Separate court fee is required to be paid on the amount of counter claim except where the fees has been fixed by the Court: High Court of Delhi
Proviso to Section 38(1) of the Act carves out a specific exception providing for Arbitral Tribunal to fix a separate fee for claims and counter claims. Where the fees has been fixed by the Court in terms of 4th Schedule to the Arbitration and Conciliation Act, 1996, Sections 38(1) would have no application. The term “sum in dispute” provided in the 4th Schedule to the Act has to be interpreted so as to include the aggregate value of the claims as well as counter claims and the same was upheld by High Court of Delhi through the learned bench led by JUSTICE AMIT BANSAL in the case of JIVANLAL JOITARAM PATEL vs. NATIONAL HIGHWAYS AUTHORITY OF INDIA [FAO (OS)(COMM) 70/2017] on 08.03.2022. The facts of the case that the parties to dispute agreed that claims of the respondent, and counter claims of the appellant would be adjudicated afresh, and that a sole Arbitrator may be appointed instead of a three-member Arbitral Tribunal, in order to save time and costs. At the hearing before the Arbitral Tribunal, the counsels were requested to address the Arbitral Tribunal on the issue whether counter claim(s) are to be included in the expression “sum in dispute” appearing in the 4th Schedule of the Arbitration and Conciliation Act, 1996, or the amount thereof is to be separately considered in terms of proviso to Section 38(1) of the Act. The senior counsels contended that the Sum in dispute includes both claim and counter claim amounts. If the legislature intended to have the Arbitral Tribunal exceed the ceiling limit by charging separate fee for claim and counter claim amounts, it would have provided so in the Fourth Schedule. The Court held that the Sections 31(8) and Section 31A would have no application where the fees of the arbitral tribunal has been fixed by agreement between the parties. Similarly, where the fees has been fixed by the Court in terms of 4th Schedule to the Act, as in the case at hand, Sections 38(1), 31(8) and Section 31A would have no application. The term “sum in dispute” provided in the 4th Schedule to the Act has to be interpreted so as to include the aggregate value of the claims as well as counter claims. The Court observed, “Proviso to Section 38(1) of the Act carves out a specific exception providing for Arbitral Tribunal to fix a separate fee for claims and counter claims. Counter claim would mostly be founded upon an independent cause of action, and can continue even if the main suit fails, or is withdrawn. Separate court fee is required to be paid on the amount of counter claim. Even in terms of Rule 3 of Delhi International Arbitration Centre and Rule 30 of Indian Council of Arbitration’s Rules of Domestic and Commercial Arbitration and Conciliation, claims and counter claims are assessed separately for calculation of arbitral fee.”
IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment Reserved on : 28th January 2022 Judgment Delivered on : 08th March 2022 FAO70 2017 JIVANLAL JOITARAM PATEL … Appellant Through: Mr. Ritin Rai Senior Advocate with Ms. Aditi Rao Advocate. NATIONAL HIGHWAYS AUTHORITY OF INDIA… Respondent Through: Mr. Arun Kumar Verma Ms.Anchal Seth Advocates. HON BLE MR. JUSTICE VIPIN SANGHI HON BLE MR. JUSTICE AMIT BANSAL JUDGEMENT OF THE COURT CM No.14819 2021 This appeal was disposed of by a judgment dated 23rd January 2018 passed by the Division Bench with the consent of the parties. It was agreed that claims No.1 and 2 of the respondent and counter claims No.2 5 7 10 and 15 of the appellant be adjudicated afresh and that a sole Arbitrator may be appointed instead of a three member Arbitral Tribunal in order to save time and costs. The relevant extracts from the aforesaid judgment are set out below: FAO70 2017 “10. Parties agree that they would rely upon pleadings urged earlier and some additional plea which may be necessary on account of change in circumstances and legal objections may be required to be taken. Accordingly the present appeal is Justice Manmohan Sarin Former Chief Justice of the J&K High Court Mobile No. 9818000210 is appointed as the Sole Arbitrator who would decide the claims and counter claims arising out of the Agreement dated 17.11.2004 between the parties. He shall fix his fee us per the 4th Schedule of the Act of 1996. The