TMI Blog2021 (8) TMI 1348X X X X Extracts X X X X X X X X Extracts X X X X ..... sts of Arbitration, arbitrarily fixed by the Arbitral Tribunal which consisted of retired High Court and Supreme Court Judges sometimes. The arbitration proceedings were to be made an attractive proposition for Alternate dispute resolution. The observations made by the Hon'ble Supreme Court in Union of India Vs. Singh Builders Syndicate [ 2009 (2) TMI 794 - SUPREME COURT] cannot be ignored by this Court, where it was held that A provision for serving officers of one party being appointed as arbitrator/s brings out considerable resistance from the other party, when disputes arise. Having regard to the emphasis on independence and impartiality in the new Act, government, statutory authorities and government companies should think of phasing out arbitration clauses providing for serving officers and encourage professionalism in arbitration. This Court is also of the considered opinion that the Fourth Schedule is applicable to even Arbitral Tribunals appointed under Section 11 (2) and the ceiling limit of Rs.30 lacs as Model Fee for all claims above Rs.20 crores would be applicable in the case of determination of Fee of Arbitral Tribunal and the orders impugned have erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Amended statement of Claim filed by the claimants on 24.09.2020 a sum of Rs.197,40,15,637/- (One hundred and Ninety Seven Crores thirty four lacs fifteen thousand and six hundred and thirty seven) had been prayed whereas the petitioners who are the respondents in the Arbitration proceedings filed a counter claim on 16.01.2021 wherein a sum of Rs.230,45,74,000/- (Two Hundred and Thirty crores Forty Five Lacs and Seventy Four Thousand) was prayed as a counter claim against the claimant. It was agreed between the parties that one Arbitrator shall be appointed by each of the parties and a third Arbitrator shall be appointed by the two Arbitrators on their own, consequently, the Arbitral Tribunal consisted of three Hon'ble retired Judges of this Court. In the preliminary hearing held for the purpose of determination of fee and administrative expenses, the Fee has been determined by the Arbitral Tribunal @ 0.125% of the Total Sum in Dispute with claim and the counter claim taken separately and additionally a fee @ 10% of the said amount has been determined towards Secretarial and Administrative expenses in connection with the Arbitration proceedings (to be shared equally by the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quoted hereinbelow:- (14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule. Explanation: For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitration (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution . (7) It has been submitted by the learned counsel for the petitioners that the Explanation to Sub Section (14) would not apply in the case of the petitioners as it is not international commercial arbitration and it is also not a case where the parties have agreed amongst themselves about the fee of the Arbitration Tribunal. Therefore, the exclusionary Clause as given in the Explanation would not come in the way for the application of Sub Section (14) of Section 11 of the Act to the Arbitration proceedings between the parties. (8) Learned counsel for the petitioners has read out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port. The mechanism derived for the purpose of rationalizing of Fee structure for arbitration after much deliberation by the Legislature was thereafter introduced in the Fourth Schedule relating to Section 11 of the Act. It was observed that the Fee Structure as set up in the Fourth Schedule was based on the Fee by the Delhi High Court International Arbitration Center (D.I.A.C.) which specifically provided that Sum in Dispute shall include the counter claim made by the party. Therefore the intent of the Legislature and the objective sought to be achieved clearly pointed out to the conclusion that Sum in Dispute would be a cumulative value of the claim and the counter claim and not each of them treated separately. The Delhi High Court observed in Paragraph-14 that even in the general parlance Sum in Dispute shall include both claim and counter claim amounts. If the Legislature intended to have the Arbitral Tribunal exceed the ceiling limit by charging separate Fee for the claim and counter claim amounts it would be provided so in the Fourth Schedule. (11) Learned Counsel for the petitioners has also pointed out the judgment rendered by a Single Judge of the Patna High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing being applicable to plus 0.5% of the claim amount over and above Rs. 20,00,00,000 . Thus, it would be seen that the afore-said provision is to be read conjunctively and not in a disjointed manner inasmuch as doing so would defeat the intention of the legislature, resulting in exorbitant amount of fees being fixed by the learned arbitrators. In Paragraph-14 of the said judgment the Patna High Court has observed as under:- Para-14. Having considered the aforesaid aspect of the matter as also the law laid down by the Hon'ble Courts, as referred to hereinabove in the preceding paragraphs, apart from taking into account the 246th Law Commission Report and the 2015 amendment made in the Arbitration and Conciliation Act, 1996, this Court is of the considered view that a sound interpretation of the Fourth Schedule , especially keeping in mind the legislative intent as also taking into cognizance the plain and simple understanding of the aforementioned provision in simple English language used for the purposes of defining the model fee, as far as sum in dispute being above Rs. 20,00,00,000/- is concerned, can only have one meaning i.e. - the ceiling of Rs. 30,00,000/- has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting of a solitary member, it would entitle him to an additional fee of 25% of the Model Fee, but if it is a multi member body then they would be entitled to composite fee as set up in the Fourth Schedule. (13) Learned counsel for the petitioners has pointed out from the order impugned filed as Annexure-1 that after referring to arguments regarding the judgments of different High Courts being cited before it the Arbitral Tribunal observed that they are inapplicable to the facts of the case. It has not been stated as to how the facts of the case before the Arbitral Tribunal were different, in so far as the issues involved were regarding the applicability of Sub Section (14) of Section 11 and the Fourth Schedule for determining the fee of the Arbitral Tribunal, and whether such fee would be on the basis of claim and counter claim being treated separately or in a cumulative manner. It also involved the question whether such fee would be payable individually to each of the members of the Arbitral Tribunal or it would be a composite fee for all of them to be divided amongst themselves later on. (14) It has been pointed out by the learned Senior counsel that after observing that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry deposit, as the case may