adjustments to the arbitral tribunal‘s determination that are necessary to satisfy the criteria in paragraph 1. Any
such adjustments shall be binding upon the arbitral tribunal;‖
43 Articles 41(3), UNCITRAL Rules 2010
44 Article 41(3)(a), PCA Rules 2010
PART C
43
UNCITRAL Rules 2010. Parties may hesitate to invoke the provisions of review in
the fear of upsetting the tribunal or they may raise unjustified requests for review
if they are dissatisfied with the award. The PCA Rules avoid these pitfalls. The
PCA is also empowered to manage the advances of costs incurred by the
arbitrators. Every time a payment is made to an arbitrator out of the deposit, it is
subject to review45. The PCA rules become relevant since India has signed a
Host Country Agreement with the PCA and a PCA facility is in the process of
being set up in India.
(iii) London Court of International Arbitration46
46 The LCIA‘s Schedule of Costs of arbitrations governs the fees payable to
the arbitrator(s). The arbitral tribunal is required to agree in writing to the rates
specified in the schedule. The tribunal‘s fees are calculated on the basis of the
work done by the arbitrator(s) in connection with the arbitration, the complexity of
the case and requirements relating to the qualification of the arbitrator(s). The
fees are charged on an hourly basis not exceeding £500 unless there are
exceptional circumstances47
. The role of the arbitrator(s) thus is limited to
reporting the hours worked which forms the basis of the fees to be paid.

45 Article 43 of the PCA Rules reads: ―[t]he [PCA] shall ensure that any disbursements of arbitral tribunal fees and
expenses made prior to the fixing of the costs of arbitration pursuant to article 40 are consistent with the criteria in
article 41, paragraph 1 and with the arbitral tribunal‘s proposal (and any adjustments thereto)…‖
46 ―LCIA‖
47 Schedule of Arbitration Fees and Costs, LCIA Rules 2020
PART C
44
(iv) International Centre for Dispute Resolution48
47 The ICDR case administrator fixes the daily or hourly rate for
arbitrator(s)
49
. The determination of fees may involve an element of negotiation
between the parties and the arbitrator(s)50
. Article 38 of the ICDR Rules 2021
provides that the ―[t]he fees and expenses of the arbitrators shall be reasonable
in amount, taking into account the time spent by the arbitrators, the size and
complexity of the case, and any other relevant circumstances‖.
(v) International Chamber of Commerce51
48 The ICC Rules 2021 stipulate that the ICC Court will determine the
arbitrators‘ fee52 according to the fee scale based on the sum in dispute, or where
the sum is not stated, based on its discretion53
. The ICC Court while setting the
fees of the arbitrator(s) has to consider various factors like ―the diligence and
efficiency of the arbitrator, the time spent, the rapidity of the proceedings, the
complexity of the dispute and the timeliness of the submission of the draft
award‖
54
. The ICC Court is empowered to increase the fees if the arbitration has

48 ―ICDR‖
49 Article 38(2), ICDR Rules 2021
50 Article 38(2) of ICDR Rules 2021 provides: ―As soon as practicable after the commencement of the arbitration,
the Administrator shall designate an appropriate daily or hourly rate of compensation in consultation with the
parties and all arbitrators, taking into account the arbitrators‘ stated rate of compensation and the size and
complexity of the case‖.
51 ―ICC‖
52 Article 38(1) of the ICC Rules 2021 provides: ―The costs of the arbitration shall include the fees and expenses
of the arbitrators and the ICC administrative expenses fixed by the Court, in accordance with the scale in force at
the time of the commencement of the arbitration, as well as the fees and expenses of any experts appointed by
the arbitral tribunal and the reasonable legal and other costs incurred by the parties for the arbitration.‖ Article
38(2) provides: ―The Court may fix the fees of the arbitrators at a figure higher or lower than that which would
result from the application of the relevant scale should this be deemed necessary due to the exceptional
circumstances of the case‖.
53 Articles 2(1), Appendix III (Arbitration Costs and Fees), ICC Rules 2021
54 Article 2(2), Appendix III (Arbitration Costs and Fees), ICC Rules 2021
PART C
45
been conducted expeditiously and reduce the fees if there has been a delay in
pronouncing the award55
.
(vi) Singapore International Arbitration Centre56
49 The fees are fixed by the Registrar in accordance with the Schedule of
Fees on basis of the amount in dispute57
. The time spent on the matter and the
complexity of the dispute are considered for the determination of fees58
. The
parties have the discretion to provide an alternative method of determining the
fees prior to the constitution of the arbitral tribunal59
.
(vii) Hong Kong International Arbitration Centre60
50 The parties determine the arbitrators‘ fees based on either the sum in
dispute or at an hourly rate61
. If the fees are decided based on the sum in
dispute, then the fees will be fixed on the basis of the guidelines and fee table

55 Paragraphs 118-22, Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration Under the ICC
Rules of Arbitration (2019)
56 ―SIAC‖
57 Rule 36(1) of SIAC Rules 2016 provides: The fees of the Tribunal shall be fixed by the Registrar in accordance
with the applicable Schedule of Fees or, if applicable, with the method agreed by the parties pursuant to Rule
34.1, and the stage of the proceedings at which the arbitration concluded. In exceptional circumstances, the
Registrar may determine that an additional fee over that prescribed in the applicable Schedule of Fees shall be
paid‖.
58 Supra at note 30
59 Rule 34(1) of SIAC Rules 2016 provides: ―The Tribunal‘s fees and SIAC‘s fees shall be ascertained in
accordance with the Schedule of Fees in force at the time of commencement of the arbitration. The parties may
agree to alternative methods of determining the Tribunal‘s fees prior to the constitution of the Tribunal‖.
60 ―HKIAC‖
61 Article 10.1 of HKIAC Rules 2018 provides: ―The fees and expenses of the arbitral tribunal shall be determined
according to either:
(a) an hourly rate in accordance with Schedule 2; or
(b) the schedule of fees based on the sum in dispute in accordance with Schedule 3.
The parties shall agree the method for determining the fees and expenses of the arbitral tribunal, and shall inform
HKIAC of the applicable method within 30 days of the date on which the Respondent receives the Notice of
Arbitration. If the parties fail to agree on the applicable method, the arbitral tribunal's fees and expenses shall be
determined in accordance with Schedule 2‖.
PART C
46
provided in the Rules. If the fees are to be determined at hourly rates, then a coarbitrator will negotiate and agree on their fees with the nominating party, and a
sole or presiding arbitrator will negotiate with parties jointly62
.
(viii) International Centre for Settlement of Investment Disputes63
51 The Secretary General, with the approval of the Chair (Chairman of the
Administrative Council), would determine and publish the fee and per diem
allowance payable to each arbitrator(s) in terms of the Regulation 14 of the ICSID
Administrative and Financial Regulations 202264
. The older 2006 version of the
Regulations allowed the parties to contract out of the fee structure prescribed by
ICSID65
.

(ix) Summary
52 Typically, when an arbitration is conducted under the auspices of an
arbitral institution, the fees payable to the arbitrator(s) are fixed by the institution

62 Article 10.2 of HKIAC Rules 2018 provides: ―Where the fees of the arbitral tribunal are to be determined in
accordance with Schedule 2,
(a) the applicable rate for each co-arbitrator shall be the rate agreed between that co-arbitrator and the
designating party;
(b) the applicable rate for a sole or presiding arbitrator designated by the parties or the co-arbitrators, as
applicable, shall be the rate agreed between that arbitrator and the parties, subject to paragraphs 9.3 to 9.5 of
Schedule 2. Where the rate of an arbitrator is not agreed in accordance with Article 10.2(a) or (b), or where
HKIAC appoints an arbitrator, HKIAC shall determine the rate of that arbitrator‖.
63 ―ICSID‖
64 Regulation 14 (2) states: ―The Secretary-General, with the approval of the Chair, shall determine and publish
the amount of the fee and the per diem allowance referred to in paragraph (1)(a) and (c). Any request by a
member for a higher amount shall be made in writing through the Secretary-General, and not directly to the
parties. Such a request must be made before the constitution of the Commission, Tribunal or Committee and
shall justify the increase requested‖.
65 Regulation 14 states: ―(1) Unless otherwise agreed pursuant to Article 60(2) of the Convention, and in addition
to receiving reimbursement for any direct expenses reasonably incurred, each member of a Commission, a
Tribunal or an ad hoc Committee appointed from the Panel of Arbitrators pursuant to Article 52(3) of the
Convention (hereinafter referred to as ―Committee‖) shall receive…‖
PART C
47
itself. However, some arbitral institutions like ICDR, SIAC and HKIAC allow a
certain level of negotiations between the parties and arbitrator(s) for the
determination of fees payable to the arbitrators, upholding the principle of party
autonomy. ICDR allows determination of compensation by the Administrator in
consultation with the arbitrator(s) and the parties. SIAC allows the parties to
propose an alternative method of calculating fees prior to the constitution of the
tribunal. HKIAC enables the parties to choose between remuneration based on
the sum in dispute or hourly rates. Interestingly, UNCITRAL Rules 2013 allow
greater control to the arbitrator(s) in determining their fees. However, the
designated appointing authority or the Secretary General of the PCA can make
adjustments to the fees proposed by the arbitrator(s). Thus, none of the
international bodies (including arbitral institutions) confer an absolute or unilateral
power to the arbitrator(s) to decide their own fees. Gary Born in his treatise on
international commercial arbitration has noted that, ―[a] number of other
institutional rules also minimize the role of arbitrators in fixing the tribunal‘s fees.
These rules typically fix the amount of the arbitrator‘s fees by reference to the
amount in dispute‖66
.
C.1.2 Position in other national jurisdictions
53 While it will not be possible to undertake a comprehensive review of all the
foreign jurisdictions in respect of the legal regime governing the payment of
remuneration to arbitrators, we have discussed a few jurisdictions that either

66 Supra at note 30
PART C
48
have explicitly recognised an arbitrators‘ entitlement to remuneration and/or have
dealt with the issue of arbitrators‘ power of fixing their own remuneration.
(i) England
54 The English courts have held that the arbitrator‘s rights and duties result
from a conjunction of contract and status67
. Upon accepting the appointment, the
arbitrator becomes a party to the arbitration agreement, giving rise to a trilateral
contract between the parties and the arbitrator68
. However, the English courts
acknowledge that certain aspects of the relationship between the arbitrator and
parties are also influenced by the quasi-judicial status of the arbitrator, which
requires the arbitrator to be independent of the parties69
.
55 Section 28 of the English Arbitration Act 199670 recognises the entitlement
of an arbitrator to remuneration. This is a mandatory provision which cannot be
derogated from71
. Section 28(1) codifies the common law position72 that parties
are jointly and severally liable to pay reasonable fees and expenses to the
arbitrator(s) as is appropriate in the circumstances. In terms of Section 28(5), the
arbitrator(s) are entitled to be paid the fees and expenses agreed by them with
the parties73
. However, if there is no such agreement, the arbitral tribunal can

67 KS Norjarl AS v. Hyundai Heavy Indus. Co., [1992] 1 QB 863, 884
68 Compagnie Européenne de Céréales SA v. Tradax Exp. SA, [1986] 2 Lloyd‘s Rep. 301 (QB)
69 Jivraj v. Hashwani, [2011] UKSC 40
70 ―English Arbitration Act‖
71 Section 4(1) and Schedule 1 of the English Arbitration Act
72 Loukas A Mistelis (ed), Concise International Arbitration (2
nd edition, 2015), Chapter 23 (―Mistelis on
Arbitration‖)
73 Section 28(5) provides: ―Nothing in this section affects any liability of a party to any other party to pay all or any
of the costs of the arbitration (see sections 59 to 65) or any contractual right of an arbitrator to payment of his
fees and expenses.‖
PART C
49
seek payment of such fees and expenses from one, some or all the parties74
. The
parties‘ liability to pay fees and expenses may be determined by courts. The
court may consider factors like the standard fees of the arbitrator(s), the time
invested, complexity of the dispute, and whether the procedures adopted by the
tribunal were suitable75
.Section 33(1)(b) stipulates that it is the duty of the arbitral
tribunal to adopt procedures that are suitable to the circumstances of the case
and to avoid unnecessary delays or expenses, to provide a fair means for the
resolution of the dispute. The court is also entitled to review the fees76
determined by the arbitrator(s) or arbitral institution, which has not been
contractually agreed to by the parties77
. However, if the agreement with an
arbitrator(s) or an arbitral institution is not clear regarding the terms of the
payment, the court can intervene to review the fees, in order to examine if they
are reasonable78
. It is also important to note that where only one party has
agreed to the fees and the fees have been held to be unreasonable, then the
other party is only jointly and severally liable to pay the amount that the court has
determined to be reasonable, but the first party may be liable contractually to pay
the contractually agreed amount79
.

74 Supra at note 72
75 ibid
76 Section 28(2) provides: ―Any party may apply to the court (upon notice to the other parties and to the
arbitrators) which may order that the amount of the arbitrators‘ fees and expenses shall be considered and
adjusted by such means and upon such terms as it may direct.‖
77 Hussmann (Europe) Ltd v. Al Ameen Development & Trade, [2000] 2 Lloyd's Rep. 83. Queen‘s Bench
Division (Commercial Court)), paragraphs 71-72
78 ibid
79 Supra at note 72
PART C
50
(ii) Italy
56 Article 814 of the Italian Code of Civil Procedure provides that the
arbitrators have a right to expenses and the fees for the work done, unless they
have waived this right at the time of acceptance or through a subsequent written
statement. Article 814 also provides that the parties are jointly and severally liable
for paying the fees and expenses of the arbitral proceedings, irrespective of how
the arbitration costs are apportioned between them. If one party has made all the
payments of the fees and expenses payable to the arbitrator(s), they are entitled
to recover this amount from the other party subject to the limits set out in the
award.
57 Article 814 also recognises that arbitrator(s) determine their own fees in
the award and allocate the responsibility of the payment of such fees. However,
such a determination is not binding unless the parties approve the fees proposed
by the arbitrator(s). If the fees have not been paid, the arbitrator(s) can approach
the President of the court in the district where the arbitration is seated for the
determination of the fees. This order is enforceable against the parties80
. The
schedule of fees is provided in the Ministerial Decree issued by the Italian
Ministry of Justice for domestic ad hoc arbitrations81
.

80 CMS Expert Guides, ―International Arbitration Law and Rules in Italy‖, available at
<https://cms.law/en/int/expert-guides/cms-expert-guide-to-international-arbitration/italy> accessed on 29 June
2022; See also, Italian Code of Civil Procedure, available at <https://www.international-arbitrationattorney.com/wp-content/uploads/2013/07/Italy-Arbitration-Law.pdf> accessed on 29 June 2022
81 Cecilia Carrara, Stefano Parlatore, Daniele Geronzi et.al, Arbitration Procedures and Practice in Italy, available
at <https://uk.practicallaw.thomsonreuters.com/6-383-
9187?transitionType=Default&contextData=(sc.Default)&firstPage=true#co_anchor_a719112> accessed on 29
June 2022
PART C
51
(iii) Sweden
58 The arbitral tribunal is empowered to set its own fees unless there is an
agreement between the parties82
. Section 37(1) of the Swedish Arbitration Act83
provides that the parties are jointly and severally liable to pay reasonable
compensation to the arbitrator(s) for work and expenses. The Swedish Supreme
Court has interpreted the words ―reasonable compensation‖ to mean an
assessment of time spent by the arbitrator(s) and the qualification of the
arbitrator(s)
84
. The Swedish Supreme Court has also noted that a
disproportionately high cost of arbitration compared to the value of sum in dispute
does not necessarily require a reduction in the compensation85
.
59 Section 37 of the Swedish Arbitration Act is applicable ―unless otherwise
jointly decided by the parties in a manner that is binding upon the arbitrators‖.
Commentators have thus noted that Section 37 is non-mandatory and can be
altered or waived off by the parties86
. However, it is understood that if the
arbitrator(s) are not parties to an agreement with respect to their compensation, it
becomes binding on the arbitrator(s) only if they are aware and understand the
agreement when they accept the appointment87
. Section 39 of the Swedish
Arbitration Act further provides that an agreement regarding compensation to the
arbitrator(s) which is not entered jointly by the parties is void.

82 Annette Magnusson, Jakob Ragnwaldh and Martin Wallin (eds), International Arbitration in Sweden: A
Practitioner's Guide (2
nd edition, 2021), Chapter 9
83 The Swedish Arbitration Act (SFS 1999:116), available at <https://sccinstitute.se/media/1773096/the-swedisharbitration-act_1march2019_eng-2.pdf> accessed on 29 June 2022
84 Supra at note 82
85 NEMU Mitt i Sverige AB v. Jan H, Gunnar B and Bo N (the arbitrators), the Supreme Court, 22 October
1998, NJA 1998 p. 574 (T 105-98)
86 Supra at note 82
87 ibid
PART C
52
60 Section 41 enables a party or an arbitrator to file an application before the
District Court regarding the amendment of the award with respect to the payment
of compensation to the arbitrator(s). The District Court is empowered to reduce
the compensation of the arbitrator(s). The national courts also have the power to
revise the fees set by arbitral institutions, if the seat of the arbitration is in
Sweden88
. This is an unusual exception since typically rules of arbitral institutions
setting the fees are never subject to judicial review89
.
(iv) Germany
61 The German arbitration law is governed by the Tenth Book of the Code of
Civil Procedure (Zivilprozessordnung)
90
. In the absence of an agreement in ad
hoc arbitrations, the ZPO does not contain any provision regulating the fees
payable to arbitrator(s). Fees are then to be charged in terms of the rules of the
German Civil Code (Bürgerliches Gesetzbuch)91 depending on whether the
contract between the parties is to be classified as a service contract or contract
for work. The provisions of the BGB provide that remuneration for such contracts
is deemed to be the fees of the arbitrator(s) in absence of an agreement between
the parties92
.
62 However, in Germany, the arbitrator(s) are prohibited from determining
their own fees in the absence of an agreement under the doctrine of prohibition of

88 Soyak Int’l Constr. & Inv. Inc. v. Hobér, Kraus & Melis, Case No. O 4227-06 (Swedish S.Ct. 2008)
89 Supra at note 30
90 ―ZPO‖
91 ―BGB‖
92 K. Bockstiegel, Stefan Kröll and Patricia Nacimiento (eds), Arbitration in Germany: The Model Law in Practice
(2
nd edition, 2015), Chapter VI
PART C
53
in rem suam decisions, i.e., arbitrators cannot be a judge of their own cause93
.
Earlier, even a decision regarding the sum in dispute by the arbitral tribunal was
seen as indirectly determining the amount of fees when fees are calculated as a
percentage of the amount at stake and thus, was considered to be a violation of
the above doctrine94
. However, recently, the Federal Court of Justice
(Bundesgerichtshof)
95 held that a decision of the tribunal regarding the sum in
dispute, even if it influences the fees payable to the arbitrator(s), does not violate
the doctrine of prohibition of in rem suam decisions96
. The BGH observed that
since the ZPO obligates the arbitral tribunal to render a determination on costs,
which often includes a determination regarding the sum in dispute, such a
determination, even if it indirectly includes a decision on the fees, would not
become a decision in rem suam97
. The BGH further noted that while a
determination of the sum in dispute only binds the parties, it is not actually a
decision in rem suam from the arbitrators‘ perspective98
. In any event, an indirect
determination by the arbitrator(s) as to their own fees only forms the basis of an
arbitrator‘s claim against a party and can be enforced only through court action if
the party fails to pay the amount. In terms of the BGB, the courts can review such
a claim to decide if it‘s equitable. Thus, the arbitrator(s) cannot determine their
fees arbitrarily99
.

93 ibid
94 ibid
95 ―BGH‖
96 BGH 28.03.2012, SchiedsVZ 2012, 154 cited in supra at note 30; See also, supra at note 92
97 ibid
98 ibid
99 ibid
PART C
54
(v) Japan
63 Under Article 47(1) of the Japanese Arbitration Law100
, the fees payable to
the arbitrator(s) are to be governed by the agreement between the parties. If
there is no agreement, then in terms of Article 47(2), the arbitral tribunal has the
power to determine the remuneration of the arbitrator(s). In such cases, the
remuneration has to be of an appropriate amount.
(vi) Singapore
64 Section 40(1) of the Arbitration Act 2001101 provides that the parties are
jointly and severally liable to pay reasonable fees and expenses to the
arbitrator(s) that are appropriate to the circumstances. Section 40(2) provides
that in the absence of a written agreement between the parties as to the fees
payable to the arbitrator(s), any party can approach the Registrar of the Supreme
Court within the meaning of the Supreme Court of Judicature Act 1969 for the
assessment of fees. While Section 41(1) of the Singapore Arbitration Act
empowers the arbitral tribunal to refuse to deliver an award if the parties have not
made full payment of their fees and expenses, Section 41(2) allows a party to
apply to the court to review the fees102
. This has been understood as the right of
the parties to challenge unreasonable fees103
.

100 Law No 138 of 2003, available at <https://japan.kantei.go.jp/policy/sihou/arbitrationlaw.pdf> accessed on 29
June 2022
101 Available at
<https://sso.agc.gov.sg/Act/AA2001#:~:text=1.,is%20the%20Arbitration%20Act%202001.&text=the%20arbitral%
20tribunal%20as%20authorised,and%20all%20the%20relevant%20circumstances> accessed on 29 June 2022
(―Singapore Arbitration Act‖)
102 Section 41(2) reads: ―(2) Where subsection (1) applies, a party to the arbitral proceedings may, upon notice to
the other parties and the arbitral tribunal, apply to the Court, which may order that —
PART C
55
(vii) United States
65 The United States Federal Arbitration Act 1925104 does not explicitly make
a reference to the rights or duties of the arbitrator(s). The Uniform Arbitration Act,
enacted in 1955, is also of relevance. It functions as a model arbitration statute to
enable each state to adopt a uniform arbitration law. It was revised in 2000.
Section 21(d) of the revised version of the Act provides that ―an arbitrator‘s
expenses and fees, together with other expenses, must be paid as provided in
the award.‖ The comment to this Section under the Act provides that ―Section
21(d)… allows arbitrators, unless the agreement provides to the contrary, to
determine in the award payment of expenses, including the arbitrator‘s expenses
and fees‖105
. In the United States, it has been held that it is a violation of public
policy if the arbitrator(s) attempt to renegotiate the fees at a later stage once they
are appointed, owing to the concern that the parties may be compelled to accede
to the demand fearing adverse consequences106
.

(a) the arbitral tribunal must deliver the award upon payment into Court by the applicant of the fees and
expenses demanded, or any lesser amount that the Court may specify;
(b) the amount of the fees and expenses demanded are to be assessed by the Registrar of the Supreme
Court; and
(c) out of the money paid into Court, the arbitral tribunal must be paid the fees and expenses that may be
found to be properly payable and the balance of the money (if any) must be paid out to the applicant‖.
103 Bernard Hanotiau and Alexis Mourre (eds), Players Interaction in International Arbitration (ICC, 2012),
Chapter 12
104 ―FAA‖
105 Uniform Arbitration Act (Last Revisions Completed Year 2000), available at
<https://www.uniformlaws.org/HigherLogic/System/DownloadDocumentFile.ashx?DocumentFileKey=8fff228f9517-f310-36a1-989efa4a826e&forceDialog=0> accessed on 29 June 2022
106 Double-M Construction Corp. v. Central School District No 1 Town of Highlands Orange County, (1978)
402 NYS 2d 442 cited in Jeffrey Waincymer, Procedure and Evidence in International Arbitration (Walters Kluwer,
2012)
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(viii) Summary
66 Although there are jurisdictional differences, the following broad principles
emerge from our discussion above:
(i) Typically, the fees payable to 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.
67 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.
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C.2 Statutory scheme on payment of fees to arbitrators in India
C.2.1 Party autonomy
68 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. Redfern and Hunter on International
Commercial Arbitration (supra) compares arbitration to a ship, highlighting the
extent of control parties exercise over arbitral proceedings:
―In some respects, an international arbitration is like a ship.
An arbitration may be said to be ‗owned‘ by the parties, just
as a ship is owned by shipowners. But the ship is under the
day-to-day command of the captain, to whom the owners
hand control. The owners may dismiss the captain if they
wish and hire a replacement, but there will always be
someone on board who is in command (5) —and, behind the
captain, there will always be someone with ultimate control.‖
The leading treatise on international commercial arbitration further notes that the
principle of party autonomy is entrenched in the international and national
regimes on arbitration:
―Party autonomy is the guiding principle in determining the
procedure to be followed in an international arbitration. It is a
principle that is endorsed not only in national laws, but also by
international arbitral institutions worldwide, as well as by
international instruments such as the New York Convention
and the Model Law. The legislative history of the Model Law
shows that the principle was adopted without
opposition, (7) and Article 19(1) of the Model Law itself
provides that: ‗Subject to the provisions of this Law, the
parties are free to agree on the procedure to be followed by
the arbitral tribunal in conducting the proceedings.‘ This
principle follows Article 2 of the 1923 Geneva Protocol, which
provides that ‗[t]he arbitral procedure, including the
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constitution of the arbitral tribunal, shall be governed by the
will of the parties …‘, and Article V(1)(d) of the New York
Convention, under which recognition and enforcement of a
foreign arbitral award may be refused if ‗the arbitral procedure
was not in accordance with the agreement of the parties‘.‖
69 The Arbitration Act recognises the principle of party autonomy in various
provisions. It allows the parties to derogate from the provisions of the Act on
certain matters. Several provisions of the Arbitration Act explicitly embody the
principle of party autonomy. Section 2(6)107 of the Arbitration Act provides that
parties have the freedom to authorise any person, including an arbitral institution,
to determine the issue between them. Section 19(2)108 provides that the parties
are free to choose the procedure to be followed for the conduct of arbitral
proceedings. Section 11(2)109 provides that parties are free to decide on the
procedure for the appointment of arbitrators. In Bharat Aluminium Co. v. Kaiser
Aluminium Technical Services110, this Court observed that party autonomy is
the ―brooding and guiding spirit‖ of arbitration. In Centrotrade Minerals & Metal
Inc. v. Hindustan Copper Ltd111, this Court referred to party autonomy as the
backbone of arbitration.
70 Having spelt out party autonomy as the cardinal principle of arbitration in
India, in the sections which follow we analyse how provisions relating to the
payment of fees to arbitrators have to be interpreted in light of this principle.