legal objections of both parties are kept open. 12. Accordingly the present appeal is disposed of.” Emphasis Supplied) Pursuant to the above judgment the Arbitral Tribunal entered reference on 28th February 2018. In the Procedural Order dated 29th April 2019 it was noted the total amount of claim was Rs.33 53 27 205 inclusive of interest @ 18% per annum from 01st October 2006 to 28th February 2018) and the total amount of counter claim including interest was Rs.11 43 40 050 . Vide Procedural Order dated 21st August 2020 the Arbitral Tribunal fixed the arbitral fees as Rs.40 44 795 in terms of ratio of the judgment of this Court in Rail Vikas Nigam Vs. Simplex Infrastructure Ltd. MANU DE 1367 2020 and both the parties consented to the fixation of the aforesaid arbitral fees. At the hearing before the Arbitral Tribunal on 26th November 2020 the counsels were requested to address the Arbitral Tribunal on the issue whether counter claim(s) is are to be included in the expression “sum in dispute” appearing in the 4th Schedule of the Arbitration and Conciliation Act 1996or the amount thereof is to be separately considered in terms of proviso to Section 38(1) of the Act. FAO70 2017 After hearing both parties the Arbitral Tribunal passed the order dated 27th January 2021 holding that the applicable arbitral fee in the present case has to be assessed separately for the claim and counter claim. While arriving at this conclusion the Arbitral Tribunal noted the following: Initially it was agreed between the parties that they do not need to file fresh pleadings or lead evidence but as the arbitration progressed need for further evidence arose and parties filed fresh documents and directions for production of records were given by the Arbitral counter claims. ii) Proviso to Section 38(1) of the Act carves out a specific exception providing for Arbitral Tribunal to fix a separate fee for claims and iii) Counter claim would mostly be founded upon an independent cause of action and can continue even if the main suit fails or is withdrawn. iv) Separate court fee is required to be paid on the amount of counter v) Adjudication of claims and counter claims mostly require additional or separate evidence and arguments. vi) Claims in a particular case may cross the ceiling provided under the 4th Schedule to the Act and if counter claims are filed thereafter and they are taken together with a claim the Arbitral Tribunal would have to decide the counter claims as well as the claims without any additional fee and this could not be the intention of the Statute. vii) Dictum of combining claims and counter claims for the purposes of determining fee under the 4th Schedule could result in inequitable FAO70 2017 situations contrary to the express language of Section 38(1) of the viii) The aforesaid contentions were neither raised nor considered by this in Delhi State Industrial Infrastructure Development Corporation Ltd. Vs. Bawana Infra Development Pvt. Ltd. 2018 SCC OnLine Del 9241. ix) A conjoint reading of Sections 38(1) and 31A of the Act leaves no doubt that arbitral fees and expenses can be fixed by the Arbitral Tribunal separately for claims and counter claims. x) Even in terms of Rule 3 of Delhi International Arbitration Centre hereinafter „DIAC Rules‟) and Rule 30 of Indian Council of Arbitration’s Rules of Domestic and Commercial Arbitration and Conciliation claims and counter claims are assessed separately for calculation of arbitral fee. After making the above said observations and fixing the arbitral fee separately for claims and counter claims the Arbitral Tribunal gave liberty to the parties to approach this Court for seeking clarification in the matter of fixation of arbitral fees. Accordingly the present application has been filed on behalf of the applicant appellant seeking clarification with regard to the fixation of arbitral fee. Reply to the application was filed on behalf of the respondent opposing the fixation of arbitral fee by the Arbitral Tribunal by taking the claims and counter claims separately. 