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High Court Of Calcutta
S. K. SEN
BURN STANDARD COMPANY LTD. - Appellant
Versus
MC DERMOTT INTERNATIONAL INC. - Respondent
Matter 2270 Of
Decided On : 03/20/1996
ARBITRATION - FEES AND COSTS - ICC RULES - EXCESSIVE FEES - JURISDICTION OF COURT - REVOCATION OF AUTHORITY OF ARBITRATORS - SECTION 5 AND 12 OF ARBITRATION ACT, 1940.
Fact of the Case:
The petitioner challenged the validity of the arbitration agreement in the Court on the ground that the same was violative of the provisions of the Foreign Exchange Regulation Act. The said agreement was, however, held by the Court to be not violative of the said Act and that the same was also held to be valid. The said judgment and decision was challenged in the Supreme Court and the Supreme Court also took the same view.
Finding of the Court:
The petitioner's advocate requested the Chairman and the arbitrators to furnish a certified copy of its decision whereby it fixed the said advance on costs as it desired to challenge the same in Court. The respondent No. 2 intimated the Advocate for the petitioner that there was no basis "upon which the Court's decision of January 5, 1994 can be challenged before this Court" and declined to furnish the certified copy of its said decision.
Issues: 1. Whether the domestic Court can intervene and hold that such demand is excessive, exorbitant and extortionate, despite the fixation of scale of fees by the ICC Rules? 2. Whether demand of such excessive fees would amount to misconduct, and if so, whether the Court can revoke the authority of the arbitrators under Section 5 of the Arbitration Act, 1940 and appoint new Arbitrators under Section 12 of the said Act?
Ratio Decidendi: 1. The Court has jurisdiction and is empowered to intervene despite the existence of ICC Rules to regulate the arbitration proceedings by the domestic law i.e. Indian Law, and to grant remedies as may be necessary to suit the justice of the case. 2. Demand of such excessive, exorbitant and extortionate fees amounts to denial/refusal of justice and inequitable. Demand of such fees would fall under the category of "exceptional Circumstances" which is one of the grounds held by Supreme Court for revocation of authority of the arbitrators.
Final Decision: The application filed by the petitioner was dismissed.
( 1 ) THIS is an application under Sections 5 and 12 of the Arbitration Act, 1940 inter alia for (1) leave to revoke the authority of the arbitrators and appointment of arbitrators in their place and stead [prayer (b)]; (ii) injunction restraining the respondents from proceeding with the arbitration pending decision of the application [prayer (c) and (d)]. Prayer (a) has not been pressed.
( 2 ) IT is not in dispute that the Technical Collaboration Aggreement containing the Arbitration Clause is valid and binding between the parties. The said Clause also provides that the conduct of arbitrator including fees for the same will be governed by the ICC, rules.
( 3 ) THE petitioner challenged the validity of the said agreement in this Court on the ground that the same is violative of the provision of the Foreign Exchange Regulation Act. The said agreement was however held by me to be not violative of the said Act and that the same was also held to be valid. The said judgment and decision was challenged in the Supreme Court and the Supreme Court also took the same view in the case of Burn Standard Company Ltd. v. M/s. Mc Dermott International Inc. reported in AIR 1991 SC 1191.
( 4 ) ON Nov. 17, 1988 the respondent No. 1 made a request to the Court of Arbitration containing the statement of claim. The respondent No. 1 nominated Prakash Narain, respondent No. 4, since deceased, as its arbitrator.
( 5 ) ON Feb. 5, 1990 the petitioner appointed the respondent No. 5 as its arbitrator. By its letter dated August 14, 1990 the respondent No. 2 refused to accept the nomination of respondent No. 5 and fixed U. S. $ 60,000 as advance on costs subject to later adjustments and requested the petitioner and the respondent No. 1 to pay U. S. $ 15,000 each.
( 6 ) THE petitioner challenged the refusal of the respondent No. 2 to accept the nomination. By a judgment and order dated May 14, 1991 in the case of Burn Standard Company Ltd. v. International Chamber of Commerce (Court of Arbitration) this Court having regard to the statements made on behalf of the petitioner recorded in petition directed the respondent No. 2 to reconsider its decision not to accept the nomination of the respondent No. 4. By its letter dated June 24, 1991 the respondent No. 2 accepted the nomination of respondent No. 5.
( 7 ) BY a letter dated June 24, 1991 the respondent No 2 in terms of Article 9. 3 read with Appendix III fixed 0. 6 $ 60. 000 as advance on costs of arbitration and directed each party to pay U. S. $ 15,000. By its letter dated August 9, 1991 the respondent No. 2 repeated its claim for payment of the fees and also appointed the respondent No. 3 as the Chairman of the arbitral tribunal. The petitioner and the respondent No. 1 paid U. S. $ 15,000 each and this fact was recorded in a letter dated Sept. 23, 1991 of the respondent No. 2.
( 8 ) ON March 19, 1992 the petitioner filed counter statement denying the allegations of the Statement of Claim and counter claim of Rs. 32. 42 crores.
( 9 ) THE respondent No. 3 drew terms of reference. At a meeting of the arbitration held on August 21, 1993 the terms of reference was settled as would appear from the minutes of the meeting of the arbitrators. This was the only meeting held by the arbitrators at that point of time.
( 10 ) ON Oct. 13, 1993 the respondent No. 2 estimated U. S. $ 75,000 and U. S. $ 267,000 as advance on costs respectively payable by the respondent No. 1 and the petitioner subject to later adjustment. By its letter dated January 6, 1994 the respondent No. 2 intimated that it decided to fix the said amount as advance on costs of arbitration and after adjustment of U. S. $ 15,000 demanded payment of U. S. $ 60,000 and U. S. $ 252,000 respectively from the respondent No. 1 and the petitioner.
( 11 ) THE petitioner's advocate by its letter dated January 7, 1994 requested the said Chairman and the arbitrators to furnish the certified copy of its decision whereby it fixed the said ad
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