Inspirisys Solutions Ltd vs Central Railway
2022 Latest Caselaw 11669 Bom

                                                                               21.carbp.222.22..doc




                                    IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                       ORDINARY ORIGINAL CIVIL JURISDICTION
ANJALI Digitally
       by ANJALI
                 signed                         IN ITS COMMERCIAL DIVISION
TUSHAR TUSHAR     ASWALE
       Date: 2022.11.17
ASWALE 16:57:02 +0530
                            COMMERCIAL ARBITRATION PETITION NO. 222 OF 2022


                           Inspirisys Solutions Ltd                         ..Petitioner
                                      Vs.
                           Central Railways                                 ..Respondent



                           Mr.Bimal Rajasekhar, for the Petitioner.

                           Mr. J. S. Saluja, for the Respondent.


                                                               CORAM:- B. P. COLABAWALLA,J.

DATE :- NOVEMBER 16, 2022.

P. C.:

The above Arbitration Petition was originally filed under

Section 29A of the Arbitration and Conciliation Act, 1996 (for short

"the Arbitration Act") seeking an extension of the mandate of the

Arbitral Tribunal. This Petition was disposed of by order dated 7 th July,

2022 which reads thus:-

"1. By consent of the parties, this petition filed under section 29A of the Arbitration and Conciliation Act, 1996 stands disposed of by the following order:

(i) The parties have agreed for constitution of the arbitral

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tribunal in the following manner:

a) Mr. Shahzad Shah

b) Mr. A.K. Mittal

c) Mr. R.C. Boolchandani

(ii) The mandate of the arbitral tribunal is extended for a period of eight months from today.

(iii) The parties shall appear before the learned arbitral tribunal within 10 days from today on a date which may be mutually fixed by the learned arbitrator.

(iv) Needless to observe that all the proceedings which were placed before the erstwhile arbitral tribunal shall be made available by the claimants before the newly appointed arbitral tribunal.

(v) It is expected that within the extended period, the arbitral tribunal shall conclude the proceedings, so that further extension is not called for.

(vi) The parties are directed to cooperate in the early disposal of the arbitral proceedings.

(vii) All contentions of the parties are expressly kept open.

2. Considering the prior background of the matter, the arbitral tribunal would take up the arbitral proceedings and make an endeavor to dispose of the arbitral proceedings as expeditiously as possible, without the constitution of the arbitral tribunal being required to be changed.

3. Disposed of. No costs."

2 The matter has been moved before me today because there

is no consensus on the fees payable to the Arbitral Tribunal. According

to Mr. Saluja, the fees payable to the Arbitral Tribunal is as per the

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circular issued by the Government of India, Ministry of Railways, New

Delhi dated 1st April, 2019.

3 I am afraid that in the facts of the present case, I do not

think that the submission of Mr. Saluja is well founded. By order dated

7th July, 2022, with the consent of parties (which obviously includes the

Respondent), the Arbitral Tribunal was constituted and the mandate of

the Tribunal was extended by a period of eight months from 7 th July,

2022. At the time when the Tribunal was constituted, the order does

not in any way mention the fees payable to the Arbitrators. In the latest

judgment of the Supreme Court in the case of Oil and Natural Gas

Corporation Ltd v/s Afcons Gunanusa JV [(2022) SCC OnLine

SC 1122], the Supreme Court has inter alia held that upon the

constitution of the Arbitral Tribunal, the parties and the Arbitral

Tribunal shall hold preliminary hearings [with a maximum cap of four

hearings] amongst themselves to finalise the terms of reference of the

Arbitral Tribunal. In cases where the arbitrator(s) are appointed by the

Court, the order of the Court should expressly stipulate the fee that

arbitral tribunal would be entitled to charge. However, where the Court

leaves this determination to the arbitral tribunal in its appointment

order, the arbitral tribunal and the parties should agree upon the Terms

of Reference as specified in the manner set out earlier. The Supreme

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Court has categorically held that when one or both parties, or the parties

and the arbitral tribunal are unable to reach a consensus, it is open to

the arbitral tribunal to charge the fee as stipulated in the Fourth

Schedule. Consequently, when an arbitral tribunal fixes the fee in

terms of the Fourth Schedule, the parties should not be permitted to

object to the fee fixation. This is obviously when the Arbitration

Agreement between the parties itself does not contemplate a fee

structure of the Arbitral Tribunal. Paragraphs 124 and 125 of this

decision clearly cull out this proposition and read thus:-

"124. We believe that the directives proposed by the amicus curiae, with suitable modifications, would be useful in structuring how these preliminary hearings are to be conducted. Exercising our powers conferred under Article 142 of the Constitution, we direct the adoption of the following guidelines for the conduct of adhoc arbitrations in India:

"1. Upon the constitution of the arbitral tribunal, the parties and the arbitral tribunal shall hold preliminary hearings with a maximum cap of four hearings amongst themselves to finalise the terms of reference (the "Terms of Reference") of the arbitral tribunal. The arbitral tribunal must set out the components of its fee in the Terms of Reference which would serve as a tripartite agreement between the parties and the arbitral tribunal.

