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 delay, demanded escalation. This demand was not answered; leading the Respondent to invoke ‘Arbitration Clause’ in the Contract, but 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 as 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?
Reasoning of the Court in arriving at its Decision
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.
Case Details
Before: Delhi High Court
Bench: Hon'ble Justice Rekha Palli
Parties: Rail Vikas Nigam Ltd. v Simplex Infrastructures Ltd.
Date of Decision: 10.07.2020
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