When the Gavel Goes Silent: Bombay High Court Addresses Arbitrator's Duty Amidst Fee Impasse

In a significant ruling for the integrity of ad hoc arbitrations, the Bombay High Court has clarified the boundaries of an arbitrator’s power regarding fees and the consequential termination of their mandate. Justice Somasekhar Sundaresan, presiding over S.S. Trading Company Limited v. S.N.C. Trading Company , held that an arbitral tribunal cannot keep proceedings in "suspended animation" indefinitely due to fee disputes, effectively triggering the clock on the arbitral mandate.

The Breakdown: A Case of Frozen Proceedings

The dispute centers on a ‘Business Agreement’ for carrying and forwarding services, where the Petitioner alleged a fraud of approximately Rs. 1.05 crores by the Respondent. While the arbitration commenced in 2022, it quickly devolved into a procedural quagmire.

The Learned Sole Arbitrator, frustrated by delays and fee-related issues, suspended proceedings on April 20, 2023, stating, "This Tribunal stands suspended till funds are arranged to support the process." Despite the Petitioner’s willingness to pay the costs (under protest) to keep the case alive, the Arbitrator refused to set further hearing dates, leading to an effective stalemate that lasted months without a formal resignation.

The Legal Tug-of-War

The Petitioner invoked Sections 11 and 15 of the Arbitration and Conciliation Act, arguing that the Arbitrator had effectively abandoned the mandate. Conversely, the Respondent contested the substitution, refusing to bear the costs of a new arbitrator. The core concern was whether the tribunal’s decision to hold proceedings hostage over unilaterally increased fees amounted to a withdrawal from office under Section 15 or a failure to act under Section 14.

The Court’s Reasoning: The "Expiry" of Justice

Drawing heavy reliance on the Supreme Court ruling in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (2024) , Justice Sundaresan underscored that arbitrators lack the authority to unilaterally enforce fee hikes.

"Arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their own fees," the Justice noted, emphasizing that the Arbitral Tribunal cannot be a "judge of their own private claim against the parties." The court observed that by failing to either resign or proceed with the matter and exercise a lien on the final award under Section 39, the arbitrator allowed the statutory clock under Section 29A—which mandates completion within strict timelines—to expire.

Key Observations

The Court underscored the following principles regarding arbitrator conduct:

> "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."

> "If neither is done (resignation or proceeding further), a case would be made out to take a view... that the Arbitral Tribunal is unwilling to complete the arbitration proceedings without undue delay."

> "The Section 29A clock would be ticking in the meantime, and by sheer efflux of time, the mandate could come to an end."

A Path Forward

In a move towards modern, efficient adjudication, the High Court allowed the petition and directed Presolv360 , an independent Online Dispute Resolution (ODR) institution, to appoint a new sole arbitrator.

The court has mandated that, unless otherwise agreed, proceedings shall be conducted online. This directive not only resolves the immediate impasse between the trading companies but also serves as a warning to tribunals: the arbitration process is not a vessel that can be tethered at the will of the arbitrator when fee negotiations fail. By invoking the ODR route, the Bombay High Court has signaled a preference for tech-enabled, transparent administration over the traditional, often stagnant, ad hoc arbitration process.

The decision serves as a pivotal precedent, reminding both practitioners and arbitrators alike that the mandate to adjudicate must be balanced against the obligation to act without undue delay.

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Note: The arbitration proceedings will proceed under the supervision of Presolv360, with all parties directed to ensure that future correspondence occurs via electronic mode.