Gujarat High Court
Manbhupinder Singh Atwal S/O Barinder ... vs Neeraj Kumarpal Shah on 13 June, 2025
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025
undefined
Reserved On : 10/03/2025
Pronounced On : 13/06/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 2819 of 2024
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2024
In R/FIRST APPEAL NO. 2819 of 2024
With
R/FIRST APPEAL NO. 2830 of 2024
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2024
In R/FIRST APPEAL NO. 2830 of 2024
With
R/FIRST APPEAL NO. 3066 of 2024
With
R/FIRST APPEAL NO. 3096 of 2024
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA
AGARWAL
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
=============================================
Approved for Reporting Yes No
✔
=============================================
MANBHUPINDER SINGH ATWAL S/O BARINDER SINGH ATWAL
Versus
NEERAJ KUMARPAL SHAH
=============================================
Appearance:
In FA No. 2819 OF 2024
DR. S. MURLIDHAR, SR.ADVOCATE assisted by MR PRANAV
VYAS, MR. KARTIK YADAV and MR.PARTH CONTRACTOR(7150)
for the Appellant(s)No. 1
MR SAURABH N. SOPARKAR, SR. ADVOCATE assisted by MR.
BHADRISH S. RAJU, MR KARAN SHAH and MR MANYA ANJARIA,
for the Defendant(s) No. 1
Page 1 of 284
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NEUTRAL CITATION
C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025
undefined
In FA No. 2830 OF 2024
DR. S. MURLIDHAR, SR. ADVOCATE assisted by MR PRANAV
VYAS, MR KARTIK YADAV and MR.PARTH CONTRACTOR(7150)
for the Appellant(s) No. 1
MR. KAPIL SIBAL, SR. ADV. WITH MR MASOOM K. SHAH, MS
MANISHA SINGH, MR JAY SHAH, MR. PARTH THUMMAR and MR
DHRUVIN DOSSANI for the Defendant(s) No. 1
In FA No. 3066 OF 2024
MR SAURABH N. SOPARKAR, SR. ADVOCATE assisted by
MR.BHADRISH S. RAJU, MR KARAN SHAH and MR MANYA
ANJARIA for the Appellant(s)No.1
DR. S. MURLIDHAR, SR. ADVOCATE assisted by MR PRANAV
VYAS, MR KARTIK YADAV and MR.PARTH CONTRACTOR(7150)
In FA No. 3096 OF 2024
MR. KAPIL SIBAL, SR. ADVOCATE WITH MR MASOOM K. SHAH,
MS MANISHA SINGH, MR JAY SHAH, MR. PARTH THUMMAR and
MR DHRUVIN DOSSANI for the Appellant(s) No. 1
DR. S. MURLIDHAR, SR. ADVOCATE assisted by MR PRANAV
VYAS, MR. KARTIK YADAV and MR.PARTH CONTRACTOR(7150)
for the Defendant (s) No. 1
=============================================
CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE
SUNITA AGARWAL
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
CAV JUDGMENT
(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)
1. At the outset, we may record that the matter was heard at length on various dates and the judgement was reserved on 10.03.2025. There is some delay in the delivery of the judgment, which we want to place on record. The delay has occurred on account of an emergent medical condition in the family of the Page 2 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Presiding judge, the author of the judgement, who had to proceed on leave for one month from 17.03.2025. The judgement was prepared during the summer vacation commenced from 09.05.2025 ended on 09.06.2025, and is being delivered without any further delay on 13.06.2025.
2. For the convenience of readers, the judgment is divided into parts as indicated in the table of contents, given hereinbelow :-
Table of contents Sr. Subject Page No. Nos.A Preface 5 B An overview of litigation 6 C Preliminary Issues 16 (i) Section 34 applications grossly time 16
barred - beyond limitation under Section 34(3) of the Act' 1996 ;(ii) Maintainability of the Appeals of the 35
respondents under Section 37 filed as Cross-Appeals;(iii) Section 29A - Termination of Mandate 43
of the Arbitral Tribunal.D Issue of Fee and Costs being Exorbitant: 75
Whether Jurisdictional Error?Analysis 92 E Scope Of Section 34/37: Principle Of 130
Interference in the Award on the ground being in conflict with the Public Policy of India.Page 3 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined F Grounds of Challenge to the Arbitral Award 160 (i) Non-Disclosure under Section 12(1) 160 Analysis 177
(ii) Plea of violation of Principles of Natural 193 Justice and Bias - violation of Section 18 of the Act' 1996 (a) & (d) : Non-adjudication of Counter 206 claims of the respondents and denial of opportunity to lead evidence.Analysis 210 (c) : Unilateral fixation of the fee 219
agreeable to the claimant's only :- Violation of Natural Justice and Bias Conclusion on the plea of Bias - Violation 226 of Section 18 of the Act' 1996.
G Merits of the claims 228 (a) Award of INR 22.19 Crores with interest 229for misappropriation of funds of LLP Analysis 246 (b) Award of damages to the tune of INR 84 251 Crores for Loss of Profits 256 Analysis (c) Award of Costs and Expenses, etc. 259 H Doctrine of Severability : When claims are 275 distinct I Conclusion 282 J Operative Portion 283 Page 4 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined (A) Preface:
3. This is a matter pertaining to an arbitral award passed in an international commercial arbitration proceedings. The above referred two connected First Appeals No. 2819 and 2830 of 2024 under Section 37 of the Arbitration and Conciliation Act, 1996 have been filed by the original claimant, namely Mr. Manbhupindar Singh Atwal (Mr.M.S. Atwal) challenging the judgment and order dated 05.07.2024 passed by the learned Single Judge in allowing the applications under Section 34 of the Arbitration and Conciliation Act, 1996 (in short as the "Arbitration Act' 1996), viz. Arbitration Petition No. 23 of 2023 and Arbitration Petition No. 24 of 2023, filed by respondents no.1 and 2, viz. Mr. N.K. Shah and Mr. K.S. Jhadwani, resulting into setting aside of the arbitral award dated 16.04.2021 delivered by the majority (in the ratio of 2:1) of three member arbitral tribunal.
4. The record indicates that an execution petition for enforcement of the arbitral award dated 16.04.2021 filed by the appellant was registered as Arbitration Petition No. 110 of 2022 and has also been decided along with the application under Section 34 of the Arbitration Act' 1996 challenging the arbitral award, inasmuch as, with the setting aside of the arbitral award, no further order was required to be passed in the execution petition.
5. The other two connected appeals, viz. First Appeals No. 3066 of 2024 and 3096 of 2024 under Section 37 of the Page 5 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Arbitration Act' 1997, have been filed by the original respondent Nos. 1 and 2 challenging certain findings of the Court in the order impugned dated 05.07.2024 passed under Section 34 of the Act' 1996.
(B) An overview of the Litigation:-
6. We may note that the First Appeal No. 2819 of 2024 (under Section 37) (arising out of Arbitration Petition No. 23 of 2023) was initially filed by two appellants, namely Mr. M.S. Atwal as appellant no.1 and M/s.C2R Projects LLP as appellant no.2. However, the appellant no.2 has been deleted from the array of parties by using whitener as is evident from the memo of the appeal under Section 37 of the Arbitration Act' 1996. There is nothing on record which would indicate of passing any order by this Court permitting for deletion of appellant no.2. Be that as it may, the connected First Appeal No. 2830 of 2024 (arising out of Arbitration Petition No. 24 of 2023) is in the name of the two appellants, viz. Mr. M.S. Atwal as appellant no.1 and M/s.C2R Projects LLP as appellant no.2.
7. The relevant facts placed before us to assail the order passed by the learned Single bench of this Court under Section 34 of the Arbitration Act' 1996, are as follows :-
8. The appellant no.1, i.e. the original claimant before the arbitral tribunal would submit that he had invested an amount of INR 45 Crores with the Limited Liability Page 6 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Partnership firm, namely M/s.C2R Projects (LLP) for 20% of its share holding. The original respondents, namely Mr. N.K. Shah, Mr. K.S. Jhadwani and Mr.Dinesh Shivanna i.e. other partners had contributed only a total sum of INR 5 lakhs to the capital of the LLP. Mr. M.S.Atwal, being the only contesting appellant is being referred as "the appellant" hereinbelow, whereas Mr. N.K.Shah and Mr. Kamal Jhadwani would be referred as the respondent No.1 and 2; respectively, in the entire judgment.
9. A dispute arose between the appellant and the original respondent No.1 namely Mr. N.K. Shah and initially appellant and respondent No.2 Mr. K.S. Jhadwani had jointly filed reference, but later Mr. K.S. Jhadwani and Mr. N.K. Shah had joined hands before commencing of the arbitral proceedings leaving behind the appellant as the sole claimant. The appellant, viz. Mr. M.S. Atwal claimed an amount of INR 22.19 crores to be paid to the LLP (impleaded as appellant no.2) on the premise that the said amount was embezzled by Mr. N.K. Shah. In addition thereto, damages to the tune of INR 54.15 crores under distinct heads and further amount incurred as legal costs to pursue the proceedings as well as pendente lite interest was also sought against both Mr. N.K. Shah and Mr. K.S. Jhadwani, the original respondents no.1 and 2.
10. It is submitted by the learned senior counsel appearing for the appellant that both the respondents refused to Page 7 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined pay the arbitrator's fee and the arbitral tribunal passed the award dated 16.04.2021 upholding the claim of the appellant deciding inter alia that :-
A. Respondent No. 1 is directed to pay to Appellant No. 2, INR 22.19 crores along with interest at 12% per annum;
B. Respondent No. 1 is directed to pay to Appellant No. 1, INR 84 crores in damages;
C. Respondent No. 1 is directed to pay to Appellant No. 1, interest at 12% per annum on the sum of INR 84 crores from 25.09.2017 till the date of payment;
D. Respondent Nos. 1 and 2 are directed to pay costs on a full indemnity basis to Appellant Nos. 1 and 2 and Mr. Dinesh Shivanna;
E. The costs as mentioned above shall inter alia include the full legal cost and expenses incurred by the Appellant No. 1 in relation to the Arbitration and related court proceedings as per Appendix A of the Final Arbitral Award."
11. It is submitted that the arbitral award was challenged by the original respondents no.1 and 2 invoking jurisdiction of this Court under Section 34 in the month of December 2021 by filing first appeals, which were severely defective. However, they were kept pending at the defect stage and after removal of all objections, they came to be registered only in the month of August 2022, long after the limitation period prescribed under Section 34 had lapsed. The applications under Section 34 and the execution petition, both were heard by the learned Page 8 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Single bench extensively and the judgement was reserved in the month of December, 2023. Though there was no stay application in the application filed under Section 34, but this Court had not proceeded with the execution petition seeking for execution of the award. The appellant no.1, however, filed interim application in the execution petition bearing Civil Application No. 1 of 2023 seeking urgent ad-interim/interim relief pending reserved judgment, which was necessitated due to the act of the respondent (Mr. N.K. Shah) in deliberately alienating his assets rendering the arbitral award a paper decree.