2. In cases where the arbitrator(s) are appointed by parties in the manner set out in the arbitration agreement, the fees payable to the arbitrators would be in accordance with the arbitration agreement. However, if the arbitral tribunal considers that the fee stipulated in

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the arbitration agreement is unacceptable, the fee proposed by the arbitral tribunal must be indicated with clarity in the course of the preliminary hearings in accordance with these directives. In the preliminary hearings, if all the parties and the arbitral tribunal agree to a revised fee, then that fee would be payable to the arbitrator(s). However, if any of the parties raises an objection to the fee proposed by the arbitrator(s) and no consensus can be arrived at between such a party and the tribunal or a member of the tribunal, then the tribunal or the member of the tribunal should decline the assignment.

3. Once the Terms of Reference have been finalised and issued, it would not be open for the arbitral tribunal to vary either the fee fixed or the heads under which the fee may be charged.

4. The parties and the arbitral tribunal may make a carve out in the Terms of Reference during the preliminary hearings that the fee fixed therein may be revised upon completion of a specific number of sittings. The quantum of revision and the stage at which such revision would take place must be clearly specified. The parties and the arbitral tribunal may hold another meeting at the stage specified for revision to ascertain the additional number of sittings that may be required for the final adjudication of the dispute which number may then be incorporated in the Terms of Reference as an additional term.

5. In cases where the arbitrator(s) are appointed by the Court, the order of the Court should expressly stipulate the fee that arbitral tribunal would be entitled to charge. However, where the Court leaves this determination to the arbitral tribunal in its appointment order, the arbitral tribunal and the parties should agree upon the Terms of Reference as specified in the manner set out in draft practice direction (1) above.

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6. There can be no unilateral deviation from the Terms of Reference. The Terms of Reference being a tripartite agreement between the parties and the arbitral tribunal, any amendments, revisions, additions or modifications may only be made to them with the consent of the parties.

7. All High Courts shall frame the rules governing arbitrators' fees for the purposes of Section 11(14) of the Arbitration and Conciliation Act, 1996.

8. The Fourth Schedule was lastly revised in the year 2016. The fee structure contained in the Fourth Schedule cannot be static and deserves to be revised periodically. We, therefore, direct the Union of India to suitably modify the fee structure contained in the Fourth Schedule and continue to do so at least once in a period of three years.

125. Conscious and aware as we are that (i) Arbitration proceedings must be conducted expeditiously; (ii) Court interference should be minimal; and (iii) Some litigants would object to even a just and fair arbitration fee, we would like to effectuate the object and purpose behind enacting the model fee schedule. When one or both parties, or the parties and the arbitral tribunal are unable to reach a consensus, it is open to the arbitral tribunal to charge the fee as stipulated in the Fourth Schedule, which we would observe is the model fee schedule and can be treated as binding on all. Consequently, when an arbitral tribunal fixes the fee in terms of the Fourth Schedule, the parties should not be permitted to object the fee fixation. It is the default fee, which can be charged by mutual consensus and not otherwise."

(emphasis supplied)

4 This being the law laid down by the Supreme Court, I am

afraid that Mr. Saluja is incorrect in his submission when he submits

that in the facts of the present case, the Arbitrators are bound to charge

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their fees as per the circular dated 1 st April, 2019. I say this because

admittedly the Arbitration Agreement between the parties, as found in

Clause 63 of the Contract Agreement No. C/CRS/BB-364/ATVM dated

1st August, 2011, does not set out any fee structure that is to be charged

by the Arbitral Tribunal. Even the order constituting the new Tribunal

does not mention the fee structure that the Arbitral Tribunal entitled to

charge. In these circumstances, as per the judgment of the Hon'ble

Supreme Court in the case of ONGC (supra), the Arbitral Tribunal

would be entitled to charge its fees as per the 4 th Schedule of the

Arbitration Act.

5 It is needless to clarify that these observations made by me

are peculiar to the facts and circumstances of the present case and shall

not be used as a precedent.

6 This order will be digitally signed by the Private

Secretary/Personal Assistant of this Court. All concerned will act on

production by fax or email of a digitally signed copy of this order.

                                        ( B. P. COLABAWALLA, J. )




Aswale                                                            page 7 of 7