NATIONAL HIGHWAYS AUTHORITY OFversusGAYATRI JHANSI ROADWAYS LIMITED

                         [2019] 9 S.C.R. 1001                          1001


       NATIONAL HIGHWAYS AUTHORITY OF INDIA                            A
                                   v.
           GAYATRI JHANSI ROADWAYS LIMITED
                     (Civil Appeal No. 5383 of 2019)
                             JULY 10, 2019                             B
             [R.F. NARIMAN AND SURYA KANT, JJ.]
      Arbitration:
      Fee of Arbitrator – Whether to be governed by Fourth
Schedule of the Arbitration Act dehors the agreement between the       C
parties – Held: The fee schedule fixed by the agreement between
the parties would govern the fee of Arbitrator and not Fourth
Schedule to the Arbitration Act – Arbitration and Conciliation Act,
1996 [As amended by Arbitration and Conciliation (Amendment)
Act, 2015] – Fourth Schedule.
                                                                       D
      Arbitration and Conciliation Act, 1996:
       s. 31(8) r/w. s. 31A – Scope of – Held: Section 31(8) r/w
s.31A deals only with the costs generally and not with arbitrator’s
fee – It is true that the arbitrator’s fees may be a component of
costs to be paid, but it is not correct to say that s. 31(8) and 31A   E
directly govern contracts in which fee structure has already been
laid down.
      Disposing of the appeals, the Court
      HELD: 1. In the facts of the present case, the fee schedule
was fixed by the agreement between the parties. This fee               F
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. Therefore, the fee schedule that is contained in        G
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.
[Para 12] [1007-A-C]
                                                                       H
                                 1001
1002            SUPREME COURT REPORTS                      [2019] 9 S.C.R.


 A            2. 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
 B
       govern the arbitral fees to be charged, but that they were bound
       to follow the judgment in National Highways Authority of India
       vs. Gayatri Jhansi Roadways Limited case passed by the Delhi
       High Court which clearly mandated that the Fourth Schedule and
       not the agreement would govern. [Para 13] [1007-C-D]
 C           3. However, the Single Judge’s conclusion that the change
       in language of Section 31(8) read with Section 31A of Arbitration
       and Conciliation Act, 1996 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
 D     a far cry thereafter to state that Sections 31(8) and 31A would
       directly govern contracts in which a fee structure has already
       been laid down. To this extent, the Single Judge is correct. The
       declaration of law by the Single Judge in Gayatri Jhansi Roadways
       Limited case is not a correct view of the law. [Para 15]
       [1007-F-H]
 E
             CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5383
       of 2019
             From the Judgment and Order dated 11.09.2017 of the High Court
       of Delhi at New Delhi in ARB. A. No. 1 of 2017
 F                                     With
             Civil Appeal No. 5384 of 2019.
              P. S. Narsimha, Ms. Meenakshi Arora, Sr. Advs., Manish
       K. Bishnoi, Archit Gupta, Prashant Kumar, Ms. Awantika Manohar,
       M/s. AP & J Chambers, Bharat Singh, Balendu Shekar, Ms. Sindoora
 G
       VNL, Rahul Tanwani, Santosh Kumar - I, Kaushik Laik, Angad Mehta,
       P. S. Sudheer, Ms. Anne Mathew, Sayid Marzook Bafaki, Advs. for the
       appearing parties.


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 NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GAYATRI                                  1003
            JHANSI ROADWAYS LIMITED

       The Judgment of the Court was delivered by                                 A
       R. F. NARIMAN, J.
       CIVIL APPEAL NO. 5384 OF 2019
       (Arising out of SLP (C) No. 22099 of 2018)
       1. Leave granted.                                                          B
       2. The brief facts of the present appeal are as follows:
       3. A contract dated 07.02.2006 was entered into between the
appellant and the respondent. It is sufficient to state, for the purpose of
this case, that insofar as the dispute resolution is concerned, the arbitration
                                                                                  C
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
                                                                                  D
       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              E
          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     F
          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       G
          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).

                                                                                  H
1004            SUPREME COURT REPORTS                          [2019] 9 S.C.R.


 A               (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
 B             VI Charges for publishing the Award – Maximum of
                 Rs.10,000/-
               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
 C                 with the Contractor/Supervisoin consultant and with the
                   specific approval of the Chairman, NHAI before
                   appointment of the Arbitrator.”
              4. Mr. P. S. Narasimha, learned senior counsel appearing on behalf
       of the respondent, has informed us that the fee schedule that was so
 D     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.
              5. As disputes arose between the parties, arbitration was invoked
       by the appellant long after the contract was entered into, i.e., on
 E     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
 F     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.
             6. The matter then came up before the Arbitral Tribunal, which
       was by then constituted, in which the Tribunal passed an order dated
 G
       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.
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 NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GAYATRI                              1005
     JHANSI ROADWAYS LIMITED [R.F. NARIMAN, J.]

      (b) The Respondent requested that fees of the AT may be fixed in        A
          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,       B
          2015.”
       7. 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           C
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             D
      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.    E
      Oral submissions on this mater were made by both 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       F
      of NHAI vs Gayatri Jhansi Roadways. The AT reiterated that
      the fees fixed in the 1st hearing shall be followed. Accordingly,
      fees shall be regulated as per provisions of ‘the fourth schedule
      of the amended Arbitration and Conciliation Act, 1996.”
        8. Faced with this order, the respondent moved an application on
                                                                              G
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.
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1006            SUPREME COURT REPORTS                          [2019] 9 S.C.R.


 A           9. 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.
              10. The learned Single Judge, by the impugned judgment, set out
 B     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 which, the
 C     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
 D     dehors the agreement between the parties.
             11. 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
 E           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
 F           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
 G           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.”

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 NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GAYATRI                                1007
     JHANSI ROADWAYS LIMITED [R.F. NARIMAN, J.]

       12. We have heard learned counsel for the both the sides. In our         A
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 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
                                                                                B
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.                                                                C
       13. 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      D
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.
      14. The arbitrators merely followed the law laid down by the Delhi        E
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 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.
                                                                                F
        15. 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            G
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.

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1008             SUPREME COURT REPORTS                         [2019] 9 S.C.R.


 A            16. 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.
             17. 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
 B     Award in the present case.
              CIVIL APPEAL NO. 5383 OF 2019
              (Arising out of SLP (C)No. 3211 of 2018
              1. Regard being had to the judgment just pronounced in the
 C     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.
              2. The appeal stands disposed of accordingly.
 D
       Kalpana K. Tripathy                                      Appeals disposed of.




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