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IN THE HIGH COURT OF DELHI AT NEW DELHI
DINESH KUMAR SHARMA, J.
SPML Infra Limited - Petitioner
Versus
Power Grid Corporation of India Limited - Respondent
O.M.P.(Misc.)(Comm.) No. 286 of 2023, O.M.P. (T) (Comm.) No. 79 of 2023, I.A. No. 1900 of 2024
Decided On : 27-11-2024
(A) Arbitration and Conciliation Act, 1996 - Section 14(1) - Unilateral enhancement of fees - The court held that arbitrators cannot unilaterally determine their fees without party consent, reaffirming party autonomy in arbitration agreements. The order enhancing fees was set aside as it violated this principle. (Paras 26, 28, 48)
(B) Bias - The court ruled that allegations of bias must be raised before the tribunal at the earliest opportunity, and failure to do so renders such claims unsustainable. (Paras 39, 48)
Facts of the case:
The petitioner challenged the unilateral enhancement of fees by the Arbitral Tribunal, asserting bias and seeking substitution of arbitrators. The Tribunal had previously ordered an increase in fees without consent from the petitioner.
Findings of Court:
The unilateral enhancement of fees was set aside, and the mandate of the tribunal was extended until 30.03.2025. The parties were directed to appear before the tribunal for further proceedings.
Issues: The main issues were the legality of the unilateral fee enhancement and the alleged bias of the arbitrators.
Ratio Decidendi: The court emphasized that arbitrators must adhere to the agreed fee structure and cannot impose changes without mutual consent. Allegations of bias must be timely raised before the tribunal.
Result: The unilateral enhancement of fees was set aside, and the tribunal's mandate was extended.
JUDGMENT :
Dinesh Kumar Sharma, J.
1. This judgment proposes to dispose of both the above said petitions by a common judgment. O.M.P.(MISC.)(COMM.) 286/2023 has been filed with the following prayer :
2. Set Aside the impugned Order dated 01.06.2023 of the Arbitral Tribunal in the above captioned case;
3. Set Aside the impugned Order dated 28.10.2022 of the Arbitral Tribunal in the above captioned case;
4. Pass a direction to the Arbitral Tribunal for conducting and concluding the Arbitration for the Original Agreed Fees as per the Fourth Schedule.
5. Stay the proceedings before the Arbitral Tribunal till the present application pertaining to prayers 1, 2 and 3 has been adjudicated upon by this Hon'ble Court; and
6. Pass such other or further order as this Hon'ble Court may deem fit and proper in favour of the Petitioner in the facts and circumstances of the present case.”
2. O.M.P. (T) (COMM.) 79/2023 has been filed with the following prayer :
2. Stay the proceedings before the Arbitral Tribunal till the present application has been adjudicated upon by this Hon’ble Court; and
3. Pass such other or further order as this Hon’ble Court may deem fit and proper in favour of the Petitioner in the facts and circumstances of the present case.”
3. The Petitioner/Claimant herein i.e. SPML INFRA LTD formerly known as Subhash Projects and Marketing Ltd., is a public limited company incorporated under the provisions of the Companies Act, 1956. The Respondent herein, i.e. Power Grid Corporation of India Limited is also a company incorporated under the provisions of the Companies Act, 1956.
4. Pursuant to the dispute having arisen between the parties with respect to the Rural Electrification Works (RE) in Kaimur District of Bihar, under the Government of India Scheme of Rajiv Gandhi Grameen Vidyuktikaran Yojana (RGGVY), an Arbitral Tribunal consisting Hon’ble Mr. Justice Deepak Verma (Presiding Arbitrator), Hon’ble Mr. Justice Dilip Rao saheb Deshmukh (Co-Arbitrator) and Hon’ble Mr. Justice Krishn Kumar Lahoti (Co-Arbitrator) was constituted.
5. In the preliminary hearing held on 02.08.2018 it was decided that the fees of the Ld. Tribunal shall be paid in accordance with the Fourth Schedule of the of Arbitration and Conciliation Act, 1996 (hereinafter referred as A&C Act) along with an additional 10% of fees to the Presiding Arbitrator for administrative expenses, by both the parties. It was also decided that fee for counter claim and reading fees shall be fixed at a later stage.
6. During the proceedings before the Ld. Arbitral Tribunal, an application under Section 29A of A&C Act was filed before this Court, seeking extension of mandate of Arbitration beyond 17.12.2019. The High Court vide order dated 06.01.2020 passed in O.M.P (Misc.) (Comm) 546/2019, extended the mandate of Arbitration, by a period of 1-year w.e.f. 17.12.2019, which was further extended from time to time.
7. Vide order dated 28.10.2022, the Ld. Arbitral Tribunal directed both parties to pay a further fee of Rs.15,00,000/- to each member of the Tribunal, and an additional 10% to the Presiding Arbitrator. The increased fee was directed as the matter was being heard for long number of dates apart from the time spent on perusing the voluminous record.
8. The petitioner aggrieved of order dated 28.10.2022, filed an application bearing No. O.M.P.(MISC.) (COMM.) 94/2023 under Section 29A(1) read with 29A(3), seeking extension of mandate of the Arbitral Tribunal and substitution of Arbitral Tribunal on the ground of unilateral enhancement of fee. This Court vide order dated 27.03.2023 granted 12 months extension of the mandate
Arbitrators cannot unilaterally enhance fees without party consent, reaffirming the principle of party autonomy in arbitration agreements.
Arbitration fees must adhere strictly to the terms of the Arbitration Agreement, and unilateral alterations by the Tribunal are impermissible.
Arbitrators must be impartial and capable of performing their duties; prolonged inaction in arbitration proceedings justifies termination of their mandate.
The main legal point established in the judgment is that the grounds for termination of an arbitrator's mandate must satisfy the circumstances laid down under the Act and the precedents set by the Ho....
The arbitral Tribunal was entitled to fix its fee as its appointment was made by way of an ad hoc agreement between the parties.
Arbitral Tribunal consisting of officers of State have become ineligible to become Arbitrators and to continue as Arbitrators.
The challenge for the appointment of Arbitrator under Section 13 of the Act can only be made along with the final award under Section 34.
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