ICRI Corporates Private Limited v. Shooglo Network Private Limited

9. The aforesaid application was opposed by the petitioner herein. Essentially, it was urged by the petitioner that fees having been already fixed based on the mutual agreement between the parties, it was not open to the arbitral tribunal to revise the same on an application of the respondent.

10. The impugned order, relying upon the judgment of Supreme Court in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV(supra) and, taking note of the fact that the same is binding and has retrospective effect, worked out the fees payable as per the IVth “10.To my mind, the Hon’ble Supreme Court in the ONGC Judgment Supra has interpreted the impact of the term “Sum in dispute” used in the Fourth Schedule of the Arbitration and Conciliation Act and such interpretation has the effect of Declaration of law and therefore it has the retrospective effect. Since the said ONGC judgment has been rendered by the Hon’ble Supreme Court only in August 2022 whereby it has been held that the Arbitral Fee is to be assessed separately for the purposes of claims and the counter claims, therefore there was no occasion for the Claimant to have taken the said stance earlier.” Schedule by calculating the amount payable by the respective parties separately on the claims and counter-claims.

11. It was further directed that the claimant shall pay the arbitral fees on its claims and respondent shall pay the arbitral fee on its counter-claims. It was accordingly directed as under:

the Counter Claimant.”

12. There is no controversy that the fee calculated by the impugned order is in terms of the IVth “7. In ONGC Ltd. (supra), the Hon'ble Supreme Court has observed as under:—

187. We answer the issues raised in this batch of cases in the following terms:

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); Schedule as applied by this Court in a number of cases, holding that the fees is to be assessed separately on claims and counter-claims. This is consistent with the judgment in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (supra). A Coordinate bench of this court in Ahluwalia Contracts India Limited v. Union of India through Executive Engineer, CPWD & Anr.2024 SCC OnLine Del 5080, has expressly held as under:-

187.2. 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] (see paras 125 to 129);

187.3. The term “sum in dispute” in the Fourth Schedule to the Arbitration Act refers to the sum in dispute in a claim and counterclaim separately, and not cumulatively. Consequently, arbitrators shall be entitled to charge a separate fee for the claim and the counterclaim 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;

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.” (emphasis added)

8. On perusal of the above paras, it is evident that Arbitrator has to calculate his fees separately for claims and counter claims in ad hoc arbitration and the ceiling limit in the fourth schedule shall also be separately applicable

13. In the above backdrop, the learned counsel for the petitioner has made the following submissions:.” (emphasis supplied)

(i) The fees payable to the arbitrator was agreed upon and duly recorded in the proceedings dated 29.08.2019, issued by the arbitrator and there was no occasion to revise/re-visit the same.

(ii) Reliance is placed on the judgment rendered by a Coordinate

Bench of this Court in Jivanlal Joitram Patel v. National Highways Authority of India 2022:DHC:846-DB, wherein it has been held that the arbitral fees has to be determined on the basis of aggregate amount of claim and counter-claim. Reliance is also placed on the said judgment to assert that where fees of the arbitral tribunal has been fixed by agreement between the parties, there is no basis or rationale for the arbitral tribunal to re-determine the same at the request of one of the parties to the arbitration.

(iii) Reliance is also placed on the judgment of the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (supra) to contend that once the terms of the reference has been finalized, it would not be open for the arbitral tribunal to vary the arbitral fees and that subsequent revision/increase of fee can be resorted to only with the agreement of the parties; in the event of disagreement, the tribunal has to continue with the previous arrangement or decline to act as arbitrator. Strong reliance is placed on para-33 and 34 of the said judgment.

14. On the other hand, learned counsel for the respondent strongly refutes both the maintainability and the merits of the present petition. It is contended that the present petition is not maintainable inasmuch as it is impermissible for the petitioner to take recourse to Section 39 (2) of A&C Act, 1996 in the absence of any award having been made by the tribunal. It is also contended that the impugned order cannot be faulted for determining the fees as to the IVth Schedule of the A&C Act inasmuch as even when the fees was fixed initially by the learned arbitrator, as recorded in the proceedings dated 29.08.2019, it was clearly recorded that the basis for the same was the IVth Schedule of the A&C Act. It is submitted that the impugned order merely applies the IVth Schedule in the light of the judgment of the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (supra) to work out the amount payable by the parties.

15. I have heard learned counsel for the parties at some length. I find the present appeal to be wholly devoid of merit.

16. The present appeal has been filed by the petitioner taking recourse to Section 39(2) of the A&C Act, 1996. A bare perusal of Section 39 reveals that the same is applicable only in the event of a lien being exercised on an arbitral award and/or in a situation where an arbitral tribunal refuses to deliver its award except on payment of costs (including fees) demanded by it). It is notable that the proviso to Section 38 (2) of the A&C Act, 1996 deals with the situation where one of the parties fails to pay its share of fees in respect of the claim/counter-claim at the pre-award stage. The same reads as under: “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.”

17. In the present case, it appears that the arbitral tribunal is yet to take a call as to whether any direction in terms of the aforesaid provisions is to be issued or not.

18. Clearly also, the arbitral proceedings have not yet progressed to the stage of making of the arbitral award and exercise of lien thereon and/or refused to deliver the same except on payment of costs (fees).

19. In these circumstances, it is ex-facie untenable for the petitioner to take recourse to Section 39(2) of A&C Act, 1996 and approach this Court at the present stage.

