Holding

Arbitrators cannot unilaterally fix binding fees; 'sum in dispute' refers to claim and counter-claim separately; the ceiling of Rs 30,00,000 applies to the total fee (base plus variable); the ceiling is per individual arbitrator.

Summary

The Supreme Court considered several petitions concerning the determination of arbitrators' fees under the Arbitration and Conciliation Act, 1996. The Court held that arbitrators cannot unilaterally issue binding orders determining their own fees, as this violates party autonomy and the principle that one cannot be a judge in one's own cause. However, the arbitral tribunal has the discretion to apportion costs and demand deposits under Sections 31(8), 31A, and 38, but any finding on fees without agreement is not enforceable. The term 'sum in dispute' in the Fourth Schedule refers to the claim and counter-claim separately, not cumulatively, so arbitrators can charge separate fees for each. The ceiling of Rs 30,00,000 in Serial No. 6 applies to the total of the base amount and variable amount, not just the variable amount. This ceiling is per individual arbitrator, not the entire tribunal. The Court also issued directives for ad hoc arbitrations to fix fees at the outset through preliminary hearings. The appeals were disposed of accordingly, with some allowed and some dismissed.

Issues considered

Whether arbitrators are entitled to unilaterally determine their own fees.
Whether the term 'sum in dispute' in the Fourth Schedule means the cumulative total of the claim and counter-claim.
Whether the ceiling of Rs 30,00,000 in Serial No. 6 of the Fourth Schedule applies only to the variable amount or the entire fee.
Whether the ceiling of Rs 30,00,000 applies as a cumulative fee payable to the arbitral tribunal or represents the fee payable to each arbitrator.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11, s. 31, s. 31A, s. 38, s. 39, s. Fourth Schedule

Subjects

ArbitrationArbitrators' feesFourth ScheduleSum in disputeCeilingParty autonomyUnilateral determinationClaim and counter-claimAd hoc arbitrationCosts and feesLien on awardDeposits

Judgment

660 [2022]REPORTS
SUPREME COURT 10 S.C.R. 660 [2022] 10 S.C.R.

A OIL AND NATURAL GAS CORPORATION LTD.
v.
AFCONS GUNANUSA JV
(Arbitration Petition (Civil) No. 05 of 2022)
B AUGUST 30, 2022
[DR. DHANANJAYA Y CHANDRACHUD, SANJIV KHANNA
AND SURYA KANT, JJ.]
Arbitration and Conciliation Act, 1996 – ss. 11, 31, 31A, 38
and 39 – Fourth Schedule – Arbitrators’ Fees – Whether the
C
arbitrator(s) are entitled to unilaterally determine their own fees –
Whether the term “sum in dispute” in the Fourth Schedule to the
Arbitration Act means the cumulative total of the amounts of the
claim and counterclaim – Whether the ceiling of Rs 30,00,000 in
the entry at Serial No 6 of the Fourth Schedule of the Arbitration
D Act is applicable only to the variable amount of the fee or the entire
fee amount – Whether the ceiling of Rs 30,00,000 applies as a
cumulative fee payable to the arbitral tribunal or it represents the
fee payable to each arbitrator – Held: Arbitrators do not have the
power to unilaterally issue binding and enforceable orders
determining their own fees – A unilateral determination of fees
E
violates the principles of party autonomy and the doctrine of the
prohibition of in rem suam decisions, i.e., the arbitrators cannot be
a judge of their own private claim against the parties regarding
their remuneration – However, the arbitral tribunal has the discretion
to apportion the costs (including arbitrators’ fee and expenses)
F between the parties in terms of s.31(8) and s.31A and also demand
a deposit (advance on costs) in accordance with s.38 – If while
fixing costs or deposits, the arbitral tribunal makes any finding
relating to arbitrators’ fees (in the absence of an agreement between
the parties and arbitrators), it cannot be enforced in favour of the
arbitrators – The arbitral tribunal can only exercise a lien over the
G
delivery of arbitral award if the payment to it remains outstanding
u/s.39(1) – The party can approach the court to review the fees
demanded by the arbitrators if it believes the fees are unreasonable
u/s.39(2) – The term “sum in dispute” in the Fourth Schedule of the
Arbitration Act refers to the sum in dispute in a claim and counter-
H claim separately, and not cumulatively – Consequently, arbitrators
660
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 661
GUNANUSA JV

shall be entitled to charge a separate fee for the claim and the A
counter-claim in an ad hoc arbitration proceeding, and the fee
ceiling contained in the Fourth Schedule will separately apply to
both, when the fee structure of the Fourth schedule has been made
applicable to the ad hoc arbitration – The ceiling of Rs 30,00,000
in the entry at Serial No 6 of the Fourth Schedule is applicable to
B
the sum of the base amount (of Rs 19,87,500) and the variable
amount over and above it –Consequently, the highest fee payable
shall be Rs 30,00,000 – This ceiling is applicable to each individual
arbitrator, and not the arbitral tribunal as a whole, where it consists
of three or more arbitrators – A sole arbitrator shall be paid 25 per
cent over and above this amount in accordance with the Note to the C
Fourth Schedule.
Arbitration Law – Concepts of costs and fees in arbitration –
Distinguished.
Arbitration Law – Ad hoc arbitration – Direction / guidelines
issued for governing proceedings in ad hoc arbitrations. D

In the instant arbitration petition, the following issues in relation to
the arbitrators’ fees arose for consideration: (i) Whether the arbitrator
(s) are entitled to unilaterally determine their own fees; (ii) Whether the
term “sum in dispute” in the Fourth Schedule to the Arbitration Act means
the cumulative total of the amounts of the claim and counterclaim; E
(iii)Whether the ceiling of Rs 30,00,000 in the entry at Serial No 6 of the
Fourth Schedule of the Arbitration Act is applicable only to the variable
amount of the fee or the entire fee amount; and (iv)Whether the ceiling
of Rs 30,00,000 applies as a cumulative fee payable to the arbitral tribunal
or it represents the fee payable to each arbitrator. F
Disposing of the appeals, the Court
HELD:
Per D.Y. Chandrachud, J. [for himself and Surya Kant, J.]
1.1. ARBITRATOR’S FEE: On a review of a few foreign G
jurisdictions that either have explicitly recognised an arbitrators’
entitlement to remuneration and/or have dealt with the issue of
arbitrators’ power of fixing their own remuneration, it is seen
that although there are jurisdictional differences, the following
broad principles emerge: (i) Typically, the fees payable to
H
662 SUPREME COURT REPORTS [2022] 10 S.C.R.

A arbitrator(s) are determined through an agreement between the
parties (of which the arbitrator(s) become aware of when they
take up the assignment) or a separate agreement of the parties
with the arbitrator(s). The arbitrator(s) then become bound by
such contractually agreed fees; and (ii) Certain arbitration
legislations give the arbitrator(s) effective power to determine
B
their own fees, typically when there is an absence of agreement
between the parties on the subject. However, such determination
of fees is subject to review by the courts who can reduce the fees
if they are not reasonable. Thus, arbitrator(s) do not possess an
absolute or unilateral power to determine their own fees. Parties
C are involved in determining the fees of the arbitrator(s) in some
form. It could be by: (i) determining the fees at the threshold in
the arbitration agreement; or (ii) negotiating with the arbitrators
when the dispute arises regarding the fees that are payable; or
(iii) by challenging the fees determined by the tribunal before a
court. [Paras 66 and 67][720-C-F]
D
1.2 Party autonomy is a cardinal principle of arbitration.
The arbitration agreement constitutes the foundation of the
arbitral process. The arbitral tribunal is required to conduct the
arbitration according to the procedure agreed by the parties. The
procedure may stipulate adherence to institutional rules or ad
E hoc rules or a combination of both. [Para 68][721-B]
1.3 (i) In terms of the decision of this Court in Gayatri Jhansi
Roadways Ltd and the cardinal principle of party autonomy, the
Fourth Schedule is not mandatory and it is open to parties by
their agreement to specify the fees payable to the arbitrator(s)
F or the modalities for determination of arbitrators’ fees; and (ii)
Since most High Courts have not framed rules for determining
arbitrators’ fees, taking into consideration Fourth Schedule of
the Arbitration Act, the Fourth Schedule is by itself not mandatory
on court-appointed arbitrators in the absence of rules framed by
G the concerned High Court. Moreover, the Fourth Schedule is
not applicable to international commercial arbitrations and
arbitrations where the parties have agreed that the fees are to
be determined in accordance with rules of arbitral institutions.
The failure of many High Courts to notify the rules has led to a

H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 663
GUNANUSA JV

situation where the purpose of introducing the Fourth Schedule A
and sub-Section (14) to Section 11 has been rendered nugatory,
and the court-appointed arbitrator (s) are continuing to impose
unilateral and arbitrary fees on parties. Such a unilateral fixation
of fees goes against the principle of party autonomy which is
central to the resolution of disputes through arbitration. Further,
B
there is no enabling provision under the Arbitration Act
empowering the arbitrator(s) to unilaterally issue a binding or
enforceable order regarding their fees. [Para 79][730-G-H; 731-
A-D]
1.4 (i) Arbitration proceedings must be conducted
expeditiously; (ii) Court interference should be minimal; and (iii) C
When one or both parties, or the parties and the arbitral tribunal
are unable to reach a consensus, it is open to the arbitral tribunal
to charge the fee as stipulated in the Fourth Schedule, which is
the model fee schedule and can be treated as binding on all.
Consequently, when an arbitral tribunal fixes the fee in terms of D
the Fourth Schedule, the parties should not be permitted to object
the fee fixation. It is the default fee, which can be changed by
mutual consensus and not otherwise. [Para 105][754-B-D]
INTERPRETATION OF “SUM IN DISPUTE” IN THE
FOURTH SCHEDULE
E
2.1 On basis of analysis, the following principles emerge:
(i) The Arbitration Act treats claims and counter-claims at par,
and holds them subject to the same procedural timelines and
requirements; (ii) The Arbitration Act allows the arbitral tribunal
to fix a deposit of costs for claims and counter-claims separately,
recognizing that they are distinct proceedings since: (a) the F
proceeding for adjudicating on the claim is independent of the
proceeding for deciding the counter-claim; (b) distinct issues may
arise before the tribunal while adjudicating on the claim and
counter-claim; (c) the evidence led in support of the claim may
not be dispositive of the material which would be relied on to G
decide the counterclaim; and (d) the decision on the claim does
not necessarily conclude the adjudication of the counter-claim;
and (iii)The Arbitration Act considers claims and counter-claims
to be independent proceedings since the latter is not contingent
upon the former. Rather, it protects the right of any respondent
H
664 SUPREME COURT REPORTS [2022] 10 S.C.R.

A to raise a counter-claim in an arbitration proceeding, provided it
arises from the arbitration agreement under dispute. Further, in
the event of a default in the payment of a deposit either for the
claim or counter-claim, it specifically notes that the proceedings
will be terminated only in respect of the claim, or as the case may
be, the counter-claim in respect of which the default has occurred;
B
(iv)Though a counter-claim may arise from similar facts as a claim,
the counter-claim is not a set off and is not in the nature of a
defence to the claim; and (v) A counter-claim will survive for
independent adjudication even if the claim is dismissed or
withdrawn and the respondent to a claim would be entitled to
C pursue their counter-claim regardless of the pursuit of or the
decision on the claim. [Para 117][760-C-H; 761-A]
2.2 On analysis of the statutory framework of the Arbitration
Act and the CPC, related academic discourse and judicial
pronouncements, the following conclusions emerge: (i) Claims
D and counter-claims are independent and distinct proceedings; (ii)
A counter-claim is not a defence to a claim and its outcome is not
contingent on the outcome of the claim; (iii) Counter-claims are
independent claims which could have been raised in separate
proceedings but are permitted to be raised in the same
proceeding as a claim to avoid a multiplicity of proceedings; and
E (iv)The dismissal of proceedings in relation to the original claim
does not affect the proceedings in relation to the counter-claim.
[Para 135][770-A-D]
2.3 On a combined reading of Section 31(8), Section 31A
and Section 38(1) of the Arbitration Act, it is clear that: (i) separate
F deposits are to be made for a claim and counter-claim in an
arbitration proceeding; and (ii) these deposits are in relation to
the costs of arbitration, which includes the fee of the arbitrators.
Therefore, prima facie, the determination of the fee under the
Fourth Schedule should also be calculated separately for a claim
G and counter-claim – i.e., the term “sum in dispute” refers to
independent claim amounts for the claim and counterclaim. Such
an interpretation is also supported by the definition of claim and
counter-claim, and by the fact that the latter constitutes
proceedings independent and distinct from the former. [Para 136]

H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 665
GUNANUSA JV

FEE CEILING IN FOURTH SCHEDULE A
3. The Law Commission of India (LCI) 246th Report,
indicates that the legislative intent behind the introduction of
the Fourth Schedule was to put an end to the practise of arbitrators
charging exorbitant fees from the parties taking their services in
ad hoc arbitrations. Consequently, when there is a option of setting B
the ceiling of the fees in the Fourth Schedule at either Rs
30,00,000 or Rs 49,87,500, it would be appropriate to choose the
lower amount since it would be in keeping with legislative intent.
The 2015 Arbitration Amendment Act was clearly enacted with
the intent to give effect to the recommendation of the LCI 246th
Report on the point. Thus, the ceiling of Rs 30,00,000 in entry at C
Serial No 6 of the Fourth Schedule is applicable to the sum of
base amount and the variable amount, and not just the variable
amount. [Para 155][782-A-C]
CEILING APPLICABLE TO INDIVIDUAL ARBITRATORS
D
4. The submission that the ceiling of Rs 30,00,000
prescribed in the entry at Serial No 6 of the Fourth Schedule will
be applicable to the cumulative fee paid to the entire arbitral
tribunal, i.e., in a three member tribunal, and each individual
arbitrator would receive a fee of Rs 10,00,000 is erroneous, and
hence must be rejected. First, there is nothing in the language of E
the Fourth Schedule to support such an interpretation. The header
of the third column states “Model Fee” and does not specify it to
be in respect of the whole tribunal. Second, if such an
interpretation were to be adopted, it would lead to absurd
consequences. For instance, in an arbitration where the sum in F
dispute is large enough to trigger the ceiling of Rs 30,00,000 and
it were to be adjudicated by a three-member tribunal, the
maximum fee would have to be divided amongst the three
arbitrators. On the other hand, if the same dispute were to be
adjudicated by a sole arbitrator, the sole arbitrator would then
receive the whole amount of the maximum fee, i.e., triple of what G
each individual arbitrator would have received in a three-member
tribunal. Such a disparity is inconceivable, regardless of the extra
work a sole arbitrator may have to put in. This is further bolstered
by the Note to the Fourth Schedule, which states that “[i]n the
event the arbitral tribunal is a sole arbitrator, he shall be entitled H
666 SUPREME COURT REPORTS [2022] 10 S.C.R.

A to an additional amount of twenty-five per cent on the fee payable
as per the above”. Consequently, the sole arbitrator would not
only receive Rs 30,00,000, but an additional 25 per cent over
and above it. Indeed, it is clear that the Note was added to the
Fourth Schedule to fairly compensate sole arbitrators who
arguably would have to do more work than as a member of a
B
larger tribunal; which is why they are allowed payment of 25 per
cent of the fee over and above what they would be paid pursuant
to the table given in the Fourth Schedule. The corollary of this is
that the fee provided in Fourth Schedule is for each individual
arbitrator, regardless of whether they are a member of a
C multimember tribunal or a sole arbitrator. Finally, this
interpretation of the Fourth Schedule, that the fee provided
therein is applicable for each individual arbitrator and not the
whole arbitral tribunal, has also been fairly conceded before this
Court by the Attorney General. [Para 157][782-E-H; 783-A-B]
D CONCLUSION
5. (i) Arbitrators do not have the power to unilaterally issue
binding and enforceable orders determining their own fees. A
unilateral determination of fees violates the principles of party
autonomy and the doctrine of the prohibition of in rem suam
E decisions, i.e., the arbitrators cannot be a judge of their own
private claim against the parties regarding their remuneration.
However, the arbitral tribunal has the discretion to apportion the
costs (including arbitrators’ fee and expenses) between the
parties in terms of Section 31(8) and Section 31A of the Arbitration
F Act and also demand a deposit (advance on costs) in accordance
with Section 38 of the Arbitration Act. If while fixing costs or
deposits, the arbitral tribunal makes any finding relating to
arbitrators’ fees (in the absence of an agreement between the
parties and arbitrators), it cannot be enforced in favour of the
arbitrators. The arbitral tribunal can only exercise a lien over
G
the delivery of arbitral award if the payment to it remains
outstanding under Section 39(1). The party can approach the court
to review the fees demanded by the arbitrators if it believes the
fees are unreasonable under Section 39(2);

H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 667
GUNANUSA JV

(ii) Since this judgment holds that the fees of the arbitrators A
must be fixed at the inception to avoid unnecessary litigation and
conflicts between the parties and the arbitrators at a later stage,
this Court has issued certain directives to govern proceedings
in ad hoc arbitrations;
(iii)The term “sum in dispute” in the Fourth Schedule of B
the Arbitration Act refers to the sum in dispute in a claim and
counter-claim separately, and not cumulatively. Consequently,
arbitrators shall be entitled to charge a separate fee for the claim
and the counter-claim in an ad hoc arbitration proceeding, and
the fee ceiling contained in the Fourth Schedule will separately
apply to both, when the fee structure of the Fourth schedule has C
been made applicable to the ad hoc arbitration;
(iv)The ceiling of Rs 30,00,000 in the entry at Serial No 6
of the Fourth Schedule is applicable to the sum of the base amount
(of Rs 19,87,500) and the variable amount over and above it.
Consequently, the highest fee payable shall be Rs 30,00,000; and D

(v) This ceiling is applicable to each individual arbitrator,
and not the arbitral tribunal as a whole, where it consists of three
or more arbitrators. Of course, a sole arbitrator shall be paid 25
per cent over and above this amount in accordance with the Note
to the Fourth Schedule. [Para 158][783-C-F; 784-A-E] E

Bharat Aluminium Co. v. Kaiser Aluminium Technical
Services (2016) 4 SCC 126 : [2016] 1 SCR 364; Copper
Ltd Centrotrade Minerals & Metal Inc. v. Hindustan
(2017) 2 SCC 228 : [2016] 9 SCR 83; Salem Advocate
Bar Assn. (II) v. Union of India (2005) 6 SCC 344 : F
[2005] 1 Suppl. SCR 929; Indian Oil Corpn. Ltd. v.
Amritsar Gas Service (1991) 1 SCC 533 : [1990] 3
Suppl. SCR 196; Nityanand Sharma v. State of Bihar
(1996) 3 SCC 576 : [1996] 2 SCR 1; Aswini Kumar
Ghose v. Arabinda Bose 1953 SCR 1 and Indore G
Development Authority (LAPSE-5 J.) v. Manoharlal
(2020) 8 SCC 129 : [2020] 3 SCR 1 – followed.
Sanjeev Kumar Jain v. RS Charitable Trust (2012) 1
SCC 455 : [2011] 12 SCR 744; Voestalpine Schienen
H
668 SUPREME COURT REPORTS [2022] 10 S.C.R.

A GmbH v. Delhi Metro Rail Corpn. Ltd. (2017) 4 SCC
665 : [2017] 1 SCR 798; State of Goa v. Praveen
Enterprises (2012) 12 SCC 581 : [2011] 10 SCR 1026;
Jag Mohan Chawla v. Dera Radha Swami Satsang
(1996) 4 SCC 699 : [1996] 2 Suppl. SCR 509; Aphali
Pharmaceuticals Ltd. v. State of Maharashtra (1989) 4
B
SCC 378 : [1989] 1 Suppl. SCR 129; Mohd. Shabir v.
State of Maharashtra (1979) 1 SCC 568 : [1979] 2
SCR 997; Mithilesh Kumari v. Prem Behari Khare (1989)
2 SCC 95 : [1989] 1 SCR 621- relied on.
Assam State Weaving and Manufacturing Co. Ltd. v.
C Vinny Engineering Enterprises (P) Ltd. AIR 2010 Cal
52- approved.
NHAI v. Gayatri Jhansi Roadways Ltd. (2020) 17 SCC
626; Union of India v.Singh Builders (2009) 4 SCC
523 : [2009] 3 SCR 563; Dattatraya Govind Mahajan
D v. State of Maharashtra (1977) 2 SCC 54; Sanjeev
Kumar Jain v. Raghubir Saran Charitable Trust and
Ors. (2012) 1 SCC 455 : [2011] 12 SCR 744; Triveni
Shankar Saxena v. State of UP & Ors. 1992 Suppl. 1
SCC 524 : [1991] 3 Suppl. SCR 534; Voltas Ltd. v.
E Rolta India Ltd. (2014) 4 SCC 516 : [2014] 2 SCR 797;
Rajni Rani v. Khairati Lal (2015) 2 SCC 682 : [2014]
10 SCR 971; Thomas Mathew v. KLDC Ltd. (2018) 12
SCC 560 - referred to.
Gammon Engineers and Contractors Pvt. Ltd. v. NHAI
F 2018 SCC OnLine Del 10183 and NHAI v. Gayatri
Jhansi Roadways Ltd. 2017 SCC OnLine Del 10285 -
referred to.
KS Norjarl AS v. Hyundai Heavy Indus. Co., [1992] 1
QB 863, 884; Compagnie Européenne de Céréales SA
G v. Tradax Exp. SA [1986] 2 Lloyd’s Rep. 301 (QB);
Jivraj v. Hashwani [2011] UKSC 40; Taylor v. Caribou
102 Me 401 : 67 A 2 (1907); Hussmann (Europe) Ltd
v. Al Ameen Development & Trade, [2000] 2 Lloyd’s
Rep. 83 Queen’s Bench Division (Commercial Court)
– referred to.
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 669
GUNANUSA JV

P St J Langan, Maxwell on The Interpretation of Statutes A
(N M Tripathi Private Ltd, 1976 David St John Sutton,
Judith Gill and Matthew Gearing); Russell on
Arbitration (24 th edition, 2015) (“Russell on
Arbitration”); Gary B Born, International Commercial
Arbitration (2nd edition, 2014) Loukas A Mistelis (ed),
B
Concise International Arbitration (2 nd edition, 2015)
Chapter 23 (“Mistelis on Arbitration”); Halsbury’s
Laws of India (Civil Procedure) (2 nd edition);
Zuckermann on Civil Procedure (Sweet & Maxwell,
4th edition) Justice GP Singh, Principles of Statutory
Interpretation (14 th edition, Lexis Nexis); Diggory C
Bailey and Luke Norbury, Bennion on Statutory
Interpretation (7th edition, Lexis Nexis)- referred to.
Per Sanjiv Khanna, J.
HELD : 1.1. While I am entirely in agreement with the
considered view expressed by D.Y. Chandrachud, J. that –(a) D
party autonomy and arbitration agreement are the foundation of
the arbitral process, and therefore, when the parties fix the fee
payable to the arbitral tribunal, the law does not permit the arbitral
tribunal to derogate and ask for additional or higher fee; (b) where
the court while appointing an arbitrator fixes the fee, the arbitral E
tribunal cannot ask for supplementary or higher fee; and (c) in
both cases, the fee payable to the arbitral tribunal may be
enhanced either by a written agreement between the parties or
by a court order. However, I am unable to concur that in the
absence of any agreement between the parties, or the parties
and the arbitral tribunal, or a court order fixing the fee, the arbitral F
tribunal is not entitled to fix the fee, as I am of the opinion that by
the implied terms of the contract and as per the provisions of the
Arbitration and Conciliation Act, 1996, an arbitral tribunal can fix
a reasonable fee, which an aggrieved party, who is not a signatory
to the written agreement, can question under sub-section (3) of G
Section 39 of the A&C Act during the pendency of the arbitration
proceedings, or in case the arbitral tribunal claims lien on the
award in terms of sub-section (2) to Section 39 of the A&C Act.
At the same time, I respectfully agree with D.Y. Chandrachud,
J., that when an arbitral tribunal, even in the absence of consent
H
670 SUPREME COURT REPORTS [2022] 10 S.C.R.

A of the parties, fixes the fee in terms of the Fourth Schedule, the
parties should not be permitted to object the fee fixation. The
Fourth Schedule is the default fee, declared by the legislature as
fair and reasonable, which can be changed by mutual consensus,
and not otherwise. Further, post the enforcement of the
Arbitration Amendment Act, 2019 vide Act 33 of 2019 on 30th
B
August 2019, and insertion of sub-section (3A) to Section 11, the
proviso to the sub-section states that the fee prescribed in the
Fourth Schedule is mandatory and applies to all arbitrations
including ad hoc arbitrations, albeit in case of institutional
arbitrations, as per sub-section (14) to Section 11 of the A&C
C Act, the fee fixed by the institution “subject to the rates specified
in the Fourth Schedule” would be payable. [Para 2][786-F-H; 787-
A-D]
1.2. On interpretation of the Fourth Schedule, I respectfully
agree with the view expressed by D.Y. Chandrachud J. on
D interpretation of Serial No.6 and that the fee prescribed is for
each member of the arbitral tribunal, with a note providing for an
additional amount of twenty five percent in case of a sole/single
member arbitral tribunal. Even so, on these aspects I would like
to give a separate reasoning, as also point anomalies in the Fourth
Schedule. However, in my opinion, the expression “sum in
E dispute” means the sum total of both the claims and counter
claims. [Para 3][787-E-F]
2. Sub-section (8) to Section 31, as originally enacted before
its substitution by Act No. 3 of 2016, had stipulated that unless
otherwise agreed by the parties, the arbitral tribunal shall fix the
F cost of arbitration. The explanation to this Section clarified that
the expression ‘costs’, for the purpose of the sub-section, means
reasonable costs relating to the fees and expenses of the
arbitrator and the witnesses. The sub-section emphasised that
the agreement between the parties is paramount and binding.
G The arbitral tribunal is entitled to fix costs of arbitration, which
includes the fee and expenses of the arbitrator, if the agreement
between the parties is wordless and silent as to the fee payable
to the arbitral tribunal. The word ‘cost’, it is argued, is different
from the arbitrator’s fee and therefore, the arbitral tribunal is not
competent or authorised to fix its own fee on the principle of
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 671
GUNANUSA JV

nemo judex in causa sua, that is, ‘no one should be judge in their A
own cause’. The principle would apply where the parties have
fixed the fee payable to the arbitral tribunal, either as a term in
the arbitration agreement or otherwise by an agreement, either
before or after the appointment of the arbitral tribunal. This
principle will apply equally where the court fixes the fee as a
term of appointment. However, this principle will have no B
application where the parties or the court has left it to the arbitral
tribunal to fix its own fee. In other words when the arbitration
agreement is silent and the parties have not agreed on the
quantum of fee payable to the arbitral tribunal, or the court order
does not fix the fee, the arbitral tribunal has the right and power C
to fix its own fee. [Paras 15 and 23][797-D-E; 798-A-B; 805-D-F]
3. It will be appropriate to summarize the legal position as
under:
(a)The arbitral tribunal is bound by the fee or remuneration
fixed by the parties in the arbitration agreement, or by mutual D
consent, whether before or after the disputes have arisen. (b)
Where the court refers disputes to an arbitral tribunal, in the
absence of any agreement between the parties fixing the fee
payable to the arbitral tribunal, it should fix the fee so payable.
The fee fixed by the court is binding on the arbitral tribunal. (c) It
E
is desirable that the parties/court should ascertain the fee
structure from the prospective arbitrators before an arbitrator is
nominated/appointed. (d) In the absence of a written agreement
or a court order fixing the fee of the arbitral tribunal, the arbitral
tribunal is entitled to ‘fair and reasonable fee’, which should be
done in a transparent manner and in consultation with the parties. F
This exercise should be undertaken at the initial/preliminary
stage. However, lack of consensus, would not bar an arbitral
tribunal from fixing ‘fair and reasonable fee’. An aggrieved party
would be entitled to question the fee fixed by the arbitral tribunal
in terms of Section 39 of the A&C Act. On a challenge being
raised, the court would examine the question of reasonableness G
of fee with reference to the factors stated above and in particular
with reference to the Fourth Schedule of the A&C Act. The fee
structure mentioned in the Fourth Schedule or by the respective
High Courts would be per se treated and regarded as ‘fair and
H
672 SUPREME COURT REPORTS [2022] 10 S.C.R.

A reasonable fee’. (e) Fee once fixed cannot be increased or
enhanced except with the consent of all the parties or by an order
of the court. (f) Post the enactment and enforcement of Act No.
33 of 2019, and in terms of the first proviso to sub-section (3A)
of Section 11 of the A&C Act, the arbitral tribunal is entitled to
the fee at the rate specified in the Fourth Schedule. Consequently,
B
the arbitral tribunal is not entitled to deviate and fix a higher fee.
Similarly, arbitral institutions, in terms of Section 11(14), are bound
to follow the fee structure mentioned in the Fourth Schedule.
However, sub-sections (3A) and (14) of Section 11 do not bar or
prohibit the ad hoc arbitral tribunal or the arbitral institution to
C charge arbitration fee which is less or lower than what is stipulated
in the Fourth Schedule. Sub-sections (3A) and (14) of Section 11
are binding on the parties and the arbitral tribunal. [Para 35][814-
G-H; 815-A-H]
4. High cost of arbitration is one of the prime reasons for
D the reluctance of the litigants to accept arbitration as an alternative
to court litigation. Arbitration, as a process of justice delivery, is
substitutional in character, would remain unattractive unless it is
affordable and a lower cost alternative to litigation. This being
the objective of the scheme of the provisions of the A&C Act in
general, and Sections 2(1)(d), 2(9), 7, 8, 9, 11, 17 and 23, it would
E be appropriate to hold that arbitral tribunal, as statutorily
conceived, is to examine and adjudicate all disputes arising from
the contract and, therefore, the Fourth Schedule mindfully uses
the expression “sum in dispute”. Any contrary interpretation
conceiving separate fee for claim and counter-claim, which, it is
F apparent, would substantially enhance the cost of arbitration, and
dissuade the litigants from resorting to arbitration. The heading
“sum in dispute” will mean the aggregate of all the amounts in
dispute without any bifurcation and separate application of the
fee schedule with reference to the amount subject matter of the
claim(s), and the amount subject matter of the counter-claim(s).
G The aforesaid dictum would not apply in cases where there is an
umbrella arbitration clause, which applies to different/distinct
contracts, in which case each contract would be treated as a
separate arbitration proceeding viz. the claim, counter-claim and
set-off relating to that contract. [Paras 46, 47 and 48][822-A-C,
H F-G; 823-A]
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 673
GUNANUSA JV

5. The model fee mentioned in the third column of the A
Fourth Schedule would be the fee payable to each member of the
arbitral tribunal, and in cases where the arbitral tribunal consists
of a sole arbitrator, he shall be entitled to an additional amount of
25% above the amount specified in the model fee. It is apparent
that this interpretation has been accepted and followed by several
B
arbitral tribunals since introduction of the Fourth Schedule. This
interpretation has gained acceptance. To interpret it differently
would lead to confusion and chaos which must be avoided, even
if the other interpretation is plausible. However, in view of the
above interpretation, the Fourth Schedule does require
modification and moderation. For example, where the sum in C
dispute is Rs.5,00,000/-, in case of the sole arbitrator, the amount
payable to him would be Rs.56,250/-, that is, Rs.45,000/- plus
25% (Rs.11,250) of Rs.45,000/-.In case of an arbitral tribunal of
three arbitrators, the fee payable would be Rs.1,50,000/-. This
fee is too high and would be unacceptable to most of the litigants
D
as they would be liable to pay minimum arbitration fee of nearly
11% in case of sole arbitrator and nearly 30% in case of an arbitral
tribunal consisting of three members. [Paras 53 and 54][825-B-
E]
National Highways Authority of India v. Gayatri Jhansi
E
Roadways Limited (2020) 17 SCC 626 – relied on.
Aphali Pharmaceuticals Ltd.v. State of Maharashtra &
Ors. (1989) 4 SCC 378 : [1989] 1 Suppl. SCR 129 –
held inapplicable.
Union of India v. Singh Builders Syndicate (2009) 4 F
SCC 523 : [2009] 3 SCR 563; Sanjeev Kumar Jain v.
Raghubir Saran Charitable Trust and Others. (2012) 1
SCC 455 : [2011] 12 SCR 744; Orissa Mining
Corporation Ltd. v. Prannath (1997) 3 SCC 535 –
referred to.
G
K/S Norjarl A/S v. Hyundai Heavy Industries Co. Ltd.
(1991) 3 All ER 211- referred to.
Julian D.M. Lew, Loukas A. Mistelis, et
al., Comparative International Commercial Arbitration,
H
674 SUPREME COURT REPORTS [2022] 10 S.C.R.

A ‘Chapter 12 Rights and Duties of Arbitrators and
Parties’ Russell on Arbitration (24th Edition).; Robert
Merkin QC, LLD,”Arbitration Law”, Service Issue
No.83, November 2019; Datuk Professor Sundra
Rajoo, Law, Practice and Procedure of Arbitration
B (Second Edition), 2016; Michael Mcilwrath and John
Savage, International Arbitration and Mediation: A
Practical Guide, (2010); Russell on Arbitration, 24th
Edition; International Commercial Arbitration’, 2nd
Edition, 2914; Julian D.M. Lew, Loukas A. Mistelis,
et al., Comparative International Commercial
C Arbitration, ‘Chapter 12 Rights and Duties of
Arbitrators and Parties’; Redfern and Hunter on
International Arbitration, Oxford University Press, 6 th
Edn., 2015; Russell on Arbitration, 24th Edition under
the heading ‘Determination of the recovery of costs
D of the arbitration’; Datuk Professor Sundra Rajoo,
Law, Practice and Procedure of Arbitration (Second
Edition), 2016. Chapter 24 in the said book refers to
Gary Born, International Commercial Arbitration;
Tackaberry, and Marriott, Bernstein’s Handbook of
Arbitration and Dispute Resolution Practice (4th Edn.,
E
2003); Mustill and Boyd, The Law and Practice of
Commercial Arbitration in England, (2nd Edn., 1989);
Datuk Professor Sundra Rajoo, Law, Practice and
Procedure of Arbitration (Second Edition), 2016;
‘India’s Grand Advocates: A Legal Elite Flourishing in
F the Era of Globalization’, by Marc Galanter and Nick
Robinson, published by the Harvard Law School, and
‘Litigation Expenses: High Cost of Justice’, by Usha
Rani Das; Earl T. Crawford, The Construction of
Statutes, 3rd Edition; J. G. Sutherland, Statutes and
G Statutory Construction, 3rd Edition, Vol.3, pp. 410-412;
Earl T. Crawford, The Construction of Statutes, 3rd
Edition; Professor Sundra Rajoo, Law, Practice and
Procedure of Arbitration (Second Edition), 2016 –
referred to.

H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 675
GUNANUSA JV

Case Law Reference A
In the judgment of DR. DHANANJAYA Y CHANDRACHUD, J.
(2020) 17 SCC 626 referred to Para 35 (i)
[2009] 3 SCR 563 referred to Para 35 (xiv)
[2011] 12 SCR 744 referred to Para 35 (xiv) B

(1977) 2 SCC 54 referred to Para 35 (xxi)
[2016] 1 SCR 364 followed Para 69
[2016] 9 SCR 83 followed Para 69
C
[2011] 12 SCR 744 relied on Para 72
[2017] 1 SCR 798 relied on Para 87
[2005] 1 Suppl. SCR 929 followed Para 89
[1991] 3 Suppl. SCR 534 referred to Para 97 D
[1990] 3 Suppl. SCR 196 followed Para 123
[2011] 10 SCR 1026 relied on Para 124
[2014] 2 SCR 797 referred to Para 124
[1996] 2 Suppl. SCR 509 relied on Para 132 E
[2014] 10 SCR 971 referred to Para 133
(2018) 12 SCC 560 referred to Para 134
[1989] 1 Suppl. SCR 129 relied on Para 138
F
[1996] 2 SCR 1 followed Para 145
1953 SCR 1 followed Para 149
[2020] 3 SCR 1 followed Para 150
[1979] 2 SCR 997 relied on Para 150
G
[1989] 1 SCR 621 relied on Para 154
In the judgment of SANJIV KHANNA, J.
[2009] 3 SCR 563 referred to Para 4
[2011] 12 SCR 744 referred to Para 4 H
676 SUPREME COURT REPORTS [2022] 10 S.C.R.

A (2020) 17 SCC 626 relied on Para 20
(1997) 3 SCC 535 referred to Para 42
[1989] 1 Suppl. SCR 129 held inapplicable Para 45
CIVIL ORIGINAL/APPELLATE JURISDICTION: Arbitration
Petition (Civil) No. 05 of 2022.
B
Petition Under Section 11(6) read with Section 14 and Section 15
of the Arbitration and Conciliation Act, 1996 for Termination of the
Mandate of the Present Arbitral Tribunal and Appointment of a Substitute
Arbitral Tribunal.

C With
SLP (C) No.10358 of 2020, 13426 of 2021, SLP (C) Diary No.8494
of 2022, Civil Appeal Nos. 5880, 5879 of 2022 and Miscellaneous
Application Nos.1990-1991 of 2019 in SLP (C) Nos. 10021-10022 of
2017.
D Tushar Mehta, SG, K.K. Venugopal, AG, Huzefa Ahmadi, Sr. Adv.
(A.C.), S.B. Upadhyay, Rajeev Sharma, Dr. Abhishek Manu Singhvi,
Anish Dayal, Sr. Advs., Pradhuman Gohil, Ms. Taruna Singh Gohil, Ms.
Ranu Purohit, R. Vishnu Kumar, Alapati Sahithya Krishna, Ms. Anushka
Shah, Ms. Nooreen Sharma, Rohan Sharma, Ms. Sharukh Alam,
Abhishek Gupta, Gunnam Venkateswara Rao, Ms. Ikshita Singh, Ms.
E Chinmayee Chandra, Kapil Raghav, Dishant Bhati, Tarkeshwar Natha,
Nishant Kumar, Harshit Singh, Lalit Mohan, Rameshwar Prasad Goyal,
Udit Seth, Anil Seth, C. Kannan, Ravi Shankar, Mayank Kshirsagar,
Suyash Gupta, Abhishek Birthray, Sumit R. Sharma, Tanmay Nandi,
Somya Budholia, Prateek Seth, Adeem Ahmed, Ms. Sonali Jaitely Bakshi,
F Jaiyesh Bakhshi, Ms. Rini Badoni, Ms. Sanjana Bakshi, Ms. Manmilan
Sidhu, Ankit Tyagi, Ms. Radhika Malik, Ms. Sudiksha Saini, Ms. Ashima
Chauhan, Ms. Anwesha Chaudhary, Gaurav Mishra, Tanmoy Nandi,
P.V. Yogeswaran, Manu Seshadri, Aveak Ganguly, Abhijit Lal, Ms. Pallavi
Anand, Mithu Jain, S.D. Singh, Rahul Kumar Singh, Ms. Meenu Singh,
Dhiraj Kumar, Ram Kripal Singh, Ms. Shweta Sinha, Ms. Bharti Tyagi,
G Santosh Kumar - I, R. Chandrachud, D. Venkata Krishna, Santosh
Kumar, K. Parameshwar, Kailas Bajirao Autade, Ms. Sregurupriya, Ms.
Sheetal Patil, Advs. for the appearing parties.
#
Ed. Note: There are two seperate judgments in the matter. One judgment was delivered
by Hon’ble Dr. Justic D. Y. Chandrachud for himself and for Hon’ble Mr. Justice Surya
H Kant. The other judgment was delivered by Hon’ble Mr. Justice Sanjiv Khanna.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 677
GUNANUSA JV

The Judgments# of the Court were delivered by A
DR. DHANANJAYA Y CHANDRACHUD, J.
This judgment has been divided into sections to facilitate analysis.
They are:
A Factual Background....................................................5*
B
A.1 Facts of Petition for Arbitration (Civil) No 5 of 2022..5*
A.2 Facts of Special Leave Petition (Civil) No 13426 of
2021..................................................................13*
A.3 Facts of Special Leave Petition (Civil) No 10358 of
2020.................................................................17* C
A.4 Facts of Miscellaneous Application Nos 1990-1991
of 2019.............................................................19*
B Submissions of Counsel..............................................20*
B.1 Submissions on behalf of the petitioners..............21*
D
B.2 Submissions on behalf of the respondents.............28*
B.3 Submissions on behalf of the amicus curiae........31*
C Determination of arbitrators’ fee...................................38*
C.1 Comparative outlook.........................................38*
E
C.1.1 Position of international organisations.........39*
(i) United National Commission on International
Trade......................................................39*
(ii) Permanent Court of Arbitration ..............42*
(iii) London Court of International Arbitration...43* F
(iv) International Centre for Dispute Resolution..44*
(v) International Chamber of Commerce.........44*
(vi) Singapore International Arbitration Centre..45*
(vii) Hong Kong International Arbitration Centre..45* G
(viii) International Centre for Settlement of
Investment Disputes.................................46*
(ix) Summary..............................................46*

*
Ed. Note: Pagination is as per the original judgment. H
678 SUPREME COURT REPORTS [2022] 10 S.C.R.

