Ahluwalia Contracts India Limited V. Union of India through Executive Engineer CPWD & Anr O.M.P. (Misc) (Comm) 477 of 2024

In the present case the Hon’ble Delhi High Court has decided an interesting issue as to whether the ceiling of the Arbitral Tribunal fees under the Schedule IV was to be calculated on the basis of claims and counterclaims together or separately for the claims and counterclaim. 

The facts of the present case are that the Hon’ble Court had appointed a sole arbitrator and had directed that the Arbitrator’s fee would be determined in terms of the Schedule IV of the Arbitration & Conciliation Act, 1996 (“1996 Act”). After the hearing in the matter was concluded, Ahluwalia Contracts India Limited (“Petitioner) filed a Petition under section 39(2) of the 1996 Act seeking directions to the sole arbitrator to deliver the arbitral award in the matter. The Ld. Arbitrator had passed an order dated 12.08.2023 in the said matter, and the said order records the final computation of the arbitrator’s fees. The Ld. Sole Arbitrator in the said order had further recorded that the computation of the fees was based on the judgement dated 10.07.2020 passed by the Hon’ble Delhi High Court in Rail Vikas Nigam Limited V. Simplex Infrastructures Limited. According to the said judgment, the upper limit of the fees payable to the sole Arbitrator under the Fourth Schedule of the 1996 Act is Rs. 62,34,375. This interpretation of the Fourth Schedule of the 1996 Act was prevalent on 24.11.2020 when the said matter was assigned to the Ld. Sole Arbitrator. Furthermore, the Hon’ble Supreme Court’s Judgment dated 30.08.2022 in ONGC V. Afcons Gunanusa JV is a subsequent judgment and applicable retrospectively.

The Hon’ble Delhi High Court observed that the judgment in the matter of Rail Vikas Nigam Limited V. Simplex Infrastructures Limited provided that the upper limit of fees payable to a sole arbitrator as per the Fourth Schedule would be calculated assuming that the sum in dispute would be consideration of the claims and counterclaims together. As such the maximum fee under the Fourth Schedule of the 1996 Act, would be Rs. 62,34,375. The said judgement was subsequently, overruled by ONGC V. Afcons Gunanusa JV which provided that the ceiling would be calculated separately for claims and separately for counterclaims. The Hon’ble Delhi High Court observed that the Ld. Sole Arbitrator passed the aforesaid order in August 2023. However, the judgment in the matter of ONGC V. Afcons Gunanusa JV had already declared that the Rail Vikas Nigam Limited V. Simplex Infrastructures Limited was not good law. Therefore, the Ld. Arbitrator erred in relying upon a judgment which had already been set aside.

Arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their own fees. Any party can file a Petition under Section 39(2) of the 1996 Act, to seek review of the fees demanded by the arbitrators. Thus, the Hon’ble Delhi High Court held that the Ld. Sole Arbitrator had erroneously applied the judgment in the matter of Rail Vikas Nigam Limited V. Simplex Infrastructures Limited. The ceiling limit for both claims and counter claims needs to be applied separately and on the basis of this calculation, some amounts were directed to be refunded to the Petitioner.

Dated: October 19, 2024

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