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Case Reviews, The Law

Entertainment City Limited v. ASPEK Media Private Limited

This case deals with the issue of fees charged by the Sole Arbitrator. It discusses the Section 11, Section 12, Section 14, and 4th Schedule of the Arbitration and Conciliation Act, 1996. 

By: J. Suparna Rao, 4th Year, BBA LL.B, Ramaiah Institute of Legal Studies, Bangalore. 

Facts:

1. On 21st December, 2018 the court appointed a learned retired judge as the Sole Arbitrator. The order did not fix any fees amount payable to arbitrator. There was also an agreement entered by the petitioner and respondent which contained an arbitral clause. Such arbitral clause did not fix any fees payable to the arbitrator concerned. 

2. The respondent filed a claim for Rs.71,76,11,202/- with 18% of compound interest and respondent filed a counter-claim of Rs.64,34,20,140/-. The learned Sole Arbitrator proceeded with the hearing of the grievances. 

3. The order did not fix any fee to be payable to the Sole Arbitrator. The petitioner was aggrieved and hence prayed for the termination of the mandate of sole arbitrator. 

4. The petitioner filed an application before the Sole Arbitrator on 7th January, 2020 pleading that fees charged by her is in violation of the Section 14, Section 11(14), Section 12(4) read with the Fourth Schedule of the Arbitration and Conciliation Act, 1996. 

5. The petitioner also pleaded the financial stringency. 

6. The learned sole arbitrator rejected the contention of the petitioner, to which the present petition has been filed under Section 12(4) and Section 14 of the Act.   

Issues: 

1. The issue was whether the quantum of fees charged by the sole arbitrator is subject to statutory limits provided in the 4th Schedule of the Act?

2. Whether the fees charged by her are in violation of the provisions of the 1966 Act? 

Rules:

1. Section 11(14) states that the determination of the fees of the arbitral tribunal can be done by the High Court by framing the rules taking into consideration the rates specified in Fourth Schedule. 

2. Section 12(3) states that an arbitrator may only be challenged if there is a situation which raises justiciable doubts to his independence or impartiality or he lack the qualification agreed to by the parties. Section 12(4) states that a party has a right to challenge the appointment of the arbitrator only for reasons which he become aware of after the appointment has made.  

3. Section 14(1) states the mandate of an arbitrator can terminate if he becomes de jure or de facto who is unable to perform his duty or if he withdraws from his position or if the party agree to his termination.

Section 14(2) states if the controversy remains for the above mentioned reasons unless if agreed by parties, the party must apply to the court to decide for the termination. 

Grounds:

1. The petitioner contented that he can claim for the termination of the mandate according to the subsection (4) of Section 12 of the Act, as only after appointment he came to know about the fees charged by the learned Sole Arbitrator. 

2. He also contended that the fee charged by the learned sole arbitrator is against the Section 11(14) of the Act and hence made her de jure unable to perform her functions. So, under Section 14(1) challenge is maintainable.  

Decision:

1. The court held that Section 12(4) of the Act should be read together with the Section 12(3). The grounds under sub-section (4) are strictly limited to the contemplations mentioned in sub-section (3). Hence, Section 12 does not apply in this case. 

2. The Court observed that the arbitrator cannot be declared to become de jure on the sole basis of fees charged by her. Hence, Section 14(1) does not apply to this case. 

3. The Court held that the rates given in Fourth Schedule is not necessarily binding, it is a guiding factor. The petitioner did not raise the question of fees being fixed at the time of appointment of the arbitrator. So, it is not certainly open for the petitioner to challenge the appointment and apply for the termination at this stage. 

4. Accordingly, the petition was dismissed, with no orders as to the costs. 

Precedents:

1. NHPC Ltd. v. Larsen & Toubro Ltd 

2. G.S. Developers & Contractors Pvt. Ltd. v. Alpha Corp. Development Pvt. Ltd.

3. Delhi State Industrial Development Corporation Ltd. v. Bawana Infra Development (P) Ltd.

Parties:

Petitioner- Entertainment City Ltd. 

Through: Mr. Pradeep Aggarwal, Mr. Arjun Aggarwal and Mr. Pawas Agarwal, Advs. 

Respondent- ASPEK Media Private Ltd. 

Through: Mr.Gaurav Mitra, Adv. with Mr. Muhammad Ali Khan, Mr. Omar Hoda, Ms. Aishwarya Mohapatra and Ms. Shriya Raychaudhari, Advs. 

Coram: Hon’ble Justice C. Hari Shankar

References:

1. http://legislative.gov.in/sites/default/files/A1996-26.pdf 

2. https://www.indiacode.nic.in/handle/123456789/1978?sam_handle=12

3456789/1362

3. https://www.barandbench.com/columns/the-delhi-high-court-in-review-june-2020-part-i

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