A C.1.2 Position in other national jurisdictions..........47*
(i) England.......................................48*
(ii) Italy.....................................................50*
(iii) Sweden................................................51*
B (iv) Germany..............................................52*
(v) Japan...................................................54*
(vi) Singapore.............................................54*
(vii) United States...........................................55*
C (viii) Summary..............................................56*
C.2 Statutory scheme on payment of fees to arbitrators
in India.............................................................57*
C.2.1 Party autonomy........................................57*
D C.2.2 Fourth Schedule and regulation of arbitrators’
fees........................................................59*
C.2.3 Costs and fees: Two different paradigms....70*
C.2.4 Directives governing fees of arbitrators in ad
hoc arbitrations........................................92*
E
D Interpretation of “sum in dispute” in the Fourth Schedule....97*
D.1 Statutory Framework......................................97*
D.2 Definition of claim and counter-claim................100*

F D.2.1 In re arbitration proceedings...................100*
(i) Statutory Framework of the Arbitration Act..100*
(ii) Academic discourse...............................105*
(iii) Judicial pronouncements.........................107*
G D.2.2 In re civil proceedings............................109*
(i) Statutory Framework of CPC..................109*
(ii) Academic discourse...............................112*
(iii) Judicial pronouncements.........................114*
H D.3 Analysis.......................................................115*
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 679
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

E Fee Ceiling in Fourth Schedule..................................119* A
E.1 Difference between the English and Hindi
translations...................................................121*
E.2 Exception to literal interpretation......................124*
E.3 Interpretation based on legislative intent............127* B
F Ceiling applicable to individual arbitrators...................130*
G Conclusion.............................................................131*
G.1 Findings.......................................................131*
G.2 Directions....................................................133* C

A Factual Background
A.1 Facts of Petition for Arbitration (Civil) No 5 of 2022
1. On 29 May 2009, the petitioner, Oil and Natural Gas Corporation D
Limited1, and the respondent, Afcons Gunanusa JV2, entered into a Lump
Sum Turnkey Contract3 for the construction of an ICP-R Platform. The
ICP-R Platform is alleged to have been completed on 31 October 2012.
2. Due to ongoing disputes and differences, Afcons invoked
arbitration on 20 July 2015, in accordance with Clause 1.3 of the LSTK E
Contract. Afcons appointed Justice Mukul Mudgal as their arbitrator.
3. The relevant parts of Clause 1.3 of the contract are extracted
below:
“1.3 Laws/Arbitration
F
[…]
1.3.2 Arbitration
Except as otherwise provided elsewhere in the contract, if any
dispute, difference question or disagreement arises between the
parties hereto or their respective representatives or assignees, in G
connection with construction, meaning, operation, effect,
1
"ONGC”
2
"Afcons”
3
"LSTK Contract”
*
Ed. Note: Pagination is as per the original judgment. H
680 SUPREME COURT REPORTS [2022] 10 S.C.R.

A Interpretation of the contract or breach thereof which parties are
unable to settle mutually, the same shall be referred to Arbitration
as provided hereunder:
1.3.2.1 A party wishing to commence arbitration proceeding shall
Invoke Arbitration Clause by giving 60 days notice to the other
B party. The notice Invoking arbitration shall specify all the
points of disputes with details of the amount claimed to be
referred to arbitration at the time of Invocation of arbitration and
not thereafter. If the claim is in foreign currency, the claimant
shall indicate its value in Indian Rupee for the purpose of
constitution of the arbitral tribunal.
C
1.3.2.2 The number of the arbitrators and the appointing authority
will be as under:

Claim amount Number of Appointing Authority
(excluding claim arbitrator
D for Interest and
counter claim, if
any)

Upto Rs. 5 Crore Sole ONGC
E Arbitrator

Above Rs. 5 Crore 3 One arbitrator by each
Arbitrators party and the 3rd arbitrator,
who shall be the presiding
arbitrator, by the two
F
arbitrators.

1.3.2.3 The parties agree that they shall appoint only those
persons as arbitrators who accept the conditions of this
G arbitration clause. No person shall be appointed as arbitrator
or presiding arbitrator who does not accept the conditions
of this arbitration clause.
[…]
1.3.2.8 Arbitrators shall be paid fees at the following rates.
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 681
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

A

B

C

D

E

For the disputes above Rs. 50 lacs, the Arbitrators shall be
entitled to an additional amount @ 20% of the fee payable
as per the above fee structure. F

1.3.2.9 lf after commencement of Arbitration proceedings, the
parties agree to settle the dispute mutually or refer the dispute to
conciliation, the arbitrators shall put the proceedings in abeyance
until such period as requested by the parties. Where the
proceedings are put in abeyance or terminated on account of G
mutual settlement of dispute by the parties, the fees payable to
the arbitrators shall be determined as under:
I) 25% of the fees if the claimant has not submitted statement of
claim.
H
682 SUPREME COURT REPORTS [2022] 10 S.C.R.

A II) 50% of the fees if the award is pending.
1.3.2.10 Each party shall pay its share of arbitrator’s fee in stages
as under:
(I) 25% of the fees on filing of reply to the statement of claims.
B (II) 25% of the fees on the competition of evidence.
(III) Balance 50% at the time when award is given to the parties.
[…]
1.3.2.14 Subject to aforesaid, provisions of the Arbitration and
Conciliation Act, 1996 and any statutory modifications or re-
C
enactment thereof shall apply to the arbitration proceedings under
this clause.”
(emphasis supplied)
4. On 20 August 2015, ONGC responded by appointing Justice
D Gyan Sudha Mishra as their arbitrator. The arbitrators appointed Justice
GN Ray as the presiding arbitrator, and the arbitral tribunal was
constituted.
5. The arbitral tribunal held a preliminary meeting on 25 November
2015 at which the members of the tribunal indicated their view that the
E fee schedule prescribed in the contract seemed unrealistic. While Afcons
was agreeable to a revision in the fee, ONGC indicated that it may not
be agreeable. The arbitral tribunal directed ONGC to consider are vision
of the arbitrators’ fee. In a letter dated 28 January 2016 addressed to
ONGC, the arbitral tribunal noted that the Fourth Schedule to the
Arbitration and Conciliation Act 19964 recommends the fee for each
F arbitrator as Rs 30 lakhs, when the amount in dispute exceeds Rs 20
crore (in the present case, it was Rs 900 crores).
6. On 16 April 2016, the arbitral tribunal informed ONGC that it
would no longer bargain on the amount if ONGC was agreeable to the
schedule provided in the Fourth Schedule to the Arbitration Act, along
G with a reading fee of Rs 6 lakhs for each arbitrator. However, the letter
stated that the ceiling of Rs 30 lakhs provided in the Fourth Schedule
was on the ‘lower side’ for an arbitration with a disputed amount of Rs
900 crores, and should be revised. The letter reads thus:

4
H "Arbitration Act”
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 683
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

“If the appropriate authority of ONGC is inclined to accept the A
ceiling referred to in the schedule of the amendment of Arbitration
and Conciliation Act and offer such remuneration, the Arbitrators
do not intend to enter into any bargaining. We may only indicate
that remuneration of Rs. 30 Lacs is in the lower side and
reasonably deserves upward revision in this case. The arbitrators
B
also expect that considering the composition of the arbitral tribunal
and huge claim involved (about Rs. 1000 crore) and extraordinarily
voluminous documents to be taken into consideration it may be
only appropriate that as special case, a reasonable reading/ perusal
fee to the tune of about 6 lacs for each arbitrator may be considered.
Such reading fee is prevalent in similar other cases.” C
7. By its letter dated 22 April 2016, ONGC informed the arbitral
tribunal that the proposal for the application of the Fourth Schedule of
the Arbitration Act was under consideration by them but since it did not
provide for a reading fee, ONGC could not agree to it.
8. At its second sitting on 4 August 2016, the arbitral tribunal passed D
a procedural order directing the parties to deposit 25 per cent of the
arbitrators’ fee, which was recorded as Rs 30 lakhs. On 22 May 2018,
the arbitral tribunal passed another procedural order finalising its fee,
stating that it had done so after taking into account the pleadings submitted
by the parties, the complexity of the issues involved, high value of the E
claim (Rs 679 crores) and counter-claim (Rs 407 crores), and the
voluminous nature of the documents. The tribunal fixed a fee of Rs 1.5
lakhs for each arbitrator for every sitting of a three-hour duration. The
tribunal indicated that it may also charge a reading fee or conference
fee (for conferences between the members), which would be indicated
at a later stage. The procedural order states as follows: F

“The first sitting of this arbitration case was held in November,
2015. The remuneration of the members of the arbitral tribunal
could not be finally fixed. The claimant had agreed to pay such
remuneration in its share as would be directed by the tribunal. But
the respondent had requested the tribunal to fix remuneration later G
on because appropriate authority was to be considered. The
arbitral tribunal was also not in a position to assess the extent of
claim and counter claim to be raised by the parties and also the
complexity of the arbitration case at that stage. The respondent’s
representative, however, had suggested for the ceiling fee at Rs. H
684 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 30.00 lakhs for each of the Arbitrators as mentioned in the fourth
schedule of amended Arbitration and Conciliation Act, 1996. It
was pointed out by the tribunal that the arbitration case arose
prior to amendment of the Act. Therefore, the ceiling fee referred
to in the amended Act was not attracted. It was also pointed out
to the respondent’s representative that the Arbitral Tribunal did
B
not like to assert the remuneration of the members of the tribunal
and it would be only appropriate if fair, pragmatic and reasonable
remuneration would be fixed at the suggestion of both the parties
who were expected to take pragmatic and realistic approach in
suggesting the remuneration of the arbitrators by taking into
C consideration of the amount of claim and counter claim to be made
by the parties, the composition of the arbitral tribunal, the
complexities of the issues requiring adjudication and number of
sittings likely to take for concluding the arbitration case, in
suggesting the remuneration of the arbitrators. However, before
D finally fixing the remuneration to be paid to the arbitrators by the
parties, 25% of Rs. 30.00 lakhs were directed to be deposited by
the parties by sharing equally.
After pleadings have been filed by the parties by taking substantially
long time, presumably, in view of complex technical issues involved
and large number of documents intended to be relied on by the
E
parties, the members of the arbitral tribunal have been able to
have a fair idea about the nature and complexities of the issues
for determination and the time likely to be required for completing
the arbitration case. The arbitral tribunal, therefore, holds that
proper remuneration payable to the members of the arbitral tribunal
F should be indicated to the parties for compliance.
It may be indicated here that the claimant has claimed about Rs.
INR 6,79,20,52,999/- crores along with 18% interest per annum
on the said sum. The respondent has made a counter claim of
about Rs. INR 4,07,12,97,603/- crores and has also claimed interest
G at 18% per annum on the said sum. Both the parties have informed
the arbitral tribunal that both the parties will examine their
respective witnesses including expert witnesses. As a matter of
fact, the claimant has filed affidavit of evidence of three expert
witnesses. Similarly, the respondent also intends to examine
witnesses including expert witness. Till date 20 sittings have been
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 685
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

held and examination of first witness of the claimant is estimated A
to be completed by holding 26 sittings.
It is, therefore, quite evident that the hearing of this arbitration
case will take fairly long time. Along with the pleadings, both
the parties have filed volumes of documents in support of their
respective case. By now the claimant has filed 68 volumes of B
their document. Similarly, the respondent has also filed 24
volumes as its document to be relied on. It is not unlikely that
further documents may be relied on by the parties in the hearing
process.
Considering the amounts of claim and counter claim, the C
voluminous documents to be taken into consideration and a very
long hearing to conclude the arbitration case and the complex
technical issues required to be taken into consideration, the arbitral
tribunal has decided that it will be only appropriate, fair and
reasonable to fix remuneration of each of the arbitrators at Rs.
D
1.50 lakhs (Rupees one lakh and fifty thousand) per sitting, each
sitting confined to three hours or part thereof. Perusal fee and
interse conference amongst the members of the tribunal, may not
be indicated now. Such fee may be indicated later or after the
case proceeds further thereby enabling the tribunal to assess the
extent of exercise called for.” E
9. On 22 June 2018, ONGC filed an application before the arbitral
tribunal for modifying the procedural order dated 22 May 2018 increasing
the fee. The arbitral tribunal issued a procedural order dated 25 July
2019rejecting ONGC’s application. The tribunal observed that:
(i) At the first sitting, the tribunal indicated that the fee specified F
in the contract (Rs 12 lakhs per arbitrator) was unrealistic.
While Afcons agreed to a revision of the fee, ONGC was
not agreeable. The tribunal granted an opportunity to ONGC
to propose a ‘reasonable and pragmatic’ fee schedule;
(ii) While awaiting ONGC’s response, the tribunal proposed G
the fee schedule in the Fourth Schedule to the Arbitration
Act “as an example” while noting that the ceiling of Rs 30
lakhs was also “too low”. Since ONGC seemed agreeable,
the tribunal directed the parties to deposit the first tranche
of fee based on Rs 30 lakhs in the interim; H
686 SUPREME COURT REPORTS [2022] 10 S.C.R.

A (iii) Since ONGC did not propose a revised fee schedule, the
tribunal, after considering the complexity of the issues
involved, the quantum of the amount in dispute and the
voluminous nature of the documents, fixed its fee by a
procedural order dated 22 May 2018;
B (iv) ONGC has not refuted the reasons provided by the tribunal
for fixing its fee. It has only contested the revision on the
ground that the fee schedule in the contract was binding.
Since ONGC had shown its willingness earlier to accept
the schedule of fees in the Fourth Schedule, ONGC’s
submission was rejected; and
C
(v) The ceiling of Rs 30 lakhs in the Fourth Schedule is not
applicable to the present dispute since it arose before the
amendment which added the Schedule.
The tribunal held that the fee was set on the basis of the amount
being paid in arbitrations of such nature. However, it agreed to reduce
D
the fee of each arbitrator to Rs 1 lakh per sitting. It noted that the reading
fee was kept open, and would be decided at a later stage.
10. By its letter dated 21 August 2020, ONGC informed the arbitral
tribunal that the revised fee was not approved by its ‘higher’ management.
Thereafter, ONGC filed a petition5 under Section 14 read with Section
E 15 of the Arbitration Act before the Bombay High Court for the
termination of the mandate of the arbitral tribunal and the substitution of
a fresh set of arbitrators. By its order dated 7 October 2021, the petition
was dismissed by the Bombay High Court on the ground of a lack of
jurisdiction since the arbitration was an international commercial
F arbitration within the meaning of Section 2(f) of the Arbitration Act.
However, ONGC was granted liberty to approach this Court and all its
contentions were kept open. ONGC then filed the present arbitration
petition.
A.2 Facts of Special Leave Petition (Civil) No 13426 of 2021
G 11. This appeal arises from a final judgement and order dated 6
August 2021 of the High Court of Delhi, by which it dismissed the petition6
filed by the petitioner, NTPC Limited7.

5
Commercial Arbitration Petition (Lodging) No 9590 of 2020
6
OMP (T) (COMM) 37 of 2021
7
H "NTPC”
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 687
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

12. NTPC and the respondent, Afcons-Shetty and Company A
Private Limited-JV8, entered into a contract for the construction of a
“desilting arrangement package for Koldam Hydro Electric Power
(Package-3) Project”. When disputes arose between the parties, Afcons-
Shetty invoked arbitration for a claim of about Rs 37 crores. An arbitral
tribunal was to be constituted in terms of Clause 67.3 of the contract.
B
Both parties nominated their arbitrators– NTPC nominated Shri Krishna
Mohan Singh and Afcons-Shetty nominated Shri Santanu Basu Rai
Chaudhuri. When the nominated arbitrators failed to appoint a presiding
arbitrator, Afcons-Shetty approached the Delhi High Court under Section
11 of the Arbitration Act9, which then appointed Justice Manmohan Sarinas
the presiding arbitrator on 21 May 2018 with the consent of parties. C
13. The arbitral tribunal held its first sitting on 12 July 2018, where
it decided that the fees payable to the tribunal shall be in terms of the
Fourth Schedule to the Arbitration Act. The Fourth Schedule was
subsequently amended on 12 November 2018.
14. NTPC filed its counter-claim of approximately Rs 19 crores. D
By a procedural order dated 13 July 2019, the arbitral tribunal fixed a
separate fee for the claim (Rs 28,64,520 per arbitrator) and counter-
claim (Rs 19,13,615 per arbitrator), aggregating to a total fee of Rs
47,78,135 per arbitrator. In support of its position, the tribunal placed
reliance upon the proviso to Section 38(1) of the Arbitration Act. E
15. On 21 September 2019, NTPC filed an application seeking a
modification of the procedural order dated 13 July 2019. By its reply
dated 18 October 2019, Afcons-Shetty opposed the application. By its
order dated 8 November 2019, the arbitral tribunal dismissed NTPC’s
application noting that: F
“4. There is merit in Mr. Mukhopadhyay’s submission that claims
and counter claims being independent of each other for which
separate fee is to be fixed the same cannot be combined for purpose
of ceiling. Moreover, it cannot also be lost sight of that the Fourth
Schedule of the Act can only serve as a guiding principle in the G
absence any rules being framed by the High Court. In view of the
foregoing discussions the order passed by us does not call for any
modifications or review. The application is accordingly dismissed.”

8
"Afcons-Shetty”
9
Arbitration Petition No 375 of 2018 H
688 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 16. On15 October 2020, NTPC sought a modification of the
tribunal’s orders dated 13 July 2019 and 8 November 2019, so that the
fee fixed in terms of the Fourth Schedule should include the fee payable
for NTPC’s counter-claim. By its reply dated 30 October 2020, Afcons-
Shetty opposed the application.
B 17. By its order dated 14 January 2021, the tribunal rejected
NTPC’s position that the claim and counter-claim have to be cumulated
to arrive at the “sum in dispute” for the purposes of the Fourth Schedule.
The tribunal held that:
(i) Section 31(8) of the Arbitration Act allows a tribunal to
C provide for the costs of arbitration. The regime for costs is
provided under Section 31A. The explanation to Section
31A(1) provides that costs include those relating to the fees
and expenses of the arbitrators;
(ii) The proviso to Section 38(1) stipulates that separate costs
D are to be fixed for claims and counter-claims. The position
under proviso to Rule 3 of the DIAC (Administrative Cost
& Arbitrators’ Fees) Rules 201810 is also similar; and
(iii) Nothing in the Fourth Schedule or the DIAC Rules imposes
a restriction on separate costs (and thus fees) being fixed
E for claims and counter-claims by the tribunal.
18. Subsequently, by its order dated 19 March 2021, the tribunal
held that in case NTPC does not comply with its directions contained in
the order dated 14 January 2021 for payment of Rs 2 lakhs per arbitrator,
the tribunal would consider whether NTPC’s counter-claim should be
F suspended.
19. NTPC filed a petition under Sections 9 and 14 read with Section
31(8) before the Delhi High Court, seeking a direction that the tribunal
charge a combined fee under the Fourth Schedule for adjudicating both
the claim and the counter-claim or, in the alternate, for the termination of
the mandate of the tribunal. The petition was opposed by Afcons-Shetty.
G
20. By a judgment dated 6 August 2021, a Single Judge of the
Delhi High Court dismissed NTPC’s petition. The Single Judge held that
the proviso to Section 38(1), Section 31(8) and Section 31A are

10
"DIAC Rules”
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 689
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

inextricably linked and on a combined reading, a tribunal would have the A
power to fix a separate fee for claims and counter-claims. The Single
Judge of the Delhi High Court held thus:
“43. …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) B
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 costs referred to in sub-section (8) of Section
31”. Sub-section (8) of Section 31 requires the Arbitral Tribunal C
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”. D
[…]
48. The position becomes clear when we view the proviso to
Section 38(1), Section 31(8) and the Explanation to Section 31A(1)
in juxtaposition. Section 31(8) mandates that the arbitral tribunal
fix the costs of arbitration, in accordance with Section 31A. Clause E
(i) of the Explanation to Section 31A(1) specifically includes the
fees and expenses of the arbitrators as an integral part of the
“costs”. Clearly, therefore, the arbitrator has to fix the fees payable
to the arbitral tribunal, with, needless to say, consent of parties.
Section 38(1) provides for advance, for such “costs” fixed, by F
way of “deposit”. The expressions “deposit”, “costs” and “fees”
are, therefore, intertwined by statute, and, as the interpreter
thereof, the Court can hardly extricate them from each other.
The proviso to Section 38(1) provides that, where the arbitral
tribunal is seized of claims and counter-claims, it may fix separate
amount of deposit for each. No doubt, the use of the word “may” G
does involve an element of discretion; but, if the arbitral tribunal
does fix separate fees for the claims and counter-claims, it cannot
be held that it has acted irregularly, or contrary to the statutory
mandate.”
H
690 SUPREME COURT REPORTS [2022] 10 S.C.R.

A A.3 Facts of Special Leave Petition (Civil) No 10358 of 2020
21. The appeal arises from a final judgement and order dated 10
July 2020 by which the High Court of Delhi dismissed the petition11 filed
by the petitioner, Rail Vikas Nigam Limited12.
22. On 28 December 2010, RVNL awarded a contract for the
B “construction of a viaduct and related works for a length of 4.748 kms in
the Joka-BBD Bag Corridor of Kolkata Metro Railway Line” to the
respondent, Simpex Infrastructures Limited13. Disputes having arisen
between the parties, Simpex invoked arbitration by its letter dated 26
December 2017.
C 23. The parties could not agree upon the appointment of arbitrators.
While Simpex nominated its arbitrator, RVNL contended that Simpex
had to nominate its arbitrator from a panel of five names recommended
by RVNL. Since RVNL refused to nominate their arbitrator, Simpex
approached the Delhi High Court under Section 11 of the Arbitration
D Act14. The High Court, by its order dated 11 December 2018,nominated
an arbitrator on behalf of RVNL and ordered that “the Arbitrator[s]
shall be paid fee as per Fourth Schedule to the [Arbitration] Act”. RVNL’s
special leave petition15 against the order of the Delhi High Court was
dismissed by this Court on 12 April 2019.

E 24. Meantime, the arbitrators nominated by the parties appointed
a presiding arbitrator. The arbitral tribunalheld its preliminary sitting on
15 January 2019, where it recorded that its fee shall be in accordance
with the Fourth Schedule to the Arbitration Act. Byits order dated 9
January 2020, the arbitral tribunal recorded that, in accordance with
Fourth Schedule, the fee of each arbitrator would be Rs 49,87,500.
F
25. RVNL then filed an application on 27 February 2020 for the
recall of the tribunal’s order dated 9 January 2020 on the ground that the
ceiling on fees for each arbitrator under the Fourth Schedule is Rs
30,00,000.
26. By its order dated 3 March 2020, the arbitral tribunal rejected
G
RVNL’s application. It noted that that the limitation of Rs 30,00,000 in
11
OMP (T) (COMM) 38 of 2020
12
"RVNL”
13
"Simpex”
14
ARB P 519 of 2018
H 15
SLP
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 691
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

the entry at Serial No 6 of the Fourth Schedule does not encompass the A
entire fee, comprising of the base component of Rs 19,87,500 and the
variable component (0.5 per cent of the claim amount above Rs 20 crores)
but was only limited to the variable component. Hence, the ceiling on
fee according to the tribunal, is Rs 49,87,500, and not Rs 30,00,000.
27. RVNL then filed a petition under Section 14 of the Arbitration B
Act before the Delhi High Court, praying for the termination of the
mandate of the arbitral tribunal.
28. By a judgment dated 10 July 2020, a Single Judge of the Delhi
High Court rejected RVNL’s petition. The Single Judge heldthat the
ceiling of Rs 30,00,000 isapplicable only to the variable component of C
the entry at Serial No 6 of the Fourth Schedule. It has been held that the
use the disjunctive, namely, ‘plus’ between the fixed base component
and the variable component indicates that the ceiling of Rs 30,00,000
applies only to the latter. According to the judgment, such an interpretation
arises not only from the English version of the Arbitration Act, but also
its Hindi version. Finally, the courtheld that while this interpretation was D
based on the text of the entry at Serial No 6 of the Fourth Schedule, it is
also supported by the 246th Report of the Law Commission (which
recommended the changes to the Fourth Schedule) and the DIAC Rules
Model Fee (on the basis of which the Schedule Four was crafted).
A.4 Facts of Miscellaneous Application Nos 1990-1991 of E
2019
29. The miscellaneous application has been filed by the respondent,
RVNL, in relation to an order dated 16 January 2018 ofa two-Judge
Bench of this Court in the main SLP. By its order dated 16 January
2018, this Court appointed Justice Vikramjit Sen as the sole arbitrator F
with the consent of the parties, to decide their disputes. The order of this
Court recognised that “[t]he learned Arbitrator is at liberty to fix his
remuneration”.
30. By a procedural order dated 24 February 2018, the sole
arbitrator, with the consent of the parties, decided that arbitral fee shall G
be payable in accordance with the Fourth Schedule to the Arbitration
Act. On 25 March 2019, the sole arbitrator raised separate invoices for
the payment of fee for claims and counter-claims.
31. RVNL filed an application on 18 May 2019 raising an objection
to the sole arbitrator raising separate invoices for payment of a fee for H
692 SUPREME COURT REPORTS [2022] 10 S.C.R.

A claims and counterclaims. By an email dated 20 May 2019, the petitioner
HCIL-Adhikarya-Arss (JV)16, agreed to RVNL’s application and for it
to be allowed.
32. The sole arbitrator dismissed RVNL’s application on 20 May
2019, holding that in terms of the proviso to Section 38(1) of the Arbitration
B Act and Order VIII Rule 6A of the Civil Procedure Code 190817, claims
and counter-claims haveto be treated separately. Further, the sole
arbitrator noted that since he had been appointed by this Court in an
adhoc arbitration with liberty to fix hisown fee, a separate fee could be
charged for the claim (Rs 325,89,48,831) and counter-claim (Rs
21,59,56,092).
C
33. RVNL has filed a miscellaneous application before this Court,
seeking a determination of whether a fee can be charged separately by
the arbitral tribunal for the claim and counter-claim and whether the
tribunal was justified in doing so after fixing its fee in terms of the Fourth
schedule.
D
B Submissions of Counsel
34. We have heard Mr KK Venugopal the learned Attorney
General, and Mr Tushar Mehta, learned Solicitor General, on behalf of
the petitioners. Dr Abhishek Manu Singhvi led the arguments on behalf
E of the respondents. Mr Manu Sheshadri and Mr K. Parmeshwar
addressed the court for the intervenors. Mr Huzefa Ahmadi, has rendered
objective assistance to this Court as amicus curiae.
B.1 Submissions on behalf of the petitioners

F 35. On behalf of the various public sector undertakings that have
instituted proceedings before this Court, the following submissions have
been made by the Attorney General and the Solicitor General:
(i) The arbitration clause of a contract is binding on the parties
and the arbitrators. Once the fee payable to the arbitrators
G has been specified in the agreement between the parties,
the arbitrators must either accept their appointment on the
terms agreed in the contract between the parties or refuse
the arbitration if they are not agreeable to accept the
16
"HCIL”
17
H "CPC”
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 693
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

assignment on the fee which has been fixed by parties in A
their agreement. In NHAI v. Gayatri Jhansi Roadways
Ltd.18, this Court has held that the fee fixed in the agreement
is binding. In Russellon Arbitration19 (24th Edition) it has
been noted that the appointment of arbitrators is a matter
of contract subject to the mandatory provisions of the
B
governing law. Arbitrators cannot increase their fees and
expenses unless their agreement with the parties entitles
them to do so. Gary Born in his treatise titled International
Commercial Arbitration20 has observed that arbitrators, in
principle, should not be permitted to unilaterally determine
their own fee in the absence of any agreement between C
the parties since that violates the principle that one cannot
be the judge of their own cause;
(ii) If either one party or both parties are not willing to pay the
fees desired by the arbitrators or if the arbitrators deviate
from the fees stipulated under the agreement, the mandate D
of the arbitral tribunal would have to be terminated in its
entirety;
(iii) Section 11(14) of the Arbitration Act provides that the “High
Court may frame such rules [for determination of fees] as
may be necessary, after taking into consideration the rate E
specified in the Fourth Schedule”. Therefore, the Fourth
Schedule should serve as a template or a guide for the High
Courts in fixing fees for the arbitrators;
(iv) Sub-Section (3A) of Section 11, inserted by the Arbitration
and Conciliation (Amendment) Act 201921, also stipulates F
that the arbitrator appointed by a party shall be entitled to
the fees at the rates specified in the Fourth Schedule;
(v) Conflicting views have emerged from the High Courts as
regards the nature of the Fourth Schedule to the Arbitration
Act. Typically, it is considered suggestive in cases where G

18
(2020) 17 SCC 626 (“Gayatri Jhansi Roadways Ltd”)
19
David St John Sutton, Judith Gill and Matthew Gearing, Russell on Arbitration (24 th
edition, 2015) (“Russell on Arbitration”)
20
Gary B Born, International Commercial Arbitration (2 nd edition, 2014)
21
"Arbitration Amendment Act 2019" H
694 SUPREME COURT REPORTS [2022] 10 S.C.R.

A arbitrators are appointed by parties and mandatory when
arbitrators are appointed by the court;
(vi) The entry at Serial No 6 of the Fourth Schedule to the
Arbitration Act provides a cap on the fees payable to the
arbitral tribunal. There is an apparent mismatch between
B the English and Hindi versions, since a comma which is
present in the Hindi version is absent in the English version,
before the phrase “with a ceiling of Rs 30,00,000”. The
comma disjoins the phrase “with a ceiling of Rs.30,00,000”
from the words preceding the comma, “Rs. 19,87,500 plus
C 0.5 % of the claim amount over and above Rs. 20 Cr.” The
use of the comma in the Hindi version suggests that the
ceiling is applicable to the entire clause. Thus, the total fees
payable to the arbitrators cannot exceed Rs 30,00,000;
(vii) The omission of the comma in the English version is an
D inadvertent grammatical mistake. Commas have a crucial
role to play in interpretation and due regard must be given
to it when multiple interpretations are possible;
(viii) If the comma is not given its due effect, the upper limit on
the fees can be interpreted to mean Rs 49,87,500 [19,87,500
E + 30,00,000]. Such an interpretation would be contrary to
the legislative intent of making arbitration cost-effective and
economical;
(ix) The Fourth Schedule is based on the Delhi International
Arbitration Centre22 fees’ schedule which contains a comma
F like the Hindi version, which disjoints the applicable fees
and establishes a ceiling of Rs 30,00,000 towards arbitrators’
fees. This ceiling applies to the aggregate amount of the
claim and counter-claim;
(x) Section 2(9) of the Arbitration Act provides that wherever
G Part - I of the Arbitration Act refers to a claim, it shall be
applicable to a counter-claim and where it refers to defence,
it shall include a reference to the defence of a counter-
claim;

22
H "DIAC”
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 695
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

(xi) The legislative intent behind using the phrase “sum in A
dispute” in the Fourth Schedule of the Arbitration Act was
to refer to the cumulative sum of the claim and counter-
claim. If the legislative intent was to charge separate fees
for both the claim and counter-claim, it would have been
explicitly stated;
B
(xii) The plain English meaning of the term “sum” means
aggregate and of the term “dispute” means the totality of
all the claims and counter-claims. The term “sum” or
“dispute” cannot be bifurcated through legal interpretation
to refer to claims and counter-claims as separate concepts;
C
(xiii) The rules of various institutions in India and abroad that
conduct arbitration proceedings also fortify the position that
the “sum in dispute” includes the claim and counter-claim;
(xiv) In Union of India v. Singh Builders 23 and Sanjeev
Kumar Jain v. RS Charitable Trust24, this Court observed D
that arbitrators are charging exorbitant fees, without any
ceilings. The Law Commission of India in its 246th Report25
identified the above mischief and recommended the
introduction of the Fourth Schedule to address this issue;
(xv) It is evident from the LCI 246th Report (supra) that the E
Fourth Schedule was introduced to make arbitration a cost-
effective solution for dispute resolution domestically by
providing some mechanism to rationalise the fee structure
for arbitration. The Law Commission stated that the model
schedule of fees recommended by it is based on the fee set
by DIAC. The fee schedule set by DIAC specifically F
provides that the “sum in dispute” includes the counter-claim
made by any party. Thus, the interpretation that the “sum in
dispute” includes the counter-claim would be in tandem with
the legislative intent and the object that was sought to be
achieved with the introduction of the Fourth Schedule; G

23
(2009) 4 SCC 523 (“Singh Builders”)
24
(2012) 1 SCC 455
25
Law Commission of India, ‘Amendments to the Arbitration and Conciliation Act
1996’ (246th Report, August 2014) available at <https://lawcommissionofindia.nic.in/
reports/report246.pdf> accessed on 29 June 2022 (“LCI 246 th Report”) H
696 SUPREME COURT REPORTS [2022] 10 S.C.R.

A (xvi) The proviso to Section 38(1) of the Arbitration Act, providing
for a separate “deposit” for claim and counter-claim as an
advance for the costs referred to in Section 31(8), cannot
be construed to include arbitrators’ fees because that would
negate the requirement of the Fourth Schedule framed either
under Section 11(14) or Section 11(3A) of the Arbitration
B
Act, as the case may be. This can be harmoniously
reconciled by excluding “fees” from the ambit of “costs”;
(xvii) Fees and costs are completely distinct. Fees are a return or
consideration for professional services rendered, where
there is an element of quid pro quo. Fees can be fixed by
C agreement between the parties in an ad hoc arbitration or
by rules in an institutional arbitration. On the other hand,
costs are expenses incurred in the facilitation of the
arbitration, which include expenses for the venue of
arbitration, transportations costs and secretarial expenses;
D (xviii) Section 31(8) of the Arbitration Act states that the cost of
arbitration is fixed by the arbitral tribunal in accordance
with Section 31A. There is no involvement of party
autonomy in the determination of costs, unlike the concept
of fees which is based on party autonomy;
E (xix) Sub-Sections (3) and (4) of Section 31A of the Arbitration
Act enumerate the circumstances which may be taken into
account by the arbitral tribunal to determine costs. None of
these circumstances make any references to arbitrators’
fees but refer to expenses incurred in the process of
F facilitating the arbitration proceedings;
(xx) In Gayatri Jhansi Roadways Ltd (supra), this Court held
that while arbitrators’ fees may be a component of costs to
be paid but it is a far cry to state that Section 31(8) and 31A
would directly govern contracts in which the fee structure
G has already been laid down. Section 31(8) read with Section
31A deals with costs generally but not with arbitrator(s)
fees;
(xxi) The Explanation to Section 31A(1) of the Arbitration Act
states for the purpose of this sub-Section, “costs” means
reasonable costs relating to the “fees” and expenses of the
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 697
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

arbitrator. The Explanation takes away the effect of the A
legislative intent enshrined in Sections 11(14) read with the
Fourth Schedule and Section 38(1) of the Arbitration Act. In
Dattatraya Govind Mahajan v. State of Maharashtra26,
this Court has held that the intention of the legislature is
paramount;
B
(xxii) Further, the Explanation to Section 31A(1) which provides
that costs include the “fees and expenses of arbitrators,
Courts and witnesses” has to be read in conjunction with
Section 31A(1)(a) which provides that the arbitral tribunal
has the discretion to determine “whether costs are payable
by one party to another”. The implication of the above is C
that when costs are awarded to the successful party, it
would recoup the entirety of the amount that has been spent
on arbitration, including fees and expenses of the arbitrators,
court and witnesses as compensation for the arbitration
which has failed against it. This does not refer to a new D
determination of fees by the arbitrators; they are only entitled
to what the agreement states. It would be extraordinary to
state that the arbitrators can stipulate a new fee at the final
stage of determining costs under Section 31A;
(xxiii) The Fourth Schedule uses the phrase “sum in dispute” and E
there is no mention of this phrase in the Arbitration Act. On
the other hand, Section 38 pertains to deposits and that too
at a preliminary stage as an advance for costs as referred
to in Section 31(8). These provisions cannot be used to
interpret the term “sum in dispute”. If the language of the
enacting part is ambiguous, then the Schedule should be F
referred to for understanding the intent of the legislature.
Thus, the Fourth Schedule would supersede the provisions
of Section 38 on the basis of which, it can be concluded
that arbitral fee refers to a cumulative amount of claim and
counter-claim; G
(xxiv) The Fourth Schedule was introduced by the Arbitration and
Conciliation (Amendment) Act 201527. The legislature was

26
(1977) 2 SCC 54
27
"Arbitration Amendment Act 2015" H
698 SUPREME COURT REPORTS [2022] 10 S.C.R.

A aware of the terminology used in Section 38(1) and could
have used the terms “costs” or “deposits” but yet it still
chose to use the term “sum in dispute”; and
(xxv) Public sector undertakings, unlike private companies, cannot
afford the high fees that are charged by the arbitrators. A
B failure to pay the hefty fees being charged by arbitrators
could lead to a situation where the arbitral tribunal forms a
bias against such public sector undertakings.
B.2 Submissions on behalf of the respondents
36. On behalf of the respondents, the following submissions have
C been urged by Dr Abhishek Manu Singhvi, Senior Counsel:
(i) If the parties have prescribed a fee schedule and the arbitral
tribunal agrees to be bound by it unconditionally, without
any caveat, then the agreed schedule would apply. However,
there is nothing in the Arbitration Act to indicate what is to
D be done in a circumstance where the parties are unable to
agree to a fee schedule. The question then arises if the
arbitral tribunal can fix its own fees;
(ii) The issue of fee fixation is dealt with as a part of “costs”
under Section 31(8) (prior to the Arbitration Amendment
E Act 2015) or Section 31(8) read with Section 31A (after
the Arbitration Amendment Act 2015);
(iii) Sections 31(8) and 31A are part of Chapter VI titled
“Making of Arbitral Award and Termination of
Proceedings”, which implies that the issue of fees remains
F open to determination till the award is made. A similar
practice is followed under the English Arbitration Act 1996,
UNICITRAL Rules and International Chamber of
Commerce Rules. Therefore, if there is no agreement
between the parties regarding the fees of the arbitrators
and the arbitration has proceeded, the arbitral tribunal would
G
be entitled to its right to remuneration, which is crystallized
as a part of “reasonable costs” as provided under the
Explanation to Section 31A(1);
(iv) It has been suggested that this Court may provide guidelines
where three case management hearings can be conducted
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 699
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

at the initial stage of arbitration leading to the fixation of the A
fee of the arbitrators, which shall not be changed except
under extraordinary circumstances;
(v) Arbitrator(s) may demand an increase in fees if there is an
undue delay in the completion of the arbitration proceedings;
(vi) The right to remuneration of the arbitrator(s) is secured by B
empowering the arbitral tribunal to fix an amount of deposit
or supplementary deposit in advance under Section 38(1)
of the Arbitration Act, which is a part of final accounting
upon the termination of arbitral proceedings under Section
38(3). The enforcement of this right is ensured by C
empowering the arbitral tribunal to exercise a lien on the
award under Section 39(1);
(vii) Section 39(1) of the Arbitration Act permits a party to
approach the court to resolve the issue of costs (including
fees) as the court “may consider reasonable”. The arbitral D
tribunal’s right to fix reasonable costs (including its final
determination of fee) is judicially reviewable under Section
39 read with Section 31A of the Arbitration Act;
(viii) Section 31(8) of the Arbitration Act provides that the costs
of arbitration shall be fixed in terms of Section 31A of the E
Act. The Explanation to Section 31A(1) provides that
“costs” shall mean reasonable costs relating to the fees
and expenses of arbitrators;
(ix) The proviso to Section 38(1) of the Arbitration Act in clear
and unambiguous terms provides that a separate amount F
may be fixed for deposit towards the claim and the counter-
claim, if any counter-claim is preferred apart from the claim;
(x) The fees of arbitrators are an integral part of the costs to
be fixed by the arbitral tribunal under Section 31(8) towards
deposits, for which the arbitral tribunal is empowered to fix
G
separate amounts for claims and counter-claims;
(xi) The phrase “sum in dispute” mentioned in the Fourth
Schedule has to be interpreted in the above context;
(xii) Any reliance on the inconsistency between the Hindi and
English versions of the Arbitration Act with respect to the H
700 SUPREME COURT REPORTS [2022] 10 S.C.R.

A entry at Serial 6 of the table in the Fourth Schedule is in the
teeth of Article 348(1)(b)(ii) of the Constitution, which
provides that the Act passed by Parliament in the English
language shall be the authoritative text. Further, Article
348(1) begins with a non-obstante clause which has an
overriding effect over other provisions;
B
(xiii) If the legislature wanted to indicate that the maximum cap
on fees payable to an arbitrator is Rs 30,00,000, it would
have simply stated so. There was no need to provide in the
entry at Serial 6 that the fixed amount of Rs 19,87,500% +
0.5% of the claim amount over and above Rs 20,00,00,000
C with a ceiling of Rs 30,00,000 would be the upper ceiling;
(xiv) Counter-claims arise from a distinct dispute, separate from
the dispute pertaining to the claim and mostly in regard to
an independent cause of action. Even if the main suit fails,
a counter-claim may survive and continue. Thus, a separate
D court fee (where a suit is filed in a court) is required to be
paid on the amount of counter-claim. A counter-claim is
different from a set-off, which arises from the same dispute
and can be claimed as an adjustment in the main suit, without
requiring the payment of court fees;
E (xv) The Arbitration Act refers to claims and counter- claims
distinctly in various provisions such as Section 2 (9), Section
23 (2A), Section 31A and Section 38;
(xvi) Section 2(9) of the Arbitration Act, which states any
reference to a claim in Part-I also applies to a counter-
F claim, has to be read in tandem with the proviso to Section
38(1), Section 31A and Section 31(8); and
(xvii) Bias is not an appropriate ground to challenge the increase
in fees of arbitrators.
B.3 Submissions on behalf of the amicus curiae
G
37. Mr Huzefa Ahmadi, learned Senior Counsel, assisting this Court
as amicus curiae made the following submissions:
(i) Party autonomy is the overarching principle of arbitration
and is crystallised in Section 2(6) of the Arbitration Act. It
H allows parties to determine the relevant law and procedure
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 701
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

that will govern the arbitration and limits court intervention. A
The principle of party autonomy extends to parties’ freedom
to decide the fees payable to the arbitrator(s);
(ii) Prior to the amendment of the Arbitration Act in 2015, the
issue of arbitrators’ fees would have been a subject of
agreement between the parties and the arbitrators. B
However, this Court in Singh Builders (supra) noted that
the arbitrators have been unilaterally, arbitrarily and
disproportionately fixing their fees. This observation was
made in the context of court-appointed arbitrators where
this Court was concerned with the fact that parties were
being sent for arbitration by courts and were being forced C
to pay the fees fixed by such arbitrators. This Court noted
that institutional arbitration has already remedied this
problem since the arbitral institution fixes the fees and not
the arbitrators in terms of the rules of the institution;
(iii) In the above backdrop, the Law Commission recognised D
that the issue of arbitrator fees in ad hoc arbitration must
be resolved by the introduction of a mechanism to rationalise
the fee structure. A model schedule of fees, the Fourth
Schedule, was added to the Arbitration Act through the
Arbitration Amendment Act 2015, which was to serve as a E
guide for High Courts to frame rules governing the fixation
of fees payable to the arbitrators. This model schedule of
fees was based on the schedule of fees developed by DIAC
and was suitably revised;
(iv) The Fourth Schedule is to be read along with provisions for F
appointment of arbitrators under Section11. It does not apply
to international commercial arbitration and is not applicable
when the parties have agreed to the fees in terms of the
rules of an arbitral institution;
(v) The High Courts have been slow in framing rules for the G
determination of fees payable to arbitrator(s);
(vi) Some High Courts have been of the view that the Fourth
Schedule is merely suggestive and not mandatory, while
others have held that it is mandatory. Thus, there is an
uncertainty regarding the nature of the Fourth Schedule. In
H
702 SUPREME COURT REPORTS [2022] 10 S.C.R.