12. However, after a period of 8 months from the date of reserving the judgment (01.03.2023), the matter was released by the Bench concerned on 09.02.2024. The appellant no.1 then approached the Apex Court by filing Special Leave Petition (C) No.7669 of 2024. A Special Leave Petition (C) No. 8264 of 2024 was also filed by the respondent no.1 Mr. N.K. Shah. Vide order dated 08.04.2024, the Apex Court had directed that the Section 34 petition and the execution petition be expeditiously disposed of. The matter was then taken up by the Bench concerned which has passed the impugned judgment and order dated 05.07.2024 allowing the applications under Section 34 of the Act' 1996 setting aside of the award.
13. Coming to the basic facts pertaining to the claim of the appellants, we may record that on 28.01.2015, the Page 9 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined limited liability partnership firm, namely M/s.C2R Projects LLP (a Limited Liability Partnership firm constituted under the provisions of Limited Liability Partnership Act, 2008) was incorporated. The LLP agreement was executed on 10.02.2015 by and amongst three persons, namely Mr. N.K. Shah, Mr. K.S. Jhadwani and Mr.Dinesh Shivanna. On 27.02.2015, the appellant, viz. Mr. M.S. Atwal, a Non-resident Indian based in the Sultanate of Oman, was added as a partner of the LLP and first addendum to the LLP agreement was executed. It is the case of the appellant Mr. M.S. Atwal that he was made to believe that the LLP was already constituted and as a member of its business he would inter alia undertake projects in the defence sector of the Company under the "Make in India" scheme. Over a period of one year after insertion, the appellant no.1 contributed a sum of INR 45 crores as a part of his capital contribution to the LLP.
14. The claim of the appellant no.1-the original claimant Mr. M.S. Atwal in the claim petition was that on 24.10.2016, it became apparent to the appellant that large sum of money was withdrawn from the Bank accounts of the LLP by the respondent no.1 Mr. N.K. Shah for unexplained purposes. This has led to the expulsion of respondent no.1 from the LLP and a dispute between the appellant and respondent no.1. Upon invocation of the arbitration clause, both the appellant and the respondent no.1 had appointed arbitrators as their Page 10 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined nominee co-arbitrators, but the co-arbitrator nominated by respondent no.1 had recused himself on 16.01.2017. On 17.01.2017, the appellant no.1 called upon the respondent no.1 to appoint another co-arbitrator. On 16.02.2017, the respondent appointed his nominee as co- arbitrator, but there was no consensus on the choice of the Presiding arbitrator, which has led to the filing of the Arbitration Petition No. 14 of 2017 on 13.04.2018 by the appellant no.1 before the Apex Court, invoking its jurisdiction under Section 11(6) of the Arbitration Act' 1996, seeking appointment of the Presiding arbitrator.
15. The stand of the appellant is that while allowing the Arbitration Petition no. 14 of 2017 vide order dated 24.07.2017, the Apex Court had classified the dispute between the parties as an international commercial arbitration dispute and appointed Presiding arbitrator to constitute three member arbitral tribunal. The Presiding arbitrator appointed by the Apex Court, however, withdrew himself on 11.11.2017 and by another order dated 04.12.2017, the Apex Court has appointed another retired High Court judge as the Presiding arbitrator and, thus, reconstituted the arbitral tribunal. It was, however, clarified in the order dated 04.12.2017 by the Apex Court that "the time period within which the award is to be delivered under Section 29A of the Act will commence on and from the date on which the first sitting of the arbitral tribunal takes place".
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16. However, on 29.11.2018 and 01.12.2018, the second Presiding arbitrator and the co-arbitrator nominated by the appellant both had withdrawn; respectively. The appellant no.1 then appointed Mr. Andre Yeap, Senior counsel, Singapore as his nominee arbitrator. The co- arbitrator nominee of the respondent , however, continued and both the arbitrators nominated by the appellant and the respondent had jointly appointed Mr. Vinayak Pradhan from Malaysia as the Presiding arbitrator, thereby re-constituting arbitral tribunal as on 24.01.2019.
17. It is sought to be contended by the learned Senior counsel for the appellant that the first sitting of the above constituted arbitral tribunal chaired by the third Presiding arbitrator (Mr. Vinayak Pradhan), appointed on 24.01.2019, was held on 07/09.11.2019. The Tribunal invited the submission of the parties on Section 29A of the Act' 1996, and after hearing the parties, determined that it had jurisdiction to proceed. The Arbitral Tribunal was also unanimous in its observation that the fee charged by it was not exorbitant.
18. On 10.02.2020, the respondents no.1 and 2 filed Special Civil Application No. 3913 of 2020 and Special Civil Application No. 4441 of 2020, separately; under Article 226 of the Constitution of India seeking relief under Section 29A agitating that the arbitral tribunal's mandate under the said provision had lapsed and pleaded that the costs of the arbitration were high. The Page 12 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined High Court vide order dated 12.02.2020 had initially stayed the arbitral proceedings in Special Civil Application No. 3913 of 2020, which was challenged before the Apex Court in Special Leave Petition (C) Diary No. 5800 of 2020. The Apex Court vide order dated 14.02.2020 had modified the interim order dated 12.02.2020 passed by this Court and directed the arbitral tribunal to resume hearing from the next day and to continue with the hearings fixed from 13.02.2020 to 18.02.2020. Simultaneously, this Court was also requested to take up the matter on 26.02.2020 to complete the hearing and deliver the judgment.
19. Hearing before the arbitral tribunal then commenced on 15.02.2020 and evidence of the witnesses of appellant were recorded on 18.02.2020. The Presiding arbitrator Mr. Vinayak Pradhan unfortunately passed away on 08.03.2020. Thereafter, on 11.03.2020, this Court had dismissed both the petitions, viz. Special Civil Application No. 3913 of 2020 and Special Civil Application No. 4441 of 2020 holding that the question whether the mandate of the Tribunal had come to an end in terms of Section 29A of the Act cannot be decided by the High Court under Article 226 of the Constitution of India, rather the arbitral tribunal has jurisdiction to adjudicate the said issue under Section 16 of the Arbitration Act' 1996. The High Court also declined to examine the issue about the costs of arbitrator stated to be exorbitant.
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20. On 09.09.2020, two co-arbitrators nominated by the parties had appointed Mr. K. Anantham, a former judge of the Court of Appeal, Malaysia, as the Presiding arbitrator and, thus, the arbitral tribunal was reconstituted fourth time on 09.09.2020. The further proceedings of adducing evidence, cross-examination and oral hearings took place in the month of November and December 2020.
21. In the meantime, the respondents had challenged the judgment and order dated 11.03.2020 passed by this Court in dismissal of the aforesaid two Writ petitions filed by them before the Apex Court and both the Special Leave Petition (C) No. 14900 of 2020 and Special Leave Petition (C) No. 14869 of 2020 were dismissed.
22. Further, on 22.02.2021, the appellant approached the Apex Court by way of an application being IA No. 1102 of 2021 in Special Leave Petition (C) Diary No. 00 of 2020 seeking appropriate directions. The observations made by the Apex Court in the order dated 22.02.2021 placed before us are relevant to be extracted as under :-
"Given the facts that pursuant to our order, the writ petitions were dismissed on 11th March, 2020 and the Special Leave Petitions arising therefrom were dismissed on 18th December, 2020, we clarify that these proceedings before us have now come to an end, as a result of which, the Arbitral Tribunal is free to go ahead with the final award"
23. Ultimately, the arbitral tribunal passed the arbitral award dated 16.04.2021, which was challenged by the Page 14 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined respondents in the applications invoking jurisdiction of this Court under Section 34 of the Arbitration Act' 1996.
24. While placing the facts pertaining to the date of filing of the execution proceedings by the appellants and the application under Section 34 filed by the respondents, it was argued before us by the learned senior counsel for the appellant that the statutorily available time period under Section 34(3) of the Act' 1996 to entertain any application seeking for setting aside of the arbitral award had lapsed on 15.07.2021. The appellant then filed a Commercial Execution Petition No. 2121 of 2021 on 08.10.2021 before the Commercial Court at the City Civil Court, Ahmedabad against respondent no.1. Further, an execution petition was filed by the appellant no.1 before the High Court of Bombay against Mr. K.S. Jhadwani (respondent no.2). The first ground to assail the order passed under Section 34 by the learned Single judge is that both the arbitration applications under Section 34 filed by the respondent nos. 1 & 2 were grossly time barred and the Court under Section 34 had no jurisdiction to condone the delay beyond the time period prescribed in Section 34(3) of the Act' 1996. In view of the submissions of the learned senior counsel for the appellants, we deem it fit to decide the preliminary issue about maintainability of Section 34 application as the first issue.
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(i) Section 34 applications grossly time barred -
beyond Limitation under Section 34(3) of the Act' 1996 :-
25. The arbitral award was challenged by the respondent no.1 by filing an appeal under Section 13(1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 read with Section 34 of the Arbitration Act' 1996, which was originally numbered as First Appeal No. 3240 of 2022. The said appeal was kept in defect until August 2022 when the defects were eventually cured and it was registered as Arbitration Petition No. 23 of 2023 under Section 34 of the Arbitration Act, 1996. Similarly, the respondent no.2 filed First Appeal No. 3950 of 2022 under Section 13(1) of the Commercial Courts Act, 2015 read with Section 34 of the Arbitration Act, 1996. The said appeal was also kept under office objection and upon removal of defects, it was registered as Arbitration Petition No. 24 of 2023 under Section 34 of the Arbitration Act' 1996.
26. It was submitted by the learned Senior counsel for the appellant that due to the onset of Covid-19 Pandemic, in terms of the order dated 10.01.2022 passed by the Apex Court in suo motu Writ Petition No. 3 of 2020, the statutory limitation period was extended uptil 30.06.2022, but even the extended limitation for filing application as per Section 34(3) of the Act, 1996 had Page 16 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined expired when the respondents no.1 and 2 had cured the defects in the presentation of their application, on 29.08.2022 and 01.10.2022; respectively. The contention is that the extension in the statutory limitation granted by the Apex Court had come to an end and the date 17.07.2022 was, thus, the outer limit for curing the office objections. However, the respondents have kept their applications under office objection and the defects were cured much after the expiry of the extended period of limitation. The result is that both the applications under Section 34 of the Arbitration Act' 1996, viz. Arbitration Petition No. 23 of 2023 and Arbitration Petition No. 24 of 2023 filed by respondents no. 1 and 2; respectively, became time barred and were liable to be dismissed being beyond limitation, at the threshold.
