Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2019 Supreme(SC) 759

SUPREME COURT OF INDIA
R. F. NARIMAN, SURYA KANT, JJ.
NATIONAL HIGHWAYS AUTHORITY OF INDIA Appellant(s)
VERSUS
GAYATRI JHANSI RAODWAYS LIMITED Respondent(s)
CIVIL APPEAL NO. 5383 OF 2019 (Arising out of SLP (C)No. 3211 of 2018) WITH
GAMMON ENGINEERS AND CONTRACTORS PVT. LTD. Appellant(s)
VERSUS
NATIONAL HIGHWAYS AUTHORITY OF INDIA Respondent(s)
CIVIL APPEAL NO. 5384 OF 2019 (Arising out of SLP (C) No. 22099 of 2018)
Decided On : 10-07-2019

Advocates Appeared:
For Petitioner(s):Mr. P. S. Narsimha, Mr. Manish K. Bishnoi, Mr. Archit Gupta, , Ms. Meenakshi Arora, Mr. Prashant Kumar, Ms. Awantika Manohar, M/s. AP & J Chambers, Advocates
For Respondent(s):Mr. P. S. Narsimha, Mr. Bharat Singh, Mr. Balendu Shekar, Ms. Sindoora VNL, Mr. Rahul Tanwani, Mr. Santosh Kumar - I, , Mr. Kaushik Laik, Mr. Angad Mehta, Mr. P. S. Sudheer, Ms. Anne Mathew, Mr. Sayid Marzook Bafaki, Advocates

IMPORTANT POINTS
Arbitrators can charge their fee as agreed by the parties and not as per fourth schedule of the Act.
Arbitrators refusing to be governed by fee schedule of the contract and holding fees as in fourth schedule of the Act to be chargeable in light of a High Court judgment do not become de jure unable to perform their functions.

Headnote:(a) Arbitration and Conciliation Act, 1996 - Section 31A - Costs - Awarded by the Arbitral Tribunal as part of its award in favour of one party to the proceedings and against the other - Not the fee of Arbitration Tribunal - Held, when parties fixed a fee schedule, fourth schedule of the act will not apply - However, the contract being old, the amended schedule of fee contained in Circular dated 01.06.2017, substituting the earlier fee schedule, will now operate - Arbitrators will be entitled to the fees in accordance with this schedule and not in accordance with the Fourth Schedule to the Arbitration Act. (Para 12, 15)
       (b) Arbitration and Conciliation Act, 1996 - Section 14 - Arbitrators refusing to be governed by fee schedule of the contract and holding fees as in fourth schedule of the Act to be chargeable - They did so in light of a High Court judgment - Arbitrators do not become de jure unable to perform their functions for this reason. (Para 13, 14)
       Facts of the case:
       A contract dated 07.02.2006 was entered into between the appellant and the respondent. It is sufficient to state, for the purpose of this case, that insofar as the dispute resolution is concerned, the arbitration clause referred the parties to the arbitration of three learned arbitrators -one to be appointed by each party and the third arbitrator to be appointed by the two arbitrators so appointed.
       Fee of the arbitrators was agreed as per schedule of the contract.
       The arbitrators fixed their fees as per the fourth schedule in the Act, 1996 deviating from the fee as contracted by the parties.
       The respondent filed an application u/s 14 of the Act, 1996 for terminating arbitration tribunal on the ground that the arbitrators had wilfully disregarded the agreement between the parties and were, therefore, de jure unable to act any further in the proceedings.
       Meanwhile, the Arbitral Tribunal passed yet another order stating that it had no objection to payment of any fees as would be decided in the pending proceedings by the High Court of Delhi.
       Finding of the Court:
       Arbitrators can charge their fee as agreed by the parties and not as per fourth schedule of the Act.
       Result: Appeal no. 5384 of 2019 allowed. Appeal no. 5383 of 2019 disposed of.

JUDGMENT

R. F. NARIMAN, J.

CIVIL APPEAL NO. 5384 OF 2019 (Arising out of SLP (C) No. 22099 of 2018)

Leave granted.

2. The brief facts of the present appeal are as follows:

A contract dated 07.02.2006 was entered into between the appellant and the respondent. It is sufficient to state, for the purpose of this case, that insofar as the dispute resolution is concerned, the arbitration clause referred the parties to the arbitration of three learned arbitrators -one to be appointed by each party and the third arbitrator to be appointed by the two arbitrators so appointed. The aforesaid contract contained paragraph 5 which reads as follows:

“5. The parties are desirous that the remuneration and other expenses payable to the Arbitrators as per arbitration clause for referring the dispute between the parties arising out of the said Contract to the Arbitral Tribunal for resolution in accordance with the procedure laid down therein, shall be as follows:
I. That the maximum limit for fee payable to each Arbitrator per day shall be Rs.5000/- subject to a maximum of Rs.1.5 lakh per case.
II That each Arbitrator shall be paid a reading fees of Rs.6000/- per case.
III That each Arbitrator shall be paid Rs.5000/- by way of secretarial assistant per case.
IV. That each Arbitrator shall be paid Rs.6000/- per case towards incidental charges like telephone, FAX, postage etc.
V. That other expenses based on actual against presentation of bills, shall also be reimbursed to each Arbitrator subject to the following ceiling (applicable for the days of hearing only)
(a) Travelling expenses – Economy class (By Air), First class AC (By train) and AC car (By road).
(b) Lodging and boarding – Rs.8000/-per day in Metro cities (Delhi, Mumbai, Chennai & Kolkata), Rs.5000/-per day in other cities OR Rs.2000/-per day if any Arbitrator makes his own arrangement.
(c) Local travel – Rs.700/- per day
VI Charges for publishing the Award – Maximum of Rs.10,000/-
VII That in exceptional cases, such as cases involving major legal implication/wider ramification/higher financial stakes etc. a special fees structure could be fixed in consultation with the Contractor/Supervisoin consultant and with the specific approval of the Chairman, NHAI before appointment of the Arbitrator.”

3. Mr. P. S. Narasimha, learned senior counsel appearing on behalf of the respondent, has informed us that the fee schedule that was so fixed, was fixed under a policy decision dated 31.05.2004 of the National Highways Authority of India (hereinafter referred to as ‘NHAI’ of brevity), a perusal of which would show that, this is, in fact, so.

4. As disputes arose between the parties, arbitration was invoked by the appellant long after the contract was entered into, i.e., on 23.05.2017. The respondent wrote a letter dated 14.07.2017 appointing Shri Sudesh Dhiman as its nominee arbitrator in which it reminded the arbitrator that the fee applicable is to be considered as per the policy circular of the NHAI dated 01.06.2017. This circular substituted amounts payable to the arbitrator as per the circular of 2004, whereby the arbitrators would now get for any claim under Rs.100 crores, Rs.25,000 per day together with enhanced other charges or a lumpsum fee of Rs.5 lakhs per case which includes counter claims, in place of the original fee structure.

5. The matter then came up before the Arbitral Tribunal, which was by then constituted, in which the Tribunal passed an order dated 23.08.2017, in which it stated as follows:

“1.12.1 Fees:
(a) The Claimant informed that there is no agreement between the parties regarding the fees of the AT.
(b) The Respondent requested that fees of the AT may be fixed in terms of the instructions issued by NHAI vide their circular dated 01.06.2017.
(c) The Tribunal considered the matter and decided that the fees of the AT shall be regulated as per provisions of the Fourth Schedule of the Arbitration and Conciliation (Amendment) Act, 2015.”

6. The respondent, against this order, moved an applica

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