A Gayatri Jhansi Roadways Ltd (supra), this Court held
that if the fee schedule is fixed by the parties in an
agreement, they would not be bound by the Fourth Schedule.
Pursuant to this decision, many High Courts have proceeded
to hold that the Fourth Schedule is only applicable to court-
appointed arbitrators if stated expressly or if the parties
B
and arbitrators have agreed to its applicability;
(vii) Section 11 has been further amended by the Arbitration
Amendment Act 2019. Sub-Section (14) of Section 11 now
reads that “[t]he arbitral institution shall determine the fees
of the arbitral tribunal and the manner of its payment to the
C arbitral tribunal subject to the rates specified in the Fourth
Schedule”. The amended Section 11 has not been brought
into force and is subject to two exceptions. Crucially, once
the amendment comes into force, the fee of the arbitral
tribunal would be fixed by the arbitral institution appointing
D the arbitrator. This Court’s interpretation regarding the nature
of the Fourth Schedule would also have an impact on the
amended Section 11 when it is brought into force;
(viii) To determine if the term “sum in dispute” refers to both the
claim and counter-claim, it has to be considered whether a
E counter claim can be treated as an independent claim for
which a legal proceeding may be instituted. Section 23 of
the Arbitration Act provides the basis on which a counter-
claim is to be adjudicated. Section 23 does not stipulate that
the counter-claim must be linked or related to the claim;
rather it only states that the counter-claim must come within
F the scope of the arbitration agreement;
(ix) The independent nature of the counter-claim is recognised
under Sections 38(1) and 38(2) of the Arbitration Act in the
following terms, where the arbitral tribunal is empowered
to:
G
(a) Determine separate amount of deposits on a claim and
counter-claim; and
(b) Suspend or terminate the proceedings in respect of the claim
or counter-claim, in the event, the deposit directed to be
paid by the tribunal is not paid by the parties;
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 703
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

(x) Claims and counter-claims are treated separately under the A
analogous provisions of Order VIII of the CPC;
(xi) Proceedings relating to a counter-claim can survive even if
the proceedings relating to a claim are terminated;
(xii) Section 2(9) only provides that provisions of the Arbitration
Act relating to a claim would mutatis mutandis apply to a B
counter-claim. It is not a definition clause but it is intended
to apply to only procedural aspects. In fact, it fortifies the
argument that the “claim amount” under the Fourth Schedule
would mutatis mutandis apply to counter-claims and is not
an aggregate of claims and counter-claims; C
(xiii) An arbitral tribunal is not restrained from deciding its fees
under the Fourth Schedule for claims and counter-claims
separately;
(xiv) The Fourth Schedule does not explicitly state that the “sum
in dispute” includes a counter-claim; D
(xv) Until the amendment to Section 11 is notified, the court
appointing arbitrators should ensure that the parties are
made aware of the terms on which the appointment is made
and specifically whether or not the Fourth Schedule is
applicable. The court should also ensure that the parties E
have clarity on the fees and expenses payable to the
arbitrator(s);
(xvi) This Court may recommend that either prior to or at the
time of notifying the amendments to Section 11, the rates
specified in the Fourth Schedule may be revised to reflect F
the rates that are realistic in present times;
(xvii) None of the provisions of the Arbitration Act entitle the
arbitrators to fix their own fees. The scheme of the Act
indicates that the arbitral tribunal is only empowered to
apportion costs (including the arbitrators’ fee) incurred during G
the arbitration as between the parties at the time of passing
the award;
(xviii) Remuneration of arbitrators is subject to direct negotiation
and agreement between the arbitrators and the parties and
ought to be determined at the inception of the proceedings. H
704 SUPREME COURT REPORTS [2022] 10 S.C.R.

A The fee that has been agreed upon between the parties
and the arbitrators is apportioned as a part of the costs at
the time when the award is passed. This view is supported
by the decision of this Court in Gayatri Jhansi Roadways
Ltd (supra), where it was observed that “…it is true that
the arbitrator’s fees may be a component of costs to be
B
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”;
(xix) Section 39 of the Arbitration Act also empowers the arbitral
tribunal to only hold the award from the parties for any
C unpaid costs of arbitration. These unpaid costs could include
arbitrators’ fees previously agreed upon between the parties
and not paid;
(xx) Any deviation from the fees agreed between the parties
and the arbitrator(s) would require the consent of the parties.
D It would be unreasonable and unfair to the parties if the
arbitral tribunal is allowed to alter its fees at a later stage of
the arbitration proceedings. At an advanced stage, parties
may be apprehensive to disagree with the arbitral tribunal
and may agree to an unreasonable and arbitrary fee sought
E by it;
(xxi) The fee payable under the Fourth Schedule would be
applicable to each member of the arbitral tribunal. It cannot
be considered as a lump sum to be split among the members.
The Note to the Fourth Schedule provides that where the
F tribunal consists of a sole arbitrator, they would be entitled
to 25 per cent over and above the fee payable under the
Fourth Schedule. It would be absurd if the sole arbitrator
would be entitled to 25 per cent over and above the
stipulated sum under the Fourth Schedule but in the case of
an arbitral tribunal consisting of three or more members,
G the entire fee would have to split;
(xxii) Under Section 10 of the Arbitration Act, parties are free to
determine the number of arbitrators. If there is no agreement,
then the default rule is of appointing a sole arbitrator. Parties
can always appoint a sole arbitrator, but if there are unwilling
H to derogate from the agreement which provides for
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 705
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

appointment of three or more arbitrators, then they would A
have to bear the costs accordingly;
(xxiii) The ceiling of Rs 30,00,000 in the Fourth Schedule is only
applicable to the sum of 0.5% of the claim amount over
and above Rs 20 crores. The expression “+” that appears
after Rs 19,87,500 is disjunctive; and B
(xxiv) The Fourth Schedule was introduced in English while the
Hindi version was the translation. Thus, precedence must
be given to the English version. A comma is not conclusive
for determining the meaning of a statutory provision.
38. Mr Ahmadi also urged the court to issue certain directives for C
governing ad hoc arbitrations in India. These are reproduced below:
“1. In cases where the arbitrator(s) are appointed by parties in
the manner set out in the arbitration agreement, upon constitution
of the arbitral tribunal, the parties and the arbitral tribunal shall
hold a preliminary hearing amongst themselves to finalise the terms D
of reference (the “Terms of Reference”) of the arbitral tribunal.
The arbitral tribunal must set out the components of its fee in the
Terms of Reference which would serve as a tripartite agreement
between the parties and the arbitral tribunal. Once the Terms of
Reference have been finalised and issued, it would not be open E
for the arbitral tribunal to vary either the fee fixed or the heads
under which the fee may be charged.
2. The parties and the arbitral tribunal may make a carve out in
the Terms of Reference that the fee fixed therein may be analysed
upon completion of pleadings. The parties and the arbitral tribunal F
may hold another meeting to ascertain the number of sittings that
may be required for the final adjudication of the dispute which
number may then be incorporated the Terms of Reference as an
additional term.
3. In cases where the arbitrator(s) are appointed by the Court,
G
the order of the Court should ideally expressly stipulate the fee
that arbitral tribunal would be entitled to charge. However, where
the Court leaves this determination to the arbitral tribunal in its
appointment order, the arbitral tribunal and the parties should agree
upon the Terms of Reference as specified in the manner set out
in draft practice direction (1) above. H
706 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 4. There can be no unilateral deviation from the Terms of
Reference. The Terms of Reference being a tripartite agreement
between the parties and the arbitral tribunal, any amendments,
revisions, additions or modifications may only be made to it with
the consent of the parties.
B 5. All High Courts shall frame the rules for arbitrator fee for the
purposes of Section 11(14) of the Arbitration and Conciliation Act,
1996.”
39. On the basis of these submissions, this Court has now been
called to determine the following issues in relation to the arbitrators’
C fees:
(i) Whether the arbitrator(s) are entitled to unilaterally
determine their own fees;
(ii) Whether the term “sum in dispute” in the Fourth Schedule
to the Arbitration Act means the cumulative total of the
D amounts of the claim and counter-claim;
(iii) Whether the ceiling of Rs 30,00,000 in the entry at Serial
No 6 of the Fourth Schedule of the Arbitration Act is
applicable only to the variable amount of the fee or the
entire fee amount; and
E (iv) Whether the ceiling of Rs 30,00,000 applies as a cumulative
fee payable to the arbitral tribunal or it represents the fee
payable to each arbitrator.
C Determination of arbitrators’ fee
C.1 Comparative outlook
F
40. The issue whether the remuneration of arbitrators has to be
decided by the parties or by the arbitrator(s) on their own has not been
exhaustively addressed in India. People and businesses across the world
have increasingly become interconnected with the advent of globalisation.
Hence, it will be useful to look at the practices adopted by international
G organisations and in national jurisdictions on the determination of
arbitrators’ fees. We must at the outset distinguish between arbitrations
administered by institutions and ad hoc arbitrations. Typically, when an
arbitration is conducted under the aegis of an arbitral institution, the fees
payable to the arbitrators is fixed by the institution, sometimes
independently or in consultation with the sole or presiding arbitrator. The
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 707
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

parties are not involved in negotiations with the arbitrator(s) to decide A
the fees. However, in ad hoc arbitrations, parties enter into their own
arrangements with the arbitrators regarding their remuneration28.
C.1.1 Position of international organisations
(i) United National Commission on International Trade 29
B
41. The UNCITRAL adopted a model law on International
Commercial Arbitration on 21 June 1985. It was hoped that states would
give due consideration to the model law while framing their own domestic
legislation. The Arbitration Act has also been enacted taking into account
the UNCITRAL Model Law. The Preamble to the Act states:
C
“WHEREAS the United Nations Commission on International
Trade Law (UNCITRAL) has adopted the UNCITRAL Model
Law on International commercial Arbitration in 1985:
AND WHEREAS the General Assembly of the United Nations
has recommended that all countries give due consideration to the
said Model Law, in view of the desirability of uniformity of the D
law of arbitral procedures and the specific needs of international
commercial arbitration practice;
AND WHEREAS the UNCITRAL has adopted the UNCITRAL
Conciliation Rules in 1980;
E
AND WHEREAS the General Assembly of the United Nations
has recommended the use of the said Rules in cases where a
dispute arises in the context of international commercial relations
and the parties seek an amicable settlement of that dispute by
recourse to conciliation;
AND WHEREAS the said Model Law and Rules make significant F
contribution to the establishment of a unified legal framework for
the fair and efficient settlement of disputes arising in international
commercial relations;
AND WHEREAS it is expedient to make law respecting
arbitration and conciliation, taking into account the aforesaid Model G
Law and Rules;
28
Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern
and Hunter on International Arbitration (6th Edition, 2015), Chapter 4, Paragraph
4.203 (“Redfern and Hunter on International Arbitration”)
29
“UNCITRAL” H
708 SUPREME COURT REPORTS [2022] 10 S.C.R.

A BE it enacted by Parliament in the forty-seventh Year of the
Republic of India as follows:-”
42. The UNCITRAL Model Law does not explicitly recognise
the right of remuneration of arbitrator(s). However, arbitrators must be
compensated for their services. This flows from the contractual
B relationship between the parties and the arbitrator and customary
practice30.
43. The original UNCITRAL Rules introduced in 1976 could be
used to govern ad hoc arbitrations as well as arbitrations where an
arbitral institution was involved. The 1976 Rules allowed the arbitrator(s)
C to determine their own fees, which were to be reasonable taking into
account the sum in dispute and the complexity of the dispute31. The
UNCITRAL rules also required the arbitrator(s) to take into account
the schedule of fees that has been issued or provided by an appointing
authority, if designated by the parties32. In the absence of such a fee
schedule, the arbitral tribunal could fix its fees only after consulting with
D the appointing authority if a party has requested the appointing authority
to furnish a statement for determining the fees and the appointing
authority has consented to providing such a statement33. However, the
appointing authority did not have the power to alter the decision of the
tribunal regarding remuneration payable to arbitrators. The arbitrators
E had the final authority to determine their remuneration34. Commentators
have noted that this was an “unusual approach” for establishing the fees
of arbitrators and was subject to criticism because it granted arbitrator(s)
undue authority to determine their compensation35.
44. The UNCITRAL Rules were revised in 2010. The Rules
F continue to grant a substantial role to the arbitrators in deciding their
own fees but the appointing authorities, if designated by the parties, or
the Permanent Court of Arbitration36, have greater control over such

30
Gary B Born, International Commercial Arbitration (3 nd edition, 2021), Chapter 13
(“GaryBorn on Arbitration”)
G 31
Article 38(a) read with Article 39(1), UNCITRAL Rules 1976
32
Article 39(2)-(3), UNCITRAL Rules 1976
33
Article 39(3)-(4), UNCITRAL Rules 1976
34
D Caron and L Caplan, The UNCITRAL Arbitration Rules: A Commentary (2 nd
edition, 2013), page 863
35
Supra at note 30
36
“PCA”
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 709
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

determination. Article 40(2)(a) read with Article 41 of the UNCITRAL A
Rules 2010 empowers the arbitral tribunal to fix their fees subject to
the same reasonableness requirement and the other criteria prescribed
under the 1976 Rules37. The arbitral tribunal is required to inform the
parties as to “how it proposes to determine its fees and expenses,
including any rates it intends to apply” promptly after its constitution38.
B
It is noted that this makes the process of determining fees more
transparent39. The fees set by the arbitrators can be reviewed they
are not reasonable. Under Articles 41(3) 40 and 41(4)(b) 41 of the
UNCITRAL Rules 2010, within 15 days of receiving the arbitral
tribunal’s determination of fees, the parties can refer the fees
determined by the arbitral tribunal to the appointing authority for review C
and if no such authority has been designated, then the review will be
undertaken by the Secretary-General of the PCA. If the Secretary-
General of the PCA or the appointing authority (if designated) finds
that the fee proposed to be charged is excessive, then it can make
necessary adjustments in terms of Article 41(4)(c)42. The fees so revised D
are binding on the tribunal43.

37
Article 41(1) reads: “The fees and expenses of the arbitrators shall be reasonable in
amount, taking into account the amount in dispute, the complexity of the subject
matter, the time spent by the arbitrators and any other relevant circumstances of the E
case.”
38
Article 41(3), UNCITRAL Rules 2010
39
Supra at note 34
40
Article 41(3) reads: “Within 15 days of receiving that proposal, any party may refer
the proposal to the appointing authority for review. If, within 45 days of receipt of
such a referral, the appointing authority finds that the proposal of the arbitral tribunal
is inconsistent with paragraph 1, it shall make any necessary adjustments thereto, F
which shall be binding upon the arbitral tribunal.”
41
Article 41(4)(b) reads: “Within 15 days of receiving the arbitral tribunal’s determination
of fees and expenses, any party may refer for review such determination to the appointing
authority. If no appointing authority has been agreed upon or designated, or if the
appointing authority fails to act within the time specified in these Rules, then the
review shall be made by the Secretary-General of the PCA;”
42
Article 41(4)(c) reads: “If the appointing authority or the Secretary-General of the G
PCA finds that the arbitral tribunal’s determination is inconsistent with the arbitral
tribunal’s proposal (and any adjustment thereto) under paragraph 3 or is otherwise
manifestly excessive, it shall, within 45 days of receiving such a referral, make any
adjustments to the arbitral tribunal’s determination that are necessary to satisfy the
criteria in paragraph 1. Any such adjustments shall be binding upon the arbitral tribunal;”
43
Articles 41(3), UNCITRAL Rules 2010
H
710 SUPREME COURT REPORTS [2022] 10 S.C.R.

A (ii) Permanent Court of Arbitration
45. The PCA Rules have been formulated on the basis of the
UNCITRAL Rules 2010. A mandatory automatic review of the fees
and expenses determined by the arbitral tribunal is carried out by Secretary
General of the PCA (as the appointing authority under the PCA Rules)
B at the conclusion of each case44. The process of review of fees set by
the arbitral tribunal is not automatic under the UNCITRAL Rules 2010.
Parties may hesitate to invoke the provisions of review in the fear of
upsetting the tribunal or they may raise unjustified requests for review if
they are dissatisfied with the award. The PCA Rules avoid these pitfalls.
The PCA is also empowered to manage the advances of costs incurred
C
by the arbitrators. Every time a payment is made to an arbitrator out of
the deposit, it is subject to review45. The PCA rules become relevant
since India has signed a Host Country Agreement with the PCA and a
PCA facility is in the process of being set up in India.
(iii) London Court of International Arbitration46
D
46. The LCIA’s Schedule of Costs of arbitrations governs the
fees payable to the arbitrator(s). The arbitral tribunal is required to agree
in writing to the rates specified in the schedule. The tribunal’s fees are
calculated on the basis of the work done by the arbitrator(s) in connection
with the arbitration, the complexity of the case and requirements relating
E
to the qualification of the arbitrator(s). The fees are charged on an hourly
basis not exceeding £500 unless there are exceptional circumstances 47.
The role of the arbitrator(s) thus is limited to reporting the hours worked
which forms the basis of the fees to be paid.

F (iv) International Centre for Dispute Resolution48
47. The ICDR case administrator fixes the daily or hourly rate for
arbitrator(s)49.The determination of fees may involve an element of

44
Article 41(3)(a), PCA Rules 2010
45
G Article 43 of the PCA Rules reads: “[t]he [PCA] shall ensure that any disbursements
of arbitral tribunal fees and expenses made prior to the fixing of the costs of arbitration
pursuant to article 40 are consistent with the criteria in article 41, paragraph 1 and with
the arbitral tribunal’s proposal (and any adjustments thereto)…”
46
“LCIA”
47
Schedule of Arbitration Fees and Costs, LCIA Rules 2020
48
“ICDR”
49
H Article 38(2), ICDR Rules 2021
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 711
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

negotiation between the parties and the arbitrator(s)50. Article 38 of the A
ICDR Rules 2021 provides that the “[t]he fees and expenses of the
arbitrators shall be reasonable in amount, taking into account the time
spent by the arbitrators, the size and complexity of the case, and any
other relevant circumstances”.
(v) International Chamber of Commerce51 B
48. The ICC Rules 2021 stipulate that the ICC Court will
determine the arbitrators’ fee52 according to the fee scale based on the
sum in dispute, or where the sum is not stated, based on its discretion53.
The ICC Court while setting the fees of the arbitrator(s) has to consider
various factors like “the diligence and efficiency of the arbitrator, the
C
time spent, the rapidity of the proceedings, the complexity of the dispute
and the timeliness of the submission of the draft award”54. The ICC
Court is empowered to increase the fees if the arbitration has been
conducted expeditiously and reduce the fees if there has been a delay in
pronouncing the award55.
(vi) Singapore International Arbitration Centre56 D
49. The fees are fixed by the Registrar in accordance with the
Schedule of Fees on basis of the amount in dispute57. The time spent on

50
Article 38(2) of ICDR Rules 2021 provides: “As soon as practicable after the
commencement of the arbitration, the Administrator shall designate an appropriate E
daily or hourly rate of compensation in consultation with the parties and all arbitrators,
taking into account the arbitrators’ stated rate of compensation and the size and
complexity of the case”.
51
“ICC”
52
Article 38(1) of the ICC Rules 2021 provides: “The costs of the arbitration shall
include the fees and expenses of the arbitrators and the ICC administrative expenses
fixed by the Court, in accordance with the scale in force at the time of the commencement F
of the arbitration, as well as the fees and expenses of any experts appointed by the
arbitral tribunal and the reasonable legal and other costs incurred by the parties for the
arbitration.” Article 38(2) provides: “The Court may fix the fees of the arbitrators at a
figure higher or lower than that which would result from the application of the relevant
scale should this be deemed necessary due to the exceptional circumstances of the
case”.
53
G
Articles 2(1),Appendix III (Arbitration Costs and Fees), ICC Rules 2021
54
Article 2(2), Appendix III (Arbitration Costs and Fees), ICC Rules 2021
55
Paragraphs 118-22, Note to Parties and Arbitral Tribunals on the Conduct of the
Arbitration Under the ICC Rules of Arbitration (2019)
56
“SIAC”
57
Rule 36(1) of SIAC Rules 2016 provides: The fees of the Tribunal shall be fixed by
the Registrar in accordance with the applicable Schedule of Fees or, if applicable, with H
712 SUPREME COURT REPORTS [2022] 10 S.C.R.

A the matter and the complexity of the dispute are considered for the
determination of fees58.The parties have the discretion to provide an
alternative method of determining the fees prior to the constitution of the
arbitral tribunal59.

(vii) Hong Kong International Arbitration Centre60
B
50. The parties determine the arbitrators’ fees based on either the
sum in dispute or at an hourly rate61. If the fees are decided based on
the sum in dispute, then the fees will be fixed on the basis of the guidelines
and fee table provided in the Rules. If the fees are to be determined at
C hourly rates, then aco-arbitrator will negotiate and agree on their fees
with the nominating party, and a sole or presiding arbitrator will negotiate
with parties jointly62.

D the method agreed by the parties pursuant to Rule 34.1, and the stage of the proceedings
at which the arbitration concluded. In exceptional circumstances, the Registrar may
determine that an additional fee over that prescribed in the applicable Schedule of Fees
shall be paid”.
58
Supra at note 30
59
Rule 34(1) of SIAC Rules 2016provides: “The Tribunal’s fees and SIAC’s fees shall
be ascertained in accordance with the Schedule of Fees in force at the time of
E commencement of the arbitration. The parties may agree to alternative methods of
determining the Tribunal’s fees prior to the constitution of the Tribunal”.
60
“HKIAC”
61
Article 10.1 of HKIAC Rules 2018provides: “The fees and expenses of the arbitral
tribunal shall be determined according to either:
(a) an hourly rate in accordance with Schedule 2; or
(b) the schedule of fees based on the sum in dispute in accordance with Schedule 3.
F The parties shall agree the method for determining the fees and expenses of the arbitral
tribunal, and shall inform HKIAC of the applicable method within 30 days of the date
on which the Respondent receives the Notice of Arbitration. If the parties fail to agree
on the applicable method, the arbitral tribunal’s fees and expenses shall be determined
in accordance with Schedule 2".
62
Article 10.2 of HKIAC Rules 2018 provides: “Where the fees of the arbitral tribunal
are to be determined in accordance with Schedule 2,
G
(a) the applicable rate for each co-arbitrator shall be the rate agreed between that co-
arbitrator and the designating party;
(b) the applicable rate for a sole or presiding arbitrator designated by the parties or the
co-arbitrators, as applicable, shall be the rate agreed between that arbitrator and the
parties,subject to paragraphs 9.3 to 9.5 of Schedule 2. Where the rate of an arbitrator is
not agreed in accordance with Article 10.2(a) or (b), or where HKIAC appoints an
H arbitrator, HKIAC shall determine the rate of that arbitrator”.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 713
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

(viii) International Centre for Settlement of Investment A
Disputes 63
51. The Secretary General, with the approval of the Chair
(Chairman of the Administrative Council), would determine and publish
the fee and per diem allowance payable to each arbitrator(s) in terms of
the Regulation 14 of the ICSID Administrative and Financial Regulations B
202264. The older 2006 version of the Regulations allowed the parties to
contract out of the fee structure prescribed by ICSID65.
(ix) Summary
52. Typically, when an arbitration is conducted under the auspices
of an arbitral institution, the fees payable to the arbitrator(s)are fixed by C
the institution itself. However, some arbitral institutions like ICDR, SIAC
and HKIAC allow a certain level of negotiations between the parties
and arbitrator(s) for the determination of fees payable to the arbitrators,
upholding the principle of party autonomy. ICDR allows determination
of compensation by the Administrator in consultation with the arbitrator(s) D
and the parties. SIAC allows the parties to propose an alternative method
of calculating fees prior to the constitution of the tribunal. HKIAC enables
the parties to choose between remuneration based on the sum in dispute
or hourly rates. Interestingly, UNCITRAL Rules 2013 allow greater
control to the arbitrator(s) in determining their fees. However, the
designated appointing authority or the Secretary General of the PCA E
can make adjustments to the fees proposed by the arbitrator(s). Thus,
none of the international bodies (including arbitral institutions) confer an
absolute or unilateral power to the arbitrator(s) to decide their own fees.
Gary Born in his treatise on international commercial arbitration has
noted that, “[a] number of other institutional rules also minimize the role F
63
“ICSID”
64
Regulation 14 (2) states: “The Secretary-General, with the approval of the Chair,
shall determine and publish the amount of the fee and the per diem allowance referred
to in paragraph (1)(a) and (c). Any request by a member for a higher amount shall be
made in writing through the Secretary-General, and not directly to the parties. Such a
request must be made before the constitution of the Commission, Tribunal or Committee
G
and shall justify the increase requested”.
65
Regulation 14 states: “(1) Unless otherwise agreed pursuant to Article 60(2) of the
Convention, and in addition to receiving reimbursement for any direct expenses
reasonably incurred, each member of a Commission, a Tribunal or an ad hoc Committee
appointed from the Panel of Arbitrators pursuant to Article 52(3) of the Convention
(hereinafter referred to as “Committee”) shall receive…” H
714 SUPREME COURT REPORTS [2022] 10 S.C.R.

A of arbitrators in fixing the tribunal’s fees. These rules typically fix the
amount of the arbitrator’s fees by reference to the amount in dispute” 66.
C.1.2 Position in other national jurisdictions
53. While it will not be possible to undertake a comprehensive
review of all the foreign jurisdictions in respect of the legal regime
B governing the payment of remuneration to arbitrators, we have discussed
a few jurisdictions that either have explicitly recognised an arbitrators’
entitlement to remuneration and/or have dealt with the issue of arbitrators’
power of fixing their own remuneration.
(i) England
C
54. The English courts have held that the arbitrator’s rights and
duties result from a conjunction of contract and status67. Upon accepting
the appointment, the arbitrator becomes a party to the arbitration
agreement, giving rise to a trilateral contract between the parties and
the arbitrator68. However, the English courts acknowledge that certain
D aspects of the relationship between the arbitrator and parties are also
influenced by the quasi-judicial status of the arbitrator, which requires
the arbitrator to be independent of the parties69.
55. Section 28 of the English Arbitration Act 199670 recognises
the entitlement of an arbitrator to remuneration. This is a mandatory
E provision which cannot be derogated from71. Section 28(1) codifies the
common law position72 that parties are jointly and severally liable to pay
reasonable fees and expenses to the arbitrator(s) as is appropriate in the
circumstances. In terms of Section 28(5), the arbitrator(s) are entitled to
be paid the fees and expenses agreed by them with the parties 73.
F However, if there is no such agreement, the arbitral tribunal can seek

66
Supra at note 30
67
KS Norjarl AS v. Hyundai Heavy Indus. Co., [1992] 1 QB 863, 884
68
Compagnie Européenne de Céréales SA v. Tradax Exp. SA, [1986] 2 Lloyd’s
Rep. 301 (QB)
69
Jivraj v. Hashwani, [2011] UKSC 40
G 70
“English Arbitration Act”
71
Section 4(1) and Schedule 1 of the English Arbitration Act
72
Loukas A Mistelis (ed), Concise International Arbitration (2nd edition, 2015), Chapter
23 (“Mistelis on Arbitration”)
73
Section 28(5) provides: “Nothing in this section affects any liability of a party to any
other party to pay all or any of the costs of the arbitration (see sections 59 to 65) or
H any contractual right of an arbitrator to payment of his fees and expenses.”
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 715
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

payment of such fees and expenses from one, some or all the parties74. A
The parties’ liability to pay fees and expenses may be determined by
courts. The court may consider factors like the standard fees of the
arbitrator(s), the time invested, complexity of the dispute, and whether
the procedures adopted by the tribunal were suitable75.Section 33(1)(b)
stipulates that it is the duty of the arbitral tribunal to adopt procedures
B
that are suitable to the circumstances of the case and to avoid unnecessary
delays or expenses, to provide a fair means for the resolution of the
dispute. The court is also entitled to review the fees76 determined by the
arbitrator(s) or arbitral institution, which has not been contractually agreed
to by the parties77. However, if the agreement with an arbitrator(s) or an
arbitral institution is not clear regarding the terms of the payment, the C
court can intervene to review the fees, in order to examine if they are
reasonable78. It is also important to note that where only one party has
agreed to the fees and the fees have been held to be unreasonable, then
the other party is only jointly and severally liable to pay the amount that
the court has determined to be reasonable, but the first party may be
D
liable contractually to pay the contractually agreed amount79.
(ii) Italy
56. Article 814 of the Italian Code of Civil Procedure provides
that the arbitrators have a right to expenses and the fees for the work
done, unless they have waived this right at the time of acceptance or E
through a subsequent written statement. Article 814 also provides that
the parties are jointly and severally liable for paying the fees and expenses
of the arbitral proceedings, irrespective of how the arbitration costs are
apportioned between them. If one party has made all the payments of
the fees and expenses payable to the arbitrator(s), they are entitled to
recover this amount from the other party subject to the limits set out in F
the award.

74
Supra at note 72
75
ibid
76
Section 28(2) provides: “Any party may apply to the court (upon notice to the other
parties and to the arbitrators) which may order that the amount of the arbitrators’ fees
G
and expenses shall be considered and adjusted by such means and upon such terms as
it may direct.”
77
Hussmann (Europe) Ltd v.Al Ameen Development & Trade, [2000] 2 Lloyd’s
Rep. 83. Queen’s Bench Division (Commercial Court)), paragraphs 71-72
78
ibid
79
Supra at note 72 H
716 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 57. Article 814 also recognises that arbitrator(s) determine their
own fees in the award and allocate the responsibility of the payment of
such fees. However, such a determination is not binding unless the parties
approve the fees proposed by the arbitrator(s). If the fees have not been
paid, the arbitrator(s) can approach the President of the court in the
district where the arbitration is seated for the determination of the fees.
B
This order is enforceable against the parties80. The schedule of fees is
provided in the Ministerial Decree issued by the Italian Ministry of Justice
for domestic ad hoc arbitrations81.
(iii) Sweden
C 58. The arbitral tribunal is empowered to set its own fees unless
there is an agreement between the parties82. Section 37(1) of the Swedish
Arbitration Act83 provides that the parties are jointly and severally liable
to pay reasonable compensation to the arbitrator(s) for work and
expenses. The Swedish Supreme Court has interpreted the words
“reasonable compensation” to mean an assessment of time spent by the
D arbitrator(s) and the qualification of the arbitrator(s)84. The Swedish
Supreme Court has also noted that a disproportionately high cost of
arbitration compared to the value of sum in dispute does not necessarily
require a reduction in the compensation85.
59. Section 37 of the Swedish Arbitration Act is applicable “unless
E otherwise jointly decided by the parties in a manner that is binding upon
the arbitrators”. Commentators have thus noted that Section 37 is non-

80
CMS Expert Guides, “International Arbitration Law and Rules in Italy”, available at
<https://cms.law/en/int/expert-guides/cms-expert-guide-to-international-arbitration/
italy> accessed on 29 June 2022; See also, Italian Code of Civil Procedure, available at
F <https://www.international-arbitration-attorney.com/wp-content/uploads/2013/07/
Italy-Arbitration-Law.pdf> accessed on 29 June 2022
81
Cecilia Carrara, Stefano Parlatore, Daniele Geronzi et.al, Arbitration Procedures and
Practice in Italy, available at <https://uk.practicallaw.thomsonreuters.com/6-383-
9187?transitionType=Default&contextData=(sc.Default)&firstPage=true#co_anchor_a719112>
accessed on 29 June 2022
82
Annette Magnusson, Jakob Ragnwaldh and Martin Wallin (eds), International
G Arbitration in Sweden: A Practitioner’s Guide (2nd edition, 2021), Chapter 9
83
The Swedish Arbitration Act (SFS 1999:116), available at <https://sccinstitute.se/
media/1773096/the-swedish-arbitration-act_1march2019_eng-2.pdf> accessed on 29
June 2022
84
Supra at note 82
85
NEMU Mitt i Sverige AB v. Jan H, Gunnar B and Bo N (the arbitrators), the
H Supreme Court, 22 October 1998, NJA 1998 p. 574 (T 105-98)
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 717
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

mandatory and can be altered or waived off by the parties 86. However, A
it is understood that if the arbitrator(s) are not parties to an agreement
with respect to their compensation, it becomes binding on the arbitrator(s)
only if they are aware and understand the agreement when they accept
the appointment87. Section 39 of the Swedish Arbitration Act further
provides that an agreement regarding compensation to the arbitrator(s)
B
which is not entered jointly by the parties is void.
60. Section 41 enables a party or an arbitrator to file an application
before the District Court regarding the amendment of the award with
respect to the payment of compensation to the arbitrator(s). The District
Court is empowered to reduce the compensation of the arbitrator(s). C
The national courts also have the power to revise the fees set by arbitral
institutions, if the seat of the arbitration is in Sweden88. This is an unusual
exception since typically rules of arbitral institutions setting the fees are
never subject to judicial review89.
(iv) Germany D
61. The German arbitration law is governed by the Tenth Book of
the Code of Civil Procedure (Zivilprozessordnung)90. In the absence of
an agreement in ad hoc arbitrations, the ZPO does not contain any
provision regulating the fees payable to arbitrator(s). Fees are then to be
charged in terms of the rules of the German Civil Code (Bürgerliches E
Gesetzbuch)91 depending on whether the contract between the parties
is to be classified as a service contract or contract for work. The
provisions of the BGB provide that remuneration for such contracts is
deemed to be the fees of the arbitrator(s) in absence of an agreement
between the parties92. F
62. However, in Germany, the arbitrator(s) are prohibited from
determining their own fees in the absence of an agreement under the
86
Supra at note 82
87
ibid
88
Soyak Int’l Constr. & Inv. Inc. v. Hobér, Kraus & Melis, Case No. O 4227-06
G
(Swedish S.Ct. 2008)
89
Supra at note 30
90
“ZPO”
91
“BGB”
92
K. Bockstiegel, Stefan Kröll and Patricia Nacimiento (eds), Arbitration in Germany:
The Model Law in Practice (2nd edition, 2015), Chapter VI H
718 SUPREME COURT REPORTS [2022] 10 S.C.R.

A doctrine of prohibition ofin rem suam decisions, i.e., arbitrators cannot
be a judge of their own cause93. Earlier, even a decision regarding the
sum in dispute by the arbitral tribunal was seen as indirectly determining
the amount of fees when fees are calculated as a percentage of the
amount at stake and thus, was considered to be a violation of the above
doctrine 94 . However, recently, the Federal Court of Justice
B
(Bundesgerichtshof)95 held that a decision of the tribunal regarding the
sum in dispute, even if it influences the fees payable to the arbitrator(s),
does not violate the doctrine of prohibition ofin rem suam decisions96.
The BGH observed that since the ZPO obligates the arbitral tribunal to
render a determination on costs, which often includes a determination
C regarding the sum in dispute, such a determination, even if it indirectly
includes a decision on the fees, would not become a decision in rem
suam97. The BGH further noted that while a determination of the sum in
dispute only binds the parties, it is not actually a decision in rem suam
from the arbitrators’ perspective98. In any event, an indirect determination
by the arbitrator(s) as to their own fees only forms the basis of an
D
arbitrator’s claim against a party and can be enforced only through court
action if the party fails to pay the amount. In terms of the BGB, the
courts can review such a claim to decide if it’s equitable. Thus, the
arbitrator(s) cannot determine their fees arbitrarily99.

E (v) Japan
63. Under Article 47(1) of the Japanese Arbitration Law100, the
fees payable to the arbitrator(s)are to be governed by the agreement
between the parties. If there is no agreement, then in terms of Article
47(2), the arbitral tribunal has the power to determine the remuneration
F of the arbitrator(s). In such cases, the remuneration has to be of an
appropriate amount.

93
ibid
94
ibid
95
“BGH”
G 96
BGH 28.03.2012, SchiedsVZ 2012, 154 cited in supraat note 30;Seealso, supra at
note 92
97
ibid
98
ibid
99
ibid
100
Law No138 of 2003, available at <https://japan.kantei.go.jp/policy/sihou/
H arbitrationlaw.pdf> accessed on 29 June 2022
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 719
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

(vi) Singapore A
101
64. Section 40(1) of the Arbitration Act 2001 provides that the
parties are jointly and severally liable to pay reasonable fees and expenses
to the arbitrator(s) that are appropriate to the circumstances. Section
40(2) provides that in the absence of a written agreement between the
parties as to the fees payable to the arbitrator(s), any party can approach B
the Registrar of the Supreme Court within the meaning of the Supreme
Court of Judicature Act 1969 for the assessment of fees. While Section
41(1) of the Singapore Arbitration Act empowers the arbitral tribunal to
refuse to deliver an award if the parties have not made full payment of
their fees and expenses, Section 41(2) allows a party to apply to the
court to review the fees102. This has been understood as the right of the C
parties to challenge unreasonable fees103.
(vii) United States
65. The United States Federal Arbitration Act 1925104 does not
explicitly make a reference to the rights or duties of the arbitrator(s). D
The Uniform Arbitration Act, enacted in 1955, is also of relevance. It
functions as a model arbitration statute to enable each state to adopt a
uniform arbitration law. It was revised in 2000. Section 21(d) of the
revised version of the Act provides that “an arbitrator’s expenses and
fees, together with other expenses, must be paid as provided in the award.”
The comment to this Section under the Act provides that “Section 21(d)… E
allows arbitrators, unless the agreement provides to the contrary, to

101
Available at <https://sso.agc.gov.sg/Act/AA2001#:~:text=1.,is%20the%20
Arbitration%20Act%202001.&text=the%20arbitral%20tribunal%20as% 20authorised,
and%20all%20the%20relevant%20circumstances>accessed on 29 June 2022
(“Singapore Arbitration Act”) F
102
Section 41(2) reads: “(2) Where subsection (1) applies, a party to the arbitral
proceedings may, upon notice to the other parties and the arbitral tribunal, apply to the
Court, which may order that —
(a) the arbitral tribunal must deliver the award upon payment into Court by the applicant
of the fees and expenses demanded, or any lesser amount that the Court may specify;
(b) the amount of the fees and expenses demanded are to be assessed by the Registrar G
of the Supreme Court; and
(c) out of the money paid into Court, the arbitral tribunal must be paid the fees and
expenses that may be found to be properly payable and the balance of the money (if
any) must be paid out to the applicant”.
103
Bernard Hanotiau and Alexis Mourre (eds), Players Interaction in International
Arbitration (ICC, 2012), Chapter 12
104
"FAA” H
720 SUPREME COURT REPORTS [2022] 10 S.C.R.

A determine in the award payment of expenses, including the arbitrator’s
expenses and fees”105. In the United States, it has been held that it is a
violation of public policy if the arbitrator(s) attempt to renegotiate the
fees at a later stage once they are appointed, owing to the concern that
the parties may be compelled to accede to the demand fearing adverse
consequences106.
B
(viii) Summary
66. Although there are jurisdictional differences, the following
broad principles emerge from our discussion above:
C (i) Typically, the fees payable to arbitrator(s) are determined
through an agreement between the parties (of which the
arbitrator(s) become aware of when they take up the
assignment) or a separate agreement of the parties with
the arbitrator(s). The arbitrator(s) then become bound by
such contractually agreed fees; and
D
(ii) Certain arbitration legislations give the arbitrator(s) effective
power to determine their own fees, typically when there is
an absence of agreement between the parties on the subject.
However, such determination of fees is subject to review
E by the courts who can reduce the fees if they are not
reasonable.
67. Thus, arbitrator(s) do not possess an absolute or unilateral
power to determine their own fees. Parties are involved in determining
the fees of the arbitrator(s) in some form. It could be by: (i) determining
F the fees at the threshold in the arbitration agreement; or (ii) negotiating
with the arbitrators when the dispute arises regarding the fees that are
payable; or (iii) by challenging the fees determined by the tribunal before
a court.

G 105
Uniform Arbitration Act (Last Revisions Completed Year 2000), available at <https:/
/www.uniformlaws.org/HigherLogic/System/DownloadDocumentFile.ashx?
DocumentFileKey=8fff228f-9517-f310-36a1-989efa4a826e&forceDialog=0> accessed
on 29 June 2022
106
Double-M Construction Corp. v. Central School District No 1 Town of
Highlands Orange County, (1978) 402 NYS 2d 442 cited in Jeffrey Waincymer,
Procedure and Evidence in International Arbitration (Walters Kluwer, 2012)
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 721
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

C.2 Statutory scheme on payment of fees to arbitrators in A
India
C.2.1 Party autonomy
68. Party autonomy is a cardinal principle of arbitration. The
arbitration agreement constitutes the foundation of the arbitral process.
The arbitral tribunal is required to conduct the arbitration according to B
the procedure agreed by the parties. The procedure may stipulate
adherence to institutional rules or ad hoc rules or a combination of both.
Redfern and Hunteron International Commercial Arbitration
(supra) compares arbitration to a ship, highlighting the extent of control
parties exercise over arbitral proceedings: C
“In some respects, an international arbitration is like a ship. An
arbitration may be said to be ‘owned’ by the parties, just as a ship
is owned by shipowners. But the ship is under the day-to-day
command of the captain, to whom the owners hand control. The
owners may dismiss the captain if they wish and hire a replacement, D
but there will always be someone on board who is in command
(5) —and, behind the captain, there will always be someone with
ultimate control.”
The leading treatise on international commercial arbitration further
notes that the principle of party autonomy is entrenched in the international E
and national regimes on arbitration:
“Party autonomy is the guiding principle in determining the
procedure to be followed in an international arbitration. It is a
principle that is endorsed not only in national laws, but also by
international arbitral institutions worldwide, as well as by F
international instruments such as the New York Convention and
the Model Law. The legislative history of the Model Law shows
that the principle was adopted without opposition, (7) and Article
19(1) of the Model Law itself provides that: ‘Subject to the
provisions of this Law, the parties are free to agree on the procedure
to be followed by the arbitral tribunal in conducting the G
proceedings.’ This principle follows Article 2 of the 1923 Geneva
Protocol, which provides that ‘[t]he arbitral procedure, including
the constitution of the arbitral tribunal, shall be governed by the
will of the parties …’, and Article V(1)(d) of the New York
Convention, under which recognition and enforcement of a foreign
H
722 SUPREME COURT REPORTS [2022] 10 S.C.R.

