1) Delhi State Industrial Development Corporation Ltd.

Vs Bawana Infra
Development Ltd (2018, HC Of Delhi)

Facts: In the instant case the issue arose after the order passed by the sole arbitrator on
24.08.2016 which indicate the “Sum in Dispute” mentioned under Schedule 4 of Arb
Account, is to be interpreted in a way to only include amount of claim and not counter claim
and therefore in an non inclusive manner. The Petitioner approached the DHC under Section
39(2) of the ARB act, 1996 to seek interpretation of fee schedule mentioned in Schedule 4, to
see whether sum in dispute include claim and counter claim cumulatively.

Held: The instant case was decided by Navin Chawla(Judge, DHC) with help of amicus curae
came to conclusion that the “Sum in Dispute” mentioned under Schedule 4, ARB Act,1996
includes both the amount of claim and counter claim in the arbitration for the following
reasons:

1) The 246’th Law Commission Report clearly mentions that the model fees structure is
based on Delhi High Court International Arbitration Centre, and as per the DIAC
rules the sum of dispute included both claim and counter claim and therefore “sum in
dispute” under Schedule 4 has to interpreted in the similar way.
2) The object behind the introduction of the Fourth Schedule to the Act was the belief of
the Commission that if arbitration is to really become a cost effective solution for
dispute resolution in the domestic context, there should be some mechanism to
rationalise fee structure for arbitration and therefore to make the proceedings cost
effective, it is imperative to include both claim and counter claim under the definition
of Sum in Dispute under Schedule 4.

Important Paragraphs:

8) “As would be evident from a bare reading of the above report, the object behind the
introduction of the Fourth Schedule to the Act was the belief of the Commission that if
arbitration is to really become a cost effective solution for dispute resolution in the
domestic context, there should be some mechanism to rationalise fee structure for
arbitration. The Law Commission states that the model schedule of fee recommended by
it is based on the fee set by the DIAC. As noted above, the fee schedule set by the DIAC
specifically provides that the "Sum in dispute" shall include the counter claim made by
any party. Therefore, the intent of the legislature and the purpose sought to be achieved
 clearly points to the conclusion that "Sum in dispute" would be a cumulative value of the
claim and counter claim.”

14) “ Even in the general parlance, "Sum in dispute" shall include both claim and counter
claim amounts. If the legislature intended to have the Arbitral Tribunal exceed the ceiling
limit by charging separate fee for claim and counter claim amounts, it would have
provided so in the Fourth Schedule.”

15) “Proviso to Section 38(1) of the Act can only apply when the Arbitral Tribunal is not
to fix its fee in terms of the Fourth Schedule to the Act. It would not have any bearing on
the interpretation to be put to the Fourth Schedule. It is noted that as regards fee even
under the Amended Act, the Arbitral Tribunal is free to fix its schedule of fee in an ad-
hoc arbitration which is conducted without the intervention of the Court. Even where the
Arbitral Tribunal is appointed by the Court under Section 11 of the Act, in absence of
rules framed under Section 11 (14) of the Act, it is not in every case that the Arbitral
Tribunal has to fix its fee in accordance with the Fourth Schedule to the Act. Therefore,
the proviso to Section 38(1) of the Act would have no bearing on the interpretation being
put to the Fourth Schedule and the phrase "Sum in dispute" therein.”

16) An argument was made that the adjudication of counter claim would require extra
effort from the Arbitrator and therefore, the Arbitrator should be entitled to charge a
separate fee for the same. I cannot agree with this argument. The object of providing for
counter claim is to avoid multiplicity of proceedings and to avoid divergent findings.
Keeping the object of the amendment in view, the ceiling on fee as prescribed in the
Fourth Schedule of the Act cannot be allowed to be breached.

17. In view of the above, the Sole Arbitrator is requested withdraw his order claiming
separate fee for the amounts claimed in the Statement of Claim and the counter claim.
The amount of Rs. 13,15,250/- deposited by the petitioner with the Registry of this Court
in compliance with the order dated 22.02.2018 passed in I.A. No. 2549/2018 in Arb.
P.420/2016 shall be refunded by the Registry of this Court to the petitioner along with
any interest accrued thereon.

2) Doshion Private Limited vs Hindustan Zinc Limited (2019. HC OF Rajasthan)

Facts: In the instant case, the question before the court was whether the conducts of
the sole arbitrator i.e. To ask the parties to pay him 55 lakh as the fees is justified if
its violating the Schedule 4 of Arb Act,1996 and also the fact that the sole arbitrator
passed an ex parte order when the commercial courts have adjourned the proceedings
is justified or whether all these acts terminate the Arbitrator from the proceeding
according to the Sec 14 of Arb Act,1996
Held: The single judge in the instant case decided that the acts of the Arbitrator make
him liable to terminate his role as an arbitrator in the instant case, essentially the
arbitrator is de-jure/de-facto unable to perform his functions effectively warranting his
mandate to be terminated under Sec 14(1)(a) of the Act as the arbitrator is clearly not
following the Schedule 4 of the Act and also, the arbitrator deliberately failed in
taking evidence of the petitioner.

