Delhi High Court Orders Arbitrator To Refund ₹6 Lakhs Of The ₹14.5 Lakhs Fees Paid By Parties

Delhi High Court Orders Arbitrator To Refund ₹6 Lakhs Of The ₹14.5 Lakhs Fees Paid By Parties

Delhi High Court Justice Prathiba M. Singh instructed the arbitrator to reimburse Rs. 6,00,000 out of the Rs. 14,50,000 fees paid by the parties, citing that the arbitrator had conducted a total of twelve hearings, with only three yielding substantive orders. Furthermore, the bench highlighted that the issues in the arbitral proceedings had not been framed yet, and the proceedings had remained suspended for over a year.

On February 12, 2021, the appointed arbitrator initiated proceedings to resolve the disputes between the parties and instructed both parties to deposit Rs.5,00,000 each. Subsequently, the arbitrator issued numerous procedural orders throughout the arbitration process. This included a decision on a Section 17 application under the Arbitration and Conciliation Act, 1996 (Arbitration Act), on March 15, 2021. Additionally, the arbitrator issued orders from April 19, 2021, to December 23, 2021, addressing various procedural matters and an application for impleadment.

On September 5, 2023, the arbitrator resigned, at which point the total amount deposited was Rs. 14,50,000, although the arbitrator had initially directed a total deposit of Rs. 20,00,000. Following the resignation, a new arbitrator was appointed on September 13, 2023. Subsequently, both parties now seek a refund of the fee paid to the previous arbitrator.

The petitioners emphasize that the significant amount already paid poses hardship, especially considering they now have to cover the fees for a new arbitrator. They argue that, apart from two applications, the arbitrator issued only procedural orders over the course of a year, suggesting minimal progress in the arbitral proceedings.

Referring to the Fourth Schedule of the Arbitration Act, which delineates fees payable to arbitrators based on the sum in dispute, the High Court observed that the maximum fee payable to an arbitrator is Rs. 30 lakhs. Since the assets under the family settlement were not quantified in the present case, the court adopted this maximum fee as the standard. The High Court noted that the reference order explicitly stated that the arbitrator would be entitled to fees in accordance with the Fourth Schedule of the Arbitration Act.

After reviewing the orders issued by the arbitrator from January 2021 to February 2022, the High Court observed that despite conducting twelve hearings, the arbitrator issued only three substantive orders, and the framing of issues had not yet occurred. Furthermore, the arbitral proceedings remained stayed for over a year before the arbitrator's resignation.

After considering the circumstances and the amount of fee already paid, the Court deemed the deposited sum to be substantial, especially since the parties involved are individual litigants seeking the implementation of a memorandum of family settlement through partition. The Court fixed the arbitrator's fee at Rs. 7,50,000, along with an additional Rs. 1,00,000 for administrative and other expenses.

Consequently, the Court ordered a refund of the remaining amount, totaling Rs. 6,00,000, to be deposited with the Registrar General within four weeks. This sum would then be distributed equally between the petitioners and respondents, with each receiving Rs. 3,00,000.