A arbitral award may be refused if ‘the arbitral procedure was not
in accordance with the agreement of the parties’.”
69. The Arbitration Act recognises the principle of party autonomy
in various provisions. It allows the parties to derogate from the
provisions of the Act on certain matters. Several provisions of the
B Arbitration Act explicitly embody the principle of party autonomy.
Section 2(6)107 of the Arbitration Act provides that parties have the
freedom to authorise any person, including an arbitral institution, to
determine the issue between them. Section 19(2)108 provides that the
parties are free to choose the procedure to be followed for the conduct
of arbitral proceedings. Section 11(2)109 provides that parties are free
C to decide on the procedure for the appointment of arbitrators. In Bharat
Aluminium Co. v. Kaiser Aluminium Technical Services110, this
Court observed that party autonomy is the “brooding and guiding spirit”
of arbitration. In Centrotrade Minerals & Metal Inc. v. Hindustan
Copper Ltd111, this Court referred to party autonomy as the backbone
D of arbitration.
70. Having spelt out party autonomy as the cardinal principle of
arbitration in India, in the sections which follow we analyse how provisions
relating to the payment of fees to arbitrators have to be interpreted in
light of this principle.
E C.2.2 Fourth Schedule and regulation of arbitrators’ fees
71. Appointment of arbitrator(s) in India may take place either
through an agreement between parties or by taking recourse to courts
under Sections 11(3) and 11(6) of the Arbitration Act. Prior to the
amendment of the Arbitration Act by the Arbitration Amendment Act
F 2015, a practice emerged, especially in cases of ad hoc arbitrations,
where arbitrators would unilaterally, and in some cases arbitrarily, fix

107
Section 2 (6) of the Arbitration Act states: “Where this Part, except section 28,
leaves the parties free to determine a certain issue, that freedom shall include the right
of the parties to authorise any person including an institution, to determine that issue”.
G 108
Section 19(2) of the Arbitration Act states: “Subject to this Part, the parties are free
to agree on the procedure to be followed by the arbitral tribunal in conducting its
proceedings”.
109
Section 11(2) of the Arbitration Act states: “Subject to sub-section (6), the parties
are free to agree on a procedure for appointing the arbitrator or arbitrators”.
110
(2016) 4 SCC 126, paragraph 5
111
(2017) 2 SCC 228, paragraph 38
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 723
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

excessive fees for themselves. In Singh Builders (supra), this Court A
noted that such arbitrary fixation of fees by the arbitrators, specifically
court-appointed arbitrators, has made arbitration an expensive proposition,
bringing it into disrepute. The Court suggested some possible solutions.
This Court observed:
“22. When an arbitrator is appointed by a court without indicating B
fees, either both parties or at least one party is at a disadvantage.
Firstly, the parties feel constrained to agree to whatever fees is
suggested by the arbitrator, even if it is high or beyond their
capacity. Secondly, if a high fee is claimed by the arbitrator and
one party agrees to pay such fee, the other party, which is unable
to afford such fee or reluctant to pay such high fee, is put to an C
embarrassing position. He will not be in a position to express his
reservation or objection to the high fee, owing to an apprehension
that refusal by him to agree for the fee suggested by the arbitrator,
may prejudice his case or create a bias in favour of the other
party which readily agreed to pay the high fee. D
23. It is necessary to find an urgent solution for this problem to
save arbitration from the arbitration cost. Institutional arbitration
has provided a solution as the arbitrators’ fees is not fixed by
the arbitrators themselves on case-to-case basis, but is governed
by a uniform rate prescribed by the institution under whose aegis E
the arbitration is held. Another solution is for the court to fix the
fees at the time of appointing the arbitrator, with the consent of
parties, if necessary in consultation with the arbitrator concerned.
Third is for the retired Judges offering to serve as arbitrators, to
indicate their fee structure to the Registry of the respective High
Court so that the parties will have the choice of selecting an F
arbitrator whose fees are in their “range” having regard to the
stakes involved.
24. What is found to be objectionable is parties being forced to go
to an arbitrator appointed by the court and then being forced to
agree for a fee fixed by such arbitrator. It is unfortunate that G
delays, high costs, frequent and sometimes unwarranted judicial
interruptions at different stages are seriously hampering the growth
of arbitration as an effective dispute resolution process. Delay
and high costs are two areas where the arbitrators by self-regulation
can bring about marked improvement.” H
724 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 72. In Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust
and Ors.112, this Court in a similar vein observed that arbitrators in ad
hoc arbitrations in India are charging disproportionately high fees. While
interpreting Section 11 of the Arbitration Act, this Court held that the
word “appointment” does not merely refer to nominating or designating
a person to act as an arbitrator, but it includes the court’s power to stipulate
B
the fees that can be charged by an arbitrator appointed by the court. The
fees should be stipulated after hearing the parties and, if required, after
ascertaining the fees structure from prospective arbitrators. This will avoid
a situation where parties have to negotiate the terms of the fees of the
arbitrators, after their appointment. Referring to Singh Builders (supra),
C this Court acknowledged the increased complaints against disproportionate
fees being charged by the arbitrators and made certain suggestions for the
healthy development of arbitration in India. One such remedy suggested
by this Court was disclosure of the fee structure prior to the appointment
of arbitrators to enable any party to express their unwillingness to bear
such expenses. This Court observed thus:
D
“41. There is a general feeling among the consumers of arbitration
(parties settling disputes by arbitration) that ad hoc arbitrations in
India—either international or domestic, are time consuming and
disproportionately expensive. Frequent complaints are made about
two sessions in a day being treated as two hearings for the purpose
E of charging fee; or about a session of two hours being treated as
full session for purposes of fee; or about non-productive sittings
being treated as fully chargeable hearings. It is pointed out that if
there is an Arbitral Tribunal with three arbitrators and if the
arbitrators are from different cities and the arbitrations are to be
F held and the arbitrators are accommodated in five star hotels, the
cost per hearing (arbitrator’s fee, lawyer’s fee, cost of travel,
cost of accommodation, etc.) may easily run into rupees one million
to one-and-half million per sitting. Where the stakes are very high,
that kind of expenditure is not commented upon. But if the number
of hearings become too many, the cost factor and efficiency/
G effectiveness factor is commented. That is why this Court in Singh
Builders Syndicate [(2009) 4 SCC 523 : (2009) 2 SCC (Civ) 246]
observed that the arbitration will have to be saved from the
arbitration cost.

112
H (2012) 1 SCC 455
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 725
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

42. Though what is stated above about arbitrations in India, may A
appear rather harsh, or as a universalisation of stray aberrations,
we have ventured to refer to these aspects in the interest of
ensuring that arbitration survives in India as an effective alternative
forum for disputes resolution in India. Examples are not wanting
where arbitrations are being shifted to neighbouring Singapore,
B
Kuala Lumpur, etc. on the ground that more professionalised or
institutionalised arbitrations, which get concluded expeditiously at
a lesser cost, are available there. The remedy for healthy
development of arbitration in India is to disclose the fees
structure before the appointment of arbitrators so that any party
who is unwilling to bear such expenses can express his C
unwillingness. Another remedy is institutional arbitration where
the arbitrator’s fee is prefixed. The third is for each High Court to
have a scale of arbitrator’s fee suitably calibrated with reference
to the amount involved in the dispute. This will also avoid different
designates prescribing different fee structures. By these methods,
there may be a reasonable check on the fees and the cost of D
arbitration, thereby making arbitration, both national and
international, attractive to the litigant public. Reasonableness and
certainty about total costs are the key to the development of
arbitration. Be that as it may.”
73. It was in the above context that the LCI 246th Report (supra) E
proposed reforms for regulating arbitrators’ fees in ad hoc arbitrations.
The Commission recommended that a model schedule of fees should be
inserted into the Arbitration Act, which was to serve as a guide for High
Courts to frame their own rules governing the fixation of arbitrators’
fees. The Commission accepted that different values and standard of F
fees may be adopted in international commercial arbitrations, which led
to the exclusion of the applicability of the Fourth Schedule to the
Arbitration Act to international commercial arbitrations. The Commission
adversely commented on the practice of charging fees on “per sitting”
basis in ad hoc arbitrations where sometimes there are 2-3 sittings in a
day in the same matter between the same parties. The Commission also G
noted that costs are further increased by continuation of proceedings for
years since dates are given with significant gaps, resulting in the denial
of timely delivery of justice to the aggrieved party.
74. The Arbitration Amendment Act 2015 introduced the Fourth
Schedule to the Arbitration Act as a model schedule of fees in terms of H
726 SUPREME COURT REPORTS [2022] 10 S.C.R.

A the recommendations of the LCI 246th Report (supra). The Fourth
Schedule came into effect on 23 October 2015. Section 11 of the Arbitration
Act was also accordingly amended to add sub-Section (14) to Section
11, which reads as follows:
“Section 11. Appointment of arbitrators
B […]
(14) For the purpose of determination of the fees of the arbitral
tribunal and the manner of its payment to the arbitral tribunal, the
High Court may frame such rules as may be necessary, after
taking into consideration the rates specified in the Fourth Schedule.
C
Explanation: For the removal of doubts, it is hereby clarified that
this subsection shall not apply to international commercial arbitration
and in arbitrations (other than international commercial arbitration)
in case where parties have agreed for determination of fees as
per the rules of an arbitralin stitution.”
D
The Fourth Schedule has to be read along with the provisions of
sub-Section (14) of Section 11. In terms of the Explanation to Section
11(14), the Fourth Schedule will not be applicable to international
commercial arbitrations. Further, the Fourth Schedule will not be applicable
where parties have agreed to the determination of the arbitrators’ fees
E according to the rules of an arbitral institution. The Fourth Schedule was
to serve as a guide for different High Courts to frame rules for determining
the fees of arbitrators. The High Courts have been slow, if not tardy, in
framing these rules. Apart from the High Courts of Rajasthan, Kerala
and Bombay, other High Courts have not framed rules under Section 11
F (14) of the Arbitration Act for the determination of fees. Further the
rules framed by High Courts of Bombay and Rajasthan only govern
arbitrators appointed by the courts. Thus, the purpose of Section 11(14)
for regulating fees in ad hoc arbitrations remains unrealised.
75. A dispute arose before the Delhi High Court regarding the
applicability of the Fourth Schedule to the arbitration agreement in a
G
situation where the fee payable to the arbitrator(s) has already been
stipulated in the arbitration agreement. In Gammon Engineers and
Contractors Pvt. Ltd. v. NHAI113, the fee schedule was fixed by the
parties in accordance with a policy decision of the National Highways

113
H 2018 SCC OnLine Del 10183 (“Gammon”)
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 727
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

Authority of India dated 31 May 2004. However, the arbitral tribunal A
decided that its fees will be regulated in terms of the Fourth Schedule
introduced through the Arbitration Amendment Act 2015 by observing
that the latest provisions in the amended Act empower it to unilaterally
determine its own fees, irrespective of the agreement between the parties.
NHAI moved an application under Section 14 of the Arbitration Act to
B
terminate the mandate of the arbitral tribunal since it had wilfully rejected
the agreement between the parties. A Single Judge of the Delhi High
Court held that since there was an agreement between the parties
regarding the fixation of fees, the Fourth Schedule will not be applicable.
The Single Judge further held that while Section 31A of the Arbitration
Act discusses different aspects of “costs” to be fixed by the arbitral C
tribunal while passing an award, it is only one of the aspects to be
considered by the tribunal for determining costs payable by one party to
another. The words “unless otherwise agreed by the parties” were omitted
from Section 31(8) of the Arbitration Act (as amended by the Arbitration
Amendment Act 2015) to ensure that parties cannot contract out of
D
paying costs and denude the ability of the tribunal to award costs in
favour of the successful party. The Single Judge, thus, terminated the
mandate of the arbitral tribunal since it wilfully ignored the agreement
between the parties. In doing so, the Single Judge disagreed with the
view of another Single Judge of the Delhi High Court in NHAI v. Gayatri
Jhansi Roadways Ltd.114. E
76. In Gayatri Jhansi (Delhi High Court) (supra), it was held
that Section 31(8) and Section 31A of the Arbitration Act govern the
determination of fees and since the expression “unless otherwise agreed
by the parties” has been removed from Section 31(8) by the Arbitration
Amendment Act 2015, the power of the parties to fix the arbitrators’ F
fees has been specifically taken away except in international commercial
arbitrations and arbitrations where parties have agreed that the fees will
be fixed under the rules of an arbitral institution. Thus, in Gayatri Jhansi
(Delhi High Court) (supra), the arbitral tribunal was allowed to fix its
fees according to the Fourth Schedule dehors the agreement between
the parties. G

77. The appeals against both the judgements of the Delhi High
Court were heard by this Court in Gayatri Jhansi Roadways Ltd
(supra), where a two-Judge Bench of this Court was called upon to
114
2017 SCC OnLine Del 10285 (“Gayatri Jhansi (Delhi High Court)”) H
728 SUPREME COURT REPORTS [2022] 10 S.C.R.

A determine the applicability of the Fourth Schedule when the arbitrators’
fee has been fixed by an agreement between the parties. This Court
held that Section 31(8) read with Section 31A will not be applicable if
the fees of the arbitrator(s) have been fixed by an agreement. This
Court upheld the observations of the Single Judge of the Delhi High
Court in Gammon (supra) in this regard. Justice Rohinton F Nariman,
B
speaking for the Bench, observed as follows:
“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
C
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
D Roadways Ltd. [NHAI v. Gayatri Jhansi Roadways Ltd., 2017
SCC OnLine Del 10285] is not a correct view of the law.”
However, this Court observed that the fee schedule contained in
NHAI’s circular dated 1 June 2017 would substitute the earlier schedule
and the arbitrators would be entitled to charge their fees in accordance
E with the updated fee schedule, but not in terms of the Fourth Schedule to
the Arbitration Act. This Court further observed that the mandate of the
arbitral tribunal in Gammon (supra) should not be terminated since the
arbitrator(s) had merely followed the law which had been laid down in
Gayatri Jhansi (Delhi High Court) (supra).
F 78. The Arbitration Amendment Act 2019 was introduced on the
basis of the report of High Level Committee dated 30 July 2017 for
promoting institutional arbitration. Sub-Section 11(14) has been
subsequently amended by the Arbitration Amendment Act 2019. The
amended sub-Section (14) to Section 11 provides thus:
G “Section 11. Appointment of arbitrators
[…]
(14) The arbitral institution shall determine the fees of the arbitral
tribunal and the manner of its payment to the arbitral tribunal subject
to the rates specified in the Fourth Schedule.
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 729
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

Explanation: For the removal of doubts, it is hereby clarified that A
this sub-section shall not apply to international commercial
arbitration and in arbitrations (other than international commercial
arbitration) in case where parties have agreed for determination
of fees as per the rules of an arbitral institution.”
Further, sub-Section (3A) has been introduced to Section 11, which B
stipulates thus:
“Section 11. Appointment of arbitrators
[…]
(3A) The Supreme Court and the High Court shall have the power C
to designate, arbitral institutions, from time to time, which have
been graded by the Council under section 43-I, for the purposes
of this Act:
Provided that in respect of those High Court jurisdictions, where
no graded arbitral institution are available, then, the Chief Justice D
of the concerned High Court may maintain a panel of arbitrators
for discharging the functions and duties of arbitral institution and
any reference to the arbitrator shall be deemed to be an arbitral
institution for the purposes of this section and the arbitrator
appointed by a party shall be entitled to such fee at the rate as
specified in the Fourth Schedule: E
Provided further that the Chief Justice of the concerned High
Court may, from time to time, review the panel of arbitrators.”
The amendments introduced to Section 11 by the Arbitration
Amendment Act 2019came into force on 30 August 2019. However,
F
even after a lapse of three years, the Arbitration Council has not been
established in accordance with Part IA of the Arbitration Amendment
Act 2019. In the absence of the Arbitration Council of India, graded
arbitral institutions for the purpose of implementing amendments to Section
11 are yet to come into existence. While several High Courts have taken
concerted steps to establish and refer matters to court adjunct arbitration G
centres, ad hoc arbitrations continue to hold the field since the
amendments made by the Arbitration Amendment Act 2019 have been
non-starters. . However, the amendments indicate the legislative intent
that going forward, the fixation of fees of arbitrator(s)would be carried
out by an arbitral institution designated for such purpose in terms of sub-
H
730 SUPREME COURT REPORTS [2022] 10 S.C.R.

A Section (14) of Section 11. Further, there is one notable difference
between the sub-Section (14) as it stood before the amendment and
after, in terms of the applicability of the Fourth Schedule. Earlier, the
rates specified in the Fourth Schedule were only to be taken into
consideration by the High Court while framing the rules relating to the
fixation of fees. However, now the provision reads that, “[t]he arbitral
B
institution shall determine the fees of the arbitral tribunal and the manner
of its payment to the arbitral tribunal subject to the rates specified in the
Fourth Schedule”. There are two exceptions to this – Section 11(14) is
not applicable to international commercial arbitrations and to a situation
where the parties have agreed to determine fees in terms of the rules of
C an arbitral institution as stipulated in the Explanation to Section 11(14). It
is important to note that the newly introduced Section 11(3A) provides
that the Supreme Court and the High Courts shall have the power to
designate arbitral institutions from time to time, which have been graded
by the Arbitration Council of India under Section 43(1) of the Arbitration
D Act. The first proviso to sub-Section (3A) to Section 11 provides that in
those jurisdictions of High Courts where there are no graded arbitral
institutions available, the Chief Justice of the High Court may maintain a
panel of arbitrators for discharging the functions and duties of an arbitral
institution. In terms of the first proviso, the reference to such an arbitrator
would be deemed to be reference to an arbitral institution for the purpose
E of Section 11 and arbitrator appointed by a party is entitled to such fee at
the rate as specified in the Fourth Schedule. A harmonious reading of
the first proviso to sub-Section (3A) of Section 11 and sub-Section (14)
of Section 11 indicate that the Fourth Schedule shall have a mandatory
effect on the stipulation of fees for arbitrator(s) appointed by arbitral
F institutions designated for such purpose in terms of Section 11 of the
Arbitration Act in the absence of an arbitration agreement governing the
fee structure.
79. Based on the above discussion, we summarise the position as
follows:
G (i) In terms of the decision of this Court in Gayatri Jhansi
Roadways Ltd (supra) and the cardinal principle of party
autonomy, the Fourth Schedule is not mandatory and it is
open to parties by their agreement to specify the fees
payable to the arbitrator(s) or the modalities for
determination of arbitrators’ fees; and
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 731
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

(ii) Since most High Courts have not framed rules for A
determining arbitrators’ fees, taking into consideration
Fourth Schedule of the Arbitration Act, the Fourth Schedule
is by itself not mandatory on court-appointed arbitrators in
the absence of rules framed by the concerned High Court.
Moreover, the Fourth Schedule is not applicable to
B
international commercial arbitrations and arbitrations where
the parties have agreed that the fees are to be determined
in accordance with rules of arbitral institutions. The failure
of many High Courts to notify the rules has led to a situation
where the purpose of introducing the Fourth Schedule and
sub-Section (14) to Section 11 has been rendered nugatory, C
and the court-appointed arbitrator(s) are continuing to
impose unilateral and arbitrary fees on parties. As we have
discussed in Section C.2.1, such a unilateral fixation of
fees goes against the principle of party autonomy which is
central to the resolution of disputes through arbitration.
D
Further, there is no enabling provision under the Arbitration
Act empowering the arbitrator(s) to unilaterally issue a
binding or enforceable order regarding their fees. This is
discussed in Section C.2.3 of this judgement. Hence, this
Court would be issuing certain directives for fixing of fees
in ad hoc arbitrations where arbitrators are appointed by E
courts in Section C.2.4 of this judgement.
C.2.3 Costs and fees: Two different paradigms
80. Prior to the Arbitration Amendment Act 2015, Section 31(8)
governing the determination of costs of arbitration by the arbitral tribunal
read thus: F

“Section 31. Form and contents of arbitral award
[…]
(8) Unless otherwise agreed by the parties:-
G
(a) the costs of an arbitration shall be fixed by the arbitral tribunal;
(b) the arbitral tribunal shall specify—
(i) the party entitled to costs,
(ii) the party who shall pay the costs,
H
732 SUPREME COURT REPORTS [2022] 10 S.C.R.

A (iii) the amount of costs or method of determining that amount,
and
(iv) the manner in which the costs shall be paid.
Explanation.—For the purpose of clause (a), “costs” means
reasonable costs relating to-
B
(i) the fees and expenses of the arbitrators and witnesses,
(ii) legal fees and expenses,
(iii) any administration fees of the institution supervising the
arbitration, and
C
(iv) any other expenses incurred in connection with the arbitral
proceedings and the arbitral award.”
The unamended sub-Section (8) of Section 31 enabled the arbitral
tribunal to fix the costs, unless otherwise agreed by the parties. The
term “costs” meant “reasonable costs” relating inter alia to the fees
D and expenses payable to the arbitrators and witnesses, in terms of the
Explanation to Section 31(8). The LCI 246th Report (supra) had
recommended the recognition of the “loser pays” principle for costs to
reflect the relative success and failure of the parties. The Law
Commission noted that the “loser pays” principle serves as a deterrent
E against frivolous invocation of disputes and incentivises contractual
compliance.
81. Pursuant to the LCI 246th Report (supra), the Arbitration
Amendment Act 2015 deleted the phrase “unless otherwise agreed by
the parties” from sub-Section 31(8) and the arbitral tribunal was given
F the power to fix costs in terms of Section 31A of the Arbitration Act.
The amended Section 31(8) reads thus:
“Section 31. Form and contents of arbitral award
[...]
(8) The costs of an arbitration shall be fixed by the arbitral tribunal
G
in accordance with section 31A.”
Section 31A of the Arbitration Act stipulates thus:
“31A. Regime for costs
(1) In relation to any arbitration proceeding or a proceeding under
H any of the provisions of this Act pertaining to the arbitration, the
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 733
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

Court or arbitral tribunal, notwithstanding anything contained in A
the Code of Civil Procedure, 1908 (5 of 1908), shall have the
discretion to determine—
(a) whether costs are payable by one party to another;
(b) the amount of such costs; and
B
(c) when such costs are to be paid.
Explanation.—For the purpose of this sub-section, “costs” means
reasonable costs relating to—
(i) the fees and expenses of the arbitrators, Courts and witnesses;
C
(ii) legal fees and expenses;
(iii) any administration fees of the institution supervising the
arbitration; and
(iv) any other expenses incurred in connection with the arbitral or
Court proceedings and the arbitral award. D
(2) If the Court or arbitral tribunal decides to make an order as to
payment of costs,—
(a) the general rule is that the unsuccessful party shall be ordered
to pay the costs of the successful party; or
E
(b) the Court or arbitral tribunal may make a different order for
reasons to be recorded in writing.
(3) In determining the costs, the Court or arbitral tribunal shall
have regard to all the circumstances, including—
(a) the conduct of all the parties; F
(b) whether a party has succeeded partly in the case;
(c) whether the party had made a frivolous counter claim leading
to delay in the disposal of the arbitral proceedings; and
(d) whether any reasonable offer to settle the dispute is made by G
a party and refused by the other party.
(4) The Court or arbitral tribunal may make any order under this
section including the order that a party shall pay—
(a) a proportion of another party’s costs;
H
734 SUPREME COURT REPORTS [2022] 10 S.C.R.

A (b) a stated amount in respect of another party’s costs;
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
B (f) costs relating only to a distinct part of the proceedings; and
(g) interest on costs from or until a certain date.
(5) 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
C
has arisen.”
Section 31A provides that the arbitral tribunal or the court has the
discretion to determine costs of arbitration which includes, inter alia,
reasonable costs relating to the fees and expenses of the arbitrators,
courts and witnesses. Sub-Section (5) of Section 31A specifies that an
D
agreement between parties apportioning costs is only valid if it is made
after the dispute has arisen. The provision has an effect of limiting party
autonomy when an agreement regarding apportioning of costs can be
entered between the parties. However, it does not completely efface
the principle of party autonomy.
E 82. Section 38 of the Arbitration Act also becomes relevant since
it enables the arbitral tribunal to demand an advance for costs in the
form of deposits. The provision reads thus:
“Section 38 - Deposits

F (1) The arbitral tribunal may fix the amount of the deposit or
supplementary deposit, as the case may be, as an advance for the
costs referred to in sub-section (8) of section 31, which it expects
will be incurred in respect of the claim submitted to it:
Provided that where, apart from the claim, a counter-claim has
G been submitted to the arbitral tribunal, it may fix separate amount
of deposit for the claim and counter-claim.
(2) The deposit referred to in sub-section(1) shall be payable in
equal shares by the parties:
Provided that where one party fails to pay his share of the deposit,
H the other party may pay that share:
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 735
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

Provided further that where the other party also does not pay the A
aforesaid share in respect of the claim or the counter-claim, the
arbitral tribunal may suspend or terminate the arbitral proceedings
in respect of such claim or counter-claim, as the case may be.
(3) Upon termination of the arbitral proceedings, the arbitral tribunal
shall render an accounting to the parties of the deposits received B
and shall return any unexpended balance to the party or parties,
as the case may be.”
Section 38(1) of the Arbitration Act empowers the arbitral tribunal
to determine the deposit that is payable as advance on costs based on its
own assessment of what may be incurred as costs for adjudicating the C
claim and counter-claim (if any) before it. Section 38(2) also empowers
the arbitral tribunal to suspend or terminate the proceedings if the parties
fail to pay the deposit.
83. Additionally, Section 39(1) enables the arbitral tribunal to hold
a lien on an arbitral award if there are any unpaid costs of arbitration. D
Section 39 of the Arbitration Act provides thus:
“Section 39 - Lien on arbitral award and deposits as to costs
(1) Subject to the provisions of sub-section (2) and to any provision
to the contrary in the arbitration, agreement, the arbitral tribunal
shall have a lien on the arbitral award for any unpaid costs of the E
arbitration.
(2) If in any case an arbitral tribunal refuses to deliver its award
except on payment of the costs demanded by it, the Court may,
on an application in this behalf, order that the arbitral tribunal shall
deliver the arbitral award to the applicant on payment into Court F
by the applicant of the costs demanded, and shall, after such inquiry,
in any, as it thinks, fit, further order that out of the money so paid
into Court there shall be paid to the arbitral tribunal by way of
costs such sum as the Court may consider reasonable and that
the balance of the money, if any, shall be refunded to the applicant.
G
(3) An application under sub-section (2) may be made by any
party unless the fees demanded have been fixed by written
agreement between him and the arbitral tribunal, and the arbitral
tribunal shall be entitled to appear and be heard on any such
application.
H
736 SUPREME COURT REPORTS [2022] 10 S.C.R.

A (4) The Court may make such orders as it thinks fit respecting the
costs of the arbitration where any question arises respecting such
costs and the arbitral award contains no sufficient provision
concerning them.”
84. The legal regime on costs under the Arbitration Act has been
B set out in some detail above because it has been argued on behalf of the
respondents that the arbitral tribunal’s power to fix costs under Section
31(8) read with 31A entails the power to fix arbitrators’ fees, which are
also a component of the costs in terms of the Explanation to Section
31A. According to the respondents, this position is bolstered by the fact
that the arbitral tribunal has the power to fix the amount of deposit that
C is payable as an advance on costs and it can also hold a lien on the
arbitral award if such costs remain unpaid.
85. In Gayatri Jhansi Roadways Ltd(supra), this Court held:
“14. However, the learned Single Judge’s conclusion that the
D 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…”
E
86. The above interpretation of this Court is in harmony with the
observations of the Law Commission in the LCI 246th Report (supra)
where it had recommended changes to the regime of costs only to provide
a statutory recognition to the “loser pays” principle. The Report contained
the following observations:
F
“70.Arbitration, much like traditional adversarial dispute resolution,
can be an expensive proposition. The savings of a party in avoiding
payment of court fee, is usually offset by the other costs of
arbitration – which include arbitrator’s fees and expenses,
institutional fees and expenses, fees and expenses in relation to
G lawyers, witnesses, venue, hearings etc. The potential for racking
up significant costs justify a need for predictability and clarity in
the rules relating to apportionment and recovery of such costs.
The Commission believes that, as a rule, it is just to allocate costs
in a manner which reflects the parties’ relative success and failure
in the arbitration, unless special circumstances warrant an
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 737
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

exception or the parties otherwise agree (only after the dispute A
has arisen between them).
71.The loser-pays rule logically follows, as a matter of law, from
the very basis of deciding the underlying dispute in a particular
manner; and as a matter of economic policy, provides economically
efficient deterrence against frivolous conduct and furthers B
compliance with contractual obligations.”
The Law Commission was seeking to regulate how costs are
apportioned and recovered between parties by suggesting amendments
to the legal framework on costs.The same LCI 246th Report (supra)
dealt with redressing the issue of exorbitant fees being charged by C
arbitrators and recommended the introduction of a model schedule of
fees, based on which High Courts could frame rules on fixing fees, to
decrease the control arbitrators have over fixing their own fees. Hence,
it is evident that the Law Commission understood that the issue of
arbitrators’ fees is independent of the issue of allocation of costs. The
LCI 246th Report (supra) was attempting to address the concern of D
arbitrary and unilateral fixation of fees by the arbitrators. The interpretation
suggested by the respondents, that while allocating costs the arbitral
tribunal can enter into a fresh and unilateral determination of fees, would
be contrary to what the Law Commission sought to achieve by
recommending the regulation of fees charged by arbitrators. E
87. The concepts of costs and fees in arbitration must be
distinguished. Fees constitute compensation or remuneration payable to
the arbitrators for their service. Arbitrators are entitled to “financial
remuneration by the parties in return for performance of his or her
mandate”115. While the national laws governing arbitration give a quasi- F
judicial status to arbitrators where they have to be impartial adjudicators,
many aspects of the relationship between the parties and arbitrators are
contractual in nature116. Without acknowledging the contractual nature
of the relationship, there is no satisfactory explanation for the parties’
right to appoint arbitrator(s) (and the corresponding right of the
arbitrator(s) to decline such appointment), arbitrators’ remuneration, G
arbitrators’ duty to conduct arbitration in terms of the arbitration
agreement (independently of the requirement of fairness and equality)

115
Supra at note 30
116
ibid
H
738 SUPREME COURT REPORTS [2022] 10 S.C.R.

A and the parties’ right to jointly remove arbitrator(s)117. In Voestalpine
Schienen GmbH v. Delhi Metro Rail Corpn. Ltd.118, this Court,
while holding that the arbitrator has to act impartially and independently,
recognised the contractual nature of the relationship between the parties
and arbitrator(s) in the following extract:
B “20. Independence and impartiality of the arbitrator are the
hallmarks of any arbitration proceedings. Rule against bias is one
of the fundamental principles of natural justice which applied to
all judicial and quasi-judicial proceedings. It is for this reason
that notwithstanding the fact that relationship between the
parties to the arbitration and the arbitrators themselves
C are contractual in nature and the source of an arbitrator’s
appointment is deduced from the agreement entered into
between the parties, notwithstanding the same non-
independence and non-impartiality of such arbitrator
(though contractually agreed upon) would render him
D ineligible to conduct the arbitration. The genesis behind
this rational is that even when an arbitrator is appointed in
terms of contract and by the parties to the contract, he is
independent of the parties. Functions and duties require him to
rise above the partisan interest of the parties and not to act in, or
so as to further, the particular interest of either parties. After all,
E the arbitrator has adjudicatory role to perform and, therefore, he
must be independent of parties as well as impartial. The United
Kingdom Supreme Court has beautifully highlighted this aspect in
Hashwani v. Jivraj [Hashwani v. Jivraj, (2011) 1 WLR 1872 :
2011 UKSC 40] in the following words : (WLR p. 1889, para 45)
F “45. … the dominant purpose of appointing an arbitrator or
arbitrators is the impartial resolution of the dispute between the
parties in accordance with the terms of the agreement and, although
the contract between the parties and the arbitrators would be a
contract for the provision of personal services, they were not
G personal services under the direction of the parties.”
(emphasis supplied)

117
ibid
118
H (2017) 4 SCC 665
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 739
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

88. The relationship between parties and arbitrator(s) is A
contractual in nature. Upon that relationship, the law superimposes a
duty upon the arbitrator(s) to act as an impartial and independent
adjudicator. The principle of party autonomy plays a substantial role in
the determination of arbitrators’ fees. We have noted in Section C.1
of this judgement that party autonomy plays a central role in the
B
determination of arbitrators’ fees in the rules of international arbitral
institutions and domestic legislation of other countries. Aside from
institutional arbitration, arbitrators’ fees in ad hoc arbitration are arrived
at through negotiations between the parties and the arbitrator(s)119.
The primacy of parties’ agreement in determination of arbitrators’ fees
was also reaffirmed by this Court in Gayatri Jhansi Roadways Ltd C
(supra). However, there may be instances where the parties have not
entered into any agreement with respect to the fees. In ad hoc
arbitrations this leads to a peculiar situation where it has to be determined
who will fix the fees in such circumstances. While certain foreign
jurisdictions enable the arbitral tribunal to fix the fees typically subject to
D
review by courts, there are jurisdictions which continue to give value to
parties’ consent in determining renumeration for arbitrators. As discussed
above in Section C.1, in certain jurisdictions like Germany, arbitrators
are prohibited from unilaterally fixing their fees because it violates the
doctrine of the prohibition of in rem suam decisions, i.e., arbitrators
cannot give an enforceable ruling on their own fees. Austria and E
Switzerland also do not allow arbitrators to issue binding and enforceable
orders regarding fixation of their own fees120. In Italy, while the
arbitrators can determine fees in absence of an agreement between
parties, such fees become binding only once the parties’ consent to it.
In Singapore, in absence of a written agreement, a party may approach
F
the Registrar of the Supreme Court within the meaning of the Supreme
Court of Judicature Act 1969 for the assessment of fees.
89. In contrast, costs are typically compensation payable by the
losing party to the winning party for the expenses the latter incurred by
G
119
Supra at note 28
120
Michael Wietzorek, “Chapter II: The Arbitrator and the Arbitration Procedure:
May Arbitrators Determine their own Fees?” in Christian Klausegger, Peter Klein, et al
(eds), Austrian Yearbook on International Arbitration 2012, Austrian Yearbook on
In ternational Arbitration, Volume 2012 (Manz’sche Verlags- und
Universitätsbuchhandlung; Manz’sche Verlags- und Universitätsbuchhandlung, 2012).
H
740 SUPREME COURT REPORTS [2022] 10 S.C.R.

A participating in the proceedings121. In Salem Advocate Bar Assn. (II)
v. Union of India122, this Court has defined costs in a similar manner in
the context of litigation:
“37. Judicial notice can be taken of the fact that many unscrupulous
parties take advantage of the fact that either the costs are not
B awarded or nominal costs are awarded against the unsuccessful
party. Unfortunately, it has become a practice to direct parties to
bear their own costs. In a large number of cases, such an order
is passed despite Section 35(2) of the Code. Such a practice
also encourages the filing of frivolous suits. It also leads to the
taking up of frivolous defences. Further, wherever costs are
C awarded, ordinarily the same are not realistic and are nominal.
When Section 35(2) provides for cost to follow the event, it is
implicit that the costs have to be those which are reasonably
incurred by a successful party except in those cases where
the court in its discretion may direct otherwise by
D recording reasons therefore. The costs have to be actual
reasonable costs including the cost of the time spent by
the successful party, the transportation and lodging, if any,
or any other incidental costs besides the payment of the
court fee, lawyer’s fee, typing and other costs in relation to
the litigation. It is for the High Courts to examine these aspects
E and wherever necessary make requisite rules, regulations or
practice direction so as to provide appropriate guidelines for the
subordinate courts to follow.”
(emphasis supplied)

F 90. The principle of the payment of “costs” remains the same in
litigation and arbitration even though the form of expenses may vary.
Redfern and Hunter on International Commercial Arbitration
(supra) has classified the various components of costs under the following
headings123:

G 121
John Y. Gotanda, “Part I: International Commercial Arbitration, Chapter 7: Bringing
Efficiency to the Awarding of Fees and Costs in International Arbitrations”, in Stefan
M. Kröll, Loukas A. Mistelis, et al. (eds), International Arbitration and International
Commercial Law: Synergy, Convergence and Evolution (Kluwer Law International,
2011)
122
(2005) 6 SCC 344
123
H Supra at note 28, Chapter 9
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 741
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

“•‘costs of the tribunal’ (including the charges for administration A
of the arbitration by any arbitral institution);
•‘costs of the arbitration’ (including hiring the hearing rooms,
interpreters, transcript preparation, among other things); and
•‘costs of the parties’ (including the costs of legal representation,
expert witnesses, witness and other travel-related expenditure, B
among other things).”
The first category of “costs of the tribunal” includes the fees,
travel-related and other expenses, payable to the arbitrators. However,
this category also includes fees and expenses relating to the experts
appointed by the tribunal, administrative secretary or registrar and other C
incidental expenses incurred by the tribunal in respect of the case124.
Fees of arbitrators constitute a component of the diverse elements
which make up the costs that are payable by one party to another. The
purpose of awarding costs is to “indemnify the winning party”. The “loser
pays” principle apportions the costs between the parties through the D
costs follow the event125 method. The primary purpose of the CFE method
is to “make the claimant whole”126. The CFE method has been statutorily
recognised in some national legislations. The English Arbitration Act
provides that “unless the parties otherwise agree, the tribunal shall award
costs on the general principle that costs should follow the event except
where it appears to the tribunal that this principle is not appropriate in E
relation to whole or part of the costs”127. Since costs are typically
awarded at the conclusion of the proceedings on the basis of the relative
success or failure of parties, an award of costs forms a part of the
final award. However, interim awards or rulings on costs may also be
issued. Most international arbitral institutions give arbitral tribunals the
F
discretion to allocate costs unless there is an agreement between the
parties regarding the apportionment of costs. It has been noted that the
“loser pays” principle is a common approach128 followed for awarding
124
ibid
125
“CFE” G
126
Supra at note 121
127
Section 61(2), English Arbitration Act
128
There are some institution rules which do not prescribe a general rule and leave the
apportionment of the costs to the arbitral tribunal. The ICDR (Art. 34) and HKIAC
(34.3) require the tribunal to carry out a reasonable apportionment of costs. The ICC
Rules (Art. 38(5) and SIAC Rules (Art. 35)leave the apportionment of costs upto the
discretion of the tribunal. H
742 SUPREME COURT REPORTS [2022] 10 S.C.R.

A costs129. The UNCITRAL Rules, while providing that costs of arbitration
shall be “borne by the unsuccessful party” as a general principle, allow
the arbitral tribunal to take the ultimate decision130. The LCIA Rules
allow the arbitral tribunal to depart from the general principle “in
circumstances (in which) the application of such a general principle would
be inappropriate” 131. The Arbitration Act also provides statutory
B
recognition to the principle of “loser pays” in Section 31A (2) 132 as the
general principle of allocating costs, which can be derogated from at the
discretion of the tribunal provided it records its reasons in writing. Further,
the Arbitration Act seeks to limit the ability of parties to contractually
allocate fees by specifying in Section 31A(5) that such an agreement
C will only be valid “if such agreement is made after the dispute in question
has arisen”. The intention of the legislature to limit party autonomy in
allocation of costs is also evident from the deletion of the phrase “unless
otherwise agreed by the parties” from Section 31(8) through the
Amendment Act 2015.
D 91. We can see that the functional role of costs and fees is different.
While fees represent the payment of remuneration to the arbitrators,
costs refer to all the expenses incurred in relation to arbitration that are
to be allocated between the parties upon the assessment of certain
parameters by the arbitral tribunal or the court. Section 31A(3) provides
E that an arbitral tribunal or the court has to take into account the following
factors for determining costs:
“(a) the conduct of all the parties;
(b) whether a party has succeeded partly in the case;
F (c) whether the party had made a frivolous counter claim leading
to delay in the disposal of the arbitral proceedings; and

129
Arif Hyder Ali, Jane Wessel, et al. (eds), The International Arbitration Rulebook: A
Guide to Arbitral Regimes(Kluwer Law International, 2019), Chapter 8
130
Article 42(1), UNCITRAL Rules
G 131
Article 28(4), LCIA Rules
132
Section 31A(2) provides:
“(2) If the Court or arbitral tribunal decides to make an order as to payment of costs,—
(a) the general rule is that the unsuccessful party shall be ordered to pay the costs of the
successful party; or
(b) the Court or arbitral tribunal may make a different order for reasons to be recorded
H in writing.”
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 743
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

(d) whether any reasonable offer to settle the dispute is made by A
a party and refused by the other party.”
This is accompanied by the general rule under Section 31A(2)
that the unsuccessful party has to bear the costs of arbitration.
92. Another way to understand the difference between costs and
fees is to distinguish between the nature of the claim that both reflect. B
Redfern and Hunter on International Commercial Arbitration
(supra) discusses costs in Chapter 9, titled “Awards”. It states that “[a]
claim in respect of the costs incurred by a partyin connection with an
international arbitration is, in principle, no different from any other claim,
except that it usually cannot be quantified until the end of the arbitral C
proceedings”133. The decision of an arbitral tribunal ordering one party
to pay arbitration costs is considered as an “award” within the meaning
of the New York Convention and UNCITRAL Model Law since the
decision resolves a claim one party has towards another in respect to
the entitlement of being repaid by the other party for expenses incurred
during arbitration134. Gary Bornon Arbitration (supra) specifically notes D
the difference between costs and fees, and states that any decision of
the arbitral tribunal relating to payment of fees to the members of the
tribunal is not considered an award since it does not resolve a claim
between the parties; rather it resolves a claim between the arbitrator(s)
against the parties135. The Swiss Federal Tribunal has observed in this E
context that136:
“[A]ccording to the majority of legal writing the arbitral tribunal
has no authority to issue an enforceable decision as to the fees it
may derive from the arbitration agreement (receptum arbitri). This
is because claims resulting from the relationship between the
arbitral tribunal and the parties do not fall within the arbitration F
clause; also because this would be an unacceptable decision in
one’s own case. The decision on costs in an arbitral award is
therefore nothing else as a rendering of account which does not
bind the parties or a circumscription of the arbitrators’ private law
claim based on the arbitration agreement on which in case of G
dispute the State Court will have to decide.”

