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The Delhi High Court recently held that the ‘Sum in dispute’ mentioned in the Fourth Schedule of the Arbitration and Conciliation Act (Act), shall include both claim and counterclaim amounts, to calculate arbitrator’s fee.
The finding came in a writ petition filed by the Delhi State Industrial Infrastructure Development Corporation Ltd. seeking an interpretation of the fee schedule for arbitrators provided in the Fourth Schedule of the Act.
The issue arose due to the opinion of the sole arbitrator appointed by the Court, that the ‘Sum in dispute’ would be the amount of the claim and the counterclaim separately, rather than cumulatively.
The counsel appearing for the Arbitrator before the High Court highlighted the proviso to Section 38 (1) of the Act and submitted that the Arbitral Tribunal has been empowered under the Act, to fix a separate amount of deposit for the claim and counterclaim.
Advocate Nakul Dewan, who was appointed as the amicus in the matter, brought the attention of the court to the 246th Report of the Law Commission as well as the rules framed by various institutions conducting arbitration in India and across the world and submitted that the universal method adopted was to charge a fee on the basis of cumulative values of the claim and counterclaim.
He further submitted that keeping in view the object behind the amendment to the Act, the Fourth schedule has to be read as prescribing a cumulative value of the ‘Sum in dispute’ rather than separate values where a separate fee can be
charged exceeding the ceiling limit on the basis of claim and counterclaim individually.
The Single Judge Bench of Justice Navin Chawla observed that,
“If India is to emerge as a preferred place of arbitration and the arbitration culture is to grow in India, it is imperative that such fee structure is rationalised so as to make it cost effective. This, as noted, was the intent of the legislature for bringing about the amendment to the Act.
Therefore, there is no reason for the Fourth Schedule to the Act to be given a meaning which is different from usage by various institutions conducting arbitration proceedings in India and abroad.’
It was held that if the legislature intended to have the Arbitral Tribunal exceed the ceiling limit by charging a separate fee for the claim and counterclaim amounts, it would have provided so in the Fourth Schedule.
The Court also observed that the proviso to Section 38(1) would only apply when the Arbitral Tribunal is not to fix its fee in terms of the Fourth Schedule and that it would not have any bearing on the interpretation to be put to the Fourth Schedule.
Finally, the Court held that the ‘Sum in Dispute’ shall include both claim and counterclaim amounts and requested the Sole Arbitrator to withdraw his order claiming separate fee for the amounts claimed in the Statement of claim and the counterclaim.