Statutory Ceiling Limit is for an Individual Arbitrator, Not for The Arbitral Tribunal

In the case of Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV[1], the Hon’ble Supreme Court of India, comprising of Justice Dr D.Y. Chandrachud, Surya Kant, and Sanjiv Khanna, JJ, determined the following issues: 

• Whether the arbitrator(s) are entitled to unilaterally determine their fees.
• Whether the term ‘sum in dispute’ in the Fourth Schedule to the Arbitration Act means the cumulative total of the amounts of the claim and counterclaim.
• Whether the ceiling of INR 30,00,000/- in the entry at Serial No 6 of the Fourth Schedule of the Arbitration Act applies only to the variable amount of the fee or the entire fee amount.
• Whether the ceiling of INR 30,00,000/- applies as a cumulative fee payable to the arbitral tribunal or it represents the fee payable to each arbitrator.

In 2009, the Oil and Natural Gas Corporation Limited (Petitioner), and Afcons Gunanusa JV (Respondent) entered into a contract for the construction of an ICP-R Platform which is alleged to have been completed in December 2012. The respondent invoked arbitration in July 2015 due to ongoing disputes and differences between the parties. Justice Gyan Sudha Mishra and Justice Mukul Mudgal were appointed as the arbitrators by the Petitioner and the Respondent respectively. The arbitrators appointed Justice GN Ray as the presiding arbitrator. The arbitral tribunal, vide its orders in August 2016 and May 2018, directed the parties to deposit 25% of the arbitrators’ fee and finalize a fee respectively to the tune of INR 1,50,000/- for each arbitrator for each sitting of a three-hour duration; reading fee or conference fee to be indicated at a later stage. ONGC filed an application before the arbitral tribunal for modifying its order issued in May 2018 and the same was rejected as the tribunal held that the fee was set based on the amount paid in arbitrations of such nature. However, the tribunal agreed to reduce the fee of each arbitrator to INR 1,00,000/- per sitting. Thereafter, ONGC filed a petition under Section 14 read with Section 15 of the Arbitration Act before the Hon’ble Bombay High Court for the termination of the mandate of the arbitral tribunal and the substitution of a fresh set of arbitrators. The said petition was dismissed by the Bombay High Court vide its order in October 2021 due to a lack of jurisdiction since the arbitration was an international commercial arbitration within the meaning of Section 2(f) of the Arbitration Act. Hence, the present petition was filed by ONGC.

The Hon’ble Court, while referring to Union of India v. Singh Builders^[2], Mithilesh Kumari v. Prem Behari Khare^[3] and LCI 246th Report^[4], held that:

• Arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their fees.
• The term ― ‘sum in dispute’ in the Fourth Schedule of the Arbitration Act refers to the sum in dispute in a claim and counter-claim separately, and not cumulatively.
• The ceiling of INR 30,00,000 in the entry at Serial No 6 of the Fourth Schedule is applicable to the sum of the base amount (INR 19,87,500/-) and the variable amount over and above it.
• Consequently, the highest fee payable shall be INR 30,00,000; and this ceiling is applicable to each arbitrator, and not the arbitral tribunal as a whole. Also, a sole arbitrator shall be paid 25% over and above this amount under the Note to the Fourth Schedule.

[1]  2022 (SC)723

[2] (2009) 4 SCC 523

[3] (1989) 2 SCC 95

[4] Law Commission of India, ‘Amendments to the Arbitration and Conciliation Act 1996’ (246th Report, August 2014) accessed on 08 September 2022 (“LCI 246th Report”)

–Harjodh Singh Panesar, Associate