107 Section 2 (6) of the Arbitration Act states: ―Where this Part, except section 28, leaves the parties free to
determine a certain issue, that freedom shall include the right of the parties to authorise any person including an
institution, to determine that issue‖.
108 Section 19(2) of the Arbitration Act states: ―Subject to this Part, the parties are free to agree on the procedure
to be followed by the arbitral tribunal in conducting its proceedings‖.
109 Section 11(2) of the Arbitration Act states: ―Subject to sub-section (6), the parties are free to agree on a
procedure for appointing the arbitrator or arbitrators‖.
110 (2016) 4 SCC 126, paragraph 5
111 (2017) 2 SCC 228, paragraph 38
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C.2.2 Fourth Schedule and regulation of arbitrators’ fees
71 Appointment of arbitrator(s) in India may take place either through an
agreement between parties or by taking recourse to courts under Sections 11(3)
and 11(6) of the Arbitration Act. Prior to the amendment of the Arbitration Act by
the Arbitration Amendment Act 2015, a practice emerged, especially in cases of
ad hoc arbitrations, where arbitrators would unilaterally, and in some cases
arbitrarily, fix excessive fees for themselves. In Singh Builders (supra), this
Court noted that such arbitrary fixation of fees by the arbitrators, specifically
court-appointed arbitrators, has made arbitration an expensive proposition,
bringing it into disrepute. The Court suggested some possible solutions. This
Court observed:
―22. When an arbitrator is appointed by a court without
indicating fees, either both parties or at least one party is at a
disadvantage. Firstly, the parties feel constrained to agree to
whatever fees is suggested by the arbitrator, even if it is high
or beyond their capacity. Secondly, if a high fee is claimed by
the arbitrator and one party agrees to pay such fee, the other
party, which is unable to afford such fee or reluctant to pay
such high fee, is put to an embarrassing position. He will not
be in a position to express his reservation or objection to the
high fee, owing to an apprehension that refusal by him to
agree for the fee suggested by the arbitrator, may prejudice
his case or create a bias in favour of the other party which
readily agreed to pay the high fee.
23. It is necessary to find an urgent solution for this problem
to save arbitration from the arbitration cost. Institutional
arbitration has provided a solution as the arbitrators' fees is
not fixed by the arbitrators themselves on case-to-case basis,
but is governed by a uniform rate prescribed by the institution
under whose aegis the arbitration is held. Another solution is
for the court to fix the fees at the time of appointing the
arbitrator, with the consent of parties, if necessary in
consultation with the arbitrator concerned. Third is for the
retired Judges offering to serve as arbitrators, to indicate their
fee structure to the Registry of the respective High Court so
that the parties will have the choice of selecting an arbitrator
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whose fees are in their ―range‖ having regard to the stakes
involved.
24. What is found to be objectionable is parties being forced
to go to an arbitrator appointed by the court and then being
forced to agree for a fee fixed by such arbitrator. It is
unfortunate that delays, high costs, frequent and sometimes
unwarranted judicial interruptions at different stages are
seriously hampering the growth of arbitration as an effective
dispute resolution process. Delay and high costs are two
areas where the arbitrators by self-regulation can bring about
marked improvement.‖
72 In Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust and Ors.112
,
this Court in a similar vein observed that arbitrators in ad hoc arbitrations in India
are charging disproportionately high fees. While interpreting Section 11 of the
Arbitration Act, this Court held that the word ―appointment‖ does not merely refer
to nominating or designating a person to act as an arbitrator, but it includes the
court‘s power to stipulate the fees that can be charged by an arbitrator appointed
by the court. The fees should be stipulated after hearing the parties and, if
required, after ascertaining the fees structure from prospective arbitrators. This
will avoid a situation where parties have to negotiate the terms of the fees of the
arbitrators, after their appointment. Referring to Singh Builders (supra), this
Court acknowledged the increased complaints against disproportionate fees
being charged by the arbitrators and made certain suggestions for the healthy
development of arbitration in India. One such remedy suggested by this Court
was disclosure of the fee structure prior to the appointment of arbitrators to
enable any party to express their unwillingness to bear such expenses. This
Court observed thus:

112 (2012) 1 SCC 455
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―41. There is a general feeling among the consumers of
arbitration (parties settling disputes by arbitration) that ad hoc
arbitrations in India—either international or domestic, are time
consuming and disproportionately expensive. Frequent
complaints are made about two sessions in a day being
treated as two hearings for the purpose of charging fee; or
about a session of two hours being treated as full session for
purposes of fee; or about non-productive sittings being
treated as fully chargeable hearings. It is pointed out that if
there is an Arbitral Tribunal with three arbitrators and if the
arbitrators are from different cities and the arbitrations are to
be held and the arbitrators are accommodated in five star
hotels, the cost per hearing (arbitrator's fee, lawyer's fee, cost
of travel, cost of accommodation, etc.) may easily run into
rupees one million to one-and-half million per sitting. Where
the stakes are very high, that kind of expenditure is not
commented upon. But if the number of hearings become too
many, the cost factor and efficiency/effectiveness factor is
commented. That is why this Court in Singh Builders
Syndicate [(2009) 4 SCC 523 : (2009) 2 SCC (Civ) 246]
observed that the arbitration will have to be saved from the
arbitration cost.
42. Though what is stated above about arbitrations in India,
may appear rather harsh, or as a universalisation of stray
aberrations, we have ventured to refer to these aspects in the
interest of ensuring that arbitration survives in India as an
effective alternative forum for disputes resolution in India.
Examples are not wanting where arbitrations are being shifted
to neighbouring Singapore, Kuala Lumpur, etc. on the ground
that more professionalised or institutionalised arbitrations,
which get concluded expeditiously at a lesser cost, are
available there. The remedy for healthy development of
arbitration in India is to disclose the fees structure before the
appointment of arbitrators so that any party who is unwilling to
bear such expenses can express his unwillingness. Another
remedy is institutional arbitration where the arbitrator's fee is
prefixed. The third is for each High Court to have a scale of
arbitrator's fee suitably calibrated with reference to the
amount involved in the dispute. This will also avoid different
designates prescribing different fee structures. By these
methods, there may be a reasonable check on the fees and
the cost of arbitration, thereby making arbitration, both
national and international, attractive to the litigant
public. Reasonableness and certainty about total costs are
the key to the development of arbitration. Be that as it may.‖
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73 It was in the above context that the LCI 246th Report (supra) proposed
reforms for regulating arbitrators‘ fees in ad hoc arbitrations. The Commission
recommended that a model schedule of fees should be inserted into the
Arbitration Act, which was to serve as a guide for High Courts to frame their own
rules governing the fixation of arbitrators‘ fees. The Commission accepted that
different values and standard of fees may be adopted in international commercial
arbitrations, which led to the exclusion of the applicability of the Fourth Schedule
to the Arbitration Act to international commercial arbitrations. The Commission
adversely commented on the practice of charging fees on ―per sitting‖ basis in ad
hoc arbitrations where sometimes there are 2-3 sittings in a day in the same
matter between the same parties. The Commission also noted that costs are
further increased by continuation of proceedings for years since dates are given
with significant gaps, resulting in the denial of timely delivery of justice to the
aggrieved party.
74 The Arbitration Amendment Act 2015 introduced the Fourth Schedule to
the Arbitration Act as a model schedule of fees in terms of the recommendations
of the LCI 246th Report (supra). The Fourth Schedule came into effect on 23
October 2015. Section 11 of the Arbitration Act was also accordingly amended to
add sub-Section (14) to Section 11, which reads as follows:
―Section 11. Appointment of arbitrators
[…]
(14) For the purpose of determination of the fees of the
arbitral tribunal and the manner of its payment to the arbitral
tribunal, the High Court may frame such rules as may be
necessary, after taking into consideration the rates specified
in the Fourth Schedule.
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Explanation: For the removal of doubts, it is hereby clarified
that this subsection shall not apply to international
commercial arbitration and in arbitrations (other than
international commercial arbitration) in case where parties
have agreed for determination of fees as per the rules of an
arbitral institution.‖
The Fourth Schedule has to be read along with the provisions of sub-Section (14)
of Section 11. In terms of the Explanation to Section 11(14), the Fourth Schedule
will not be applicable to international commercial arbitrations. Further, the Fourth
Schedule will not be applicable where parties have agreed to the determination of
the arbitrators‘ fees according to the rules of an arbitral institution. The Fourth
Schedule was to serve as a guide for different High Courts to frame rules for
determining the fees of arbitrators. The High Courts have been slow, if not tardy,
in framing these rules. Apart from the High Courts of Rajasthan, Kerala and
Bombay, other High Courts have not framed rules under Section 11 (14) of the
Arbitration Act for the determination of fees. Further the rules framed by High
Courts of Bombay and Rajasthan only govern arbitrators appointed by the courts.
Thus, the purpose of Section 11(14) for regulating fees in ad hoc arbitrations
remains unrealised.
75 A dispute arose before the Delhi High Court regarding the applicability of
the Fourth Schedule to the arbitration agreement in a situation where the fee
payable to the arbitrator(s) has already been stipulated in the arbitration
agreement. In Gammon Engineers and Contractors Pvt. Ltd. v. NHAI113, the
fee schedule was fixed by the parties in accordance with a policy decision of the
National Highways Authority of India dated 31 May 2004. However, the arbitral

113 2018 SCC OnLine Del 10183 (―Gammon‖)
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tribunal decided that its fees will be regulated in terms of the Fourth Schedule
introduced through the Arbitration Amendment Act 2015 by observing that the
latest provisions in the amended Act empower it to unilaterally determine its own
fees, irrespective of the agreement between the parties. NHAI moved an
application under Section 14 of the Arbitration Act to terminate the mandate of
the arbitral tribunal since it had wilfully rejected the agreement between the
parties. A Single Judge of the Delhi High Court held that since there was an
agreement between the parties regarding the fixation of fees, the Fourth
Schedule will not be applicable. The Single Judge further held that while Section
31A of the Arbitration Act discusses different aspects of ―costs‖ to be fixed by the
arbitral tribunal while passing an award, it is only one of the aspects to be
considered by the tribunal for determining costs payable by one party to another.
The words ―unless otherwise agreed by the parties‖ were omitted from Section
31(8) of the Arbitration Act (as amended by the Arbitration Amendment Act 2015)
to ensure that parties cannot contract out of paying costs and denude the ability
of the tribunal to award costs in favour of the successful party. The Single Judge,
thus, terminated the mandate of the arbitral tribunal since it wilfully ignored the
agreement between the parties. In doing so, the Single Judge disagreed with the
view of another Single Judge of the Delhi High Court in NHAI v. Gayatri Jhansi
Roadways Ltd.114
.
76 In Gayatri Jhansi (Delhi High Court) (supra), it was held that Section
31(8) and Section 31A of the Arbitration Act govern the determination of fees and
since the expression ―unless otherwise agreed by the parties‖ has been removed

114 2017 SCC OnLine Del 10285 (―Gayatri Jhansi (Delhi High Court)‖)
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from Section 31(8) by the Arbitration Amendment Act 2015, the power of the
parties to fix the arbitrators‘ fees has been specifically taken away except in
international commercial arbitrations and arbitrations where parties have agreed
that the fees will be fixed under the rules of an arbitral institution. Thus, in Gayatri
Jhansi (Delhi High Court) (supra), the arbitral tribunal was allowed to fix its fees
according to the Fourth Schedule dehors the agreement between the parties.
77 The appeals against both the judgements of the Delhi High Court were
heard by this Court in Gayatri Jhansi Roadways Ltd (supra), where a twoJudge Bench of this Court was called upon to determine the applicability of the
Fourth Schedule when the arbitrators‘ fee has been fixed by an agreement
between the parties. This Court held that Section 31(8) read with Section 31A will
not be applicable if the fees of the arbitrator(s) have been fixed by an agreement.
This Court upheld the observations of the Single Judge of the Delhi High Court in
Gammon (supra) in this regard. Justice Rohinton F Nariman, speaking for the
Bench, observed as follows:
―14. However, the learned Single Judge's conclusion that the
change in language of Section 31(8) read with Section 31-A
which deals only with the costs generally and not with
arbitrator's fees is correct in law. It is true that the arbitrator's
fees may be a component of costs to be paid but it is a far cry
thereafter to state that Sections 31(8) and 31-A would directly
govern contracts in which a fee structure has already been
laid down. To this extent, the learned Single Judge is correct.
We may also state that the declaration of law by the learned
Single Judge in Gayatri Jhansi Roadways Ltd. [NHAI v.
Gayatri Jhansi Roadways Ltd., 2017 SCC OnLine Del 10285]
is not a correct view of the law.‖
However, this Court observed that the fee schedule contained in NHAI‘s circular
dated 1 June 2017 would substitute the earlier schedule and the arbitrators would
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be entitled to charge their fees in accordance with the updated fee schedule, but
not in terms of the Fourth Schedule to the Arbitration Act. This Court further
observed that the mandate of the arbitral tribunal in Gammon (supra) should not
be terminated since the arbitrator(s) had merely followed the law which had been
laid down in Gayatri Jhansi (Delhi High Court) (supra).
78 The Arbitration Amendment Act 2019 was introduced on the basis of the
report of High Level Committee dated 30 July 2017 for promoting institutional
arbitration. Sub-Section 11(14) has been subsequently amended by the
Arbitration Amendment Act 2019. The amended sub-Section (14) to Section 11
provides thus:
―Section 11. Appointment of arbitrators
[…]
(14) The arbitral institution shall determine the fees of the
arbitral tribunal and the manner of its payment to the arbitral
tribunal subject to the rates specified in the Fourth Schedule.
Explanation: For the removal of doubts, it is hereby clarified
that this sub-section shall not apply to international
commercial arbitration and in arbitrations (other than
international commercial arbitration) in case where parties
have agreed for determination of fees as per the rules of an
arbitral institution.‖
Further, sub-Section (3A) has been introduced to Section 11, which stipulates
thus:
―Section 11. Appointment of arbitrators
[…]
(3A) The Supreme Court and the High Court shall have the
power to designate, arbitral institutions, from time to time,
which have been graded by the Council under section 43-I,
for the purposes of this Act:
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Provided that in respect of those High Court jurisdictions,
where no graded arbitral institution are available, then, the
Chief Justice of the concerned High Court may maintain a
panel of arbitrators for discharging the functions and duties of
arbitral institution and any reference to the arbitrator shall be
deemed to be an arbitral institution for the purposes of this
section and the arbitrator appointed by a party shall be
entitled to such fee at the rate as specified in the Fourth
Schedule:
Provided further that the Chief Justice of the concerned High
Court may, from time to time, review the panel of arbitrators.‖
The amendments introduced to Section 11 by the Arbitration Amendment Act
2019 came into force on 30 August 2019. However, even after a lapse of three
years, the Arbitration Council has not been established in accordance with Part
IA of the Arbitration Amendment Act 2019. In the absence of the Arbitration
Council of India, graded arbitral institutions for the purpose of implementing
amendments to Section 11 are yet to come into existence. While several High
Courts have taken concerted steps to establish and refer matters to court adjunct
arbitration centres, ad hoc arbitrations continue to hold the field since the
amendments made by the Arbitration Amendment Act 2019 have been nonstarters. . However, the amendments indicate the legislative intent that going
forward, the fixation of fees of arbitrator(s) would be carried out by an arbitral
institution designated for such purpose in terms of sub-Section (14) of Section 11.
Further, there is one notable difference between the sub-Section (14) as it stood
before the amendment and after, in terms of the applicability of the Fourth
Schedule. Earlier, the rates specified in the Fourth Schedule were only to be
taken into consideration by the High Court while framing the rules relating to the
fixation of fees. However, now the provision reads that, ―[t]he arbitral institution
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shall determine the fees of the arbitral tribunal and the manner of its payment to
the arbitral tribunal subject to the rates specified in the Fourth Schedule‖. There
are two exceptions to this – Section 11(14) is not applicable to international
commercial arbitrations and to a situation where the parties have agreed to
determine fees in terms of the rules of an arbitral institution as stipulated in the
Explanation to Section 11(14). It is important to note that the newly introduced
Section 11(3A) provides that the Supreme Court and the High Courts shall have
the power to designate arbitral institutions from time to time, which have been
graded by the Arbitration Council of India under Section 43(1) of the Arbitration
Act. The first proviso to sub-Section (3A) to Section 11 provides that in those
jurisdictions of High Courts where there are no graded arbitral institutions
available, the Chief Justice of the High Court may maintain a panel of arbitrators
for discharging the functions and duties of an arbitral institution. In terms of the
first proviso, the reference to such an arbitrator would be deemed to be reference
to an arbitral institution for the purpose of Section 11 and arbitrator appointed by
a party is entitled to such fee at the rate as specified in the Fourth Schedule. A
harmonious reading of the first proviso to sub-Section (3A) of Section 11 and
sub-Section (14) of Section 11 indicate that the Fourth Schedule shall have a
mandatory effect on the stipulation of fees for arbitrator(s) appointed by arbitral
institutions designated for such purpose in terms of Section 11 of the Arbitration
Act in the absence of an arbitration agreement governing the fee structure.
79 Based on the above discussion, we summarise the position as follows:
(i) In terms of the decision of this Court in Gayatri Jhansi Roadways Ltd
(supra) and the cardinal principle of party autonomy, the Fourth Schedule
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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 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. As we have discussed in Section C.2.1, 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. This
is discussed in Section C.2.3 of this judgement. Hence, this Court would
be issuing certain directives for fixing of fees in ad hoc arbitrations where
arbitrators are appointed by courts in Section C.2.4 of this judgement.
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C.2.3 Costs and fees: Two different paradigms
80 Prior to the Arbitration Amendment Act 2015, Section 31(8) governing the
determination of costs of arbitration by the arbitral tribunal read thus:
―Section 31. Form and contents of arbitral award
[…]
(8) Unless otherwise agreed by the parties:-
(a) the costs of an arbitration shall be fixed by the arbitral
tribunal;
(b) the arbitral tribunal shall specify--
(i) the party entitled to costs,
(ii) the party who shall pay the costs,
(iii) the amount of costs or method of determining that
amount, and
(iv) the manner in which the costs shall be paid.
Explanation.---For the purpose of clause (a), "costs" means
reasonable costs relating to-
(i) the fees and expenses of the arbitrators and witnesses,
(ii) legal fees and expenses,
(iii) any administration fees of the institution supervising the
arbitration, and
(iv) any other expenses incurred in connection with the
arbitral proceedings and the arbitral award.‖
The unamended sub-Section (8) of Section 31 enabled the arbitral tribunal to fix
the costs, unless otherwise agreed by the parties. The term ―costs‖ meant
―reasonable costs‖ relating inter alia to the fees and expenses payable to the
arbitrators and witnesses, in terms of the Explanation to Section 31(8). The LCI
246th Report (supra) had recommended the recognition of the ―loser pays‖
principle for costs to reflect the relative success and failure of the parties. The
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Law Commission noted that the ―loser pays‖ principle serves as a deterrent
against frivolous invocation of disputes and incentivises contractual compliance.
81 Pursuant to the LCI 246th Report (supra), the Arbitration Amendment Act
2015 deleted the phrase ―unless otherwise agreed by the parties‖ from subSection 31(8) and the arbitral tribunal was given the power to fix costs in terms of
Section 31A of the Arbitration Act. The amended Section 31(8) reads thus:
―Section 31. Form and contents of arbitral award
[...]
(8) The costs of an arbitration shall be fixed by the arbitral
tribunal in accordance with section 31A.‖
Section 31A of the Arbitration Act stipulates thus:
―31A. Regime for costs
(1) In relation to any arbitration proceeding or a proceeding
under any of the provisions of this Act pertaining to the
arbitration, the Court or arbitral tribunal, notwithstanding
anything contained in the Code of Civil Procedure, 1908 (5 of
1908), shall have the discretion to determine--
(a) whether costs are payable by one party to another;
(b) the amount of such costs; and
(c) when such costs are to be paid.
Explanation.--For the purpose of this sub-section, "costs"
means reasonable costs relating to--
(i) the fees and expenses of the arbitrators, Courts and
witnesses;
(ii) legal fees and expenses;
(iii) any administration fees of the institution supervising the
arbitration; and
(iv) any other expenses incurred in connection with the
arbitral or Court proceedings and the arbitral award.
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(2) If the Court or arbitral tribunal decides to make an order as
to payment of costs,--
(a) the general rule is that the unsuccessful party shall be
ordered to pay the costs of the successful party; or
(b) the Court or arbitral tribunal may make a different order for
reasons to be recorded in writing.
(3) In determining the costs, the Court or arbitral tribunal shall
have regard to all the circumstances, including--
(a) the conduct of all the parties;
(b) whether a party has succeeded partly in the case;
(c) whether the party had made a frivolous counter claim
leading to delay in the disposal of the arbitral proceedings;
and
(d) whether any reasonable offer to settle the dispute is made
by a party and refused by the other party.
(4) The Court or arbitral tribunal may make any order under
this section including the order that a party shall pay--
(a) a proportion of another party's costs;
(b) a stated amount in respect of another party's costs;
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
(f) costs relating only to a distinct part of the proceedings;
and
(g) interest on costs from or until a certain date.
(5) An agreement which has the effect that a party is to pay
the whole or part of the costs of the arbitration in any event
shall be only valid if such agreement is made after the dispute
in question has arisen.‖
Section 31A provides that the arbitral tribunal or the court has the discretion to
determine costs of arbitration which includes, inter alia, reasonable costs relating
to the fees and expenses of the arbitrators, courts and witnesses. Sub-Section
(5) of Section 31A specifies that an agreement between parties apportioning
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costs is only valid if it is made after the dispute has arisen. The provision has an
effect of limiting party autonomy when an agreement regarding apportioning of
costs can be entered between the parties. However, it does not completely efface
the principle of party autonomy.
82 Section 38 of the Arbitration Act also becomes relevant since it enables the
arbitral tribunal to demand an advance for costs in the form of deposits. The
provision reads thus:
―Section 38 - Deposits
(1) The arbitral tribunal may fix the amount of the deposit or
supplementary deposit, as the case may be, as an advance
for the costs referred to in sub-section (8) of section 31, which
it expects will be incurred in respect of the claim submitted to
it:
Provided that where, apart from the claim, a counter-claim
has been submitted to the arbitral tribunal, it may fix separate
amount of deposit for the claim and counter-claim.
(2) The deposit referred to in sub-section(1) shall be payable
in equal shares by the parties:
Provided that where one party fails to pay his share of the
deposit, the other party may pay that share:
Provided further that where the other party also does not pay
the aforesaid share in respect of the claim or the counterclaim, the arbitral tribunal may suspend or terminate the
arbitral proceedings in respect of such claim or counter-claim,
as the case may be.
(3) Upon termination of the arbitral proceedings, the arbitral
tribunal shall render an accounting to the parties of the
deposits received and shall return any unexpended balance
to the party or parties, as the case may be.‖
Section 38(1) of the Arbitration Act empowers the arbitral tribunal to determine
the deposit that is payable as advance on costs based on its own assessment of
what may be incurred as costs for adjudicating the claim and counter-claim (if
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any) before it. Section 38(2) also empowers the arbitral tribunal to suspend or
terminate the proceedings if the parties fail to pay the deposit.
83 Additionally, Section 39(1) enables the arbitral tribunal to hold a lien on an
arbitral award if there are any unpaid costs of arbitration. Section 39 of the
Arbitration Act provides thus:
―Section 39 - Lien on arbitral award and deposits as to
costs
(1) Subject to the provisions of sub-section (2) and to any
provision to the contrary in the arbitration, agreement, the
arbitral tribunal shall have a lien on the arbitral award for any
unpaid costs of the arbitration.
(2) If in any case an arbitral tribunal refuses to deliver its
award except on payment of the costs demanded by it, the
Court may, on an application in this behalf, order that the
arbitral tribunal shall deliver the arbitral award to the applicant
on payment into Court by the applicant of the costs
demanded, and shall, after such inquiry, in any, as it thinks,
fit, further order that out of the money so paid into Court there
shall be paid to the arbitral tribunal by way of costs such sum
as the Court may consider reasonable and that the balance of
the money, if any, shall be refunded to the applicant.
(3) An application under sub-section (2) may be made by any
party unless the fees demanded have been fixed by written
agreement between him and the arbitral tribunal, and the
arbitral tribunal shall be entitled to appear and be heard on
any such application.
(4) The Court may make such orders as it thinks fit respecting
the costs of the arbitration where any question arises
respecting such costs and the arbitral award contains no
sufficient provision concerning them.‖
84 The legal regime on costs under the Arbitration Act has been set out in
some detail above because it has been argued on behalf of the respondents that
the arbitral tribunal‘s power to fix costs under Section 31(8) read with 31A entails
the power to fix arbitrators‘ fees, which are also a component of the costs in
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terms of the Explanation to Section 31A. According to the respondents, this
position is bolstered by the fact that the arbitral tribunal has the power to fix the
amount of deposit that is payable as an advance on costs and it can also hold a
lien on the arbitral award if such costs remain unpaid.
85 In Gayatri Jhansi Roadways Ltd (supra), this Court held:
―14. However, the learned Single Judge‘s conclusion that the
change in language of section 31(8) read with Section 31A
which deals only with the costs generally and not with
arbitrator‘s fees is correct in law. It is true that the arbitrator‘s
fees may be a component of costs to be paid but it is a far cry
thereafter to state that section 31(8) and 31A would directly
govern contracts in which a fee structure has already
been laid down…‖
86 The above interpretation of this Court is in harmony with the observations
of the Law Commission in the LCI 246th Report (supra) where it had
recommended changes to the regime of costs only to provide a statutory
recognition to the ―loser pays‖ principle. The Report contained the following
observations:
―70. Arbitration, much like traditional adversarial dispute
resolution, can be an expensive proposition. The savings of a
party in avoiding payment of court fee, is usually offset by the
other costs of arbitration – which include arbitrator‘s fees and
expenses, institutional fees and expenses, fees and
expenses in relation to lawyers, witnesses, venue, hearings
etc. The potential for racking up significant costs justify a
need for predictability and clarity in the rules relating to
apportionment and recovery of such costs. The Commission
believes that, as a rule, it is just to allocate costs in a manner
which reflects the parties‘ relative success and failure in the
arbitration, unless special circumstances warrant an
exception or the parties otherwise agree (only after the
dispute has arisen between them).
71.The loser-pays rule logically follows, as a matter of law,
from the very basis of deciding the underlying dispute in a
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particular manner; and as a matter of economic policy,
provides economically efficient deterrence against frivolous
conduct and furthers compliance with contractual obligations.‖
The Law Commission was seeking to regulate how costs are apportioned and
recovered between parties by suggesting amendments to the legal framework on
costs. The same LCI 246th Report (supra) dealt with redressing the issue of
exorbitant fees being charged by arbitrators and recommended the introduction
of a model schedule of fees, based on which High Courts could frame rules on
fixing fees, to decrease the control arbitrators have over fixing their own fees.
Hence, it is evident that the Law Commission understood that the issue of
arbitrators‘ fees is independent of the issue of allocation of costs. The LCI 246th
Report (supra) was attempting to address the concern of arbitrary and unilateral
fixation of fees by the arbitrators. The interpretation suggested by the
respondents, that while allocating costs the arbitral tribunal can enter into a fresh
and unilateral determination of fees, would be contrary to what the Law
Commission sought to achieve by recommending the regulation of fees charged
by arbitrators.
87 The concepts of costs and fees in arbitration must be distinguished. Fees
constitute compensation or remuneration payable to the arbitrators for their
service. Arbitrators are entitled to ―financial remuneration by the parties in return
for performance of his or her mandate‖
115
. While the national laws governing
arbitration give a quasi-judicial status to arbitrators where they have to be
impartial adjudicators, many aspects of the relationship between the parties and

115 Supra at note 30
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arbitrators are contractual in nature116
. Without acknowledging the contractual
nature of the relationship, there is no satisfactory explanation for the parties‘ right
to appoint arbitrator(s) (and the corresponding right of the arbitrator(s) to decline
such appointment), arbitrators‘ remuneration, arbitrators‘ duty to conduct
arbitration in terms of the arbitration agreement (independently of the requirement
of fairness and equality) and the parties‘ right to jointly remove arbitrator(s)
117
. In
Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn. Ltd.118, this Court,
while holding that the arbitrator has to act impartially and independently,
recognised the contractual nature of the relationship between the parties and
arbitrator(s) in the following extract:
―20. Independence and impartiality of the arbitrator are the
hallmarks of any arbitration proceedings. Rule against bias is
one of the fundamental principles of natural justice which
applied to all judicial and quasi-judicial proceedings. It is for
this reason that notwithstanding the fact that relationship
between the parties to the arbitration and the arbitrators
themselves are contractual in nature and the source of
an arbitrator's appointment is deduced from the
agreement entered into between the parties,
notwithstanding the same non-independence and nonimpartiality of such arbitrator (though contractually
agreed upon) would render him ineligible to conduct the
arbitration. The genesis behind this rational is that even
when an arbitrator is appointed in terms of contract and
by the parties to the contract, he is independent of the
parties. Functions and duties require him to rise above the
partisan interest of the parties and not to act in, or so as to
further, the particular interest of either parties. After all, the
arbitrator has adjudicatory role to perform and, therefore, he
must be independent of parties as well as impartial. The
United Kingdom Supreme Court has beautifully highlighted
this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj, (2011) 1
WLR 1872 : 2011 UKSC 40] in the following words : (WLR p.
1889, para 45)

