In a significant legal case before the Supreme Court of India, the dispute over the NHAI fee schedule came to a crucial decision. The case involved Mr. P. S. Narasimha raising concerns about the fee structure set under the NHAI policy decision dated 31.05.2004. Find out more about the Court’s ruling and its impact on arbitration fees in this detailed summary.
Facts
- The respondent filed an application under Section 14 of the Arbitration and Conciliation Act, 1996, to terminate the mandate of the arbitrators, alleging wilful disregard of the agreement.
- The respondent requested that fees be fixed in accordance with the NHAI circular dated 01.06.2017.
- The Tribunal decided to regulate fees as per the Fourth Schedule of the Arbitration and Conciliation (Amendment) Act, 2015.
- The respondent appointed Shri Sudesh Dhiman as its nominee arbitrator, reminding the arbitrator to consider fees as per the NHAI policy circular of 01.06.2017.
- Disputes arose regarding the arbitration fees, with the Tribunal ultimately deciding that there was no prior agreement on fees.
- The arbitration circular of 2017 replaced the previous fee structure, providing specific amounts for arbitrators based on claim amounts.
- The Tribunal’s decision on fee regulation was based on the absence of an agreement and the invocation of arbitration by the appellant after the contract was initiated.
- Arbitral Tribunal reiterated that the fees fixed in the 1st hearing shall be followed.
- Arbitral Tribunal passed another order stating no objection to payment of any fees as decided by the High Court.
- Learned Single Judge referred to clause 5 of the agreement between the parties.
- Fourth Schedule of the Arbitration Act is not mandatory according to the learned Single Judge.
- The terms laid down in the agreement regarding arbitrator’s fees must be followed as per the learned Single Judge.
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Arguments
- The respondent, Mr. P. S. Narasimha, informed the court about the fee schedule being fixed under a policy decision dated 31.05.2004 of NHAI.
- The fee schedule was set in accordance with the policy decision of NHAI.
- The policy decision from NHAI dated 31.05.2004 was the basis for fixing the fee schedule.
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Analysis
- Paragraph 5 of the contract specifically outlines the parties’ intention regarding remuneration and expenses payable to the Arbitrators for referring disputes to the Arbitral Tribunal.
- The clause emphasizes the importance of resolving disputes through arbitration in accordance with the specified procedure.
- The parties agree to abide by the arbitration clause for resolving any disputes arising from the contract.
- The fee schedule in the Circular dated 01.06.2017 now supersedes the earlier fee schedule based on a 2004 circular.
- Arbitrators are entitled to charge fees according to the new fee schedule and not the Fourth Schedule to the Arbitration Act.
- Application filed before the High Court to remove arbitrators is deemed disingenuous as arbitrators were following the law laid down by the Delhi High Court.
- Arbitrators cannot be deemed unable to perform their functions for following legal precedent.
- Special fee structure can be fixed in consultation with involved parties and specific approval of the Chairman, NHAI before Arbitrator appointment.
- Judgment of learned Single Judge allowing Section 14 application to remove the arbitrators was set aside.
- Award of costs of arbitration in favor of the successful party.
- Decision on fee schedule pending challenge before the Supreme Court via Special Leave Petition.
- Arbitrators may only be terminated from their mandate if they genuinely become unable to perform their functions.
- Parties cannot contract out of payment of ‘costs’ according to Section 31A.
- Latest provision in the amended Act empowers the Arbitral Tribunal to fix fees regardless of party agreement.
- In a judgment, it was held that Section 31(8) and Section 31A of the Arbitration Act would govern matters related to arbitrator’s fees
- The judgment omitted the expression ‘unless otherwise agreed by the parties’ from Section 31A by the Amendment Act of 2015
- Arbitrator’s fees were to be fixed in accordance with the Fourth Schedule of the Arbitration Act regardless of the agreement between the parties
- The judgment of the Court in Gayatri Jhansi Roadways Limited was considered per incuriam as it did not consider relevant decisions or the report of the Law Commission
- The impugned judgment disagreed with the previous view on costs under Section 31(8) and 31A of the Act, stating that these costs are awarded by the Arbitral Tribunal as part of its award
- Arbitrator’s fees may be a component of costs to be paid, but section 31(8) and 31A do not directly govern contracts with pre-existing fee structures.
- The declaration of law by the learned Single Judge in Gayatri Jhansi Roadways Limited is deemed incorrect.
- The learned Single Judge is correct in this respect.
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Decision
- Each Arbitrator shall be paid Rs.6000/- per case towards incidental charges like telephone, FAX, postage etc.
- Arbitrators are directed to proceed with the arbitration as expeditiously as possible.
- Time for delivering the Arbitral Award is extended by one year with the consent of the parties.
- Other expenses like travelling, lodging, boarding, and local travel shall be reimbursed to each Arbitrator against presentation of bills with specified ceilings.
- Maximum limit for fee payable to each Arbitrator per day is Rs.5000/- subject to a maximum of Rs.1.5 lakh per case.
- Charges for publishing the Award are capped at a maximum of Rs.10,000/-.
- Setting aside of the judgment will not affect the final Award upheld by the Court.
- Reading fees of Rs.6000/- per case and secretarial assistant fees of Rs.5000/- per case are to be paid to each Arbitrator.
Case Title: NATIONAL HIGHWAY AUTHORITY OF INDIA Vs. GAYATRI JHANSI RAODWAYS LIMITED
Case Number: C.A. No.-005383-005383 / 2019
