Full Judgment Text
‘ REPORTABLE’
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5383 OF 2019
(Arising out of SLP (C)No. 3211 of 2018)
NATIONAL HIGHWAYS AUTHORITY OF INDIA Appellant(s)
VERSUS
GAYATRI JHANSI RAODWAYS LIMITED Respondent(s)
WITH
CIVIL APPEAL NO. 5384 OF 2019
(Arising out of SLP (C) No. 22099 of 2018)
GAMMON ENGINEERS AND CONTRACTORS PVT. LTD. Appellant(s)
VERSUS
NATIONAL HIGHWAYS AUTHORITY OF INDIA Respondent(s)
J U D G M E N T
R. F. NARIMAN, J.
CIVIL APPEAL NO. 5384 OF 2019
(Arising out of SLP (C) No. 22099 of 2018)
Leave granted.
The brief facts of the present appeal are as follows:
A contract dated 07.02.2006 was entered into between
Signature Not Verified
Digitally signed by R
NATARAJAN
Date: 2019.07.25
10:44:31 IST
Reason:
the appellant and the respondent. It is sufficient to
state, for the purpose of this case, that insofar as the
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dispute resolution is concerned, the arbitration clause
referred the parties to the arbitration of three learned
arbitrators - one to be appointed by each party and the
third arbitrator to be appointed by the two arbitrators so
appointed. The aforesaid contract contained paragraph 5
which reads as follows:
“5. The parties are desirous that the remuneration
and other expenses payable to the Arbitrators as per
arbitration clause for referring the dispute between
the parties arising out of the said Contract to the
Arbitral Tribunal for resolution in accordance with
the procedure laid down therein, shall be as
follows:
I. That the maximum limit for fee payable to
each Arbitrator per day shall be Rs.5000/-
subject to a maximum of Rs.1.5 lakh per case.
II That each Arbitrator shall be paid a reading
fees of Rs.6000/- per case.
III That each Arbitrator shall be paid Rs.5000/-
by way of secretarial assistant per case.
IV. That each Arbitrator shall be paid Rs.6000/-
per case towards incidental charges like
telephone, FAX, postage etc.
V. That other expenses based on actual against
presentation of bills, shall also be
reimbursed to each Arbitrator subject to the
following ceiling (applicable for the days of
hearing only)
(a) Travelling expenses – Economy class (By
Air), First class AC (By train) and AC
car (By road).
(b) Lodging and boarding – Rs.8000/- per day
in Metro cities (Delhi, Mumbai, Chennai &
Kolkata), Rs.5000/- per day in other
cities OR Rs.2000/- per day if any
Arbitrator makes his own arrnagement.
(c) Local travel – Rs.700/- per day
VI Charges for publishing the Award – Maximum of
Rs.10,000/-
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VII That in exceptional cases, such as cases
involving major legal implication/wider
ramification/higher financial stakes etc. a
special fees structure could be fixed in
consultation with the Contractor/Supervisoin
consultant and with the specific approval of
the Chairman, NHAI before appointment of the
Arbitrator.”
Mr. P. S. Narasimha, learned senior counsel appearing
on behalf of the respondent, has informed us that the fee
schedule that was so fixed, was fixed under a policy
decision dated 31.05.2004 of the National Highways Authority
of India (hereinafter referred to as ‘NHAI’ of brevity), a
perusal of which would show that, this is, in fact, so.
As disputes arose between the parties, arbitration was
invoked by the appellant long after the contract was entered
into, i.e., on 23.05.2017. The respondent wrote a letter
dated 14.07.2017 appointing Shri Sudesh Dhiman as its
nominee arbitrator in which it reminded the arbitrator that
the fee applicable is to be considered as per the policy
circular of the NHAI dated 01.06.2017. This circular
substituted amounts payable to the arbitrator as per the
circular of 2004, whereby the arbitrators would now get for
any claim under Rs.100 crores, Rs.25,000 per day together
with enhanced other charges or a lumpsum fee of Rs.5 lakhs
per case which includes counter claims, in place of the
original fee structure.
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The matter then came up before the Arbitral Tribunal,
which was by then constituted, in which the Tribunal passed
an order dated 23.08.2017, in which it stated as follows:
“1.12.1 Fees:
(a) The Claimant informed that there is no
agreement between the parties regarding
the fees of the AT.
(b) The Respondent requested that fees of the
AT may be fixed in terms of the
instructions issued by NHAI vide their
circular dated 01.06.2017.
(c) The Tribunal considered the matter and
decided that the fees of the AT shall be
regulated as per provisions of the Fourth
Schedule of the Arbitration and
Conciliation (Amendment) Act, 2015.”
The respondent, against this order, moved an
application dated 13.10.2017 before the Tribunal in which it
sought to remind the Tribunal that the arbitral fees has
been fixed by the agreement and that, therefore, they may
be fixed in terms of the policy of 2017 and not as per the
Fourth Schedule of the Arbitration and Conciliation Act,
1996. The matter came up before the Tribunal yet again on
30.01.2018. The Tribunal then passed the following order:
“3.8 The respondent had filed an application for
review of fees fixed by the AT and to modify the
same in terms of the NHAI circular dated 01.06.2017.
It was brought out that the Claimant had
inadvertently informed the AT as per para 1.12.1(a)
that there was no agreement between the parties
regarding the fees of the AT. In fact, the
agreement provides for a fixed rate of fee of the AT
as agreed by the parties.