116 ibid
117 ibid
118 (2017) 4 SCC 665
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―45. … the dominant purpose of appointing an arbitrator or
arbitrators is the impartial resolution of the dispute between
the parties in accordance with the terms of the agreement
and, although the contract between the parties and the
arbitrators would be a contract for the provision of personal
services, they were not personal services under the direction
of the parties.‖
(emphasis supplied)
88 The relationship between parties and arbitrator(s) is contractual in nature.
Upon that relationship, the law superimposes a duty upon the arbitrator(s) to act
as an impartial and independent adjudicator. The principle of party autonomy
plays a substantial role in the determination of arbitrators‘ fees. We have noted in
Section C.1 of this judgement that party autonomy plays a central role in the
determination of arbitrators‘ fees in the rules of international arbitral institutions
and domestic legislation of other countries. Aside from institutional arbitration,
arbitrators‘ fees in ad hoc arbitration are arrived at through negotiations between
the parties and the arbitrator(s)
119
. The primacy of parties‘ agreement in
determination of arbitrators‘ fees was also reaffirmed by this Court in Gayatri
Jhansi Roadways Ltd (supra). However, there may be instances where the
parties have not entered into any agreement with respect to the fees. In ad hoc
arbitrations this leads to a peculiar situation where it has to be determined who
will fix the fees in such circumstances. While certain foreign jurisdictions enable
the arbitral tribunal to fix the fees typically subject to review by courts, there are
jurisdictions which continue to give value to parties‘ consent in determining
renumeration for arbitrators. As discussed above in Section C.1, in certain
jurisdictions like Germany, arbitrators are prohibited from unilaterally fixing their

119 Supra at note 28
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fees because it violates the doctrine of the prohibition of in rem suam decisions,
i.e., arbitrators cannot give an enforceable ruling on their own fees. Austria and
Switzerland also do not allow arbitrators to issue binding and enforceable orders
regarding fixation of their own fees120
. In Italy, while the arbitrators can determine
fees in absence of an agreement between parties, such fees become binding
only once the parties‘ consent to it. In Singapore, in absence of a written
agreement, a party may approach the Registrar of the Supreme Court within the
meaning of the Supreme Court of Judicature Act 1969 for the assessment of
fees.
89 In contrast, costs are typically compensation payable by the losing party to
the winning party for the expenses the latter incurred by participating in the
proceedings121
. In Salem Advocate Bar Assn. (II) v. Union of India122, this
Court has defined costs in a similar manner in the context of litigation:
―37. Judicial notice can be taken of the fact that many
unscrupulous parties take advantage of the fact that either the
costs are not awarded or nominal costs are awarded against
the unsuccessful party. Unfortunately, it has become a
practice to direct parties to bear their own costs. In a large
number of cases, such an order is passed despite Section
35(2) of the Code. Such a practice also encourages the filing
of frivolous suits. It also leads to the taking up of frivolous
defences. Further, wherever costs are awarded, ordinarily the
same are not realistic and are nominal. When Section 35(2)
provides for cost to follow the event, it is implicit that the
costs have to be those which are reasonably incurred by
a successful party except in those cases where the court
in its discretion may direct otherwise by recording

120
 Michael Wietzorek, ―Chapter II: The Arbitrator and the Arbitration Procedure: May Arbitrators Determine their
own Fees?‖ in Christian Klausegger, Peter Klein, et al (eds), Austrian Yearbook on International Arbitration 2012,
Austrian Yearbook on International Arbitration, Volume 2012 (Manz‘sche Verlags- und Universitätsbuchhandlung;
Manz‘sche Verlags- und Universitätsbuchhandlung, 2012).
121 John Y. Gotanda, ―Part I: International Commercial Arbitration, Chapter 7: Bringing Efficiency to the Awarding
of Fees and Costs in International Arbitrations‖, in Stefan M. Kröll, Loukas A. Mistelis, et al. (eds), International
Arbitration and International Commercial Law: Synergy, Convergence and Evolution (Kluwer Law International,
2011)
122 (2005) 6 SCC 344
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reasons therefore. The costs have to be actual
reasonable costs including the cost of the time spent by
the successful party, the transportation and lodging, if
any, or any other incidental costs besides the payment of
the court fee, lawyer's fee, typing and other costs in
relation to the litigation. It is for the High Courts to examine
these aspects and wherever necessary make requisite rules,
regulations or practice direction so as to provide appropriate
guidelines for the subordinate courts to follow.‖
(emphasis supplied)
90 The principle of the payment of ―costs‖ remains the same in litigation and
arbitration even though the form of expenses may vary. Redfern and Hunter on
International Commercial Arbitration (supra) has classified the various
components of costs under the following headings123:
―•‗costs of the tribunal‘ (including the charges for
administration of the arbitration by any arbitral institution);
•‗costs of the arbitration‘ (including hiring the hearing rooms,
interpreters, transcript preparation, among other things); and
•‗costs of the parties‘ (including the costs of legal
representation, expert witnesses, witness and other travelrelated expenditure, among other things).‖
The first category of ―costs of the tribunal‖ includes the fees, travel-related and
other expenses, payable to the arbitrators. However, this category also includes
fees and expenses relating to the experts appointed by the tribunal,
administrative secretary or registrar and other incidental expenses incurred by
the tribunal in respect of the case124
. Fees of arbitrators constitute a component
of the diverse elements which make up the costs that are payable by one party to
another. The purpose of awarding costs is to ―indemnify the winning party‖. The

123 Supra at note 28, Chapter 9
124 ibid
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―loser pays‖ principle apportions the costs between the parties through the costs
follow the event125 method. The primary purpose of the CFE method is to ―make
the claimant whole‖126
. The CFE method has been statutorily recognised in some
national legislations. The English Arbitration Act provides that ―unless the parties
otherwise agree, the tribunal shall award costs on the general principle that costs
should follow the event except where it appears to the tribunal that this principle
is not appropriate in relation to whole or part of the costs‖127
. Since costs are
typically awarded at the conclusion of the proceedings on the basis of the relative
success or failure of parties, an award of costs forms a part of the final award.
However, interim awards or rulings on costs may also be issued. Most
international arbitral institutions give arbitral tribunals the discretion to allocate
costs unless there is an agreement between the parties regarding the
apportionment of costs. It has been noted that the ―loser pays‖ principle is a
common approach128 followed for awarding costs129
. The UNCITRAL Rules, while
providing that costs of arbitration shall be ―borne by the unsuccessful party‖ as a
general principle, allow the arbitral tribunal to take the ultimate decision130
. The
LCIA Rules allow the arbitral tribunal to depart from the general principle ―in
circumstances (in which) the application of such a general principle would be
inappropriate‖131
. The Arbitration Act also provides statutory recognition to the

125 ―CFE‖
126 Supra at note 121
127 Section 61(2), English Arbitration Act
128 There are some institution rules which do not prescribe a general rule and leave the apportionment of the
costs to the arbitral tribunal. The ICDR (Art. 34) and HKIAC (34.3) require the tribunal to carry out a reasonable
apportionment of costs. The ICC Rules (Art. 38(5) and SIAC Rules (Art. 35) leave the apportionment of costs
upto the discretion of the tribunal.
129 Arif Hyder Ali, Jane Wessel, et al. (eds), The International Arbitration Rulebook: A Guide to Arbitral Regimes
(Kluwer Law International, 2019), Chapter 8
130 Article 42(1), UNCITRAL Rules
131 Article 28(4), LCIA Rules
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principle of ―loser pays‖ in Section 31A (2)132 as the general principle of allocating
costs, which can be derogated from at the discretion of the tribunal provided it
records its reasons in writing. Further, the Arbitration Act seeks to limit the ability
of parties to contractually allocate fees by specifying in Section 31A(5) that such
an agreement will only be valid ―if such agreement is made after the dispute in
question has arisen‖. The intention of the legislature to limit party autonomy in
allocation of costs is also evident from the deletion of the phrase ―unless
otherwise agreed by the parties‖ from Section 31(8) through the Amendment Act
2015.
91 We can see that the functional role of costs and fees is different. While
fees represent the payment of remuneration to the arbitrators, costs refer to all
the expenses incurred in relation to arbitration that are to be allocated between
the parties upon the assessment of certain parameters by the arbitral tribunal or
the court. Section 31A(3) provides that an arbitral tribunal or the court has to take
into account the following factors for determining costs:
―(a) the conduct of all the parties;
(b) whether a party has succeeded partly in the case;
(c) whether the party had made a frivolous counter claim
leading to delay in the disposal of the arbitral proceedings;
and
(d) whether any reasonable offer to settle the dispute is made
by a party and refused by the other party.‖

132 Section 31A(2) provides:
―(2) If the Court or arbitral tribunal decides to make an order as to payment of costs,--
(a) the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party; or
(b) the Court or arbitral tribunal may make a different order for reasons to be recorded in writing.‖
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This is accompanied by the general rule under Section 31A(2) that the
unsuccessful party has to bear the costs of arbitration.
92 Another way to understand the difference between costs and fees is to
distinguish between the nature of the claim that both reflect. Redfern and Hunter
on International Commercial Arbitration (supra) discusses costs in Chapter 9,
titled ―Awards‖. It states that ―[a] claim in respect of the costs incurred by a party
in connection with an international arbitration is, in principle, no different from any
other claim, except that it usually cannot be quantified until the end of the arbitral
proceedings‖133
. The decision of an arbitral tribunal ordering one party to pay
arbitration costs is considered as an ―award‖ within the meaning of the New York
Convention and UNCITRAL Model Law since the decision resolves a claim one
party has towards another in respect to the entitlement of being repaid by the
other party for expenses incurred during arbitration134
. Gary Born on Arbitration
(supra) specifically notes the difference between costs and fees, and states that
any decision of the arbitral tribunal relating to payment of fees to the members of
the tribunal is not considered an award since it does not resolve a claim between
the parties; rather it resolves a claim between the arbitrator(s) against the
parties135
. The Swiss Federal Tribunal has observed in this context that136:
―[A]ccording to the majority of legal writing the arbitral tribunal
has no authority to issue an enforceable decision as to the
fees it may derive from the arbitration agreement (receptum
arbitri). This is because claims resulting from the relationship
between the arbitral tribunal and the parties do not fall within
the arbitration clause; also because this would be an
unacceptable decision in one‘s own case. The decision on

133 Supra at note 123
134 Supra at note 30, Chapter 23
135 ibid
136 Judgment of 10 November 2010, DFT 136 III 597, 603 cited in ibid
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costs in an arbitral award is therefore nothing else as a
rendering of account which does not bind the parties or a
circumscription of the arbitrators‘ private law claim based on
the arbitration agreement on which in case of dispute the
State Court will have to decide.‖
The German arbitration law also takes the above position, where a portion of the
award relating to costs of arbitration was denied enforcement as arbitrators are
prohibited from fixing their own fees and costs, except when there is an
agreement between the parties and arbitrators137
.
93 Since fees of the arbitrators are not a claim that needs to be quantified at
the end of the proceedings based, inter alia, on the conduct of parties and
outcome of the proceedings, they can be determined at the stage when the
arbitral tribunal is being constituted. Redfern and Hunter on International
Commercial Arbitration (supra) discusses the concept of fees of arbitrators in
Chapter 4, titled ―Establishment and Organisation of an Arbitral Tribunal‖,
indicating that fees have to be determined much earlier at the inception of the
proceedings. In fact, the commentary states that in ad hoc arbitrations, ―it is
necessary for the parties to make their own arrangements with the arbitrators as
to their fees. The arbitrators should do this at an early stage in the proceedings,
in order to avoid misunderstandings later‖
138
.
94 It has been argued on behalf of the respondents that the power of
arbitrator(s) under Section 38(1) of the Arbitration Act to demand a deposit as an
advance on costs ―which it expects will be incurred‖ in relation to the claim and

137 Judgment of 24 October 2008, XXXIV Y.B. Comm. Arb. 533 (Oberlandesgericht Frankfurt) (2009) cited in
supra at note 123
138 Supra at note 28
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counterclaim (if any) indicates that the tribunal is entitled to determine its own
fees. If such a deposit is not paid, the tribunal can suspend or terminate the
proceedings under Section 38(2) of the Arbitration Act. It can also hold a lien on
the award if the costs of arbitration remain unpaid under Section 39(1) of the
Arbitration Act.
95 Gary Born on Arbitration (supra) explains the concept of an advance on
costs or deposits in the following terms139:
―Once the arbitral tribunal is in place, the parties are generally
required to provide security for the fees and costs of the
arbitrators. Most institutional arbitration rules contain express
provisions for payment by the parties of an advance on costs
(or deposit), and arbitrators often have the power under
national law to require payment of an advance even absent
express provision to that effect in either the arbitration
agreement or institutional rules.
The amount of the advance on costs is based upon the
expected total amount of fees and expenses of the arbitrators
and institutional administrative costs. If the parties do not pay
the advance, the arbitration will not go forward; if one party
fails to make payment, the other may do so on its behalf, so
that the arbitration will proceed, hopefully to conclude with a
decision in its favor, in which the prevailing party will be
awarded (among other things) reimbursement of the amounts
it advanced on behalf of its counter-party.‖
The above extract and Section 38140 of the Arbitration Act indicate that the
purpose of demanding a deposit is to simply secure the future expenses or the

139 Supra at note 30, Chapter 15
140 ―Section 38 - Deposits
(1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit, as the case may be, as an
advance for the costs referred to in sub-section (8) of section 31, which it expects will be incurred in respect of
the claim submitted to it:
Provided that where, apart from the claim, a counter-claim has been submitted to the arbitral tribunal, it may fix
separate amount of deposit for the claim and counter-claim.
(2) The deposit referred to in sub-section(1) shall be payable in equal shares by the parties:
Provided that where one party fails to pay his share of the deposit, the other party may pay that share:
Provided further that where the other party also does not pay the aforesaid share in respect of the claim or the
counter-claim, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of such claim or
counter-claim, as the case may be.
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―costs‖ relating to the arbitration, including arbitrators‘ fees. The arbitrator(s) may
resign or cease their work until such payment is made. This principle cannot be
extended to establish that the arbitrator(s) have a unilateral power to fix their own
fees while demanding a deposit. The arbitral tribunal can also ask for a
supplementary deposit, which indicates that the amount fixed in the deposit is
provisional in nature. Upon the termination of the mandate of the arbitral tribunal,
it is required to provide an account of the deposits and if the deposits exceed the
total amount of costs, the tribunal is required to return the balance. This indicates
that the order on deposits is not a binding determination as to costs (including
arbitrators‘ fees). It is a procedural order issued for the purpose of securing
payment of future expenses.
96 While the arbitral tribunal can exercise a lien over the arbitral award for
any unpaid costs of arbitration under Section 39(1) of the Arbitration Act, a party
can also approach the court for the release of the award and the court on inquiry
can assess whether the costs demanded are reasonable under Section 39(2).
These costs would include the arbitrators‘ fees that have been previously agreed
upon. However, even if there is no agreement between the parties and the
arbitrator(s) regarding the fees payable to the arbitrator(s), any determination of
costs relating to arbitrators‘ fees by the tribunal is a non-binding demand that has
been raised by the tribunal. As has been discussed above, while costs, in
general, are to be decided at the discretion of the tribunal or the court because
they involve a claim that one party has against the another relating to resolution
of a dispute arising from the arbitration agreement, fees of the arbitrators are not

(3) Upon termination of the arbitral proceedings, the arbitral tribunal shall render an accounting to the parties of
the deposits received and shall return any unexpended balance to the party or parties, as the case may be.‖
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a claim to be decided between the parties. Rather, it is an independent claim that
the arbitrator(s) have against the parties141
. It will be for the court to decide
whether the claim of the arbitrator(s) regarding their remuneration is reasonable.
This also becomes clear from sub-Sections (2) and (3) of Section 39, which
provide:
―Section 39 - Lien on arbitral award and deposits as to
costs
[…]
(2) If in any case an arbitral tribunal refuses to deliver its
award except on payment of the costs demanded by it, the
Court may, on an application in this behalf, order that the
arbitral tribunal shall deliver the arbitral award to the applicant
on payment into Court by the applicant of the costs
demanded, and shall, after such inquiry, in any, as it thinks,
fit, further order that out of the money so paid into Court there
shall be paid to the arbitral tribunal by way of costs such sum
as the Court may consider reasonable and that the balance of
the money, if any, shall be refunded to the applicant.
(3) An application under sub-section (2) may be made by any
party unless the fees demanded have been fixed by written
agreement between him and the arbitral tribunal, and the
arbitral tribunal shall be entitled to appear and be heard on
any such application.
[…]‖
(emphasis supplied)
Sub-Section (2) provides that an application can be made to the court if the
arbitral tribunal is refusing to deliver the award, except on payment of costs
demanded by it. The court can then order the arbitral tribunal to deliver the award
to the applicant on payment of the costs demanded by the tribunal to the court.
Crucially, the court can conduct an inquiry to determine if the costs are
reasonable and out of the money paid to the court, it can direct the payment of

141 Paragraphs 91-92 of this judgement
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reasonable costs to the tribunal and the balance (if any) to be refunded to the
applicant. Sub-Section (3) provides that an application under sub-Section (2) for
the delivery of an award withheld by the arbitral tribunal exercising a lien over it,
can only be made if the fees demanded have not been fixed by a written
agreement by the party and the arbitral tribunal. Section 39 of the Arbitration Act
is similar to Section 38 of the now repealed Arbitration Act 1940. Section 38 of
the erstwhile legislation provided thus:
―38. Disputes as to arbitrator's remuneration or costs:
(1) If in any case an arbitrator or umpire refuses to deliver his
award except on payment of the fees demanded by him, the
Court may. on an application in this behalf, order that the
arbitrator or umpire shall deliver the award to the applicant on
payment into Court by the applicant of the fees demanded,
and shall, after such inquiry, if any, as it thinks fit, further
order that out of the money so paid into Court there shall be
paid to the arbitrator or umpire by way of fees such sum as
the Court may consider reasonable and that the balance of
the money, if any, shall be refunded to the applicant.
(2) An application under Sub-section (1) may be made by any
party to the reference unless the fees demanded have been
fixed by written agreement between him and the arbitrator or
umpire, and the arbitrator or umpire shall be entitled to
appear and be heard on any such application.
(3) The Court may make such orders as it thinks fit respecting
the costs of an arbitration where any question arises
respecting such costs and the award contains no sufficient
provision concerning them.‖
Section 38(1) of the Arbitration Act 1940 enabled an arbitrator or umpire to refuse
delivery of an award if the payment of fees demanded by them remained unpaid,
and in such cases the court could direct the arbitrator or the umpire to deliver the
award upon payment of such fees to the court by the applicant. Thereafter, it
could assess the propriety of the fees demanded and out of the amount
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89
deposited in court, it could direct payment to the tribunal and the balance (if any)
to be refunded to the applicant. The difference between Section 38(1) of the
Arbitration Act 1940 and Section 39(1) of the Arbitration Act is that the former
specifically refers to the payment of the arbitrators‘ fee, while the latter refers to
costs demanded by the tribunal. Section 39(1) seems to be wider in scope.
However, since the costs under Section 39 are to be payable to the arbitral
tribunal, these would typically reflect costs relating to fees of the members of the
tribunal and other out-of-pocket expenses payable to the arbitrators that are
necessary for the conduct of arbitral proceedings like expenses relating to travel,
accommodation and any other allowances.
97 This interpretation of costs under Section 39 as only limited to the costs
owed to the arbitral tribunal is also in consonance with the purpose of Section 39,
which is that it enables the arbitral tribunal to exercise a lien over the arbitral
award. In Triveni Shankar Saxena v. State of UP & Ors.
142, this Court defined
lien as follows:
―17…The word 'lien' originally means "binding" from the Latin
ligamen. Its lexical meaning is "right to retain". The word 'lien'
is now variously described and used under different contexts
such as 'contractual lien', 'equitable lien', 'specific lien',
'general lien', 'partners lien', etc. etc. in Halsbury's Laws of
England, Fourth Edition, Volume 28 at page 221, para 502 it
is stated:
―In its primary or legal sense "lien" means a right at common
law in one man to retain that which is rightfully and
continuously in his possession belonging to another until the
present and accrued claims are satisfied.‖‖

142 1992 Suppl. 1 SCC 524
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―Lien‖ has been defined in P Ramanatha Aiyar: The Major Law Lexicon as143:
――Lien‖ defined. A right by which a person in possession of the
property holds and retains it against the other in satisfaction
of a demand due to the party retaining it. [O. VIII, R. 6(2),
CPC (5 of 1908)and S. 47, margin, (3 of 1930)].
Right of one person to satisfy a claim against another by
holding or retaining possession of that other‘s
assets/property. (Finance)
The right to possession of property until such time that an
outstanding liability has been repaid. A banker‘ s lien gives a
bank the right to retain or sell the property of a debtor in
lieu of payment. (Banking; Insurance & International
Accounting).‖
The arbitral tribunal can exercise a lien over the arbitral award and refuse to
deliver it if there are outstanding payments yet to be made to the tribunal. The
principle behind allowing the arbitral tribunal to exercise a lien over the arbitral
award is to ensure that the tribunal is not left in the lurch without its expenses
being met, while the beneficiary of the award reaps the benefits of it. In Assam
State Weaving and Manufacturing Co. Ltd. v. Vinny Engineering Enterprises
(P) Ltd.144
, the Calcutta High Court observed that:
―Section 39 of the 1996 Act, much like Section 38 of the old
Act, recognises an arbitral tribunal's lien over the award. The
section conceives of a situation where there may be a dispute
between the arbitral tribunal and one or more parties to the
reference as to the costs of the arbitration. Upon an arbitral
tribunal refusing to deliver its award unless its demand for
payment of costs were met by a party, an application may be
carried to court for directing the tribunal to deliver the award
to the applicant. Sub-section (2) contemplates an applicant
thereunder to put into court the costs demanded by the
arbitral tribunal. Upon such costs being deposited the court
may order the tribunal to deliver the award to the applicant.
The court can thereafter inquire into the propriety of the costs
demanded and deal with the matter following the inquiry.

143 P Ramanatha Aiyar: The Major Law Lexicon (LexisNexis, 4
th edition)
144 AIR 2010 Cal 52
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Sub-section (3) of Section 39 permits an application under
sub-section (2) to be carried by any party to the reference
only on condition that the fees demanded were not as fixed
by written agreement between the applicant and the arbitral
tribunal. The sub-section does not limit an application to be
made under sub-section (2) only by a party who has been
refused the delivery of the award. The delivery that Section
39 speaks of is the physical delivery of the document
embodying the award and not merely the pronouncement of
the award. For, it is the physical receipt of the document that
would entitle a party to apply for setting aside the award or for
implementing it.‖
98 Hence, sub-Section (2) and (3) of Section 39, read together, govern a
situation where the fees and other expenses payable to the arbitrators have not
been decided through a written agreement between the party and the arbitral
tribunal. While ideally, the parties and the arbitrators should arrive at an
arrangement regarding the remuneration of arbitrators, the arbitral tribunal may
raise a non-binding invoice regarding the arbitration costs (i.e., fees and
expenses payable to arbitrator(s)) and may refuse to deliver the award unless the
outstanding payments have been made. The parties are not obligated to pay
such costs if they believe that such costs are unreasonable. In such a case, it is
the court that determines whether the fees and other expenses demanded by the
tribunal are reasonable in terms of Section 39(2).
99 To conclude, the arbitral tribunal while deciding the allocation of costs
under Sections 31(8) read with 31A or advance of costs under Section 38 cannot
issue any binding or enforceable orders regarding their own remuneration. This
would violate the principle of party autonomy and the doctrine of prohibition of in
rem suam decisions 145
, which postulates that the arbitrators cannot be the judge

145Supra at note 120
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of their own claim against parties‘ regarding their remuneration. The principles of
party autonomy and the doctrine of prohibition of in rem suam decisions do not
restrict the arbitral tribunal from apportioning costs between the parties (including
the arbitrator(s) remuneration) since this is merely a reimbursement of the
expenses that the successful party has incurred in participating in the arbitral
proceedings. Likewise, the arbitral tribunal can also demand deposits and
supplementary deposits since these advances on costs are merely provisional in
nature. If while fixing costs or deposits, the arbitral tribunal makes any finding
relating to arbitrators‘ fees (in the absence of an agreement), it cannot be
enforced in favour of the arbitrators. The party can approach the court to review
the fees demanded by the arbitrators.
100 Ideally, in ad hoc arbitrations, the fees payable to the arbitrator(s) should
be decided through an arrangement between the parties and the arbitrator(s). In
the next section, we are issuing certain directives to govern the process of how
fees payable to the arbitrator(s) have to be fixed in ad hoc arbitrations.
C.2.4 Directives governing fees of arbitrators in ad hoc arbitrations
101 Preliminary meetings in arbitration proceedings entail a meeting convened
by the arbitral tribunal with the parties to arrive at a common understanding about
how the arbitration is to be conducted. It generally takes place at an early stage
of the dispute resolution process, prior to the ―written phase of the proceedings‖.
Rules of certain international arbitral institutions provide for convening a
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preliminary meeting146 or case-management conference147. The fees and
expenses are typically addressed at this stage148
. We propose that this stage of
having a preliminary hearing should be adopted in the process of conducting ad
hoc arbitrations in India as it will provide much needed clarity on how arbitrators
are to be paid and reduce conflicts and litigation on this issue.
102 These preliminary hearings should also be conducted when the fees are
specified in the arbitration agreement. The arbitration agreement may have been
entered into at an earlier point in time, even several years earlier. It is possible
that at the time when the disputes between the parties arise, the fees stipulated
in the arbitration agreement may have become an unrealistic estimate of the
remuneration that is to be offered for the services of the arbitrator due to the
passage of time. In the preliminary hearings, if all the parties and the arbitral
tribunal agree to a revised fee, then that fee would be payable to the arbitrator(s).
However, if any of the parties raises an objection to the fee being demanded by
the arbitrator(s) and no consensus can be arrived at between such a party and
the tribunal or a member of the tribunal, then the tribunal or the member of the
tribunal should decline the assignment. Since the relationship between the
parties and arbitrator(s) is contractual in nature, specifically with respect to the
payment of remuneration, there must be a consensus on the fees to be paid.
103 It is possible that during the preliminary hearings, the parties and the
arbitral tribunal may be unsure about the extent of time that needs to be invested
by the arbitrator(s) and the complexity of the dispute. It is also possible that the