27. The contention is that this Court while dealing with the application under Section 34 has failed to consider the said issue. The submission is that the respondent no.1 has kept the Arbitration Petition No. 23 of 2023 under office objection for 8 months and 12 days and hence, the filing of the said application effectively became non est. In any case, the date of filing of the said application under Section 34 of the Act, 1996 must be taken to be 29.08.2022 when the office objections were removed. The case status of the application shows that relevant documents for registration of the case such as vakalatnama, memo of the petition, certified copy of the award were all filed only on 29.08.2022 or 01.09.2022.
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28. Based on the said Rules, it was argued by the learned Senior counsel for the appellants that for the failure on the part of the respondents to cure the defects, the delay exceeding one month for removal of the office objections could be excused only under the order of the Court and it was to be treated prima facie as failure to prosecute diligently. The contention, thus, is that the petition under Section 34 of the Act 1996 is liable to be dismissed being barred by limitation prescribed under sub-section (3) of Section 34. Placing heavy reliance on the proviso to sub-section (3) of Section 34, it was vehemently argued by the learned Senior counsel that even in a case, where the Court is satisfied that the petitioner was prevented by sufficient cause from making the application under Section 34 within the time period of three months for the sufficient cause being shown to it, there is an outer limit of further period of thirty days when such petition can be entertained, but not thereafter.
29. It was further argued that as no specific rules have been framed by the Gujarat High Court which are applicable to arbitration proceedings, miscellaneous rules Page 18 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined contained in Chapter XXI prescribing procedure of filing all appeals, civil or criminal including the procedure for filing application for the delay in presentation of the appeal and the removal of office objection being General rule applicable on all forms of petitions/appeals and existed at the time of filing of the application under Section 34, will be applicable. It was argued that a party cannot be granted an indefinite period and unexplained delay in removal of office objections cannot be accepted to be condoned. The applications under Section 34 filed by both the respondents no. 1 and 2 were deliberately kept under defect and, in the interregnum, the assets were dissipated by respondent no.1 taking advantage of keeping the arbitration application under defect for about more than one and a half year and, thus, the respondent no.1 has succeeded in defeating the enforcement of the arbitral award. The conduct of the respondent no.1 in not pursuing the Section 34 petition with diligence ought not to have been ignored by the learned Single judge. The contention is that the interpretation of the High Court Rules prescribing for the timeline for removal of office objections should be consistent with the provisions contained in Section 34(3) of the Arbitration Act'1996.
30. Reliance is placed on the decisions of the High Court of Delhi in Delhi Development Authority v. Durga Construction Co.1 and Union of India v. Bharat 1 [2013 SCC OnLine Del 4451] Page 19 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Biotech International Ltd.2 to argue that in both the matters, the Delhi High Court has taken note of the decisions rendered by the Apex Court in dealing with the question as to whether the High Court have jurisdiction to condone the delay under Section 34(3) of the Arbitration Act, 1996 after a period of 3 months plus 30 days. It was placed before us that the purpose of specifying an inelastic period of limitation under Section 34(3) of the Act would have to be borne in mind, which means that no application under Section 34 can be permitted to be instituted beyond 3 months plus a further period of 30 days, which extension is permissible subject to showing sufficient cause.
31. It was further submitted that the question before the Delhi High Court in Durga Construction1 was for condonation of delay of 166 days in re-filing the application under Section 34 of the Act' 1996. In the said case, on the application filed under Section 34 on 24.07.2009, initially with the delay of 17 days, the registry of the Court raised certain objections and papers were returned under objections on the same date. The said application under Section 34 was then re- filed on 24.08.2009 when it was again returned due to certain objections. Upon re-filing, on 22.12.2009 again, the registry raised certain office objections and returned the same. Ultimately, the application under Section 34 was finally re-filed on 06.01.2010 after removing all office objections. Thus, the question of condonation of 2 [2020 SCC OnLine Del 483] Page 20 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the period of 166 days in re-filing of the application under Section 34 was the subject matter of consideration before the Delhi High Court, which was beyond the inelastic limitation period prescribed in Section 34(3) of the Act' 1996.
32. The Delhi High Court upon reading of the Delhi High Court Rules has opined that in absence of any specific statute, although the courts would have the jurisdiction to condone the delay, but the approach in exercising such jurisdiction cannot be liberal and the conduct of the applicant will have to be tested on the anvil of whether the applicant acted with due diligence and dispatch. The applicant would have to show that the delay was on account of the reasons beyond the control of the applicant and could not be avoided despite all possible efforts by the applicant. It was opined that though the Court would have jurisdiction to condone the delay in re- filing, even if the period extends beyond the time specified in sub-section (3) of Section 34 of the Act, however, this jurisdiction is not to be exercised liberally considering the object of the Arbitration and Conciliation Act' 1996 to ensure that the arbitration proceedings are concluded expeditiously. The delay caused in re-filing cannot be permitted to frustrate the object of the Arbitration Act, 1996. In any case, the applicant/petitioner would have to satisfy the Court that it had persuaded the matter diligently and the delays were beyond his control and were unavoidable.
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33. In another decision in Bharat Biotech International Ltd.2, the question before the Delhi High Court was of condonation of delay in re-filing the applications under Sections 34 of the Arbitration and Conciliation Act, 1996. In the preliminary objections raised by the respondents therein, it was contended that the application when originally filed within the statutory period of limitation was merely a bunch of papers and could not be treated as being valid institution in the eyes of law. A complete and valid application under Section 34 was filed only beyond the date when the limitation period of 3 months and 30 days as prescribed under Section 34(3) of the Act had already expired. The Delhi High Court while considering the rigours of the proviso to Section 34(3) and the decision of the Apex Court in Union of India v. Popular Construction Co.3, wherein it has been held that the Court cannot entertain an application to set aside an arbitral award beyond the extended period under the proviso to Section 34(3) of the Act, has concluded that the application for condonation of delay in re-filing the application under Section 34 beyond the time prescribed under Section 34(3) of the Act has to be considered in light of the object and purpose of the limitation prescribed under Section 34(3).
34. Considering its previous decision in Durga Construction1 of the Division Bench of the High Court 3 [(2001) 8 SCC 470] Page 22 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined of Delhi, it was noted therein that though the Court is empowered to condone the delay beyond the extended period of limitation of 3 months and 30 days, while considering the delay condonation application in re-filing an application under Section 34, but it is required for the party seeking the condonation to show that despite his diligence, the rectification of defects and re-filing could not be carried out within the limitation period, for the bonafide reasons beyond his control. It was noted that it is important for the Court to bear in mind the legislative intent for prescribing the statutory period of limitation under Section 34(3) of the Act ensuring expeditious disposal of the arbitration proceedings and preventing delay in implementation of the arbitral award by parties who would malafidely challenge the same. It was observed that a liberal approach while dealing with an application for condonation of delay in challenging the arbitral award would only endanger and frustrate the purpose for which the Arbitration Act was enacted. It was noted by the Delhi High Court that since the applicant therein had demonstrated alarmingly lackadaisical approach in complying with general filing practice and the statutory requirements under Section 34 of the Act' 1996, the delay in re-filing the petition under Section 34 could not be condoned being vague, unsubstantiated, insufficient and contrary to the records.
35. It was then argued that the submissions made by the appellant herein about Section 34 application being Page 23 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined beyond the period prescribed in Section 34(3) made before the Court under Section 34 proceeding were though noted by the learned Single judge and the contentions have been recorded in paragraphs 9.13 to 9.20 on the issue raised pertaining to the dates of presentation of the application under Section 34 and the effect of the Gujarat High Court Rules, 1993, viz. Rules 267 and 268, but there has been no adjudication. After noticing the arguments on the question of limitation raised by the appellant, there is complete silence in the order of the Court under Section 34 which has proceeded to return the findings on the issues pertaining to the jurisdiction under Section 34 and the scope of interference on the merits of the arbitral award while setting aside the entire arbitral award on the jurisdictional defects. It is vehemently argued by the learned Senior counsel for the appellant that the issue of limitation was the preliminary issue, had it been decided, there would have been no requirement of entering into the discussion on other issues, inasmuch as, the applications under Section 34 of the Arbitration Act, 1996 would have to be rendered non-maintainable and, as such, the entire order under Section 34 of setting aside the arbitral award would have to go.
36. Considering the above, we propose to decide the issue raised about the applicability of Section 34(3) of the Act, 1996, in the facts and circumstances of the present case in light of the existing High Court Rules on the date of Page 24 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined presentation of the applications under Section 34 by both the respondents no.1 and 2.
37. At the outset, we may extract the relevant Rules relied by the learned Senior counsel for the appellants contained in Chapter XXI under the heading "Miscellaneous" in the Gujarat High Court Rules, 1993. For the sake of clarity, we may quote Rules 264 to 270 in the said heading :-
"Miscellaneous
264. Filing of Appeals.--All appeals-Civil or Criminal, shall be filed in the office of the Registrar and shall be accepted, if within time, and are other wise in conformity with the rules.
265. Procedure regarding appeals which are beyond time.--When an appeal civil or criminal appears to the office to be beyond time, it shall be returned to the party or his Advocate, unless it is accompanied by a separate application for excuse of delay or the party or his Advocate applies for it to be placed before the Court for orders.
266. Application for excusing delay.--An application for excusing the delay in presenting the appeal shall be filed within a fortnight of such return. Such application shall be placed before the Court for orders as soon as practicable.
267. Removal of office objections.--All other office objections shall be removed by the party or his Advocate within 14 days from the date of service of the office objection.
268. Removal of office objections within specified time.-- (i) Where any party is required under these rules to do anything in regard to an Page 25 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined application, appeal or otherwise within a specified time and he fails to do so, the Registrar may, on sufficient cause shown, excuse any delay not exceeding one month.
(ii) Any delay exceeding one month shall be treated prima facie as failure to prosecute diligently, and the delay may be excused only by order of the Court.
269. Appeal not prosecuted diligently to be placed before court.-- Where an appellant, after the admission of an appeal, does not prosecute the appeal diligently the appeal shall be placed before the Appellate Court for orders. The Appellate Court may dismiss the appeal or pass such orders as it may deem fit.
270. Applicability of Civil Procedure Code, and Criminal Procedure Code.--The provisions of the Code of Civil Procedure and Code of Criminal Procedure unless inconsistent with these rules, shall apply mutatis mutandis to civil and criminal proceedings or appeals under these rules."
