When Arbitrators Hit "Pause": Bombay HC Clarifies Limits on Unilateral Fee Hikes

In a significant ruling for commercial arbitration in India, the Bombay High Court has reaffirmed that arbitrators cannot unilaterally impose fee increases on disputing parties. Justice Somasekhar Sundaresan, presiding over S.S. Trading Company Limited v. S.N.C. Trading Company , underscored that "held-hostage" arbitration proceedings—kept in suspended animation due to fee tantrums—are subject to the "inexorable" ticking clock of Section 29A , ultimately resulting in the expiration of the arbitrator’s mandate.

The Breakdown of a Business Impasse

The dispute arose from a 2019 Business Agreement between S.S. Trading Company Limited and S.N.C. Trading Company. While the arbitration initially began, it quickly devolved into a standoff. After the Sole Arbitrator demanded a "fine" from the Respondent and then unilaterally suspended proceedings on April 20, 2023, citing a lack of funds to continue the process, the Petitioner was left in limbo. Despite paying portion of the disputed fees under protest, the Arbitrator refused to resume hearings without further financial arrangements, effectively grounding the case.

Legal Analysis: The "No-Go" Zone for Arbitrators

Justice Sundaresan’s analysis turned on the principles set by the Supreme Court in ONGC vs. Afcons (2024) . The High Court clarified that while arbitrators are entitled to remuneration, they cannot act as judges in their own cause regarding fee enhancements.

The Court noted:

* Arbitral Autonomy vs. Prohibitions: An arbitrator cannot unilaterally issue binding orders determining their own fees in the absence of party consent.

* The Section 29A Clock: Even if a tribunal feels aggrieved by fee defaults, keeping proceedings in "suspended animation" does not stop the clock. Once statutory deadlines for completing proceedings ( Section 29A ) pass without extensions, the mandate terminates by operation of law.

* The Remedy: If an arbitrator is unhappy with fees, they have only two professional paths: resign or proceed to pass an award and exercise a statutory lien under Section 39 . Abandoning the board is not an option.

Key Observations from the Bench

The judgment offers a firm rebuke of the "pay or we stay paused" approach:

> "The Learned Arbitral Tribunal could have resigned having been unhappy with the fee default. This step was not taken. The Learned Arbitral Tribunal kept the proceedings suspended unless the unilaterally revised fees are paid... Doing neither, and keeping the proceedings in suspended animation, also expired with the expiry of the mandate by operation of Section 29A of the Act."

> "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..." ( Citing ONGC vs. Afcons )

> "If the parties do not accept the fee proposal from the Arbitral Tribunal, the Arbitral Tribunal could well take a view that the arbitration proceedings are not worth its while."

A Shift to Online Dispute Resolution (ODR)

Finding the mandate of the original arbitrator had reached an involuntary termination, the Court allowed the Petitioner’s request for a substitute. To modernize the process and bypass the inefficiencies of the past, the Court directed Presolv360 , an independent ODR institution, to appoint a new sole arbitrator.

Key directions from the Court include:

* Online Mandate: All proceedings will be conducted through electronic mode to ensure accessibility.

* Accountability: The new arbitrator is tasked with continuing the proceedings from the stage at which they were left, ensuring that previous procedural efforts are not entirely wasted.

* Equal Burden: Costs and fees remain a shared burden for the parties, subject to final adjudication in the eventual award.

This decision serves as a stern reminder: the privilege of serving as an arbitrator comes with the duty to move the needle. When the process stalls due to external financial grievances, the protection of the law will shift toward facilitating a resolution rather than protecting the stalled tribunal.