NATIONAL HIGHWAYS AUTHORITY OF INDIA vs MS IJM GAYATRI JV
$~20
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 21st May, 2024
+ O.M.P. (COMM) 235/2021 & I.A. 10226/2021
NATIONAL HIGHWAYS AUTHORITY OF INDIA ….. Petitioner
Through: Mr. Sudhir Nandrajog, Senior Advocate with Mr. Krishan Kumar, Mr. Seemant K. Garg & Mr. Nitin Pant, Advocates.
versus
MS IJM GAYATRI JV ….. Respondent
Through: Mr. Angad Mehta, Mr. Arsh & Mr. Achala Kumar, Advocates.
[M:-9971080486]
CORAM:
HONBLE MR. JUSTICE PRATEEK JALAN
PRATEEK JALAN, J. (ORAL)
1. The challenge in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 [the Act] is to an award dated 04.02.2021, by which the disputes between the parties under a contract dated 25.05.2001 have been adjudicated by a three-member Arbitral Tribunal.
2. The respondent was the claimant in the arbitral proceedings. Its claims were for an amount of approximately ?147 crores along with interest. The learned Arbitral Tribunal has rejected the respondents claims. However, the present petition has been filed by the National Highway Authority of India [NHAI], for setting aside of a direction that it reimburse an amount of ?29,81,250/- paid by the respondent towards its share of remuneration of the learned Arbitral Tribunal.
A. Facts
3. The Arbitral Tribunal was constituted pursuant to an order of this Court dated 09.04.2012, setting aside an earlier arbitral award under the same contract. It held its first sitting on 23.09.2020. The parties were both represented. Paragraph 5 of the minutes of the said hearing are relevant:-
5. It is agreed that fee of the members of the Arbitral Tribunal shall be paid as per Fourth Schedule to the Arbitration and Conciliation Act, as interpreted by the Honble High Court.1
4. At this time, a judgment of this Court in Rail Vikas Nigam Ltd. v. Simplex Infrastructures Ltd2. [RVNL] held the field as far as interpretation of the last entry [S.No. 6] in the Fourth Schedule to the Act is concerned. The said entry provides that, in respect of an arbitration where the sum in dispute is above ?20 crores, the model fee would be ?19,87,500 plus 0.5% of the claim amount over and above ?20,00,00,000 with a ceiling of ?30,00,000. This Court took the view that the ceiling of ?30 lakhs was applicable to the amount payable by way of fee over and above the basic quantum of ?19,87,500/-, i.e. the maximum fee payable under the Fourth Schedule would be ?49,87,500/-.
5. The aforesaid judgment was challenged before the Supreme Court in SLP (C) 10358/2020.
6. Thereafter, NHAI filed an application before learned Arbitral Tribunal on 12.11.2020, requesting the learned Arbitral Tribunal to fix the maximum fee at ?30 lakhs, subject to the decision of the Supreme Court.
7. The application was taken up by the learned Arbitral Tribunal on 23.11.2020. By then, notice had been issued in the Special Leave Petition by an order of the Supreme Court dated 19.11.2020, but the judgment of this Court had not been stayed. In fact, the order of the Supreme Court specifically recorded that the arbitration proceedings would not be stayed. Keeping this in mind, the learned Arbitral Tribunal, in its order dated 23.11.2020, held that fee calculated in terms of Fourth Schedule, as interpretated by the High Court, continued to apply, and was rightly calculated.
8. Hearing was concluded before the learned Arbitral Tribunal on 24.11.2020 and the award was reserved.
9. By a communication dated 26.12.2020, the learned Presiding Arbitrator addressed the parties as follows:-
To all concerned
Award in this case was reserved on 24.11.2020. In the Procedural Order of that date, the Tribunal directed both the parties to deposit balance amount of fee payable to the arbitrators within a period of two weeks.