133
Supra at note 123
134
Supra at note 30, Chapter 23
135
ibid
136
Judgment of 10 November 2010, DFT 136 III 597, 603 cited in ibid H
744 SUPREME COURT REPORTS [2022] 10 S.C.R.

A The German arbitration law also takes the above position, where
a portion of the award relating to costs of arbitration was denied
enforcement as arbitrators are prohibited from fixing their own fees and
costs, except when there is an agreement between the parties and
arbitrators137.
B 93. Since fees of the arbitrators are not a claim that needs to be
quantified at the end of the proceedings based, inter alia, on the conduct
of parties and outcome of the proceedings, they can be determined at
the stage when the arbitral tribunal is being constituted. Redfern and
Hunter on International Commercial Arbitration (supra) discusses
the concept of fees of arbitrators in Chapter 4, titled “Establishment and
C Organisation of an Arbitral Tribunal”, indicating that fees have to be
determined much earlier at the inception of the proceedings. In fact, the
commentary states that in ad hoc arbitrations, “it is necessary for the
parties to make their own arrangements with the arbitrators as to their
fees. The arbitrators should do this at an early stage in the proceedings,
D in order to avoid misunderstandings later”138.
94. It has been argued on behalf of the respondents that the power
of arbitrator(s) under Section 38(1) of the Arbitration Act to demand a
deposit as an advance on costs “which it expects will be incurred” in
relation to the claim and counterclaim (if any) indicates that the tribunal
E is entitled to determine its own fees. If such a deposit is not paid, the
tribunal can suspend or terminate the proceedings under Section 38(2)
of the Arbitration Act. It can also hold a lien on the award if the costs of
arbitration remain unpaid under Section 39(1) of the Arbitration Act.
95. Gary Born on Arbitration(supra) explains the concept of an
advance on costs or deposits in the following terms139:
F
“Once the arbitral tribunal is in place, the parties are generally
required to provide security for the fees and costs of the arbitrators.
Most institutional arbitration rules contain express provisions for
payment by the parties of an advance on costs (or deposit), and
arbitrators often have the power under national law to require
G payment of an advance even absent express provision to that
effect in either the arbitration agreement or institutional rules.

137
Judgment of 24 October 2008, XXXIV Y.B. Comm. Arb. 533 (Oberlandesgericht
Frankfurt) (2009) cited in supra at note 123
138
Supra at note 28
H 139
Supra at note 30, Chapter 15
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 745
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

The amount of the advance on costs is based upon the expected A
total amount of fees and expenses of the arbitrators and institutional
administrative costs. If the parties do not pay the advance, the
arbitration will not go forward; if one party fails to make payment,
the other may do so on its behalf, so that the arbitration will proceed,
hopefully to conclude with a decision in its favor, in which the B
prevailing party will be awarded (among other things)
reimbursement of the amounts it advanced on behalf of its counter-
party.”
The above extract and Section 38140 of the Arbitration Act indicate
that the purpose of demanding a deposit is to simply secure the future C
expenses or the “costs” relating to the arbitration, including arbitrators’
fees. The arbitrator(s) may resign or cease their work until such payment
is made. This principle cannot be extended to establish that the arbitrator(s)
have a unilateral power to fix their own fees while demanding a deposit.
The arbitral tribunal can also ask for a supplementary deposit, which
D
indicates that the amount fixed in the deposit is provisional in nature.
Upon the termination of the mandate of the arbitral tribunal, it is required
to provide an account of the deposits and if the deposits exceed the total
amount of costs, the tribunal is required to return the balance. This
indicates that the order on deposits is not a binding determination as to
costs (including arbitrators’ fees). It is a procedural order issued for the E
purpose of securing payment of future expenses.

140
"Section 38 - Deposits
(1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit,
as the case may be, as an advance for the costs referred to in sub-section (8) of section F
31, which it expects will be incurred in respect of the claim submitted to it:
Provided that where, apart from the claim, a counter-claim has been submitted to the
arbitral tribunal, it may fix separate amount of deposit for the claim and counter-claim.
(2) The deposit referred to in sub-section(1) shall be payable in equal shares by the
parties:
Provided that where one party fails to pay his share of the deposit, the other party may
pay that share:
G
Provided further that where the other party also does not pay the aforesaid share in
respect of the claim or the counter-claim, the arbitral tribunal may suspend or terminate
the arbitral proceedings in respect of such claim or counter-claim, as the case may be.
(3) Upon termination of the arbitral proceedings, the arbitral tribunal shall render an
accounting to the parties of the deposits received and shall return any unexpended
balance to the party or parties, as the case may be.” H
746 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 96. While the arbitral tribunal can exercise a lien over the arbitral
award for any unpaid costs of arbitration under Section 39(1) of the
Arbitration Act, a party can also approach the court for the release of
the award and the court on inquiry can assess whether the costs demanded
are reasonable under Section 39(2). These costs would include the
arbitrators’ fees that have been previously agreed upon. However, even
B
if there is no agreement between the parties and the arbitrator(s)
regarding the fees payable to the arbitrator(s), any determination of costs
relating to arbitrators’ fees by the tribunal is a non-binding demand that
has been raised by the tribunal. As has been discussed above, while
costs, in general, are to be decided at the discretion of the tribunal or the
C court because they involve a claim that one party has against the another
relating to resolution of a dispute arising from the arbitration agreement,
fees of the arbitrators are not a claim to be decided between the parties.
Rather, it is an independent claim that the arbitrator(s) have against the
parties141. It will be for the court to decide whether the claim of the
arbitrator(s) regarding their remuneration is reasonable. This also
D
becomes clear from sub-Sections (2) and (3) of Section 39, which provide:
“Section 39 - Lien on arbitral award and deposits as to costs
[…]
(2) If in any case an arbitral tribunal refuses to deliver its award
E except on payment of the costs demanded by it, the Court may,
on an application in this behalf, order that the arbitral tribunal shall
deliver the arbitral award to the applicant on payment into Court
by the applicant of the costs demanded, and shall, after such inquiry,
in any, as it thinks, fit, further order that out of the money so paid
F into Court there shall be paid to the arbitral tribunal by way of
costs such sum as the Court may consider reasonable and that
the balance of the money, if any, shall be refunded to the applicant.
(3) An application under sub-section (2) may be made by any
party unless the fees demanded have been fixed by written
G agreement between him and the arbitral tribunal, and the arbitral
tribunal shall be entitled to appear and be heard on any such
application.
[…]”
(emphasis supplied)
141
H Paragraphs 91-92of this judgement
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 747
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

Sub-Section (2) provides that an application can be made to the A
court if the arbitral tribunal is refusing to deliver the award, except on
payment of costs demanded by it. The court can then order the arbitral
tribunal to deliver the award to the applicant on payment of the costs
demanded by the tribunal to the court. Crucially, the court can conduct
an inquiry to determine if the costs are reasonable and out of the money
B
paid to the court, it can direct the payment of reasonable costs to the
tribunal and the balance (if any) to be refunded to the applicant. Sub-
Section (3) provides that an application under sub-Section (2) for the
delivery of an award withheld by the arbitral tribunal exercising a lien
over it, can only be made if the fees demanded have not been fixed by a
written agreement by the party and the arbitral tribunal. Section 39 of C
the Arbitration Act is similar to Section 38 of the now repealed Arbitration
Act 1940. Section 38 of the erstwhile legislation provided thus:
“38. Disputes as to arbitrator’s remuneration or costs:
(1) If in any case an arbitrator or umpire refuses to deliver his
award except on payment of the fees demanded by him, the Court D
may. on an application in this behalf, order that the arbitrator or
umpire shall deliver the award to the applicant on payment into
Court by the applicant of the fees demanded, and shall, after such
inquiry, if any, as it thinks fit, further order that out of the money
so paid into Court there shall be paid to the arbitrator or umpire by E
way of fees such sum as the Court may consider reasonable and
that the balance of the money, if any, shall be refunded to the
applicant.
(2) An application under Sub-section (1) may be made by any
party to the reference unless the fees demanded have been fixed F
by written agreement between him and the arbitrator or umpire,
and the arbitrator or umpire shall be entitled to appear and be
heard on any such application.
(3) The Court may make such orders as it thinks fit respecting the
costs of an arbitration where any question arises respecting such G
costs and the award contains no sufficient provision concerning
them.”
Section 38(1) of the Arbitration Act 1940 enabled an arbitrator or
umpire to refuse delivery of an award if the payment of fees demanded
by them remained unpaid, and in such cases the court could direct the
H
748 SUPREME COURT REPORTS [2022] 10 S.C.R.

A arbitrator or the umpire to deliver the award upon payment of such fees
to the court by the applicant. Thereafter, it could assess the propriety of
the fees demanded and out of the amount deposited in court, it could
direct payment to the tribunal and the balance (if any) to be refunded to
the applicant. The difference between Section 38(1) of the Arbitration
Act 1940 and Section 39(1) of the Arbitration Act is that the former
B
specifically refers to the payment of the arbitrators’ fee, while the latter
refers to costs demanded by the tribunal. Section 39(1) seems to be
wider in scope. However, since the costs under Section 39 are to be
payable to the arbitral tribunal, these would typically reflect costs relating
to fees of the members of the tribunal and other out-of-pocket expenses
C payable to the arbitrators that are necessary for the conduct of arbitral
proceedings like expenses relating to travel, accommodation and any
other allowances.
97. This interpretation of costs under Section 39 as only limited to
the costs owed to the arbitral tribunal is also in consonance with the
D purpose of Section 39, which is that it enables the arbitral tribunal to
exercise a lien over the arbitral award. In Triveni Shankar Saxena v.
State of UP & Ors.142, this Court defined lien as follows:
“17…The word ‘lien’ originally means “binding” from the Latin
ligamen. Its lexical meaning is “right to retain”. The word ‘lien’ is
E now variously described and used under different contexts such
as ‘contractual lien’, ‘equitable lien’, ‘specific lien’, ‘general lien’,
‘partners lien’, etc. etc. in Halsbury’s Laws of England, Fourth
Edition, Volume 28 at page 221, para 502 it is stated:
“In its primary or legal sense “lien” means a right at common law
F in one man to retain that which is rightfully and continuously in his
possession belonging to another until the present and accrued claims
are satisfied.””
“Lien” has been defined in P Ramanatha Aiyar: The Major
Law Lexiconas143:
G “”Lien” defined. A right by which a person in possession of the
property holds and retains it against the other in satisfaction of a
demand due to the party retaining it. [O. VIII, R. 6(2), CPC (5 of
1908)and S. 47, margin, (3 of 1930)].
142
1992 Suppl. 1 SCC 524
H 143
P Ramanatha Aiyar: The Major Law Lexicon(LexisNexis, 4 thedition)
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 749
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

Right of one person to satisfy a claim against another by holding A
or retaining possession of that other’s assets/property. (Finance)
The right to possession of property until such time that an
outstanding liability has been repaid. A banker’ s lien gives a bank
the right to retain or sell the property of a debtor in lieu of payment.
(Banking; Insurance & International Accounting).” B
The arbitral tribunal can exercise a lien over the arbitral award
and refuse to deliver it if there are outstanding payments yet to be made
to the tribunal. The principle behind allowing the arbitral tribunal to
exercise a lien over the arbitral award is to ensure that the tribunal is not
left in the lurch without its expenses being met, while the beneficiary of C
the award reaps the benefits of it. In Assam State Weaving and
Manufacturing Co. Ltd. v. Vinny Engineering Enterprises (P)
Ltd.144, the Calcutta High Court observed that:
“Section 39 of the 1996 Act, much like Section 38 of the old Act,
recognises an arbitral tribunal’s lien over the award. The section D
conceives of a situation where there may be a dispute between
the arbitral tribunal and one or more parties to the reference as to
the costs of the arbitration. Upon an arbitral tribunal refusing to
deliver its award unless its demand for payment of costs were
met by a party, an application may be carried to court for directing
the tribunal to deliver the award to the applicant. Sub-section (2) E
contemplates an applicant thereunder to put into court the costs
demanded by the arbitral tribunal. Upon such costs being deposited
the court may order the tribunal to deliver the award to the applicant.
The court can thereafter inquire into the propriety of the costs
demanded and deal with the matter following the inquiry. F
Sub-section (3) of Section 39 permits an application under sub-
section (2) to be carried by any party to the reference only on
condition that the fees demanded were not as fixed by written
agreement between the applicant and the arbitral tribunal. The
sub-section does not limit an application to be made under sub- G
section (2) only by a party who has been refused the delivery of
the award. The delivery that Section 39 speaks of is the physical
delivery of the document embodying the award and not merely
the pronouncement of the award. For, it is the physical receipt of
144
AIR 2010 Cal 52 H
750 SUPREME COURT REPORTS [2022] 10 S.C.R.

A the document that would entitle a party to apply for setting aside
the award or for implementing it.”
98. Hence, sub-Section (2) and (3) of Section 39, read together,
govern a situation where the fees and other expenses payable to the
arbitrators have not been decided through a written agreement between
B the party and the arbitral tribunal. While ideally, the parties and the
arbitrators should arrive at an arrangement regarding the remuneration
of arbitrators, the arbitral tribunal may raise a non-binding invoice
regarding the arbitration costs (i.e., fees and expenses payable to
arbitrator(s)) and may refuse to deliver the award unless the outstanding
payments have been made. The parties are not obligated to pay such
C costs if they believe that such costs are unreasonable. In such a case, it
is the court that determines whether the fees and other expenses
demanded by the tribunal are reasonable in terms of Section 39(2).
99. To conclude, the arbitral tribunal while deciding the allocation
of costs under Sections 31(8) read with 31A or advance of costs under
D Section 38 cannot issue any binding or enforceable orders regarding
their own remuneration. This would violate the principle of party autonomy
and the doctrine of prohibition of in rem suam decisions145, which
postulates that the arbitrators cannot be the judge of their own claim
against parties’ regarding their remuneration. The principles of party
E autonomy and the doctrine of prohibition ofin rem suam decisions do
not restrict the arbitral tribunal from apportioning costs between the parties
(including the arbitrator(s) remuneration) since this is merely a
reimbursement of the expenses that the successful party has incurred in
participating in the arbitral proceedings. Likewise, the arbitral tribunal
can also demand deposits and supplementary deposits since these
F advances on costs are merely provisional in nature. If while fixing costs
or deposits, the arbitral tribunal makes any finding relating to arbitrators’
fees (in the absence of an agreement), it cannot be enforced in favour
of the arbitrators. The party can approach the court to review the fees
demanded by the arbitrators.
G 100. Ideally, in ad hoc arbitrations, the fees payable to the
arbitrator(s) should be decided through an arrangement between the
parties and the arbitrator(s). In the next section, we are issuing certain
directives to govern the process of how fees payable to the arbitrator(s)
have to be fixed in ad hoc arbitrations.
145
H Supra at note 120
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 751
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

C.2.4 Directives governing fees of arbitrators in ad hoc A
arbitrations
101. Preliminary meetings in arbitration proceedings entail a
meeting convened by the arbitral tribunal with the parties to arrive at a
common understanding about how the arbitration is to be conducted. It
generally takes place at an early stage of the dispute resolution process, B
prior to the “written phase of the proceedings”. Rules of certain
international arbitral institutions provide for convening a preliminary
meeting146 or case-management conference147. The fees and expenses
are typically addressed at this stage148. We propose that this stage of
having a preliminary hearing should be adopted in the process of conducting
ad hoc arbitrations in India as it will provide much needed clarity on C
how arbitrators are to be paid and reduce conflicts and litigation on this
issue.
102. These preliminary hearings should also be conducted when
the fees are specified in the arbitration agreement. The arbitration
agreement may have been entered into at an earlier point in time, even D
several years earlier. It is possible that at the time when the disputes
between the parties arise, the fees stipulated in the arbitration agreement
may have become an unrealistic estimate of the remuneration that is to
be offered for the services of the arbitrator due to the passage of time.
In the preliminary hearings, if all the parties and the arbitral tribunal E
agree to a revised fee, then that fee would be payable to the arbitrator(s).
However, if any of the parties raises an objection to the fee being
demanded by the arbitrator(s) and no consensus can be arrived at between
such a party and the tribunal or a member of the tribunal, then the tribunal
or the member of the tribunal should decline the assignment. Since the
relationship between the parties and arbitrator(s) is contractual in nature, F
specifically with respect to the payment of remuneration, there must be
a consensus on the fees to be paid.
103. It is possible that during the preliminary hearings, the parties
and the arbitral tribunal may be unsure about the extent of time that
needs to be invested by the arbitrator(s) and the complexity of the dispute. G
It is also possible that the arbitral proceedings may continue for much

146
Rule 19.3, SIAC Rules
147
Article 24, ICC Rules
148
Supra at note 28 H
752 SUPREME COURT REPORTS [2022] 10 S.C.R.

A longer time than was expected. In order to anticipate such contingencies,
during the preliminary hearings, the parties and the arbitrator(s) should
stipulate that after a certain number of sittings, the fee would stand
revised at a specified rate. The number of sittings after which the revision
would take place and the quantum of revision must be clearly discussed
and determined during the preliminary hearings through the process of
B
negotiation between the parties and the arbitrator(s). There is no unilateral
power reserved to the arbitrator(s) to revise the fees on their own terms
if they believe that an additional number of sittings would be required to
settle the dispute. The fees payable to the arbitral tribunal in an ad hoc
arbitration must be settled between the arbitral tribunal and the parties
C at the threshold during the course of the preliminary hearings. Resolution
of the fees payable to the arbitral tribunal by mutual agreement during
the preliminary hearings is necessary. Failing such an agreement, the
arbitrator(s) who decline to accept the fee suggested by the parties (or
any of them) are at liberty to decline the assignment. The fixation of
arbitral fees at the threshold will obviate the grievance that the
D
arbitrator(s) are arm-twisting parties at an advanced stage of the dispute
resolution process. In such a situation, a party who is not agreeable to a
unilateral revision of fees demanded by the arbitral tribunal in the midst
of the proceedings has a real apprehension that its refusal may result in
embarrassing consequences bearing on the substance of the dispute.
E 104. We believe that the directives proposed by the amicus curiae,
with suitable modifications, would be useful in structuring how these
preliminary hearings are to be conducted. Exercising our powers
conferred under Article 142 of the Constitution, we direct the adoption
of the following guidelines for the conduct of ad hoc arbitrations in
F India:
“1. Upon the constitution of the arbitral tribunal, the parties and
the arbitral tribunal shall hold preliminary hearings with a maximum
cap of four hearings amongst themselves to finalise the terms of
reference (the “Terms of Reference”) of the arbitral tribunal.
G The arbitral tribunal must set out the components of its fee in the
Terms of Reference which would serve as a tripartite agreement
between the parties and the arbitral tribunal.
2. In cases where the arbitrator(s) are appointed by parties in the
manner set out in the arbitration agreement, the fees payable to
the arbitrators would be in accordance with the arbitration
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 753
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

agreement. However, if the arbitral tribunal considers that the fee A
stipulated in the arbitration agreement is unacceptable, the fee
proposed by the arbitral tribunal must be indicated with clarity in
the course of the preliminary hearings in accordance with these
directives. In the preliminary hearings, if all the parties and the
arbitral tribunal agree to a revised fee, then that fee would be
B
payable to the arbitrator(s). However, if any of the parties raises
an objection to the fee proposed by the arbitrator(s) and no
consensus can be arrived at between such a party and the tribunal
or a member of the tribunal, then the tribunal or the member of
the tribunal should decline the assignment.
3. Once the Terms of Reference have been finalised and issued, C
it would not be open for the arbitral tribunal to vary either the fee
fixed or the heads under which the fee may be charged.
4. The parties and the arbitral tribunal may make a carve out in
the Terms of Reference during the preliminary hearings that the
fee fixed therein may be revised upon completion of a specific D
number of sittings. The quantum of revision and the stage at which
such revision would take place must be clearly specified. The
parties and the arbitral tribunal may hold another meeting at the
stage specified for revision to ascertain the additional number of
sittings that may be required for the final adjudication of the dispute
which number may then be incorporated in the Terms of Reference E
as an additional term.
5. In cases where the arbitrator(s) are appointed by the Court,
the order of the Court should expressly stipulate the fee that arbitral
tribunal would be entitled to charge. However, where the Court
leaves this determination to the arbitral tribunal in its appointment F
order, the arbitral tribunal and the parties should agree upon the
Terms of Reference as specified in the manner set out in draft
practice direction (1) above.
6. There can be no unilateral deviation from the Terms of
Reference. The Terms of Reference being a tripartite agreement
G
between the parties and the arbitral tribunal, any amendments,
revisions, additions or modifications may only be made to them
with the consent of the parties.
7. All High Courts shall frame the rules governing arbitrators’
fees for the purposes of Section 11(14) of the Arbitration and
Conciliation Act, 1996. H
754 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 8. The Fourth Schedule was lastly revised in the year 2016. The
fee structure contained in the Fourth Schedule cannot be static
and deserves to be revised periodically. We, therefore, direct the
Union of India to suitably modify the fee structure contained in
the Fourth Schedule and continue to do so at least once in a period
of three years.”
B
105. Conscious and aware as we are that (i) Arbitration
proceedings must be conducted expeditiously; (ii) Court interference
should be minimal; and (iii) Some litigants would object to even a just
and fair arbitration fee, we would like to effectuate the object and purpose
behind enacting the model fee schedule. When one or both parties, or
C the parties and the arbitral tribunal are unable to reach a consensus, it is
open to the arbitral tribunal to charge the fee as stipulated in the Fourth
Schedule, which we would observe is the model fee schedule and can
be treated as binding on all. Consequently, when an arbitral tribunal fixes
the fee in terms of the Fourth Schedule, the parties should not be permitted
D to object the fee fixation. It is the default fee, which can be changed by
mutual consensus and not otherwise.
D Interpretation of “sum in dispute” in the Fourth Schedule
D.1 Statutory Framework

E 106. We must begin by looking at the statutory framework of the
Arbitration Act. In order to understand the genesis of the competing
interpretations, it is important to first consider Sections 31(8), the
Explanation to Section 31A(1) and Section 38(1).
107. Section 31(8) of the Arbitration Act reads thus:
F “31. Form and contents of arbitral award.—
[…]
(8) The costs of an arbitration shall be fixed by the arbitral tribunal
in accordance with Section 31-A.”
G Sub-Section (8) of Section 31 was amended by the Arbitration
Amendment Act 2015, which also added Section 31A to the Arbitration
Act.
108. Section 31A(1) is in the following terms:
“31-A. Regime for costs.—(1) In relation to any arbitration
H proceeding or a proceeding under any of the provisions of this
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 755
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

Act pertaining to the arbitration, the court or arbitral tribunal, A
notwithstanding anything contained in the Code of Civil Procedure,
1908 (5 of 1908), shall have the discretion to determine—
(a) whether costs are payable by one party to another;
(b) the amount of such costs; and
B
(c) when such costs are to be paid.
Explanation.—For the purpose of this sub-section, “costs”
means reasonable costs relating to—
(i) the fees and expenses of the arbitrators, courts and
witnesses; C
(ii) legal fees and expenses;
(iii) any administration fees of the institution supervising the
arbitration; and
(iv) any other expenses incurred in connection with the arbitral or D
court proceedings and the arbitral award.
[…]”
(emphasis supplied)
Sub-Section (1) of Section 31A provides the court or the arbitral
tribunal with the power to determine the following in regard to costs: (i) E
whether they are payable by one party to the other; (ii) their amount;
and (iii) when they are payable. The Explanation to Section 31A(1)
defines “costs” to include four components, the first of which is “the
fees and expenses of the arbitrators, courts and witnesses”.
109. Section 31(8) is also linked to Section 38(1), which is as F
follows:
“38. Deposits.—(1) The arbitral tribunal may fix the amount of
the deposit or supplementary deposit, as the case may be, as an
advance for the costs referred to in sub-section (8) of Section 31,
which it expects will be incurred in respect of the claim submitted G
to it:
Provided that where, apart from the claim, a counter-claim
has been submitted to the arbitral tribunal, it may fix
separate amount of deposit for the claim and counter-claim.”
(emphasis supplied) H
756 SUPREME COURT REPORTS [2022] 10 S.C.R.

A According to sub-Section (1) of Section 38 of the Arbitration Act,
the arbitral tribunal can direct the parties to make a deposit, as an advance,
for the costs referred to in Section 31(8). As noted earlier, Section 31(8)
states that such costs are to be determined in accordance with Section
31A. Crucially, the proviso to Section 38(1) provides that the arbitral
tribunal may fix a separate amount of deposit for the claim and counter-
B
claim, in an arbitration where a counter-claim has been filed.
110. The inter-connection between Section 31(8), Section 31A
and Section 38(1) bears directly on the interpretation of the Fourth
Schedule of the Arbitration Act. The Fourth Schedule is extracted below:
“THE FOURTH SCHEDULE
C
See Section 11(3-A)
Sl. No. Sum in dispute Model fee

(1) (2) (3)

D 1. Up to Rs 5,00,000 Rs 45,000

2. Above Rs 5,00,000 and up Rs 45,000 plus 3.5 per cent of
to Rs 20,00,000 the claim amount over and
above Rs 5,00,000.

3. Above Rs 20,00,000 and up Rs 97,500 plus 3 per cent of the
E to Rs 1,00,00,000 claim amount over and above Rs
20,00,000.

4. Above Rs 1,00,00,000 and Rs 3,37,500 plus 1 per cent of
up to Rs 10,00,00,000 the claim amount over and
above Rs 1,00,00,000.
F
5. Above Rs 10,00,00,000 and Rs 12,37,500 plus 0.75 per cent
up to Rs 20,00,00,000 of the claim amount over and
above Rs 10,00,00,000.

6. Above Rs 20,00,00,000 Rs 19,87,500 plus 0.5 per cent
G of the claim amount over and
above Rs 20,00,00,000 with a
ceiling of Rs 30,00,000.

Note: In the event the arbitral tribunal is a sole arbitrator, he shall
be entitled to an additional amount of twenty-five per cent on the
H fee payable as per the above.”
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 757
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

The issue before this Court turns on the interpretation of the term A
“sum in dispute”, which is the header of the second column of the Fourth
Schedule. This column provides the different categories of the amounts,
corresponding to which the third column provides the relevant fee which
the arbitrators can charge for that category.
111. On the one hand, it has been argued before us that the B
expression “sum in dispute” should be the cumulative sum of the claim
and counter-claim raised by the parties. If such a position is adopted, the
arbitrators will charge one common fee for hearing both the claim and
counter-claim, and the ceiling prescribed in the Fourth Schedule will
apply to their cumulative total. On the other hand, it is submitted that C
“sum in dispute” refers to the individual sums in dispute in the claim
and counter-claim. The consequence of adopting this position would be
that the arbitrators will charge different sets of fees for the claim and
counter-claim, and hence, separate fee ceilings will apply to both.
D.2 Definition of claim and counter-claim D
D.2.1 In re arbitration proceedings
(i) Statutory Framework of the Arbitration Act
112. The Arbitration Act does not specifically define either the
E
expression “claim” or “counter-claim”. However, these expressions are
referred to in numerous instances, which we shall now outline.

113. Part I of the Arbitration Act is titled “Arbitration”. Section 2
is the definitions clause for Part I. Section 2(1) defines the various
terms used throughout Part I. Sections 2(2) to 2(5) clarify the scope of F
the disputes which will be covered by Part I. Section 2(6) notes that
where Part I allows parties to determine any issue, it also provides
them a right to let any other person or institution determine the issue
for them. Section 2(7) notes that awards passed under Part I shall be
domestic awards. Section 28(1) clarifies that any reference to an
agreement made by the parties (or which may be made), will also G
include a reference to any arbitration rules referred to in the agreement.
Crucially, Section 2(9) states that “[w]here [Part I], other than clause
(a) of Section 25 or clause (a) of sub-section (2) of Section 32, refers to
a claim, it shall also apply to a counter-claim, and where it refers to a
defence, it shall also apply to a defence to that counter-claim”. This H
758 SUPREME COURT REPORTS [2022] 10 S.C.R.

A corresponds to Article 2(f)149 of the UNCITRAL Model Law, on which
the Arbitration Act is based. Section 25(a) notes that if the claimant fails
to communicate his statement of claim in accordance with sub-section
(1) of Section 23, the arbitral tribunal shall terminate the proceedings,
while Section 32(2)(a) provides that the arbitral tribunal shall issue an
order for termination of arbitration proceedings where the claimant
B
withdraws his claim, unless the respondent objects to the order and the
arbitral tribunal recognises a legitimate interest on his part in obtaining a
final settlement of the dispute. Hence, as is evident, other than these
specific provisions which refer to only a claim filed by the claimant, the
Arbitration Act treats claims and counter-claims at par.
C
114. Another reference is then made to counter-claims in sub-
Section (2-A) of the Section 23, which provides as follows:
“23. Statements of claim and defence.
[…]
D
(2-A) The respondent, in support of his case, may also submit a
counter claim or plead a set-off, which shall be adjudicated upon
by the arbitral tribunal, if such counter claim or set-off falls within
the scope of the arbitration agreement.”
Section 23(2-A) clarifies that an arbitral tribunal is under an
E obligation to also adjudicate upon a counter-claim or set-off filed by a
party in an arbitration proceeding, with the limitation that they should fall
within the scope of the arbitration agreement. This is in line with the
requirements under the UNCITRAL Model Law150. If a party files a
frivolous counter-claim which leads to a delay in the arbitration
F proceedings, the arbitral tribunal can take that into account while
determining costs in accordance with Section 31A(3)(c).
115. Section 23(2-A) was introduced by the Arbitration
Amendment Act 2015, bearing in view the recommendations in the LCI
246th Report (supra). The Report had recommended the addition of
G
149
Article 2(f) provides: “(f)where a provision of this Law, other than in Article 25(a)
and 32(2)(a), refers to a claim, it also applies to a counter-claim, and where it refers to
a defence, it also applies to a defence to such counter-claim”.
150
Howard M Holtzmann and Joseph E Neuhaus, A Guide to the UNCITRAL Model
Law on International Commercial Arbitration: Legislative History and Commentary
(Walter Kluwers, 1989), page 649
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 759
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

an explanation to Section 23(1) (instead of a different sub-Section) along A
with the following comment:
“Amendment of Section 23
13.In section 23, after sub-section (1) and before sub-section (2),
add the words “Explanation: In his defence the respondent may
also submit a counter claim or plead a set off, which shall be B
treated as being within the scope of reference and be adjudicated
upon by the arbitral tribunal notwithstanding that it may not fall
within the scope of the initial reference to arbitration, but provided
it falls within the scope of the arbitration agreement.”
[NOTE: This explanation is in order to ensure that counter claims C
and set off can be adjudicated upon by an arbitrator without seeking
a separate/new reference by the respondent so long as it falls
within the scope of the arbitration agreement, in order to ensure
final settlement of disputes between parties and prevent multiplicity
of litigation.]” D
Thus, the object of taking up a counter-claim along with the claim
in the same proceeding is not because the counter-claim arises due to
the claim (which it may not) but in order to prevent a multiplicity of
proceedings.
116. We have already noted Section 38(1) earlier in this judgment, E
where the proviso provides the arbitral tribunal with the power to fix a
separate amount of deposits (of costs determined under Section 31(8))
in instances where a claim and counter-claim have both been filed in an
arbitration proceeding. We must also take note of Section 38(2) of the
Arbitration Act, which provides:
F
“(2) The deposit referred to in sub-section (1) shall be payable in
equal shares by the parties:
Provided that where one party fails to pay his share of the deposit,
the other party may pay that share:
Provided further that where the other party also does not pay the G
aforesaid share in respect of the claim or the counter-claim, the
arbitral tribunal may suspend or terminate the arbitral proceedings
in respect of such claim or counter-claim, as the case may be.”
As a general rule, sub-Section (2) of Section 38 provides that the
deposits determined under Section 38(1) have to be shared by both parties. H
760 SUPREME COURT REPORTS [2022] 10 S.C.R.

A The first proviso notes that if one party fails to pay their share, the other
party may step in and pay it. Further, the second proviso notes that if the
other party also does not pay that share, the arbitral tribunal can suspend
proceedings. Importantly, it provides that it may terminate proceedings
in relation to either the claim or counter-claim or both, depending upon
whether the appropriate deposits have been made for one of them or
B
neither of them.
117. Consequently, on the basis of the above analysis, the following
principles emerge:
(i) The Arbitration Act treats claims and counter-claims at par,
C and holds them subject to the same procedural timelines
and requirements;
(ii) The Arbitration Act allows the arbitral tribunal to fix a deposit
of costs for claims and counter-claims separately,
recognizing that they are distinct proceedings since:(a) the
D proceeding for adjudicating on the claim is independent of
the proceeding for deciding the counter-claim; (b)distinct
issues may arise before the tribunal while adjudicating on
the claim and counter-claim; (c) the evidence led in support
of the claim may not be dispositive of the material which
would be relied on to decide the counter-claim; and (d)the
E decision on the claim does not necessarily conclude the
adjudication of the counter-claim; and
(iii) The Arbitration Act considers claims and counter-claims to
be independent proceedings since the latter is not
contingent upon the former. Rather, it protects the right of
F any respondent to raise a counter-claim in an arbitration
proceeding, provided it arises from the arbitration agreement
under dispute. Further, in the event of a default in the
payment of a deposit either for the claim or counter-claim,
it specifically notes that the proceedings will be terminated
G only in respect of the claim, or as the case may be, the
counter-claim in respect of which the default has occurred;
(iv) Though a counter-claim may arise from similar facts as a
claim, the counter-claim is not a set off and is not in the
nature of a defence to the claim; and
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 761
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

(v) A counter-claim will survive for independent adjudication A
even if the claim is dismissed or withdrawn and the
respondent to a claim would be entitled to pursue their
counter-claim regardless of the pursuit of or the decision
on the claim.
(ii) Academic discourse B
118. In Justice R S Bachawat’s seminal treatise on Law of
Arbitration & Conciliation, it has been noted that an arbitral tribunal
has the jurisdiction to decide any claim and counter-claim arising out of
a dispute referred to it, and not deciding the latter would be a ground to
set aside the award151: C
“[s 7.44.3] Counter-claim
When disputes in a pending suit are referred to arbitration, the
arbitrator has jurisdiction to decide both the claim and the
counterclaim…An award allowing the claim without deciding the
counterclaim is liable to be set aside. Where the arbitration D
agreement permitted reference of all disputes to arbitration, it could
not be said that by entertaining a counterclaim, the arbitrator
exceeded his jurisdiction.”
119. Similarly, CR Dutta’s treatise on Law of Arbitration &
Conciliation supports the proposition that the Arbitration Act treats a E
claim and counter-claim as two separate and independent proceedings152:
“4. To be paid equally
The cost amount to be deposited will be in respect of the claim
and separately in respect of the counter-claim by the parties in
F
equal shares. If a party does not pay the other party may be asked
to pay the shares of both the parties. If the amount directed to be
deposited in respect of the claim is not made, then the proceedings
in respect of the claim may be suspended or terminated but the
proceedings in respect of counter-claim can proceed if the amount
in respect thereof has been deposited. For the purposes of deposit G
of costs and expenses, the claim and counter-claim have been
treated as two separate independent proceedings.”

151
Anirudh Wadha and Anirudh Krishnan, Justice R S Bachawat’s Law of Arbitration &
Conciliation (6th edition, 2017)
152
CR Dutta’s Law Of Arbitration And Conciliation (LexisNexis) H
762 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 120. Gary Born on Arbitration (supra) notes that a party is
generally not bound by any restriction in regards to its counter-claim,
except that it must fall within the scope of the arbitration agreement153:
“In general, there are no limits under national law on the subject
matter of a respondent’s counterclaims, beyond whatever
B restrictions may be contained in the parties’ arbitration agreement:
the respondent may assert any counterclaim that falls within the
scope of the arbitration agreement. This general freedom may be
limited by the parties’ arbitration agreement or applicable
institutional rules (which, however, usually do not impose further
limits).”
C
121. Finally, in Procedure and Evidence in International
Arbitration, a counter-claim is differentiated from a set-off by noting
that it is a claim brought by the defendant and is not a defence to the
claimant’s claim154:

D “4.4. A counterclaim is usually seen as a claim brought by a
respondent in a civil suit against the claimant that is independent
of the primary claim although it may be linked to the same facts.
The term is used in contradistinction to a set-off that is seen as a
defence to the primary claim, albeit one invariably related to
different facts. Because it is not simply a defence, a counterclaim
E leads to a separate judgment that may be in excess of the judgment
under the primary claim. Furthermore, the counterclaim remains
alive even if the initial claim is withdrawn. Thus, it is truly a reverse
claim and not a defence as such.”
122. These academic writings a support the conclusion that claims
F and counter-claims within an arbitration proceeding are distinct and
independent proceedings in themselves.
(iii) Judicial pronouncements
123. Even before the introduction of Section 23(2-A) through the
Arbitration Amendment Act 2015, counter-claims were raised by parties
G
in arbitration proceedings. In Indian Oil Corpn. Ltd. v. Amritsar Gas
Service155, this Court had to decide on the validity of an award under
153
Supra at note 30
154
Jeffrey Waincymer, Procedure and Evidence in International Arbitration (Walters
Kluwer, 2012)
155
H (1991) 1 SCC 533 (“Amritsar Gas Service”)
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 763
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

the Arbitration Act 1940 where the appellant’s counter-claim had been A
dismissed by the arbitrator since it was not part of the reference. Speaking
for the three-Judge Bench, Justice J S Verma held that when all disputes
under an arbitration agreement are referred to arbitration, a party can
file its counter-claim before the arbitral tribunal:
“15. The appellant’s grievance regarding non-consideration of its B
counter-claim for the reason given in the award does appear to
have some merit. In view of the fact that reference to arbitrator
was made by this Court in an appeal arising out of refusal to stay
the suit under Section 34 of the Arbitration Act and the reference
was made of all disputes between the parties in the suit, the
occasion to make a counter-claim in the written statement could C
arise only after the order of reference. The pleadings of the parties
were filed before the arbitrator, and the reference covered all
disputes between the parties in the suit. Accordingly, the counter-
claim could not be made at any earlier stage. Refusal to consider
the counter-claim for the only reason given in the award does, D
therefore, disclose an error of law apparent on the face of the
award. However, in the present case, the counter-claim not being
pressed at this stage by learned counsel for the appellant, it is
unnecessary to examine this matter any further.”
124. In State of Goa v. Praveen Enterprises156, a two-Judge E
Bench followed the principle enunciated in Amritsar Gas Service
(supra) in a case arising under the Arbitration Act. Speaking for the
two-Judge Bench, Justice R V Raveendran, in the course of an erudite
exposition of the law, highlighted that a respondent to a claim could well
seek independent recourse to arbitration for deciding the counter-claim,
but raising a counter-claim obviates a multiplicity of litigation: F

“32. A counterclaim by a respondent presupposes the pendency
of proceedings relating to the disputes raised by the claimant. The
respondent could no doubt raise a dispute (in respect of the subject-
matter of the counterclaim) by issuing a notice seeking reference
to arbitration and follow it by an application under Section 11 of G
the Act for appointment of arbitrator, instead of raising a
counterclaim in the pending arbitration proceedings. The object
of providing for counterclaims is to avoid multiplicity of proceedings

156
(2012) 12 SCC 581 (“Praveen Enterprises”) H
764 SUPREME COURT REPORTS [2022] 10 S.C.R.

A and to avoid divergent findings. The position of a respondent in an
arbitration proceeding being similar to that of a defendant in a
suit, he has the choice of raising the dispute by issuing a notice to
the claimant calling upon him to agree for reference of his dispute
to arbitration and then resort to an independent arbitration
proceeding or raise the dispute by way of a counterclaim, in the
B
pending arbitration proceedings.”
Subsequently, in Voltas Ltd. v. Rolta India Ltd.157, another two-
Judge Bench of this Court followed the reasoning in Praveen
Enterprises (supra), that counter-claims were independent claim
proceedings by the respondent. The Court held that the limitation for a
C counter-claim would be determined with reference to the date it was
instituted before the arbitral tribunal. However, it carved out an exception
to this general rule for instances where the respondent had earlier raised
the counter-claim as a claim in a notice for arbitration sent to the claimant,
but did not subsequently file an application under Section 11 of the
D Arbitration and raised it directly as a counter-claim. In such instances,
the date of limitation would, it was observed, begin from when the notice
of arbitration was first received by the claimant.
D.2.2 In re civil proceedings
(i) Statutory Framework of CPC
E
125. Order VIII of the CPC contains provisions pertaining to
written statements, set-offs and counter-claims by the defendant. Rule
6 elucidates the particulars of a set-off to be given in a written statement:
“6. Particulars of set-off to be given in written statement.—
F (1) Where in a suit for the recovery of money the defendant claims
to set-off against the plaintiff’s demand any ascertained sum of
money legally recoverable by him from the plaintiff, not exceeding
the pecuniary limits of the jurisdiction of the Court, and both parties
fill the same character as they fill in the plaintiff’s suit, the defendant
may, at the first hearing of the suit, but not afterwards unless
G permitted by the Court, present a written statement containing
the particulars of the debt sought to be set-off.
(2) Effect of set-off.—The written statement shall have the same
effect as a plaint in a cross-suit so as to enable the Court to

157
H (2014) 4 SCC 516
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 765
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

pronounce a final judgment in respect both of the original claim A
and of the set-off, but this shall not affect the lien, upon the amount
decreed, of any pleader in respect of the costs payable to him
under the decree.
(3) The rules relating to a written statement by a defendant apply
to a written statement in answer to a claim of set-off.” B
Rule 6(1) specifies that while filing their written statement, a
defendant may mention the particulars of an ascertained sum legally
recoverable from the plaintiff. Rule 6(2) notes that the effect of pleading
a set-off in a written statement is the same as filing a plaint in a cross-
suit. Rule 6(3) then notes that the plaintiff’s written statement in C
respondent to the defendant’s set-off claim shall follow the same rules
as the defendant’s written statement in response to the plaintiff’s plaint.
126. On the other hand, a distinct provision is made for a counter-
claim under Rule 6-A of Order VIII of the CPC:
D
“6-A. Counter-claim by defendant.—(1) A defendant in a suit
may, in addition to his right of pleading a set-off under Rule 6, set
up, by way of counter-claim against the claim of the plaintiff, any
right or claim in respect of a cause of action accruing to the
defendant against the plaintiff either before or after the filing of
the suit but before the defendant has delivered his defence or E
before the time limited for delivering his defence has expired,
whether such counter-claim is in the nature of a claim for damages
or not:
Provided that such counter-claim shall not exceed the pecuniary
limits of the jurisdiction of the Court. F

(2) Such counter-claim shall have the same effect as a cross-suit
so as to enable the Court to pronounce a final judgment in the
same suit, both on the original claim and on the counter-claim.
(3) The plaintiff shall be at liberty to file a written statement in G
answer to the counter-claim of the defendant within such period
as may be fixed by the Court.
(4) The counter-claim shall be treated as a plaint and governed by
the rules applicable to plaints.”
H
766 SUPREME COURT REPORTS [2022] 10 S.C.R.

