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Entertainment City Limited Versus Aspek Media Private Limited
Court / Forum :High Court of Delhi Citation : O.M.P. (T) (COMM) 24/2020 Coram : Mr. Justice H.C. Shankar Subject : Section 12 &14 of Arbitration and Conciliation Act, 1996 (“1996 Act”) Date of Decision : June 3, 2020
The present Petition has been filed under section 14, read with section 12(4) of the 1996 Act, whereby, the Petitioner has prayed for terminating the mandate of the Ld. Sole Arbitrator on account of grievance of the of the Petitioner in relation to the fees being charged by the Ld. Sole Arbitrator. The main contention of the Petitioner is that the fees, which the Ld. Sole Arbitrator has required the parties to pay, is in violation of the provisions of the 1996 Act.
Whether the fees chargeable by the Ld. Sole Arbitrator, in the present case, were subject to the statutory limits, stipulated in the 4th Schedule to the 1996 Act or not?
The Court observed that section 12(4) of the 1996 Act cannot be regarded as a standalone provision and has, to be read with section 12(3). The grounds for challenge under Section 12 of the 1996 Act, are statutorily limited to those contemplated by sub-section (3) thereof, i.e., where there are justifiable doubts regarding the independence and impartiality of the Ld. Sole Arbitrator, or where he does not possess the qualifications agreed to by the parties. If the continuance of the mandate, of the arbitrator, is challenged on either of these grounds, section 12(4) postulates, as a further condition, that the applicant became aware of the ground of challenge after the appointment of the arbitrator. Therefore, it was held by the Court that section 12 of the 1996 Act does not apply in the present case.
Thereafter, the counsel of the Respondent argued that the fees charged by the Ld. Sole Arbitrator, in the present case, is not in accordance with Section 11 (14) of the 1996 Act, thus, the Ld. Sole Arbitrator has become de jure unable to perform her functions in terms of section 14 (1)(a) of the 1996 Act.
The Court observed that section 14 deals with situations in which there is “failure or impossibility to act” on the part of the Ld. Sole Arbitrator, in which case, as well, the mandate of the Arbitrator terminates. Further, Section 11(4) of the 1996 Act merely empowers this Court to frame rules, for the purpose of determination of fees of arbitral tribunals, taking into consideration the rates specified in the Fourth Schedule.
A similar challenge had come up before this Court in NHPC Ltd. v. Larsen & Toubro Ltd., O.M.P. (T) (Comm.) 81/2018 in which it was noted that no rules, under section 11(14) of the 1996 Act, had been framed by this Court and the same position continues, till date.
Further, Delhi International Arbitration Center (Administrative costs and Arbitrators’ Fees) Rules, 2018, apply only where the arbitrator is appointed by the Delhi International Arbitration Centre (“DIAC”), consequent on the parties moving the DIAC in that regard. DIAC do not govern cases in which the arbitrator is appointed by the Court directly, without the intervention of the DIAC.
Also, in G.S. Developers & Contractors Pvt. Ltd. v. Alpha Corp Development Pvt. Ltd 261 (2019) DLT 533 and Delhi State Industrial Development Corporation Ltd. v. Bawana Infra Development (P) Ltd, 261 (2019) DLT 533 in which similar challenges, to the fees fixed by the arbitrators directly appointed by the High Court, have been repelled, and it has been categorically held that arbitrators, appointed by the court, may in the absence of any fees having been fixed by the court itself, or any stipulation, regarding fees, finding place in the contract or agreement between the parties, determine their own fees.
Thus, the Court held that the rates of fees fixed in the Fourth Schedule to the 1996 Act, were not necessarily binding on the Ld. Arbitrator in the present matter. The Court also noted that the Petitioner did not insist on any fees being fixed, at the time of appointment of Ld. Sole Arbitrator by this Court, and thus, the Court was of the opinion that it is certainly not open to the Petitioner, at this stage, to seek termination of the mandate of the Ld. Sole Arbitrator on the sole ground of the fees, fixed by her, or to invoke, for the said purpose, Section 14(1)(a) of the 1996 Act. It cannot be said that the Ld. Sole Arbitrator has become de jure unable to perform her functions.
The Court also observed that section 14(1)(a) contemplates the mandate of an Arbitrator, if the Arbitrator becomes de jure or de facto unable to perform his functions, and not if one of the parties becomes de facto unable to continue with the arbitral proceedings, on account of financial stringency or otherwise.