Unilateral Fee Fixation and Article 227 Intervention: Calcutta High Court Reaffirms Party Autonomy in Arbitration - 2025-04-29

Bridging the Gap: Calcutta High Court Limits Judicial Interference in Arbitrator Fee Disputes

In a significant ruling aimed at preserving the sanctity of the arbitral process, the Calcutta High Court has clarified the extent of judicial interference permissible under Article 227 of the Constitution. Justice Bibhas Ranjan De, presiding over P and P Business Private Limited v. Marco Francesco Shoes (India) Private Limited , held that an arbitrator’s fee fixation, when rooted in party autonomy, remains outside the immediate supervisory reach of the High Court.

The Sand Block Saga: A Dispute Over Costs

The case emerged from a commercial dispute involving a sand mining lease in Gopalpur, Bankura. Following a disagreement between P and P Business Private Limited (Petitioner) and Marco Francesco Shoes (India) Private Limited (Respondent), the matter moved to arbitration.

While the proceedings were underway, the Ld. Sole Arbitrator fixed a lumpsum fee of Rs. 30 Lakhs. The Petitioner contested this, arguing that it violated the Fourth Schedule of the Arbitration and Conciliation Act, 1996, which would have capped the remuneration at approximately Rs. 9.9 Lakhs. When the Petitioner refused to pay its share, the Arbitrator suspended the counter-claim, leading the Petitioner to approach the High Court via a revision application under Article 227.

Arguments from the Bar

The Petitioner contended that the unilateral fee fixation by the Arbitrator bypassed the "party autonomy" principle and exceeded his jurisdiction. Counsel argued that without a specific remedy under Sections 34 or 37 of the Act, Article 227 was the only path to prevent a miscarriage of justice.

Conversely, the Respondent maintained that the 1996 Act operates as a "complete Code." They argued that the Fourth Schedule serves as a model rather than a mandatory mandate and that Section 38(2) clearly empowers an arbitrator to suspend proceedings—or claims—if required deposits are not paid.

Legal Analysis: The High Court’s Stance

Justice Bibhas Ranjan De emphasized that the power under Article 227 is extraordinary and must be exercised with "extreme circumspection." The Court noted that:

1. Party Autonomy Prevails : The Fourth Schedule of the Act does not override agreements made between parties and the arbitrator. Where parties have agreed to a fee structure—or have acquiesced to the arbitrator's proposal—the model schedule does not apply.
2. Statutory Remedies : The Court clarified that dissatisfaction with an arbitrator's fee is not a ground for immediate intervention under Article 227. Instead, parties are expected to raise these issues during the proceedings under Section 16(3) or reserve them for a challenge against the final award under Section 34.
3. Operational Necessity : The Court upheld the Arbitrator's decision to suspend the counter-claim, citing the clear authority provided by Section 38(2) of the Act.

Key Observations

The judgment provides essential guidance on the limits of court supervision:

• "The contractual agreement regarding fees takes precedence over the statutory provisions of the Fourth Schedule, allowing for flexibility in remuneration as long as it aligns with the parties agreement."
• "Power under Art.227 are extra ordinary in nature but the Hon'ble Apex Court has time again reminded us all that such power should only be used with extreme circumspection."
• "The arbitrator has ample jurisdiction to decide on matters relating to his remuneration including the authority to rule on any objection raised by the parties regarding his fees."

Final Verdict: A Push for Finality

The Calcutta High Court ultimately dismissed the revision application, ruling that the Petitioner’s attempt to bypass the statutory framework was legally untenable. The Court clarified that while the Arbitrator in the original case had since passed away, this did not justify the cancellation of the proceedings. The parties were granted the liberty to pursue their claims through appropriate legal channels at the conclusion of the arbitration, reinforcing a clear judicial preference for minimizing intervention in ongoing arbitral disputes.

This ruling serves as a stern reminder that the path to challenging the cost of justice in arbitration lies within the Act itself, rather than in the constitutional supervisory jurisdiction of the High Court.