146 Rule 19.3, SIAC Rules
147 Article 24, ICC Rules
148 Supra at note 28
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arbitral proceedings may continue for much longer time than was expected. In
order to anticipate such contingencies, during the preliminary hearings, the
parties and the arbitrator(s) should stipulate that after a certain number of sittings,
the fee would stand revised at a specified rate. The number of sittings after which
the revision would take place and the quantum of revision must be clearly
discussed and determined during the preliminary hearings through the process of
negotiation between the parties and the arbitrator(s). There is no unilateral power
reserved to the arbitrator(s) to revise the fees on their own terms if they believe
that an additional number of sittings would be required to settle the dispute. The
fees payable to the arbitral tribunal in an ad hoc arbitration must be settled
between the arbitral tribunal and the parties at the threshold during the course of
the preliminary hearings. Resolution of the fees payable to the arbitral tribunal by
mutual agreement during the preliminary hearings is necessary. Failing such an
agreement, the arbitrator(s) who decline to accept the fee suggested by the
parties (or any of them) are at liberty to decline the assignment. The fixation of
arbitral fees at the threshold will obviate the grievance that the arbitrator(s) are
arm-twisting parties at an advanced stage of the dispute resolution process. In
such a situation, a party who is not agreeable to a unilateral revision of fees
demanded by the arbitral tribunal in the midst of the proceedings has a real
apprehension that its refusal may result in embarrassing consequences bearing
on the substance of the dispute.
104 We believe that the directives proposed by the amicus curiae, with suitable
modifications, would be useful in structuring how these preliminary hearings are
to be conducted. Exercising our powers conferred under Article 142 of the
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Constitution, we direct the adoption of the following guidelines for the conduct of
ad hoc arbitrations in India:
―1. Upon the constitution of the arbitral tribunal, the
parties and the arbitral tribunal shall hold preliminary hearings
with a maximum cap of four hearings amongst themselves to
finalise the terms of reference (the ―Terms of Reference‖) of
the arbitral tribunal. The arbitral tribunal must set out the
components of its fee in the Terms of Reference which would
serve as a tripartite agreement between the parties and the
arbitral tribunal.
2. In cases where the arbitrator(s) are appointed by
parties in the manner set out in the arbitration agreement, the
fees payable to the arbitrators would be in accordance with
the arbitration agreement. However, if the arbitral tribunal
considers that the fee stipulated in the arbitration agreement
is unacceptable, the fee proposed by the arbitral tribunal must
be indicated with clarity in the course of the preliminary
hearings in accordance with these directives. In the
preliminary hearings, if all the parties and the arbitral tribunal
agree to a revised fee, then that fee would be payable to the
arbitrator(s). However, if any of the parties raises an objection
to the fee proposed by the arbitrator(s) and no consensus can
be arrived at between such a party and the tribunal or a
member of the tribunal, then the tribunal or the member of the
tribunal should decline the assignment.
3. Once the Terms of Reference have been finalised
and issued, it would not be open for the arbitral tribunal to
vary either the fee fixed or the heads under which the fee may
be charged.
4. The parties and the arbitral tribunal may make a carve
out in the Terms of Reference during the preliminary hearings
that the fee fixed therein may be revised upon completion of a
specific number of sittings. The quantum of revision and the
stage at which such revision would take place must be clearly
specified. The parties and the arbitral tribunal may hold
another meeting at the stage specified for revision to
ascertain the additional number of sittings that may be
required for the final adjudication of the dispute which number
may then be incorporated in the Terms of Reference as an
additional term.
5. In cases where the arbitrator(s) are appointed by the
Court, the order of the Court should expressly stipulate the
fee that arbitral tribunal would be entitled to charge. However,
where the Court leaves this determination to the arbitral
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tribunal in its appointment order, the arbitral tribunal and the
parties should agree upon the Terms of Reference as
specified in the manner set out in draft practice direction (1)
above.
6. There can be no unilateral deviation from the Terms
of Reference. The Terms of Reference being a tripartite
agreement between the parties and the arbitral tribunal, any
amendments, revisions, additions or modifications may only
be made to them with the consent of the parties.
7. All High Courts shall frame the rules governing
arbitrators' fees for the purposes of Section 11(14) of the
Arbitration and Conciliation Act, 1996.
8. The Fourth Schedule was lastly revised in the year
2016. The fee structure contained in the Fourth Schedule
cannot be static and deserves to be revised periodically. We,
therefore, direct the Union of India to suitably modify the fee
structure contained in the Fourth Schedule and continue to do
so at least once in a period of three years.‖
105 Conscious and aware as we are that (i) Arbitration proceedings must be
conducted expeditiously; (ii) Court interference should be minimal; and (iii) Some
litigants would object to even a just and fair arbitration fee, we would like to
effectuate the object and purpose behind enacting the model fee schedule. 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 we would observe 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.
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D Interpretation of “sum in dispute” in the Fourth Schedule
D.1 Statutory Framework
106 We must begin by looking at the statutory framework of the Arbitration Act.
In order to understand the genesis of the competing interpretations, it is important
to first consider Sections 31(8), the Explanation to Section 31A(1) and Section
38(1).
107 Section 31(8) of the Arbitration Act reads thus:
―31. Form and contents of arbitral award.—
[…]
(8) The costs of an arbitration shall be fixed by the arbitral
tribunal in accordance with Section 31-A.‖
Sub-Section (8) of Section 31 was amended by the Arbitration Amendment Act
2015, which also added Section 31A to the Arbitration Act.
108 Section 31A(1) is in the following terms:
―31-A. Regime for costs.—(1) In relation to any arbitration
proceeding or a proceeding under any of the provisions of this
Act pertaining to the arbitration, the court or arbitral tribunal,
notwithstanding anything contained in the Code of Civil
Procedure, 1908 (5 of 1908), shall have the discretion to
determine—
(a) whether costs are payable by one party to another;
(b) the amount of such costs; and
(c) when such costs are to be paid.
Explanation.—For the purpose of this sub-section,
“costs” means reasonable costs relating to—
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(i) the fees and expenses of the arbitrators, courts and
witnesses;
(ii) legal fees and expenses;
(iii) any administration fees of the institution supervising the
arbitration; and
(iv) any other expenses incurred in connection with the
arbitral or court proceedings and the arbitral award.
[…]‖
(emphasis supplied)
Sub-Section (1) of Section 31A provides the court or the arbitral tribunal with the
power to determine the following in regard to costs: (i) whether they are payable
by one party to the other; (ii) their amount; and (iii) when they are payable. The
Explanation to Section 31A(1) defines ―costs‖ to include four components, the
first of which is ―the fees and expenses of the arbitrators, courts and witnesses‖.
109 Section 31(8) is also linked to Section 38(1), which is as follows:
―38. Deposits.—(1) The arbitral tribunal may fix the amount
of the deposit or supplementary deposit, as the case may be,
as an advance for the costs referred to in sub-section (8) of
Section 31, which it expects will be incurred in respect of the
claim submitted to it:
Provided that where, apart from the claim, a counterclaim has been submitted to the arbitral tribunal, it may
fix separate amount of deposit for the claim and counterclaim.‖
(emphasis supplied)
According to sub-Section (1) of Section 38 of the Arbitration Act, the arbitral
tribunal can direct the parties to make a deposit, as an advance, for the costs
referred to in Section 31(8). As noted earlier, Section 31(8) states that such costs
are to be determined in accordance with Section 31A. Crucially, the proviso to
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Section 38(1) provides that the arbitral tribunal may fix a separate amount of
deposit for the claim and counter-claim, in an arbitration where a counter-claim
has been filed.
110 The inter-connection between Section 31(8), Section 31A and Section
38(1) bears directly on the interpretation of the Fourth Schedule of the Arbitration
Act. The Fourth Schedule is extracted below:
―THE FOURTH SCHEDULE
See Section 11(3-A)
Sl. No. Sum in dispute Model fee
(1) (2) (3)
1. Up to Rs 5,00,000 Rs 45,000
2. Above Rs 5,00,000 and up to Rs
20,00,000
Rs 45,000 plus 3.5 per cent of
the claim amount over and above
Rs 5,00,000.
3. Above Rs 20,00,000 and up to
Rs 1,00,00,000
Rs 97,500 plus 3 per cent of the
claim amount over and above Rs
20,00,000.
4. Above Rs 1,00,00,000 and up to
Rs 10,00,00,000
Rs 3,37,500 plus 1 per cent of
the claim amount over and above
Rs 1,00,00,000.
5. Above Rs 10,00,00,000 and up
to Rs 20,00,00,000
Rs 12,37,500 plus 0.75 per cent
of the claim amount over and
above Rs 10,00,00,000.
6. Above Rs 20,00,00,000 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.
Note: In the event the arbitral tribunal is a sole arbitrator, he shall be entitled to
an additional amount of twenty-five per cent on the fee payable as per the
above.‖
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The issue before this Court turns on the interpretation of the term ―sum in
dispute‖, which is the header of the second column of the Fourth Schedule. This
column provides the different categories of the amounts, corresponding to which
the third column provides the relevant fee which the arbitrators can charge for
that category.
111 On the one hand, it has been argued before us that the expression ―sum in
dispute‖ should be the cumulative sum of the claim and counter-claim raised by
the parties. If such a position is adopted, the arbitrators will charge one common
fee for hearing both the claim and counter-claim, and the ceiling prescribed in the
Fourth Schedule will apply to their cumulative total. On the other hand, it is
submitted that ―sum in dispute‖ refers to the individual sums in dispute in the
claim and counter-claim. The consequence of adopting this position would be that
the arbitrators will charge different sets of fees for the claim and counter-claim,
and hence, separate fee ceilings will apply to both.
D.2 Definition of claim and counter-claim
D.2.1 In re arbitration proceedings
(i) Statutory Framework of the Arbitration Act
112 The Arbitration Act does not specifically define either the expression
―claim‖ or ―counter-claim‖. However, these expressions are referred to in
numerous instances, which we shall now outline.
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113 Part I of the Arbitration Act is titled ―Arbitration‖. Section 2 is the definitions
clause for Part I. Section 2(1) defines the various terms used throughout Part I.
Sections 2(2) to 2(5) clarify the scope of the disputes which will be covered by
Part I. Section 2(6) notes that where Part I allows parties to determine any issue,
it also provides them a right to let any other person or institution determine the
issue for them. Section 2(7) notes that awards passed under Part I shall be
domestic awards. Section 28(1) clarifies that any reference to an agreement
made by the parties (or which may be made), will also include a reference to any
arbitration rules referred to in the agreement. Crucially, Section 2(9) states that
―[w]here [Part I], other than clause (a) of Section 25 or clause (a) of sub-section
(2) of Section 32, refers to a claim, it shall also apply to a counter-claim, and
where it refers to a defence, it shall also apply to a defence to that counter-claim‖.
This corresponds to Article 2(f)149 of the UNCITRAL Model Law, on which the
Arbitration Act is based. Section 25(a) notes that if the claimant fails to
communicate his statement of claim in accordance with sub-section (1) of Section
23, the arbitral tribunal shall terminate the proceedings, while Section 32(2)(a)
provides that the arbitral tribunal shall issue an order for termination of arbitration
proceedings where the claimant withdraws his claim, unless the respondent
objects to the order and the arbitral tribunal recognises a legitimate interest on his
part in obtaining a final settlement of the dispute. Hence, as is evident, other than
these specific provisions which refer to only a claim filed by the claimant, the
Arbitration Act treats claims and counter-claims at par.

149 Article 2(f) provides: ―(f)where a provision of this Law, other than in Article 25(a) and 32(2)(a), refers to a
claim, it also applies to a counter-claim, and where it refers to a defence, it also applies to a defence to such
counter-claim‖.
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114 Another reference is then made to counter-claims in sub-Section (2-A) of
the Section 23, which provides as follows:
―23. Statements of claim and defence.
[…]
(2-A) The respondent, in support of his case, may also submit
a counter claim or plead a set-off, which shall be adjudicated
upon by the arbitral tribunal, if such counter claim or set-off
falls within the scope of the arbitration agreement.‖
Section 23(2-A) clarifies that an arbitral tribunal is under an obligation to also
adjudicate upon a counter-claim or set-off filed by a party in an arbitration
proceeding, with the limitation that they should fall within the scope of the
arbitration agreement. This is in line with the requirements under the UNCITRAL
Model Law150
. If a party files a frivolous counter-claim which leads to a delay in
the arbitration proceedings, the arbitral tribunal can take that into account while
determining costs in accordance with Section 31A(3)(c).
115 Section 23(2-A) was introduced by the Arbitration Amendment Act 2015,
bearing in view the recommendations in the LCI 246th Report (supra). The
Report had recommended the addition of an explanation to Section 23(1)
(instead of a different sub-Section) along with the following comment:
―Amendment of Section 23
13.In section 23, after sub-section (1) and before sub-section
(2), add the words ―Explanation: In his defence the
respondent may also submit a counter claim or plead a set
off, which shall be treated as being within the scope of
reference and be adjudicated upon by the arbitral tribunal
notwithstanding that it may not fall within the scope of the

150 Howard M Holtzmann and Joseph E Neuhaus, A Guide to the UNCITRAL Model Law on International
Commercial Arbitration: Legislative History and Commentary (Walter Kluwers, 1989), page 649
PART D
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initial reference to arbitration, but provided it falls within the
scope of the arbitration agreement.‖
[NOTE: This explanation is in order to ensure that counter
claims and set off can be adjudicated upon by an arbitrator
without seeking a separate/new reference by the respondent
so long as it falls within the scope of the arbitration
agreement, in order to ensure final settlement of disputes
between parties and prevent multiplicity of litigation.]‖
Thus, the object of taking up a counter-claim along with the claim in the same
proceeding is not because the counter-claim arises due to the claim (which it may
not) but in order to prevent a multiplicity of proceedings.
116 We have already noted Section 38(1) earlier in this judgment, where the
proviso provides the arbitral tribunal with the power to fix a separate amount of
deposits (of costs determined under Section 31(8)) in instances where a claim
and counter-claim have both been filed in an arbitration proceeding. We must
also take note of Section 38(2) of the Arbitration Act, which provides:
―(2) The deposit referred to in sub-section (1) shall be payable
in equal shares by the parties:
Provided that where one party fails to pay his share of the
deposit, the other party may pay that share:
Provided further that where the other party also does not pay
the aforesaid share in respect of the claim or the counterclaim, the arbitral tribunal may suspend or terminate the
arbitral proceedings in respect of such claim or counter-claim,
as the case may be.‖
As a general rule, sub-Section (2) of Section 38 provides that the deposits
determined under Section 38(1) have to be shared by both parties. The first
proviso notes that if one party fails to pay their share, the other party may step in
and pay it. Further, the second proviso notes that if the other party also does not
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pay that share, the arbitral tribunal can suspend proceedings. Importantly, it
provides that it may terminate proceedings in relation to either the claim or
counter-claim or both, depending upon whether the appropriate deposits have
been made for one of them or neither of them.
117 Consequently, on the basis of the above 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 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
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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.
(ii) Academic discourse
118 In Justice R S Bachawat‘s seminal treatise on Law of Arbitration &
Conciliation, it has been noted that an arbitral tribunal has the jurisdiction to
decide any claim and counter-claim arising out of a dispute referred to it, and not
deciding the latter would be a ground to set aside the award151:
“[s 7.44.3] Counter-claim
When disputes in a pending suit are referred to arbitration,
the arbitrator has jurisdiction to decide both the claim and the
counterclaim…An award allowing the claim without deciding
the counterclaim is liable to be set aside. Where the
arbitration agreement permitted reference of all disputes to
arbitration, it could not be said that by entertaining a
counterclaim, the arbitrator exceeded his jurisdiction.‖

151 Anirudh Wadha and Anirudh Krishnan, Justice R S Bachawat’s Law of Arbitration & Conciliation (6th edition,
2017)
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119 Similarly, CR Dutta‘s treatise on Law of Arbitration & Conciliation supports
the proposition that the Arbitration Act treats a claim and counter-claim as two
separate and independent proceedings152:
―4. To be paid equally
The cost amount to be deposited will be in respect of the
claim and separately in respect of the counter-claim by the
parties in equal shares. If a party does not pay the other party
may be asked to pay the shares of both the parties. If the
amount directed to be deposited in respect of the claim is not
made, then the proceedings in respect of the claim may be
suspended or terminated but the proceedings in respect of
counter-claim can proceed if the amount in respect thereof
has been deposited. For the purposes of deposit of costs and
expenses, the claim and counter-claim have been treated as
two separate independent proceedings.‖
120 Gary Born on Arbitration (supra) notes that a party is generally not
bound by any restriction in regards to its counter-claim, except that it must fall
within the scope of the arbitration agreement153:
―In general, there are no limits under national law on the
subject matter of a respondent‘s counterclaims, beyond
whatever restrictions may be contained in the parties‘
arbitration agreement: the respondent may assert any
counterclaim that falls within the scope of the arbitration
agreement. This general freedom may be limited by the
parties‘ arbitration agreement or applicable institutional rules
(which, however, usually do not impose further limits).‖
121 Finally, in Procedure and Evidence in International Arbitration, a counterclaim is differentiated from a set-off by noting that it is a claim brought by the
defendant and is not a defence to the claimant‘s claim154:

152 CR Dutta’s Law Of Arbitration And Conciliation (LexisNexis)
153 Supra at note 30
154 Jeffrey Waincymer, Procedure and Evidence in International Arbitration (Walters Kluwer, 2012)
PART D
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―4.4. A counterclaim is usually seen as a claim brought by a
respondent in a civil suit against the claimant that is
independent of the primary claim although it may be linked to
the same facts. The term is used in contradistinction to a setoff that is seen as a defence to the primary claim, albeit one
invariably related to different facts. Because it is not simply a
defence, a counterclaim leads to a separate judgment that
may be in excess of the judgment under the primary claim.
Furthermore, the counterclaim remains alive even if the initial
claim is withdrawn. Thus, it is truly a reverse claim and not a
defence as such.‖
122 These academic writings a support the conclusion that claims and counterclaims within an arbitration proceeding are distinct and independent proceedings
in themselves.
(iii) Judicial pronouncements
123 Even before the introduction of Section 23(2-A) through the Arbitration
Amendment Act 2015, counter-claims were raised by parties in arbitration
proceedings. In Indian Oil Corpn. Ltd. v. Amritsar Gas Service155
, this Court
had to decide on the validity of an award under the Arbitration Act 1940 where
the appellant‘s counter-claim had been dismissed by the arbitrator since it was
not part of the reference. Speaking for the three-Judge Bench, Justice J S Verma
held that when all disputes under an arbitration agreement are referred to
arbitration, a party can file its counter-claim before the arbitral tribunal:
―15. The appellant's grievance regarding non-consideration of
its counter-claim for the reason given in the award does
appear to have some merit. In view of the fact that reference
to arbitrator was made by this Court in an appeal arising out
of refusal to stay the suit under Section 34 of the Arbitration
Act and the reference was made of all disputes between the
parties in the suit, the occasion to make a counter-claim in the
written statement could arise only after the order of reference.

155 (1991) 1 SCC 533 (―Amritsar Gas Service‖)
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The pleadings of the parties were filed before the arbitrator,
and the reference covered all disputes between the parties in
the suit. Accordingly, the counter-claim could not be made at
any earlier stage. Refusal to consider the counter-claim for
the only reason given in the award does, therefore, disclose
an error of law apparent on the face of the award. However,
in the present case, the counter-claim not being pressed at
this stage by learned counsel for the appellant, it is
unnecessary to examine this matter any further.‖
124 In State of Goa v. Praveen Enterprises156
, a two-Judge Bench followed
the principle enunciated in Amritsar Gas Service (supra) in a case arising under
the Arbitration Act. Speaking for the two-Judge Bench, Justice R V Raveendran,
in the course of an erudite exposition of the law, highlighted that a respondent to
a claim could well seek independent recourse to arbitration for deciding the
counter-claim, but raising a counter-claim obviates a multiplicity of litigation:
―32. A counterclaim by a respondent presupposes the
pendency of proceedings relating to the disputes raised by
the claimant. The respondent could no doubt raise a dispute
(in respect of the subject-matter of the counterclaim) by
issuing a notice seeking reference to arbitration and follow it
by an application under Section 11 of the Act for appointment
of arbitrator, instead of raising a counterclaim in the pending
arbitration proceedings. The object of providing for
counterclaims is to avoid multiplicity of proceedings and to
avoid divergent findings. The position of a respondent in an
arbitration proceeding being similar to that of a defendant in a
suit, he has the choice of raising the dispute by issuing a
notice to the claimant calling upon him to agree for reference
of his dispute to arbitration and then resort to an independent
arbitration proceeding or raise the dispute by way of a
counterclaim, in the pending arbitration proceedings.‖

156 (2012) 12 SCC 581 (―Praveen Enterprises‖)
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Subsequently, in Voltas Ltd. v. Rolta India Ltd.157
, another two-Judge Bench of
this Court followed the reasoning in Praveen Enterprises (supra), that counterclaims were independent claim proceedings by the respondent. The Court held
that the limitation for a counter-claim would be determined with reference to the
date it was instituted before the arbitral tribunal. However, it carved out an
exception to this general rule for instances where the respondent had earlier
raised the counter-claim as a claim in a notice for arbitration sent to the claimant,
but did not subsequently file an application under Section 11 of the Arbitration
and raised it directly as a counter-claim. In such instances, the date of limitation
would, it was observed, begin from when the notice of arbitration was first
received by the claimant.
D.2.2 In re civil proceedings
(i) Statutory Framework of CPC
125 Order VIII of the CPC contains provisions pertaining to written statements,
set-offs and counter-claims by the defendant. Rule 6 elucidates the particulars of
a set-off to be given in a written statement:
―6. Particulars of set-off to be given in written
statement.—(1) Where in a suit for the recovery of money
the defendant claims to set-off against the plaintiff's demand
any ascertained sum of money legally recoverable by him
from the plaintiff, not exceeding the pecuniary limits of the
jurisdiction of the Court, and both parties fill the same
character as they fill in the plaintiff's suit, the defendant may,
at the first hearing of the suit, but not afterwards unless
permitted by the Court, present a written statement containing
the particulars of the debt sought to be set-off.

157 (2014) 4 SCC 516
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(2) Effect of set-off.—The written statement shall have the
same effect as a plaint in a cross-suit so as to enable the
Court to pronounce a final judgment in respect both of the
original claim and of the set-off, but this shall not affect the
lien, upon the amount decreed, of any pleader in respect of
the costs payable to him under the decree.
(3) The rules relating to a written statement by a defendant
apply to a written statement in answer to a claim of set-off.‖
Rule 6(1) specifies that while filing their written statement, a defendant may
mention the particulars of an ascertained sum legally recoverable from the
plaintiff. Rule 6(2) notes that the effect of pleading a set-off in a written statement
is the same as filing a plaint in a cross-suit. Rule 6(3) then notes that the
plaintiff‘s written statement in respondent to the defendant‘s set-off claim shall
follow the same rules as the defendant‘s written statement in response to the
plaintiff‘s plaint.
126 On the other hand, a distinct provision is made for a counter-claim under
Rule 6-A of Order VIII of the CPC:
―6-A. Counter-claim by defendant.—(1) A defendant in a
suit may, in addition to his right of pleading a set-off under
Rule 6, set up, by way of counter-claim against the claim of
the plaintiff, any right or claim in respect of a cause of action
accruing to the defendant against the plaintiff either before or
after the filing of the suit but before the defendant has
delivered his defence or before the time limited for delivering
his defence has expired, whether such counter-claim is in the
nature of a claim for damages or not:
Provided that such counter-claim shall not exceed the
pecuniary limits of the jurisdiction of the Court.
(2) Such counter-claim shall have the same effect as a crosssuit so as to enable the Court to pronounce a final judgment
in the same suit, both on the original claim and on the
counter-claim.
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(3) The plaintiff shall be at liberty to file a written statement in
answer to the counter-claim of the defendant within such
period as may be fixed by the Court.
(4) The counter-claim shall be treated as a plaint and
governed by the rules applicable to plaints.‖
Rule 6-A(1) provides that the defendant‘s counter-claim is in addition to a claim
for set-off under Rule 6. It provides that the defendant may file a counter-claim
based on a cause of action accruing to them against the plaintiff either before or
after the filing of the suit but before the defendant has delivered his defence or
before the time limited for delivering his defence has expired. The proviso notes
that the value of the counter-claim cannot exceed the pecuniary jurisdiction of the
court where it is being filed. Rule 6-A(2) provides that the counter-claim has the
same effect as a cross-suit. Rule 6-A(3) permits a plaintiff to file a written
statement against the defendant‘s counter-claim. Finally, Rule 6-A(4) notes that
the counter-claim shall be treated as a plaint and the rules governing plaints will
be applicable to it.
127 Rule 6-D of Order VIII is of particular importance, and it provides thus:
―6-D. Effect of discontinuance of suit.—If in any case in
which the defendant sets up a counter-claim, the suit of the
plaintiff is stayed, discontinued or dismissed, and counterclaim may nevertheless be proceeded with.‖
Rule 6-D clarifies, in no uncertain terms, that even if the suit which has been
instituted by the plaintiff is stayed, discontinued or dismissed, it would not affect
the defendant‘s counter-claim. This highlights, once again, that counter-claims
are distinct and independent from claims. The defendant‘s counter-claim is
equivalent to a plaint. The counter-claim is not being filed as an independent suit
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but as a counter-claim within a pre-existing suit so as to avoid a multiplicity of
litigation. However, it is not dependant on the outcome of the original suit and is
an independent proceeding.
(ii) Academic discourse
128 Mulla‘s treatise on the Code of Civil Procedure notes that a counter-claim
is an independent suit which exists within another pre-existing suit, in order to
enable the court to pronounce final judgment on the claim and the counter-claim
together158:
―The very object of Rule 6A is to treat a counterclaim as an
independent suit to be heard together with the plaintiff‘s suit
to enable the court to pronounce final judgement.‖
129 Sarkar’s Code of Civil Procedure notes that a counter-claim is an
independent action and not a defence to the plaintiff‘s original claim159:
―The provisions of Rule 6A(1) are in substance similar to
those of RSC, 1965 [Rules of the Supreme Court of UK,
1965], Order 15, Rule 2(1). Cf Rule 6(2) with Order 8, Rule
6(2) of the Code and Rule 6A(4) with RSC 1965, Order 18,
Rule 18. The effect of this rule is from the point of view of
pleading to assimilate a counter-claim with a plaint in a suit
and is therefore governed by the same rules of pleading as a
plaint. A counter-claim is substantially a cross-action, not
merely a defence to the plaintiff’s claim. It must be of such
a nature that the court would have jurisdiction to entertain it
as a separate action.‖
(emphasis supplied)

158 Mulla, The Code of Civil Procedure, (Volume 2, 18th edition) page 1925
159 Sudipto Sarkar and Aditya Swarup, Sarkar’s Code of Civil Procedure (LexisNexis, 13th edition) (―Sarkar‖)
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Sarkar (supra) further notes that this understanding is crystallised in Order VIII
Rule 6-D, where the dismissal of a frivolous action by the plaintiff would not affect
the defendant‘s counter-claim:
―[Rule 6-D] further illustrates the principle that a counter-claim
is to be treated as a cross action, and is not affected by
anything which relates solely to the plaintiff‘s claim. Thus,
where the plaintiff discontinues action the counter-claim has
been served, he cannot prevent the defendant from enforcing
against him the causes of action contained in the counterclaim. So if an action is dismissed being frivolous, the
counter-claim is not affected and the defendant may be
granted the relief which he seeks thereby.‖
130 The above exposition of a counter-claim is elaborated in Halsbury’s Laws
of India (Civil Procedure)160:
―A ―counter-claim‖ is a claim made by a defendant in a suit
against a plaintiff. It is a claim, independent of and
separable from the plaintiff’s claim, which can be
enforced by a cross-action. It is a cause of action in favour
of the defendant against the plaintiff…‖
(emphasis supplied)
131 Zuckerman‘s treatise on Civil Procedure, Principles of Practice also
observes that counter-claims are an independent proceeding161:
―4.52. A counterclaim is independent of the main claim. It may
relate to the same transaction, as where the claimant claims
for the price of goods and the defendant counterclaims
damages for late delivery or for defects. Equally, a
counterclaim can be wholly separate from the claim, as where
the defendant sues in respect of entirely different events from
those that are raised in the claimant‘s claim.‖

160 Halsbury’s Laws of India (Civil Procedure) (2nd edition)
161 Zuckermann on Civil Procedure (Sweet & Maxwell, 4th edition)
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(iii) Judicial pronouncements
132 In Jag Mohan Chawla v. Dera Radha Swami Satsang162
, a two-Judge
Bench of this Court had to decide whether, under the CPC, a counter-claim can
be made on a cause of action different from the primary claim. Speaking for the
two-Judge Bench, Justice K Ramaswamy held:
―5…In sub-rule (1) of Rule 6-A, the language is so couched
with words of wide width as to enable the parties to bring
his own independent cause of action in respect of any
claim that would be the subject-matter of an independent
suit. Thereby, it is no longer confined to money claim or to
cause of action of the same nature as original action of the
plaintiff. It need not relate to or be connected with the original
cause of action or matter pleaded by the plaintiff. The words
―any right or claim in respect of a cause of action accruing
with the defendant‖ would show that the cause of action from
which the counter-claim arises need not necessarily arise
from or have any nexus with the cause of action of the plaintiff
that occasioned to lay the suit…The counter-claim
expressly is treated as a cross-suit with all the indicia of
pleadings as a plaint including the duty to aver his cause
of action and also payment of the requisite court fee
thereon. Instead of relegating the defendant to an
independent suit, to avert multiplicity of the proceeding
and needless protection (sic protraction), the legislature
intended to try both the suit and the counter-claim in the
same suit as suit and cross-suit and have them disposed
of in the same trial. In other words, a defendant can claim
any right by way of a counter-claim in respect of any cause of
action that has accrued to him even though it is independent
of the cause of action averred by the plaintiff and have the
same cause of action adjudicated without relegating the
defendant to file a separate suit…‖
(emphasis supplied)
Hence, it was held that since the counter-claim was effectively an entirely
independent suit from the claim, it could arise out of any unrelated cause of
action.