A Rule 6-A(1) provides that the defendant’s counter-claim is in
addition to a claim for set-off under Rule 6. It provides that the defendant
may file a counter-claim based on a cause of action accruing to them
against the plaintiff either before or after the filing of the suit but before
the defendant has delivered his defence or before the time limited for
delivering his defence has expired. The proviso notes that the value of
B
the counter-claim cannot exceed the pecuniary jurisdiction of the court
where it is being filed. Rule 6-A(2) provides that the counter-claim has
the same effect as a cross-suit. Rule 6-A(3) permits a plaintiff to file a
written statement against the defendant’s counter-claim. Finally, Rule 6-
A(4) notes that the counter-claim shall be treated as a plaint and the
C rules governing plaints will be applicable to it.
127. Rule 6-D of Order VIII is of particular importance, and it
provides thus:
“6-D. Effect of discontinuance of suit.—If in any case in which
the defendant sets up a counter-claim, the suit of the plaintiff is
D stayed, discontinued or dismissed, and counter-claim may
nevertheless be proceeded with.”
Rule 6-D clarifies, in no uncertain terms, that even if the suit
which has been instituted by the plaintiff is stayed, discontinued or
dismissed, it would not affect the defendant’s counter-claim. This
E highlights, once again, that counter-claims are distinct and independent
from claims. The defendant’s counter-claim is equivalent to a plaint.
The counter-claim is not being filed as an independent suit but as a
counter-claim within a pre-existing suit so as to avoid a multiplicity of
litigation. However, it is not dependant on the outcome of the original
F suit and is an independent proceeding.
(ii) Academic discourse
128. Mulla’s treatise on the Code of Civil Procedure notes that
a counter-claim is an independent suit which exists within another pre-
existing suit, in order to enable the court to pronounce final judgment on
G the claim and the counter-claim together158:
“The very object of Rule 6A is to treat a counterclaim as an
independent suit to be heard together with the plaintiff’s suit to
enable the court to pronounce final judgement.”
158
H Mulla, The Code of Civil Procedure, (Volume 2, 18 th edition) page 1925
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 767
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

129. Sarkar’s Code of Civil Procedure notes that a counter- A
claim is an independent action and not a defence to the plaintiff’s original
claim159:
“The provisions of Rule 6A(1) are in substance similar to those of
RSC, 1965 [Rules of the Supreme Court of UK, 1965], Order 15,
Rule 2(1). Cf Rule 6(2) with Order 8, Rule 6(2) of the Code and B
Rule 6A(4) with RSC 1965, Order 18, Rule 18. The effect of this
rule is from the point of view of pleading to assimilate a counter-
claim with a plaint in a suit and is therefore governed by the same
rules of pleading as a plaint. A counter-claim is substantially a
cross-action, not merely a defence to the plaintiff’s claim.
It must be of such a nature that the court would have jurisdiction C
to entertain it as a separate action.”
(emphasis supplied)
Sarkar (supra) further notes that this understanding is crystallised
in Order VIII Rule 6-D, where the dismissal of a frivolous action by the D
plaintiff would not affect the defendant’s counter-claim:
“[Rule 6-D] further illustrates the principle that a counter-claim is
to be treated as a cross action, and is not affected by anything
which relates solely to the plaintiff’s claim. Thus, where the plaintiff
discontinues action the counter-claim has been served, he cannot E
prevent the defendant from enforcing against him the causes of
action contained in the counter-claim. So if an action is dismissed
being frivolous, the counter-claim is not affected and the defendant
may be granted the relief which he seeks thereby.”
130. The above exposition of a counter-claim is elaborated in F
Halsbury’s Laws of India (Civil Procedure)160:
“A “counter-claim” is a claim made by a defendant in a suit against
a plaintiff. It is a claim, independent of and separable from
the plaintiff’s claim, which can be enforced by a cross-action.
It is a cause of action in favour of the defendant against the
G
plaintiff…”
(emphasis supplied)

159
Sudipto Sarkar and Aditya Swarup, Sarkar’s Code of Civil Procedure (LexisNexis,
13th edition) (“Sarkar”)
160
Halsbury’s Laws of India (Civil Procedure) (2 nd edition) H
768 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 131. Zuckerman’s treatise on Civil Procedure, Principles of
Practice also observes that counter-claims are an independent
proceeding161:
“4.52. A counterclaim is independent of the main claim. It may
relate to the same transaction, as where the claimant claims for
B the price of goods and the defendant counterclaims damages for
late delivery or for defects. Equally, a counterclaim can be wholly
separate from the claim, as where the defendant sues in respect
of entirely different events from those that are raised in the
claimant’s claim.”
C (iii) Judicial pronouncements
132. In Jag Mohan Chawla v. Dera Radha Swami Satsang162,
a two-Judge Bench of this Court had to decide whether, under the CPC,
a counter-claim can be made on a cause of action different from the
primary claim. Speaking for the two-Judge Bench, Justice K Ramaswamy
D held:
“5…In sub-rule (1) of Rule 6-A, the language is so couched
with words of wide width as to enable the parties to bring
his own independent cause of action in respect of any claim
that would be the subject-matter of an independent suit.
E Thereby, it is no longer confined to money claim or to cause of
action of the same nature as original action of the plaintiff. It need
not relate to or be connected with the original cause of action or
matter pleaded by the plaintiff. The words “any right or claim in
respect of a cause of action accruing with the defendant” would
show that the cause of action from which the counter-claim arises
F need not necessarily arise from or have any nexus with the cause
of action of the plaintiff that occasioned to lay the suit…The
counter-claim expressly is treated as a cross-suit with all
the indicia of pleadings as a plaint including the duty to
aver his cause of action and also payment of the requisite
G court fee thereon. Instead of relegating the defendant to
an independent suit, to avert multiplicity of the proceeding
and needless protection (sic protraction), the legislature

161
Zuckermann on Civil Procedure (Sweet & Maxwell, 4 th edition)
162
(1996) 4 SCC 699
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 769
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

intended to try both the suit and the counter-claim in the A
same suit as suit and cross-suit and have them disposed of
in the same trial. In other words, a defendant can claim any
right by way of a counter-claim in respect of any cause of action
that has accrued to him even though it is independent of the cause
of action averred by the plaintiff and have the same cause of
B
action adjudicated without relegating the defendant to file a
separate suit…”
(emphasis supplied)
Hence, it was held that since the counter-claim was effectively
an entirely independent suit from the claim, it could arise out of any C
unrelated cause of action.
133. In Rajni Rani v. Khairati Lal163, Justice Dipak Misra (as
the learned Chief Justice then was), speaking for a two-Judge Bench of
this Court, analysed the provisions of Order VIII and held:
“9.6…a counterclaim preferred by the defendant in a suit is D
in the nature of a cross-suit and by a statutory command
even if the suit is dismissed, counterclaim shall remain alive
for adjudication. For making a counterclaim entertainable by
the court, the defendant is required to pay the requisite court fee
on the valuation of the counterclaim. The plaintiff is obliged to file E
a written statement and in case there is default the court can
pronounce the judgment against the plaintiff in relation to the
counterclaim put forth by the defendant as it has an independent
status. The purpose of the scheme relating to counterclaim
is to avoid multiplicity of the proceedings. When a
counterclaim is dismissed on being adjudicated on merits it F
forecloses the rights of the defendant. As per Rule 6-A(2) the
court is required to pronounce a final judgment in the same suit
both on the original claim and also on the counterclaim.
The...purpose is to avoid piecemeal adjudication…”
134. In Thomas Mathew v. KLDC Ltd., another two-Judge G
Bench of this Court held that a counter-claim is an independent suit and
consequently, the period of limitation would be three years from the date
of accrual of the cause of action164.
163
(2015) 2 SCC 682
164
(2018) 12 SCC 560 H
770 SUPREME COURT REPORTS [2022] 10 S.C.R.

A D.3 Analysis
135. On our analysis of the statutory framework of the Arbitration
Act and the CPC, related academic discourse and judicial
pronouncements, the following conclusions emerge:
(i) Claims and counter-claims are independent and distinct
B proceedings;
(ii) A counter-claim is not a defence to a claim and its outcome
is not contingent on the outcome of the claim;
(iii) Counter-claims are independent claims which could have
C been raised in separate proceedings but are permitted to be
raised in the same proceeding as a claim to avoid a
multiplicity of proceedings; and
(iv) The dismissal of proceedings in relation to the original claim
does not affect the proceedings in relation to the counter-
D claim.
136. We must now consider these principles in the context of the
inter-connection between Section 31(8), Section 31A and Section 38(1)
and the Fourth Schedule of the Arbitration Act. On a combined reading
of Section 31(8), Section 31A and Section 38(1), it is clear that: (i) separate
deposits are to be made for a claim and counter-claim in an arbitration
E
proceeding; and (ii) these deposits are in relation to the costs of arbitration,
which includes the fee of the arbitrators. Therefore, prima facie, the
determination of the fee under the Fourth Schedule should also be
calculated separately for a claim and counter-claim – i.e., the term “sum
in dispute” refers to independent claim amounts for the claim and counter-
F claim. Such an interpretation is also supported by the definition of claim
and counter-claim, and by the fact that the latter constitutes proceedings
independent and distinct from the former.
137. If this interpretation were to be discarded in favor of
construing “sum in dispute” as a cumulation of the claim amount for the
G claim and counter-claim, it would have far-reaching consequences in
terms of procedural fairness. First, under the proviso to Section 38(1),
the arbitral tribunal can direct separate deposits for a claim and counter-
claim. These are based on the cost of arbitration defined by a conjoint
reading of Sections 31(8) and 31A, which includes the arbitrators’ fee.
Hence, if the arbitrators were to charge a common fee for both the
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 771
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

claim and counter-claim, they would have to then equitably divide that A
fee while calculating individual deposits for the purpose of the proviso to
Section 38(1).Second, the second proviso to Section 38(2) provides that
if the deposit is not made by both the parties, the arbitral tribunal can
dismiss the claim and/or counter-claim, as the case may be. If the claim
was to be dismissed in such a manner, it would lead to an absurd situation
B
where the arbitrators’ fee would have to be revised in the middle of the
arbitration proceedings solely on the basis of the amount of the counter-
claim. Third, under Section 23(2-A), the only requirement of a counter-
claim is that it should arise out of the same arbitration agreement as the
claim. However, the cause of action of a counter-claim may be entirely
different from the claim and possibly far more complex. Therefore, C
determining the arbitrators’ fee on a combined basis for both the claim
and counter-claim would thus not match up to the separate effort they
would have to put in for each individual dispute in the claim and counter-
claim.
138. In support of the proposition that “sum in dispute” in the D
Fourth Schedule includes the cumulation of the sums of the claim and
counter-claim, we have also been referred to the LCI 246th Report
(supra). It has been argued that the Law Commission highlighted the
problem of arbitrators charging an excessive fee in ad hoc arbitrations,
which is what led to the introduction of the Fourth Schedule by the
Arbitration Amendment Act 2015. Thus, it has been urged that “sum in E
dispute” in the Fourth Schedule should be interpreted keeping in mind
the purpose with which it was introduced. However, we must reject the
argument since it would militate against the statutory framework of the
Arbitration Act as it stands today. If Parliament intended that a common
fee be charged for a claim and counter-claim, it would have amended F
the rest of the Arbitration Act as well or introduced a specific clause in
the Fourth Schedule. Parliament may in its legislative wisdom still do so.
In Aphali Pharmaceuticals Ltd. v. State of Maharashtra165 speaking
for a two-Judge Bench of this Court, Justice K N Saikia held:
“31. A Schedule in an Act of Parliament is a mere question of G
drafting…The Schedule may be used in construing provisions in
the body of the Act. It is as much an act of legislature as the Act
itself and it must be read together with the Act for all purposes of

165
(1989) 4 SCC 378 H
772 SUPREME COURT REPORTS [2022] 10 S.C.R.

A construction. Expressions in the Schedule cannot control or
prevail against the express enactment and in case of any
inconsistency between the Schedule and the enactment, the
enactment is to prevail and if any part of the Schedule cannot
be made to correspond it must yield to the Act.”
B (emphasis supplied)
139. In a final attempt, we have also been referred to the rules of
numerous arbitral institutions which provide for the calculation of
arbitrators’ fees on the cumulation of the sum of the claim and counter-
claim –such as the DIAC 166, Mumbai Centre for International
C Arbitration167, Indian Council of Arbitration168, Construction Industry
Arbitration Council169, SIAC, HKIAC170, Stockholm.
140. Chamber of Commerce 171 and European Court of
Arbitration172. This will, however, have no bearing on our judgment. As
noted earlier in this judgment, parties have the freedom to opt for
D institutional arbitration and be bound by the rules of the institution.
However, the judgment is currently dealing with instances of ad hoc
arbitrations where the Fourth Schedule has been made applicable for
the calculation of the arbitrators’ fee. In such cases, we hold that the
“sum in dispute” in the Fourth Schedule of the Arbitration Act shall be

E 166
Rule 3(ii) of the DIAC Rules provides: “3. Arbitrators’ Fees - (ii)The fee shall be
determined and assessed on the aggregate amount of the claim(s) and counter claim(s)”.
167
Based on its online Fee Calculator available at <https://mcia.org.in/mcia-schedule-
of-fees/calculate_fees/#> accessed on 29 June 2022
168
Rule 31(2) of Rules of Domestic Commercial Arbitration and Conciliation
169
Schedule of Fees available at <http://www.ciac.in/fee_arbitrator.html> accessed on
F 29 June 2022
170
Article 6.3 of Schedule III of HKIAC Administered Arbitration Rules 2013 provides:
“6.3 Claims and counterclaims are added for the determination of the amount in dispute.
The same rule applies to any set-off defence, unless the arbitral tribunal, after consulting
with the parties, concludes that such set-off defence will not require significant additional
work”.
171
Article 2 of Appendix IV of 2017 Arbitration Rules provides: “(3) The amount in
G dispute shall be the aggregate value of all claims, counterclaims and set-offs. Where the
amount in dispute cannot be ascertained, the Board shall determine the Fees of the
Arbitral Tribunal having regard to all relevant circumstances.”.
172
Appendix 3 of the Arbitration Rules of the European Court of Arbitration – 2021
provides: “For the purposes of the application of the scale range the amount to be
taken into account to apply this scale will be the total of the claims made by the parties,
i.e. of the claims and counterclaims.”.
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 773
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

considered separately for the claim amount in dispute in the claim and A
counter-claim. Consequently, the arbitrators’ fee will be calculated
separately for the claim and counter-claim, and the ceiling on the fee
will also be applicable separately to both.
E Fee Ceiling in Fourth Schedule
141. This issue revolves around the interpretation of the sixth entry B
of the Fourth Schedule. For convenience of the reader, the Fourth
Schedule is being extracted again:
“THE FOURTH SCHEDULE
See Section 11(3-A) C

D

E

F

G

Note: In the event the arbitral tribunal is a sole arbitrator, he shall
be entitled to an additional amount of twenty-five per cent on the
fee payable as per the above.”
(emphasis supplied) H
774 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 142. The choice before this Court is between two competing
interpretations of the Model Fee where the sum in dispute is above Rs
20,00,00,000. Before we explain the competing interpretations, it is
important to note that there is an agreement on the following:
(i) For an arbitration with the sum in dispute is Rs 20,00,00,000,
B the fee would be Rs 19,87,500. This will be referred to as
the base amount;
(ii) For any increase in the sum in dispute over and above Rs
20,00,00,000, 0.5 per cent of the amount above Rs
20,00,00,000 will be added to the fee. This will be referred
C to as the variable amount. For instance, if the sum in dispute
was Rs 21,00,00,000, the amount above Rs 20,00,00,000 is
Rs 1,00,00,000. Hence, 0.5 per cent of Rs 1,00,00,000 will
be added as the variable amount; and
(iii) There is a ceiling of Rs 30,00,000.
D The controversy before this Court is in relation to the third point,
namely, to what does the ceiling apply. There are two possible
interpretations:
(i) First, the ceiling is for the sum of the base amount and the
variable amount. If this interpretation were to be accepted,
E the highest possible fee would be Rs 30,00,000; or
(ii) Second, the ceiling is for the variable amount only. If this
interpretation were to be accepted, the highest possible fee
would be Rs 49,87,500.
E.1 Difference between the English and Hindi translations
F
143. The first submission before us is that there is a difference
between the English and Hindi translation of the relevant text. For ready
reference, the two versions are being extracted below:

Rs.19,87,500 plus 0.5 per cent of 19]87]500 :i, $ 20]00]00]000 :i, ls
G the claim amount over and above vf/kd dh nkok jde dk 0-5 izfr”kr]
Rs.20,00,00,000 with a ceiling of 30]00]000 :i, dh vf/kdre lhek
Rs.30,00,000. lfgrA

(emphasis supplied)
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 775
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

The difference between the two is the presence of a comma (“,”) A
in the Hindi translation, which is absent in the English version. It has
been submitted that the comma was inadvertently missed from the English
version, and hence the Hindi translation should be given preference. In
support of this proposition, reliance is also placed upon Article 343(1) of
the Constitution which provides that “[t]he official language of the Union
B
shall be Hindi in Devanagari script”.
144. We must reject this submission at the threshold since it is in
teeth of Article 348(1)(b)(ii) of the Constitution, which reads thus:
“348. Language to be used in the Supreme Court and in
the High Courts and for Acts, Bills, etc.—(1) Notwithstanding C
anything in the foregoing provisions of this Part, until Parliament
by law otherwise provides—
[…]
(b) the authoritative texts—
D
(i) of all Bills to be introduced or amendments thereto to be moved
in either House of Parliament or in the House or either House of
the Legislature of a State,
[…]
shall be in the English language.” E
Article 348 begins with a non-obstante clause, which clarifies that
it shall have precedence over other Articles in Part XVII, including Article
343(1).
145. In Nityanand Sharma v. State of Bihar173, a three-Judge
Bench of this Court had to decide whether the ‘Lohar’ community would F
be construed as a Scheduled Tribe since their name appeared in the
Schedule in the Hindi translation while the English original had the community
“Lohra”. Speaking for the Bench, Justice K Ramaswamy held:
“19. Article 348(1)(b) of the Constitution provides that
notwithstanding anything in Part II (in Chapter II Articles G
346 and 347 relate to regional languages) the authoritative
text of all Bills to be introduced and amendments thereto
to be moved in either House of Parliament … of all

173
(1996) 3 SCC 576 H
776 SUPREME COURT REPORTS [2022] 10 S.C.R.

A ordinances promulgated by the President… and all orders,
rules, regulations and bye-laws issued under the
Constitution or under any law made by Parliament, shall be
in the English language. By operation of sub-article (3) thereof
with a non obstante clause, where the Legislature of a State has
prescribed any language other than the English language for use
B
in Bills introduced in, or Acts passed by, the Legislature of the
State or in Ordinances promulgated by the Governor of the State
or in any order, rule, regulation or bye-law referred to in paragraph
(iii) of that sub-clause, a translation of the same in the English
language published under the authority of the Governor of the
C State in the Official Gazette of that State shall be deemed to be
the authoritative text thereof in the English language under this
article. Therefore, the Act and the Schedule thereto are part
of the Act, as enacted by Parliament in English language. It
is the authoritative text. When the Schedules were translated
into Hindi, the translator wrongly translated Lohara as Lohar
D omitting the letter ‘a’ while Lohra is written as mentioned in English
version. It is also clear when we compare Part XVI of the Second
Schedule relating to the State of West Bengal, the word Lohar
both in English as well as in the Hindi version was not mentioned.
Court would take judicial notice of Acts of Parliament and would
E interpret the Schedule in the light of the English version being an
authoritative text of the Act and the Second Schedule.”
(emphasis supplied)
Similarly, in the present case, this Court shall be governed by article
348 (1)(b)(i) while interpreting the entry at Serial No 6 of the Fourth
F Schedule.
E.2 Exception to literal interpretation
146. There is no comma in the English version of the sixth entry
of the Fourth schedule. Hence, there is nothing to suggest conclusively
(unlike the Hindi translation) that the ceiling of Rs 30,00,000 applies
G cumulatively to the sum of the base amount and variable amount.
147. The absence of a comma may be one indicator of the meaning
of a provision. However, in his seminal treatise on Principles of Statutory
Interpretation, Justice GP Singh has observed174 :
174
H Justice GP Singh, Principles of Statutory Interpretation (14th edition, LexisNexis)
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 777
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

“In England, before 1850, there was no punctuation in the A
manuscript copy of any Act which received the Royal assent;
therefore, the courts cannot have any regard to punctuation for
construing the older Acts. Even as regards more modern Acts, it
is very doubtful if punctuation can be looked at for purposes of
construction. The opinion on Indian statutes is not very much
B
different.”
148. Similarly, Bennion in his treatise on Statutory Interpretation
notes175 :
“16.8. Punctuation is a part of an Act and may be considered in
construing a provision. It is usually of little weight, however, since C
the sense of an Act should be the same with or without its
punctuation…Although punctuation may be considered, it will
generally be of little use since the sense of an Act should be the
same with or without it. Punctuation is a device not for making
meaning, but for making meaning plain. Its purpose is to denote
the steps that ought to be made in oral reading and to point out the D
sense. The meaning of a well-crafted legislative proposition should
not turn on the presence or absence of a punctuation mark.”
149. In Aswini Kumar Ghose v. Arabinda Bose 176 , a
Constitution Bench of this Court had to interpret provisions of the Bar
Councils Act 1926. A key submission was in reference to the presence E
of a comma before the word “or” in the non-obstante provision. Justice
B K Mukherjea in his judgment observed:
“56…Punctuation is after all a minor element in the construction
of a statute, and very little attention is paid to it by English courts.
Cockburn, C.J. said in Stephenson v. Taylor [(1861) 1 B & S p. F
101] : “On the Parliament Roll there is no punctuation and we
therefore are not bound by that in the printed copies”. It seems,
however, that in the Vellum copies printed since 1850 there are
some cases of punctuation, and when they occur they can be
looked upon as a sort of contemporanea exposition[See Craies on G
Statute Law, p. 185]. When a statute is carefully punctuated and
there is doubt about its meaning, a weight should undoubtedly be

175
Diggory Bailey and Luke Norbury, Bennion on Statutory Interpretation (7 th edition,
LexisNexis)
176
1953 SCR 1 H
778 SUPREME COURT REPORTS [2022] 10 S.C.R.

A given to the punctuation [Vide Crawford on Statutory Construction,
p. 343]. I need not deny that punctuation may have its uses in
some cases, but it cannot certainly be regarded as a controlling
element and cannot be allowed to control the plain meaning of a
text [Ibid].”
B Thus, Justice Mukherjea chose a middle-path where the learned
Judge admitted to the use of punctuation but held that it still cannot be a
controlling element in interpreting a provision.
150. Another Constitution Bench of this Court in Indore
Development Authority (LAPSE-5 J.) v. Manoharlal177, has noted
C its support of the use of punctuation as a tool of interpretation and cited
with approval the following extract from Taylor v. Caribou178:
“We are aware that it has been repeatedly asserted by courts and
jurists that punctuation is no part of a statute, and that it ought not
to be regarded in construction. This rule in its origin was founded
D upon commonsense, for in England until 1849 statutes were
entrolled upon parchment and enacted without punctuation…Such
a rule is not applicable to conditions where, as in this State, a Bill
is printed and is on the desk of every Member of the Legislature,
punctuation and all, before its final passage. There is no reason
why punctuation, which is intended to and does assist in making
E clear and plain the meaning of all things else in the English language,
should be rejected in the case of the interpretation of statutes.
“Cessante ratione legis cessat ipso lex”. Accordingly we find that
it has been said that in interpreting a statute punctuation may be
resorted to when other means fail…; that it may aid its
F construction…; that by it the meaning may often be determined;
that it is one of the means of discovering the legislative intent…;
that it may be of material assistance in determining the legislative
intention…”
Indeed, in Mohd. Shabir v. State of Maharashtra, a two-Judge
G Bench of this Court held that mere stocking was not an offence under
Section 27 of Drugs and Cosmetics Act 1940 due to the absence of a
comma after the word “stock”179.

177
(2020) 8 SCC 129
178
102 Me 401 : 67 A 2 (1907)
179
H (1979) 1 SCC 568
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 779
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

151. In the present case, the English version of the entry at Serial A
No 6 of the Fourth Schedule does not have any comma. Due to its
absence, it can be construed that the literal meaning of the provision is
that the ceiling should only apply to the variable amount. However,
Maxwell on The Interpretation of Statutes notes that the literal meaning
of a provision must be rejected when it goes manifestly against the
B
legislative intent behind the enactment180:
“WHERE the language of a statute, in its ordinary meaning and
grammatical construction, leads to a manifest contradiction of the
apparent purpose of the enactment, or to some inconvenience or
absurdity which can hardly have been intended, a construction
may be put upon it which modifies the meaning of the words and C
even the structure of the sentence. This may be done by departing
from the rules of grammar, by giving an unusual meaning to
particular words, or by rejecting them altogether, on the ground
that the legislature could not possibly have intended what its words
signify, and that the modifications made are mere corrections of D
careless language and really give the true meaning. Where the
main object and intention of a statute are clear, it must not be
reduced to a nullity by the draftsman's unskilfulness or ignorance
of the law, except in a case of necessity, or the absolute intractability
of the language used.”
E
Hence, in the present case, we must aim to ascertain the legislative
intent behind the Fourth Schedule.
E.3 Interpretation based on legislative intent
152. The Fourth Schedule was added to the Arbitration Act
pursuant to the Arbitration Amendment Act 2015, which in itself was F
based upon the recommendations in the LCI 246th Report (supra).
The Report referred to the judgment in Singh Builders (supra), which
raised the issue of arbitrators charging exorbitant fees:
“20. Another aspect referred to by the appellant, however requires
serious consideration. When the arbitration is by a tribunal G
consisting of serving officers, the cost of arbitration is very low.
On the other hand, the cost of arbitration can be high if the Arbitral
Tribunal consists of retired Judge(s).
180
P St J Langan, Maxwell on The Interpretation of Statutes (N M Tripathi Private Ltd,
1976) H
780 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 21. When a retired Judge is appointed as arbitrator in place of
serving officers, the Government is forced to bear the high cost
of arbitration by way of private arbitrator’s fee even though it had
not consented for the appointment of such non-technical non-
serving persons as arbitrator(s). There is no doubt a prevalent
opinion that the cost of arbitration becomes very high in many
B
cases where retired Judge(s) are arbitrators. The large number
of sittings and charging of very high fees per sitting, with several
add-ons, without any ceiling, have many a time resulted in the
cost of arbitration approaching or even exceeding the amount
involved in the dispute or the amount of the award.
C
22. When an arbitrator is appointed by a court without indicating
fees, either both parties or at least one party is at a disadvantage.
Firstly, the parties feel constrained to agree to whatever fees is
suggested by the arbitrator, even if it is high or beyond their
capacity. Secondly, if a high fee is claimed by the arbitrator and
D one party agrees to pay such fee, the other party, which is unable
to afford such fee or reluctant to pay such high fee, is put to an
embarrassing position. He will not be in a position to express his
reservation or objection to the high fee, owing to an apprehension
that refusal by him to agree for the fee suggested by the arbitrator,
E may prejudice his case or create a bias in favour of the other
party which readily agreed to pay the high fee.
23. It is necessary to find an urgent solution for this problem to
save arbitration from the arbitration cost. Institutional arbitration
has provided a solution as the arbitrators’ fees is not fixed by the
F arbitrators themselves on case-to-case basis, but is governed by
a uniform rate prescribed by the institution under whose aegis the
arbitration is held. Another solution is for the court to fix the fees
at the time of appointing the arbitrator, with the consent of parties,
if necessary in consultation with the arbitrator concerned. Third
is for the retired Judges offering to serve as arbitrators, to indicate
G
their fee structure to the Registry of the respective High Court so
that the parties will have the choice of selecting an arbitrator whose
fees are in their “range” having regard to the stakes involved.”
153. After noting the judgment in Singh Builders (supra), the
LCI 246th Report (supra) stated as follows:
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 781
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

“11. In order to provide a workable solution to this problem, the A
Commission has recommended a model schedule of fees and has
empowered the High Court to frame appropriate rules for fixation
of fees for arbitrators and for which purpose it may take the said
model schedule of fees into account. The model schedule of fees
are based on the fee schedule set by the Delhi High Court
B
International Arbitration Centre, which are over 5 years old, and
which have been suitably revised. The schedule of fees would
require regular updating, and must be reviewed every 3-4 years
to ensure that they continue to stay realistic.
12.The Commission notes that International Commercial
arbitrations involve foreign parties who might have different values C
and standards for fees for arbitrators; similarly, institutional rules
might have their own schedule of fees; and in both cases greater
deference must be accorded to party autonomy. The Commission
has, therefore, expressly restricted its recommendations in the
context of purely domestic, ad hoc, arbitrations.” D
As a means of controlling the rising fees of arbitrators, the Law
Commission proposed a model fee schedule based on the one used by
the DIAC. Schedule B of the DIAC Rules provides that when the sum
in dispute is above Rs 20,00,00,000, the fees shall be “Rs.19,87,500/- +
0.5% of the claim amount over and above Rs.20 crores, with a ceiling of E
Rs.30,00,000/-”. Evidently, the DIAC Rules have a comma, which would
mean that the ceiling would have been applicable to the base amount
and the variable amount.
154. In Mithilesh Kumari v. Prem Behari Khare181, a two-
Judge Bench of this Court held that, depending on the facts and F
circumstances of each case, law commission reports preceding
enactments of statutes can be relied on as an aid in interpretation.
Speaking for the Bench, Justice K N Saikia held:
“15…where a particular enactment or amendment is the result of
recommendation of the Law Commission of India, it may be G
permissible to refer to the relevant report as in this case. What
importance can be given to it will depend on the facts and
circumstances of each case.”

181
(1989) 2 SCC 95 H
782 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 155. The LCI 246th Report (supra), indicates that the legislative
intent behind the introduction of the Fourth Schedule was to put an end
to the practise of arbitrators charging exorbitant fees from the parties
taking their services in ad hoc arbitrations. Consequently, when we have
the option of setting the ceiling of the fees in the Fourth Schedule at
either Rs 30,00,000 or Rs 49,87,500, we believe that it would be
B
appropriate to choose the lower amount since it would be in keeping
with legislative intent. The 2015 Arbitration Amendment Act was clearly
enacted with the intent to give effect to the recommendation of the LCI
246th Report on the point. Thus, we hold that the ceiling of Rs 30,00,000
in entry at Serial No 6 of the Fourth Schedule is applicable to the sum of
C base amount and the variable amount, and not just the variable amount.
F Ceiling applicable to individual arbitrators
156. The final submission made before this Court was that the
ceiling of Rs 30,00,000 prescribed in the entry at Serial No 6 of the
Fourth Schedule will be applicable to the cumulative fee paid to the
D entire arbitral tribunal, i.e., in a three-member tribunal, each individual
arbitrator would receive a fee of Rs 10,00,000.
157. Such a submission is erroneous, and hence we must reject
it.First, there is nothing in the language of the Fourth Schedule to support
such an interpretation. The header of the third column states “Model
E Fee” and does not specify it to be in respect of the whole tribunal. Second,
if such an interpretation were to be adopted, it would lead to absurd
consequences. For instance, in an arbitration where the sum in dispute is
large enough to trigger the ceiling of Rs 30,00,000 and it were to be
adjudicated by a three-member tribunal, the maximum fee would have to
F be divided amongst the three arbitrators. On the other hand, if the same
dispute were to be adjudicated by a sole arbitrator, the sole arbitrator
would then receive the whole amount of the maximum fee, i.e., triple of
what each individual arbitrator would have received in a three-member
tribunal. Such a disparity is inconceivable, regardless of the extra work a
sole arbitrator may have to put in. This is further bolstered by the Note to
G the Fourth Schedule, which states that “[i]n the event the arbitral tribunal
is a sole arbitrator, he shall be entitled to an additional amount of twenty-
five per cent on the fee payable as per the above”. Consequently, the sole
arbitrator would not only receive Rs 30,00,000, but an additional 25 per
cent over and above it. Indeed, it is clear that the Note was added to the
H Fourth Schedule to fairly compensate sole arbitrators who arguably would
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 783
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

have to do more work than as a member of a larger tribunal; which is why A
they are allowed payment of 25 per cent of the fee over and above what
they would be paid pursuant to the table given in the Fourth Schedule. The
corollary of this is that the fee provided in Fourth Schedule is for each
individual arbitrator, regardless of whether they are a member of a multi-
member tribunal or a sole arbitrator. Finally, this interpretation of the Fourth
B
Schedule, that the fee provided therein is applicable for each individual
arbitrator and not the whole arbitral tribunal, has also been fairly conceded
before this Court by the learned Attorney General.
G Conclusion
G.1 Findings C
158. We answer the issues raised in this batch of cases in the
following terms:
(i) Arbitrators do not have the power to unilaterally issue binding
and enforceable orders determining their own fees. A
unilateral determination of fees violates the principles of D
party autonomy and the doctrine of the prohibition ofin rem
suam decisions, i.e., the arbitrators cannot be a judge of
their own private claim against the parties regarding their
remuneration. However, the arbitral tribunal has the
discretion to apportion the costs (including arbitrators’ fee E
and expenses) between the parties in terms of Section 31(8)
and Section 31A of the Arbitration Act and also demand a
deposit (advance on costs) in accordance with Section 38
of the Arbitration Act. If while fixing costs or deposits, the
arbitral tribunal makes any finding relating to arbitrators’
fees (in the absence of an agreement between the parties F
and arbitrators), it cannot be enforced in favour of the
arbitrators. The arbitral tribunal can only exercise a lien
over the delivery of arbitral award if the payment to it
remains outstanding under Section 39(1). The party can
approach the court to review the fees demanded by the G
arbitrators if it believes the fees are unreasonable under
Section 39(2);
(ii) Since this judgment holds that the fees of the arbitrators
must be fixed at the inception to avoid unnecessary litigation
and conflicts between the parties and the arbitrators at a
H
784 SUPREME COURT REPORTS [2022] 10 S.C.R.

A later stage, this Court has issued certain directives to govern
proceedings in ad hoc arbitrations in Section C.2.4;
(iii) The term “sum in dispute” in the Fourth Schedule of the
Arbitration Act refers to the sum in dispute in a claim and
counter-claim separately, and not cumulatively.
B Consequently, arbitrators shall be entitled to charge a
separate fee for the claim and the counter-claim in an ad
hoc arbitration proceeding, and the fee ceiling contained in
the Fourth Schedule will separately apply to both, when the
fee structure of the Fourth schedule has been made
applicable to the ad hoc arbitration;
C
(iv) The ceiling of Rs 30,00,000 in the entry at Serial No 6 of
the Fourth Schedule is applicable to the sum of the base
amount (of Rs 19,87,500) and the variable amount over and
above it. Consequently, the highest fee payable shall be Rs
30,00,000; and
D
(v) This ceiling is applicable to each individual arbitrator, and
not the arbitral tribunal as a whole, where it consists of
three or more arbitrators. Of course, a sole arbitrator shall
be paid 25 per cent over and above this amount in
accordance with the Note to the Fourth Schedule.
E
G.2 Directions
159. We issue the following directions in each of the cases before
this Court:
(i) In respect of Arbitration Petition (Civil) No 5 of 2022, a fee
F schedule for the arbitrators was already prescribed in the
LSTK contract. However, during the preliminary meeting
on 25 November 2015, the arbitral tribunal observed that
the fee schedule in the LSTK contract was unrealistic. While
Afcons agreed to revise the fees, ONGC expressed its
disagreement. The tribunal directed ONGC to consider
G
revising the fees. On 16 April 2016,the arbitral tribunal
informed ONGC that it would no longer bargain on the
amount of fees if ONGC was agreeable to the fee provided
in the Fourth Schedule to the Arbitration Act, along with a
reading fee of Rs 6 lakhs for each arbitrator. By its letter
H dated 22 April 2016, ONGC indicated that it was agreeable
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 785
GUNANUSA JV [DR. DHANANJAYA Y CHANDRACHUD, J.]

to revising the fees in terms of the Fourth Schedule. It only A
objected to the reading fee. Subsequently, the arbitral tribunal
passed a procedural order dated 4 August 2016 directing
the parties to deposit 25 per cent of the arbitrators’ fee,
which was recorded as Rs 30 lakhs. It seems a ceiling of
Rs 30 lakhs was determined following the Fourth Schedule
B
to the Arbitration Act. However, the arbitral tribunal then
unilaterally decided to revise the fees and passed a
procedural order fixing a fee of Rs 1.5 lakhs for each
arbitrator for every sitting of a three-hour duration. The
tribunal also indicated it may also charge a reading or
conference fee, which would be decided at a later stage. C
By an order dated 25 July 2019, the arbitral tribunal adjusted
its fees to Rs 1 lakh per sitting. Around 54 sittings have
been held in terms of the arbitral tribunal’s order dated 25
July 2019. In this background, it is evident that there was
no consensus between the parties and the arbitrators
regarding the fee that is to be paid to the members of the D
arbitral tribunal. Allowing the continuance of the arbitral
tribunal would mean foisting a fee upon the parties and the
arbitral tribunal to which they are not agreeable. In view of
our directives in Section C.2.4 and the facts noted earlier,
we exercise our powers under Article 142 of the Constitution E
of India and direct the constitution of a new arbitral tribunal
in accordance with the arbitration agreement. For this
purpose, Arbitration Petition (C) No. 5 of 2022 would be
listed for directions before this Court on 21 September 2022.
The above directions should not be construed as a finding
on the conduct of the arbitration proceedings. These F
directions are an attempt to ensure that the arbitral
proceedings are conducted without rancour which may
derail the proceedings. In consonance with our findings,
the fee payable to the earlier arbitral tribunal would be the
fee payable in terms of the Fourth Schedule of the Arbitration G
Act. Though the Fourth Schedule is per se not applicable to
an international commercial arbitration, since ONGC had
indicated (following the suggestion of the arbitral tribunal)
that it would be agreeable to pay the fee payable in terms
of Schedule, it cannot now take recourse to the arbitration
agreement between the parties to pay a lesser fee. We H
786 SUPREME COURT REPORTS [2022] 10 S.C.R.

A further clarify that if the fee in excess of the amount payable
under the Fourth Schedule has been paid to the members
of the arbitral tribunal, such amount will not be recovered
from them;
(ii) The civil appeal arising out of Special Leave Petition (Civil)
B No 13426 of 2021 is dismissed and the judgment of the
Single Judge of the Delhi High Court dated 6 August 2021
is upheld;
(iii) The civil appeal arising out of Special Leave Petition (Civil)
No 10358 of 2020 is allowed and the judgment of the Single
C Judge of the Delhi High Court dated 10 July 2020 is set
aside; and
(iv) Miscellaneous Application Nos 1990-1991 of 2019are
dismissed.
160. Before parting, we would like to place on record our sincere
D appreciation for the submissions made by the amicus curiae, Mr Huzefa
Ahmadi who was ably assisted by Ms Anushka Shah.
161. Pending applications, if any, stand disposed of.

E SANJIV KHANNA, J.
Reason and cause for my separate judgment.
This is an unfortunate litigation wherein one or both parties have
questioned the legitimacy and reasonableness of the fee claimed by the
arbitral tribunal.
F
2. While I am entirely in agreement with the considered view
expressed by esteemed brother D.Y. Chandrachud, J. that –(a) party
autonomy and arbitration agreement are the foundation of the arbitral
process, and therefore, when the parties fix the fee payable to the arbitral
tribunal, the law does not permit the arbitral tribunal to derogate and ask
G for additional or higher fee; (b) where the court while appointing an
arbitrator fixes the fee, the arbitral tribunal cannot ask for supplementary
or higher fee; and (c) in both cases, the fee payable to the arbitral tribunal
may be enhanced either by a written agreement between the parties or
by a court order. However, I am unable to concur that in the absence of
H any agreement between the parties, or the parties and the arbitral tribunal,
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 787
GUNANUSA JV [SANJIV KHANNA, J.]

or a court order fixing the fee, the arbitral tribunal is not entitled to fix A
the fee, as I am of the opinion that by the implied terms of the contract
and as per the provisions of the Arbitration and Conciliation Act, 19961,
an arbitral tribunal can fix a reasonable fee, which an aggrieved party,
who is not a signatory to the written agreement, can question under sub-
section (3) of Section 39 of the A&C Act during the pendency of the
B
arbitration proceedings, or in case the arbitral tribunal claims lien on the
award in terms of sub-section (2) to Section 39 of the A&C Act. At the
same time, I respectfully agree with brother D.Y. Chandrachud, J., that
when an arbitral tribunal, even in the absence of consent of the parties,
fixes the fee in terms of the Fourth Schedule2, the parties should not be
permitted to object the fee fixation. The Fourth Schedule is the default C
fee, declared by the legislature as fair and reasonable, which can be
changed by mutual consensus, and not otherwise. Further, post the
enforcement of the Arbitration Amendment Act, 2019 vide Act 33 of
2019 on 30th August 2019, and insertion of sub-section (3A) to Section
11, the proviso to the sub-section states that the fee prescribed in the
Fourth Schedule is mandatory and applies to all arbitrations including ad D
hoc arbitrations, albeit in case of institutional arbitrations, as per sub-
section (14) to Section 11 of the A&C Act, the fee fixed by the institution
“subject to the rates specified in the Fourth Schedule” would be payable.
3. On interpretation of the Fourth Schedule, I respectfully agree
with the view expressed by learned D.Y. Chandrachud J. on interpretation E
of Serial No.6 and that the fee prescribed is for each member of the
arbitral tribunal, with a note providing for an additional amount of twenty
five percent in case of a sole/single member arbitral tribunal. Even so,
on these aspects I would like to give a separate reasoning, as also point
anomalies in the Fourth Schedule. However, in my opinion, the expression F
“sum in dispute” means the sum total of both the claims and counter
claims.
Background of the problem of high cost of arbitration, the
legislative history and remedial changes in the Arbitration and
Conciliation Act, 1996.
G
4. The issue of skyrocketing costs of arbitration has been a subject
of concern and lament in two decisions of this Court in Union of India

1
For short, the ‘A&C Act’.
2
The fee schedule fixed under Section 11(14) or Section 11(3A) , as the case may be, of
the A&C Act. H
788 SUPREME COURT REPORTS [2022] 10 S.C.R.