8. We have heard the senior counsels on behalf of the parties. It is the common submission on behalf of both the sides that the judgment of the FAO70 2017 Single Judge of this Court in DSIIDC lays down the correct law with regard to fixation of arbitral fees under the 4th Schedule to the Act when the Arbitral Tribunal is adjudicating a claim as well as counter claim. It is further submitted by the senior counsels that Sections 38(1) and 31A of the Act would come into play only when the Arbitral Tribunal is itself fixing the fees and not when the fees of the Arbitral Tribunal has been fixed by the Court in terms of 4th Schedule to the Act. It is contended by the senior counsels that the reliance placed by the Arbitral Tribunal on the proviso to Rule 3 of DIAC Rules is misplaced as the said proviso fixes the fee only when a party fails to pay its share of the 10. We have considered that aspects taken note of by the Ld. Sole Arbitrator in his order dated 27.01.2021 and the submissions of Ld. Senior Counsels and also examined the decision above referred to. At the outset we may refer to the judgment in DSIIDCof the Act seeking interpretation of the fee schedule provided in 4th Schedule to the Act which came up for consideration before this Court. The Ld. Single Judge in DSIIDCcame to the conclusion that “sum in dispute” would include FAO70 2017 both the claim and counter claim amounts taken cumulatively. In arriving at this conclusion the Single Judge relied upon: 246th Law Commission Report giving the rationale behind fixing of a model schedule of fees so that arbitration becomes a cost effective solution for dispute resolution in the domestic context. ii) Rules of various Indian as well as international arbitral institutions with regard to fixation of arbitral fees. the fee schedule set by DIAC where “sum in dispute” is the cumulative value of claim and counter claim. 11. The relevant observations of the Single Judge in DSIIDCare set out below: “14. Even in the general parlance “Sum in dispute” shall include both claim and counter claim amounts. If the legislature intended to have the Arbitral Tribunal exceed the ceiling limit by charging separate fee for claim and counter claim amounts it would have provided so in the Fourth 15. Proviso to Section 38(1) of the Act can only apply when the Arbitral Tribunal is not to fix its fee in terms of the Fourth Schedule to the Act. It would not have any bearing on the interpretation to be put to the Fourth Schedule. It is noted that as regards fee even under the Amended Act the Arbitral in an ad hoc arbitration which is conducted without the intervention of the Court. Even where the Arbitral Tribunal is appointed by the Court under Section 11 of the Act in absence of rules framed under Section 11of the Act it is not in every case that the Arbitral Tribunal has to fix its fee in accordance with the Fourth Schedule to the Act. Therefore the proviso to Section 38(1) of the Act would have no bearing on the interpretation being put to the Fourth Schedule and the phrase “Sum in dispute” therein. its schedule of FAO70 2017 16. An argument was made that the adjudication of counter claim would require extra effort from the Arbitrator and therefore the Arbitrator should be entitled to charge a separate fee for the same. I cannot agree with this argument. The object of providing for counter claim is to avoid multiplicity of proceedings and to avoid divergent findings. Keeping the object of the amendment in view the ceiling on fee as prescribed in the Fourth Schedule of the Act cannot be allowed to be breached.” emphasis supplied) 12. We are in complete agreement with the aforesaid observations of the Single Judge in DSIIDCof the Act can only apply when the Arbitral Tribunal fixes its own fees as in the case of most ad hoc arbitrations. The said proviso cannot apply when the fees of the Arbitral Tribunal has been fixed in terms of 4th Schedule to the Act. Therefore Section 38(1) of the Act and its proviso cannot be resorted to while interpreting the term “sum in dispute” as occurring in the 4th Schedule to the Act. 13. Rule 3 of the DIAC Rules relied upon by the Arbitral Tribunal in its order dated 27th January 2021 is set out below: “3. Arbitrators Fees i)The fees payable to the Arbitrators shall be determined in accordance with the scales specified in Schedules „B C D & E‟ to these rules. FAO70 2017 and counter claims(s). PROVIDED that in the event of failure of party to arbitration to pay its share as determined by the centre on the aggregation of claim(s) and counter claim(s) the Centre may assess the claim(s) and counter claim(s) separately and demand the same from the parties concerned. " Schedule B provides for Arbitrator’s fee in Domestic Arbitrations and Schedule C provides for Arbitrator’s fee in Summary Arbitrations. It is provided therein that “Sums in dispute mentioned in the Schedule B and C above shall include any counter claim made by a party”. 