162 (1996) 4 SCC 699
PART D
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133 In Rajni Rani v. Khairati Lal163
, Justice Dipak Misra (as the learned Chief
Justice then was), speaking for a two-Judge Bench of this Court, analysed the
provisions of Order VIII and held:
―9.6…a counterclaim preferred by the defendant in a suit
is in the nature of a cross-suit and by a statutory
command even if the suit is dismissed, counterclaim
shall remain alive for adjudication. For making a
counterclaim entertainable by the court, the defendant is
required to pay the requisite court fee on the valuation of the
counterclaim. The plaintiff is obliged to file a written statement
and in case there is default the court can pronounce the
judgment against the plaintiff in relation to the counterclaim
put forth by the defendant as it has an independent status.
The purpose of the scheme relating to counterclaim is to
avoid multiplicity of the proceedings. When a counterclaim
is dismissed on being adjudicated on merits it forecloses the
rights of the defendant. As per Rule 6-A(2) the court is
required to pronounce a final judgment in the same suit both
on the original claim and also on the counterclaim.
The...purpose is to avoid piecemeal adjudication…‖
134 In Thomas Mathew v. KLDC Ltd., another two-Judge Bench of this Court
held that a counter-claim is an independent suit and consequently, the period of
limitation would be three years from the date of accrual of the cause of action164
.
D.3 Analysis
135 On our 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;

163 (2015) 2 SCC 682
164 (2018) 12 SCC 560
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(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.
136 We must now consider these principles in the context of the interconnection between Section 31(8), Section 31A and Section 38(1) and the Fourth
Schedule of the Arbitration Act. On a combined reading of Section 31(8), Section
31A and Section 38(1), 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.
137 If this interpretation were to be discarded in favor of construing ―sum in
dispute‖ as a cumulation of the claim amount for the claim and counter-claim, it
would have far-reaching consequences in terms of procedural fairness. First,
under the proviso to Section 38(1), the arbitral tribunal can direct separate
deposits for a claim and counter-claim. These are based on the cost of arbitration
PART D
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defined by a conjoint reading of Sections 31(8) and 31A, which includes the
arbitrators‘ fee. Hence, if the arbitrators were to charge a common fee for both
the claim and counter-claim, they would have to then equitably divide that fee
while calculating individual deposits for the purpose of the proviso to Section
38(1). Second, the second proviso to Section 38(2) provides that if the deposit is
not made by both the parties, the arbitral tribunal can dismiss the claim and/or
counter-claim, as the case may be. If the claim was to be dismissed in such a
manner, it would lead to an absurd situation where the arbitrators‘ fee would have
to be revised in the middle of the arbitration proceedings solely on the basis of
the amount of the counter-claim. Third, under Section 23(2-A), the only
requirement of a counter-claim is that it should arise out of the same arbitration
agreement as the claim. However, the cause of action of a counter-claim may be
entirely different from the claim and possibly far more complex. Therefore,
determining the arbitrators‘ fee on a combined basis for both the claim and
counter-claim would thus not match up to the separate effort they would have to
put in for each individual dispute in the claim and counter-claim.
138 In support of the proposition that ―sum in dispute‖ in the Fourth Schedule
includes the cumulation of the sums of the claim and counter-claim, we have also
been referred to the LCI 246th Report (supra). It has been argued that the Law
Commission highlighted the problem of arbitrators charging an excessive fee in
ad hoc arbitrations, which is what led to the introduction of the Fourth Schedule
by the Arbitration Amendment Act 2015. Thus, it has been urged that ―sum in
dispute‖ in the Fourth Schedule should be interpreted keeping in mind the
purpose with which it was introduced. However, we must reject the argument
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since it would militate against the statutory framework of the Arbitration Act as it
stands today. If Parliament intended that a common fee be charged for a claim
and counter-claim, it would have amended the rest of the Arbitration Act as well
or introduced a specific clause in the Fourth Schedule. Parliament may in its
legislative wisdom still do so. In Aphali Pharmaceuticals Ltd. v. State of
Maharashtra165, speaking for a two-Judge Bench of this Court, Justice K N
Saikia held:
―31. A Schedule in an Act of Parliament is a mere question of
drafting…The Schedule may be used in construing provisions
in the body of the Act. It is as much an act of legislature as
the Act itself and it must be read together with the Act for all
purposes of construction. Expressions in the Schedule
cannot control or prevail against the express enactment
and in case of any inconsistency between the Schedule
and the enactment, the enactment is to prevail and if any
part of the Schedule cannot be made to correspond it
must yield to the Act.‖
(emphasis supplied)
139 In a final attempt, we have also been referred to the rules of numerous
arbitral institutions which provide for the calculation of arbitrators‘ fees on the
cumulation of the sum of the claim and counter-claim – such as the DIAC166
,
Mumbai Centre for International Arbitration167, Indian Council of Arbitration168
,
Construction Industry Arbitration Council169, SIAC, HKIAC170
, Stockholm.

165 (1989) 4 SCC 378
166 Rule 3(ii) of the DIAC Rules provides: ―3. Arbitrators' Fees - (ii)The fee shall be determined and assessed on
the aggregate amount of the claim(s) and counter claim(s)‖.
167 Based on its online Fee Calculator available at <https://mcia.org.in/mcia-schedule-of-fees/calculate_fees/#>
accessed on 29 June 2022
168 Rule 31(2) of Rules of Domestic Commercial Arbitration and Conciliation
169 Schedule of Fees available at <http://www.ciac.in/fee_arbitrator.html> accessed on 29 June 2022
170 Article 6.3 of Schedule III of HKIAC Administered Arbitration Rules 2013 provides: ―6.3 Claims and
counterclaims are added for the determination of the amount in dispute. The same rule applies to any set-off
defence, unless the arbitral tribunal, after consulting with the parties, concludes that such set-off defence will not
require significant additional work‖.
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140 Chamber of Commerce171 and European Court of Arbitration172. This will,
however, have no bearing on our judgment. As noted earlier in this judgment,
parties have the freedom to opt for institutional arbitration and be bound by the
rules of the institution. However, the judgment is currently dealing with instances
of ad hoc arbitrations where the Fourth Schedule has been made applicable for
the calculation of the arbitrators‘ fee. In such cases, we hold that the ―sum in
dispute‖ in the Fourth Schedule of the Arbitration Act shall be considered
separately for the claim amount in dispute in the claim and counter-claim.
Consequently, the arbitrators‘ fee will be calculated separately for the claim and
counter-claim, and the ceiling on the fee will also be applicable separately to
both.
E Fee Ceiling in Fourth Schedule
141 This issue revolves around the interpretation of the sixth entry of the
Fourth Schedule. For convenience of the reader, the Fourth Schedule is being
extracted again:
―THE FOURTH SCHEDULE
See Section 11(3-A)
Sl. No. Sum in dispute Model fee
(1) (2) (3)
1. Up to Rs 5,00,000 Rs 45,000

171 Article 2 of Appendix IV of 2017 Arbitration Rules provides: ―(3) The amount in dispute shall be the aggregate
value of all claims, counterclaims and set-offs. Where the amount in dispute cannot be ascertained, the Board
shall determine the Fees of the Arbitral Tribunal having regard to all relevant circumstances.‖.
172 Appendix 3 of the Arbitration Rules of the European Court of Arbitration – 2021 provides: ―For the purposes of
the application of the scale range the amount to be taken into account to apply this scale will be the total of the
claims made by the parties, i.e. of the claims and counterclaims.‖.
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2. Above Rs 5,00,000 and up to Rs
20,00,000
Rs 45,000 plus 3.5 per cent of
the claim amount over and above
Rs 5,00,000.
3. Above Rs 20,00,000 and up to
Rs 1,00,00,000
Rs 97,500 plus 3 per cent of the
claim amount over and above Rs
20,00,000.
4. Above Rs 1,00,00,000 and up to
Rs 10,00,00,000
Rs 3,37,500 plus 1 per cent of
the claim amount over and above
Rs 1,00,00,000.
5. Above Rs 10,00,00,000 and up
to Rs 20,00,00,000
Rs 12,37,500 plus 0.75 per cent
of the claim amount over and
above Rs 10,00,00,000.
6. Above Rs 20,00,00,000 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.
Note: In the event the arbitral tribunal is a sole arbitrator, he shall be entitled to
an additional amount of twenty-five per cent on the fee payable as per the
above.‖
(emphasis supplied)
142 The choice before this Court is between two competing interpretations of
the Model Fee where the sum in dispute is above Rs 20,00,00,000. Before we
explain the competing interpretations, it is important to note that there is an
agreement on the following:
(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
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121
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.
The controversy before this Court is in relation to the third point, namely, to what
does the ceiling apply. 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.
E.1 Difference between the English and Hindi translations
143 The first submission before us is that there is a difference between the
English and Hindi translation of the relevant text. For ready reference, the two
versions are being extracted below:
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.
19,87,500 + 20,00,00,000
 र म 0.5 , 30,00,000
 म म
(emphasis supplied)
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The difference between the two is the presence of a comma (―,‖) in the Hindi
translation, which is absent in the English version. It has been submitted that the
comma was inadvertently missed from the English version, and hence the Hindi
translation should be given preference. In support of this proposition, reliance is
also placed upon Article 343(1) of the Constitution which provides that ―[t]he
official language of the Union shall be Hindi in Devanagari script‖.
144 We must reject this submission at the threshold since it is in teeth of Article
348(1)(b)(ii) of the Constitution, which reads thus:
―348. Language to be used in the Supreme Court and in
the High Courts and for Acts, Bills, etc.—(1)
Notwithstanding anything in the foregoing provisions of this
Part, until Parliament by law otherwise provides—
[…]
(b) the authoritative texts—
(i) of all Bills to be introduced or amendments thereto to be
moved in either House of Parliament or in the House or either
House of the Legislature of a State,
[…]
shall be in the English language.‖
Article 348 begins with a non-obstante clause, which clarifies that it shall have
precedence over other Articles in Part XVII, including Article 343(1).
145 In Nityanand Sharma v. State of Bihar173
, a three-Judge Bench of this
Court had to decide whether the ‗Lohar‘ community would be construed as a
Scheduled Tribe since their name appeared in the Schedule in the Hindi

173 (1996) 3 SCC 576
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translation while the English original had the community ―Lohra‖. Speaking for the
Bench, Justice K Ramaswamy held:
―19. Article 348(1)(b) of the Constitution provides that
notwithstanding anything in Part II (in Chapter II Articles
346 and 347 relate to regional languages) the
authoritative text of all Bills to be introduced and
amendments thereto to be moved in either House of
Parliament … of all ordinances promulgated by the
President… and all orders, rules, regulations and byelaws issued under the Constitution or under any law
made by Parliament, shall be in the English language. By
operation of sub-article (3) thereof with a non obstante
clause, where the Legislature of a State has prescribed any
language other than the English language for use in Bills
introduced in, or Acts passed by, the Legislature of the State
or in Ordinances promulgated by the Governor of the State or
in any order, rule, regulation or bye-law referred to in
paragraph (iii) of that sub-clause, a translation of the same in
the English language published under the authority of the
Governor of the State in the Official Gazette of that State shall
be deemed to be the authoritative text thereof in the English
language under this article. Therefore, the Act and the
Schedule thereto are part of the Act, as enacted by
Parliament in English language. It is the authoritative
text. When the Schedules were translated into Hindi, the
translator wrongly translated Lohara as Lohar omitting the
letter ‗a‘ while Lohra is written as mentioned in English
version. It is also clear when we compare Part XVI of the
Second Schedule relating to the State of West Bengal, the
word Lohar both in English as well as in the Hindi version was
not mentioned. Court would take judicial notice of Acts of
Parliament and would interpret the Schedule in the light of the
English version being an authoritative text of the Act and the
Second Schedule.‖
(emphasis supplied)
Similarly, in the present case, this Court shall be governed by article 348 (1)(b)(i)
while interpreting the entry at Serial No 6 of the Fourth Schedule.
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E.2 Exception to literal interpretation
146 There is no comma in the English version of the sixth entry of the Fourth
schedule. Hence, there is nothing to suggest conclusively (unlike the Hindi
translation) that the ceiling of Rs 30,00,000 applies cumulatively to the sum of the
base amount and variable amount.
147 The absence of a comma may be one indicator of the meaning of a
provision. However, in his seminal treatise on Principles of Statutory
Interpretation, Justice GP Singh has observed174:
―In England, before 1850, there was no punctuation in the
manuscript copy of any Act which received the Royal assent;
therefore, the courts cannot have any regard to punctuation
for construing the older Acts. Even as regards more modern
Acts, it is very doubtful if punctuation can be looked at for
purposes of construction. The opinion on Indian statutes is
not very much different.‖
148 Similarly, Bennion in his treatise on Statutory Interpretation notes175:
―16.8. Punctuation is a part of an Act and may be considered
in construing a provision. It is usually of little weight, however,
since the sense of an Act should be the same with or without
its punctuation…Although punctuation may be considered, it
will generally be of little use since the sense of an Act should
be the same with or without it. Punctuation is a device not for
making meaning, but for making meaning plain. Its purpose is
to denote the steps that ought to be made in oral reading and
to point out the sense. The meaning of a well-crafted
legislative proposition should not turn on the presence or
absence of a punctuation mark.‖
149 In Aswini Kumar Ghose v. Arabinda Bose176
, a Constitution Bench of
this Court had to interpret provisions of the Bar Councils Act 1926. A key

174 Justice GP Singh, Principles of Statutory Interpretation (14th edition, LexisNexis)
175 Diggory Bailey and Luke Norbury, Bennion on Statutory Interpretation (7th edition, LexisNexis)
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submission was in reference to the presence of a comma before the word ―or‖ in
the non-obstante provision. Justice B K Mukherjea in his judgment observed:
―56…Punctuation is after all a minor element in the
construction of a statute, and very little attention is paid to it
by English courts. Cockburn, C.J. said in Stephenson v.
Taylor [(1861) 1 B & S p. 101] : ―On the Parliament Roll there
is no punctuation and we therefore are not bound by that in
the printed copies‖. It seems, however, that in the Vellum
copies printed since 1850 there are some cases of
punctuation, and when they occur they can be looked upon
as a sort of contemporanea exposition [See Craies on Statute
Law, p. 185]. When a statute is carefully punctuated and
there is doubt about its meaning, a weight should
undoubtedly be given to the punctuation [Vide Crawford on
Statutory Construction, p. 343]. I need not deny that
punctuation may have its uses in some cases, but it cannot
certainly be regarded as a controlling element and cannot be
allowed to control the plain meaning of a text [Ibid].‖
Thus, Justice Mukherjea chose a middle-path where the learned Judge admitted
to the use of punctuation but held that it still cannot be a controlling element in
interpreting a provision.
150 Another Constitution Bench of this Court in Indore Development
Authority (LAPSE-5 J.) v. Manoharlal177
, has noted its support of the use of
punctuation as a tool of interpretation and cited with approval the following extract
from Taylor v. Caribou178:
―We are aware that it has been repeatedly asserted by courts
and jurists that punctuation is no part of a statute, and that it
ought not to be regarded in construction. This rule in its origin
was founded upon common sense, for in England until 1849
statutes were entrolled upon parchment and enacted without
punctuation…Such a rule is not applicable to conditions
where, as in this State, a Bill is printed and is on the desk of

176 1953 SCR 1
177 (2020) 8 SCC 129
178 102 Me 401 : 67 A 2 (1907)
PART E
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every Member of the Legislature, punctuation and all, before
its final passage. There is no reason why punctuation, which
is intended to and does assist in making clear and plain the
meaning of all things else in the English language, should be
rejected in the case of the interpretation of statutes.
―Cessante ratione legis cessat ipso lex‖. Accordingly we find
that it has been said that in interpreting a statute punctuation
may be resorted to when other means fail…; that it may aid
its construction…; that by it the meaning may often be
determined; that it is one of the means of discovering the
legislative intent…; that it may be of material assistance in
determining the legislative intention…‖
Indeed, in Mohd. Shabir v. State of Maharashtra, a two-Judge Bench of this
Court held that mere stocking was not an offence under Section 27 of Drugs and
Cosmetics Act 1940 due to the absence of a comma after the word ―stock‖179
.
151 In the present case, 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. However, Maxwell on The Interpretation of Statutes
notes that the literal meaning of a provision must be rejected when it goes
manifestly against the legislative intent behind the enactment180:
―WHERE the language of a statute, in its ordinary meaning
and grammatical construction, leads to a manifest
contradiction of the apparent purpose of the enactment, or to
some inconvenience or absurdity which can hardly have been
intended, a construction may be put upon it which modifies
the meaning of the words and even the structure of the
sentence. This may be done by departing from the rules of
grammar, by giving an unusual meaning to particular words,
or by rejecting them altogether, on the ground that the
legislature could not possibly have intended what its words
signify, and that the modifications made are mere corrections
of careless language and really give the true meaning. Where
the main object and intention of a statute are clear, it must not

179 (1979) 1 SCC 568
180 P St J Langan, Maxwell on The Interpretation of Statutes (N M Tripathi Private Ltd, 1976)
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be reduced to a nullity by the draftsman's unskilfulness or
ignorance of the law, except in a case of necessity, or the
absolute intractability of the language used.‖
Hence, in the present case, we must aim to ascertain the legislative intent behind
the Fourth Schedule.
E.3 Interpretation based on legislative intent
152 The Fourth Schedule was added to the Arbitration Act pursuant to the
Arbitration Amendment Act 2015, which in itself was based upon the
recommendations in the LCI 246th Report (supra). The Report referred to the
judgment in Singh Builders (supra), which raised the issue of arbitrators
charging exorbitant fees:
―20. Another aspect referred to by the appellant, however
requires serious consideration. When the arbitration is by a
tribunal consisting of serving officers, the cost of arbitration is
very low. On the other hand, the cost of arbitration can be
high if the Arbitral Tribunal consists of retired Judge(s).
21. When a retired Judge is appointed as arbitrator in place of
serving officers, the Government is forced to bear the high
cost of arbitration by way of private arbitrator‘s fee even
though it had not consented for the appointment of such nontechnical non-serving persons as arbitrator(s). There is no
doubt a prevalent opinion that the cost of arbitration becomes
very high in many cases where retired Judge(s) are
arbitrators. The large number of sittings and charging of very
high fees per sitting, with several add-ons, without any ceiling,
have many a time resulted in the cost of arbitration
approaching or even exceeding the amount involved in the
dispute or the amount of the award.
22. When an arbitrator is appointed by a court without
indicating fees, either both parties or at least one party is at a
disadvantage. Firstly, the parties feel constrained to agree to
whatever fees is suggested by the arbitrator, even if it is high
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or beyond their capacity. Secondly, if a high fee is claimed by
the arbitrator and one party agrees to pay such fee, the other
party, which is unable to afford such fee or reluctant to pay
such high fee, is put to an embarrassing position. He will not
be in a position to express his reservation or objection to the
high fee, owing to an apprehension that refusal by him to
agree for the fee suggested by the arbitrator, may prejudice
his case or create a bias in favour of the other party which
readily agreed to pay the high fee.
23. It is necessary to find an urgent solution for this problem
to save arbitration from the arbitration cost. Institutional
arbitration has provided a solution as the arbitrators‘ fees is
not fixed by the arbitrators themselves on case-to-case basis,
but is governed by a uniform rate prescribed by the institution
under whose aegis the arbitration is held. Another solution is
for the court to fix the fees at the time of appointing the
arbitrator, with the consent of parties, if necessary in
consultation with the arbitrator concerned. Third is for the
retired Judges offering to serve as arbitrators, to indicate their
fee structure to the Registry of the respective High Court so
that the parties will have the choice of selecting an arbitrator
whose fees are in their ―range‖ having regard to the stakes
involved.‖
153 After noting the judgment in Singh Builders (supra), the LCI 246th Report
(supra) stated as follows:
―11. In order to provide a workable solution to this problem,
the Commission has recommended a model schedule of fees
and has empowered the High Court to frame appropriate
rules for fixation of fees for arbitrators and for which purpose
it may take the said model schedule of fees into account. The
model schedule of fees are based on the fee schedule set by
the Delhi High Court International Arbitration Centre, which
are over 5 years old, and which have been suitably revised.
The schedule of fees would require regular updating, and
must be reviewed every 3-4 years to ensure that they
continue to stay realistic.
12.The Commission notes that International Commercial
arbitrations involve foreign parties who might have different
values and standards for fees for arbitrators; similarly,
institutional rules might have their own schedule of fees; and
in both cases greater deference must be accorded to party
autonomy. The Commission has, therefore, expressly
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restricted its recommendations in the context of purely
domestic, ad hoc, arbitrations.‖
As a means of controlling the rising fees of arbitrators, the Law Commission
proposed a model fee schedule based on the one used by the DIAC. Schedule B
of the DIAC Rules provides that when the sum in dispute is above Rs
20,00,00,000, the fees shall be ―Rs.19,87,500/- + 0.5% of the claim amount over
and above Rs.20 crores, with a ceiling of Rs.30,00,000/-‖. Evidently, the DIAC
Rules have a comma, which would mean that the ceiling would have been
applicable to the base amount and the variable amount.
154 In Mithilesh Kumari v. Prem Behari Khare181
, a two-Judge Bench of this
Court held that, depending on the facts and circumstances of each case, law
commission reports preceding enactments of statutes can be relied on as an aid
in interpretation. Speaking for the Bench, Justice K N Saikia held:
―15…where a particular enactment or amendment is the
result of recommendation of the Law Commission of India, it
may be permissible to refer to the relevant report as in this
case. What importance can be given to it will depend on the
facts and circumstances of each case.‖
155 The LCI 246th Report (supra), 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 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

181 (1989) 2 SCC 95
PART F
130
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.
F Ceiling applicable to individual arbitrators
156 The final submission made before this Court 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 threemember tribunal, each individual arbitrator would receive a fee of Rs 10,00,000.
157 Such a submission is erroneous, and hence we must reject it. 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
PART G
131
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 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 learned Attorney General.
G Conclusion
G.1 Findings
158 We answer the issues raised in this batch of cases in the following terms:
(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
PART G
132
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);
(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 in Section C.2.4;
(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;
PART G
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(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.
G.2 Directions
159 We issue the following directions in each of the cases before this Court:
(i) In respect of Arbitration Petition (Civil) No 5 of 2022, a fee schedule for the
arbitrators was already prescribed in the LSTK contract. However, during
the preliminary meeting on 25 November 2015, the arbitral tribunal
observed that the fee schedule in the LSTK contract was unrealistic. While
Afcons agreed to revise the fees, ONGC expressed its disagreement. The
tribunal directed ONGC to consider revising the fees. On 16 April 2016, the
arbitral tribunal informed ONGC that it would no longer bargain on the
amount of fees if ONGC was agreeable to the fee provided in the Fourth
Schedule to the Arbitration Act, along with a reading fee of Rs 6 lakhs for
each arbitrator. By its letter dated 22 April 2016, ONGC indicated that it
was agreeable to revising the fees in terms of the Fourth Schedule. It only
objected to the reading fee. Subsequently, the arbitral tribunal passed a
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134
procedural order dated 4 August 2016 directing the parties to deposit 25
per cent of the arbitrators‘ fee, which was recorded as Rs 30 lakhs. It
seems a ceiling of Rs 30 lakhs was determined following the Fourth
Schedule to the Arbitration Act. However, the arbitral tribunal then
unilaterally decided to revise the fees and passed a procedural order fixing
a fee of Rs 1.5 lakhs for each arbitrator for every sitting of a three-hour
duration. The tribunal also indicated it may also charge a reading or
conference fee, which would be decided at a later stage. By an order dated
25 July 2019, the arbitral tribunal adjusted its fees to Rs 1 lakh per sitting.
Around 54 sittings have been held in terms of the arbitral tribunal‘s order
dated 25 July 2019. In this background, it is evident that there was no
consensus between the parties and the arbitrators regarding the fee that is
to be paid to the members of the arbitral tribunal. Allowing the continuance
of the arbitral tribunal would mean foisting a fee upon the parties and the
arbitral tribunal to which they are not agreeable. In view of our directives in
Section C.2.4 and the facts noted earlier, we exercise our powers under
Article 142 of the Constitution of India and direct the constitution of a new
arbitral tribunal in accordance with the arbitration agreement. For this
purpose, Arbitration Petition (C) No. 5 of 2022 would be listed for directions
before this Court on 21 September 2022. The above directions should not
be construed as a finding on the conduct of the arbitration proceedings.
These directions are an attempt to ensure that the arbitral proceedings are
conducted without rancour which may derail the proceedings. In
consonance with our findings, the fee payable to the earlier arbitral tribunal
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135
would be the fee payable in terms of the Fourth Schedule of the Arbitration
Act. Though the Fourth Schedule is per se not applicable to an
international commercial arbitration, since ONGC had indicated (following
the suggestion of the arbitral tribunal) that it would be agreeable to pay the
fee payable in terms of Schedule, it cannot now take recourse to the
arbitration agreement between the parties to pay a lesser fee. We further
clarify that if the fee in excess of the amount payable under the Fourth
Schedule has been paid to the members of the arbitral tribunal, such
amount will not be recovered from them;
(ii) The civil appeal arising out of Special Leave Petition (Civil) No 13426 of
2021 is dismissed and the judgment of the Single Judge of the Delhi High
Court dated 6 August 2021 is upheld;
(iii)The civil appeal arising out of Special Leave Petition (Civil) No 10358 of
2020 is allowed and the judgment of the Single Judge of the Delhi High
Court dated 10 July 2020 is set aside; and
(iv) Miscellaneous Application Nos 1990-1991 of 2019 are dismissed.
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136
160 Before parting, we would like to place on record our sincere appreciation
for the submissions made by the amicus curiae, Mr Huzefa Ahmadi who was ably
assisted by Ms Anushka Shah.
161 Pending applications, if any, stand disposed of.