A v. Singh Builders Syndicate3 and Sanjeev Kumar Jain v. Raghubir
Saran Charitable Trust and Others.4 The Court in Singh Builders
Syndicate (supra) judicially noticed the prevalent opinion that the cost
of arbitration becomes very high when retired judges are appointed as
arbitrators. A large number of sittings, fee being charged on a “per sitting”
basis, and several other add-ons without any ceiling contribute to the
B
cost of arbitration approaching or even at times exceeding the amount
involved in the dispute or the award amount. When an arbitrator is
appointed by the Court without prior fixation of fee, either of the parties
might be at a disadvantage as they feel invariably compelled to agree to
whatever fee is suggested by the arbitrator, even if it is extravagant and
C beyond their paying capacity. Secondly, in the event one party agrees to
pay such a fee, the other party who is unable to afford or reluctant to
pay such a fee is put in an embarrassing position. The party may be
disinclined to express reservation or object to the high fee owing to the
apprehension that this may prejudice his case or create a bias in favour
of the other party. The decision in Sanjeev Kumar Jain (supra) refers
D
to the statutory provisions of the A&C Act, namely, Section 31(8), as it
existed, dealing with costs of arbitration, and the explanation that defines
the expression ‘costs’ to mean reasonable costs relating to (i) the fees
and expenses of arbitrators and witnesses, (ii) legal fee and expenses
(iii) any administration fee of the institution supervising the arbitration,
E and (iv) other expenses incurred in connection with the arbitration
proceedings and the arbitral award. Interpreting Section 11 of the A&C
Act which deals with the appointment of an arbitrator, the Court opined
that the word ‘appointment’ not only means nominating or designating a
person who will act as an arbitrator, but is wide enough to encompass
stipulating terms on which he is appointed. Therefore, it is open to the
F
Court, at the time of appointment of an arbitrator under Section 11, to
stipulate the fees payable to the tribunal. This, the court commended,
should be done after hearing the parties, and if necessary, after
ascertaining the fee structure from the prospective arbitrators, to avoid
the situation where the parties have to negotiate the terms of the fee
G after the appointment of the arbitral tribunal. The judgment adverts to
institutionalised arbitration as the preferred mode as fixed fee is
prescribed by the institution under whose aegis the arbitration is held,
viz.ad hoc arbitrations, where the arbitrators are appointed by the parties
3
(2009) 4 SCC 523
4
H (2012) 1 SCC 455
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 789
GUNANUSA JV [SANJIV KHANNA, J.]

with or without the intervention of the court, albeit in the absence of any A
agreement between the parties on the procedure to be followed, the
arbitral tribunal, subject to Part 1 of the A&C Act, conducts the
proceedings in the manner it deems appropriate.5 Referring to the ad
hoc arbitrations in India, the Court judicially acknowledged that frequent
complaints regarding the cost of arbitration, including high fees charged
B
by arbitrators, have adversely affected the efficiency and effectiveness
of arbitration. While some of the criticism may be harsh as it would be
wrong to state that there is a universalisation of stray aberrations, the
court observes that these are still matters of concern and the remedy for
healthy development of arbitration in India is to disclose the fee structure
before the appointment of the arbitrators so that any party which is C
unwilling to bear such expenses can express its unwillingness.
Consequently, the judgment ennobles and leans towards institutionalised
or ad hoc arbitration, where the arbitrator’s fee is prefixed. Another
remedy that the court suggested is for each High Court to have a scale
of arbitrator’s fee, suitably calibrated with reference to the amount in
dispute. These steps, the Court felt, would make arbitration attractive to D
the litigant public. Reasonableness and certainty regarding the total costs
are the key to the development of arbitration.
5. The 246th Report of the Law Commission of India dated 5th
August 2014, under the heading ‘Fees of Arbitrators’, highlighted the
problem of high costs, especially associated with ad hoc arbitrations, E
and the complaint that several arbitrators arbitrarily and unilaterally fix
disproportionate fees. To counter this, the Law Commission suggested a
mechanism to rationalise the fee structure for arbitration by
recommending a model schedule of fees. The Report nevertheless
accepted that different values and standards of fees may be payable in
F
international commercial arbitrations. The Report adversely commented
on the ‘per sitting’ basis on which fee is charged in ad hoc arbitrations,
sometimes with 2-3 sittings a day in the same matter between the same
parties, and that costs further increase by continuation of proceedings
for years since the dates are spread over a long period of time. The
Commission suggested the model schedule of fee that should be inserted G
in the A&C Act.

5
The observations on ad hoc arbitration are my observations with reference to sub-
sections (2) and (3) to Section 19 of the A&C Act, which postulate that the arbitral
tribunal, subject to the agreement between the parties, is entitled to conduct the
proceedings in the manner it considers appropriate. H
790 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 6. In view of the recommendations made by the Law Commission,
the A&C Act was amended effective from23rd October 2015, vide Act
No. 3 of 2016, with the insertion of the Fourth Schedule to the A&C Act,
exemplifying a schedule of fee payable to the arbitrators. Sub-section
(14) to Section 11was enacted, and read thus:
B “(14) For the purpose of determination of the fees of the arbitral
tribunal and the manner of its payment to the arbitral tribunal, the
High Court may frame such rules as may be necessary, after
taking into consideration the rates specified in the Fourth Schedule.
Explanation.– For the removal of doubts, it is hereby clarified
C that this sub-section shall not apply to international commercial
arbitration and in arbitrations (other than international commercial
arbitration) in case where parties have agreed for determination
of fees as per the rules of an arbitral institution.”
The fee structure in the Fourth Schedule was to serve as a guide
D for the different High Courts to frame rules determining the fee payable
to the arbitral tribunals. However, most of the High Courts did not frame
rules under Section 11(14) for the purpose of determination of fee and
the manner of payment to the arbitral tribunal.6 Further, the rules, as
framed by the High Courts, except for the High Court of Kerala, are
applicable when the arbitrators are appointed by the Court or the parties
E by agreement or mutual consent agree to be governed by the applicable
rules. Resultantly, the desired purpose of Section 11(14) has not been
met, and remains unrealised.
7. Based on the High Level Committee Report dated 30th July
2017, vide Act No. 33 of 2019, a number of significant amendments
F were made to the A&C Act to promote and establish the culture of
institutional arbitration. The relevant amendments, for our purpose, include
the amendment to Section 2(1), by inserting clause (ca) which defines
the expression “arbitral institution” as “an arbitral institution designated
by the Supreme Court or a High Court under this Act”. PartIA consisting
G of Sections 43A to 43M have been inserted for the establishment and
incorporation of an Arbitration Council of India, with Section 43D
prescribing duties and functions of the said Council, which include framing
policies governing gradation of arbitral institutions, recognising professional
6
High Courts of Kerala, Madhya Pradesh, Delhi, Punjab and Haryana, Rajasthan,
H Karnatakaand Madras have framed rules.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 791
GUNANUSA JV [SANJIV KHANNA, J.]

institutes providing accreditation of arbitrators, review or grading of A
arbitral institutions or arbitrators, making recommendations to the Central
Government on various measures to be adopted and to make provisions
for easy resolution of commercial disputes. Simultaneously, sub-section
(3A) to Section 11 has been inserted and reads:
“(3A) The Supreme Court and the High Court shall have the power B
to designate, arbitral institutions, from time to time, which have
been graded by the Council under section 43-I, for the purposes
of this Act:
Provided that in respect of those High Court jurisdictions, where
no graded arbitral institution are available, then, the Chief Justice C
of the concerned High Court may maintain a panel of arbitrators
for discharging the functions and duties of arbitral institution and
any reference to the arbitrator shall be deemed to be an arbitral
institution for the purposes of this section and the arbitrator
appointed by a party shall be entitled to such fee at the rate as
D
specified in the Fourth Schedule:
Provided further that the Chief Justice of the concerned High
Court may, from time to time, review the panel of arbitrators.”
Corresponding substitutions/insertions have been made in sub-
sections (4), (5), (6), (8) and (9) to Section 11 to provide for and give E
effect to the provisions that appointment of an arbitrator shall be made
on an application of a party by the arbitral institution designated by the
Supreme Court in the case of international commercial arbitration or by
the High Court in other cases. Sub-section (11) to (14) to Section 11 as
substituted read:
F
“(11) Where more than one request has been made under sub-
section (4) or sub-section (5) or sub-section (6) to different arbitral
institutions, the arbitral institution to which the request has been
first made under the relevant sub-section shall be competent to
appoint.
G
(12) Where the matter referred to in sub-sections (4), (5), (6) and
(8) arise in an international commercial arbitration or any other
arbitration, the reference to the arbitral institution in those sub-
sections shall be construed as a reference to the arbitral institution
designated under sub-section (3A).
H
792 SUPREME COURT REPORTS [2022] 10 S.C.R.

A (13) An application made under this section for appointment of an
arbitrator or arbitrators shall be disposed of by the arbitral institution
within a period of thirty days from the date of service of notice on
the opposite party.
(14) The arbitral institution shall determine the fees of the arbitral
B tribunal and the manner of its payment to the arbitral tribunal subject
to the rates specified in the Fourth Schedule.”
8. However, even after the lapse of nearly three years, the
Arbitration Council of India has not been fully operationalised, and Part
IA, dealing with the Arbitration Council of India, from Sections 43A to
C 43M, have not been enforced. The substituted provisions of sub-sections
(11) to (14) to Section 117 of the A&C Act, which came into force on
30th August 2019 vide SO No. 3154(E) dated 30th August 2019, have
been effectively only partially enforced and implemented. However, on
the positive side, I would record that several High Courts have taken
concerted steps to establish and refer matters to the court adjunct
D arbitration centres. Despite these efforts, ad hoc arbitrations have
continued and hold the field as they were prior to the enactment and
enforcement of Act No. 33 of 2019. Therefore, the amendments made
by Act No. 33 of 2019 have been somewhat a non-starter and thus, the
shift envisaged by the legislature from ad hoc arbitration to institutional
E arbitration has not been accomplished.
The legal issues required to be adjudicated.
9. The question of quantum of fee payable to the arbitrators can
be broadly divided into three categories: (i) institutionalised arbitration
where the fee payable to the arbitrator is governed by the prescribed
F fee schedule. In the present petition/appeals, we are not concerned with
such cases8; (ii) ad hoc arbitrations where (a) the fee is prescribed in
the agreement between the parties, (b) where the fee is fixed by the
court while appointing the arbitral tribunal, (c) where no fee is prescribed
in the agreement between the parties, or where the court while appointing
G the arbitral tribunal does not fix the fee or permits the arbitral tribunal to
fix the fee ; and (iii) where the arbitration fee is prescribed and governed
by the Fourth Schedule to the A&C Act.

7
Including newly inserted sub-section (3A) to Section 11 of the A&C Act.
8
The legal effect of the substituted sub-section (14) to Section 11 vide Act 33 of 2019
H requires elucidation for the present decision and has been interpreted.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 793
GUNANUSA JV [SANJIV KHANNA, J.]

10. While deciding questions relating to the second category, I A
would refer to and interpret the statutory provisions pre and post
Amendment Act No.3 of 2016 and Amendment Act No.33 of 2019, and
elucidate on the rights of the parties/ litigants in the fee fixation. In the
second portion of my judgment, I would examine and interpret the Fourth
Schedule.
B
Who decides the fee payable to the Arbitral Tribunal?
(a) Where fee payable is fixed by an agreement between the
parties, or by a court order.
11. Arbitration is contract centric and is structured on party
autonomy. The parties are free to agree upon the procedure on conduct C
of the arbitration, which includes the right to fix the fee payable to the
arbitrator. While the relationship between the parties and the arbitrator
is based on the contract, the arbitrator’s status as ade-jure adjudicator
stems directly from the law. The relationship between the parties and
the arbitral tribunal is both contractual and statutory. Consequently, an D
arbitral tribunal, in addition to the contractual terms, must abide by the
rules and procedure that are bare essential pre-requisites of any dispute
resolution system.9 In Sanjeev Kumar Jain (supra), this court has held
that when a court appoints an arbitrator, and also fixes the fee, whether
in terms of the Fourth Schedule or otherwise, the fee is binding on the
arbitrator/tribunal. The arbitral tribunal, while accepting an appointment, E
must accept the remuneration as fixed by the parties or as determined in
the court order appointing the tribunal. Russell pertinently observes that
the appointment of an arbitrator is a matter of contract, subject to
mandatory provisions of the statute An arbitrator will not be usually entitled
to increase his fee and expenses unless his agreement with the parties F
allows him to do so.10 The arbitrators should not exceed their authority,
either under the terms of the arbitration agreement fixing their fee, or
under their powers in law, which does not permit them to rewrite the
agreement or ignore the court order fixing the fee. It follows that the

9
Julian D.M. Lew , Loukas A. Mistelis , et al., Comparative International Commercial
G
Arbitration, ‘Chapter 12 Rights and Duties of Arbitrators and Parties’, pp. 276 - 277
10
Russell on Arbitration (24th Edition). Russell also observes that attempts to increase
fee have led to allegation of bias against the arbitrators and of what used to be called
‘misconduct’, and if pursued unreasonably, would lead to an application for removal of
an arbitrator or even challenge to an award made by him because of the breach of duty
to avoid unnecessary expense. H
794 SUPREME COURT REPORTS [2022] 10 S.C.R.

A arbitral tribunal, during the proceedings, is not entitled to unilaterally
increase its fee, unless the agreement on which it is constituted allows it
to do so, or all parties voluntarily agree to enhancement. Where fee is
fixed by a court order, the arbitral tribunal may approach the court for
modification/increase in the fee by giving reasons justifying the same.
Unilateral increase is unacceptable, as explained in the judgment by
B
D.Y.Chandrachud J. and in my opinion this would violate the provisions
of the A&C Act. This principle applies to institutional arbitration, as an
arbitrator/tribunal so appointed is bound by the rules of the institution
and must abide by the terms of appointment. Where an arbitral tribunal
solicits higher fees, an aggrieved party, in my opinion, as explained below,
C can approach the court for appropriate orders under sub-sections (2) or
(3) to Section 39 of the A&C Act.
(b) Where fee is not fixed by a court order, or an agreement
between the parties.
12. There is considerable jurisprudence and legal opinion which
D accepts that in the absence of an agreement or consensus between the
parties, or a court order fixing the fee, the arbitral tribunal is entitled to
fix the fee payable for conducting the arbitration, albeit the fee so fixed
should be fair and reasonable. Robert Merkin11 states that, where the
agreement between the parties or with the arbitrator is silent as to the
E fee, the arbitrator is nevertheless entitled to reasonable fee based either
on an implied term in the agreement, or on the application of the principle
of quantum meruit. Reasonable fee and expenses appropriate in such
circumstances can be determined by the arbitrator. Professor Sundra
Rajoo,12 while accepting that the fee of the arbitrator is an important
consideration when the parties contemplate arbitrating a dispute, agrees
F that it is common in ad hoc arbitration proceedings for the arbitral tribunal
to fix its own fee.13 He observes that, if the parties cannot agree on the
remuneration in advance, the arbitral tribunal is ordinarily entitled to
reasonable remuneration on quantum meruit basis for the value of the
work actually done. Russell, in his work,14 observes that where there is
no express agreement with the arbitrator, the arbitrator may also have
G
11
Robert Merkin QC, LLD, “Arbitration Law”, Service Issue No.83, November 2019.
12
Datuk Professor Sundra Rajoo, Law, Practice and Procedure of Arbitration (Second
Edition), 2016, at pg.341 and 346, paragraphs 24.4 and 24.7.
13
Reference is made to Michael Mcilwrath and John Savage, International Arbitration
and Mediation: A Practical Guide, (2010) at p.267, para 5-112.
14
H Russell on Arbitration, 24 th Edition, pgs. 150 and 152, paragraphs 4-052 and 4-056.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 795
GUNANUSA JV [SANJIV KHANNA, J.]

the right to payment of reasonable fees under a contract implied by A
conduct in circumstances where a party participates in the arbitration,
even if that party disputes the jurisdiction of the tribunal. Referring to
the English Arbitration Act, 1996, he states that the enactment provides
that the parties are jointly and severally liable to pay to the arbitrators
such reasonable fee and expenses. The level of fee may be agreed
B
directly with the arbitral tribunal, which normally occurs in ad hoc
arbitration. However, in the absence of any established arrangement, it
is desirable that the parties and the tribunal should negotiate and agree
on the fee payable beforehand, which must be reasonable. Gary B.
Born,15 referring to the 2010 UNICITRAL Rules, observes that where
the parties do not discuss a method of calculation of the arbitrator’s C
remuneration, the arbitrator is entitled to a reasonable fee. What is
‘reasonable’ depends on the facts and on what the national systems
prescribe. This includes judicial assessment of the appropriate amount, 16
an aspect which Iwould elucidate subsequently. The model law adopted
by the UNCITRAL on International Commercial Arbitration recognises
D
that the arbitrators must be compensated for their services and this flows
from the contractual relationship between the parties and the arbitrator,
as well as customary practices. The 1976 UNCITRAL Rules had
expressly allowed the arbitrators to determine their own fee, which should
be reasonable, taking into account the sum in dispute and the complexity
of the dispute. Further, the rules require the arbitrators take into account E
the schedule of the fee that has been issued or provided by an appointing
authority, if designated by the parties. The 1976 UNICTRAL rule position
was criticised as granting arbitrators undue authority to determine their
compensation. The revised rules issued in 2010, while continuing with
the substantial role to the arbitrators in deciding the ‘reasonable’ fee,
F
requires the arbitrators to inform the parties as to how it proposes to
determine its fee and expenses promptly after its constitution. Thereby
the process of determining the fee ismadetransparent. The fee set by
the arbitrators can be reduced if it is not reasonable and challenged
within the prescribed period by the party moving to the appointing/
designated authority, and in absence of designated authority, the review G
is undertaken by the Secretary General of the Permanent Court of
Arbitration.

15
‘International Commercial Arbitration’, 2 nd Edition, 2914 @ paragraph 13.04.
16
Julian D.M. Lew , Loukas A. Mistelis , et al., Comparative International Commercial
Arbitration, ‘Chapter 12 Rights and Duties of Arbitrators and Parties’, pp. 2167-2173 H
796 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 13. I would now turn my attention to the statutory provisions of
the A&C Act, and would state that my attention has not been drawn to
any provision which expressly or by necessary implication barsan arbitral
tribunal from determining its fee, or to infer that the prohibition of nemo
judex in causa sua (judge in your own cause) applies to arbitrations in
India. Section 517 of the A&C Act states that in matters governed by
B
Part 1, no judicial authority shall intervene except when provided in Part
1. Therefore, unless a provision in Part 1 of the A&C Act confers
jurisdiction on the court in respect of the matter, by inference the subject-
matter would fall within the implied jurisdiction of the arbitral tribunal.
Section 2(6) of the A&C Act states that where Part 1, except for Section
C 28, leaves the parties to determine a certain issue, that freedom shall
authorise any person, including the arbitral tribunal, to determine that
issue18. Sub-section (2) to Section 1919 states that subject to provisions
of Part 1, the parties are free to agree on the procedure to be followed
by the arbitral tribunal. Sub-section (3) to Section 1920 states that where
the parties fail to reach an agreement, subject to adhering to the provisions
D
of Part 1, the arbitral tribunal is entitled to conduct the proceedings in the
manner it considers appropriate. It follows that, where the parties do not
agree on the fee, or the court while appointing an arbitral tribunal does
not fix the fee, the arbitral tribunal by implication is authorised to fix the
fee, which should be reasonable.
E 14. I would respectfully agree with D.Y. Chandrachud J. that the
process of fixation of fee by the arbitral tribunal should be in accordance
with public policy underlying arbitration, that is, with agreement and
consensus of the parties who bear the cost of arbitration. The arbitral
tribunal should be transparent and disclose the fee structure and terms
F of payment at the preliminary stage, so that an unwilling party can express

17
“5. Extent of judicial intervention.—Notwithstanding anything contained in any
other law for the time being in force, in matters governed by this Part, no judicial
authority shall intervene except where so provided in this Part.”
18
Section 2(6) reads: “(6) Where this Part, except section 28, leaves the parties free to
G determine a certain issue, that freedom shall include the right of the parties to authorise
any person including an institution, to determine that issue.”
19
Section 19(2) reads: “(2) Subject to this Part, the parties are free to agree on the
procedure to be followed by the arbitral tribunal in conducting its proceedings.”
20
Section 19(3) reads: “(3) Failing any agreement referred to in sub-section (2), the
arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it
H considers appropriate.”
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 797
GUNANUSA JV [SANJIV KHANNA, J.]

its unwillingness. No party should feel compelled to agree and therefore, A
it is necessary that the consent of the parties in writing should be taken.
This exercise undertaken at the initial stage would avoid embarrassing
situations and prevent delay and litigation. The suggestion in Sanjeev
Kumar Jain (supra) that the parties before nomination should ascertain
the fee structure from the prospective arbitrators is salutary. At the same
B
time, I would accept that fee fixation is a matter of the procedure and
relates to conduct of arbitration, and for reasons supra and as held below,
is an obligation as well as a right conferred on the arbitral tribunal.
Therefore, even in cases where consensus between the parties or with
the arbitral tribunal is not possible, the arbitral tribunal is entitled to fix
the professional fee payable for adjudication, as without fee fixation, C
except in cases of pro bono arbitration, the arbitral tribunal would be
unable to proceed further to decide and adjudicate the disputes. It goes
without saying that the fee so fixed should be fair and reasonable.21
15. I would now proceed to examine the specific provisions which,
according to me, make the legal position clear as they empower an arbitral D
tribunal to fix its fee. Sub-section (8) to Section 31,22 as originally enacted
before its substitution by Act No. 3 of 2016, had stipulated that unless
otherwise agreed by the parties, the arbitral tribunal shall fix the cost of
arbitration. The explanation to this Section clarified that the expression
‘costs’, for the purpose of the sub-section, means reasonable costs
E
21
The term ‘reasonable’ has been used in the explanation to the pre-amended sub-
section (8) to Section 31, and post-amendment Section 31A of the A&C Act, preceding
the word ‘costs’. Sub-section (2) to Section 39 also provides for costs, by way of a sum
that the court may consider ‘reasonable’, to be paid to the arbitral tribunal if, after
necessary inquiry, the court thinks it fit.
22
“(8) Unless otherwise agreed by the parties, –– F
(a) the costs of an arbitration shall be fixed by the arbitral tribunal;
(b) the arbitral tribunal shall specify––
(i) the party entitled to costs,
(ii) the party who shall pay the costs,
(iii) the amount of costs or method of determining that amount, and
(iv) the manner in which the costs shall be paid.
Explanation.––For the purpose of clause (a), “costs” means reasonable costs relating
G
to––
(i) the fees and expenses of the arbitrators and witnesses,
(ii) legal fees and expenses,
(iii) any administration fees of the institution supervising the arbitration, and
(iv) any other expenses incurred in connection with the arbitral proceedings and the
arbitral award.” H
798 SUPREME COURT REPORTS [2022] 10 S.C.R.

A relating to the fees and expenses of the arbitrator and the witnesses.23
The sub-section emphasised that the agreement between the parties is
paramount and binding. The arbitral tribunal is entitled to fix costs of
arbitration, which includes the fee and expenses of the arbitrator, if the
agreement between the parties is wordless and silent as to the fee payable
to the arbitral tribunal.
B
16. Post enforcement of Act No. 3 of 2016, sub-section (8) to
Section 31 states that the cost of arbitration shall be fixed by the arbitral
tribunal in accordance with Section 31A of the A&C Act. Section 31A,
as inserted by Act No. 3 of 2016 and applicable with retrospective effect
from 23rd October 2015, reads:
C
“31A. Regime for costs.––(1) In relation to any arbitration
proceeding or a proceeding under any of the provisions of this
Act pertaining to the arbitration, the Court or arbitral tribunal,
notwithstanding anything contained in the Code of Civil Procedure,
1908 (5 of 1908), shall have the discretion to determine—
D
(a) whether costs are payable by one party to another;
(b) the amount of such costs; and
(c) when such costs are to be paid.
Explanation.—For the purpose of this sub-section, “costs”
E
means reasonable costs relating to—
(i) the fees and expenses of the arbitrators, Courts and
witnesses;
(ii) legal fees and expenses;
F (iii) any administration fees of the institution supervising the
arbitration; and
(iv) any other expenses incurred in connection with the arbitral
or Court proceedings and the arbitral award.

G (2) If the Court or arbitral tribunal decides to make an order as to
payment of costs, —
(a) the general rule is that the unsuccessful party shall be
ordered to pay the costs of the successful party; or

23
H See observations in Sanjeev Kumar Jain(supra) referred to in paragraph 4 above.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 799
GUNANUSA JV [SANJIV KHANNA, J.]

(b) the Court or arbitral tribunal may make a different order A
for reasons to be recorded in writing.
(3) In determining the costs, the Court or arbitral tribunal shall
have regard to all the circumstances, including—
(a) the conduct of all the parties;
B
(b) whether a party has succeeded partly in the case;
(c) whether the party had made a frivolous counter-claim
leading to delay in the disposal of the arbitral proceedings; and
(d) whether any reasonable offer to settle the dispute is made
by a party and refused by the other party. C
(4) The Court or arbitral tribunal may make any order under this
section including the order that a party shall pay—
(a) a proportion of another party’s costs;
(b) a stated amount in respect of another party’s costs; D
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
(f) costs relating only to a distinct part of the proceedings; and E
(g) interest on costs from or until a certain date.
(5) 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
F
has arisen.”
17. The explanation to sub-section (1) to Section 31A states that,
for the purpose of the sub-section, ‘costs’ means the reasonable costs
relating to the fee and expenses of the arbitrator, the court and the
witnesses. Further, the regime of costs introduced by the insertion of
Section 31A in terms of sub-section (1) is to be given effect G
notwithstanding anything contained in the Code of Civil Procedure,
1908.24 Section 31A gives discretion to the arbitral tribunal to determine
– (a) the costs payable by one party to the other; (b) amount of such
24
Hereinafter referred to as ‘the Code’. H
800 SUPREME COURT REPORTS [2022] 10 S.C.R.

A costs; and (c) when such costs are to be paid. Sub-sections (2), (3) and
(4) to Section 31A lay down the rules and principles which the arbitral
tribunal should keep in mind while exercising the discretion to apportion
and award costs. Significantly, sub-section (5) to Section 31A annuls
and abrogates any pre-dispute agreement which has the effect that one
party is to pay the whole or part of the costs of arbitration. In other
B
words, an agreement between the parties as to ‘payment’ of costs would
be valid only if such agreement is made after the dispute between the
parties has arisen. The object and purpose behind sub-section (5) to
Section 31A is to check the malpractice in standard form agreements or
unequitablecontracts whereby the dominating party could incorporate a
C clause in the contract or the arbitration agreement, burdening one of the
parties to bear the costs of arbitration in whole or part. I would not
interpret the mandate of sub-section (5) to Section 31A as an attempt to
trample the freedom to contract or autonomy of parties. On the other
hand, it is a check on the dominating party from incorporating an
unconscionable term that the costs of arbitration would be paid entirely
D
or in part by one of the parties, and the general rule incorporated in
clause (a) to sub-section (2) to Section 31A states that unless there is an
agreement between the parties post the disputes, the unsuccessful party
shall be ordered to pay costs to the successful party. In other words
‘costs follow the event.’
E
18. What is of importance for the decision and issue raised in the
present case is Section 38 of the A&C Act, which reads thus:
“38. Deposits.—(1) The arbitral tribunal may fix the amount of
the deposit or supplementary deposit, as the case may be, as an
advance for the costs referred to in sub-section (8) of section 31,
F
which it expects will be incurred in respect of the claim submitted
to it:
Provided that where, apart from the claim, a counter-claim
has been submitted to the arbitral tribunal, it may fix separate
amount of deposit for the claim and counter-claim.
G
(2) The deposit referred to in sub-section (1) shall be payable in
equal shares by the parties:
Provided that where one party fails to pay his share of the
deposit, the other party may pay that share:
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 801
GUNANUSA JV [SANJIV KHANNA, J.]

Provided further that where the other party also does not pay A
the aforesaid share in respect of the claim or the counter-claim,
the arbitral tribunal may suspend or terminate the arbitral
proceedings in respect of such claim or counter-claim, as the case
may be.
(3) Upon termination of the arbitral proceedings, the arbitral tribunal B
shall render an accounting to the parties of the deposits received
and shall return any unexpended balance to the party or parties,
as the casemay be.”
Section 38 has not been substituted or amended vide Act No. 3 of
2016. The reference made in Section 38to sub-section (8) to Section 31, C
therefore, cites the said sub-section before its substitution by Act No. 3
of 2016. Be that as it may, I do not think that this would make any
substantial difference, as post the substitution, sub-section (8) to Section
31 refers to Section 31A, which was inserted by Act No.3 of 2016. Sub-
section (1) to Section 31A, in fact, is substantially parimateria to the
D
earlier (pre-substitution) sub-section (8) to Section 31, except for the
portion in sub-section (8) to Section 31 which gave absolute primacy to
the arbitration agreement. I need not again refer to and interpret sub-
sections (1) and (5) to Section 31A of the A&C Act. Sub-section (1) to
Section 38 empowers the arbitral tribunal to fix the amount of the deposit
or the supplementary deposit, as the case may be, as an advance for the E
costs referred to in sub-section (8) to Section 31. In other words, the
arbitral tribunal can ask the parties to deposit the costs in advance and
such deposits towards costs can be directed on more than one occasion.
The expression ‘costs’ in Section 38 would obviously include the fees
and expenses of the arbitral tribunal. This position is lucid beyond a
F
doubt in view of the language of the proviso, and vide the language and
words of sub-sections (2) and (3) to Section 38. Sub-section (2) states
that costs referred to in sub-section (1) shall be payable by the parties in
equal shares. However, in case one party fails to pay its share of the
deposit, the other party would pay that share. Further, if the other party
also does not pay the aforesaid share in respect of the claim or the G
counter-claim, the arbitral tribunal may suspend or terminate the arbitral
proceedings in respect of such claim or counter-claim. The second proviso
to sub-section (2) to Section 38 will have limited application where the
Fourth Schedule applies to the arbitration proceedings, in which case the
fee will be payable not with reference to the claim or counter-claim, but
H
802 SUPREME COURT REPORTS [2022] 10 S.C.R.

A with reference to the “sum in dispute”. Iwill subsequently interpret the
expression “sum in dispute” to mean the aggregate or total amount subject
matter of the disputes before the arbitral tribunal. The effect of sub-
section (2) to Section 38, which has to be read with the limitation
incorporated vide sub-section (5) to Section 31A, is that as a general
rule, the costs, including the fee of the arbitrators, would be payable in
B
advance and shared equally by the parties. It is not the sole responsibility
of the party raising the claim or counter-claim. These payments, during
the course of the arbitration proceedings, are treated as advance
payments and in terms of sub-section (3) to Section 38, the arbitral tribunal,
upon termination of the arbitration proceedings, must render an account
C to the parties of the deposits received. Any unexpended balance is to be
returned to the party or the parties, as the case may be, who had made
the payment. The expression “termination of arbitration proceedings”
not only refers to the termination of the proceedings which takes place
under the second proviso to sub-section (2) to Section 38, but also to the
D termination of proceedings on pronouncement/making of the award in
terms of Section 32, as well as under Sections 14 and 15 of the A&C
Act. This is important as we do have cases wherein the arbitrators resign
or recuse without pronouncing an award, but thereupon they are bound
to render an account of the costs, including the fee paid to them. As per
the statutory mandate of sub-section (3) to Section 38, the arbitral tribunal
E must render an account to the parties of the deposits received upon
termination of the arbitration proceedings.25
19. Sub-section (5) to Section 31A does not apply so as to override
an agreementon the quantum of thefee payable to the arbitrators, as
the said provision only applies where an agreement has the effect that
F a party is to pay whole or part of the cost of the arbitration. Sub-
section (5) deals with the discretion of the arbitral tribunal to
apportionthe costs of arbitration, and does not restrict the authority of
the arbitral tribunal to fixthe cost of arbitration, including the quantum

G 25
Premature termination of arbitrator’s mandate has serious repercussions in form of
loss of time, money, as well as repetition of proceedings, and the delay may lead to
additional damages and interest. By accepting appointment, an arbitrator undertakes to
carry out his responsibilities. Resignations must be for a good cause especially when
the proceeding have continued and substantial time and money has been spent. (see -
Julian D.M. Lew, Loukas A. Mistelis, et al., Comparative International Commercial
H Arbitration, ‘Chapter 12 Rights and Duties of Arbitrators and Parties’, pp. 281 – 282)
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 803
GUNANUSA JV [SANJIV KHANNA, J.]

of fee payable to it. However, any contractual term fixing the fee A
payable to the arbitral tribunalis binding, and cannot be overridden by
the arbitral tribunal.
20. The aforesaid legal exposition is in consonance with the
decision of this Court in National Highways Authority of India v.
Gayatri Jhansi Roadways Limited,26 wherein a Division Bench of this B
Court has held as under:
“
xx xx xx
11. We have heard the learned counsel for the both the sides. In
our view, Shri Narasimha, learned Senior Counsel, is right in stating C
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 and the date of the D
disputes that have arisen under the agreement. We, therefore,
hold that the fee schedule that is contained in the Circular dated
1-6-2017, 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. E

12. 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 F
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 Ltd. case which clearly mandated that the Fourth
Schedule and not the agreement would govern. G
xx xx xx
14. However, the learned Single Judge’s conclusion that the change
in language of Section 31(8) read with Section 31-A which deals
26
(2020) 17 SCC 626 H
804 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 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
B
law by the learned Single Judge in Gayatri Jhansi Roadways Ltd.
is not a correct view of the law.”
We would, however, explain the mandate as stated in paragraphs
12 and 14 in this decision.
C 21. Paragraph 14, as quoted, refers to Section 31(8) read with
Section 31A, to state that it deals with costs in general and not with
arbitrator’s fee. This reasoning has to be read with myinterpretation,
which refers to and takes into account Section 38 of the A&C Act. In
my opinion, arbitrator’s fee, being a component of cost, can be fixed by
D the arbitral tribunal when it is not already predetermined by way of an
agreement between the parties, or by a court order. This is because the
arbitral tribunal has the power to fix and direct the parties to make payment
of deposits in advance and during the course of the arbitration
proceedings, subject to the arbitral tribunal rendering an account on
termination of the arbitration proceedings. In Gayatri Jhansi Roadways
E Limited (supra), there was an agreement between the parties on the
quantum of fee payable to the arbitral tribunal, and in this context the
Division Bench has observed that Sections 31(8) and 31A would not
directly govern the contracts in which the fee structure has been laid
down.
F
22. Paragraph 12 of the judgment is of utmost significance as it
interprets and holds that the dispute as to the payment of fee does not
result in termination of proceedings under clause (a) to sub-section (1)
to Section 14 of the A&C Act. If one or both the parties fail to deposit
the arbitration costs, including the arbitrator’s fee, the mandate of the
G arbitrator is not terminated because he has become de jure or de facto
unable to perform his functions as under Section 14(1)(a). On the other
hand, in such situations, the two provisos to sub-section (2) to Section 38
come into play. Where one of the parties fails to pay its share of the
deposit, it is open to the other party to pay that share. However, if the
other party also does not pay the share, the arbitral tribunal is entitled to
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 805
GUNANUSA JV [SANJIV KHANNA, J.]

terminate or suspend the arbitration proceedings.27 This legal position A
also takes care of the argument raised by some counsels that the
arbitration proceedings should be treated as terminated, where in the
absence of any written agreement, the fee fixed by the arbitrator is
unacceptable to a party on the ground that it is too high or even for the
reason that they are unable to pay or bear the financial burden of the
B
said fee, and such cases are to be treated as ‘de jure’ impossibility
covered under Section 14(1)(a) of the A&C Act. This argument would
be contrary to and unacceptable in view of the two provisos to sub-
section (2) to Section 38. In all fairness, it must be stated that Mr. K.K.
Venugopal, learned Attorney General for India, had accepted this legal
position, and I quote… “[t]his of course would indicate that no ground of C
bias can be raised if the arbitrator directs one party to pay the fee payable
by the party, in case the other party is not prepared to pay the fee. No
question of bias would arise”.28
23. The word ‘cost’, it is argued, is different from the arbitrator’s
fee and therefore, the arbitral tribunal is not competent or authorised to D
fix its own fee on the principle of nemo judex in causa sua, that is, ‘no
one should be judge in their own cause’. The principle would apply where
the parties have fixed the fee payable to the arbitral tribunal, either as a
term in the arbitration agreement or otherwise by an agreement, either
before or after the appointment of the arbitral tribunal. This principle will
apply equally where the court fixes the fee as a term of appointment. E
However, this principle will have no application where the parties or the
court has left it to the arbitral tribunal to fix its own fee. In other words
when the arbitration agreement is silent and the parties have not agreed
on the quantum of fee payable to the arbitral tribunal, or the court order
does not fix the fee, the arbitral tribunal has the right and power to fix its F
own fee.

27
The International Arbitration Rulebook: A Guide to Arbitral Regimes published by
KluwerArbitration in Chapter 8: Costs and Fees observes that the arbitrators and
arbitration institutions have to be paid for their services and reimbursed for the expenses
incurred for fulfilling their duties. Each party is to pay equal proportion of costs in
G
advance. Further the parties are jointly and severally liable, and if one party fails to
pay, the other party will be invited to pay that share of costs in addition to its own. If
the fees are not paid, as a general matter, it is quite possible that the arbitration may not
proceed.
28
Petitioner’s submission in rejoinder in Arbitration Case (C) No. 5 of 2022 filed by
Mr. Gunnam Venkateswara Rao, Advocate. H
806 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 24. The pre-amended sub-section (8) to Section 31 and post-
amendment Section 31A and Section 38 of the A&C Act, use the
expression ‘costs’, albeit they also refer to fee and expenses of the
arbitrator/tribunal. The sections are, therefore, comprehensive and all-
embracing provisions that equally empower and authorise the arbitral
tribunal to fix the fee in the absence of any agreement between the
B parties or a court order fixing the fee payable to the arbitral tribunal.
Any other interpretation would make the A&C Act unworkable and
Sections 31A, 38 and 39 superfluous. These provisions must be given
their full intended effect and they are notsupererogatory in nature. The
sections should not be read as unnecessary when they refer to arbitration
C fee. Notably, arbitral tribunals, since time immemorial, have been fixing
arbitration fee, and the legislature has not intervened or barred them
from doing so even by the amendments made vide Act No. 3 of 2016.
Additionally, there is no provision in the A&C Act which states that the
parties can move the court for fixation of fee of the arbitral tribunal
when the arbitration agreement is silent or the parties are unable to
D agree on the quantum of fee or where the court, while making reference,
has not fixed the fee and has left it to the arbitral tribunal to decide upon
its own fee. To hold to the contrary would create chaos and invalidate a
number of orders passed by the High Courts and even this Court, which
leave it open for the arbitral tribunal to fix its own fee.
E 25. ‘Redfern and Hunter on International Arbitration’,29 referring
to the expression ‘costs’, has divided the same into three categories,
namely: (i) costs of the tribunal, which include charges for administration
of arbitration; (ii) costs of arbitration, which includes hiring of rooms,
transcript writers, amongst other things; and (iii) costs of the parties,
which includes costs of legal representatives and expert witnesses,
F
amongst other things; to observe that all three elements would include
the fee of the arbitral tribunal. The expression ‘costs’, therefore, is
comprehensive and broad to include fee and expenses of the arbitral
tribunal.Russell30 observes that the arbitral tribunal may make an order
for costs on such basis as it thinks fit. Under the same heading, he
G observes that normally the tribunal or the appointing authority will
determine the tribunal’s fee and expenses, which would be recovered in

29
Redfern and Hunter on International Arbitration Oxford University Press, 6 th Edn.,
2015, pg. 532-537.
30
Russell on Arbitration, 24 th Edition, pg. 461, paragraphs 7-217 to 7-222, under the
H heading ‘Determination of the recovery of costs of the arbitration’.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 807
GUNANUSA JV [SANJIV KHANNA, J.]

and be a part of the award. However, when there is a question about the A
fee and expenses of the tribunal being reasonable and appropriate, the
court, in terms of Section 28(2) of the English Arbitration Act, 1996, and
also while exercising power under Section 63(4) of the aforesaid Act,
can examine the said question.The court can also examine the said question
on an application by any of the parties under Section 64(2) of the English
B
Arbitration Act, 1996. For our purposes, it is relevant to state that Section
6331 deals with recovery of costs of arbitration and does not per se deal
with the fee payable to the arbitral tribunal, nevertheless arbitration fee
being a subset and a part of costs, can be made subject-matter of
proceedings under Sections 63/64 of the English Arbitration Act, 1996.
26. Professor Sundra Rajoo has elaborately examined the question C
of arbitrator’s remuneration to observe that it consists of sums due to
him in respect of his professional fee and expenses. Such remuneration
is also known as the ‘cost of the award’, that is, the fee and expenses of
the arbitrator or umpire, though the term ‘fee’ must be distinguished
from the cost of the reference, that is, the legal cost incurred by the D
parties.32 Reference is made by him to Tackaberry and Marriott 33, who
have summarised the ratio in K/S Norjarl A/S v. Hyundai Heavy
Industries Co. Ltd.34 as under:
(1) An arbitrator who accepts appointment with or without any
stipulation as to fees thereby enters into a trilateral E
agreement with the parties.
(2) By that agreement the arbitrator assumes the status of a
quasi-judicial adjudicator with all the duties and disabilities
inherent in that status.
(3) Amongst those disabilities is an inability to deal unilaterally F
with one person for a personal benefit.