14. There is no ambiguity in the aforesaid Rule. The arbitral fee has to be determined on the basis of aggregate amount of claim and counter claim. The proviso to Rule 3 of the DIAC Rules kicks in only when the party fails to pay its share of the aggregate amount of claim and counter claim. Thus in such cases DIAC has the discretion to assess the claim and counter claim separately and demand the same from the parties. The proviso does not deal with the aspect of computation of the arbitral fee. To read rule 3(ii) as “The fee shall be determined and assessed on the amount of the claim(s) and counter claim(s) and aggregated” would do violence to the plain and ordinary grammatical meaning of the said Rule. The parties agreed to appointment of the Sole Arbitrator and to his fee being fixed in accordance with the Fourth Schedule of the Act on the clear understanding of inter alia Rule 3(ii) to mean that the fee of the Sole Arbitrator shall be fixed on the aggregate of the claim(s) and counter claim(s). To now call upon them to pay separate fee for the claim(s) and counter claim(s) would not be fair to them and is bound to cause them embarrassment. If the interpretation FAO70 2017 proposed by the Ld. Sole Arbitrator was known to them they or one of them may not have agreed to the appointment of the Sole Arbitrator. Similarly the Tribunal was conscious when it accepted and embarked upon the reference of the intent of fee that would be payable and the limitations on it. Having chosen to accept the assignment the fee cannot be enhanced by a process of interpretation of the Rules not in consonance with the interpretation already adopted. 15. As regards the observations made in the order dated 27th January 2021 of the Arbitral Tribunal with regard to counter claim being an independent action requiring separate adjudication this aspect has also been considered by the Single Judge in DSIIDCin paragraph 16 set out above. We fully concur with the findings of the Single Judge in this regard. Here it may also be relevant to note that unlike a civil suit where a counter claim could be in respect of a totally different transaction in the context of arbitral proceedings the counter claim has to necessarily be in relation to the arbitration agreement. Therefore in the context of arbitration proceedings it may not be correct to say that counter claim would be an “independent” cause of action. It seems from the same subject matter transation. 16. The judgment of the Single Judge of this Court in M s Chandok Machineries Vs. M s. S.N. Sunderson & Co. 2018 SCC OnLine Del 11000 relied upon by the Arbitral Tribunal was in a different context. In that case this Court while appointing the Arbitral Tribunal had directed that the fee shall be fixed by the Arbitral Tribunal itself. In this regard reference may be made to paragraph 36 of the judgment: “36. It may further be noted that this Court while appointing the Presiding Arbitrator vide its order dated 27 November 2015 in Arbitration Petition No. 365 2015 had directed that FAO70 2017 the fee shall be fixed by the learned Arbitrator himself. Therefore it was for the Arbitral Tribunal to fix its own fee and merely because it gives a reference to the Fourth Schedule of the Act while fixing its fee it cannot be said that it had bound itself to the said Fourth Schedule.” Therefore in that case the Arbitral Tribunal was not bound to fix the fee in terms of the 4th Schedule to the Act. It was in that context that this Court while relying upon Section 38 of the Act observed in paragraph 39 that Arbitral Tribunal may fix separate amount of deposit for the claims and counter claims and upheld the decision of the Arbitral Tribunal fixing separate fee in respect of claim and counter claim. Therefore in our view there is no conflict between the judgments in DSIIDC and M s Chandok Machineriesare set out below: “43. In my view the scheme of 1996 Act is such that the provisions of Section 38(1) 31(8) and 31A are inextricably interlinked. These provisions cannot be read in isolation. The proviso to Section 38(1) clearly states that where there are claims and counter claims before the arbitral tribunal the Arbitral Tribunal may fix separate amount of deposits for the claim and counter claim. Section 38(1) clarifies that the “amount of deposit” is to be directed “as an advance for the FAO70 2017 costs referred to in sub sectionof Section 31”. Sub section 8) of Section 31 requires the Arbitral Tribunal to fix the costs of arbitration in accordance with Section 31A. The explanation to Section 31A(1) clearly states that for the purposes of Section 31A(1) the expression “costs” means reasonable costs relating to inter alia “the fees and expenses of the arbitrators”. 