38. We may also note the submissions of Mr. Saurabh Soparkar, learned Senior counsel appearing for the respondents on the question of limitation and maintainability of the applications under Section 34. It was submitted that though the applications under Section 34 of the Arbitration Act' 1996 were wrongly titled as First Appeals, but the provisions of law mentioned therein were correct as Section 34 of the Arbitration Act' 1996 when filing of the first application was made on 17.12.2021. The scrutiny of the said application was made on 17.12.2021 itself and no major objections were raised. It was the period of onset of Page 26 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Covid-19 Pandemic and extension of statutory limitation came to an end only on 28.02.2022 as per the order of the Apex Court. All the defects were removed in the matter on 25.08.2022 and it was listed in the Court on 07.09.2022. It is further submitted by the learned Senior counsel for the respondents that the contention of the appellants that from the case status, it was revealed that the filing was a non est filing, stating that the original filing consisted of a loose bunch of papers and that no vakalatnama, no affidavit and no memo were filed on 17.12.2021, is an absolutely false statement. In fact, this Court in the present proceeding has permitted a joint inspection of the original file and on 07.01.2025, the lawyers of both the parties conducted a joint inspection, when it was revealed that proper filing had been done on 17.12.2021 and all relevant documents such as the memo of appeal, vakalatnama and affidavit of the party were filed. The filing, as such, cannot be said to be a "non est filing". It was further argued that the appellants are raising a lot of dispute about the filing of the First Appeal instead of an application under Section 34 of the Act, 1996, but the fact remains that it was only a defect of the cause title and the First Appeal was converted to an application under Arbitration Act' 1996 under the order of the High Court dated 15.02.2023 and no objections at the relevant point of time were raised. It is settled law that the nomenclature or the cause title of the case would not matter if the remedy under the relevant statutory provision has been Page 27 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined invoked before a proper court of law. Moreover, the reliance placed by the appellants on the decisions of the Delhi High Court based on the procedure prescribed in the Delhi High Court Rules is completely misplaced.
39. With respect to Arbitration Petition No. 23 of 2023 filed by respondent no.1, Mr. N.K. Shah, it was contended that the said matter was never listed in the Court for non-removal of the office objections and registry had allotted regular number after removal of the defects on 25.08.2022. Whereas with respect to Arbitration Petition No. 24 of 2023 filed by respondent no.2 Mr.Kamal Jhadwani, a judicial order was passed on 15.09.2022 granting time to remove office objections, which were removed, accordingly. It was argued that the limitation period of 90 days as prescribed under Section 34(3) was extended uptil 28.02.2022 by the Apex Court in suo motu petition during the period of Covid-19 Pandemic. Before the extended period of limitation came to an end in this case, the vacation in the High Court of Gujarat commenced and the registry opened on 05.06.2022 after the summer vacation. All the defects as pointed out by the registry had been removed on 29.08.2022 and on mentioning for urgent circulation made on 05.09.2022, the matter was listed in the Court on 07.09.2022. The contention is that as the petition under Section 34 of the Arbitration Act 1996 was presented in the registry on 17.12.2021 within the period of limitation, but had remained pending under Page 28 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined office objections because of the overwhelming situations of Covid-19 Pandemic and further on removal of office objections, regular registration number was allocated by the registry, it cannot be argued now that the filing of the application under Section 34 was a 'non est filing' and there was any delay. It was vehemently argued that the matter was never listed before the Court for non- removal of office objections and no judicial order was passed as per the Gujarat High Court Rules. All the arguments of delay are frivolous and liable to be rejected, outrightly.
40. Reliance is placed on the decisions of the Apex Court in F. N. Roy v. Collector of Customs, Calcutta & Ors. 4 ;
Commissioner of Income Tax, Rajkot v.
Shatrusailya Digvijaysinh Jadeja5 and Indra Kumar Patodia & Anr. v. Reliance Industries Ltd. 6 to argue that the law regarding proper filing is well established. The contention is that the date of the presentation of the appeal in the registry of this Court would be relevant to compute the limitation and for the fact that after filing the papers remained under office objections, the applications under Section 34 cannot be said to be irregular or incompetent.
41. Considering the rival submissions of the learned counsels for the parties on the question of limitation, we find from the reading of the rules and the procedure 4 [AIR 1957 SC 648] 5 [(2005) 7 SCC 294] 6 [(2012) 13 SCC 1] Page 29 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined adopted by the registry at the relevant point of time that though the flow of papers presented in the registry has been clearly prescribed in the Rules 267, 268 and 269 of the Gujarat High Court Rules, 1993, but the procedure prescribed therein was not being followed when a Standard Operating Procedure (SOP) dated 30.11.2023 was implemented with the decision of the Standing Committee of the Gujarat High Court.
42. We may further record that a careful reading of the above extracted rules indicates that as per Rule 267, the party or his advocate are mandated to remove all office objections except the delay in the presentation of the appeal, within a period of 14 days from the date of service of the office objection. Rule 268(i) provides that the Registrar may on sufficient cause being shown, excuse any delay in removal of office objections, not exceeding one month. Rule 268(ii) further provides that any delay exceeding one month shall be treated prima facie as failure to prosecute diligently and such delay may be excused only by the order of the Court. Rule 269 further provides that after admission of the appeal, if the appellant does not prosecute the appeal diligently, the appeal shall be placed before the appellate court for orders, which may dismiss the appeal or pass such orders as it may deem fit.
43. Admittedly, there is no separate Rules framed by the Gujarat High Court prescribing procedure for presentation of the application under Section 34 of the Page 30 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Arbitration Act' 1996, keeping in mind the mandate of the Act' 1996 for expeditious disposal of the arbitration matters. The arbitration application, in the instant case, was filed with the title of a First Appeal under Section 13 of the Commercial Courts Act, 2015 read with Section 34 of the Arbitration Act' 1996, which was later converted into application under Section 34 under the order of the Court dated 15.02.2023. The fact remains that both the applications filed under Section 34 remained pending in the registry of the High Court at the stage of objections and there was no movement of the papers after alloting Diary number (filing number), to place them before the Court under office objection. As the registry has not followed the procedure prescribed in the High Court Rules for movement of the papers from the registry to the competent court inspite of the expiry of the time period prescribed in Rules 267 and 268 of the Rules of the Court, there was no occasion for consideration by the concerned Court as to whether the respondents/applicants were entitled to get condonation of delay in removal of office objection within the time prescribed in the High Court Rules. No such occasion arose in the Arbitration Petition No. 23 of 2023 filed by respondent no.1 Mr. N.K. Shah wherein a regular number was allotted by the registry on its own with the removal of the defects on 25.08.2022 and the matter was listed before the Court after urgent circulation mentioning.
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44. As regards the Arbitration Petition No. 24 of 2023, it was posted before the Division Bench having jurisdiction of the First Appeal as cause title of the case was First Appeal and an order dated 15.09.2022 was passed by the Court for removal of office objections within a period of two weeks. The office objections were removed, thereafter, and the matter was again listed in the Court, which had permitted conversion of the First Appeal to an application under Section 34 of the Arbitration Act, 1996 by passing the order dated 15.02.2023.
45. In this fact situation, it is difficult for us to hold that the applications under Section 34 of the Arbitration Act, 1996 were liable to be dismissed outrightly having been filed/presented in this Court beyond the period prescribed in Section 34(3) viz. 90 days + 30 days = Total 120 days. Even otherwise, with the removal of the office objections by the parties presenting a matter, by the registry or under the order passed by this Court, the date of removal of office objection would relate back to the date of the presentation or filing of the case. Accordingly, in the present matter, with the removal of office objections, the date of removal of defects, i.e. 25.08.2022 in Arbitration Petition No. 23 of 2023 would relate back to the date of filing or presentation of the said application under Section 34, which was admittedly 17.12.2021.
46. Similarly, with the removal of office objections on 01.10.2022 in Arbitration Petition No. 24 of 2023 under Page 32 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the judicial order dated 15.09.2022, the said date would relate back to the date of original filing, which was admittedly 23.12.2021 for the said matter.
47. The Rules of the Delhi High Court, which provided for return of the papers presented on the office objection raised by the registry and for re-filing of the same with the removal of defects, discussed in the decisions of the Delhi High Court, relied upon by the learned Senior counsel appearing for the appellants, cannot be applied in the facts and circumstances of the present case considering the procedure prescribed in the Gujarat High Court Rules, 1993. As per the procedure followed in the Gujarat High Court, the registry provides a filing (Diary) number upon receiving the papers of a case such as, appeal memo, vakalatnama and affidavit, etc. and notifies the office objections, if any, with the allotment of the filing number.
48. There cannot be two opinion about the prescription in the Rules 267 and 268 of the Gujarat High Court, where the party and his advocate is mandated to remove office objections within the timeline prescribed therein, but the fact remains that both the matters registered as Arbitration Petition No. 23 of 2023 and Arbitration Petition No. 24 of 2023 were never dismissed for want of prosecution, for non-removal of the office objection.
49. As per the new SOP dated 31.11.2023, the movement of file from the filing desk to the Registrar (listing) and Page 33 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined ultimately to the Court in case of non-removal of office objections by the party or their advocate is being maintained seamlessly.
50. Be that as it may, in view of the above discussion, the preliminary issue of limitation raised by the learned Senior counsel for the appellant is hereby decided. In our considered opinion, no infirmity can be attached to the decision of the learned Single judge in not dismissing both the applications under Section 34 on the ground of being beyond the limitation prescribed in Section 34(3) of the Arbitration Act' 1996.
51. However, before parting with the issue, noticing the gaps in the High Court Rules, in order to streamline the procedure in filing of the applications under the Arbitration Act' 1996, which may not cause prejudice to any party approaching this Court, we are of the considered opinion that this order be placed before the Hon'ble the Chief Justice for considering for framing of the Rules in the matter of presentation of the applications under Section 34/37 of the Arbitration Act' 1996, in the High Court of Gujarat, so that recurrence of any such situation may be avoided and the timeline for the remedy prescribed in the Arbitration Act, 1996 be adhered to upholding the spirit of the object of the Arbitration Act' 1996, so as to ensure that the arbitration proceedings instituted in this Court are conducted expeditiously and any delay which may frustrate the object of the Arbitration Act'1996 may be Page 34 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined arrested, at the outset.
52. There are two more issues, which have been raised by the learned Senior counsels appearing for the rival parties as preliminary issues which, as submitted, if decided in favour of the party raising it, would result in the dismissal of the appeals under Section 37 or setting aside of order under Section 34, outrightly, as the case may be.
(ii) Maintainability of the Appeals of the respondents under Section 37 filed as Cross-Appeals.
53. There are two appeals under Section 37; viz. First Appeal No. 3066 of 2024 filed by respondent no.1 Mr. N.K. Shah and First Appeal No. 3096 of 2024 filed by respondent no.2 Mr. Kamal Jhadwani against whom the arbitral award was passed. The issue raised by the learned Senior counsel appearing for the appellant is about the maintainability of the said appeals. It was argued that there is no concept of cross appeal as in the case of Regular civil appeal (first appeal) under the Arbitration Act' 1996 and in view of the clear language employed in sub-section (1) of Section 37, an appeal may lie only from the orders mentioned in clauses (a) to (c) to sub-section (1) and no appeal would lie to the Court from any other order. Considering Section 37(1)(c), an appeal may lie against an order for setting aside or refusing to set aside an arbitral award under Section 34. Thus, an appeal is allowed only in case an arbitral award is set aside or the Court under Section 34 refuses to set Page 35 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined aside an award. No appeal is permitted to be filed by a party at whose instance the arbitral award is already set aside under Section 34.
