New Delhi, March 15, 2022: While observing that Section 38(1) of the Arbitration and Conciliation Act, 1996 and its proviso cannot be resorted to while interpreting the term “sum in dispute”, as occurring in the 4th Schedule to the Arbitration and Conciliation Act, 1996, the Supreme Court has said that arbitral fee has to be determined on the basis of aggregate amount of claim and counter claim and the proviso to Rule 3 of the Delhi International Arbitration Centre (DIAC) Rules kicks in only when the party fails to pay its share of the aggregate amount of claim and counter claim.
Thus, in such cases, DIAC has the discretion to assess the claim and counter claim separately and demand the same from the parties, as proviso does not deal with the aspect of computation of the arbitral fee, added the Court.
A Division Bench of Justice Vipin Sanghi and Justice Amit Bansal observed that Sections 31(8) and Section 31A would have no application where the fees of the arbitral tribunal have 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, added the Bench.
Going by the background of the case, the Arbitral Tribunal entered reference and noted that the total amount of claim was Rs.33,53,27,205 and the total amount of counter claim, including interest, was Rs.11,43,40,050. Vide Procedural Order, the Arbitral Tribunal fixed the arbitral fees as Rs.40,44,795 in terms of ratio of the judgment of this Court in Rail Vikas Nigam Vs. Simplex Infrastructure Ltd., and both the parties consented to the fixation of the arbitral fees. At the hearing before the Arbitral Tribunal, the counsels were requested to address the Arbitral Tribunal on the issue whether counter claim(s) is/are to be included in the expression “sum in dispute” appearing in the 4th Schedule of the Arbitration and Conciliation Act, 1996, or the amount thereof is to be separately considered in terms of proviso to Section 38(1) of the Act.
After hearing both parties, the Arbitral Tribunal held that the applicable arbitral fee, in the present case, had to be assessed separately for the claim, and counterclaim. After making such observations, the Arbitral Tribunal gave liberty to the parties to approach this Court for seeking clarification in the matter of fixation of arbitral fees. Accordingly, the present application was filed on behalf of Jivanlal (Applicant/appellant) seeking clarification with regard to the fixation of arbitral fee.
After considering the submissions, the Top Court noted that the term “sum in dispute”, would take in its ambit claims as well as counter claims and 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.
While concurring 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 Delhi High Court observed that the said proviso cannot apply when the fees of the Arbitral Tribunal has been fixed in terms of 4th Schedule to the Act.
The Delhi High Court further noted that the parties agreed to appointment of the Sole Arbitrator and to his fee being fixed in accordance with the Fourth Schedule of the Act on the clear understanding of inter alia, Rule 3(ii) to mean that the fee of the Sole Arbitrator shall be fixed on the aggregate of the claim(s) and counter claim(s), and therefore, to now call upon them to pay separate fee for the claim(s) and counter claim(s) would not be fair to them, and would be bound to cause them embarrassment.
The Apex Court therefore concluded that 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.