OIL AND NATURAL GAS CORPORATION LTD versus AFCONS GUNANUSA JV

Citation: [2022] 10 S.C.R. 660 · Decided: 30-08-2022 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Disposed off

Cited by 3 judgment(s) · cites 12 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 10 S.C.R.
[2022] 10 S.C.R. 660
660
OIL AND NATURAL GAS CORPORATION LTD.
v.
AFCONS GUNANUSA JV
(Arbitration Petition (Civil) No. 05 of 2022)
AUGUST 30, 2022
[DR. DHANANJAYA Y CHANDRACHUD, SANJIV KHANNA
AND SURYA KANT, JJ.]
Arbitration and Conciliation Act, 1996 – ss. 11, 31, 31A, 38
and 39 – Fourth Schedule – Arbitrators’ Fees – Whether the
arbitrator(s) are entitled to unilaterally determine their own fees –
Whether the term “sum in dispute” in the Fourth Schedule to the
Arbitration Act means the cumulative total of the amounts of the
claim and counterclaim – Whether the ceiling of Rs 30,00,000 in
the entry at Serial No 6 of the Fourth Schedule of the Arbitration
Act is applicable only to the variable amount of the fee or the entire
fee amount – Whether the ceiling of Rs 30,00,000 applies as a
cumulative fee payable to the arbitral tribunal or it represents the
fee payable to each arbitrator – Held: Arbitrators do not have the
power to unilaterally issue binding and enforceable orders
determining their own fees – A unilateral determination of fees
violates the principles of party autonomy and the doctrine of the
prohibition of in rem suam decisions, i.e., the arbitrators cannot be
a judge of their own private claim against the parties regarding
their remuneration – However, the arbitral tribunal has the discretion
to apportion the costs (including arbitrators’ fee and expenses)
between the parties in terms of s.31(8) and s.31A and also demand
a deposit (advance on costs) in accordance with s.38 – If while
fixing costs or deposits, the arbitral tribunal makes any finding
relating to arbitrators’ fees (in the absence of an agreement between
the parties and arbitrators), it cannot be enforced in favour of the
arbitrators – The arbitral tribunal can only exercise a lien over the
delivery of arbitral award if the payment to it remains outstanding
u/s.39(1) – The party can approach the court to review the fees
demanded by the arbitrators if it believes the fees are unreasonable
u/s.39(2) – The term “sum in dispute” in the Fourth Schedule of the
Arbitration Act refers to the sum in dispute in a claim and counter-
claim separately, and not cumulatively – Consequently, arbitrators
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shall be entitled to charge a separate fee for the claim and the
counter-claim in an ad hoc arbitration proceeding, and the fee
ceiling contained in the Fourth Schedule will separately apply to
both, when the fee structure of the Fourth schedule has been made
applicable to the ad hoc arbitration – The ceiling of Rs 30,00,000
in the entry at Serial No 6 of the Fourth Schedule is applicable to
the sum of the base amount (of Rs 19,87,500) and the variable
amount over and above it –Consequently, the highest fee payable
shall be Rs 30,00,000 – This ceiling is applicable to each individual
arbitrator, and not the arbitral tribunal as a whole, where it consists
of three or more arbitrators – A sole arbitrator shall be paid 25 per
cent over and above this amount in accordance with the Note to the
Fourth Schedule.
Arbitration Law – Concepts of costs and fees in arbitration –
Distinguished.
Arbitration Law – Ad hoc arbitration – Direction / guidelines
issued for governing proceedings in ad hoc arbitrations.
In the instant arbitration petition, the following issues in relation to
the arbitrators’ fees arose for consideration: (i) Whether the arbitrator
(s) are entitled to unilaterally determine their own fees; (ii) Whether the
term “sum in dispute” in the Fourth Schedule to the Arbitration Act means
the cumulative total of the amounts of the claim and counterclaim;
(iii)Whether the ceiling of Rs 30,00,000 in the entry at Serial No 6 of the
Fourth Schedule of the Arbitration Act is applicable only to the variable
amount of the fee or the entire fee amount; and (iv)Whether the ceiling
of Rs 30,00,000 applies as a cumulative fee payable to the arbitral tribunal
or it represents the fee payable to each arbitrator.
Disposing of the appeals, the Court
HELD:
Per D.Y. Chandrachud, J. [for himself and Surya Kant, J.]
1.1. ARBITRATOR’S FEE: On a review of a few foreign
jurisdictions that either have explicitly recognised an arbitrators’
entitlement to remuneration and/or have dealt with the issue of
arbitrators’ power of fixing their own remuneration, it is seen
that although there are jurisdictional differences, the following
broad principles emerge: (i) Typically, the fees payable to
OIL AND NATURAL 

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