Gujarat High Court To Examine Order Setting Aside Arbitral Award Over "Exorbitant Fees" Charged By Tribunal

The Gujarat High Court Thursday issued notice on a plea seeking stay of an order setting aside an international arbitral award on various grounds including that the fee charged by the arbitral tribunal was exorbitant.

A division bench of Chief Justice Sunita Agarwal and Justice Pranav Trivedi said, “Let a notice be issued to the Respondent, returnable date 28-8-2024…It is clarified that the interim application in the instant appeal will be considered on the next date fixed. Any transfer or alienation of the assets by the Respondent would be subject to the result of the order passed in the interim application”. 

The high court further permitted the appellant– an NRI based in Oman, to make direct service of the plea upon the respondent. The appellant moved the division bench in an appeal against a July 5 order of a single judge bench which set aside the arbitration award passed by a three member arbitral tribunal.

Appearing for the appellant, senior advocate S Muralidhar argued, “I'm the claimant, I invested Rs. 45 crore in an LLP of which respondent held shares and he promised that there are going to be projects for the defence sector.  I'm an NRI based in Oman. As things transpired, there were no such projects and the money I invested was siphoned off”.

The appellant invoked the arbitration in 2016 and made three claims– Rs. 22.19 crore for the “siphoned off money due to fraud” which Muralidhar said was unanimously allowed by the tribunal. Second claim pertained to loss of profit. The senior counsel said that while two members of the tribunal allowed this claim of Rs. 84 crore with interest the dissenting member denied it. The third claim pertained to costs which was also allowed, he added.

The senior counsel said that after the award was passed in April 2021, the respondents filed Section 34 petitions under the Arbitration and Conciliation Act in December 2021 seeking setting aside of the arbitral award which was listed before the single judge bench.

Muralidhar thereafter said, “The learned single judge agrees with the tribunal that fraud was committed and therefore concurs with the tribunal that Rs. 22.19 crore was rightly awarded to me. But strangely because the fees laid down by the Tribunal which strictly in terms of the ICC scales was unable to be paid by the respondents, he agrees with them that fee is exorbitant and therefore there is a bias. He ends up setting aside the award on the ground of bias. And not personal bias”.

Muralidhar said that “claimant (appellant) paid even respondents share of the fees” as far as the appellant's claims were concerned.

“Tribunal said that if you want your counterclaim to be heard you have to pay the fees. On that they (respondents) claim that the fees is exorbitant. Now the learned single judge sets aside the entire award only because the respondent was unable to afford the fee of arbitration in the counter claims,” the senior counsel added. 

Muralidhar said that as it is on the issue of interference with arbitral awards, courts have said that it is a “very narrow space” and the single judge bench's order is a “complete misinterpretation” of the Supreme Court's judgments on fees. He said that the fees was not exorbitant and the tribunal had gone by the ICC scale of fees.

“So nobody can complain that the ICC scale is unaffordable. And on my claims I have paid both my share and respondents which is permissible. So how can the award be set aside on this. I find this very strange. I can understand on the counter claims part but not on my claims,” Muralidhar said.

Stating that it shall hear the interim relief application after two weeks, the high court listed the matter on August 28. 

Case title: MANBHUPINDER SINGH ATWAL v/s NEERAJ KUMARPAL SHAH