20. Reliance placed by the learned counsel for the petitioner on McNally Bharat Engineering Company Limited v. Steel Authority of India Limited & Anr. 2022:DHC:1683 is misconceived for the reason that:

(i) In the said case, the Court was construing the relevant provisions of the Indian Council of Arbitration (ICA Rules) and the peculiar provisions thereof.

(ii) The court was not concerned as to how the fees is to be calculated in terms of IVth

(iii) In view of the applicability of the ICA Rules, this Court had no occasion to consider the applicability and binding nature of the dicta laid down in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (supra). Schedule and as mandated in terms of judgment of Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (supra) inasmuch as the fee payable was governed by the extant ICA Rules.

(iv) The Court was concerned with the peculiar nature of the relevant ICA Rules which impelled the Court to conclude that for all intents and purposes, the order of arbitral tribunal in that case finally determined the question of deposit fees which justified the invocation of Section 39 (2) of the A&C Act, 1996.

21. As noticed, in the present case, both the factual circumstances and the relevant stage of arbitration do not mandate or permit invocation of Section 39 (2) of A&C Act, 1996. This Court in M/s Janapriya Engineers Syndicate v. Union of India 270 2020 DLT 419 has subscribed to a similar view and has held as under – “53. I am not in agreement with the submissions made by Mr. Nandrajog, for the simple reason, the stand of the learned arbitrator that drafting of the Award shall commence on payment of the fee, does not suggest, that the Award has been made and is ready to be delivered. Perusal of Section 39 (2) of the Act clearly contemplates that the application is maintainable when the Award is made, but not delivered to the parties as a party has not paid the fee demanded by the learned arbitrator. The said situation has not arisen in the case in hand and the same is clear from perusal of the proceedings dated February 7, 2019; February 8, 2019 in both the petitions respectively, as there is no indication that the proceedings have been reserved for Award. Even it is not the case of the petitioner or the learned Arbitrator that the Awards have been prepared/pronounced in both the cases and are ready for delivery. There is a purpose for delivery of the Award as the delivery of Award shall entitle a party to either challenge the Award or seek execution of the same. It is in such a situation a party can invoke the provision of Section 39(2) of the Act. As the aforesaid facts clearly demonstrate that since the position as contemplated in Section 39 has not arisen, the present petitions are not maintainable. In this regard, I may refer to the judgment as relied by the counsels for respondent No.1/UOI, of the Calcutta High Court in Assam State Weaving & Manufacturing Co. Ltd. v. Vinny Engineering Enterprises (P) Ltd. and Anr., 2010 (4) R.A.J. 609 (Cal) wherein the following observations have been made in paragraphs 20 and 21. The said observations are in terms of Section 39, more particularly 39(2) of the Act.

physical receipt of the document that would entitle a party to apply for setting aside the award or for implementing it.”

54. In view of my aforesaid conclusion, without going into the other submissions made by the counsels, the petitions being premature are not maintainable and are dismissed

22. Even on merits, I find no merit whatsoever in the contentions of learned counsel for the petitioner. The initial fixation of fees, as recorded in the proceedings dated 29.08.2019, was based on adoption of the IV. (emphasis supplied) th Schedule of the A&C Act, 1996. It is not as if the parties arrived at an agreement independent of the IVth Schedule of the A&C Act, 1996. The calculation of the arbitral fees, was clearly intended to be based on the IVth Schedule. The manner in which the IVth Schedule is to be applied and the fees is to be calculated has now been clarified by the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (supra).The impugned order merely applies the correct methodology for working out the fees payable by the respective parties as per the IVth

23. Indeed, learned counsel for the petitioner does not dispute that the calculation of the fees in the impugned order is in accord with the IV Schedule. No fault can be found with the same. th

24. As noticed, this argument is fallacious for the simple reason that the initial fixation of fees was not on account of an agreement between the Schedule as interpreted by the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (supra).What is sought to be contended is that it is no longer open for the arbitral tribunal to re-visit the issue of fixation of fees since the fees has already been fixed with the consent of the parties. parties independent of the IVth Schedule. On the contrary, while fixing the fees, the arbitrator expressly purported to apply the IVth

25. The observations in para-34 of Chennai Metro Rail Limited Administrative Building v. M/s. Transtonnelstroy Afcons (JV) & Anr.2023 INSC 932 are wholly inapplicable in the facts of the present case. In that case, it was held by the Supreme Court that a pre-existing arrangement regarding arbitral fees can be novated only with the agreement of the parties; in the event of disagreement, the tribunal has to continue with the previous arrangement, or decline to act as an arbitrator. It was, inter-alia observed as under: Schedule and make the same applicable for the purpose of determination of fees. Therefore, it is not as if the impugned order seeks to disregard an agreement between the parties as regards which the arbitral fees would be payable.

26. In the present case, however, the pre-existing arrangement/agreement is itself predicated on the IVth

27. Likewise, reliance of the judgment of this Court in Jivanlal Joitram Patel v. National Highways Authority of India (supra) is misconceived for the reason that: Schedule. The impugned order merely works out the amount to be borne by respective parties in terms thereof.

(i) the said judgment was rendered prior to the judgment in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (supra).

(ii) the Court was concerned with the issue as to how the expression “sum in dispute” is to be construed. The position in this regard has now been unambiguously laid down by the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (supra).

28. In the circumstances, I find no merit in the present petition. The same is consequently dismissed.

SACHIN DATTA, J OCTOBER 7, 2024