….......…...….......………………........J.
 [Dr Dhananjaya Y Chandrachud]
….....…...….......………………........J.
 [Surya Kant]
New Delhi;
August 30, 2022
Arbitration Petition No. 5 of 2022 & Ors. Page 1 of 69
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
ARBITRATION PETITION NO. 5 OF 2022
OIL AND NATURAL GAS CORPORATION LIMITED ... PETITIONER
VERSUS
AFCONS GUNANUSA JV. ... RESPONDENT
W I T H
SPECIAL LEAVE PETITION (CIVIL) NO. 10358 OF 2020
SPECIAL LEAVE PETITION (CIVIL) NO. 13426 OF 2021
SPECIAL LEAVE PETITION (CIVIL) NO. OF 2022
(DIARY NO. 8494 OF 2022)
A N D
MISCELLANEOUS APPLICATION NOS. 1990-1991 OF 2019
(IN SPECIAL LEAVE PETITION (CIVIL) NOS. 10021-10022 OF 2017)
J U D G M E N T
SANJIV KHANNA, J.
Reason and cause for my separate judgment.
This is an unfortunate litigation wherein one or both parties
have questioned the legitimacy and reasonableness of the fee
claimed by the arbitral tribunal.
Arbitration Petition No. 5 of 2022 & Ors. Page 2 of 69
2. While I am entirely in agreement with the considered view
expressed by esteemed brother 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, 19961
, 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 sub1 For short, the ‘A&C Act’.
Arbitration Petition No. 5 of 2022 & Ors. Page 3 of 69
section (2) to Section 39 of the A&C Act. At the same time, I
respectfully agree with brother D.Y. Chandrachud, J., that when an
arbitral tribunal, even in the absence of consent of the parties, fixes
the fee in terms of the Fourth Schedule2
, 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 subsection (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.
3. On interpretation of the Fourth Schedule, I respectfully agree with
the view expressed by learned 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
2 The fee schedule fixed under Section 11(14) or Section 11(3A) ,as the case may be, of the A&C Act.
Arbitration Petition No. 5 of 2022 & Ors. Page 4 of 69
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.
Background of the problem of high cost of arbitration, the legislative
history and remedial changes in the Arbitration and Conciliation
Act, 1996.
4. The issue of skyrocketing costs of arbitration has been a subject of
concern and lament in two decisions of this Court in Union of India
v. Singh Builders Syndicate3 and Sanjeev Kumar Jain v.
Raghubir Saran Charitable Trust and Others.
4 The Court in
Singh Builders Syndicate (supra) judicially noticed the prevalent
opinion that the cost of arbitration becomes very high when retired
judges are appointed as arbitrators. A large number of sittings, fee
being charged on a “per sitting” basis, and several other add-ons
without any ceiling contribute to the cost of arbitration approaching
or even at times exceeding the amount involved in the dispute or
the award amount. When an arbitrator is appointed by the Court
without prior fixation of fee, either of the parties might be at a
disadvantage as they feel invariably compelled to agree to
whatever fee is suggested by the arbitrator, even if it is extravagant
3
(2009) 4 SCC 523
4
(2012) 1 SCC 455
Arbitration Petition No. 5 of 2022 & Ors. Page 5 of 69
and beyond their paying capacity. Secondly, in the event one party
agrees to pay such a fee, the other party who is unable to afford or
reluctant to pay such a fee is put in an embarrassing position. The
party may be disinclined to express reservation or object to the high
fee owing to the apprehension that this may prejudice his case or
create a bias in favour of the other party. The decision in Sanjeev
Kumar Jain (supra) refers to the statutory provisions of the A&C
Act, namely, Section 31(8), as it existed, dealing with costs of
arbitration, and the explanation that defines the expression ‘costs’
to mean reasonable costs relating to (i) the fees and expenses of
arbitrators and witnesses, (ii) legal fee and expenses (iii) any
administration fee of the institution supervising the arbitration, and
(iv) other expenses incurred in connection with the arbitration
proceedings and the arbitral award. Interpreting Section 11 of the
A&C Act which deals with the appointment of an arbitrator, the
Court opined that the word ‘appointment’ not only means
nominating or designating a person who will act as an arbitrator, but
is wide enough to encompass stipulating terms on which he is
appointed. Therefore, it is open to the Court, at the time of
appointment of an arbitrator under Section 11, to stipulate the fees
payable to the tribunal. This, the court commended, should be done
after hearing the parties, and if necessary, after ascertaining the fee
Arbitration Petition No. 5 of 2022 & Ors. Page 6 of 69
structure from the prospective arbitrators, to avoid the situation
where the parties have to negotiate the terms of the fee after the
appointment of the arbitral tribunal. The judgment adverts to
institutionalised arbitration as the preferred mode as fixed fee is
prescribed by the institution under whose aegis the arbitration is
held, viz. ad hoc arbitrations, where the arbitrators are appointed
by the parties with or without the intervention of the court, albeit in
the absence of any agreement between the parties on the
procedure to be followed, the arbitral tribunal, subject to Part 1 of
the A&C Act, conducts the proceedings in the manner it deems
appropriate.
5 Referring to the ad hoc arbitrations in India, the Court
judicially acknowledged that frequent complaints regarding the cost
of arbitration, including high fees charged by arbitrators, have
adversely affected the efficiency and effectiveness of arbitration.
While some of the criticism may be harsh as it would be wrong to
state that there is a universalisation of stray aberrations, the court
observes that these are still matters of concern and the remedy for
healthy development of arbitration in India is to disclose the fee
structure before the appointment of the arbitrators so that any party
which is unwilling to bear such expenses can express its
5 The observations on ad hoc arbitration are my observations with reference to sub-sections (2) and
(3) to Section 19 of the A&C Act, which postulate that the arbitral tribunal, subject to the agreement
between the parties, is entitled to conduct the proceedings in the manner it considers appropriate.
Arbitration Petition No. 5 of 2022 & Ors. Page 7 of 69
unwillingness. Consequently, the judgment ennobles and leans
towards institutionalised or ad hoc arbitration, where the arbitrator’s
fee is prefixed. Another remedy that the court suggested is for each
High Court to have a scale of arbitrator’s fee, suitably calibrated
with reference to the amount in dispute. These steps, the Court felt,
would make arbitration attractive to the litigant public.
Reasonableness and certainty regarding the total costs are the key
to the development of arbitration.
5. The 246th Report of the Law Commission of India dated 5th August
2014, under the heading ‘Fees of Arbitrators’, highlighted the
problem of high costs, especially associated with ad hoc
arbitrations, and the complaint that several arbitrators arbitrarily and
unilaterally fix disproportionate fees. To counter this, the Law
Commission suggested a mechanism to rationalise the fee
structure for arbitration by recommending a model schedule of fees.
The Report nevertheless accepted that different values and
standards of fees may be payable in international commercial
arbitrations. The Report adversely commented on the ‘per sitting’
basis on which fee is charged in ad hoc arbitrations, sometimes with
2-3 sittings a day in the same matter between the same parties, and
that costs further increase by continuation of proceedings for years
since the dates are spread over a long period of time. The
Arbitration Petition No. 5 of 2022 & Ors. Page 8 of 69
Commission suggested the model schedule of fee that should be
inserted in the A&C Act.
6. In view of the recommendations made by the Law Commission, the
A&C Act was amended effective from 23rd
 October 2015, vide Act
No. 3 of 2016, with the insertion of the Fourth Schedule to the A&C
Act, exemplifying a schedule of fee payable to the arbitrators. Subsection (14) to Section 11 was enacted, and read thus:
“(14) For the purpose of determination of the fees of the
arbitral tribunal and the manner of its payment to the
arbitral tribunal, the High Court may frame such rules
as may be necessary, after taking into consideration the
rates specified in the Fourth Schedule.
Explanation.– For the removal of doubts, it is hereby
clarified that this sub-section shall not apply to
international commercial arbitration and in arbitrations
(other than international commercial arbitration) in case
where parties have agreed for determination of fees as
per the rules of an arbitral institution.”
The fee structure in the Fourth Schedule was to serve as a
guide for the different High Courts to frame rules determining the
fee payable to the arbitral tribunals. However, most of the High
Courts did not frame rules under Section 11(14) for the purpose of
determination of fee and the manner of payment to the arbitral
tribunal.
6 Further, the rules, as framed by the High Courts, except
6 High Courts of Kerala, Madhya Pradesh, Delhi, Punjab and Haryana, Rajasthan, Karnataka and
Madras have framed rules.
Arbitration Petition No. 5 of 2022 & Ors. Page 9 of 69
for the High Court of Kerala, are applicable when the arbitrators are
appointed by the Court or the parties by agreement or mutual
consent agree to be governed by the applicable rules. Resultantly,
the desired purpose of Section 11(14) has not been met, and
remains unrealised.
7. Based on the High Level Committee Report dated 30th July 2017,
vide Act No. 33 of 2019, a number of significant amendments were
made to the A&C Act to promote and establish the culture of
institutional arbitration. The relevant amendments, for our purpose,
include the amendment to Section 2(1), by inserting clause (ca)
which defines the expression “arbitral institution” as “an arbitral
institution designated by the Supreme Court or a High Court under
this Act”. Part IA consisting of Sections 43A to 43M have been
inserted for the establishment and incorporation of an Arbitration
Council of India, with Section 43D prescribing duties and functions
of the said Council, which include framing policies governing
gradation of arbitral institutions, recognising professional institutes
providing accreditation of arbitrators, review or grading of arbitral
institutions or arbitrators, making recommendations to the Central
Government on various measures to be adopted and to make
provisions for easy resolution of commercial disputes.
Arbitration Petition No. 5 of 2022 & Ors. Page 10 of 69
Simultaneously, sub-section (3A) to Section 11 has been inserted
and reads:
“(3A) The Supreme Court and the High Court shall have
the power to designate, arbitral institutions, from time to
time, which have been graded by the Council under
section 43-I, for the purposes of this Act:
Provided that in respect of those High Court
jurisdictions, where no graded arbitral institution are
available, then, the Chief Justice of the concerned High
Court may maintain a panel of arbitrators for
discharging the functions and duties of arbitral
institution and any reference to the arbitrator shall be
deemed to be an arbitral institution for the purposes of
this section and the arbitrator appointed by a party shall
be entitled to such fee at the rate as specified in the
Fourth Schedule:
Provided further that the Chief Justice of the concerned
High Court may, from time to time, review the panel of
arbitrators.”
Corresponding substitutions/insertions have been made in
sub-sections (4), (5), (6), (8) and (9) to Section 11 to provide for and
give effect to the provisions that appointment of an arbitrator shall
be made on an application of a party by the arbitral institution
designated by the Supreme Court in the case of international
commercial arbitration or by the High Court in other cases. Subsection (11) to (14) to Section 11 as substituted read:
“(11) Where more than one request has been made
under sub-section (4) or sub-section (5) or sub-section
(6) to different arbitral institutions, the arbitral institution
to which the request has been first made under the
relevant sub-section shall be competent to appoint.
Arbitration Petition No. 5 of 2022 & Ors. Page 11 of 69
(12) Where the matter referred to in sub-sections (4),
(5), (6) and (8) arise in an international commercial
arbitration or any other arbitration, the reference to the
arbitral institution in those sub-sections shall be
construed as a reference to the arbitral institution
designated under sub-section (3A).
(13) An application made under this section for
appointment of an arbitrator or arbitrators shall be
disposed of by the arbitral institution within a period of
thirty days from the date of service of notice on the
opposite party.
(14) The arbitral institution shall determine the fees of
the arbitral tribunal and the manner of its payment to the
arbitral tribunal subject to the rates specified in the
Fourth Schedule.”
8. However, even after the lapse of nearly three years, the Arbitration
Council of India has not been fully operationalised, and Part IA,
dealing with the Arbitration Council of India, from Sections 43A to
43M, have not been enforced. The substituted provisions of subsections (11) to (14) to Section 117 of the A&C Act, which came into
force on 30th August 2019 vide SO No. 3154(E) dated 30th August
2019, have been effectively only partially enforced and
implemented. However, on the positive side, I would record that
several High Courts have taken concerted steps to establish and
refer matters to the court adjunct arbitration centres. Despite these
efforts, ad hoc arbitrations have continued and hold the field as they
were prior to the enactment and enforcement of Act No. 33 of 2019.
7
Including newly inserted sub-section (3A) to Section 11 of the A&C Act.
Arbitration Petition No. 5 of 2022 & Ors. Page 12 of 69
Therefore, the amendments made by Act No. 33 of 2019 have been
somewhat a non-starter and thus, the shift envisaged by the
legislature from ad hoc arbitration to institutional arbitration has not
been accomplished.
The legal issues required to be adjudicated.
9. The question of quantum of fee payable to the arbitrators can be
broadly divided into three categories: (i) institutionalised arbitration
where the fee payable to the arbitrator is governed by the
prescribed fee schedule. In the present petition/appeals, we are not
concerned with such cases8
; (ii) ad hoc arbitrations where (a) the
fee is prescribed in the agreement between the parties, (b) where
the fee is fixed by the court while appointing the arbitral tribunal, (c)
where no fee is prescribed in the agreement between the parties,
or where the court while appointing the arbitral tribunal does not fix
the fee or permits the arbitral tribunal to fix the fee ; and (iii) where
the arbitration fee is prescribed and governed by the Fourth
Schedule to the A&C Act.
10. While deciding questions relating to the second category, I would
refer to and interpret the statutory provisions pre and post
8 The legal effect of the substituted sub-section (14) to Section 11 vide Act 33 of 2019 requires
elucidation for the present decision and has been interpreted.
Arbitration Petition No. 5 of 2022 & Ors. Page 13 of 69
Amendment Act No.3 of 2016 and Amendment Act No.33 of 2019,
and elucidate on the rights of the parties/ litigants in the fee fixation.
In the second portion of my judgment, I would examine and interpret
the Fourth Schedule.
Who decides the fee payable to the Arbitral Tribunal?
(a) Where fee payable is fixed by an agreement between the
parties, or by a court order.
11. Arbitration is contract centric and is structured on party autonomy.
The parties are free to agree upon the procedure on conduct of the
arbitration, which includes the right to fix the fee payable to the
arbitrator. While the relationship between the parties and the
arbitrator is based on the contract, the arbitrator’s status as a dejure adjudicator stems directly from the law. The relationship
between the parties and the arbitral tribunal is both contractual and
statutory. Consequently, an arbitral tribunal, in addition to the
contractual terms, must abide by the rules and procedure that are
bare essential pre-requisites of any dispute resolution system.9
In
Sanjeev Kumar Jain (supra), this court has held that when a court
appoints an arbitrator, and also fixes the fee, whether in terms of
the Fourth Schedule or otherwise, the fee is binding on the
9Julian D.M. Lew , Loukas A. Mistelis , et al., Comparative International Commercial Arbitration,
'Chapter 12 Rights and Duties of Arbitrators and Parties', pp. 276 - 277
Arbitration Petition No. 5 of 2022 & Ors. Page 14 of 69
arbitrator/tribunal. The arbitral tribunal, while accepting an
appointment, must accept the remuneration as fixed by the parties
or as determined in the court order appointing the tribunal. Russell
pertinently observes that the appointment of an arbitrator is a matter
of contract, subject to mandatory provisions of the statute. An
arbitrator will not be usually entitled to increase his fee and
expenses unless his agreement with the parties allows him to do
so.10 The arbitrators should not exceed their authority, either under
the terms of the arbitration agreement fixing their fee, or under their
powers in law, which does not permit them to rewrite the agreement
or ignore the court order fixing the fee. It follows that the arbitral
tribunal, during the proceedings, is not entitled to unilaterally
increase its fee, unless the agreement on which it is constituted
allows it to do so, or all parties voluntarily agree to enhancement.
Where fee is fixed by a court order, the arbitral tribunal may
approach the court for modification/increase in the fee by giving
reasons justifying the same. Unilateral increase is unacceptable, as
explained in the judgment by D.Y. Chandrachud J. and in my opi
nion this would violate the provisions of the A&C Act. This principle
applies to institutional arbitration, as an arbitrator/tribunal so
10 Russell on Arbitration (24th Edition). Russell also observes that attempts to increase fee have led to
allegation of bias against the arbitrators and of what used to be called ‘misconduct’, and if pursued
unreasonably, would lead to an application for removal of an arbitrator or even challenge to an award
made by him because of the breach of duty to avoid unnecessary expense.
Arbitration Petition No. 5 of 2022 & Ors. Page 15 of 69
appointed is bound by the rules of the institution and must abide by
the terms of appointment. Where an arbitral tribunal solicits higher
fees, an aggrieved party, in my opinion, as explained below, can
approach the court for appropriate orders under sub-sections (2) or
(3) to Section 39 of the A&C Act.
(b) Where fee is not fixed by a court order, or an agreement
between the parties.
12. There is considerable jurisprudence and legal opinion which
accepts that in the absence of an agreement or consensus between
the parties, or a court order fixing the fee, the arbitral tribunal is
entitled to fix the fee payable for conducting the arbitration, albeit
the fee so fixed should be fair and reasonable. Robert Merkin11
states that, where the agreement between the parties or with the
arbitrator is silent as to the fee, the arbitrator is nevertheless entitled
to reasonable fee based either on an implied term in the agreement,
or on the application of the principle of quantum meruit.
Reasonable fee and expenses appropriate in such circumstances
can be determined by the arbitrator. Professor Sundra Rajoo,12
while accepting that the fee of the arbitrator is an important
consideration when the parties contemplate arbitrating a dispute,
11Robert Merkin QC, LLD, “Arbitration Law”, Service Issue No.83, November 2019.
12 Datuk Professor Sundra Rajoo, Law, Practice and Procedure of Arbitration (Second Edition), 2016,
at pg. 341 and 346, paragraphs 24.4 and 24.7.
Arbitration Petition No. 5 of 2022 & Ors. Page 16 of 69
agrees that it is common in ad hoc arbitration proceedings for the
arbitral tribunal to fix its own fee.13 He observes that, if the parties
cannot agree on the remuneration in advance, the arbitral tribunal
is ordinarily entitled to reasonable remuneration on quantum meruit
basis for the value of the work actually done. Russell, in his work,14
observes that where there is no express agreement with the
arbitrator, the arbitrator may also have the right to payment of
reasonable fees under a contract implied by conduct in
circumstances where a party participates in the arbitration, even if
that party disputes the jurisdiction of the tribunal. Referring to the
English Arbitration Act, 1996, he states that the enactment provides
that the parties are jointly and severally liable to pay to the
arbitrators such reasonable fee and expenses. The level of fee may
be agreed directly with the arbitral tribunal, which normally occurs
in ad hoc arbitration. However, in the absence of any established
arrangement, it is desirable that the parties and the tribunal should
negotiate and agree on the fee payable beforehand, which must be
reasonable. Gary B. Born,15 referring to the 2010 UNICITRAL Rules,
observes that where the parties do not discuss a method of
calculation of the arbitrator’s remuneration, the arbitrator is entitled
13 Reference is made to Michael Mcilwrath and John Savage, International Arbitration and Mediation:
A Practical Guide, (2010) at p.267, para 5-112.
14 Russell on Arbitration, 24th Edition, pgs. 150 and 152, paragraphs 4-052 and 4-056.
15 ‘International Commercial Arbitration’, 2nd Edition, 2914 @ paragraph 13.04.
Arbitration Petition No. 5 of 2022 & Ors. Page 17 of 69
to a reasonable fee. What is ‘reasonable’ depends on the facts and
on what the national systems prescribe. This includes judicial
assessment of the appropriate amount,16 an aspect which I would
elucidate subsequently. The model law adopted by the UNCITRAL
on International Commercial Arbitration recognises that the
arbitrators must be compensated for their services and this flows
from the contractual relationship between the parties and the
arbitrator, as well as customary practices. The 1976 UNCITRAL
Rules had expressly allowed the arbitrators to determine their own
fee, which should be reasonable, taking into account the sum in
dispute and the complexity of the dispute. Further, the rules require
the arbitrators take into account the schedule of the fee that has
been issued or provided by an appointing authority, if designated
by the parties. The 1976 UNICTRAL rule position was criticised as
granting arbitrators undue authority to determine their
compensation. The revised rules issued in 2010, while continuing
with the substantial role to the arbitrators in deciding the
‘reasonable’ fee, requires the arbitrators to inform the parties as to
how it proposes to determine its fee and expenses promptly after
its constitution. Thereby the process of determining the fee is made
16Julian D.M. Lew , Loukas A. Mistelis , et al., Comparative International Commercial Arbitration,
'Chapter 12 Rights and Duties of Arbitrators and Parties', pp. 2167-2173
Arbitration Petition No. 5 of 2022 & Ors. Page 18 of 69
transparent. The fee set by the arbitrators can be reduced if it is not
reasonable and challenged within the prescribed period by the party
moving to the appointing/designated authority, and in absence of
designated authority, the review is undertaken by the Secretary
General of the Permanent Court of Arbitration.
13. I would now turn my attention to the statutory provisions of the A&C
Act, and would state that my attention has not been drawn to any
provision which expressly or by necessary implication bars an
arbitral tribunal from determining its fee, or to infer that the
prohibition of nemo judex in causa sua (judge in your own cause)
applies to arbitrations in India. Section 517 of the A&C Act states that
in matters governed by Part 1, no judicial authority shall intervene
except when provided in Part 1. Therefore, unless a provision in
Part 1 of the A&C Act confers jurisdiction on the court in respect of
the matter, by inference the subject-matter would fall within the
implied jurisdiction of the arbitral tribunal. Section 2(6) of the A&C
Act states that where Part 1, except for Section 28, leaves the
parties to determine a certain issue, that freedom shall authorise
17
“5. Extent of judicial intervention.—Notwithstanding anything contained in any other law for the
time being in force, in matters governed by this Part, no judicial authority shall intervene except where
so provided in this Part.”
Arbitration Petition No. 5 of 2022 & Ors. Page 19 of 69
any person, including the arbitral tribunal, to determine that issue18
.
Sub-section (2) to Section 1919 states that subject to provisions of
Part 1, the parties are free to agree on the procedure to be followed
by the arbitral tribunal. Sub-section (3) to Section 1920 states that
where the parties fail to reach an agreement, subject to adhering to
the provisions of Part 1, the arbitral tribunal is entitled to conduct
the proceedings in the manner it considers appropriate. It follows
that, where the parties do not agree on the fee, or the court while
appointing an arbitral tribunal does not fix the fee, the arbitral
tribunal by implication is authorised to fix the fee, which should be
reasonable.
14. I would respectfully agree with D.Y. Chandrachud J. that the
process of fixation of fee by the arbitral tribunal should be in
accordance with public policy underlying arbitration, that is, with
agreement and consensus of the parties who bear the cost of
arbitration. The arbitral tribunal should be transparent and disclose
the fee structure and terms of payment at the preliminary stage, so
that an unwilling party can express its unwillingness. No party
18 Section 2(6) reads: “(6) Where this Part, except section 28, leaves the parties free to determine a
certain issue, that freedom shall include the right of the parties to authorise any person including an
institution, to determine that issue.”
19 Section 19(2) reads: “(2) Subject to this Part, the parties are free to agree on the procedure to be
followed by the arbitral tribunal in conducting its proceedings.”
20 Section 19(3) reads: “(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal
may, subject to this Part, conduct the proceedings in the manner it considers appropriate.”
Arbitration Petition No. 5 of 2022 & Ors. Page 20 of 69
should feel compelled to agree and therefore, it is necessary that
the consent of the parties in writing should be taken. This exercise
undertaken at the initial stage would avoid embarrassing situations
and prevent delay and litigation. The suggestion in Sanjeev Kumar
Jain (supra) that the parties before nomination should ascertain the
fee structure from the prospective arbitrators is salutary. At the
same time, I would accept that fee fixation is a matter of the
procedure and relates to conduct of arbitration, and for reasons
supra and as held below, is an obligation as well as a right
conferred on the arbitral tribunal. Therefore, even in cases where
consensus between the parties or with the arbitral tribunal is not
possible, the arbitral tribunal is entitled to fix the professional fee
payable for adjudication, as without fee fixation, except in cases of
pro bono arbitration, the arbitral tribunal would be unable to proceed
further to decide and adjudicate the disputes. It goes without saying
that the fee so fixed should be fair and reasonable.
21
15. I would now proceed to examine the specific provisions which,
according to me, make the legal position clear as they empower an
arbitral tribunal to fix its fee. Sub-section (8) to Section 31,
22 as
21 The term ‘reasonable’ has been used in the explanation to the pre-amended sub-section (8) to
Section 31, and post-amendment Section 31A of the A&C Act, preceding the word ‘costs’. Sub-section
(2) to Section 39 also provides for costs, by way of a sum that the court may consider ‘reasonable’, to
be paid to the arbitral tribunal if, after necessary inquiry, the court thinks it fit.
22 “(8) Unless otherwise agreed by the parties,––
Arbitration Petition No. 5 of 2022 & Ors. Page 21 of 69
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.
23 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.
16. Post enforcement of Act No. 3 of 2016, sub-section (8) to Section
31 states that the cost of arbitration shall be fixed by the arbitral
tribunal in accordance with Section 31A of the A&C Act. Section
31A, as inserted by Act No. 3 of 2016 and applicable with
retrospective effect from 23rd October 2015, reads:
 (a) the costs of an arbitration shall be fixed by the arbitral tribunal;
 (b) the arbitral tribunal shall specify––
(i) the party entitled to costs,
(ii) the party who shall pay the costs,
(iii) the amount of costs or method of determining that amount, and
(iv) the manner in which the costs shall be paid.
 Explanation. ––For the purpose of clause (a), “costs” means reasonable costs relating to––
 (i) the fees and expenses of the arbitrators and witnesses,
 (ii) legal fees and expenses,
 (iii) any administration fees of the institution supervising the arbitration, and
 (iv) any other expenses incurred in connection with the arbitral proceedings and the arbitral award.”
23 See observations in Sanjeev Kumar Jain(supra) referred to in paragraph 4 above.
Arbitration Petition No. 5 of 2022 & Ors. Page 22 of 69
“31A. Regime for costs.––(1) In relation to any
arbitration proceeding or a proceeding under any of the
provisions of this Act pertaining to the arbitration, the
Court or arbitral tribunal, notwithstanding anything
contained in the Code of Civil Procedure,1908 (5 of
1908), shall have the discretion to determine—
(a) whether costs are payable by one party to
another;
(b) the amount of such costs; and
(c) when such costs are to be paid.
Explanation.—For the purpose of this sub-section,
“costs” means reasonable costs relating to—
(i) the fees and expenses of the arbitrators,
 Courts and witnesses;
(ii) legal fees and expenses;
(iii) any administration fees of the institution
 supervising the arbitration; and
(iv) any other expenses incurred in
 connection with the arbitral or Court
 proceedings and the arbitral award.
(2) If the Court or arbitral tribunal decides to make an
order as to payment of costs,—
(a) the general rule is that the unsuccessful party
shall be ordered to pay the costs of the successful
party; or
(b) the Court or arbitral tribunal may make a
different order for reasons to be recorded in writing.
(3) In determining the costs, the Court or arbitral tribunal
shall have regard to all the circumstances, including—
(a) the conduct of all the parties;
(b) whether a party has succeeded partly in the
case;
Arbitration Petition No. 5 of 2022 & Ors. Page 23 of 69
(c) whether the party had made a frivolous counterclaim leading to delay in the disposal of the arbitral
proceedings; and
(d) whether any reasonable offer to settle the
dispute is made by a party and refused by the other
party.
(4) The Court or arbitral tribunal may make any order
under this section including the order that a party shall
pay—
(a) a proportion of another party’s costs;
(b) a stated amount in respect of another party’s
 costs;
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the
 proceedings;
(f) costs relating only to a distinct part of the
 proceedings; and
(g) interest on costs from or until a certain date.
(5) An agreement which has the effect that a party is to
pay the whole or part of the costs of the arbitration in
any event shall be only valid if such agreement is made
after the dispute in question has arisen.”
17. The explanation to sub-section (1) to Section 31A states that, for