The Claimant deposited its share of fee by despatching the cheques with covering letter dated 09.12.2020. The Presiding Arbitrator has received the cheque on 11.12.2020 and within a day or two thereafter, the other arbitrators have also received the same. The Tribunal, accordingly, sent e-mail dated 16.12.2020 to the parties informing about the remittance made by the Claimant. The Respondent was directed to deposit its share of the balance amount of fee at the earliest to enable the Tribunal to pronounce the Award as the Award was ready by that time. The Claimant was also directed to furnish the Stamp Paper for printing the Award.
It transpires that NHAI/Respondent has deposited further fee of Rs. 5.00 lakhs in the account of each of the arbitrators (after adjusting TDS), leaving a balance of Rs. 9,93,750 to each of the arbitrators. As the Award is ready, the Tribunal is waiting for the Respondent to deposit the balance amount as indicated above. The Tribunal is giving two weeks further time for the Respondent to deposit the said amount. In case it is not done, a peremptory order under Section 38(2) of the Arbitration & Conciliation Act, 1996 is hereby passed, directing the Claimant to deposit the aforesaid share of the Respondent’s fee, making it a clear that the same shall form part of cost in the Award. Giving two weeks time to the Claimant for this purpose, the Arbitral Tribunal is fixing the date of 25.01.2021 as the date for pronounce of the Award. It is made clear that the Arbitral Tribunal shall have lien on the said Awards, which shall not be disclosed to the parties and the copy thereof also shall not be given till the time the Tribunal is not paid the balance fee as aforesaid.
The Respondent shall also pay to Mr. Dinkar P. Thomas, P.S. to the Presiding Arbitrator, the amount due to him towards secretarial charges.
The Claimant is directed to furnish the Stamp Paper for thy Award at the earliest.3
10. By this time, the petitioner had deposited the sum of ?15 lakhs with each arbitrator, being its share of arbitral fees, as computed in accordance with its interpretation that ?30 lakhs was the maximum fee payable under the Fourth Schedule. It did not make any further payment in terms of the directions of the learned Arbitral Tribunal. The respondent paid the balance amount of ?9,93,750/- to each of the arbitrators on 25.01.2021, as directed by the learned Arbitral Tribunal, and the impugned award was issued on 04.02.2021. The operative directions in the impugned award are as follows:-
6.22 The aforesaid discussion leads us to conclude that the manner in which the Respondent applied the formula mentioned in Clause 70 and compensated the Claimant was correct and justified. Since the Claimant has already been paid/compensated on that basis, no further amount is payable to the Claimant. The claim of the Claimant is, accordingly, rejected with no order as to costs. As a consequence, both the parties shall bear their own cost. It may be recorded that the Respondent had not paid entire share of their arbitral fee which led to passing of Orders under Section 38(2) of the Arbitration & Conciliation Act, 1996 directing the Claimant to deposit the unpaid share of the Respondent. Pursuant thereto, the Claimant deposited a sum of Rs. 9,93,750 in the account of each of the Arbitrator (i.e., in total Rs. 29,81,250 for the three members of the Tribunal). The Claimant shall be entitled to recover this amount from the Respondent and the Award of recovery of cost of Rs. 29,81,250 passed in favour of the Claimant.4
11. On 30.08.2022, the judgment of this Court in RVNL5 was reversed by a decision of the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa Jv6 [Afcons]. The Supreme Court expressly held that the ceiling of ?30 lakhs, in S.No.6 of the Fourth Schedule, is applicable to the sum of the base amount of ?19,87,500/- and the variable amount over and above it.
B. Submissions
12. I have heard Mr. Sudhir Nandrajog, learned Senior Counsel for the petitioner, and Mr. Angad Mehta, learned counsel for the respondent.
13. Mr. Nandrajog clarifies at the outset that the petitioners challenge is not to the direction that the parties shall bear their own costs. However, he submits that the award is susceptible to challenge, as it directs recovery of an amount that was not legally payable as arbitral fees, as held by the Supreme Court in Afcons7. It is Mr. Nandrajogs contention that the learned Arbitral Tribunal ought to have awaited the decision of the Supreme Court in the appeal and, if the respondent chose to pay the additional amount, that was at its own peril. Mr. Nandrajog draws my attention to the judgement of the Supreme Court in Sarwan Kumar and Anr. v. Madan Lal Aggarwal8 [Sarwan Kumar], to submit that the interpretation of the Fourth Schedule in Afcons9 must be taken to lay down the law as it always was. The fact that the judgment was pronounced after the conclusion of the arbitral proceedings cannot, he submits, rendered legitimacy to payment of costs beyond the amount permitted by the Fourth Schedule.
