Arbitrators move Supreme Court after Rajasthan HC cuts their fees citing delay; SC also says "delay is too much"

The Supreme Court recently expressed serious concern over the time and costs involved in arbitration proceedings, observing that prolonged hearings defeat the very purpose of choosing arbitration as an alternative to conventional litigation.

A Bench of Chief Justice of India (CJI) Surya Kant and Justices Joymalya Bagchi and V Mohana made the observations while hearing appeals filed by arbitral tribunal members in a case arising from the arbitration between HCL Infosystems Limited and Rajasthan power distribution companies including Jaipur Vidyut Vitran Nigam Limited.

The arbitral proceedings had commenced in 2020 and 198 hearings had been held with substantial amounts having been paid towards arbitral fees. The process was yet to conclude.

The Rajasthan High Court had taken exception to the delay in arbitration and had ordered a 5 percent reduction in the fees charged by arbitrators from April 2025.

This prompted the arbitrators to approach the Supreme Court.

However, the top court also said the delay was "too long".

Justice Bagchi asked whether an arbitration that continued for years could serve its intended purpose.

"We talk about an arbitration-friendly environment and look at this. This is egregious. Of course, our observation is not on the individual arbitrator, but look at the process as a whole. Arbitration was supposed to be an efficient and convenient bypass and cost-efficient. If arguments go on from 2024 to 2026... Look at the fate of arbitration. The delay is too long," Justice Bagchi said.

The dispute arose from contracts awarded to HCL in 2009 under the Restructured Accelerated Power Development and Reforms Programme for IT and power infrastructure works across Rajasthan.

The project was valued at approximately ₹528.20 crore. Arbitration was invoked in September 2019 and the first preliminary hearing before the tribunal took place in July 2020.

The three-member tribunal comprising former Supreme Court Justice Deepak Verma and former High Court Justices Dinesh Chandra Somani and N Kumar themselves approached the Supreme Court against portions of the High Court judgment.

The Rajasthan High Court, through Justice Sameer Jain, had taken exception to the manner in which the arbitration had progressed despite repeated extensions.

It noted that the proceedings arising from 2009 work orders had remained inconclusive for years and held that the prolonged pendency ran contrary to the object of arbitration as a mechanism for speedy dispute resolution.

The High Court also recorded that approximately ₹13 crore had already been incurred in arbitral fees in a dispute valued at around ₹528 crore. It termed the escalation in costs without corresponding progress in adjudication inefficient and economically burdensome.

The High Court attributed the delay from April 30, 2025 onwards to the tribunal and ordered that the arbitral fee already paid be reduced at the rate of 5 percent for every month of delay until disposal of the matter. The amount was directed to be returned to the parties proportionately.

It further directed the tribunal to conduct day-to-day hearings at the Jaipur Arbitration and Mediation Centre and conclude the proceedings and render the award within 45 days of its May 27 judgment.

The tribunal members then moved the Supreme Court against the same.

On June 30, the Supreme Court issued notice on HCL Infosystems’ challenge to the judgment.

It allowed the arbitral proceedings to continue but restrained the tribunal from pronouncing, serving or uploading its final award. The Court also stayed the High Court’s direction requiring the tribunal to refund part of its fees.

On July 6, the bench of Justices KV Viswanathan and Alok Aradhe issued notice on the power distribution companies’ cross-petition and tagged it with HCL’s plea. It also clarified that references to the “Arbitrator” in its June 30 order should be read as references to the three-member “Arbitral Tribunal.”

When the matter was heard on August 17, the Supreme Court maintained that the overall delay required examination.

"Look at the fate of arbitration. We understand one arbitrator passed away, substitute arbitrator was there and all that. But nevertheless, the delay is too long. The delay is too long," the Court said.

Justice Bagchi also remarked that had the parties pursued an ordinary civil suit, they might have obtained a decree by now.

The Court indicated that the proceedings presented an opportunity to consider broader parameters governing such arbitrations.

The Bench ultimately directed the parties to file and exchange their written submissions within ten days.

The existing interim arrangement will continue in the meantime. The arbitral proceedings can continue, but the tribunal cannot pronounce its final award until further orders of the Supreme Court, the Bench said.

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