7.5 lakh fees per sitting: Rajasthan HC flags exorbitant fees, repeated adjournments by arbitral tribunal

The Rajasthan High Court recently flagged serious concerns over delays, repeated adjournments, escalating costs and procedural excesses in arbitration, warning that such practices undermine its purpose as a speedy dispute resolution mechanism. [Jaipur Vidyut Vitran Nigam Ltd. & Ors. v HCL Infosystems Ltd.]

In a judgment dated May 27, Justice Sameer Jain intervened in a long-pending high-value arbitration involving Rajasthan DISCOMs and HCL Infosystems Ltd.

The Court in particular flagged the exorbitant fees charged by the arbitral tribunal as well the repeated and long adjournments granted by it.

It noted that each hearing session entailed a fee of ₹7.5 lakh for the arbitral tribunal excluding reading fee, travel, accommodation and stationery charges.

Nearly ₹13 crore had already been incurred in arbitral fees in a dispute valued at about ₹528 crore, the Court observed.

The tribunal had adopted a session-based fee structure, including “reading fees,” which, when combined with discontinuous hearings, resulted in a substantial escalation of costs, the High Court said.

"While it is not disputed that such fee structure was initially consented to by the parties, such consent cannot be viewed in isolation from the statutory framework. This Court is of a stern view that consent operates within the bounds of law and is necessarily subordinate to the legislative mandate of time-bound adjudication under Section 29A. The continuation of a sessionbased fee model, particularly in circumstances where hearings are sporadic and widely spaced, creates an unintended yet significant perverse incentive structure," the High Court opined.

Hence, it proceeded to impose strict timelines, regulate arbitral fees and restore procedural discipline, holding that the process had become inefficient and financially burdensome for the parties.

The Court warned that arbitration was becoming too focused on formalities and losing sight of its core objective.

"When procedure is allowed to dominate the process, manifesting in repeated delays, excessive hearings, or inflated fee structures, it defeats the very purpose for which arbitration exists. Instead of being a streamlined alternative to litigation, it risks replicating the inefficiencies of conventional courts," observed the Court.

The Court was dealing with challenges to successive extensions granted to an arbitral tribunal whose mandate had continued for years despite repeated judicial interventions. The arbitration arose from disputes concerning the Restructured Accelerated Power Development and Reforms Programme (R-APDRP), involving electricity infrastructure projects worth approximately ₹528 crores spread across 87 towns and 534 locations across Rajasthan.

The arbitration was initiated in 2019 while the disputed dated back to 2009.

The petition on behalf of the Rajasthan DISCOMs strongly opposed repeated extensions of the arbitral tribunal’s mandate under Section 29A (timelines for completion of arbitration), contending that the arbitration had effectively transformed into a procedurally indulgent and excessively expensive process contrary to the very objective of arbitration law.

Significantly, the DISCOMs also sought reduction and proportionate refund-related consequences in respect of arbitral fees already paid to the tribunal, contending that despite enormous expenditure and repeated extensions, the proceedings had remained inconclusive for years.

The Court examined the statutory framework under the Arbitration and Conciliation Act, 1996 (governs arbitration in India) and noted that provisions such as Section 24 (mandating efficient conduct of hearings) and Section 29A had not been adhered to in their true spirit in the present case.

The Court found a pattern of repeated adjournments, fragmented hearings, and long gaps between sittings, which at times extended to several months. It also flagged that earlier judicial directions to conclude the proceedings within a fixed number of sittings had not been followed, contributing to prolonged delay.

The Court observed that the cumulative effect of these practices had transformed the arbitration into what it called a “luxury litigation”. This, it explained, is where procedural indulgence and high costs overshadowed the goal of timely dispute resolution.

It further took note of the arbitral tribunal’s approach, observing that procedural flexibility had been exercised in a manner that hindered, rather than facilitated, resolution of the dispute.

Emphasising the need for disciplined conduct of proceedings, it observed,

"Procedural discretion must be exercised judiciously, ensuring that it advances, rather than impedes, the resolution of disputes. Efficiency, expedition, and fairness must guide the conduct of proceedings, so that arbitration remains a pragmatic and litigant-centric mechanism, yielding meaningful and timely outcomes rather than devolving into a prolonged and burdensome exercise."

The Court also voiced its concerns over the exorbitant fees of ₹13 crore charged by the arbitral tribunal.

It further flagged the decision to shift the venue of arbitration from Rajasthan to New Delhi, despite the contractual stipulation designating Rajasthan as the venue.

This, the Court said, imposed avoidable logistical and financial burdens on the parties, including travel and accommodation costs, thereby undermining accessibility and efficiency.

"The conduct of the Arbitral Tribunal, marked by a lethargic and casual approach, repeated and unwarranted adjournments, and fixation of disproportionately high fee structures, including session wise or “reading” fees, has undermined the very spirit of arbitration," said the Court.

Additionally, the Court examined the role of the Commercial Court, which had granted repeated extensions of time under Section 29A (allows courts to extend arbitration timelines). These extensions had sometimes gone up to 20 months. It held that such extensions were granted without sufficient cause.

Noting the limited scope of judicial interference under Section 5 (restricts court intervention in arbitration), the Court clarified that such intervention is warranted where cumulative deficiencies undermine the purpose of arbitration.

"This Court finds it just and necessary to impose corrective measures, including reduction of arbitral fees, so as to balance equities and restore adherence to statutory discipline. The cumulative effect of these circumstances compels this Court to hold that unchecked procedural indulgence and excessive financial imposition cannot be permitted to defeat the legislative intent, and that arbitration must remain a forum of efficient, fair, and pragmatic dispute resolution, rather than an instrument of delay and inequity," observed the Court.

The Court directed that arbitration resume on May 31 at the Jaipur Arbitration and Mediation Centre on a day-to-day basis, with proceedings to conclude by June 30. It directed the arbitral award to be delivered within 15 days thereafter.

The Court also issued directions to regulate arbitral fees and prevent further financial burden on the parties:

• Since the tribunal was responsible for delay, the Court ordered that arbitral fees already paid would be reduced at the rate of 5% per month from April 30, 2025 until the conclusion of proceedings, with proportionate refunds to be made before the award.

• It mandated that the fee structure going forward must strictly comply with statutory norms to ensure transparency and reasonableness in costs.

• The Court clarified that only actual out-of-pocket expenses incurred during proceedings may be claimed.

• It restrained the tribunal from levying any payments beyond those expressly permitted under the statutory framework.

• It further directed that no additional financial burden arising from the tribunal’s conduct or procedural lapses can be imposed on the parties.

Advocate General Rajendra Prasad assisted by advocates Kartik Seth, Shilpa Saini and Dhriti Laddha appeared for Jaipur Vidyut Vitran Nigam Limited.

Senior Advocate RN Mathur along with advocates Shailesh Kapoor, Lokesh Atrey and Sakshi Chaturvedi represented HCL Infosystems Limited.

[Read Judgment]