2022 Supreme(SC) 878

SUPREME COURT OF INDIA
Dhananjaya Y Chandrachud, Surya Kant, Sanjiv Khanna, JJ.
Oil and Natural Gas Corporation Ltd. – Petitioner
Versus
Afcons Gunanusa JV – Respondent
Arbitration Petition (Civil) No. 05 of 2022 With Civil Appeal No 5880 of 2022 With Civil Appeal No 5879 of 2022 And With Miscellaneous Application Nos. 1990-1991 of 2019 in Special Leave Petition (Civil) Nos. 10021-10022 of 2017
Decided On : 30-08-2022

Arbitrators cannot unilaterally fix binding fees due to party autonomy and the nemo judex in causa sua doctrine. Under the Fourth Schedule, 'sum in dispute' is computed separately for claims and counter-claims, and the fee ceiling applies to each arbitrator individually.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 11(3A), 11(14), 31(8), 31A, 38, and 39; Code of Civil Procedure, 1908 - Order VIII Rules 6, 6-A, and 6-D - Determination of arbitrator’s fees - Whether an arbitrator can unilaterally fix binding fees - Meaning of “sum in dispute” in the Fourth Schedule - Applicability of the fee ceiling - Individual versus tribunal fee structure.

(B) Arbitrators do not possess the power to unilaterally issue binding and enforceable orders determining their own fees; such action violates the principles of party autonomy and the doctrine of prohibition of in rem suam decisions, as an arbitrator cannot be a judge of their own private claim regarding remuneration (Paras 99, 158(i)).

(C) The term “sum in dispute” in the Fourth Schedule refers to the amounts in a claim and counter-claim separately, not cumulatively. Consequently, fees and ceilings are calculated independently for each (Paras 136, 158(iii)).

(D) The ceiling of Rs. 30,00,000 in entry Serial No. 6 of the Fourth Schedule applies to the combined sum of the base amount and the variable amount, establishing the absolute maximum fee payable per arbitrator (Paras 155, 158(iv)). (E) The model fee specified in the Fourth Schedule is payable to each individual arbitrator and is not a cumulative sum to be divided among the members of a multi-member tribunal (Paras 157, 158(v)). (F) To ensure transparency and avoid conflict, fees should be finalized during preliminary hearings and incorporated into the Terms of Reference, serving as a tripartite agreement between the parties and the tribunal (Paras 104, 158(ii)).

Facts of the case:
Multiple disputes arose regarding the calculation and fixation of arbitrators' fees in ad hoc proceedings. Issues were raised concerning the unilateral revision of fees by tribunals, whether "sum in dispute" should aggregate claims and counter-claims, and whether the statutory fee ceiling applied to the entire tribunal or per individual arbitrator.

Findings of Court:
Arbitrators cannot unilaterally fix binding fees. The "sum in dispute" for fee calculation must be treated separately for claims and counter-claims. The statutory ceiling of Rs. 30 lakhs in the Fourth Schedule is the maximum total fee per individual arbitrator.

Issues: (i) Whether arbitrators are entitled to unilaterally determine their own fees; (ii) Whether “sum in dispute” in the Fourth Schedule means the cumulative total of claims and counter-claims; (iii) Whether the fee ceiling in Serial No. 6 applies to the variable amount only or the total fee; (iv) Whether the ceiling applies to the tribunal as a whole or per arbitrator.

Ratio Decidendi: Party autonomy is central to arbitration, and the doctrine of prohibition of in rem suam decisions prevents arbitrators from deciding their own remuneration. Statutory provisions allowing separate deposits for claims and counter-claims under Section 38 imply a similar separate calculation for fees. The legislative intent to curb exorbitant fees necessitates that the statutory ceiling be viewed as an absolute maximum.

Result: Mixed results across the petitions, including the direction to constitute a new arbitral tribunal in one case and the dismissal or allowance of others based on the interpreted fee guidelines.