Arbitral Fee Under Fourth Schedule Based On Aggregate Value Of Claim & Counter-Claim : Delhi High Court

The Delhi High Court has observed that the term "sum in dispute" provided in the 4th Schedule to the Arbitration and Conciliation Act, 1996 has to be interpreted so as to include the aggregate value of the claims as well as counter claims.

The High Court disagreed with the Arbitrator's view that the claims and counter-claims have to be assessed separately for calculation of fee as per the fee scale provided under the 4th Schedule.

"The term "sum in dispute", would take in its ambit claims as well as counter claims. The said expression "sum in dispute" used in the 4th Schedule to the Act has to be given its ordinary meaning, to include the total amount of claim made by the claimant, and the total amount of counter claim made by the respondent", a bench comprising Acting Chief Justice Vipin Sanghi and Justice Amit Bansal observed.

The bench further held that Sections 31(8) and 31A will have no application where the fee has been fixed as per the 4th Schedule.

"Sections 31(8) and Section 31A would have no application where the fees of the arbitral tribunal has been fixed by agreement between the parties... Similarly, where the fees has been fixed by the Court in terms of 4th Schedule to the Act, as in the case at hand, Sections 38(1), 31(8) and Section 31A would have no application. The term "sum in dispute" provided in the 4th Schedule to the Act has to be interpreted so as to include the aggregate value of the claims as well as counter claims".

The judgment arose pursuant to a hearing before the Arbitral Tribunal on 26th November, 2020, where the counsels for parties were requested to address the Tribunal on the issue whether counter claim(s) are to be included in the expression "sum in dispute" appearing in the 4th Schedule of the Act or the amount thereof is to be separately considered in terms of proviso to Section 38(1) of the Act.

The Arbitral Tribunal had then passed the order dated 27th January, 2021 holding that the applicable arbitral fee, as in the present matter has to be assessed separately for the claim, and counter claim. After making the said observations and fixing the arbitral fee separately for claims and counter claims, the Arbitral Tribunal gave liberty to the parties to approach the High Court for seeking clarification in the matter of fixation of arbitral fees.

Accordingly, an application was filed on behalf of the appellant seeking clarification with regards to the fixation of arbitral fee.

The common submission of both the parties was that the judgment of a single judge of the High Court in case titled Delhi State Industrial Infrastructure Development Corporation Ltd. v. Bawana Infra Development Pvt. Ltd., 2018 had laid down the correct law with regard to fixation of arbitral fees under the 4th Schedule to the Act, when the Arbitral Tribunal is adjudicating a claim as well as counter claim.

It was also submitted that Sections 38(1) and 31A of the Act would come into play, only when the Arbitral Tribunal is itself fixing the fees, and not when the fees of the Arbitral Tribunal has been fixed by the Court in terms of 4th Schedule to the Act.

The Court agreed with the observations of the Single Judge which held that the term "sum in dispute", would take in its ambit claims as well as counter claims.

"The said expression "sum in dispute" used in the 4th Schedule to the Act has to be given its ordinary meaning, to include the total amount of claim made by the claimant, and the total amount of counter claim made by the respondent. We concur with the finding of the Single Judge that the proviso to Section 38(1) of the Act can only apply when the Arbitral Tribunal fixes its own fees, as in the case of most ad hoc arbitrations," the Court said.

It added "The said proviso cannot apply when the fees of the Arbitral Tribunal has been fixed in terms of 4th Schedule to the Act. Therefore, Section 38(1) of the Act and its proviso cannot be resorted to while interpreting the term "sum in dispute", as occurring in the 4th Schedule to the Act."

The Court also noted that unlike a civil suit, where a counter claim could be in respect of a totally different transaction, in the context of arbitral proceedings, the counter claim has to necessarily be in relation to the arbitration agreement. Therefore, the Court said that in the context of arbitration proceedings it may not be correct to say that counter claim would be an "independent" cause of action. It seems from the same subject matter or transaction.

Accordingly, the Court disposed of the plea by observing that Sections 31(8) and Section 31A of the Act would have no application where the fees of the arbitral tribunal has been fixed by agreement between the parties. It added that where the fees has been fixed by the Court in terms of 4th Schedule to the Act, as in the present matter, Sections 38(1), 31(8) and Section 31A would have no application.

Also Read : Arbitrator's Fees : Supreme Court To Hear Issues Relating To 4th Schedule Of Arbitration Act

Case Title: JIVANLAL JOITARAM PATEL v. NATIONAL HIGHWAYS AUTHORITY OF INDIA

Citation: 2022 LiveLaw (Del) 202

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