54. In the present case, as the arbitral award has been set aside as a whole, it would be absurd on the part of the respondents to file appeal under Section 34 in the shape of cross appeals, that too seeking to challenge certain findings returned by the Court under Section 34 in favour of the appellants, while setting aside the arbitral award in its entirety.
55. The vehement contention of the learned Senior counsel for the appellant is that the substantive provisions of the Code of Civil Procedure' 1908 are not applicable in respect of the procedure of conducting arbitration proceedings or the proceedings under the statutory remedies provided under the Arbitration Act, 1996.
56. In rebuttal, Mr. Saurabh Soparkar, learned Senior counsel for the respondents would submit that the appeal filed by the respondents fall within the meaning of clause (c) to sub-section (1) of Section 37, which provides for an appeal against an order "setting aside or refusing to set aside the arbitral award under section 34". The submission is that the phrase "refusing to set aside" in Section 37 is to be constructively interpreted. If an arbitral award is set aside on specific grounds [Eg. say (abc)] and the Court refuses to set it aside on other grounds [say (xyz)], the refusal fits into the definition of Page 36 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined "refusal to set aside" and hence, the order of refusal would be appealable under Section 37 of the Act' 1996. A narrow view of the expression "refusal to set aside", confining it to orders of refusal to set aside the entire award, would leave the litigant remediless. Such an interpretation creates an absurd situation, inasmuch as, though the validity of the order passed under Section 34 for setting aside of award on certain grounds can be examined in Section 37 appeal, but for challenging the other part of the same order passed under Section 34 refusing to set aside the award on certain grounds, the party to the same proceedings would have to approach a different court. This situation not only leads to incongruity in the decision on a challenge to the same award before two different forums, but also would give rise to multiplicity of the proceedings.
57. It was further argued that the question of applicability of the Code of Civil Procedure to the proceedings under the Arbitration and Conciliation Act, 1996 as expressed in ITI Ltd. v. Siemens Public Communications Network Ltd.7 is engaging attention of the Apex Court in a reference made in MTNL v. Applied Electronics Ltd.8. In view thereof, the expression of law in ITI Ltd.7 that merely because the 1996' Act does not provide CPC to be applicable, it should not be inferred that the CPC is inapplicable, remains the binding precedent. Reference has been made to certain 7 [(2002) 5 SCC 510] 8 [(2017) 2 SCC 37] Page 37 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined observations made by the Division Bench of this Court in First Appeal No. 3428 of 2023 decided on 30.07.2024.
58. Considering the above, we may note the position of law on the scope of challenge to the arbitral award under Section 34 and the scope of appeal under Section 37 of the Act' 1996. In Reliance Infrastructure Ltd. v. State of Goa9, the Apex Court noticing its previous decision in MMTC Ltd. v. Vedanta Ltd. 10 has noted the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the Act' 1996, particularly when dealing with the concurrent findings of the arbitrator and that of the Court. Relevant paragraph '14' of MMTC Ltd.10 as noted in paragraph '26' in Reliance Infrastructure Ltd.9 is to be extracted hereinunder :-
"14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."
59. The same view has been expressed in UHL Power 9 [(2024) 1 SCC 479] 10 [(2019) 4 SCC 163] Page 38 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Company Ltd. v. State of Himachal Pradesh 11, in paragraph '16' while noticing paragraph '11' in MMTC Ltd.10 :-
"16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC Ltd. v. Vedanta Ltd. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] , the reasons for vesting such a limited jurisdiction on the High Court in exercise of powers under Section 34 of the Arbitration Act have been explained in the following words : (SCC pp. 166-67, para 11)
"11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] 11 [(2022) 4 SCC 116] Page 39 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract."
60. In Haryana Tourism Ltd. v. Kandhari Beverages Ltd.12, as noted in paragraph '30' in Reliance Infrastructure Ltd.9, it was held on the scope of interference under Sections 34 and 37 of the Act' 1996 as under :-
"30. In Haryana Tourism [Haryana Tourism Ltd. v. Kandhari Beverages Ltd., (2022) 3 SCC 237 :
(2022) 2 SCC (Civ) 87] , this Court yet again pointed out the limited scope of interference under Sections 34 and 37 of the Act; and disapproved interference by the High Court under Section 37 of the Act while entering into merits of the claim in the following words : (SCC p. 240, paras 8-9) "8. So far as the impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court quashing and setting aside the award and the order passed by the Additional District Judge under Section 34 of the Arbitration Act are concerned, it is required to be noted that in an appeal under Section 37 of the Arbitration Act, the High Court has entered into the merits of the claim, which is not permissible in exercise of powers under Section 37 of the Arbitration Act.
9. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the 12 [(2022) 3 SCC 237] Page 40 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Arbitration Act, if the award is found to be contrary to : (a) fundamental policy of Indian Law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court is hence not sustainable."
61. It was, thus, observed in paragraph '33' of Reliance Infrastructure Ltd.9 as under :-
"33. Keeping in view the aforementioned principles enunciated by this Court with regard to the limited scope of interference in an arbitral award by a Court in the exercise of its jurisdiction under Section 34 of the Act, which is all the more circumscribed in an appeal under Section 37, we may examine the rival submissions of the parties in relation to the matters dealt with by the High Court."
62. Considering the above, we may note that Section 37 is an enabling provision providing remedy for filing appeal against the order passed under Section 34 setting aside or refusing to set aside the arbitral award to a court authorised by the law to hear appeals from original decrees of the court. The validity of the order passed under Section 34 of the Act' 1996 is to be examined Page 41 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined considering the powers of the Court alligned under Section 34 to quash and set aside the arbitral award. As noted hereinabove, while considering the grounds to set aside the award, the provisions of Section 34/37 of the Arbitration Act' 1996 are referred interchangeably but the scope of interference is circumscribed by the provisions of Section 34. It is for this reason, the Apex Court has observed that the jurisdiction conferred on courts under Section 34 of the Arbitration Act' 1996 is fairly narrow as it is, and when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of the appellate court in examining an order setting aside or refusing to set aside an award is all the more circumscribed.
63. Considering the above position of law, we may also find it pertinent to note that the powers of the Court under Section 34/37 of the Act' 1996 is contemporary, where this Court has been conferred the powers to examine the validity of the arbitral award. In the crux, the Court has to examine the validity of the award confining itself within the limits of the powers prescribed in the statute. We, therefore, do not find any reason to delve on the issue about the maintainability of appeal under Section 37 filed by the respondents as a cross-appeal confining the challenge to the issues decided against them. We find it fit and proper to deal with all grounds of challenge to the arbitral award raised under Section 34, within the scope of the appeals under Section 37 of the Page 42 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Act' 1996. All appeals, thus, have been heard together and are being decided by this common judgment.
(iii) Section 29A - Termination of Mandate of the Arbitral Tribunal :-
64. The next issue, which is agitated as a preliminary issue, with much vehemence by the learned Senior counsel for the respondents is about the challenge to the validity of the award on the ground of loss of mandate of the Arbitral tribunal by virtue of Section 29A. The contention is that the mandate of the arbitrator was terminated on 31.01.2019. The arbitral award passed on 16.04.2021 is, thus, liable to be set aside being without jurisdiction. It was urged that this issue goes to the very root of the matter and has wrongly been adjudicated by the learned Single Judge who has refused to set aside the arbitral award by returning the finding that the arbitral tribunal has rightly continued with the proceedings, inasmuch as, with the amendments brought into Section 29A with effect from 30.08.2019, the time limit of 12 months would not be applicable to international commercial arbitration proceeding.
65. The submission is that the arbitral tribunal as well the Court under Section 34 have wrongly appreciated the provisions of Section 29A in rejecting the contentions made on behalf of the respondents that the arbitral tribunal had lost its mandate on the completion of 12 months as on 31.01.2019. The question posed by the Page 43 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Court under Section 34 as to whether the arbitration proceedings between the parties can be said to be pending as on 30.08.2019 so as to attract the amended provisions of Section 29A(1) of the Arbitration Act' 1996, has been wrongly decided against the respondents herein.
66. Mr. Kapil Sibal, learned Senior counsel appearing for the respondents placing the chronology of dates and events and a comparative chart of the provisions of Section 29A pre and post the amendments with effect from 30.08.2019, to press the point, would argue that as per the pre-amended provisions, the time limit of period of 12 months for making of an award from the date an arbitral tribunal enters upon the reference as per sub-
section (1) of Section 29A, was applicable in all arbitrations including international commercial arbitration. The exclusion came only with effect from 30.08.2019.
67. It was placed that in the instant case, vide notice dated 10.11.2015, the appellant along with the respondents other than respondent no.1 jointly appointed their nominee arbitrator. The respondent no.1, however, appointed his nominee arbitrator vide letter dated 05.12.2016, but the said arbitrator recused himself. Another arbitrator was appointed by the respondent no.1 vide email dated 16.02.2017 as his nominee arbitrator. The respondent no.1 herein later withdrew his consent for appointment of nominee arbitrator and nominated Page 44 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined another arbitrator as his co-arbitrator. The same suit was followed by the respondent no.2. The result is that the parties by themselves could not constitute arbitral tribunal, which had resulted in filing of the Arbitration Petition No. 14 of 2017 by the appellant, viz. Mr. M.S. Atwal before the Apex Court seeking for appointment of the Chairman/Presiding Arbitrator. The arbitral tribunal came to be constituted for the first time vide order dated 24.07.2017 passed by the Apex Court in the aforesaid arbitration petition.
68. The arbitral tribunal so constituted entered into the reference and the first hearing took place on 29.08.2017 when the respondents were directed to file their replies to the application under Section 17 of the Act' 1996 by 20.09.2017 and a timetable was fixed for filing of the pleadings by the parties. However, after hearing the application under Section 17 and reserving its order, the then presiding arbitrator resigned from the arbitral tribunal owing to personal reasons. The application under Section 17 of the Act' 1996 filed by the appellants, thus, remained undecided.
69. The appellant again approached the Apex court by filing a miscellaneous application in Arbitration Petition No. 14 of 2017, and by order dated 04.12.2017, another presiding arbitrator was appointed. The tribunal constituted under the order of the Apex Court, had fixed the first date of hearing as on 01.02.2018 after entering upon the reference, hence the period of 12 months as Page 45 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined per Section 29A would commence on the said date. However, on 29.11.2018, the presiding arbitrator and the nominee arbitrator of the appellant both withdrew from arbitration. It is contended by Mr. Sibal, the learned senior counsel appearing for the respondents that as per own case of the appellant, two arbitrators were replaced, with the nomination of their nominee arbitrator and the nominee arbitrators jointly appointing the presiding arbitrator on 24.01.2019.