14. Mr. Mehta, on the other hand, submits that the petitioner is taking recourse to a judgment delivered well after the conclusion of the arbitral proceedings, in an attempt to overturn a position that was in consonance with the law declared at the time of the award. He cites the judgment of the Supreme Court in Gaytri Jhansi Roadways Limited v. Gammon Engineers and Contractors Private Limited10, to submit that the determination of arbitral fees in terms of a subsisting judgment of this Court cannot be interdicted.
C. Analysis
15. Having heard learned counsel for the parties, I am of the view that the respondent must prevail, on the facts of the present case. The impugned direction relates to a question of arbitral fees, which must be decided, at the latest, when the award is rendered. It is significant that the entire arbitral proceedings took place, in this case, during the period when the judgment of this Court in RVNL11 held the field. It is true that the Supreme Court had been moved, but the judgment had not been stayed. To the contrary, the arbitration, even in that very case, was permitted to proceed during the pendency of the appeal.
16. The order of the learned Arbitral Tribunal dated 23.09.2020 specifically records the agreement of the parties that the remuneration of the learned Arbitral Tribunal will be under Fourth Schedule as interpreted by the Honble High Court. NHAIs application was rejected by an order dated 23.11.2020, after considering the order of the Supreme Court.
17. The learned Arbitral Tribunal was ready with its award by the time it addressed the email dated 26.12.2020 to the parties. The direction of the learned Arbitral Tribunal with regard to the deposit of the amount by the claimant [respondent herein] in the event the petitioner failed to deposit the amount, was in accordance with Section 38(2) of the Act, which reads as follows:-
38. Deposits
xxx xxx xxx
(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 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.12
18. The respondent was also acting in accordance with the orders of the learned Arbitral Tribunal, in making the deposit on behalf of the petitioner. It was entitled to act in a manner that would avoid the consequence of non-compliance, as provided in Section 38(2) of the Act, which is that the tribunal would have suspended or terminated the proceedings altogether. Such a consequence would defeat the very purpose of effective and efficient resolution of disputes by arbitration.
19. It is not disputed that the amount of ?29,81,250/- was in fact paid by the respondent to the Arbitral Tribunal towards NHAIs share of remuneration. The impugned award, to the extent that it permits the respondent to recover this amount from NHAI, is not really an award of costs in favour of the respondent, but a consequence of the direction that both parties would bear their own costs. This direction, Mr. Nandrajog clarifies, is not challenged. To hold in NHAIs favour in the present case would tantamount to a direction that part of NHAIs share of arbitral remuneration is borne by the respondent, which is contrary to the unchallenged direction that parties would bear their own costs.
20. NHAI, if it wished to dispute the computation of arbitral fee by the learned Arbitral Tribunal, had the possibility of recourse under Section 39 of the Act, which reads as follows:
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 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 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 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 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 costs and the arbitral award contains no sufficient provision concerning them.13
21. The aforesaid provision shows that the Arbitral Tribunal was entitled to exercise a lien on the award for recovery of its fees. In the event of a dispute as to the quantum of fees, the disputing party here, NHAI could have had recourse to the Court under Section 39(2) of the Act. It could have deposited the disputed amount into Court, subject to directions that the Court ultimately passed with regard to computation. The present case provides, in my view, an illustration of exactly the sort of situation in which the remedy under Section 39(2) of the Act should have been invoked. This remedy has also been recognised in the concurring judgement of Honble Sanjiv Khanna, J. in Afcons14. NHAI chose not to exercise this remedy, which would have avoided the situation in which the parties find themselves, but instead proceeded on its own interpretation of the Fourth Schedule.
