When Arbitrators Hold Proceedings Hostage: High Court Breaks the Deadlock

The Bombay High Court has delivered a significant ruling clarifying the boundaries of an arbitrator's authority, specifically regarding the unilateral hiking of fees and the subsequent suspension of proceedings. In the case of S.S. Trading Company Limited v. S.N.C. Trading Company , Justice Somasekhar Sundaresan underscored that arbitral tribunals cannot indefinitely "suspend" proceedings due to fee disputes without consequence, effectively allowing the statutory clock under Section 29A of the Arbitration and Conciliation Act to terminate the arbitrator's mandate.

The Genesis of the Impasse

The dispute arose from a 2019 Business Agreement between a Carrying and Forwarding agent and a Consignee Agent. What began as a standard arbitration quickly devolved into a procedural quagmire. After entering the reference in 2022, the Sole Arbitrator initially imposed "fines" on the respondent for non-attendance. However, the situation shifted in April 2023, when the Arbitrator unilaterally suspended the proceedings, refusing to proceed unless "funds were arranged" by the claimant to meet hiked, non-consensual fee demands.

Stuck in "suspended animation," the Petitioner approached the High Court under Sections 11 and 15 of the Act, seeking the appointment of a substitute arbitrator after the previous tribunal refused to move forward without increased remuneration.

Legal Friction: Autonomy vs. Accountability

The core of the dispute highlighted a critical clash between party autonomy and the administrative power of an arbitrator. The court examined whether the tribunal’s withdrawal and the subsequent delay triggered a mandate termination.

Relying heavily on the Supreme Court’s recent ruling in ONGC vs. Afcons (2024) , the High Court reiterated that arbitrators lack the power to unilaterally impose binding fee structures. Justice Sundaresan noted that while tribunals may propose fees, they cannot hold proceedings hostage to force payment.

Key Observations from the Bench

The Court’s frustration with the tribunal's conduct was palpable in its findings:

• On Unilateral Fees : "Arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their own fees." ( Cited from ONGC vs. Afcons )
• On the Statutory Clock : "To hold on to it and also not conduct it, would inexorably lead to the time ticking under Section 29A to have its eventual inexorable effect."
• On Procedural Abandonment : "The Learned Arbitral Tribunal kept the proceedings suspended unless the unilaterally revised fees are paid... keeping the proceedings in suspended animation, also expired with the expiry of the mandate by operation of Section 29A."

The Resolution: Embracing ODR

In a forward-looking move to resolve the deadlock, the Court exercised its power to appoint a new tribunal. To bypass the pitfalls of traditional, slow-moving ad hoc arbitration, Justice Sundaresan directed that the disputes be administered by Presolv360 , an independent Online Dispute Resolution (ODR) institution.

The Court ordered that the arbitration be conducted primarily through electronic mode. This decision ensures that the mandate is not only revived but modernized, with a clear directive that the new arbitrator shall "take over the proceedings from the stage at which they are" to prevent further loss of time.

Implications for Future Disputes

This judgment serves as a stern warning to arbitral tribunals: the statutory mandate under Section 29A is mandatory and unforgiving. An arbitrator who chooses to suspend proceedings in a tug-of-war over fees risks the ipso facto expiration of their own appointment. For legal professionals and parties involved in ad hoc arbitrations, this ruling reaffirms that accountability is a two-way street—the tribunal is as bound by the timelines of the Act as the parties are by their contractual obligations.

The shift toward ODR platforms in such instances also signals a growing judicial preference for streamlined, technology-enabled arbitration to minimize the risk of human-led procedural delays.