70. By placing sub-section (3) of Section 29A, it was argued by Mr. Sibal that one of the options for the parties to extend the period specified in sub-section (1) of Section 29A for making the award was, by consent, that too only for a further period not exceeding six months. In the instant case, the parties never reached at any consensus to extend the time limit for making of arbitral award prescribed in sub-section (1) of Section 29A. The result is that by virtue of sub-section (4) of Section 29A, as the award was not made within the period specified in sub- section (1) and there was no extended period as specified in sub-section (3), the mandate of the arbitral tribunal stood terminated. The termination of the mandate of the arbitral tribunal was automatic by operation of law and the revival was subject to the procedure prescribed in sub-sections (4) and (5) of Section 29A. As there was no application of any of the parties seeking for extension of the mandate of the arbitrator beyond the period referred to in sub-section Page 46 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined (4) to Section 29A, the arbitral tribunal was not competent to make the award on 16.04.2021.
71. Placing the order of the Apex Court dated 04.12.2017 in Arbitration Petition No. 14 of 2017, it was argued by Mr. Sibal that while appointing the Presiding arbitrator of the arbitral tribunal, the Apex Court has specified that the period within which the award was to be delivered under section 29A of the Arbitration Act' 1996, will commence on and from the date on which the first sitting took place. It was, thus, argued that even at the time of appointment of the presiding arbitrator, there was a clear understanding between the parties that the provisions of Section 29A were applicable in the present matter, which commenced as an international commercial arbitration. As the mandate of the arbitral tribunal had expired much before the amendments were brought in Section 29A with effect from 30.08.2019, the Court while dealing with the application under Section 34 has erred in holding that the arbitration proceedings were pending on the date of the amendment and Section 29A would not be applicable.
72. By reading of sub-section (7) of Section 29A, it was argued by Mr. Sibal, learned senior counsel appearing for respondents no.1 and 2 that there is no concept of new tribunal being constituted. Even with the substitution of arbitrators, if any, under sub-section (6) of Section 29A, the arbitral proceedings will be treated to have been continued from the stage already reached Page 47 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined and on the basis of the evidence and material already on record. It was submitted that an application dated 07.11.2019 was filed by Mr. Kamal Jhadwani, one of the respondents herein, raising an issue with regard to the termination of the mandate of the arbitrators as on 01.02.2019, clearly mentioning that the arbitral tribunal is to declare the cessation of the arbitral proceedings in absence of the agreement of the parties to the mandate of the arbitral tribunal and no application having been filed before the Court seeking extension of time stipulated under the Act, 1996. Placing the proceedings before the arbitral tribunal on 07.11.2019, it was submitted that the Chairman of the Tribunal has noted that the fundamental question of Section 29A was required to be resolved and has, thus, continued with the hearing on the aspect of the mandatory provisions of Section 29A. It was noted by the Presiding arbitrator that there was no extension of the time period by conduct of the parties, but on 08.11.2019, it was concluded and pronounced that the Tribunal will proceed with the evidence.
73. Placing the record of the proceedings of hearing dated 09.11.2019, it was argued by Mr. Sibal that the respondent no.1 raised an important issue before the arbitral tribunal as to which date should be considered as the commencing date of the hearing by the Tribunal and insisted that the said issue be adjudicated by the Tribunal. Instead of answering the said issue at that Page 48 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined stage, a communication dated 15.01.2020 was sent with reference to the applications dated 07.11.2019 and 22.11.2019 that the issues relating to Section 29A will be dealt with by the Tribunal at the final stage of making of the award.
74. Aggrieved, the respondent no.1, namely, Mr. N.K. Shah filed Special Civil Application No. 3913 of 2020 contending that the arbitral tribunal had lost its mandate and, therefore, cannot proceed further with the arbitration. Notices were issued on 12.02.2020 and the arbitral tribunal has been paused from undertaking further proceedings with the arbitral process/hearings. Challenging the interim order dated 12.02.2020, a Special Leave Petition (C) Diary No.(s) 5800 of 2020 was filed by the appellant, namely Mr. M.S. Atwal wherein the arbitral tribunal was directed by the Apex Court to continue with the hearings and while requesting the High Court to decide the matter, the arbitral tribunal was directed to confine itself for the time being to taking evidence and hearing the parties.
75. Ultimately, the Special Civil Application No. 3913 of 2020 and Special Civil Application No. 4441 of 2020 seeking the writ of quo warranto had been dismissed vide judgment and order dated 11.03.2020 holding that intervention by the High Court under Article 226 of the Constitution of India in arbitration proceedings at that stage was not permissible.
Page 49 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
76. It was argued by the learned Senior counsel for the respondents that though the challenge to the judgment and order dated 11.03.2020 made to the Apex Court in Special Leave to Appeal (C) No. 14900 of 2020 by one of the respondents herein, was not entertained, but the fact remains that the issue pertaining to the applicability of Section 29A to the arbitration proceedings, in the instant case, has not been adjudicated by the High Court. The said issue was never closed and remained alive till the final award was made by the arbitral tribunal.
77. Reliance is placed on the decision of the Apex Court in TATA Sons (P) Ltd. v. Siva Industries & Holdings Ltd.13 to submit that the effect of the amended provisions of Section 29A, the exclusion of mandatory timelines provided therein, has been considered at length by the Apex Court while holding that the original Section 29A introduced with effect from 23.10.2015 applied to all arbitration proceedings that commenced on or after 23.10.2015. Section 29A of the amendment Act provides for timelines within which the arbitral award is to be made. Though Section 29A has been held to be procedural in nature and is made applicable to all pending arbitral proceedings as on the effective date, i.e. 30.08.2019, but the arbitration proceedings, in the instant case, cannot be said to be pending on the effective date of amendment.
78. It was vehemently argued by the learned Senior Counsel 13 [(2023) 5 SCC 421] Page 50 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined for the respondents that the arbitration proceedings stood terminated with the expiry of the mandate of the arbitrator as on 31.01.2019 as there was no extension within the meaning of the applicable provisions of unamended Section 29A. Since the arbitrators have lost their mandate for making an award much prior to the effective date of the amendment, there was no question of revival.
79. With reference to the decision of the Apex Court in Rohan Builders (India) Private Limited v. Berger Paints India Limited14, it was argued that Section 29A(4) provides that if the award is not made within the timeline prescribed in Sub-section (1) [within 12 months from the date of completion of pleadings or within extended period of six months with the consent of the parties as per Sub-section (3)], the mandate of the arbitrator shall terminate and without there being any extension application, there was no question of extension of the period for making of the award. As in the instant case, no application seeking extension of the time period for making of the award has been filed by any of the parties invoking provisions of Section 29A(4), the law laid down by the Apex Court in Rohan Builders14 that there could be extension of mandate or time period for making an arbitral award under Section 29A(4) read with Section 29A(5), even after the expiry period of 12 months or the extended six months, as the case may be, will not be applicable.
14 [2024 SCC OnLine SC 2494 : 2024 9 SCR 479] Page 51 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
80. The submission is that there is no question of automatic extension of the mandate of the arbitrator and the requirement was to file an application seeking extension upon which the Court has to adjudicate considering the guiding principles of sufficient cause being shown in the exercise of the judicial discretion of the court. Referring to the observations in Paragraph No. '15' in Rohan Builders14, it was argued that the power to extend the period referred to in Sub-section (4) of Section 29A is to be exercised only in cases where there is sufficient cause for such extension. No extension is to be granted mechanically on filing of the application. The reason being that Section 29A intends to ensure timely completion of arbitration proceedings. The judicial discretion of the Court in terms of the statutory enactment, act as a deterrent against any party abusing the process of law by delaying the arbitration proceedings and then seeking extension. The court can impose terms and conditions while granting the extension and delay even on the part of the arbitral tribunal is not countenanced as the first proviso to Section 29A(4) empowers the Court to permit for reduction of fees of arbitrators up to 5% for each month of delay attributable to the arbitral tribunal. The mandate of the arbitral tribunal, as per the second proviso to Section 29A(4) continues only when an application under Sub-section (5) is pending. The power to extend time period for making of the award vests with Page 52 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the Court and not with the arbitral tribunal.
81. Adding to the submissions made by Mr. Sibal, the learned Senior Advocate, Mr. Saurabh Soparkar, the learned Senior Counsel for the respondents would further submit that Section 29A of the Arbitration Act is a mandatory provision and the consequence of its non- compliance is that if the award is made beyond the stipulated or extended period prescribed in the said section, the mandate of the arbitrator being terminated is expressly provided. The result is that with the termination of the mandate of the arbitrator, the award if declared, would be without jurisdiction.
82. Reference has been made to the decision of the Division Bench of the High Court of Telangana in the case of Roop Singh Bhatty, s/o. Narasimha Singh v. M/s. Shriram City Union Finance Limited15 to submit that the amendment in Section 29A cannot operate retrospectively to attach legality to the award. With the termination of the mandate of 12 months from the date of the first hearing, in the instant case, the arbitral tribunal became functus officio as it ceased to operate being terminated by virtue of law. It was argued that the arbitrator / arbitral tribunal being a creature of statute has to work within the boundaries of the powers prescribed under the Act. The amended provision does not relate back to the date of incorporation of the original provision that was amended.
15 [2022 SCC OnLine TS 1049] Page 53 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
83. As regards the arguments of the appellant about the arbitral proceedings being pending as on the effective date of the amendment, i.e. 30.08.2019, It was submitted that laws relating to limitation have been held to be prospective to the extent that they do not have the effect of reviving the right of action, which is already barred on the date of their coming into operation, nor they have the effect of extinguishing the right of action subsisting on the date. The limitation provisions can be procedural in the context of one set of facts and substantive in the context of different set of facts. Law of limitation is generally regarded as procedural as its object is not to create any right but prescribe period within which legal proceedings should be instituted for enforcement of rights or adjudication orders should be passed. Statutes of limitation, therefore, have retrospective effect insofar as they apply to all the legal proceedings brought after they came into force. However, unless the language of the provisions dealing with the period of limitation clearly manifests, in express terms or by necessary implications a contrary intention divesting vested rights, such provisions is to be construed as prospective.
84. With the aid of the said observations of the Apex Court in the Maharashtra Vidarbha Irrigation Development Corpn. v. Mahesh16, it was also argued that the amended provisions of Section 29A whereby the time limit of 12 months for making of an arbitral award 16 [(2022) 2 SCC 772] Page 54 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined has been excluded in the case of an international commercial arbitration, cannot be applied retrospectively, so as to revive the mandate of the arbitrator after its termination, as the arbitral tribunal became functus officio. There is no question of revival as no application for extension in accordance with the provisions of sub-section (4) of Section 29A was filed or stated to be pending as on the date of the amendment which is 30.08.2019.