22. NHAI now seeks setting aside of the impugned award on the ground that it has been directed to reimburse sums, which were in excess of the maximum fee payable. Having regard to the facts of the case, this plea of the petitioner amounts, in my view, to seek a benefit which would not have accrued to it if it had acted in accordance with the Tribunals directions, which aligned with the law, as had then been declared.
23. In considering whether the impugned award, to this extent, is required to be set aside, the Court must examine whether it is irrational, implausible or perverse, giving rise to a ground for interference under Section 34 of the Act. The present proceedings are not by way of appeal, but for setting aside of an arbitral award. This jurisdiction is a limited one, to be exercised only when the Arbitral Tribunal has committed a palpable and manifest error which goes to the root of the matter; its decision must be one which no reasonable tribunal could have reached.
24. Upon an analysis of the timelines in this case, I do not find the impugned award to be vulnerable to challenge on the touchstone of these tests. The arbitral fee has to be determined contemporaneously. The tribunal relied upon an interpretation of the statute which then subsisted, and the respondent acted in terms of those directions. The Court must bear in mind that the judgment in Afcons15 was delivered 18 months after the arbitration had concluded. NHAI also did not, as stated above, avail of the statutory remedy provided for determination of disputed questions of arbitral remuneration, but chose to proceed on the basis of the interpretation it considered to be correct.
25. I find support for this conclusion in Gaytri Jhansi16. In the context of a petition under Section 14 of the Act, the Supreme Court observed as follows:-
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 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 [NHAI v. Gayatri Jhansi Roadways Ltd., 2017 SCC OnLine Del 10285] which clearly mandated that the Fourth Schedule and not the agreement would govern.
13. The arbitrators merely followed the law laid down by the Delhi High Court and cannot, on that count, be said to have done anything wrong so that their mandate may be terminated as if they have now become de jure unable to perform their functions. The learned Single Judge, in allowing the Section 14 application, therefore, was in error and we set aside the judgment [NHAI v. Gammon Engineers & Contractor (P) Ltd., 2018 SCC OnLine Del 10183] of the learned Single Judge on this count.
26. Mr. Nandrajogs reliance upon the judgment in Sarwan Kumar17. does not persuade me to a contrary conclusion. The proposition, according to him, is that the judgment of the Supreme Court in Afcons18 has retrospective effect, and the Fourth Schedule must be read in accordance with the said judgment, from the day it was enacted. Without diluting in any manner from that principle, it does not, however, follow that all concluded proceedings must or can be reopened and re-agitated in terms of the law subsequently declared. In Sarwan Kumar19, a decree of eviction had been passed under the Delhi Rent Control Act on the ground that a commercial tenancy was not heritable. Before the decree could be executed, the Supreme Court overruled the judgment of this Court on the point, and held that a commercial tenancy was indeed heritable. The executing court, however, proceeded in execution, despite the plea of the judgment debtor that the decree was a nullity. It is in this context when the proceedings for execution of an eviction decree were still pending. The Court reversed the orders of the executing Court and this Court. In the present case, as noted herein above, the entire arbitral proceedings had concluded well before the declaration of the law in Afcons20.
27. On the facts of this case, therefore, I do not find any ground to interfere with the award, to the extent challenged by the petitioner.
D. Conclusion
28. The petition is therefore dismissed, but with no order as to costs. All pending application also stands disposed of.
PRATEEK JALAN, J
MAY 21, 2024
pv
1 Emphasis supplied.
2 OMP (T) (COMM) 28/2020 dated 10.07.2020.
3 Emphasis supplied.
4 Emphasis supplied.
5 Supra (note 2).
6 ARB.P.(C) 5/2022 and connected matters, dated 30.08.2022, reported in (2022) SCC Online SC 1122.
7 Ibid.
8 (2003) 4 SCC 147.
9 Supra (note 6).
10 (2020) 17 SCC 626
11 Supra (note 2)
12 Emphasis supplied.
13 Emphasis supplied.
14 Supra (note 6), paragraph 244(d).
15 Supra (note 6)
16 Supra (note 10)
17 Supra (note 8)
18 Supra (note 6)
19 Supra (note 8)
20 Supra (note 6)
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