be as advance for the purpose of Costs referred to in Sub Section (8) of Section 31 which it expects will be incurred in respect of claim submitted to it. The First Proviso to Section 38 (1) says that where apart from claim, the counter claim has been submitted to the Arbitral Tribunal it may fix separate amount of deposit for the claim and counter claim. (17) It has been argued by the learned counsel for the petitioners that the Proviso is only with respect to the payment of Costs to take into account the claim and counter claim separately, not with respect to determination of Fees, but Arbitral Tribunal has erroneously assumed that Costs would include the fee and Section 38 relates to separate deposit for claim and counter claim, therefore, the fees should also be determined separately for claim and counter claim. (18) It has been submitted that the learned Tribunal has assumed that provisions with regard to Costs are the same as for fees . This is apparent from the Paragraph-17 of the order which says that keeping in view the Costs should remain reasonable this Tribunal decides that the fee payable to each member of the Arbitral T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders passed separately today have been supplied to the parties. The matter shall now be taken up on 18.07.2021 at 2pm for identifying issues arising for determination of the case. (20) It is an order that says that the fee be deposited in installments and the first installment of an amount of Rs.14 lacs (divided between the parties in equal shares) be deposited with each of the Arbitrators within a fortnight of the order. Similarly, the second installment of Rs.14 lacs should be deposited by or before the date of issues, and the third similar installment should be paid before the commencement of evidence and the last installment of the remaining amount be deposited by or before time of final argument. (21) It has been argued that the learned Tribunal has taken the cue from Section 38 of the Act in making such order for deposit of Fee in advance. Fee is differently treated from Cost it is only for the cost to be determined at the termination of arbitration proceedings which are likely to be incurred by the parties, that a provision has been made in the Act under Section 38, for it to be deposited in advance. (22) In sum and substance, the arguments raised by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Delhi High Court to mean the claim and counter claim taken cumulatively and not separately, and the learned Tribunal has erroneously interpreted the Section 38 relating to Costs as applicable to Section 11 also. (26) He has pointed out from Annexure-1 to the writ petition that the basic premise for determination of Fee by the orders impugned by the learned Tribunal has been that for Fourth Schedule referred to Sub Section (14) of Section 11 which comes into operation only when the Arbitral Tribunal is constituted on an application of a party to the High Court or the Supreme Court, and that it does not apply to the cases where the Tribunal come into existence without intervention of the Court under Section 11 of the Act. Such premise has led to the super structure of the entire order become vitiated. The counsel for the respondents has also pointed out Paragraphs 12, 13, and 14 of the order impugned wherein reference has been made to Section 31, 31-A and Section 38 and says that all these sections relate to determination of Costs after termination of Arbitration proceedings and it has been specifically stated in the Act that such Costs would be part of the Arbitration Awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration, arbitrarily fixed by the Arbitral Tribunal which consisted of retired High Court and Supreme Court Judges sometimes. The arbitration proceedings were to be made an attractive proposition for Alternate dispute resolution. The observations made by the Hon'ble Supreme Court in Union of India Vs. Singh Builders Syndicate (Supra) cannot be ignored by this Court. (31) In a Seven Judges Constitution Bench judgment rendered in Bengal Immunity Co. Ltd. v. State of Bihar [AIR 1955 SC 661], the Supreme Court observed in Paragraph-23 that it is a sound rule of construction of statute firmly established in England as far as back as 1584 when Heydon's case was decided that for the sure and true interpretation of all statutes in general (Be they penal or beneficial, restrictive or enlarging of the Common law), four things are to be discerned and considered:- (1) what was the Common law before the making of the Act; (2) what was the mischief and defect for which the common law did not provide; (3) what remedy Parliament has resolved and appointed to cure the disease of the commonwealth; and (4) the true reason of the remedy; and then the office of all the judges is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the other sub-rules of Rule 4. Rule 5 of Order 18 speaks of the other formalities which are required to be complied with. In the cases, however, where an appeal is not allowed, the procedures laid down in Rule 5 are not required to be followed. (33) The Supreme Court observed in Paragraphs 21, 22 and 23 of Ameer Trading Corporation (Supra), thus:- 21. In a situation of this nature, the doctrine of suppression of mischief rule as adumbrated in Heydon's case [(1584) 3 Co Rep 7a : 76 ER 637] shall apply. Such an amendment was made by Parliament consciously and, thus, full effect thereto must be given. 22. In Halsbury's Laws of England, Vol. 44(1), 4th Reissue, para 1474, pp. 906-07, it is stated: ?Parliament intends that an enactment shall remedy a particular mischief and it is therefore presumed that Parliament intends that the court, when considering, in relation to the facts of the instant case, which of the opposing constructions of the enactment corresponds to its legal meaning, should find a construction which applies the remedy provided by it in such a way as to suppress that mischief. The doctrine originates in Heydon's case [(1584) 3 Co Rep 7a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd purposive approaches. In other words, the legislative intention i.e. the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. (35) This Court is of the considered opinion that Sub Section (14) of Section 11 and the Fourth Schedule relatable to it, are applicable to even Arbitral Tribunal appointed by the parties themselves in terms of their contract/agreement. (36) This Court is also in agreement with the observations made by the various High Courts quoted hereinabove, regarding the question of Sum in Dispute which has to be taken cumulatively as the claim and counter claim and not calculated separately as eventually only one of the parties to the arbitration proceedings would most likely succeed. If the claimant succeeds it would be getting around 198 crores whereas if the respondents succeed they would be getting an amount of Rs.230 crores. As each of the parties would be getting only the amount claimed by them at the termination of the arbitration proceedings. (37) This Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
