High Court Refuses Intervention in Arbitrator Fee Fixation: Scope of Article 227 in Arbitration Defined by Calcutta High Court - 2025-04-29

Curbing Judicial Interference: Calcutta HC Rules on Arbitrator Fee Disputes

In a significant ruling aimed at upholding the sanctity of the Arbitration and Conciliation Act, 1996 , the Calcutta High Court has clarified the limitations of judicial intervention in ongoing arbitral proceedings. Justice Bibhas Ranjan De, presiding over a revision application filed by P and P Business Private Limited, held that Article 227 of the Constitution cannot be utilized to challenge an arbitrator’s fee structure or interim procedural orders while the arbitration is still ongoing.

The Conflict Over Fees

The dispute originated from a contractual agreement concerning a sand block in Bankura, West Bengal. As tensions escalated between P and P Business Private Limited and Marco Francesco Shoes (India) Private Limited, the matter moved to arbitration. The core contention arose when the sole arbitrator fixed a consolidated fee of Rs. 30,00,000, which the petitioner argued was a unilateral departure from the Fourth Schedule of the Arbitration and Conciliation Act.

When the petitioner failed to pay their portion of the fees, the arbitrator invoked Section 38(2) of the Act and suspended their counter-claim. The petitioner subsequently moved the High Court under Article 227, seeking relief from what they described as an "arbitrary and non-reasoned" order regarding remuneration and procedural dismissal.

Arguments from the Bar

The petitioner’s counsel, Mr. Partha Pratim Roy, emphasized that the arbitrator’s unilateral fixation of fees violated the core principle of "party autonomy." He argued that the Schedule IV guidelines were mandatory and that the court must exercise its supervisory jurisdiction under Article 227 when no other appellate remedy is explicitly provided under the Act.

Conversely, the respondent’s counsel, Mr. Sayak Ranjan Ganguly, maintained that the Arbitration Act is a self-contained "Complete Code." He argued that the Fourth Schedule serves as a model fee structure rather than a rigid mandate, and that the arbitrator was well within their statutory powers under Section 38 to suspend proceedings if fees were not deposited.

Key Observations

Reflecting on the statutory intent of the 1996 Act, the Court observed:

> "The power conferred under Art. 227 are extraordinary in nature but the Hon'ble Apex Court has time again reminded us all that such power should only be used with extreme circumspection so that the interference is only restricted to orders which are patently lacking in inherent jurisdiction."

Regarding the arbitrator's authority, the Court noted:

> "The Courts have constantly held that when parties have fixed a fee schedule, then Fourth Schedule to the Act of 1996 does not apply. This indicates that the contractual agreement between the parties takes precedence over the statutory fee structure."

On the issue of maintainability, the Court firmly stated:

> "In my humble opinion, the appropriate recourse available to the petitioner would have been to challenge the final arbitral award passed by the arbitrator including the issue of remuneration of the arbitrator through the mechanism enshrined in S.34 of the Act of 1996."

The Verdict: Finality Preserved

The Calcutta High Court dismissed the petition, confirming that the High Court does not act as an appellate body during the pendency of arbitration. Justice De reasoned that permitting parties to approach the High Court under Article 227 for every grievance would fundamentally derail the expedited nature of arbitral proceedings.

The judgment reinforces the principle that judicial interference should be minimal, restricted only to cases of patent illegality or absolute lack of jurisdiction. By directing the parties to await the final award and follow the statutory remedy under Section 34, the Court reaffirmed that the Arbitration Act provides a comprehensive framework that must be respected to ensure the efficiency and integrity of private dispute resolution in India.