Important Paragraphs:
32. “In view of the above discussion, it is apparent that as the fee determined by the
arbitrator has been reduced to half and the manner in which the arbitral proceedings
continued before the learned sole arbitrator, the petitioner will definitely have some
doubt as to the conduct of the proceedings and the same would certainly lead to loss
of
confidence and as observed by Madras High Court in Madras Fertilizers Ltd. (supra),
such an unpleasant situation is to be avoided in the best interest of the parties
including
the arbitrator.”

33. “Because of long drawn controversy in petitioner challenging the quantum of fees
before the learned arbitrator, moving application before the Commercial Court,
wherein, the determination of fees made by the learned arbitrator has been reversed
and then again filing the present proceedings before this Court seeking termination of
the
mandate of the learned arbitrator, more importantly the learned arbitrator during the
pendency of the proceedings before the Commercial Court passing an ex-parte award
and during the pendency of present petition before this Court, again closing evidence
of the petitioner and fixing the matter for final arguments, taking the totality of above
facts
and circumstances of the case, this Court is of the considered view that the learned
 arbitrator has been rendered de jure/de facto unable to perform his functions
effectively
warranting his mandate to be terminated under Section 14(1)(a) of the Act and the
determination made by the Commercial Court in this regard, therefore, cannot be
sustained”.
34. “In view of the above discussion, the writ petition filed by the petitioner is
allowed.
The order dated 9/4/2018 (Annex. 1) passed by the Commercial Court is set aside to
the extent it has refused to terminate the mandate of the learned arbitrator, the
mandate
of the arbitral tribunal appointed by order dated 27/9/2016 shall stand terminated. The
parties may appoint a substitute arbitrator in terms of the arbitration agreement
between them within a period of 15 days from today. The arbitral tribunal so
constituted
shall proceed from the stage where the proceedings stood before the order was passed
by the then existing arbitral tribunal on 1/4/2018.”

3) Union of India vs Singh Builders Syndicate(Supreme Court, 2009)

Facts: This case has been cited as numerous times in a lot of judgment pertaining to the
Arbitrators fees, as this is the first exhaustive judgment, which dealt with the above-
mentioned issue of high fees taken by the arbitrators in India. The factual matrix of the
instant case is that, a dispute arose from a contract, parties decided to arbitrate the matter,
the difference of opinion arose from the fact that the appellant wanted to follow Clause 64
of the contract, which pertains to the appointment of the panel of arbitrator, as per the
clause, two arbitrators who were serving Gazetted Railway Officers were to appointed.
The issues since, numerous arbitrators were leaving the proceeding in the middle due to
following the clause 64 as the servicing officers(Arbitrators) were being transferred to
different parts of the country and thereby rendering the entire process of the Arbitration
lengthy and time consuming. The facts also indicated that the appointment of the retired
judges were effectively making the arbitration significantly costly. Therefore, the
question before the court was whether the appointment of the retired Judge of the High
Court as sole arbitrator should be set aside and an Arbitral Tribunal should again be
constituted in the manner provided in the terms of Clause 64.
Held: The instant case was decided by the division bench of the Supreme Court, the
judges held the appeal is untenable.
Important Paragraphs:
8) “The object of the alternative dispute resolution process of arbitration is to have
expeditious and effective disposal of the disputes through a private forum of parties'
choice. If the Arbitral Tribunal consists of serving officers of one of the parties to the
dispute, as members in terms of the arbitration agreement, and such Tribunal is made
non-functional on account of the action or inaction or delay of such party, either by
frequent transfers of such members of the Arbitral Tribunal or by failing to take steps
expeditiously to replace the arbitrators in terms of the Arbitration Agreement, the Chief
Justice or his designate, required to exercise power under Section 11 of the Act, can
step in and pass appropriate orders.
We fail to understand why the General Manager of the Railways repeatedly furnished
panels containing names of officers who were due for transfer in the near future. We are
conscious of the fact that a serving officer is transferred on account of exigencies of
service and transfer policy of the employer and that merely because an employee is
appointed as arbitrator, his transfer cannot be avoided or postponed. But an effort
should be made to ensure that officers who are likely to remain in a particular place are
alone appointed as Arbitrators and that the Arbitral Tribunal consisting of serving
officers, decides the matter expeditiously. Constituting Arbitral Tribunals with serving
officers from different far away places should be avoided. There can be no hard and fast
rule, but there should be a conscious effort to ensure that Arbitral Tribunal is
constituted promptly and arbitration does not drag on for years and decades”.
9) . “As noticed above, the matter has now been pending for nearly ten years from the
date when the demand for arbitration was first made with virtually no progress. Having
regard to the passage of time, if the Arbitral Tribunal has to be reconstituted in terms of
Clause 64, there may be a need to change even the other two members of the Tribunal.
The delays and frequent changes in the Arbitral Tribunal make a mockery of the process
of arbitration. Having regard to this factual background, we are of the view that the
appointment of a retired Judge of the Delhi High Court as sole Arbitrator does not call
for interference in exercise of jurisdiction under Article 136 of the Constitution of India.
10) 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. 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 non-technical 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. 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, who 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 who readily agreed
to pay the high fee. 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. 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 cost, 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 cost
are two areas where the Arbitrators by self-regulation can bring about marked
improvement”.
11.” We find that a provision for serving officers of one party being appointed as
 arbitrator/s brings out considerable resistance from the other party, when disputes
arise. Having regard to the emphasis on independence and impartiality in the new Act,
government, statutory authorities and government companies should think of phasing
out arbitration clauses providing for serving officers and encourage professionalism in
arbitration”.
12. “As far as this case is concerned, we do not propose to issue any directions in
regard to the fees, as the High Court has fixed the fee at Rs. 10,000/- per hearing
subject to a maximum of Rs. 150,000/- plus clerkage, to be shared equally by the
parties”.