31
The recoverable costs of the arbitration. 63 (1) – xxxx; (2) xxxx; (3) The tribunal
may determine by award the recoverable costs of the arbitration on such basis as it
thinks fit. If it does so, it shall specify – (a) the basis on which it has acted, and (b) the
items of recoverable costs and the amount referable to each; xxxx.
G
32
Datuk Professor Sundra Rajoo, Law, Practice and Procedure of Arbitration (Second
Edition), 2016. Chapter 24 in the said book refers to Gary Born, International Commercial
Arbitration.
33
Tackaberry, and Marriott, Bernstein’s Handbook of Arbitration and Dispute Resolution
Practice (4 th Edn., 2003) at pg. 2-358
34
(1991) 3 All ER 211 H
808 SUPREME COURT REPORTS [2022] 10 S.C.R.

A (4) It follows that an arbitrator who has accepted appointment
on a particular basis as to the amount and payment of his
fees, which may include a stipulation as to payment in
advance or a commitment fee, cannot, thereafter, alter the
basis of his remuneration unless all parties agree.
B (5) An arbitrator who has accepted appointment without
stipulation as to fees is entitled to a reasonable fee to be
taxed, by him or by the court, at the conclusion of the
arbitration, and cannot thereafter make any special
agreement or arrangement about his fees unless all parties
to the reference concur in it.
C
(6) So the arbitrator may not enter into any fee agreement or
arrangement with a party to which any other party objects.
(7) These propositions apply to a sole arbitrator, a party-
appointed arbitrator, an umpire, a chairman or a third
arbitrator.
D
The points (1) to (5) set out the correct position. However, as far
as point (5) is concerned, in the context of the statutory provisions of the
A&C Act, it should be understood that where an arbitrator has accepted
appointment without any stipulation as to the fee, he is entitled to
reasonable fee as an implied term of the contract of appointment or on
E the principle of quantum merit.Point (6) should be read withthe mandate
ofSection 38 of the A&C Act as examined above. In this background,
and in the context of statutory provisions of the A&C Act, I believe that
the suggestion in Sanjeev Kumar Jain (supra), and as proposed by Mr.
Huzefa Ahmedi, Senior Advocate, who was appointed by this Court as
F amicus curiae, and as held by brother D.Y. Chandrachud J., the arbitral
tribunal should, at the very outset or during the preliminary hearings,
with mutual consent of the parties and by a written agreementfix the
fee, which once fixed should remain binding and should not be revised,
has merit. There cannot be any unilateral deviation from the terms of
fee as agreed, which terms not only bind the parties, but the arbitral
G tribunal as well. Any deviation, amendment, or modification can only be
by a written agreement with the consent of all parties to the litigation.
27. In the context of the situation where the arbitrator and the
parties are unable to agree on the remuneration to be paid to the arbitral
tribunal, and the arbitral tribunal fixes the fee payable, I would like to
H refer to Section 39 of the A&C Act which reads thus:
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 809
GUNANUSA JV [SANJIV KHANNA, J.]

“39. Lien on arbitral award and deposits as to costs.—(1) A
Subject to the provisions of sub-section (2) and to any provision to
the contrary in the arbitration agreement, the arbitral tribunal shall
have a lien on the arbitral award for any unpaid costs of the
arbitration.
(2) If in any case an arbitral tribunal refuses to deliver its award B
except on payment of the costs demanded by it, the Court may,
on an application in this behalf, order that the arbitral tribunal shall
deliver the arbitral award to the applicant on payment into Court
by the applicant of the costs demanded, and shall, after such inquiry,
if any, as it thinks fit, further order that out of the money so paid
C
into Court there shall be paid to the arbitral tribunal by way of
costs such sum as the Court may consider reasonable and that
the balance of the money, if any, shall be refunded to the applicant.
(3) An application under sub-section (2) may be made by any
party unless the fees demanded have been fixed by written
D
agreement between him and the arbitral tribunal, and the arbitral
tribunal shall be entitled to appear and be heard on any such
application.
(4) The Court may make such orders as it thinks fit respecting the
costs of the arbitration where any question arises respecting such
E
costs and the arbitral award contains no sufficient provision
concerning them.”
Section 39 is a part of Chapter X, which is a miscellaneous chapter.
Sub-section (1) to Section 39 states that the arbitral tribunal shall have
lien over the arbitral award for any unpaid costs of arbitration. This lien F
is subject to provisions of sub-section (2) to Section 39, which states that
where an arbitral tribunal refuses to deliver an award except on payment
of costs demanded by it, the party may make an application to a court
for an order that the arbitral tribunal should deliver the arbitral award to
the party. The court thereupon is required to conduct an inquiry and
may, if it deems proper, direct the party to deposit the costs in the court G
for delivery of the award to the party. After the inquiry, the court can
pass orders for payment of costs to the arbitral tribunal as the court may
consider reasonable. In case any deposit has been made by the party,
the same would abide by the decision of the court. If extra payment has
been made, the same shall be refunded to the party.
H
810 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 28. Sub-section (3) to Section 39 states that an application under
sub-section (2) may be made by ‘any party’ unless the fee35 demanded
has been fixed by a written agreement between him and the arbitral
tribunal. Further, the arbitral tribunal is entitled to appear and be heard
when an application is made under sub-section (2) to Section 39. In
other words, where there is a written agreement between the arbitral
B
tribunal and a party on the aspect of the payable fee, the party cannot
file any application under sub-section (3) to Section 39 of the A&C Act.
This is significant as it bars and prohibits a party to challenge the fee to
be paid to the arbitral tribunal, once it has agreed to it in writing. The
object and purpose is to impede such party from raising any objection to
C fixation of fee or costs during the course of the arbitration proceedings
or after the award is made. The agreement between the parties or with
the arbitral tribunal in writing as to the quantum of fee payable to the
arbitral tribunal binds the parties.
29. Sub-section (3) to Section 39 of the A&C Act is ambiguous
D and requires interpretation to effectuate the legislative object and intent.
Sub-sections (1) and (2) to Section 39, as noticed, particularly deal with
cases where the arbitral tribunal does not deliver the award and claims
a lien for the unpaid costs of arbitration, in which event the aggrieved
party can move an application for an order directing the arbitral tribunal
E to deliver the award to the applicant. Such party is required to make
payment into the court of the costs demanded, whereupon the court
conducts an inquiry, if any, as it thinks fit and thereupon passes an order
as to the money to be paid from the amount deposited with the arbitral
tribunal towards costs. The amount determined by the court should be
reasonable. Balance money, if any, is to be refunded to the applicant.
F
Sub-section (3), on the other hand, empowers ‘any party’ tomove an
application before the court under sub-section (2), provided the ‘fee’
demanded has not been fixed under a written agreement between him
and the arbitral tribunal. In my opinion, sub-section (3) to Section 39 of
the A&C Act confers a right on ‘any party’ to move to the court if he
G has discontent with the ‘fee’ fixed by the arbitral tribunal, unless he has
already agreed to the ‘fee’in a written agreement. Sub-section (3) is,

35
Sub-section (3) to Section 39 expressly uses the words “the fees demanded…”,
which can be contrasted with the word ‘cost’, which is a more comprehensive and
H includes fee.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 811
GUNANUSA JV [SANJIV KHANNA, J.]

therefore, independent and will apply even in situations not covered by A
sub-section (2), where the arbitral tribunal refuses to deliver the award
to the applicant, except on payment of costs as demanded. No doubt,
sub-section (3) to Section 39 refers to sub-section (2) thereof, but the
said reference is in the context of the inquiry which the court has to
conduct to determine the reasonable quantum of the ‘fee’ that should be B
paid/is payable to the arbitral tribunal. In terms of sub-section (3) to
Section 39, the arbitral tribunal, in such event, is entitled to appear and
be heard on such application. The above interpretation should be accepted
for two reasons: (a) sub-section (3) to Section 39 is an independent
provision and cannot be treated as a superfluous or redundant provision
applicable in circumstances where sub-sections (1) and (2) to Section C
39 are applicable; and (b) it would effectuate the legislative intent and
object to ensure that any party can approach the court in case there is a
dispute with regard to fixation of ‘fee’ by the arbitral tribunal before an
award is made. I do not find any good ground and reason to hold that the
legislative intent is to prevent a party from approaching the court on ‘fee D
fixation’ by the arbitrator/tribunal till an award is made. This power/right
of any party to approach the court against the ‘fee fixation’ by the arbitral
tribunal is notwithstanding Section 38 of the A&C Act, for the simple
reason that a party may feel aggrieved and may not want to participate
in the arbitration proceedings for want of high costs which it can ill-
E
afford to pay or would be compelled to pay in spite of its weak financial
condition, as failure to pay the ‘fee’ to the arbitral tribunal may have
negative consequences.
30. Sub-section (4) to Section 39 empowers the court to make
such orders as it thinks fit respecting the costs of arbitration where a F
question arises respecting such costs and the arbitral award contains no
sufficient provision concerning them. The power conferred under sub-
section (4) to Section 39 is, therefore, wide and can even apply post the
award, when the award itself contains no sufficient direction concerning
the costs. Thus, in myopinion, sub-sections (2) and (3) to Section 39 are
independent provisions, and the latter sub-sectioncan be invoked whenever G
a party does not agree to the ‘fee’ fixed by the arbitral tribunal in a
situation where the ‘fee’ is not fixed by a written agreement. Section
39(3) applies when both parties or one of the parties does not agree to
the ‘fee’ fixed by the arbitral tribunal.
H
812 SUPREME COURT REPORTS [2022] 10 S.C.R.

A What is ‘fair and reasonable fee’?
31. I have held that in the absence of any agreement or court
order, the arbitral tribunal is entitled to fix ‘fair and reasonable
remuneration’. Fixation of fee by an arbitrator is a delicate matter as
he is then determining the fee which he is entitled to command having
B regard to: (i) complexity of the disputes; (ii) difficulty or novelty of the
questions involved; (iii) the skill, specialized knowledge and responsibility
of the arbitral tribunal; (iv) number and importance of documents to be
studied; (v) value of the property involved or the amount or the sum in
issue; and (vi) importance of the dispute to the parties.36 Professor
SundraRajoo37 has observed that experienced and qualified arbitrators
C are accustomed to receiving fees at least equivalent to the upperend
of the fee charged for their profession in their home jurisdiction. If the
fee structure is too low, it may be difficult to procure the services of
appropriately qualified arbitrators. Even if they do, they may not be willing
to dictate the amount of time required to resolve the case.Therefore, the
D arbitrators must openly, and in a transparent manner, state the fee that
they would like to charge so as to avoid embarrassing allegations and
disagreements. This should be done before acceptance of appointment
or at the very commencement of the arbitration process. The arbitrators
are conscious of the role they perform as adjudicators, which is very
different from and cannot be equated with advocates. While it is possible
E to choose and change an advocate keeping in view one’s pocket, an
arbitrator once appointed stands on a different footing. When an arbitral
tribunal has been duly constituted, either party, irrespective of the fact
whether they can afford the fee or not, is unlikely to displease the
arbitral tribunal stating that the fee fixed is not reasonable.38 At the
F same-time, any challenge to the arbitrator’s fee by those who are
willingly paying similar professional fee to those who argue for them

36
Mustill and Boyd, The Law and Practice of Commercial Arbitration in England, (2nd
Edn., 1989) at p.236.
37
Datuk Professor Sundra Rajoo, Law, Practice and Procedure of Arbitration (Second
G Edition), 2016.
38
The high fee charged by senior advocates has been the subject matter of several
articles, including the write-up ‘India’s Grand Advocates: A Legal Elite Flourishing in
the Era of Globalization’, by Marc Galanter and Nick Robinson, published by the
Harvard Law School, and ‘Litigation Expenses: High Cost of Justice’, by Usha Rani
Das. The latter article, in fact, refers to several quotations by leading advocates who
H have acknowledged the problem.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 813
GUNANUSA JV [SANJIV KHANNA, J.]

before the arbitratorwould be discordant.39 To avoid any controversy A
and litigation, the fee structure fixed in the Fourth Schedule, or by the
respective High Courts, when adopted by the arbitral tribunal, in my
opinion should be considered as ‘fair and reasonable’. The courtwould
not permit a party to question the feeif it is in terms of the Fourth
Schedule, or the rules framed by the High Court. I, therefore, albeit
B
for different grounds and reasons, concur with the observations made
in paragraph 105 by my brother D.Y. Chandrachud, J.
Situation post enforcement of Act No. 33 of 2019: Effect of
the proviso to sub-section (3A) to Section 11 of the Arbitration
and Conciliation Act, 1996. C
32. Sub-section (3A) to Section 11 states that the Supreme Court
and the High Courts shall have the power to designate arbitral institutions
from time to time, which institutions have been graded by the Council
under Section 43-I of the A&C Act. In the absence of any designation
and gradation, the sub-section (3A) to Section 11 is not effectively and D
de-factoenforced. However, the first proviso would be applicable as it
applies in respect of those High Courts’ jurisdiction where no graded
arbitral institution is available. In such cases, the Chief Justice of the
concerned High Court may maintain a panel of arbitrators in discharging
the functions and duties of an arbitral institution. Further, reference to
the arbitrator is deemed to be an arbitral institution for the purpose of E
Section 11 and the arbitrator is entitled to such fee as the rates specify in
the Fourth Schedule. In other words, the Fourth Schedule is binding.
Sub-section (14) to Section 11 states that the arbitral institution shall
determine the fee of the arbitral tribunal and the manner of payment to
the arbitral tribunal, subject to the rates specified in the Fourth Schedule. F
When we read the first proviso to sub-section (3A) to Section 11 and
sub-section (14) to Section 11 together and in a harmonious manner, it is
lucid that the rate of fee specified in the Fourth Schedule is obligatory.
The expression ‘the rate’ specified in the Fourth Schedule refers to the
fee mentioned in the Forth Schedule and Section 11(14), when it uses
the expression “subject to the Fourth Schedule”, it requires that the fee G
cannot exceed the fee fixed in the schedule, albeit may be lower than
the figure mentioned in the schedule.

39
High cost of litigation has grave implications and consequences, a concern which
must engage the attention of the senior members of the Bar. H
814 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 33. Therefore, post enforcement of Act No. 33 of 2019 in terms
of the proviso to sub-section (3A) to Section 11, which applies to ad hoc
arbitrations, the fee structure fixed by the Fourth Schedule is imperative
and binding. In the case of institutional arbitrations, the fee structure
should be fixed in terms of the Fourth Schedule. However, both sub-
sections (3A) and (14) to Section 11 of the A&C Act do not bar the
B
arbitral tribunal, or the arbitral institution, from fixing fee which is lower
than the Fourth Schedule.
Power of the arbitral tribunal to direct advance deposit of
costs, including supplementary costs, under Section 38 of the
C Arbitration and Conciliation Act, 1996:
34. I am conscious that the aforesaid determination on the
remuneration/fee payable to the arbitral tribunal may lead to difficulty,
especially in cases where one party deliberately delays and prolongs
the proceedings, as a result of which, a number of hearings are required
D to be held. In such situations, the arbitral tribunal is entitled to take
recourse to Section 38 of the A&C Act and call upon the party to
make supplementary deposits in the form of costs of arbitration, which,
while not including any ‘supplementary’ fee payable to the arbitral
tribunal, would mean the ‘cost incurred bythe parties’ payable in terms
of Section 31A of the A&C Act. Of course, the deposit would finally
E
abide by the directions given in the award on payment of costs. The
power and authority given to the arbitral tribunal to direct the parties
or a party to make advance deposit of costs, including supplementary
costs, remains, and has not been limited or obliterated by Act No. 33
of 2019.
F
Summary
35. It will nowbe appropriate to summarize the legal position as
under:

G (a) The arbitral tribunal is bound by the fee or remuneration
fixed by the parties in the arbitration agreement, or by mutual
consent, whether before or after the disputes have arisen.
(b) Where the court refers disputes to an arbitral tribunal, in
the absence of any agreement between the partiesfixing
H the fee payable to the arbitral tribunal, it should fix the fee
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 815
GUNANUSA JV [SANJIV KHANNA, J.]

so payable.The fee fixed by the court is binding on the A
arbitral tribunal.
(c) It is desirable that the parties/court should ascertain the fee
structure from the prospective arbitrators before an
arbitrator is nominated/appointed.
B
(d) In the absence of a written agreement or a court order
fixing the fee of the arbitral tribunal, the arbitral tribunal is
entitled to ‘fair and reasonable fee’, which should be done
in a transparent manner and in consultation with the
parties.This exercise should be undertaken at the initial/
preliminary stage. However, lack of consensus, would not C
bar an arbitral tribunal from fixing ‘fair and reasonable fee’.
An aggrieved party would be entitled to question the fee
fixed by the arbitral tribunal in terms of Section 39 of the
A&C Act. On a challenge being raised, the court would
examine the question of reasonableness of fee with D
reference to the factors stated above and in particular with
reference to the Fourth Schedule of the A&C Act. The fee
structure mentioned in the Fourth Schedule or by the
respective High Courts would be per se treated and
regarded as ‘fair and reasonable fee’.
E
(e) Fee once fixed cannot be increased or enhanced except
with the consent of all the parties or by an order of the
court.
(f) Post the enactment and enforcement of Act No. 33 of 2019,
and in terms of the first proviso to sub-section (3A) of Section F
11 of the A&C Act, the arbitral tribunal is entitled to the fee
at the rate specified in the Fourth Schedule.Consequently,
the arbitral tribunal is not entitled to deviate and fix a higher
fee. Similarly, arbitral institutions, in terms of Section 11(14),
are bound to follow the fee structure mentioned in the Fourth
G
Schedule. However, sub-sections (3A) and (14) of Section
11 do not bar or prohibit the ad hoc arbitral tribunal or the
arbitral institution to charge arbitration fee which is less or
lower than what is stipulated in the Fourth Schedule.Sub-
sections (3A) and (14) of Section 11 are binding on the
parties and the arbitral tribunal. H
816 SUPREME COURT REPORTS [2022] 10 S.C.R.

A Interpretation of the Fourth Schedule
36. The Fourth Schedule was introduced vide Act No. 3 of 2016
with retrospective effect from 23rd October 2015 and reads:
“
B THE FOURTH SCHEDULE
[See section 11(3A)]

C

D

E

The Fourth Schedule, post substitution by Act No. 33 of 2019,
refers to Section 11(3A), instead Section 11(14) of the A&C Act.
37. The three aspects of the Fourth Schedule which require
F interpretation are: (a) whether the expression ‘sum in dispute’ refers to
the aggregate of the claim and the counter-claim, or the fee payable as
per theschedule has to be separately computed for the claim(s) and
counter-claim(s) without aggregating them; (b) do the words in Serial
No.6 - “Rs.19, 87, 500/- plus 0.5% of the claim amount over and
G above Rs.20, 00, 000/- with the ceiling of Rs.30, 00, 000/-” mean
Rs.19, 87, 500/- plus 0.5% of the total claims, subject to the ceiling of
Rs.30, 00, 000/-, or the maximum fee payable is Rs.30, 00, 000/- plus
Rs.19, 87, 500/-, that is, Rs.49, 87, 500/-; and (c) whether the fee
prescribed in the Fourth Schedule is cumulative for the three-member
arbitral tribunal, to be shared/divided between the three members, or the
H
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 817
GUNANUSA JV [SANJIV KHANNA, J.]

fee prescribed is for each individual member of the three member arbitral A
tribunal.
Interpretation of the expression “sum in dispute”
38. The expression “sum in dispute” does not refer to a claim or a
counter-claim. The word ‘sum’means the whole, aggregate or the total
amount. Thus, the legislature has deliberately and consciously avoideda B
separate reference to the amounts stated either in the claim or the counter-
claim.The “sum in dispute” refers to the total amount subject matter
before the arbitral tribunal, which is to be adjudicated upon. Thus, it
would be correct to state that the language and the words “sum in
dispute”are an intended and a calculateddeparture, as the words ‘claim’ C
and ‘counter-claim’ do find specific mention in Section 23(2A), which
states that the respondent in support of his case may also submit a counter-
claim or plead a set-off which shall be adjudicated by the arbitral tribunal
if such counter-claim or set-off falls within the scope of the arbitration
agreement.40 Similarly, Section 2(9) states that for the purpose of Part 1,
except in the case of Section 25(a) and Section 32(2)(a), reference to a D
claim shall also apply to a counter-claim, and where it refers to defence,
it shall also apply to defence to that counter-claim.Likewise, proviso to
Section 38(1)41 states that where, apart from the claim, a counter-claim
has been submitted to the arbitral tribunal, it may fix a separate amount
of deposit for the claim or the counter-claim. Notwithstanding the E
provisions, the legislature, while enacting the Fourth Schedule, though
cognizant of the difference between claim and counter claim/set-off,
eschewed anyseparate reference to the amount prayed in the claim(s)
or counter-claim(s)/set-off. The Fourth Schedule does nottreat them as
separate for computing the fee payable to the arbitral tribunal. On the
other hand, the expression “sum in dispute” before the arbitral tribunal F
has been made the basis for computation of fee.

40
Inserted vide Act No. 3 of 2016 with retrospective effect from 23 rd October 2015.
Even before the insertion, the position in law was the same.
41
38. Deposits.– (1) The arbitral tribunal may fix the amount of the deposit or G
supplementary deposit, as the case may be, as an advance for the costs referred to in
sub-section (8) of section 31, where it expects will be incurred in respect of the claim
submitted to it;
Provided that where, apart from the claim, a counter-claim has been submitted to
the arbitral tribunal, it may fix separate amount of deposit for the claim and counter-
claim.
xx xx xx H
818 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 39. The legislature is presumed to know the prior construction of
the terms in the original act, and an amendment substituting the new
term or phrase for the one previously construed indicates that the judicial
or executive construction of the former terms or phrases did not
correspond with the legislative intent and a different interpretation must
be given to the new term or phrase. Thus, in interpreting an amendatory
B
act, there is a presumption of change in legal rights. A change in
phraseology creates a presumption that the legislature intended a change
in meaning.Conversely, when words used in the original statute are used
in the re-enacted/amendatory act, they should be presumed to be used
in the same sense in the new statute or amendatory act.42
C 40. Further, while interpreting a provision in an amendatory act,
an additional principleof construction is to examine the object of the
amendatory act to determine the legislative intent.For this purpose, the
court should give effect to every word, and in case of ambiguity, refer to
the surrounding circumstances in the form of legislative proceedings
D and reports of the legislative committees concerning the amendments. 43
Statutes in parimateria may also be resorted to for assistance.44
41. In the context of the Fourth Schedule, for clarification and
affirmation, it would be most appropriate if reference is made to the
246th Report of the Law Commission of India. The Law Commission,
E while recommending a model schedule of fee45, had stated that the
schedule was based on the fee schedule set by the Delhi High Court

42
Earl T. Crawford, The Construction of Statutes, 3 rd Edition, pp. 617 and 619
43
J. G. Sutherland, Statutes and Statutory Construction, 3 rd Edition, Vol.3, pp. 410-412
44
Earl T. Crawford, The Construction of Statutes, 3 rd Edition, pp. 616-617
F 45
“10. One of the main complaints against arbitration in India, especially ad hoc
arbitration, is the high costs associated with the same – including the arbitrary,
unilateral and disproportionate fixation of fees by several arbitrators. The
commission believes that if arbitration is really to become a cost-effective solution
for dispute resolution in the domestic context, there should be some mechanism to
rationalize the fee structure for arbitrations.
11. In order to provide a workable solution to this problem, the Commission has
G recommended a model schedule of fees and has empowered the High Court to frame
appropriate rules for fixation of fees for arbitrators and for which purpose it may
take the said model schedule of fees into account. The model schedule of fees are
based on the fee schedule set by the Delhi High Court International Arbitration
Centre, which are over 5 years old, and which have been suitably revised. The
schedule of fees would require regular updating, and must be reviewed every 3-4
H years to ensure that they continue to stay realistic.”
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 819
GUNANUSA JV [SANJIV KHANNA, J.]

International Arbitration Centre. The schedule in the Delhi International A
Arbitration Centre (Administrative Cost & Arbitrators’ Fees)
Rulesusesthe identical expression, “sum in dispute”, and provides
cumulative fee of both theclaim and the counter-claim. Accordingly, the
expression “sum in dispute” borrowed from the Delhi High Court
International Arbitration Centre, should be given an identical construction
B
as referring to the entire amount or the sum total of the disputes which
are subject matter of the arbitration, that is, the disputes raised in the
claim petition as well as the counter-claim. Separate fee for the claim
and counter-claim/ set off is not envisaged and postulated.
42. One of the objectives of the A&C Act is to ensure cohesion
C
of the remedy.Sections 2(9) and 23(2-A) incorporate the rule against
fragmentation of remedies and nothing more. This is a marked and
deliberate departure from the earlier Arbitration Act, 1940 wherein an
arbitrator’s jurisdiction was confined to the disputes referred to him by
way of an order of reference. The arbitrator could not enlarge the scope
of reference and entertain fresh claims or even a counter-claim/set-off D
without a fresh order of reference.46
43. The argument that a counter-claim and set-off should be treated
as separate, as adjudication of the claim and counter-claim are distinct
andtreated differently under the A&C Act and the Code, and entail
separate adjudication, though an attractive argument at the first blush, E
overlooks the legal position that the counter-claim and set-off raised
before an arbitral tribunal must fall within the scope of the arbitration
agreement, which is the subject matter and basis of any claim in the
arbitration proceedings. A counter-claim can only be filed before an
arbitral tribunal, if it is covered and governed by the arbitration agreement F
relied upon by the claimant, and not in respect of the cause of action
notcoveredby the subject matter of the arbitration agreement.Necessarily,
therefore, there would be a connect between the claim and the counter-
claim/set-off. A set-off is a defence to the action and claims made by
the claimant, which may be both legal and equitable. Equitable set-offs
are not recognised under Order VIII Rule 6 of the Code but are permitted G
to be raised by the defendant as the Code is not exhaustive. However,
equitable set-offs must arise out of the same transaction or one that is so

46
See Section 20 of the Arbitration Act, 1940. Refer to Orissa Mining Corporation Ltd.
v. Prannath, (1997) 3 SCC 535. H
820 SUPREME COURT REPORTS [2022] 10 S.C.R.

A connected that they may be looked upon as part of the same transaction.
Counter-claim, on the other hand, is regarded as a cross-action. When a
counter-claim is not connected with the claim in the suit, the Court, in
exercise of power under Rule 6(c) to Order VIII of the Code, can direct
that such counter-claim may be excluded and tried as an independent
suit.
B
44. Arbitral tribunal derives its jurisdiction from Section 7 of the
A&C Act, which extends to “all or certain disputes which have arisen or
which may arise between them in respect of a defined legal relationship,
whether contractual or not”. As stated above, the A&C Act does not
contemplate separate jurisdictions for arbitral tribunal on the basis of
C number or nature of claims, and, therefore, does not afford to the tribunal
the liberty to treat claim and counter-claim separately. Commentary on
the UNCITRAL Model Law on International Commercial Arbitration47
observes that when two or more parties have entered into an agreement
to arbitrate, any of them normally has a power to commence arbitral
D proceedings. It is a common practice that more than one party put forth
their claims in same arbitration. The labels that are appended to these
claims presented by opposing parties, namely, the claim or counter-claim,
are nothing more than an acknowledgement of the chronological order
in which actions have been brought in the arbitration, and they do not
entail any type of structural differentiation. It is for this reason that
E clarification is offered by Article 2(f) of the UNCITRAL Model Law
which states that claim also applies to counter-claim and whenever it
refers to defence, it also applies to a defence to a counter-claim. As
noticed above, these facets of the UNCITRAL Model Law have been
incorporated in the A&C Act. A reading of the rules published by the
F High Courts of Delhi, Bombay, Madhya Pradesh, Karnataka, Rajasthan
and Madras indicate that they, in unison, have stated that the sum in
dispute or the arbitrator’s fee shall be calculated on the aggregate of the
claim and the counter-claim. The fee is not to be calculated independently,
first with reference to the claim and then the counter-claim. This is also
postulated in the rules framed by the Indian Council of Arbitration Rules
G of Domestic Commercial Arbitration, Mumbai Centre for International
Arbitration, and Construction Industry Arbitration Council. Our attention
has also been drawn to the rules framed by the Singapore International

47
Authored by Ilias Bantekas, Pietro Ortolani, Shahla Ali, Manuel A. Gomez and
H Michael Polkinghorne; published by the Cambridge University Press.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 821
GUNANUSA JV [SANJIV KHANNA, J.]

Arbitration Centre, Hong Kong International Arbitration Centre, A
Stockholm Chamber of Commerce Arbitration, and European Court of
Arbitration, which stipulate that for the purpose of fee, the amount in
dispute would be the total of the claim and the counter-claim, that is, the
aggregate value of all the claims, counter-claims and set-offs. If we
have to accept the contra-stand, the rules framed by the several High
B
Courts, as noted above, would have to be re-drawn, and the unsettlement
would cause confusion, especially in pending matters. This must be
avoided.
45. We have interpreted Section 38 of the A&C Act. Suffice at
this stage is to again observe that the proviso to sub-section (1) to Section
38 applies only when the arbitral tribunal is entitled to a separate fee for C
the claim and counter-claim. It would not apply where the Fourth Schedule
applies, in which event the arbitral tribunal is entitled to the fee as per
the schedule, which is the cumulative figure on adding the claims and
the counter-claims. Notably, sub-section (2) to Section 38 states that the
deposit in terms of sub-section (1) shall be payable in equal share by the D
parties. Section 38 is a part of the original enactment, whereas the Fourth
Schedule was inserted vide Act No. 3 of 2016. While we have to
harmoniously construe Section 38 with the Fourth Schedule, we must
give effect to the legislative intent in furtherance of the objectand purpose
of introducing the Fourth Schedule, an aspect I have adverted to earlier.
This Court in Aphali Pharmaceuticals Ltd. v. State of Maharashtra E
& Ors.48 had referred to the Schedule to the Medicinal and Toilet
Preparations (Excise Duties) Act, 1955 and observed that a schedule is
a mere question of drafting and can be used to construe the provisions in
the body of the Act, albeit the expressions in the schedule cannot control
or prevail against the express enactment, and in case of any inconsistency F
between the schedule and the enactment, the enactmentshall prevail.
These observations would not be applicable in the context of the present
case, as the Fourth Schedule is not in conflict with the express enactment.
The Fourth Schedule prescribes the quantum/scale of fee, whereas
Section 38 does not prescribe the quantum or the formula for computing
the fee. Section 38 and the Fourth Schedule can be construed G
harmoniously without one contradicting or being inconsistent with the
other. A statute must be read as a whole and a schedule is as much a
part of the statute as any other provision.

48
(1989) 4 SCC 378 H
822 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 46. High cost of arbitration is one of the prime reasons for the
reluctance of the litigants to accept arbitration as an alternative to court
litigation. Arbitration, as a process of justice delivery, is substitutional in
character, would remain unattractive unless it is affordable and a lower
cost alternative to litigation. This being the objective of the scheme of
the provisions of the A&C Act in general, and Sections 2(1)(d), 2(9), 7,
B
8, 9, 11, 17 and 23, it would be appropriate to hold that arbitral tribunal,
as statutorily conceived, is to examine and adjudicate all disputes arising
from the contract and, therefore, as observed earlier, the Fourth Schedule
mindfully uses the expression “sum in dispute”. Any contrary
interpretation conceiving separate fee for claim and counter-claim, which,
C it is apparent, would substantially enhance the cost of arbitration,
anddissuade the litigants from resorting to arbitration. Enhancement in
cost of arbitration would be across the board even for small cases, when
claims/counter-claims are less than Rs.5, 00, 000/-, in which case the
fee payable to the arbitrator may, in a given case, double; to big amount
arbitrationswith claims and counter-claims of over Rs.20, 00, 00, 000/-,
D
in which case the highest fee payable to the arbitral tribunal under Serial
No. 6 could increase from Rs.90, 00, 000/- to Rs.1, 80, 00, 000/- in case
of three member tribunal, and from Rs.40, 00, 000/- to Rs.80, 00, 000/-
in case of a sole member tribunal. This, according to me, is not postulated
and the legislative intent in enacting the Fourth Schedule. Serial No. 6 in
E the Fourth Schedule is a compromise between ad valorem method, where
the arbitrators’ fee is assessed as a percentage of the total amount in
dispute, including any counter-claim, and the fixed fee method, as it
prescribes the fee-cap when the amounts of the claim and the counter-
claim exceed Rs.20, 00, 00, 000/- (rupees twenty crores only).49
F 47. For the reasons aforesaid, I would hold that the heading “sum
in dispute” will mean the aggregate of all the amounts in dispute without
any bifurcation and separate application of the fee schedule with reference
to the amount subject matter of the claim(s), and the amount subject
matter of the counter-claim(s).
G 48. The aforesaid dictum would not apply in cases where there is
an umbrella arbitration clause, which applies to different/distinct contracts,

49
Professor Sundra Rajoo, Law, Practice and Procedure of Arbitration (Second Edition),
2016, has referred to four different types of remuneration agreements, namely, fixed fee
method, time spent method, brief fee and daily refresher method, and ad valorem fee
H method.
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 823
GUNANUSA JV [SANJIV KHANNA, J.]

in which case each contract would be treated as a separate arbitration A
proceeding viz. the claim, counter-claim and set-off relating to that
contract.
Interpretation of Serial No. 6 of the Fourth Schedule
49. Serial No. 6 of the Fourth Schedule has been interpreted as
having incorporated a cap or ceiling of Rs.30, 00, 000/-. However, in B
some cases, it has been held that the fee specified of Rs.19, 87, 500/-
plus 0.5% of the claim amount, over and above Rs.20, 00, 00, 000/- with
a ceiling fee of Rs.30, 00, 000/-, means that the ceiling of Rs.30, 00, 000/
- is not the cumulative ceiling. In other words, Serial No. 6 specifies the
ceiling of Rs.19, 87, 500/- plus Rs.30, 00, 000/-, which comes to Rs.49, C
87, 500/-.
50. A perusal of the graded scale manifest from the serial numbers
mentioned in the Fourth Schedule, along with the model fee prescribed
therein, exposits the legislative intent. The scales prescribed in the
schedule have to be read in entirety and serial no. 6 cannot be read in D
isolation. The Serial Numbers 1 to 5, which have reference to the sum in
dispute, specify the model fee which in respect of serial numbers 2, 3, 4
and 5, refers to the highest amount payable in respect of the preceding
serial number and then states the additional (plus) amount payable by
the specific percentage of the claim amount over and above the amount
specified in the earlier serial number. For claims between Rs.10, 00, 00, E
000/- to Rs.20, 00, 00, 000/-, which is applicable to Serial Number 5, an
arbitral tribunal is entitled to an arbitral fee of Rs.12, 35, 500/- plus 0.75%
over and above Rs.10, 00, 00, 000/-. This means the maximum fee payable
under Serial Number 5, that is, when the sum in dispute is below Rs.20,
00, 00, 000/-, is Rs.19, 87, 500/-. Serial No. 6 deals with sum in dispute F
above Rs.20, 00, 00, 000/- without any higher or upper limit stipulation. It
stipulates that arbitral tribunal is entitled to the fee of Rs. 19, 87, 500/-
which is the highest fee payable in Serial No.5, plus 0.5% when the
amount in dispute exceeds Rs.20, 00, 00, 000/-. If this is so, and
undoubtedly it is so, then the reasoning predicated on the legislative intent,
is that, there is an overall ceiling of Rs.30, 00, 000/-. Contrary contention G
that the ceiling stipulated is Rs.19, 87, 500/- plus Rs.30, 00, 000/- must
be rejected. The legislature was clearly aware that Serial No. 6 would
apply to all arbitrations where the sum in dispute exceeds Rs.20, 00, 00,
000/-. Serial No. 6, in its plain and simple language, which when read as
it states and speaks, specifies that for claims above Rs.20, 00, 00, 000/- H
824 SUPREME COURT REPORTS [2022] 10 S.C.R.

A , in addition to Rs.19, 87, 500/-, the arbitral tribunal will be entitled to fee
at the rate of 0.5% of the claim amount above Rs.20, 00, 00, 000/-, but
the total fee is subject to ceiling of Rs.30, 00, 000/-. The expression
“with the ceiling of Rs.30, 00, 000/-” would applywhen claims are above
Rs.20, 00, 00, 000/-. The ceiling of Rs.30, 00, 000/- is not with reference
to 0.5% of the claim amount over and above Rs.20, 00, 00, 000/-. To
B
read it otherwise would be overstretching the language of Serial No.6
and adding words to it.
51. Before us, reference was made to the absence of the
punctuation mark in the form of a comma after Rs.20, 00, 00, 000/-
which is to be found in the Hindi language notification. Absence of the
C comma in the English language version would not make any difference
as the intent of the legislature, in my opinion, is to put a ceiling of Rs.30,
00, 000/-. The intent is not to fix ceiling of Rs.30, 00, 000/- in addition to
the fee of Rs.19, 87, 500/-.
Whether the Fourth Schedule prescribes fee for individual
D members or the whole tribunal?
52. The last aspect relating to the interpretation of the Fourth
Schedule is debatable as both views are plausible. The expression ‘arbitral
tribunal’, as defined in Section 2(1)(d) means a sole arbitrator or a panel
of arbitrators. Section 10 of the A&C Act states that the parties are free
E to determine the number of arbitrators, provided the number shall not be
an even number. Failing such determination, the arbitral tribunal shall
consist of the sole member. Thus, by default, the expression ‘arbitral
tribunal’ refers to a sole member. Section 11, which relates to appointment
of arbitrators, vide sub-section (2), states that the parties are free to
F agree on a procedure for appointment of an arbitrator or arbitrators. As
per sub-section (3), failing such an agreement in an arbitration with three
arbitrators, each party shall appoint one arbitrator and the two arbitrators
so appointedshall appoint the third arbitrator, who shall act as the presiding
arbitrator. If we accept Section 10 as the default rule, it is possible to
interpret that the model fee prescribed in the Fourth Schedule is for one-
G member arbitral tribunal. This interpretation, however, seems to be at
variancewith the wordings of the appended Note to the Fourth Schedule
which applies in the event the arbitral tribunal is a sole arbitrator. Wordings
in thenote-‘sole arbitrator shall be entitled to additional amount of twenty-
five per cent on the fee payable as per above’, can also be read to make
H the other interpretation more acceptable.As the expression ‘arbitral
OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS 825
GUNANUSA JV [SANJIV KHANNA, J.]

tribunal’ can refer to a three member or sole member arbitral tribunal, A
the Note, it can be argued, affirms the interpretation that the amounts
mentioned in the Fourth Schedule refer to the fee payable to each member
of the three member arbitral tribunal, and not cumulative fee which is to
be divided amongst the three member arbitral tribunal.
53. I would respectfully prefer the interpretation placed by D.Y. B
Chandrachud J. In other words, the model fee mentioned in the third
column of the Fourth Schedule would be the fee payable to each member
of the arbitral tribunal, and in cases where the arbitral tribunal consists
of a sole arbitrator, he shall be entitled to an additional amount of 25%
above the amount specified in the model fee. It is apparent that this
interpretation has been accepted and followed by several arbitral tribunals C
since introduction of the Fourth Schedule. This interpretation has gained
acceptance. To interpret it differently would lead to confusion and chaos
which must be avoided, even if the other interpretation is plausible.
54. However, in view of the above interpretation, the Fourth
Schedule does require modification and moderation. For example, where D
the sum in dispute is Rs.5, 00, 000/-, in case of the sole arbitrator, the
amount payable to him would be Rs.56, 250/-, that is, Rs.45, 000/- plus
25% (Rs.11, 250) of Rs.45, 000/-.In case of an arbitral tribunal of three
arbitrators, the fee payable would be Rs.1, 50, 000/-. This fee is too high
and would be unacceptable to most of the litigants as they would be E
liable to pay minimum arbitration fee of nearly 11% in case of sole
arbitrator and nearly 30% in case of an arbitral tribunal consisting of
three members. Similar may be the situation in case of claims falling
under Serial Nos. 2 and 3.A high fee pay-out at serial numbers 1 to 3 as
framed by the legislature makes arbitration unaffordable and beyond
reach for a common litigant. Public perception that arbitration is costly F
and for moneyed litigants must be dispelled, if arbitration is to gain mass
acceptance as the preferred alternative. High fee structure denies access
to arbitration. In fact, the above figures would suggest that the fee
specified in the Fourth Schedule is the cumulative fee to be divided
between the three-member arbitral tribunal.Nevertheless, for the sake
G
of certainty and to avoid confusion, it may not be advisable to overturn
the settled and accepted position. For example, the fee schedule of the
Delhi High Court International Arbitration Center, as amended with effect
from 1st July 2018, clearly states that the schedule of fee mentioned in
the table is for each arbitrator in a three-member tribunal, and not the
cumulative fee to be divided amongst the three-member arbitral tribunal. H
826 SUPREME COURT REPORTS [2022] 10 S.C.R.

A 55. Section 11A states that the Central Government, when satisfied
that it is necessary or expedient, can amend the Fourth Schedule from
time to time, which exercise has not been undertaken.50
Final directions
56. I respectfully agree with the findings recorded by brother D.Y.
B Chandrachud, J. under the Heading G-2 Directions, in paragraph 158(i),
in respect of Arbitration Petition (Civil) No. 5 of 2022, whereby in exercise
of the power under Article 142 of the Constitution of India, direction for
constitution of a new arbitral tribunal in accordance with the arbitration
agreement have been issued to ensure that the arbitration proceedings
C are conducted without any discomfort and rancour, which couldderail
the proceedings.
57. In view of my findingson the first aspect, it will be appropriate
and proper in other cases to hear the learned counsel for the parties
individuallyto examine-whether or not interference is required in terms
D of sub-section (3) to Section 39 of the A&C Act. In a given matter, an
order of remit may be required for fresh decision by the High Court.
Accordingly, I would list each appeal/petitionfor hearing and appropriate
orders and decision.

E Bibhuti Bhushan Bose Appeals disposed of.
(Assisted by : Shubhanshu Das, LCRA)

F

G

50
Periodical updation, without repeated legislation or notifications, can be achieved by
yearly increase based or indexed on appropriate price index, as in case of Dearness
H Allowance.