High Court: Fees charged by the Sole Arbitrator is not subject to Statutory limit [Read Judgment]

On 3^rd June 2020, the High Court of Delhi, in the case of Entertainment City ltd v. Aspek media private ltd. it was held that the fees chargeable by the sole arbitrator, in the present case, are not subject to the statutory limits, stipulated in the 4th schedule to the act.

FACTS

Arbitral disputes arising between the petitioner and the respondent were preferred before this Court, for the appointment of an arbitrator to arbitrate on the disputes. A retired Judge was appointed as Sole Arbitrator. The said order did not fix any fees, as payable to the learned Sole Arbitrator. Even, the contract/agreement, between the petitioner and the respondent, too, contained an arbitral clause but does not fix any fees as payable to the Arbitrator.

The grievance of the petitioner, on the basis whereof the prayer for terminating the mandate of the learned Sole Arbitrator is being urged in these proceedings, essentially relates to the fees being charged by the learned Sole Arbitrator.

ISSUE

Whether the fees chargeable by the Sole Arbitrator, in the present case, were subject to the statutory limits, stipulated in the 4th Schedule to the Act?

SOLE ARBITRATOR

An application was preferred, by the petitioner, before the learned Sole Arbitrator, pleading that the fees demanded by her infracted Section 11(14) of the Act, read with the Fourth Schedule thereto The petitioner also pleaded financial stringency.

Sole Arbitrator rejected the aforesaid objection of the petitioner, regarding the fees charged by her. The specific finding of the learned Sole Arbitrator, on this point, as contained in the said order, may be reproduced as under:

“The Respondent on the last date had moved an application seeking fixation of fee for the undersigned. The undersigned has been appointed by the Hon’ble High Court on a petition under Section 9 of the Arbitration and Conciliation Act, 1996 on 21.12.2018. The undersigned had been directed to give for disclosure under Section 12 of the said Act which is on record. The undersigned is not bound by the 4th Schedule; it can be considered as a guiding factor. In the instant case, there is a claim and counterclaim. The provision of Section 38(1) and (2) of the said Act noted in the fee shall be charged separately for the claim of the plaint. The fee will be charged accordingly. The parties will calculate the amount.”

HIGH COURT

The High Court of Delhi held that the

1. The use of the word “only”, in sub-section (3) of Section 12 evinces, unmistakably, the statutory intent of delineating the grounds of challenge, available under Section 12, to the two contingencies stipulated therein, i.e. the existence of justifiable doubts, regarding the independence or impartiality of the arbitrator, or absence of required qualifications
2. Sub-Section (4) of Section 12 cannot be regarded as a standalone provision and has, necessarily, to be read within conjunction with sub-Section (3) of Section 12.
3. Pre-amended subsection (14) of Section 11 of the Act, the position remains that, till date, no rules have been framed under Section 11(14) of the Act by this court, whereby or whereby fees of Arbitrators, directly appointed by the court, could be governed
4. It was always open to the petitioner, as one of the parties to the agreement dated, to insist on the incorporation, therein, of a condition regarding fees payable in arbitral proceedings. The petitioner did not choose to do so. Neither, apparently, did the petitioner insist on any fees being fixed, at the time of appointment of learned Sole Arbitrator by this Court.
5. No case, for holding that the learned Sole Arbitrator has become, de jure, or de facto, unable to perform her functions, exists, in my opinion, in the present case.

The Court further held that it is certainly not open to the petitioner, at this stage, to seek termination of the mandate of the Sole Arbitrator on the sole ground of the fees, fixed by her, or to invoke, for the said purpose, Section 14(1)(a) of the Act. It cannot, in my view, be said that the learned Sole Arbitrator has become de jure unable to perform her functions.

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