4) Rail Vikas Nigam vs Simplex Infrastructures.:

Facts: In the instant case, The petitioner; Rail Vikas Nigam Limited (PSU- railway
construction projects), issued an ‘Invitation to Bid’ for construction of a project, in which the
Respondent’s (herein) bid was accepted and a formal contract was executed. The 30- month
long contract however took 84 weeks for its completion, and the Respondent, citing
Petitioner’s alleged failure to perform the Contract as a reason for the delay, demanded
escalation. This demand was not answered; leading the Respondent to invoke ‘Arbitration
Clause’ in the Contract, but the same was also not answered by the Petitioner, due to which,
the Respondent moved an Arbitration Application before the Delhi High Court. In response
to this application, the Court appointed Hon’ble Mr. Justice Swatanter Kumar (Retd.) as the
nominee Arbitrator.

The Arbitration fee was to be determined as per the provisions mentioned in Schedule IV of
the Arbitration Act. The Fee calculated was Rs.49,87,500/-. This sum was challenged by the
Petitioner by moving an application to this effect before the Tribunal on the premise that
the same is above the statutory limit of Rs. 30 Lakh. The Tribunal rejected this application
and fixed a date for continuation of the Arbitral Proceedings, in the meanwhile a petition u/s
14 of the Act was preferred for seeking termination of the mandate of the 3 member Arbitral
Tribunal.
The Counsel for the Petitioner argued for abiding by the Statutory limit of Rs. 30 Lakh
ceiling on the grounds that; (a) the High Court itself held, while appointing Justice Swatanter,
that the fee should be determined according to Schedule IV; (b) Entry No. 6 provides for
Arbitration in disputes exceeding Rs. 20 Crore, & respondent’s claim is of Rs.102 Crore,
hence Schedule IV should have been followed for fee determination; and (c) these provisions
permit fixation of fee at Rs.19,87,500/- and 0.5% of the claim amount over and above Rs.20
Crore; the cumulative so arrived at is further subject to a ceiling of Rs.30 lakh. Justifying the
quantum given in the Schedule, the

Counsel contended that it is based on the Delhi International Arbitration Center

Administrative Costs and Arbitrators Fees Rules (DIAC Rules).

The question before the court was the interpretation of Entry No. 6 of Schedule IV: is the
ceiling limit of Rs. 30,00,000/- inclusive of the base fee of Rs.19,87,500/- or is it only
applicable as a cap on the latter portion of the Model Fee prescribed, i.e., 0.5% of the claim
amount over and above Rs. 20 crores?

Held: The court held: “In fact, the plain text of Entry No. 6 reveals that for all arbitrations
involving sums in dispute exceeding Rs. 20,00,00,000/-, there is a base fee prescribed of Rs.
19,87,500/-. However, a certain amount of fee, i.e., the variable fee component, follows the
word ‘plus’ and can be further charged by the arbitrator by way of a formula provided to
calculate this amount, i.e., 0.5% of the sums in dispute which is over and above Rs.
20,00,000/-. The disputed phrase ‘ceiling of Rs. 30,00,000/-’, as per the petitioner, includes
the base fee of Rs.19,87,500/-, and, as per the Tribunal, is only applicable to the variable fee
component. In the light of the discussion in the preceding paragraph that the word ‘plus’ is
the disjunctive between the base fee and variable fee component, it is evident that the ceiling
of Rs. 30,00,000/- has been imposed on the variable fee component.”