44. Mr. Upadhyay also sought to contend that the word “fees” has to be segregated from the concept of “costs” in the 1996 Act. Empirically stated this may be correct however for the purposes of application of Section 31A(1) it is not possible to dichotomise “fees” and “costs”. This submission in my view would be in the teeth of Section 31(8) read with Section 31A and cannot therefore be accepted. 45. Section 31(8) requires the arbitral tribunal to fix the costs of the arbitration and the explanation to Section 31A(1) clearly holds that the words “costs” means reasonable costs to the expression “costs” this arbitrators”. Apart statutorily also means reasonable costs relating tothe fees and expenses of the Courts and witnesses legal fees and expenses any administration fees of the institution supervising the arbitrationand any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award.” fees and expenses of inter alia “the 18. While arriving at the aforesaid finding the Single Judge in NTPC supra) concurred with the view expressed in M s Chandok Machineries supra) without going into the issue if there is an inconsistency between DSIIDCand M s Chandok Machineriesand NTPC were in the context of interpreting Sections 38(1) and 31A of the Act where the Arbitral Tribunal was free to fix its own fees and the fee was not fixed by the Court in terms of 4th Schedule to the Act. In DSIIDC the FAO70 2017 fees of the Arbitral Tribunal was specifically fixed by this Court in terms of 4th Schedule to the Act. Therefore there is no inconsistency between the judgments of this Court in DSIIDCon one hand and M s Chandok Machineriesand NTPCon the other hand. The judgments in M s Chandok Machineriesand NTPCcannot be resorted to for interpretation of the words “sum in dispute” as occurring in 4th Schedule to the Act. Therefore in our view the said judgments are not applicable to the facts and circumstances of the present case. 20. Our attention was also drawn to the judgement of the Supreme Court in National Highways Authority of India Vs. Gayatri Jhansi Roadways Limited 2019 SCC OnLine SC 906. The issue before the Supreme Court in the aforesaid case was whether the fee of the Arbitral Tribunal was to be fixed in terms of the agreement between the parties or the 4th Schedule to the Act. In the facts of that case the Supreme Court held that the fees was to be fixed in terms of the agreement between the parties and not the 4th Schedule to the Act. It was in that context that the Supreme Court made the following observations: “14. However the learned Single Judge s conclusion that the change in language of Section 31(8) read with Section 31 A which deals only with the costs generally and not with arbitrator s fees is correct in law. It is true that the arbitrator s fees may be a component of costs to be paid but it is a far cry thereafter to state that Sections 31(8) and 31 A would directly govern contracts in which a fee structure has already been laid down. To this extent the learned Single Judge is correct. We may also state that the declaration of law by the learned Single Judge in Gayatri Jhansi Roadways Ltd. is not a correct view of the law.” FAO70 2017 21. Thus Sections 31(8) and Section 31A would have no application where the fees of the arbitral tribunal has been fixed by agreement between the parties as in the case before the Supreme Court. Similarly where the fees has been fixed by the Court in terms of 4th Schedule to the Act as in the case at hand Sections 38(1) 31(8) and Section 31A would have no application. The term “sum in dispute” provided in the 4th Schedule to the Act has to be interpreted so as to include the aggregate value of the claims as well as counter claims. 22. The application stands disposed of in the above terms. VIPIN SANGHI J.) MARCH 08 2022 FAO70 2017 