Challenge By NHAI On Fee Fixation By Arbitral Tribunal, Delhi High Court Holds That Tribunal Can Fix Its Fees

The Single Bench of Justice Sanjeev Narula held that where the Arbitral Tribunal has accepted its appointment outside the mandate of the International Centre for Alternative Dispute Resolution (ICADR), it is entitled to determine its fee and is not bound by ICADR Rules. The Court upheld the order of the Arbitral Tribunal fixing the arbitral fee separately for the claims and the counter-claims. The Court added that the Arbitral Tribunal's observations that the arbitral fee is to be determined in terms of the Fourth Schedule of the Arbitration and Conciliation Act, 1996 (A&C Act), does not mean that the fee has to be charged cumulatively on the claims and counter-claims.

The petitioner National Highway Authority of India (NHAI) and the respondent MEP Chennai Bypass Toll Road Pvt Ltd entered into a Concession Agreement. After a dispute arose between the parties, an Arbitral Tribunal was constituted and the dispute was referred for arbitration. The Arbitral Tribunal passed an order that it was not bound by ICADR Rules and thus determined the arbitral fees for the claims and the counter-claims, separately.

The Arbitral Tribunal passed an order suspending the claims and counter-claims of the respective parties on the ground that the parties had failed to clear arrears of arbitral fee. Thereafter, the Tribunal restored the counter-claims on payment of the arbitral fee by the respondent MEP Chennai. The Arbitral Tribunal, however, reiterated that NHAI's claims would remain suspended on account of its failure to clear the outstanding arbitral fee.

NHAI filed an application before the Arbitral Tribunal to revise the arbitral fee in accordance with the Fourth Schedule of the A&C Act. The Arbitral Tribunal dismissed the application holding that it was not bound by the Fourth Schedule of the A&C Act and that the arbitral fee was determined separately for the claims and the counter-claims, keeping in mind the facts and complexity of the dispute between the parties. The Arbitral Tribunal held that the counter-claim(s) should be treated separately from the claims in view of Order 8 Rule 6A of the Code of Civil Procedure, 1908.

Against the order passed by the Arbitral Tribunal, the petitioner NHAI filed a petition under Section 14 and Section 15(2) of the A&C Act to seek termination of the mandate of the Arbitral Tribunal on the ground that the Arbitral Tribunal had become de jure and de facto unable to perform its functions.

The petitioner NHAI submitted before the High Court that the Arbitral Tribunal had fixed the arbitral fee contrary to the terms of the agreement between the parties. NHAI contended that as per the agreement entered into between the parties, the arbitral fee was payable to the Arbitral Tribunal as per the ICADR Rules. Thus, NHAI averred that arbitral fee was payable on the dispute, i.e., the claim and the counter-claim, cumulatively and not separately.

Therefore, NHAI contended that the Tribunal could not charge fees separately on claims and counter-claims or charge a fee higher than what was agreed upon between the parties, in light of the interpretations given by the Court to the expression "amount in dispute"- as found in the Fourth Schedule of the A&C Act, which is pari materia to Schedule I of the ICADR Rules.

NHAI thus averred that the Arbitral Tribunal by charging a higher fee than what was agreed between the parties, had not accepted the mandate, and was therefore de jure unable to perform its functions.

The High Court observed that the Arbitral Tribunal had passed an order holding that although ICADR and ICADR Rules were mentioned in the arbitration clause, the arbitration clause did not mandate that the arbitral proceedings must be held under the aegis of ICADR. Also, the Court observed, the Arbitral Tribunal had noted that the parties mutually agreed that the Tribunal may adopt a procedure as deemed appropriate.

Thus, the Court held that the Arbitral Tribunal had clearly articulated the terms of appointment by holding that the arbitral proceedings were an ad hoc arbitration and that its appointment was outside the mandate of ICADR. The Court thus ruled that since the Arbitral Tribunal had accepted its appointment outside the mandate of ICADR, it was entitled to determine its fee and it was not bound by ICADR Rules.

The Court added that continuation of arbitral proceedings and periodical payments made by NHAI, without any protest or reservation, signified that NHAI had agreed and accepted the fee decided to be charged by the Arbitral Tribunal. The Court ruled that the Arbitral Tribunal's observations that the arbitral fee was to be determined in terms of Fourth Schedule of the A&C Act, does not mean that the fee has to be charged cumulatively on the claims and counter-claims.

The Court held that continuation of the arbitral proceedings since 2019 indicated that NHAI had explicitly accepted the terms of appointment of the Arbitral Tribunal. The Court added that the proceedings before the Arbitral Tribunal proceeded on the basis of NHAI's acceptance, who never questioned the fee fixed by the Arbitral Tribunal during the arbitral proceedings, until now. The Court therefore ruled that there was substantial delay in approaching the Court, which was a good ground to refuse interference by the Court.

The Court ruled that the Arbitral Tribunal was permitted to fix its fee, since its appointment was made by way of an ad hoc agreement between the parties.

The Court thus dismissed the petition.

Case Title: National Highway Authority of India versus MEP Chennai Bypass Toll Road Pvt. Ltd. & Anr.

Citation: 2022 LiveLaw (Del) 453

Dated: 09.05.2022 (Delhi High Court)

Counsel for the Petitioner: Mr. Santosh Kumar, Mr. Shashwat Singh and Mr. Daksh Arora, Advocates

Counsel for the Respondent: Mr. Tapesh Kumar Singh, Mr. Sukant Vikram and Mr. Aditya Pratap Singh, Advocates

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