And that:

“Even otherwise, considering the fact that arbitrations can involve enormous sums in dispute,
often running into hundreds and thousands of crores, the cap of Rs. 49,87,500/- in Entry no.6
as the maximum fee which can be charged per arbitrator under Schedule IV is reasonable and
in furtherance of the recommendations made in the 246th Law Commission Report(...)
Keeping in view that the language of Schedule IV is quite clear and consonant with the very
purpose of its enactment and that Entry No. 6 is not in conflict with the recommendations of
the Law Commission Report or the DIAC Rules, I have no hesitation in holding that the
ceiling limit of Rs. 30,00,000/- is not inclusive of the base fee of Rs. 19,87,500/-, but has
rightly been interpreted by the learned Tribunal as a cap on the additional fee chargeable, i.e.,
0.5% of the claim amount which is over and above Rs.20 crores.”

Decision of the Court

The court thus held that the Tribunal fixed the fees strictly in accordance with Schedule IV of
the Act and that the Petitioner failed to make out a case for termination of the mandate of the
learned Tribunal under Section 14.

Important Paragraphs:

22) “Since the 246th Law Commission Report provided reasons for incorporation of the
Schedule and the DIAC Rules lent the format on which the Schedule was ultimately
modelled, there is merit in the petitioner’s contention that these two documents are useful
external aids of interpretation. In fact, the reliance on the decisions in R.S. Nayak (supra) and
Mithilesh Kumari (supra) has been placed tocontend that a Law Commission Report can be
referred to as an external aid of interpretation when there is ambiguity present in the statutory
text, to understand the legislative intent behind the ambiguous provision. The petitioner is
also correct in contending that the amount of fee fixed by the arbitrator ought to be regulated
in order to reduce the costs associated with arbitration in the country and encourage alternate
disputes resolution mechanisms, a mischief which the Law Commission sought to address in
its 246th Report. There is absolutely no dispute with this proposition or the admissibility of
external aids of evidence, which can be resorted to when the plain text of the statute is
insufficient to gauge the meaning behind the text. However, in the present case, the plain text
of Schedule IV is sufficient to shed light on the meaning and implication of Entry no. 6
insofar as it expressly provides the ceiling of Rs.30,00,000/- on the latter portion of the
Model Fee, i.e., 0.5% of the claim amount over and above Rs. 20 crores. I am supported in
my view by the decision in Ben Hiraben Manilal (supra), which has been relied upon by the
petitioner. In Ben Hiraben, although the Supreme Court observed that when confronted with
an issue of statutory interpretation, the Court ought to read the statute in a manner which
furthers the legislative intent conveyed through the express language of the provisions, it also
clarified that when the language is plain and explicit, no problem of construction arises

23) Even otherwise, considering the fact that arbitrations can involve enormous sums in
dispute, often running into hundreds and thousands of crores, the cap of Rs. 49,87,500/- in
Entry no.6 as the maximum fee which can be charged per arbitrator under Schedule IV is
reasonable and in furtherance of the recommendations made in the 246th Law Commission
Report. In a similar vein, even the DIAC Rules show that the ceiling limit is applicable on the
variable component of the Model Fee prescribed under Entry No.6 in Schedule IV. The
prevalent practice in some arbitration proceedings conducted under the aegis of DIAC, of
capping the overall fee chargeable under Entry No.6 at Rs.30,00,000/- does not change the
text, spirit or effect of the Schedule and it is always open for a Tribunal to charge fee which is
lower than that set out in Schedule IV. Keeping in view that the language of Schedule IV is
quite clear and consonant with the very purpose of its enactment and that Entry No. 6 is not
in conflict with the recommendations of the Law Commission Report or the DIAC Rules, I
have no hesitation in holding that the ceiling limit of Rs. 30,00,000/- is not inclusive of the
base fee of Rs. 19,87,500/-, but has rightly been interpreted by the learned Tribunal as a cap
on the additional fee chargeable, i.e., 0.5% of the claim amount which is over and above
Rs.20 crores.

24. In these circumstances, when the interpretation of the learned Tribunal is in consonance
with Schedule-IV of the Act, I find that the petitioner has been unable to make out a case for
termination of the mandate of the learned Tribunal under Section 14. Before, I conclude, I
deem it necessary to observe that, in view of my finding that the learned Tribunal has fixed
the fees strictly in accordance with Schedule IV of the Act, the decisions in Madras
Fertilisers (supra), Doshion (supra), Gayatri Jhansi Roadways (supra) reiterating the settled
principle of law that non-adherence to Schedule IV while fixing fee for arbitration can be a
valid ground for termination, are wholly inapplicable to the facts of the present case.