the purpose of the sub-section, ‘costs’ means the reasonable costs
relating to the fee and expenses of the arbitrator, the court and the
witnesses. Further, the regime of costs introduced by the insertion
of Section 31A in terms of sub-section (1) is to be given effect
Arbitration Petition No. 5 of 2022 & Ors. Page 24 of 69
notwithstanding anything contained in the Code of Civil Procedure,
1908.
24 Section 31A gives discretion to the arbitral tribunal to
determine – (a) the costs payable by one party to the other; (b)
amount of such costs; and (c) when such costs are to be paid. Subsections (2), (3) and (4) to Section 31A lay down the rules and
principles which the arbitral tribunal should keep in mind while
exercising the discretion to apportion and award costs.
Significantly, sub-section (5) to Section 31A annuls and abrogates
any pre-dispute agreement which has the effect that one party is to
pay the whole or part of the costs of arbitration. In other words, an
agreement between the parties as to ‘payment’ of costs would be
valid only if such agreement is made after the dispute between the
parties has arisen. The object and purpose behind sub-section (5)
to Section 31A is to check the malpractice in standard form
agreements or unequitable contracts whereby the dominating party
could incorporate a clause in the contract or the arbitration
agreement, burdening one of the parties to bear the costs of
arbitration in whole or part. I would not interpret the mandate of subsection (5) to Section 31A as an attempt to trample the freedom to
contract or autonomy of parties. On the other hand, it is a check on
the dominating party from incorporating an unconscionable term
24 Hereinafter referred to as ‘the Code’.
Arbitration Petition No. 5 of 2022 & Ors. Page 25 of 69
that the costs of arbitration would be paid entirely or in part by one
of the parties, and the general rule incorporated in clause (a) to subsection (2) to Section 31A states that unless there is an agreement
between the parties post the disputes, the unsuccessful party shall
be ordered to pay costs to the successful party. In other words
‘costs follow the event.’
18. What is of importance for the decision and issue raised in the
present case is Section 38 of the A&C Act, which reads thus:
“38. Deposits.—(1) The arbitral tribunal may fix the
amount of the deposit or supplementary deposit, as the
case may be, as an advance for the costs referred to in
sub-section (8) of section 31, which it expects will be
incurred in respect of the claim submitted to it:
Provided that where, apart from the claim, a
counter-claim has been submitted to the arbitral
tribunal, it may fix separate amount of deposit for the
claim and counter-claim.
(2) The deposit referred to in sub-section (1) shall be
payable in equal shares by the parties:
Provided that where one party fails to pay his share
of the deposit, the other party may pay that share:
Provided further that where the other party also
does not pay the aforesaid share in respect of the claim
or the counter-claim, the arbitral tribunal may suspend
or terminate the arbitral proceedings in respect of such
claim or counter-claim, as the case may be.
(3) Upon termination of the arbitral proceedings, the
arbitral tribunal shall render an accounting to the parties
of the deposits received and shall return any
Arbitration Petition No. 5 of 2022 & Ors. Page 26 of 69
unexpended balance to the party or parties, as the case
may be.”
Section 38 has not been substituted or amended vide Act No. 3 of
2016. The reference made in Section 38 to sub-section (8) to
Section 31, therefore, cites the said sub-section before its
substitution by Act No. 3 of 2016. Be that as it may, I do not think
that this would make any substantial difference, as post the
substitution, sub-section (8) to Section 31 refers to Section 31A,
which was inserted by Act No.3 of 2016. Sub-section (1) to Section
31A, in fact, is substantially pari materia to the earlier (presubstitution) sub-section (8) to Section 31, except for the portion in
sub-section (8) to Section 31 which gave absolute primacy to the
arbitration agreement. I need not again refer to and interpret subsections (1) and (5) to Section 31A of the A&C Act. Sub-section (1)
to Section 38 empowers the arbitral tribunal to fix the amount of the
deposit or the supplementary deposit, as the case may be, as an
advance for the costs referred to in sub-section (8) to Section 31.
In other words, the arbitral tribunal can ask the parties to deposit
the costs in advance and such deposits towards costs can be
directed on more than one occasion. The expression ‘costs’ in
Section 38 would obviously include the fees and expenses of the
arbitral tribunal. This position is lucid beyond a doubt in view of the
language of the proviso, and vide the language and words of sub-
Arbitration Petition No. 5 of 2022 & Ors. Page 27 of 69
sections (2) and (3) to Section 38. Sub-section (2) states that costs
referred to in sub-section (1) shall be payable by the parties in equal
shares. However, in case one party fails to pay its share of the
deposit, the other party would pay that share. Further, if the other
party also does not pay the aforesaid share in respect of the claim
or the counter-claim, the arbitral tribunal may suspend or terminate
the arbitral proceedings in respect of such claim or counter-claim.
The second proviso to sub-section (2) to Section 38 will have limited
application where the Fourth Schedule applies to the arbitration
proceedings, in which case the fee will be payable not with
reference to the claim or counter-claim, but with reference to the
“sum in dispute”. I will subsequently interpret the expression “sum
in dispute” to mean the aggregate or total amount subject matter of
the disputes before the arbitral tribunal. The effect of sub-section
(2) to Section 38, which has to be read with the limitation
incorporated vide sub-section (5) to Section 31A, is that as a
general rule, the costs, including the fee of the arbitrators, would be
payable in advance and shared equally by the parties. It is not the
sole responsibility of the party raising the claim or counter-claim.
These payments, during the course of the arbitration proceedings,
are treated as advance payments and in terms of sub-section (3) to
Section 38, the arbitral tribunal, upon termination of the arbitration
Arbitration Petition No. 5 of 2022 & Ors. Page 28 of 69
proceedings, must render an account to the parties of the deposits
received. Any unexpended balance is to be returned to the party or
the parties, as the case may be, who had made the payment. The
expression “termination of arbitration proceedings” not only refers
to the termination of the proceedings which takes place under the
second proviso to sub-section (2) to Section 38, but also to the
termination of proceedings on pronouncement/making of the award
in terms of Section 32, as well as under Sections 14 and 15 of the
A&C Act. This is important as we do have cases wherein the
arbitrators resign or recuse without pronouncing an award, but
thereupon they are bound to render an account of the costs,
including the fee paid to them. As per the statutory mandate of subsection (3) to Section 38, the arbitral tribunal must render an
account to the parties of the deposits received upon termination of
the arbitration proceedings.25
19. Sub-section (5) to Section 31A does not apply so as to override an
agreement on the quantum of the fee payable to the arbitrators, as
the said provision only applies where an agreement has the effect
25 Premature termination of arbitrator’s mandate has serious repercussions in form of loss of time,
money, as well as repetition of proceedings, and the delay may lead to additional damages and
interest. By accepting appointment, an arbitrator undertakes to carry out his responsibilities.
Resignations must be for a good cause especially when the proceeding have continued and substantial
time and money has been spent. (see - Julian D.M. Lew, Loukas A. Mistelis, et al., Comparative
International Commercial Arbitration, 'Chapter 12 Rights and Duties of Arbitrators and Parties', pp. 281
– 282)
Arbitration Petition No. 5 of 2022 & Ors. Page 29 of 69
that a party is to pay whole or part of the cost of the arbitration. Subsection (5) deals with the discretion of the arbitral tribunal to
apportion the costs of arbitration, and does not restrict the authority
of the arbitral tribunal to fix the cost of arbitration, including the
quantum of fee payable to it. However, any contractual term fixing
the fee payable to the arbitral tribunal is binding, and cannot be
overridden by the arbitral tribunal.
20. The aforesaid legal exposition is in consonance with the decision of
this Court in National Highways Authority of India v. Gayatri
Jhansi Roadways Limited,
26 wherein a Division Bench of this
Court has held as under:
xx xx xx
11. We have heard the learned counsel for the both the
sides. In our view, Shri Narasimha, learned Senior
Counsel, is right in stating that in the facts of this case,
the fee schedule was, in fact, fixed by the agreement
between the parties. This fee schedule, being based on
an earlier circular of 2004, was now liable to be
amended from time to time in view of the long passage
of time that has ensued between the date of the
agreement and the date of the disputes that have arisen
under the agreement. We, therefore, hold that the fee
schedule that is contained in the Circular dated 1-6-
2017, substituting the earlier fee schedule, will now
operate and the arbitrators will be entitled to charge
their fees in accordance with this schedule and not in
26 (2020) 17 SCC 626
Arbitration Petition No. 5 of 2022 & Ors. Page 30 of 69
accordance with the Fourth Schedule to the Arbitration
Act.
12. We may, however, indicate that the application that
was filed before the High Court to remove the arbitrators
stating that their mandate must terminate, is wholly
disingenuous and would not lie for the simple reason
that an arbitrator does not become de jure unable to
perform his functions if, by an order passed by such
arbitrator(s), all that they have done is to state that, in
point of fact, the agreement does govern the arbitral
fees to be charged, but that they were bound to follow
the Delhi High Court in Gayatri Jhansi Roadways Ltd.
case which clearly mandated that the Fourth Schedule
and not the agreement would govern.
xx xx xx
14. However, the learned Single Judge's conclusion
that the change in language of Section 31(8) read with
Section 31-A which deals only with the costs generally
and not with arbitrator's fees is correct in law. It is true
that the arbitrator's fees may be a component of costs
to be paid but it is a far cry thereafter to state that
Sections 31(8) and 31-A would directly govern
contracts in which a fee structure has already been laid
down. To this extent, the learned Single Judge is
correct. We may also state that the declaration of law
by the learned Single Judge in Gayatri Jhansi
Roadways Ltd. is not a correct view of the law.”
We would, however, explain the mandate as stated in
paragraphs 12 and 14 in this decision.
21. Paragraph 14, as quoted, refers to Section 31(8) read with Section
31A, to state that it deals with costs in general and not with
arbitrator’s fee. This reasoning has to be read with my
interpretation, which refers to and takes into account Section 38 of
Arbitration Petition No. 5 of 2022 & Ors. Page 31 of 69
the A&C Act. In my opinion, arbitrator’s fee, being a component of
cost, can be fixed by the arbitral tribunal when it is not already
predetermined by way of an agreement between the parties, or by
a court order. This is because the arbitral tribunal has the power to
fix and direct the parties to make payment of deposits in advance
and during the course of the arbitration proceedings, subject to the
arbitral tribunal rendering an account on termination of the
arbitration proceedings. In Gayatri Jhansi Roadways Limited
(supra), there was an agreement between the parties on the
quantum of fee payable to the arbitral tribunal, and in this context
the Division Bench has observed that Sections 31(8) and 31A
would not directly govern the contracts in which the fee structure
has been laid down.
22. Paragraph 12 of the judgment is of utmost significance as it
interprets and holds that the dispute as to the payment of fee does
not result in termination of proceedings under clause (a) to subsection (1) to Section 14 of the A&C Act. If one or both the parties
fail to deposit the arbitration costs, including the arbitrator’s fee, the
mandate of the arbitrator is not terminated because he has become
de jure or de facto unable to perform his functions as under Section
14(1)(a). On the other hand, in such situations, the two provisos to
sub-section (2) to Section 38 come into play. Where one of the
Arbitration Petition No. 5 of 2022 & Ors. Page 32 of 69
parties fails to pay its share of the deposit, it is open to the other
party to pay that share. However, if the other party also does not
pay the share, the arbitral tribunal is entitled to terminate or
suspend the arbitration proceedings.27 This legal position also takes
care of the argument raised by some counsels that the arbitration
proceedings should be treated as terminated, where in the absence
of any written agreement, the fee fixed by the arbitrator is
unacceptable to a party on the ground that it is too high or even for
the reason that they are unable to pay or bear the financial burden
of the said fee, and such cases are to be treated as ‘de jure’
impossibility covered under Section 14(1)(a) of the A&C Act. This
argument would be contrary to and unacceptable in view of the two
provisos to sub-section (2) to Section 38. In all fairness, it must be
stated that Mr. K.K. Venugopal, learned Attorney General for India,
had accepted this legal position, and I quote… “[t]his of course
would indicate that no ground of bias can be raised if the arbitrator
directs one party to pay the fee payable by the party, in case the
27 The International Arbitration Rulebook: A Guide to Arbitral Regimes published by Kluwer Arbitration
in Chapter 8: Costs and Fees observes that the arbitrators and arbitration institutions have to be paid
for their services and reimbursed for the expenses incurred for fulfilling their duties. Each party is to
pay equal proportion of costs in advance. Further the parties are jointly and severally liable, and if one
party fails to pay, the other party will be invited to pay that share of costs in addition to its own. If the
fees are not paid, as a general matter, it is quite possible that the arbitration may not proceed.
Arbitration Petition No. 5 of 2022 & Ors. Page 33 of 69
other party is not prepared to pay the fee. No question of bias would
arise”.
28
23. 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 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.
24. The pre-amended sub-section (8) to Section 31 and postamendment Section 31A and Section 38 of the A&C Act, use the
28 Petitioner’s submission in rejoinder in Arbitration Case (C) No. 5 of 2022 filed by Mr. Gunnam
Venkateswara Rao, Advocate.
Arbitration Petition No. 5 of 2022 & Ors. Page 34 of 69
expression ‘costs’, albeit they also refer to fee and expenses of the
arbitrator/tribunal. The sections are, therefore, comprehensive and
all-embracing provisions that equally empower and authorise the
arbitral tribunal to fix the fee in the absence of any agreement
between the parties or a court order fixing the fee payable to the
arbitral tribunal. Any other interpretation would make the A&C Act
unworkable and Sections 31A, 38 and 39 superfluous. These
provisions must be given their full intended effect and they are not
supererogatory in nature. The sections should not be read as
unnecessary when they refer to arbitration fee. Notably, arbitral
tribunals, since time immemorial, have been fixing arbitration fee,
and the legislature has not intervened or barred them from doing so
even by the amendments made vide Act No. 3 of 2016. Additionally,
there is no provision in the A&C Act which states that the parties
can move the court for fixation of fee of the arbitral tribunal when
the arbitration agreement is silent or the parties are unable to agree
on the quantum of fee or where the court, while making reference,
has not fixed the fee and has left it to the arbitral tribunal to decide
upon its own fee. To hold to the contrary would create chaos and
invalidate a number of orders passed by the High Courts and even
this Court, which leave it open for the arbitral tribunal to fix its own
fee.
Arbitration Petition No. 5 of 2022 & Ors. Page 35 of 69
25. ‘Redfern and Hunter on International Arbitration’,
29 referring to the
expression ‘costs’, has divided the same into three categories,
namely: (i) costs of the tribunal, which include charges for
administration of arbitration; (ii) costs of arbitration, which includes
hiring of rooms, transcript writers, amongst other things; and (iii)
costs of the parties, which includes costs of legal representatives
and expert witnesses, amongst other things; to observe that all
three elements would include the fee of the arbitral tribunal. The
expression ‘costs’, therefore, is comprehensive and broad to
include fee and expenses of the arbitral tribunal. Russell
30 observes
that the arbitral tribunal may make an order for costs on such basis
as it thinks fit. Under the same heading, he observes that normally
the tribunal or the appointing authority will determine the tribunal’s
fee and expenses, which would be recovered in and be a part of
the award. However, when there is a question about the fee and
expenses of the tribunal being reasonable and appropriate, the
court, in terms of Section 28(2) of the English Arbitration Act, 1996,
and also while exercising power under Section 63(4) of the
aforesaid Act, can examine the said question. The court can also
29 Redfern and Hunter on International Arbitration, Oxford University Press, 6th Edn., 2015, pg. 532-
537.
30 Russell on Arbitration, 24th Edition, pg. 461, paragraphs 7-217 to 7-222, under the heading
‘Determination of the recovery of costs of the arbitration’.
Arbitration Petition No. 5 of 2022 & Ors. Page 36 of 69
examine the said question on an application by any of the parties
under Section 64(2) of the English Arbitration Act, 1996. For our
purposes, it is relevant to state that Section 6331 deals with recovery
of costs of arbitration and does not per se deal with the fee payable
to the arbitral tribunal, nevertheless arbitration fee being a subset
and a part of costs, can be made subject-matter of proceedings
under Sections 63/64 of the English Arbitration Act,1996.
26. Professor Sundra Rajoo has elaborately examined the question of
arbitrator’s remuneration to observe that it consists of sums due to
him in respect of his professional fee and expenses. Such
remuneration is also known as the ‘cost of the award’, that is, the
fee and expenses of the arbitrator or umpire, though the term ‘fee’
must be distinguished from the cost of the reference, that is, the
legal cost incurred by the parties.32 Reference is made by him to
Tackaberry and Marriott33
, who have summarised the ratio in K/S
Norjarl A/S v. Hyundai Heavy Industries Co. Ltd.34
 as under:
31 The recoverable costs of the arbitration. 63 (1) – xxxx; (2) xxxx; (3) The tribunal may determine
by award the recoverable costs of the arbitration on such basis as it thinks fit. If it does so, it shall
specify – (a) the basis on which it has acted, and (b) the items of recoverable costs and the amount
referable to each; xxxx.
32 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.
33 Tackaberry, and Marriott, Bernstein’s Handbook of Arbitration and Dispute Resolution Practice (4th
Edn., 2003) at pg. 2-358
34 (1991) 3 All ER 211
Arbitration Petition No. 5 of 2022 & Ors. Page 37 of 69
(1) An arbitrator who accepts appointment with or without any
stipulation as to fees thereby enters into a trilateral agreement
with the parties.
(2) By that agreement the arbitrator assumes the status of a quasijudicial adjudicator with all the duties and disabilities inherent
in that status.
(3) Amongst those disabilities is an inability to deal unilaterally with
one person for a personal benefit.
(4) It follows that an arbitrator who has accepted appointment on
a particular basis as to the amount and payment of his fees,
which may include a stipulation as to payment in advance or a
commitment fee, cannot, thereafter, alter the basis of his
remuneration unless all parties agree.
(5) An arbitrator who has accepted appointment without stipulation
as to fees is entitled to a reasonable fee to be taxed, by him or
by the court, at the conclusion of the arbitration, and cannot
thereafter make any special agreement or arrangement about
his fees unless all parties to the reference concur in it.
(6) So the arbitrator may not enter into any fee agreement or
arrangement with a party to which any other party objects.
(7) These propositions apply to a sole arbitrator, a party-appointed
arbitrator, an umpire, a chairman or a third arbitrator.
Arbitration Petition No. 5 of 2022 & Ors. Page 38 of 69
The points (1) to (5) set out the correct position. However, as
far as point (5) is concerned, in the context of the statutory
provisions of the A&C Act, it should be understood that where an
arbitrator has accepted appointment without any stipulation as to
the fee, he is entitled to reasonable fee as an implied term of the
contract of appointment or on the principle of quantum merit. Point
(6) should be read with the mandate of Section 38 of the A&C Act
as examined above. In this background, and in the context of
statutory provisions of the A&C Act, I believe that the suggestion in
Sanjeev Kumar Jain (supra), and as proposed by Mr. Huzefa
Ahmedi, Senior Advocate, who was appointed by this Court as
amicus curiae, and as held by brother D.Y. Chandrachud J., the
arbitral tribunal should, at the very outset or during the preliminary
hearings, with mutual consent of the parties and by a written
agreement fix the fee, which once fixed should remain binding and
should not be revised, has merit. There cannot be any unilateral
deviation from the terms of fee as agreed, which terms not only bind
the parties, but the arbitral tribunal as well. Any deviation,
amendment, or modification can only be by a written agreement
with the consent of all parties to the litigation.
Arbitration Petition No. 5 of 2022 & Ors. Page 39 of 69
27. In the context of the situation where the arbitrator and the parties
are unable to agree on the remuneration to be paid to the arbitral
tribunal, and the arbitral tribunal fixes the fee payable, I would like
to refer to Section 39 of the A&C Act which reads thus:
“39. Lien on arbitral award and deposits as to
costs.—(1) Subject to the provisions of sub-section (2)
and to any provision to the contrary in the arbitration
agreement, the arbitral tribunal shall have a lien on the
arbitral award for any unpaid costs of the arbitration.
(2) If in any case an arbitral tribunal refuses to deliver
its award except on payment of the costs demanded by
it, the Court may, on an application in this behalf, order
that the arbitral tribunal shall deliver the arbitral award
to the applicant on payment into Court by the applicant
of the costs demanded, and shall, after such inquiry, if
any, as it thinks fit, further order that out of the money
so paid into Court there shall be paid to the arbitral
tribunal by way of costs such sum as the Court may
consider reasonable and that the balance of the money,
if any, shall be refunded to the applicant.
(3) An application under sub-section (2) may be made
by any party unless the fees demanded have been fixed
by written agreement between him and the arbitral
tribunal, and the arbitral tribunal shall be entitled to
appear and be heard on any such application.
(4) The Court may make such orders as it thinks fit
respecting the costs of the arbitration where any
question arises respecting such costs and the arbitral
award contains no sufficient provision concerning
them.”
Section 39 is a part of Chapter X, which is a miscellaneous
chapter. Sub-section (1) to Section 39 states that the arbitral
tribunal shall have lien over the arbitral award for any unpaid costs
of arbitration. This lien is subject to provisions of sub-section (2) to
Section 39, which states that where an arbitral tribunal refuses to
Arbitration Petition No. 5 of 2022 & Ors. Page 40 of 69
deliver an award except on payment of costs demanded by it, the
party may make an application to a court for an order that the
arbitral tribunal should deliver the arbitral award to the party. The
court thereupon is required to conduct an inquiry and may, if it
deems proper, direct the party to deposit the costs in the court for
delivery of the award to the party. After the inquiry, the court can
pass orders for payment of costs to the arbitral tribunal as the court
may consider reasonable. In case any deposit has been made by
the party, the same would abide by the decision of the court. If extra
payment has been made, the same shall be refunded to the party.
28. Sub-section (3) to Section 39 states that an application under subsection (2) may be made by ‘any party’ unless the fee35 demanded
has been fixed by a written agreement between him and the arbitral
tribunal. Further, the arbitral tribunal is entitled to appear and be
heard when an application is made under sub-section (2) to Section
39. In other words, where there is a written agreement between the
arbitral tribunal and a party on the aspect of the payable fee, the
party cannot file any application under sub-section (3) to Section 39
of the A&C Act. This is significant as it bars and prohibits a party to
challenge the fee to be paid to the arbitral tribunal, once it has
35 Sub-section (3) to Section 39 expressly uses the words “the fees demanded…”, which can be
contrasted with the word ‘cost’, which is a more comprehensive and includes fee.
Arbitration Petition No. 5 of 2022 & Ors. Page 41 of 69
agreed to it in writing. The object and purpose is to impede such
party from raising any objection to fixation of fee or costs during the
course of the arbitration proceedings or after the award is made.
The agreement between the parties or with the arbitral tribunal in
writing as to the quantum of fee payable to the arbitral tribunal binds
the parties.
29. Sub-section (3) to Section 39 of the A&C Act is ambiguous and
requires interpretation to effectuate the legislative object and intent.
Sub-sections (1) and (2) to Section 39, as noticed, particularly deal
with cases where the arbitral tribunal does not deliver the award
and claims a lien for the unpaid costs of arbitration, in which event
the aggrieved party can move an application for an order directing
the arbitral tribunal to deliver the award to the applicant. Such party
is required to make payment into the court of the costs demanded,
whereupon the court conducts an inquiry, if any, as it thinks fit and
thereupon passes an order as to the money to be paid from the
amount deposited with the arbitral tribunal towards costs. The
amount determined by the court should be reasonable. Balance
money, if any, is to be refunded to the applicant. Sub-section (3),
on the other hand, empowers ‘any party’ to move an application
before the court under sub-section (2), provided the ‘fee’ demanded
has not been fixed under a written agreement between him and the
Arbitration Petition No. 5 of 2022 & Ors. Page 42 of 69
arbitral tribunal. In my opinion, sub-section (3) to Section 39 of the
A&C Act confers a right on ‘any party’ to move to the court if he has
discontent with the ‘fee’ fixed by the arbitral tribunal, unless he has
already agreed to the ‘fee’ in a written agreement. Sub-section (3)
is, therefore, independent and will apply even in situations not
covered by sub-section (2), where the arbitral tribunal refuses to
deliver the award to the applicant, except on payment of costs as
demanded. No doubt, sub-section (3) to Section 39 refers to subsection (2) thereof, but the said reference is in the context of the
inquiry which the court has to conduct to determine the reasonable
quantum of the ‘fee’ that should be paid/is payable to the arbitral
tribunal. In terms of sub-section (3) to Section 39, the arbitral
tribunal, in such event, is entitled to appear and be heard on such
application. The above interpretation should be accepted for two
reasons: (a) sub-section (3) to Section 39 is an independent
provision and cannot be treated as a superfluous or redundant
provision applicable in circumstances where sub-sections (1) and
(2) to Section 39 are applicable; and (b) it would effectuate the
legislative intent and object to ensure that any party can approach
the court in case there is a dispute with regard to fixation of ‘fee’ by
the arbitral tribunal before an award is made. I do not find any good
ground and reason to hold that the legislative intent is to prevent a
Arbitration Petition No. 5 of 2022 & Ors. Page 43 of 69
party from approaching the court on ‘fee fixation’ by the
arbitrator/tribunal till an award is made. This power/right of any
party to approach the court against the ‘fee fixation’ by the arbitral
tribunal is notwithstanding Section 38 of the A&C Act, for the simple
reason that a party may feel aggrieved and may not want to
participate in the arbitration proceedings for want of high costs
which it can ill-afford to pay or would be compelled to pay in spite
of its weak financial condition, as failure to pay the ‘fee’ to the
arbitral tribunal may have negative consequences.
30. Sub-section (4) to Section 39 empowers the court to make such
orders as it thinks fit respecting the costs of arbitration where a
question arises respecting such costs and the arbitral award
contains no sufficient provision concerning them. The power
conferred under sub-section (4) to Section 39 is, therefore, wide
and can even apply post the award, when the award itself contains
no sufficient direction concerning the costs. Thus, in my opinion,
sub-sections (2) and (3) to Section 39 are independent provisions,
and the latter sub-section can be invoked whenever a party does
not agree to the ‘fee’ fixed by the arbitral tribunal in a situation where
the ‘fee’ is not fixed by a written agreement. Section 39(3) applies
when both parties or one of the parties does not agree to the ‘fee’
fixed by the arbitral tribunal.
Arbitration Petition No. 5 of 2022 & Ors. Page 44 of 69
What is ‘fair and reasonable fee’?
31. I have held that in the absence of any agreement or court order, the
arbitral tribunal is entitled to fix ‘fair and reasonable remuneration’.
Fixation of fee by an arbitrator is a delicate matter as he is then
determining the fee which he is entitled to command having regard
to: (i) complexity of the disputes; (ii) difficulty or novelty of the
questions involved; (iii) the skill, specialized knowledge and
responsibility of the arbitral tribunal; (iv) number and importance of
documents to be studied; (v) value of the property involved or the
amount or the sum in issue; and (vi) importance of the dispute to
the parties.36 Professor Sundra Rajoo37 has observed that
experienced and qualified arbitrators are accustomed to receiving
fees at least equivalent to the upper end of the fee charged for their
profession in their home jurisdiction. If the fee structure is too low,
it may be difficult to procure the services of appropriately qualified
arbitrators. Even if they do, they may not be willing to dictate the
amount of time required to resolve the case. Therefore, the
arbitrators must openly, and in a transparent manner, state the fee
that they would like to charge so as to avoid embarrassing
allegations and disagreements. This should be done before