85. It was argued that neither the parties nor the Court had extended the mandate of the arbitral tribunal beyond the month of January, 2019. The arbitrators are not able to give themselves the mandate to pass the award. After the termination of the mandate on 31.01.2019, nothing could be done. The subsequent legislative amendment will not revive the arbitral proceedings, inasmuch as, the amendment has been held to be retroactive, and not retrospective in TATA Sons13 by the Apex Court, i.e. applicable only in case of pending arbitral proceedings.
86. Reliance is placed on the decision of R.R. Chari v.
State of U.P.17, CIT v. Settlement Commission18, Asgarali Nazarali Singaporewalla v. State of Bombay19 and Lt. Col. S.K. Kashyap v. State of Rajasthan20 to vehemently argue that arbitration proceedings cannot be said to be pending as on or after 17 [1962 SCC OnLine SC 124] 18 [2012 SCC OnLine Del 5766] 19 [1957 SCC OnLine SC 71] 20 [(1971) 2 SCC 126] Page 55 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 01.02.2019, inasmuch as, 12 months for making of the award had come to an end on 31.01.2019, itself.
87. It was vehemently argued that the arbitral tribunal had no jurisdiction to pass the award on or after 01.02.2019, as thereafter the tribunal became functus officio and had no jurisdiction to act at all. The amendment of Section 29A with effect from 30.08.2019 which has to be applied prospectively cannot attach validity to the award which had been made after the expiry of the time specified in Section 29A. Subsequent amendment brought in 2019 cannot bring life to the proceedings which were not pending as on the date of the amendment.
88. Reliance is further placed on the decision of the High Court of Kerala in the case of Union of India v. Advanced Polymer Technology and Ors. 21 and of the Apex Court in the cases of Strawboard Mfg. Co. Ltd. v. Gutta Mill Worker's Union22, M. Gurumoorthy v. Accountant General, Assam (Nagaland)23 and T. Kaliamurthi v. Five Gori Thaikkal Wakf24 to substantiate the above submissions.
89. In rebuttal, learned Senior Advocate appearing for the appellant, would argue that the timeline provided in Section 29A does not apply to international commercial arbitration after 30.08.2019. It was urged that there is 21 [2018 SCC OnLine Ker 23565] 22 [(1952) 2 SCC 746] 23 [(1971) 2 SCC 137] 24 [(2008) 9 SCC 306] Page 56 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined no question of termination of the arbitral proceedings, inasmuch as, in the case of termination of the mandate of the arbitrator under Section 29A, the extension of the time period for making an award beyond 12 months prescribed in Section 29(1), was possible even after the expiry of the mandate. As has been held by the Apex Court in Rohan Builders14, the termination of the arbitral mandate under Section 29A(4) is not absolute in character. The word 'terminate' does not reflect termination as if the proceedings have come to a legal and final end and cannot continue even on filing of an application for extension of time.
90. The submission is that an application for extension of time period for passing an arbitral award under Section 29A(4) read with Section 29A(5) was maintainable even after the expiry of the 12 months or the extended six months period, as the case may be, and hence, it cannot be argued that the arbitral proceedings, in the instant case, stood automatically terminated with the termination of the mandate of the arbitrator after expiry of the period of 12 months as on 31.01.2019. Further, with the amendment brought in with effect from 30.08.2019, there was no requirement of filing of any application seeking extension of the mandate of the arbitrator. Moreover, there was a dispute with regard to the first date of hearing so as to compute the period of 12 months and, as such, it cannot be argued in a definite manner that the mandate of the arbitrator stood Page 57 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined terminated as on 31.01.2019.
91. It was further submitted that from the proceedings of the arbitral tribunal and the proceedings before the High Court and the Apex Court, in the interregnum, at every stage, it is clear that the parties have understood that the arbitral proceedings continued beyond 31.01.2019 legally. Both the respondents continued to participate in the proceedings before the arbitral tribunal and even filed an application on 07.11.2019 seeking hearings before the arbitral tribunal to press their counter claims, to file evidence, cross examination of witnesses and leading oral arguments. Both the respondents continued to seek hearings for interim reliefs pressing their counter claims and evidence, which is evident from the e-mails sent by them dated 05.03.2019, 08.05.2019 and 28.10.2019. Even in the proceedings under Section 9 of the Act' 1996 drawn by the appellants before the High Court, it was recorded in the order dated 21.06.2019 that the respondents, in their affidavit in reply, contested the application under Section 9 stating that as on the date the arbitral tribunal comprising of three members (comprising of two Co- arbitrators and a Presiding Arbitrator) was continued and was in existence. This High Court itself noted that the respondent N.K. Shah was in express agreement with the fact that the mandate of the arbitrator was continuing as he sought relegation for the interim relief prayed by the appellants to be agitated before the Page 58 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined arbitral tribunal under Section 17 of the Arbitration Act. The High Court, while rejecting the application under Section 9, has recorded in the order dated 21.06.2019 (placed before us) that the application under Section 9 of the Act' 1996 came to be filed when the new arbitral tribunal was already constituted; the members of the Tribunal and the Presiding Arbitrator were appointed by the parties and the application under Section 17 of the Act filed by the appellant herein was also pending.
92. It was, thus, argued that, in any eventuality, the arbitration proceedings shall be treated as 'pending' as on 30.08.2019, the date on which amendment in section 29A(1) was introduced and since the amendment is retroactive in nature as has been held by the Apex Court in TATA Sons13, all arguments of the respondents pertaining to the application of Section 29A are liable to be turned down.
93. Reliance is placed on the decision of the Delhi High Court in ONGC Petro Additions Ltd. v. Ferns Construction Co. Inc. 25 and Shapoorji Pallonji & Co. (P) Ltd. v. Jindal India Thermal Power Ltd. 26 to argue that Section 29A has been classified as a procedural law since its inception and even in its original form this section does not create any vested rights in the parties in the arbitration proceedings. By the amendment of 2019 to Section 29A(1), the time period 25 [2020 SCC OnLine Del 2582] 26 [2020 SCC OnLine Del 2611] Page 59 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined for making an arbitral award in international commercial arbitration has been made inapplicable. The prescription of time limit by Amendment Act of 2015 has not conferred any rights or liabilities on a party. It is a procedural law establishing a mechanism for the arbitral tribunal to render the award, which determine the rights and liabilities of parties in 12 months and removal thereof cannot be said to confer rights on any party to be given effect prospectively. The statute merely procedural in nature is to be construed as retrospective and hence, would be applicable to all pending arbitration seated in India as on 30.08.2019 and the arbitral tribunal shall not be bound by the timeline prescribed therein, if the proceedings are in the nature of an international commercial arbitration.
94. Insofar as the reliance placed by the learned Senior Counsel for the respondent upon the decisions noted herein above, it was argued that there was no question of making extension application as the arbitral proceedings were pending and continuing as on the date of the amendment of Section 29A(1) with effect from 30.08.2019. On all other decisions relied by the learned Senior Counsel to elaborate on the aspect of the expression 'pending proceedings', it was argued that the ratio of the said decisions are not applicable in the present case, as the issue herein pertain to the interpretation of provisions of the Arbitration and Conciliation Act, 1996, which is a special statute.
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95. Dealing with these submissions made by the learned Counsels for the parties, we may refer to the opinion expressed by the Apex Court in TATA Sons13, where the question before the Apex Court, in a matter of international commercial arbitration, was that the original period of one year and extension of six months as agreed between the parties, as per Section 29A(1) read with Sub-section (3) had expired on 14.08.2019 prior to the amendment of Section 29A brought with effect from 30.8.2019. The relief as sought before the Apex Court was to hold that the arbitration proceedings may be allowed to continue without any need for an extension of the term of the learned Sole Arbitrator; or in the alternative, in case, the Court was of the opinion that the amended Section 29A was inapplicable to the said arbitration proceedings, time limit to render the award be extended by a period of one year. Adjudicating the said application, the Apex Court, after issuing notices, had gone through the effect of the amendments brought into Section 29A by the Act 33 of 2019 from 30.08.2019.
96. By reading the expression "in the matters other than the international commercial arbitration" as inserted by amendment in Section 29A(1), it was held therein that post-amendment, the time limit of 12 months, as prescribed in Section 29A, is applicable to only domestic arbitrations and the period of 12 months would not be Page 61 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined mandatory for an international commercial arbitration and remains only directory in nature. It was then observed that in terms of amended provisions of Section 29A, arbitral tribunal(s) in international commercial arbitrations are only expected to make an endeavor to complete the proceedings within 12 months from the date of completion of pleadings and are not bound to abide by the time limit prescribed for the domestic arbitrations.
97. The further question posed by the Apex Court was as to whether the amended Section 29A would apply prospectively or retrospectively. On an exhaustive consideration of the need for introduction of amendment in Section 29A in relation to international arbitral institutions, it was noticed therein that as a contrast to the introduction of the original provisions of Section 29A by Act No.03 of 2016 (by virtue of Section 26 of the 2015 Amendment, which expressly introduced the provisions as prospective in nature), the 2019 Amendment Act does not contain any provision equivalent to Section 26 of Act 3 of 2016 evincing a legislative intent making the application of amended provision prospective. It was further noted by the Apex Court that the two Judges Bench in BCCI v. Kochi Cricket (P) Ltd.27, while dealing with the construction and applicability of Section 26 of the Act 3 of 2016 in relation to arbitration proceedings, has observed that Section 29A is procedural in nature. However, since Section 29A 27 [(2018) 6 SCC 287] Page 62 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined provided a strict time limit for rendering an arbitral award for the first time in the framework of the Arbitration Act, 1996, while introducing amendments, the parties were given an option to adopt the timelines, which though procedural in nature, created new obligations in respect of the trials already begun under the unamended Act. The Apex Court has, thus, noted in Paragraphs '33', '34' and '36' as under:
"33. What can be seen from the above is that Section 26 has, while retaining the bifurcation of proceedings into arbitration and court proceedings, departed somewhat from Section 85-A as proposed by the Law Commission.
34. That a provision such as Section 26 has to be construed literally first, and then purposively and pragmatically, so as to keep the object of the provision also in mind, has been laid down in Thyssen [Thyssen Stahlunion GmbH v. SAIL, (1999) 9 SCC 334] in para 26 as follows: (SCC pp. 370-71) "26. Present-day courts tend to adopt a purposive approach while interpreting the statute which repeals the old law and for that purpose to take into account the objects and reasons which led to the enacting of the new Act. We have seen above that this approach was adopted by this Court in MMTC Ltd. case [MMTC Ltd. v. Sterlite Industries (India) Ltd., (1996) 6 SCC 716] . Provisions of both the Acts, old and new, are very different and it has been so observed in Sundaram Finance Ltd. case [Sundaram Finance Ltd. v. NEPC India Ltd., (1999) 2 SCC 479] . In that case, this Court also said that provisions of the new Act have Page 63 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined to be interpreted and construed independently and that in fact reference to the old Act may actually lead to misconstruction of the provisions of the new Act. The Court said that it will be more relevant, while construing the provisions of the new Act, to refer to the UNCITRAL Model Law rather than the old Act. In State of Kuwait v. Frederick Snow & Partners [State of Kuwait v. Frederick Snow & Partners, 1984 AC 426 : (1984) 2 WLR 340 : (1984) 1 All ER 733 (HL)] the award was given before Kuwait became a party to the New York Convention recognised by an Order-in-Council in England. The House of Lords held that though a foreign award could be enforced in England under the (UK) Arbitration Act, 1975 as when the proceedings for enforcement of the award were initiated in England Kuwait had become a party to the Convention. It negatived the contention that on the date the award was given Kuwait was not a party to the New York Convention."
