National Highway Authority of India v. Ssangyong Engineering Construction Co Ltd

1. The present petition has been filed by the petitioner assailing orders dated 21.10.2024 and 30.10.2023 passed by a three-member Arbitral Tribunal (hereinafter ‘the Arbitral Tribunal’) currently seized of disputes between the petitioner and the respondent. The said disputes arise out of the Contract Agreement dated 12.04.2006 (Contract Agreement executed between the parties herein) for the ‘four laning of Jhansi-Lakhanadon section KM 297 to KM 351 of National Highway-26 in the State of Madhya Pradesh’ being Contract Package No. ADB-II/C[8].

2. Disputes having arisen between the parties, the petitioner invoked the arbitration on 17.09.2022.

3. The petitioner is aggrieved by the fact that the Arbitral Tribunal vide order dated 30.10.2023 fixed fee/s of Rs.3,00,000/- per Arbitrator per sitting. Feeling aggrieved by such fixation of fees, the petitioner preferred an application dated 16.05.2024 seeking modification of the said order dated 30.10.2023 to the extent of seeking that the Arbitral Tribunal may fix an upper limit of Rs.30,00,000/- on the fees of each Arbitrator as contemplated under IVth

4. The Arbitral Tribunal vide its order dated 21.10.2024 rejected the aforesaid modification application filed by the petitioner. While rejecting the said application, it was observed by the Arbitral Tribunal that the present arbitration, being an international commercial arbitration in terms of Section 2(1)(f)(ii) of the A&C Act, the IVth Schedule of the A&C Act was not applicable in terms of the explanation to Section 11(14) of the A&C Act. Schedule of the Arbitration and Conciliation Act, 1996 (“A&C Act”).

5. It is submitted by the learned counsel for the petitioner that in passing the impugned order dated 21.10.2024, the Arbitral Tribunal has ignored the principles of ‘party autonomy’.

6. Further, it is submitted that the Arbitral Tribunal has conducted thirteen hearings till now and the matter is at the stage of arguments on preliminary issues. Going by the alleged amount of fees fixed by the Arbitral Tribunal, total fees of Rs.1,17,00,000/- are to be paid to the Arbitral Tribunal by both the parties. Accordingly, the petitioner will be required to pay an amount of Rs.58,50,000/- to the Arbitral Tribunal for the hearings conducted till now. The aforesaid amount has surpassed way beyond the upper limit of Rs.30,00,000/- contemplated in terms of the IVth Schedule of the A&C Act. It is submitted that such fixation of fees by the Arbitral Tribunal is highly unreasonable and uncalled for.

7. It is further submitted that the decision of the Arbitral Tribunal to unilaterally fix the fees is against the settled position of law as laid down by the Supreme Court in the judgment of ONGC Ltd. v. Afcons Gunanusa JV, (2024) 4 SCC 481. Reliance in this regard is placed on the following paragraphs of the said judgment:- “187.1. Arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their own fees. A unilateral determination of fees violates the principles of party autonomy and the doctrine of the prohibition of in rem suam decisions i.e. the arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration. However, the Arbitral Tribunal has the discretion to apportion the costs (including arbitrators' fee and expenses) between the parties in terms of Section 31(8) and Section 31-A 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); xxx xxx xxx

187.4. The ceiling of Rs 30,00,000 in the entry at Sl. 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

187.5. 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% over and above this amount in accordance with the Note to the Fourth Schedule.”

8. Learned counsel for the petitioner submits that the present case being an exceptional case, this Court would exercise jurisdiction under Article 226 of the Constitution of India and pass appropriate orders, as contemplated in the judgment of Surender Kumar Singhal v. Arun Kumar Bhalotia and Others, 2021 SCC OnLine Del 3708.

9. A perusal of the orders passed by the Arbitral Tribunal reveals that the very premise of the petition viz. that the Arbitral Tribunal has fixed its fees unilaterally, is non-existent. A perusal of various proceedings before the Arbitral Tribunal reveals that in the 1st “8.0 The Tribunal has informed the parties that the sitting fee/reading fees/one-time arbitration-cum-reading fee, administrative expenses etc., will be fixed during the next sitting and on completion of pleadings. In the meanwhile and for the present, both the parties (Claimant on the one side and the Respondent on the other) shall pay, on account, to each member of the Arbitral Tribunal an amount of Rs. 5 lakhs each within four weeks from today, after deducting TDS.” sitting itself i.e., on 05.12.2022, the Arbitral Tribunal directed as under:-

10. During the 2nd

12. During the 3rd