The Supreme Court on Tuesday heard part submissions made on behalf Afcons Gunanusa JV, dealing with the primary issue as to whether a separate fee under the Fourth Schedule of Arbitration and Conciliation Act, 1966 is payable on counterclaim or not.
Senior Advocate Abhishek Manu Singhvi, who appeared for Afcons Gunanusa JV in continuation of his previous arguments countering the submissions of Attorney General K.K. Venugopal, further submitted that once the arbitrator has fixed fees unilaterally, it sounds unreasonable. “There is no unilateral variation in my case.”
“Nothing is fixed, yet clause is there, Fourth Schedule is given a go-by with their own consent and Fourth Schedule is not final and binding on the arbitrator,” Singhvi submitted.
Justice Chandrachud said: “You control cross-examinations, isn’t it right? After 70 hearings, then we can say to fix fees at later stage. Can this not happen? If arbitrator have overall cap, then there is no question.”
Justice Chandrachud: “You give us a set of suggestions, there should not be a straitjacket formula. Such suggestions should bring reform in arbitration. An ideal situation is being done at upfront but not at later stage, to avoid complexity in further proceedings. We cannot be in a situation where we can say arbitrator to fix fees of Rs 15,000, that will shake the backbone of arbitration.”
AG Venugopal said: Fourth Schedule to stand as it is now. Arbitrator should decide as per Fourth Schedule. Ask the parties estimates for the fees depending on the number of hearings.’
To this, Singhvi submitted that upfront fees actually would be 2-3 hearings on the subject. Further counterclaim is not being challenged by ONGC.
“There was not a law that they should fix fees in the beginning, Section 14, 15, 16 of Arbitration Act does not come into picture,” contended Singhvi for Afcons.
“Your lordship cannot stretch the law so much as demanded by ONGC,” Singhvi said.
He submitted that costs include expenses which includes fees of lawyer, fees of arbitrator, stenographer fees. “There cannot be a separate procedure for fixation of fees/expenses to individuals.
An international arbitration has much higher fees value,” says Singhvi.
“Costs should not be read so as to exclude fees in it, My Lord,” he said.
Termination of Section 31(8) remains with Arbitral Tribunal either pre-amendment or post-amendment, he argued.
The proviso 31(a)(5) of Arbitration Act provides that an agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event shall be only valid if such agreement is made after the dispute in question has arisen, such provision was read over in the court by Singhvi.
Singhvi submitted that what is so interesting is that arbitrator panel is deciding their own fees.
Justice Sanjiv Khanna said, “If you look at Section 31(8) originally, it seems different. Deposit has to be made u/s 34 of Arbitration Act.”
In continuation, Attorney General Venugopal appearing for ONGC addressed the three-judge bench of Justices Chandrachud, Sanjiv Khanna and Surya Kant that the arbitrator has control over the proceedings and in international arbitration, international code of conduct prevails, but the actual problem lies in ad-hoc arbitrations.
To this, Justice Chandrachud advised to either set up institutions or govern by existing institutions.
Justice Chandrachud said, “However, there is remedy available under Section 29A of Arbitration and Conciliation Act, 1996, but that does not apply to International Arbitration.”
ONGC has sought the directions to terminate the existing tribunal and substitute it with a new one. In its petition before the Supreme Court, ONGC has claimed that the arbitrators, two former judges of the Supreme Court and one judge of the High Court, had increased the fees mid-way, while the arbitration was going on.
ONGC said that the new fee scale was not just against the contract terms, but also “far from the fees” fixed for the arbitrators under the Fourth Schedule of the Arbitration and Reconciliation Act, 1996 (A&RA), which guides proceedings when disputes arise between contracting parties.
Under the Fourth Schedule of Arbitration and Conciliation Act 1996, there is a ceiling of Rs 30 lakh per arbitrator, if the dispute between two parties is worth more than Rs 20 crore. As per the contract between the ONGC and Afcons, the upper ceiling for an arbitrator’s fee is Rs 10 lakh with a time-limit prescribed to end the arbitration. The Centre contented that the arbitrators fixed Rs 1 lakh per arbitrator for every sitting as the fee and each sitting was for a duration of three hours. Therefore, it has been submitted that there should be some uniformity or certainty in the fees to be paid to the arbitrators, and asked the court to settle and fix a fee scale for the arbitrators.
Case Name- ONGC Vs Afcons Gunanusa JV
EARLIER AFCONS SUBMISSIONS –
Sr. Adv Abhishek Manu Singhvi, for respondent Afcons submits that this court heard about the issue about punctuations, commas and about fixation of fees.
He further submits that kindly see the conduct of ONGC. This would be sufficient enough to dispose of my case. In 2020, tribunal cancelled all dates, then the matter conducted through VC. It was specifically mentioned in the agreement that no interest on the amount shall be paid. ONGC submits that I will not join through Video Conferencing.
After 13 months, 1 lac fees were fixed. There were 120 sittings for cross examination of the witness. The amount of Rs. 30 lacs, if I bifurcate that comes to around 25,000 Rs. per session. In the starting, arbitrator should give some reasonable indication.
Is it practical I would be cross examined in 120 sittings? states Mr. Singhvi, for Afcons. They are judicial arbitrators, not strangers. – Mr. Singhvi.
I have no problem, it should be 30 lacs for each, not at all problem with aggregate amount/fees. (aggregate refers herein to ‘Composite amount’), says Singhvi.
Mr. Singhvi submits that arbitration agreement got invoked in year 2015. Petitioner ONGC proposed the amount to be 30 lacs. I was not privy to this information. I was not consulted for this amount to be fixed. On 22 may 2018, the Tribunal noted that after 20 sittings, one witness examination was not fully completed.
Further cross of Jadhav, expert witness of claimant was not concluded. Even 1.5 lacs got reduced. ONGC filed application for modification of minutes and fixation of fess before tribunal, Respondent challenged this fee structure submits Singhvi.
J. Surya Kant asks the Counsel of Afcons – What do you suggest, to approach under section 34? If not, then Will it come under section 16?
No one can misuse section 14 and 15 of Arbitration Act, urges Mr. Singhvi.
How many interpretations were done on behalf of ONGC with respect to the sections 14, 15 and 16, just because 1.5 fee is inexpedient for them, submits Singhvi.