36 Mustill and Boyd, The Law and Practice of Commercial Arbitration in England, (2nd Edn., 1989) at
p.236.
37 Datuk Professor Sundra Rajoo, Law, Practice and Procedure of Arbitration (Second Edition), 2016.
Arbitration Petition No. 5 of 2022 & Ors. Page 45 of 69
acceptance of appointment or at the very commencement of the
arbitration process. The arbitrators are conscious of the role they
perform as adjudicators, which is very different from and cannot be
equated with advocates. While it is possible to choose and change
an advocate keeping in view one’s pocket, an arbitrator once
appointed stands on a different footing. When an arbitral tribunal
has been duly constituted, either party, irrespective of the fact
whether they can afford the fee or not, is unlikely to displease the
arbitral tribunal stating that the fee fixed is not reasonable.38 At the
same-time, any challenge to the arbitrator’s fee by those who are
willingly paying similar professional fee to those who argue for them
before the arbitrator would be discordant.39 To avoid any
controversy and litigation, the fee structure fixed in the Fourth
Schedule, or by the respective High Courts, when adopted by the
arbitral tribunal, in my opinion should be considered as ‘fair and
reasonable’. The court would not permit a party to question the fee
if it is in terms of the Fourth Schedule, or the rules framed by the
High Court. I, therefore, albeit for different grounds and reasons,
38 The high fee charged by senior advocates has been the subject matter of several articles, including
the write-up ‘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. The latter article, in fact, refers to several quotations by leading
advocates who have acknowledged the problem.
39 High cost of litigation has grave implications and consequences, a concern which must engage the
attention of the senior members of the Bar.
Arbitration Petition No. 5 of 2022 & Ors. Page 46 of 69
concur with the observations made in paragraph 105 by my brother
D.Y. Chandrachud, J.
Situation post enforcement of Act No. 33 of 2019: Effect of the
proviso to sub-section (3A) to Section 11 of the Arbitration and
Conciliation Act, 1996.
32. Sub-section (3A) to Section 11 states that the Supreme Court and
the High Courts shall have the power to designate arbitral
institutions from time to time, which institutions have been graded
by the Council under Section 43-I of the A&C Act. In the absence
of any designation and gradation, the sub-section (3A) to Section
11 is not effectively and de-facto enforced. However, the first
proviso would be applicable as it applies in respect of those High
Courts’ jurisdiction where no graded arbitral institution is available.
In such cases, the Chief Justice of the concerned High Court may
maintain a panel of arbitrators in discharging the functions and
duties of an arbitral institution. Further, reference to the arbitrator is
deemed to be an arbitral institution for the purpose of Section 11
and the arbitrator is entitled to such fee as the rates specify in the
Fourth Schedule. In other words, the Fourth Schedule is binding.
Sub-section (14) to Section 11 states that the arbitral institution
shall determine the fee of the arbitral tribunal and the manner of
payment to the arbitral tribunal, subject to the rates specified in the
Fourth Schedule. When we read the first proviso to sub-section
Arbitration Petition No. 5 of 2022 & Ors. Page 47 of 69
(3A) to Section 11 and sub-section (14) to Section 11 together and
in a harmonious manner, it is lucid that the rate of fee specified in
the Fourth Schedule is obligatory. The expression ‘the rate’
specified in the Fourth Schedule refers to the fee mentioned in the
Forth Schedule and Section 11(14), when it uses the expression
“subject to the Fourth Schedule”, it requires that the fee cannot
exceed the fee fixed in the schedule, albeit may be lower than the
figure mentioned in the schedule.
33. Therefore, post enforcement of Act No. 33 of 2019 in terms of the
proviso to sub-section (3A) to Section 11, which applies to ad hoc
arbitrations, the fee structure fixed by the Fourth Schedule is
imperative and binding. In the case of institutional arbitrations, the
fee structure should be fixed in terms of the Fourth Schedule.
However, both sub-sections (3A) and (14) to Section 11 of the A&C
Act do not bar the arbitral tribunal, or the arbitral institution, from
fixing fee which is lower than the Fourth Schedule.
Power of the arbitral tribunal to direct advance deposit of costs,
including supplementary costs, under Section 38 of the Arbitration
and Conciliation Act, 1996:
34. I am conscious that the aforesaid determination on the
remuneration/ fee payable to the arbitral tribunal may lead to
difficulty, especially in cases where one party deliberately delays
Arbitration Petition No. 5 of 2022 & Ors. Page 48 of 69
and prolongs the proceedings, as a result of which, a number of
hearings are required to be held. In such situations, the arbitral
tribunal is entitled to take recourse to Section 38 of the A&C Act
and call upon the party to make supplementary deposits in the form
of costs of arbitration, which, while not including any
‘supplementary’ fee payable to the arbitral tribunal, would mean the
‘cost incurred by the parties’ payable in terms of Section 31A of the
A&C Act. Of course, the deposit would finally abide by the directions
given in the award on payment of costs. The power and authority
given to the arbitral tribunal to direct the parties or a party to make
advance deposit of costs, including supplementary costs, remains,
and has not been limited or obliterated by Act No. 33 of 2019.
Summary
35. It will now 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.
Arbitration Petition No. 5 of 2022 & Ors. Page 49 of 69
(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 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
Arbitration Petition No. 5 of 2022 & Ors. Page 50 of 69
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.
Interpretation of the Fourth Schedule
36. The Fourth Schedule was introduced vide Act No. 3 of 2016 with
retrospective effect from 23rd October 2015 and reads:
THE FOURTH SCHEDULE
[See section 11(3A)]
Sl. No.
(1)
Sum in dispute
(2)
Model fee
(3)
1. Upto Rs. 5,00,000 Rs.45,000
2. Above Rs. 5,00,000 and
upto Rs. 20,00,000
Rs. 45,000 plus 3.5 per cent. of the
claim amount over and above Rs.
5,00,000
3. Above Rs. 20,00,000 and
upto Rs. 1,00,00,000
Rs. 97,500 plus 3 per cent. of the
claim amount over and above Rs.
20,00,000
Arbitration Petition No. 5 of 2022 & Ors. Page 51 of 69
4. Above Rs. 1,00,00,000 and
upto Rs. 10,00,00,000
Rs. 3,37,500 plus 1per cent.of the
claim amount over and above Rs.
1,00,00,000
5. Above Rs. 10,00,00,000
and upto Rs. 20,00,00,000
Rs. 12,37,500 plus 0.75 per cent.of
the claim amount over and above
Rs. 1,00,00,000
6. Above Rs. 20,00,00,000 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
The Fourth Schedule, post substitution by Act No. 33 of 2019, refers
to Section 11(3A), instead Section 11(14) of the A&C Act.
37. The three aspects of the Fourth Schedule which require
interpretation are: (a) whether the expression ‘sum in dispute’ refers
to the aggregate of the claim and the counter-claim, or the fee
payable as per the schedule has to be separately computed for the
claim(s) and counter-claim(s) without aggregating them; (b) do the
words in Serial No.6 - “Rs.19,87,500/- plus 0.5% of the claim
amount over and above Rs.20,00,000/- with the ceiling of
Rs.30,00,000/-” mean Rs.19,87,500/- plus 0.5% of the total claims,
subject to the ceiling of Rs.30,00,000/-, or the maximum fee
payable is Rs.30,00,000/- plus Rs.19,87,500/-, that is,
Rs.49,87,500/-; and (c) whether the fee prescribed in the Fourth
Schedule is cumulative for the three-member arbitral tribunal, to be
shared/divided between the three members, or the fee prescribed
is for each individual member of the three member arbitral tribunal.
Arbitration Petition No. 5 of 2022 & Ors. Page 52 of 69
Interpretation of the expression “sum in dispute”
38. The expression “sum in dispute” does not refer to a claim or a
counter-claim. The word ‘sum’ means the whole, aggregate or the
total amount. Thus, the legislature has deliberately and consciously
avoided a separate reference to the amounts stated either in the
claim or the counter-claim. The “sum in dispute” refers to the total
amount subject matter before the arbitral tribunal, which is to be
adjudicated upon. Thus, it would be correct to state that the
language and the words “sum in dispute” are an intended and a
calculated departure, as the words ‘claim’ and ‘counter-claim’ do
find specific mention in Section 23(2A), which states that the
respondent in support of his case may also submit a counter-claim
or plead a set-off which shall be adjudicated by the arbitral tribunal
if such counter-claim or set-off falls within the scope of the
arbitration agreement. 40 Similarly, Section 2(9) states that for the
purpose of Part 1, except in the case of Section 25(a) and Section
32(2)(a), reference to a claim shall also apply to a counter-claim,
and where it refers to defence, it shall also apply to defence to that
40 Inserted vide Act No. 3 of 2016 with retrospective effect from 23rd October 2015. Even before the
insertion, the position in law was the same.
Arbitration Petition No. 5 of 2022 & Ors. Page 53 of 69
counter-claim. Likewise, proviso to Section 38(1)41 states that
where, apart from the claim, a counter-claim has been submitted to
the arbitral tribunal, it may fix a separate amount of deposit for the
claim or the counter-claim. Notwithstanding the provisions, the
legislature, while enacting the Fourth Schedule, though cognizant
of the difference between claim and counter claim/set-off,
eschewed any separate reference to the amount prayed in the
claim(s) or counter-claim(s)/set-off. The Fourth Schedule does not
treat them as separate for computing the fee payable to the arbitral
tribunal. On the other hand, the expression “sum in dispute” before
the arbitral tribunal has been made the basis for computation of fee.
39. The legislature is presumed to know the prior construction of the
terms in the original act, and an amendment substituting the new
term or phrase for the one previously construed indicates that the
judicial or executive construction of the former terms or phrases did
not correspond with the legislative intent and a different
interpretation must be given to the new term or phrase. Thus, in
41 38. Deposits.– (1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit,
as the case may be, as an advance for the costs referred to in sub-section (8) of section 31, where it
expects will be incurred in respect of the claim submitted to it;
Provided that where, apart from the claim, a counter-claim has been submitted to the arbitral
tribunal, it may fix separate amount of deposit for the claim and counter-claim.
xx xx xx
Arbitration Petition No. 5 of 2022 & Ors. Page 54 of 69
interpreting an amendatory act, there is a presumption of change in
legal rights. A change in phraseology creates a presumption that
the legislature intended a change in meaning. Conversely, when
words used in the original statute are used in the reenacted/amendatory act, they should be presumed to be used in
the same sense in the new statute or amendatory act.42
40. Further, while interpreting a provision in an amendatory act, an
additional principle of construction is to examine the object of the
amendatory act to determine the legislative intent. For this purpose,
the court should give effect to every word, and in case of ambiguity,
refer to the surrounding circumstances in the form of legislative
proceedings and reports of the legislative committees concerning
the amendments.43 Statutes in pari materia may also be resorted to
for assistance.44
41. In the context of the Fourth Schedule, for clarification and
affirmation, it would be most appropriate if reference is made to the
246th Report of the Law Commission of India. The Law
Commission, while recommending a model schedule of fee45
, had
42 Earl T. Crawford, The Construction of Statutes, 3rd Edition, pp. 617 and 619
43 J. G. Sutherland, Statutes and Statutory Construction, 3rd Edition, Vol.3, pp. 410-412
44 Earl T. Crawford, The Construction of Statutes, 3rd Edition, pp. 616-617
45
“10. One of the main complaints against arbitration in India, especially ad hoc
arbitration, is the high costs associated with the same – including the arbitrary,
unilateral and disproportionate fixation of fees by several arbitrators. The commission
Arbitration Petition No. 5 of 2022 & Ors. Page 55 of 69
stated that the schedule was based on the fee schedule set by the
Delhi High Court International Arbitration Centre. The schedule in
the Delhi International Arbitration Centre (Administrative Cost &
Arbitrators’ Fees) Rules uses the identical expression, “sum in
dispute”, and provides cumulative fee of both the claim and the
counter-claim. Accordingly, the expression “sum in dispute”
borrowed from the Delhi High Court International Arbitration Centre,
should be given an identical construction as referring to the entire
amount or the sum total of the disputes which are subject matter of
the arbitration, that is, the disputes raised in the claim petition as
well as the counter-claim. Separate fee for the claim and counterclaim/ set off is not envisaged and postulated.
42. One of the objectives of the A&C Act is to ensure cohesion of the
remedy. Sections 2(9) and 23(2-A) incorporate the rule against
fragmentation of remedies and nothing more. This is a marked and
deliberate departure from the earlier Arbitration Act, 1940 wherein
believes that if arbitration is really to become a cost-effective solution for dispute
resolution in the domestic context, there should be some mechanism to rationalize
the fee structure for arbitrations.
11. In order to provide a workable solution to this problem, the Commission has
recommended a model schedule of fees and has empowered the High Court to frame
appropriate rules for fixation of fees for arbitrators and for which purpose it may take
the said model schedule of fees into account. The model schedule of fees are based
on the fee schedule set by the Delhi High Court International Arbitration Centre, which
are over 5 years old, and which have been suitably revised. The schedule of fees
would require regular updating, and must be reviewed every 3-4 years to ensure that
they continue to stay realistic.”
Arbitration Petition No. 5 of 2022 & Ors. Page 56 of 69
an arbitrator’s jurisdiction was confined to the disputes referred to
him by way of an order of reference. The arbitrator could not enlarge
the scope of reference and entertain fresh claims or even a counterclaim/set-off without a fresh order of reference.46
43. The argument that a counter-claim and set-off should be treated as
separate, as adjudication of the claim and counter-claim are distinct
and treated differently under the A&C Act and the Code, and entail
separate adjudication, though an attractive argument at the first
blush, overlooks the legal position that the counter-claim and setoff raised before an arbitral tribunal must fall within the scope of the
arbitration agreement, which is the subject matter and basis of any
claim in the arbitration proceedings. A counter-claim can only be
filed before an arbitral tribunal, if it is covered and governed by the
arbitration agreement relied upon by the claimant, and not in
respect of the cause of action not covered by the subject matter of
the arbitration agreement. Necessarily, therefore, there would be a
connect between the claim and the counter-claim/set-off. A set-off
is a defence to the action and claims made by the claimant, which
may be both legal and equitable. Equitable set-offs are not
recognised under Order VIII Rule 6 of the Code but are permitted
46 See Section 20 of the Arbitration Act, 1940. Refer to Orissa Mining Corporation Ltd. v. Prannath,
(1997) 3 SCC 535.
Arbitration Petition No. 5 of 2022 & Ors. Page 57 of 69
to be raised by the defendant as the Code is not exhaustive.
However, equitable set-offs must arise out of the same transaction
or one that is so connected that they may be looked upon as part
of the same transaction. Counter-claim, on the other hand, is
regarded as a cross-action. When a counter-claim is not connected
with the claim in the suit, the Court, in exercise of power under Rule
6(c) to Order VIII of the Code, can direct that such counter-claim
may be excluded and tried as an independent suit.
44. Arbitral tribunal derives its jurisdiction from Section 7 of the A&C
Act, which extends to “all or certain disputes which have arisen or
which may arise between them in respect of a defined legal
relationship, whether contractual or not”. As stated above, the A&C
Act does not contemplate separate jurisdictions for arbitral tribunal
on the basis of number or nature of claims, and, therefore, does not
afford to the tribunal the liberty to treat claim and counter-claim
separately. Commentary on the UNCITRAL Model Law on
International Commercial Arbitration47 observes that when two or
more parties have entered into an agreement to arbitrate, any of
them normally has a power to commence arbitral proceedings. It is
a common practice that more than one party put forth their claims
47 Authored by Ilias Bantekas, Pietro Ortolani, Shahla Ali, Manuel A. Gomez and Michael Polkinghorne;
published by the Cambridge University Press.
Arbitration Petition No. 5 of 2022 & Ors. Page 58 of 69
in same arbitration. The labels that are appended to these claims
presented by opposing parties, namely, the claim or counter-claim,
are nothing more than an acknowledgement of the chronological
order in which actions have been brought in the arbitration, and they
do not entail any type of structural differentiation. It is for this reason
that clarification is offered by Article 2(f) of the UNCITRAL Model
Law which states that claim also applies to counter-claim and
whenever it refers to defence, it also applies to a defence to a
counter-claim. As noticed above, these facets of the UNCITRAL
Model Law have been incorporated in the A&C Act. A reading of
the rules published by the High Courts of Delhi, Bombay, Madhya
Pradesh, Karnataka, Rajasthan and Madras indicate that they, in
unison, have stated that the sum in dispute or the arbitrator’s fee
shall be calculated on the aggregate of the claim and the counterclaim. The fee is not to be calculated independently, first with
reference to the claim and then the counter-claim. This is also
postulated in the rules framed by the Indian Council of Arbitration
Rules of Domestic Commercial Arbitration, Mumbai Centre for
International Arbitration, and Construction Industry Arbitration
Council. Our attention has also been drawn to the rules framed by
the Singapore International Arbitration Centre, Hong Kong
International Arbitration Centre, Stockholm Chamber of Commerce
Arbitration Petition No. 5 of 2022 & Ors. Page 59 of 69
Arbitration, and European Court of Arbitration, which stipulate that
for the purpose of fee, the amount in dispute would be the total of
the claim and the counter-claim, that is, the aggregate value of all
the claims, counter-claims and set-offs. If we have to accept the
contra-stand, the rules framed by the several High Courts, as noted
above, would have to be re-drawn, and the unsettlement would
cause confusion, especially in pending matters. This must be
avoided.
45. We have interpreted Section 38 of the A&C Act. Suffice at this stage
is to again observe that the proviso to sub-section (1) to Section 38
applies only when the arbitral tribunal is entitled to a separate fee
for the claim and counter-claim. It would not apply where the Fourth
Schedule applies, in which event the arbitral tribunal is entitled to
the fee as per the schedule, which is the cumulative figure on
adding the claims and the counter-claims. Notably, sub-section (2)
to Section 38 states that the deposit in terms of sub-section (1) shall
be payable in equal share by the parties. Section 38 is a part of the
original enactment, whereas the Fourth Schedule was inserted vide
Act No. 3 of 2016. While we have to harmoniously construe Section
38 with the Fourth Schedule, we must give effect to the legislative
intent in furtherance of the object and purpose of introducing the
Fourth Schedule, an aspect I have adverted to earlier. This Court
Arbitration Petition No. 5 of 2022 & Ors. Page 60 of 69
in Aphali Pharmaceuticals Ltd. v. State of Maharashtra & Ors.48
had referred to the Schedule to the Medicinal and Toilet
Preparations (Excise Duties) Act, 1955 and observed that a
schedule is a mere question of drafting and can be used to construe
the provisions in the body of the Act, albeit the expressions in the
schedule cannot control or prevail against the express enactment,
and in case of any inconsistency between the schedule and the
enactment, the enactment shall prevail. These observations would
not be applicable in the context of the present case, as the Fourth
Schedule is not in conflict with the express enactment. The Fourth
Schedule prescribes the quantum/scale of fee, whereas Section 38
does not prescribe the quantum or the formula for computing the
fee. Section 38 and the Fourth Schedule can be construed
harmoniously without one contradicting or being inconsistent with
the other. A statute must be read as a whole and a schedule is as
much a part of the statute as any other provision.
46. 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
48 (1989) 4 SCC 378
Arbitration Petition No. 5 of 2022 & Ors. Page 61 of 69
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, as observed earlier, 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. Enhancement in
cost of arbitration would be across the board even for small cases,
when claims/counter-claims are less than Rs.5,00,000/-, in which
case the fee payable to the arbitrator may, in a given case, double;
to big amount arbitrations with claims and counter-claims of over
Rs.20,00,00,000/-, in which case the highest fee payable to the
arbitral tribunal under Serial No. 6 could increase from
Rs.90,00,000/- to Rs.1,80,00,000/- in case of three member
tribunal, and from Rs.40,00,000/- to Rs.80,00,000/- in case of a sole
member tribunal. This, according to me, is not postulated and the
legislative intent in enacting the Fourth Schedule. Serial No. 6 in
the Fourth Schedule is a compromise between ad valorem method,
where the arbitrators’ fee is assessed as a percentage of the total
Arbitration Petition No. 5 of 2022 & Ors. Page 62 of 69
amount in dispute, including any counter-claim, and the fixed fee
method, as it prescribes the fee-cap when the amounts of the claim
and the counter-claim exceed Rs.20,00,00,000/- (rupees twenty
crores only).49
47. For the reasons aforesaid, I would hold that 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).
48. 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.
Interpretation of Serial No. 6 of the Fourth Schedule
49. Serial No. 6 of the Fourth Schedule has been interpreted as having
incorporated a cap or ceiling of Rs.30,00,000/-. However, in some
cases, it has been held that the fee specified of Rs.19,87,500/- plus
0.5% of the claim amount, over and above Rs.20,00,00,000/- with
49 Professor Sundra Rajoo, Law, Practice and Procedure of Arbitration (Second Edition), 2016, has
referred to four different types of remuneration agreements, namely, fixed fee method, time spent
method, brief fee and daily refresher method, and ad valorem fee method.
Arbitration Petition No. 5 of 2022 & Ors. Page 63 of 69
a ceiling fee of Rs.30,00,000/-, means that the ceiling of
Rs.30,00,000/- is not the cumulative ceiling. In other words, Serial
No. 6 specifies the ceiling of Rs.19,87,500/- plus Rs.30,00,000/-,
which comes to Rs.49,87,500/-.
50. A perusal of the graded scale manifest from the serial numbers
mentioned in the Fourth Schedule, along with the model fee
prescribed therein, exposits the legislative intent. The scales
prescribed in the schedule have to be read in entirety and serial no.
6 cannot be read in isolation. The Serial Numbers 1 to 5, which
have reference to the sum in dispute, specify the model fee which
in respect of serial numbers 2, 3, 4 and 5, refers to the highest
amount payable in respect of the preceding serial number and then
states the additional (plus) amount payable by the specific
percentage of the claim amount over and above the amount
specified in the earlier serial number. For claims between
Rs.10,00,00,000/- to Rs.20,00,00,000/-, which is applicable to
Serial Number 5, an arbitral tribunal is entitled to an arbitral fee of
Rs.12,35,500/- plus 0.75% over and above Rs.10,00,00,000/-. This
means the maximum fee payable under Serial Number 5, that is,
when the sum in dispute is below Rs.20,00,00,000/-, is
Rs.19,87,500/-. Serial No. 6 deals with sum in dispute above
Rs.20,00,00,000/- without any higher or upper limit stipulation. It
Arbitration Petition No. 5 of 2022 & Ors. Page 64 of 69
stipulates that arbitral tribunal is entitled to the fee of Rs.
19,87,500/- which is the highest fee payable in Serial No.5, plus
0.5% when the amount in dispute exceeds Rs.20,00,00,000/-. If
this is so, and undoubtedly it is so, then the reasoning predicated
on the legislative intent, is that, there is an overall ceiling of
Rs.30,00,000/-. Contrary contention that the ceiling stipulated is
Rs.19,87,500/- plus Rs.30,00,000/- must be rejected. The
legislature was clearly aware that Serial No. 6 would apply to all
arbitrations where the sum in dispute exceeds Rs.20,00,00,000/-.
Serial No. 6, in its plain and simple language, which when read as
it states and speaks, specifies that for claims above
Rs.20,00,00,000/-, in addition to Rs.19,87,500/-, the arbitral tribunal
will be entitled to fee at the rate of 0.5% of the claim amount above
Rs.20,00,00,000/-, but the total fee is subject to ceiling of
Rs.30,00,000/-. The expression “with the ceiling of Rs.30,00,000/-”
would apply when claims are above Rs.20,00,00,000/-. The ceiling
of Rs.30,00,000/- is not with reference to 0.5% of the claim amount
over and above Rs.20,00,00,000/-. To read it otherwise would be
overstretching the language of Serial No.6 and adding words to it.
51. Before us, reference was made to the absence of the punctuation
mark in the form of a comma after Rs.20,00,00,000/- which is to be
found in the Hindi language notification. Absence of the comma in
Arbitration Petition No. 5 of 2022 & Ors. Page 65 of 69
the English language version would not make any difference as the
intent of the legislature, in my opinion, is to put a ceiling of
Rs.30,00,000/-. The intent is not to fix ceiling of Rs.30,00,000/- in
addition to the fee of Rs.19,87,500/-.
Whether the Fourth Schedule prescribes fee for individual members
or the whole tribunal?
52. The last aspect relating to the interpretation of the Fourth Schedule
is debatable as both views are plausible. The expression ‘arbitral
tribunal’, as defined in Section 2(1)(d) means a sole arbitrator or a
panel of arbitrators. Section 10 of the A&C Act states that the
parties are free to determine the number of arbitrators, provided the
number shall not be an even number. Failing such determination,
the arbitral tribunal shall consist of the sole member. Thus, by
default, the expression ‘arbitral tribunal’ refers to a sole member.
Section 11, which relates to appointment of arbitrators, vide subsection (2), states that the parties are free to agree on a procedure
for appointment of an arbitrator or arbitrators. As per sub-section
(3), failing such an agreement in an arbitration with three arbitrators,
each party shall appoint one arbitrator and the two arbitrators so
appointed shall appoint the third arbitrator, who shall act as the
presiding arbitrator. If we accept Section 10 as the default rule, it is
possible to interpret that the model fee prescribed in the Fourth
Arbitration Petition No. 5 of 2022 & Ors. Page 66 of 69
Schedule is for one-member arbitral tribunal. This interpretation,
however, seems to be at variance with the wordings of the
appended Note to the Fourth Schedule which applies in the event
the arbitral tribunal is a sole arbitrator. Wordings in the note-‘sole
arbitrator shall be entitled to additional amount of twenty-five per
cent on the fee payable as per above’, can also be read to make
the other interpretation more acceptable. As the expression ‘arbitral
tribunal’ can refer to a three member or sole member arbitral
tribunal, the Note, it can be argued, affirms the interpretation that
the amounts mentioned in the Fourth Schedule refer to the fee
payable to each member of the three member arbitral tribunal, and
not cumulative fee which is to be divided amongst the three
member arbitral tribunal.
53. I would respectfully prefer the interpretation placed by D.Y.
Chandrachud J. In other words, 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
Arbitration Petition No. 5 of 2022 & Ors. Page 67 of 69
it differently would lead to confusion and chaos which must be
avoided, even if the other interpretation is plausible.
54. 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. Similar may be the situation
in case of claims falling under Serial Nos. 2 and 3. A high fee payout at serial numbers 1 to 3 as framed by the legislature makes
arbitration unaffordable and beyond reach for a common litigant.
Public perception that arbitration is costly and for moneyed litigants
must be dispelled, if arbitration is to gain mass acceptance as the
preferred alternative. High fee structure denies access to
arbitration. In fact, the above figures would suggest that the fee
specified in the Fourth Schedule is the cumulative fee to be divided
between the three-member arbitral tribunal. Nevertheless, for the
sake of certainty and to avoid confusion, it may not be advisable to
Arbitration Petition No. 5 of 2022 & Ors. Page 68 of 69
overturn the settled and accepted position. For example, the fee
schedule of the Delhi High Court International Arbitration Center,
as amended with effect from 1st July 2018, clearly states that the
schedule of fee mentioned in the table is for each arbitrator in a
three-member tribunal, and not the cumulative fee to be divided
amongst the three-member arbitral tribunal.
55. Section 11A states that the Central Government, when satisfied
that it is necessary or expedient, can amend the Fourth Schedule
from time to time, which exercise has not been undertaken.50
Final directions
56. I respectfully agree with the findings recorded by brother D.Y.
Chandrachud, J. under the Heading G-2 Directions, in paragraph
158(i), in respect of Arbitration Petition (Civil) No. 5 of 2022,
whereby in exercise of the power under Article 142 of the
Constitution of India, direction for constitution of a new arbitral
tribunal in accordance with the arbitration agreement have been
issued to ensure that the arbitration proceedings are conducted
without any discomfort and rancour, which could derail the
proceedings.
50 Periodical updation, without repeated legislation or notifications, can be achieved by yearly increase
based or indexed on appropriate price index, as in case of Dearness Allowance.
Arbitration Petition No. 5 of 2022 & Ors. Page 69 of 69
57. In view of my findings on the first aspect, it will be appropriate and
proper in other cases to hear the learned counsel for the parties
individually to examine-whether or not interference is required in
terms of sub-section (3) to Section 39 of the A&C Act. In a given
matter, an order of remit may be required for fresh decision by the
High Court. Accordingly, I would list each appeal/petition for hearing
and appropriate orders and decision.
......................................J.
(SANJIV KHANNA)
NEW DELHI;
AUGUST 30, 2022.

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