Arbitrator Can Fix Fee In Consultation With Parties Without Recourse To A&C Act; Quantum Can't Be Challenged Under Article 227: Calcutta HC

The court held that a party cannot file a revision application under Article 227 of the Constitution solely based on dissatisfaction with an arbitrator's order regarding quantum of remuneration as it does not fall within the scope of Section 37 (2) of the Act. The appropriate recourse available to the petitioner would be to challenge the final award under Section 34 of the Act.

Brief Facts

The petitioner filed the civil revisional application under Article 227 of the Constitution, challenging the arbitral orders dated 22.03.2022 and 11.12.2022 passed by the Sole Arbitrator in the arbitration proceedings between Marco Francesco Shoes (India) Private Limited and P & P Business Private Limited.

Disputes arose between the parties with regard to sand block at Gopalpur, Bankura. The opposite party, who held the tender to operate the said sand block, granted the petitioner a lease to mine it for a monetary consideration. Alleging non-payment of fees under the agreement dated 23.05.2018, the opposite party initiated arbitration proceedings. During the arbitration, the claimant filed a statement of claim amounting to ₹2.56 crores. The petitioner filed a counterclaim of ₹6.9 crores. The Arbitrator claimed a lump sum fee of ₹30 lakh. The Arbitrator, by order dated 22.12.2022, rejected the petitioner's counterclaim due to non-payment of fees. Aggrieved by such decision of the Arbitrator, the petitioners filed the application.

Contentions:

Mr. Partha Pratim Roy, Counsel for the Petitioner submitted that unilateral fixation of fees is against the principle of party autonomy and violates Section 11(3A) and Section 11(14) of the Arbitration and Conciliation Act, 1996. He contended that the Act does not empower Arbitrators to issue enforceable orders concerning their fees de hors the agreement. Mr. Roy calculated the arbitrator's fee based on the Fourth Schedule to be ₹9.93 lakhs. He argued that the charged fee of ₹30 lakhs was excessive and impermissible.

On the issue of maintainability, Mr. Roy submitted that the Arbitration Act provides no remedy to challenge such a unilateral fee order either under Section 34 or Section 37. He argued that in the absence of an alternative statutory remedy, the petitioner is entitled to invoke the extraordinary jurisdiction of the High Court under Article 227.

He further contended that the Arbitrator passed the fee order without assigning any reasons, thereby violating principles of natural justice. The order was passed before the completion of pleadings, and therefore not valid.

Mr. Sayak Ranjan Ganguly, Counsel for the Respondent contended that the Arbitration and Conciliation Act is a self-contained code which provides for the powers of the arbitrator and the remedies available to the parties. He argued that the impugned order does not fall under the category of appealable orders under Section 37, and hence, a writ petition or supervisory intervention is not maintainable.

Mr. Ganguly further submitted that the Fourth Schedule is merely a model fee structure and does not have binding force upon either the parties or the arbitral tribunal. He argued that the arbitrator is vested with the autonomy to fix his fees, and such determination cannot be subjected to judicial interference.

He reiterated that the High Court must not entertain a petition under Article 226 if an effective alternate remedy is available to the aggrieved person or when the statute under which the action complained of has been taken, itself contains a mechanism for redressal of grievance.

Observations

Issue A: Whether the Arbitrator can fix his own remuneration in violation of Schedule IV of the Act of 1996.

The Court observed that an arbitrator can indeed fix his own remuneration, and this can be done in a manner that may not comply with the Fourth Schedule of the Act of 1996, provided that such a decision is made in consultation with the parties involved. The Court further observed that when parties have contractually agreed on a fee, the Fourth Schedule does not apply. This indicates that the contractual agreement between the parties takes precedence over the statutory fee structure.

Issue B: Whether an arbitrator can refuse counter claim of the party which refuses to pay its share of the remuneration of the Arbitrator.

The Court noted the second proviso to Section 38(2) of the Act, which states:

“Provided further that where the other party also does not pay the aforesaid share in respect of the claim or the counter-claim, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of such claim or counter-claim, as the case may be.”

The Court held that if an arbitrator rejects a counterclaim due to non-payment of the requisite deposit, then it cannot be said that the arbitrator acted beyond his jurisdiction.

Issue C: Whether the petitioner who is aggrieved with the order of the arbitrator with respect to quantum of remuneration can prefer application invoking jurisdiction under Article 227 of the Constitution.

The Court reiterated that the High Court's supervisory jurisdiction is limited. It observed that power under Article 227 should be exercised sparingly, particularly in arbitration matters where minimal judicial intervention is the guiding principle.

The Court explained that Section 37(2) of the Act only permits appeals against orders accepting a plea under Section 16(2) or (3). The Court observed that:

“A party cannot file a revision application under Article 227 solely based on dissatisfaction with an arbitrator's order regarding quantum of remuneration as it does not fall within the scope of Section 37 (2) of the Act of 1996.”

The court stated that the appropriate recourse available to the petitioner would have been to challenge the final award under Section 34 of the Act before the Principal Civil Court.

With these observations, the Court dismissed the revision application.

Case Title: P & P Business Private Limited vs. Marco Francesco Shoes (India) Private Limited

Case Number: C.O.140 of 2023

For the petitioner :Mr. Partha Pratim Roy, Adv. Mr. Srijib Chakraborty, Adv. Mr. Sunny Nandy, Adv.

For the Opposite Party :Mr. Sayak Ranjan Ganguly, Adv. Ms. Srijani Ghosh, Adv. Ms. Indrani Majumdar, Adv.

Date of Judgment: 29.04.2025