Oral submissions on this mater were made by both
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the parties. The AT deliberated on the matter and
has decided that in view of the latest provision in
the amended Act, the AT is competent to fix the fees
regardless of the agreement of the parties. This is
as per judgment dated 11.09.2017 of the Hon’ble High
Court in the matter of NHAI vs Gayatri Jhansi
Roadways. The AT reiterated that the fees fixed in
st
the 1 hearing shall be followed. Accordingly, fees
shall be regulated as per provisions of ‘the fourth
schedule of the amended Arbitration and Conciliation
Act, 1996.”
Faced with this order, the respondent moved an
application on 08.05.2018 under Section 14 of the
Arbitration and Conciliation Act, 1996, to terminate the
mandate of the arbitrators, inasmuch as, according to the
respondent, the arbitrators had wilfully disregarded the
agreement between the parties and were, therefore, de jure
unable to act any further in the proceedings.
Meanwhile, the Arbitral Tribunal passed yet another
order dated 19.07.2018 in which the Tribunal stated it had
no objection to payment of any fees as would be decided in
the pending proceedings by the High Court of Delhi.
The learned Single Judge, by the impugned judgment,
set out clause 5 of the agreement between the parties and
then stated that the Fourth Schedule of the Arbitration Act
not being mandatory, whatever terms are laid down as to
arbitrator’s fees in the agreement, must needs be followed.
In so doing, he disagreed with the another learned Single
Judge Bench judgment dated 11.09.2017 in National Highways
Authority of India v. Gayatri Jhansi Roadways Limited in
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which, the learned Single Judge had held that Section 31(8)
and Section 31A of the Arbitration Act would govern matters
such as this and since the expression ‘unless otherwise
agreed by the parties’ had been omitted from Section 31A by
the Amendment Act of 2015, arbitrator’s fees would have to
be fixed in accordance with the Fourth Schedule of the
Arbitration Act dehors the agreement between the parties.
The impugned judgment violently disagreed with this
view holding the said judgment as per incuriam stating that:
“25. A reading of the above would clearly show that
the “costs” under Section 31(8) and 31A of the Act
are the costs which are awarded by the Arbitral
Tribunal as part of its award in favour of one party
to the proceedings and against the other.
26. The deletion of words “unless otherwise agreed
by the parties” in Section 31A only signifies that
the parties, by an agreement, cannot contract out of
payment of ‘costs’ and denude the Arbitral Tribunal
to award ‘costs’ of arbitration in favour of the
successful party. The Judgment of this Court in
Gayatri Jhansi Roadways Limited (Supra) relied upon
by the counsel for the respondent does not take note
of the above decisions or the report of the Law
Commission. The said judgment is, therefore, per
incuriam. I am informed that the said decision is
pending challenge before the Supreme Court by way of
a Special Leave Petition. In any case, the said
Judgment was passed on an appeal under Section 37 of
the Act and did not consider the contours of Section
14 of the Act.”
We have heard learned counsel for the both the sides.
In our view, Shri Narasimha, learned senior counsel, is
right in stating that in the facts of this case, the fee
schedule was, in fact, fixed by the agreement between the
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parties. This fee schedule, being based on an earlier
circular of 2004, was now liable to be amended from time to
time in view of the long passage of time that has ensued
between the date of the agreement and the date of the
disputes that have arisen under the agreement. We,
therefore, hold that the fee schedule that is contained in
the Circular dated 01.06.2017, substituting the earlier fee
schedule, will now operate and the arbitrators will be
entitled to charge their fees in accordance with this
schedule and not in accordance with the Fourth Schedule to
the Arbitration Act.
We may, however, indicate that the application that
was filed before the High Court to remove the arbitrators
stating that their mandate must terminate, is wholly
disingenuous and would not lie for the simple reason that an
arbitrator does not become de jure unable to perform his
functions if, by an order passed by such arbitrator(s), all
that they have done is to state that, in point of fact, the
agreement does govern the arbitral fees to be charged, but
that they were bound to follow the Delhi High Court in
Gayatri Jhansi Roadways Limited case which clearly mandated
that the Fourth Schedule and not the agreement would govern.
The arbitrators merely followed the law laid down by
the Delhi High Court and cannot, on that count, be said to
have done anything wrong so that their mandate may be
terminated as if they have now become de jure unable to
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perform their functions. The learned Single Judge, in
allowing the Section 14 application, therefore, was in error
and we set aside the judgment of the learned Single Judge on
this count.
However, the learned Single Judge’s conclusion that
the change in language of section 31(8) read with Section
31A 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 section 31(8) and
31A 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 Limited is not a correct view of the law.
With these observations, this appeal is allowed, the
impugned judgment is set aside and the arbitrators are
directed to proceed with the arbitration as expeditiously as
possible.
We extend the time, with the consent of the parties,
to a period of one year from today in which the arbitrators
must deliver the Arbitral Award in the present case.
CIVIL APPEAL NO. 5383 OF 2019
(Arising out of SLP (C)No. 3211 of 2018
Regard being had to the judgment just pronounced in
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Civil Appeal No. 5383 of 2019 etc.
the aforementioned Civil Appeal No. 5384 of 2019, we set
aside the impugned judgment dated 11.09.2017 in the present
case. However, the setting aside of this judgment will not,
in any way, come in the way of the final Award between the
parties which has been upheld finally by this Court.
The appeal stands disposed of accordingly.
…………………………………………………………………., J.
[ R. F. NARIMAN ]
…………………………………………………………………., J.
[ SURYA KANT ]
New Delhi;
July 10, 2019.
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