36. All the learned counsel have agreed, and this Court has found, on a reading of Section 26, that the provision is indeed in two parts. The first part refers to the Amendment Act not applying to certain proceedings, whereas the second part affirmatively applies the Amendment Act to certain proceedings. The question is what exactly is contained in both parts. The two parts are separated by the word "but", which also shows that the two parts are separate and distinct. However, Shri Viswanathan has argued that the expression "but" means only that there is an emphatic repetition of the first part of Section 26 in the second part of the said section. For this, he relied upon Concise Oxford Dictionary on Current English, which states:
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98. Thus, while considering that Section 29A is a procedural law and there is no express legislative intent making the application of the amended provision prospective, it was held therein that the amendment of 2019, which is intended to meet the criticism over the timeline in its application to international commercial arbitrations, is remedial in nature, inasmuch as, it carves out international commercial arbitration from the rigors of the timeline which governs domestic arbitrations. The removal of the mandatory timeline for making an arbitral award in the case of an international commercial arbitration does not confer any rights or liabilities on any party. Thus, Section 29A(1), as amended with effect from 30.08.2019 being remedial in nature, should be made applicable to all the pending arbitral proceedings as on the said date.
99. In light of the above noted declaration of law by the Apex Court, the relief prayed for in the intervenor application therein (in TATA Sons13) that the Sole Arbitrator may be allowed to continue without any need for extension of the term beyond what was originally stipulated as per Section 29A, was granted.Page 65 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
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100. We may note from the observations in Paragraph No.34, (extracted hereinbefore) that as per amended provisions of Section 29A, arbitral tribunals in the international commercial arbitrations are only expected to make an endeavour to complete the proceedings within 12 months from the date of completion of pleadings and are not bound to abide by the timeline prescribed for domestic arbitrations. In terms of amended Section 29A, the arbitral tribunal has to endeavour to dispose of the proceedings in an international commercial arbitration, as expeditiously as possible, within the period of 12 months from completion of pleadings and the rigor of this time limit lies within the domain of the arbitrator and is outside the purview of judicial intervention.
101. When the above noted ratio of the decision of the Apex Court in TATA Sons13 is applied to the facts and circumstances of the present case, it is more than evident that the requirement of making an application seeking extension of the mandate of the arbitrator after 30.01.2019, (when the period of 12 months came to an end as per the case of the respondents) has been done away with the amendments brought in Section 29A(1) with effect from 30.08.2019. The result is that there was no need for moving any application to the Court seeking extension of the mandate of the arbitral tribunal beyond 30.01.2019 in the instant case. The arguments of the learned Senior Counsels appearing for the respondents that since no application was filed seeking extension of Page 66 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the mandate of the arbitrator as per Section 29A(4) or (5) and no such application was pending as on the date of amendment, i.e. 30.08.2019, the arbitral proceedings cannot be said to be pending, does not appeal to us.
102. The filing of application seeking extension of mandate of the arbitrator as per Sub-section (4) or Sub-section (5) has no linking with the pendency of the arbitration proceedings. The expression "the mandate of the arbitrator shall terminate" under Sub-section (4) of Section 29A has been interpreted succinctly by the Apex Court in the case of Rohan Builders14, where the question before the Apex Court was as to whether an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 1996 can be filed after the expiry of the period for making of the arbitral award. The Apex Court in Rohan Builders14, while reading the provisions of Sub-sections (4) and (5) of Section 29A has held that the word 'terminate' in Section 29A(4) has to be read in the context of the said provision and should not be read as an isolated word with a dictionary meaning, rather it should be read in conjunction with the surroundings words and expressions, which warrant recognition and consideration. The legislature, by using the word 'terminate', intends to affirm the principle of party autonomy. The result being that if neither party moves any application for extension of time for making the Page 67 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined award, the arbitration proceedings are terminated and the consequences would follow.
103. It was held in Rohan Builders14 that the word 'terminate' in Section 29A(4) makes an arbitral tribunal functus officio but not in absolute terms. It was noted that the word 'terminate' is followed by the connecting word 'unless the court, has either prior to or after the expiry of the period so specified, extended the period'. The expression 'prior to or after the expiry of the period so specified' has to be understood with reference to the power of the Court to grant extension of time. Accordingly, the termination of the arbitral mandate is conditional upon the non-filing of extension application and cannot be treated as termination strictu sensu. Thus, the word 'terminate' in the contextual form does not reflect termination as if the proceedings have come to a legal and final end, and cannot continue even on filing of an application for extension of time. The termination under Section 29A(4) is not set in stone or absolutistic in character. (emphasis supplied)
104. While elaborating the provisions of Section 29A, it was observed by the Apex Court in Rohan Builders14 that Section 29A intends to ensure the timely completion of arbitral proceedings while allowing the Courts the flexibility to grant extensions when warranted. If a narrow and restrictive meaning of Section 29A(4) is given, the Court would be indulging in judicial resolutions by incorporating a negative stipulation of a Page 68 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined bar of limitation which has annulling effect. While observing that the Courts should be wary of prescribing a specific period of limitation in cases where the legislature has refrained from doing so, it was held that such an interpretation will add words to widen the scope of legislation and amounts to modification or rewriting of the statute.
105. A rigid interpretation would amount to legislating and prescribing a limitation for filing an application under Section 29A when the section does not conspicuously so speak. None of the Sub-sections (5), (6), (7, (8) and (9) support the narrow interpretation of the expression 'terminate' rather, Sub-section (7) of Section 29A is couched in a manner that it obliterates the need to file a fresh application under Section 11 of the Act 1996 for the appointment of an arbitrator rather it provides that in the event of substitution of arbitrator(s), the arbitral proceedings will commence from the stage already reached. Evidence or material already on record is deemed to be received by the newly constituted tribunal. The deeming provisions in Sub-section (7) of Section 29A underscore the legislative intent to effectuate efficiency and expediency in the arbitral process. This intent has also been demonstrated in Section 29A(8) when it confers power upon the Court to impose actual or exemplary costs upon the parties. Sub-section (9) of Section 29A further stipulates for expeditious disposal of the application for extension filed under Sub-section (5) Page 69 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined of Section 29A. Moreover, the second proviso to Sub- section (4) of Section 29A clearly provides that the mandate of the arbitral tribunal continues where an application under Sub-section (5) is pending. The power to extend time for making of the award vests with the Court and not with the arbitral tribunal. Therefore, the arbitral tribunal may not pronounce the award till the application under Section 29A(5) of the Act is sub judice before the court. It was even observed that in a given case where an award is pronounced during the pendency of an application for extension of the period of arbitral tribunal, the Court must still decide the application under Sub-section (5) and may even when an award has been pronounced, invoke when required and justified Sub-section (6) to (8) or the first and third proviso to Section 29A(4) of the Arbitration and Conciliation Act, 1996.
106. In light of the law laid down by the Apex Court in Rohan Builders14, it is evident that the termination of the mandate of the arbitrator as contemplated under Sub- section (4) of Section 29A does not automatically result in the arbitration proceedings having come to a legal and final end. Even after expiry of the original period of one year and six months (with the consent of the parties) as per Sub-section (1) and Sub-section (3) of Section 29A, on an application filed by any of the parties to arbitration proceedings, which is even filed after expiry of the aforesaid period, the Court is empowered to Page 70 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined exercise its judicial discretion to grant or refuse extension. While granting extensions, even the delay on the part of the arbitral tribunal is not countenanced and the Court may order for reduction of fees if the delay is attributable to the arbitral tribunal. The provisions of Sub-section (4) of Section 29A conferring power upon the Court to extend the period even after the mandate of the arbitrator(s) terminates evince the legislative intent to affirm the core principles of party autonomy in arbitration proceedings in the scheme of the Act, 1996. The arbitration proceedings are terminated only if neither party moves an application for extension of time for making the award and the arbitrator becomes functus officio in such situation. However, on an application filed by any of the parties even after expiry of the period so specified under Section 29A by virtue of the second proviso to Sub-section (4), the mandate of the arbitrator shall continue till disposal of the said application.
107. On a comprehensive reading of Sub-section (1) to (9) of Section 29A as per the ratio of the Apex Court in Rohan Builders14 the termination of mandate of arbitrator by virtue of Sub-section (4) will not result in termination of the arbitration proceedings ipso facto. The arbitration proceedings cannot be said to have come to a legal and final end, only because the application seeking extension of mandate of the arbitrator had not been filed soon after the expiry of the period specified under Subsection Page 71 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined (1) or Sub-section (3). The result is that the arbitration proceedings be treated to have been pending or surviving and, in case, any of the party files application seeking extension of the mandate of the arbitral tribunal, with the filing of the application under Sub-section (5), the mandate of the arbitrator shall be revived and continue till the disposal of the said application by virtue of the second proviso to Section 29A(4). It may be another situation where the court in exercise of its judicial discretion impose any terms and conditions while granting extension and the power of the Court to extend the time is to be exercised only in cases where there is sufficient cause for such extension as per Section 29A(5). However, it cannot be argued that with the termination of the mandate of the arbitrator by virtue of Sub-section (4) of Section 29A and in case of no application having been filed by any of the parties seeking extension of the mandate of the arbitrator soon after expiry, the arbitral proceeding itself has come to a legal or final end when the original period of 12 months came to an end on 30.01.2019. Such an interpretation cannot be countenanced as it would run contrary to the law laid down by the Apex Court in the case of Rohan Builders14.
108. On a conjoint and careful reading of the decisions of the Apex Court in TATA Sons13 and Rohan Builders14, it is evident that even when no application filed by any of the parties seeking extension of the mandate of the arbitral Page 72 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined tribunal was pending as on 30.08.2019, the arbitral tribunal constituted with the consent of the parties, in the instant case, cannot be said to have become functus officio, inasmuch as, after 30.08.2019, in the matter of international commercial arbitration, the rigour of period of 12 months from the completion of the pleadings, has been done away. In terms of amended provisions of Section 29A, the arbitral tribunal has to simply endeavour to dispose of the proceedings as expeditiously as possible. In the post-amendment regime, the fixation of the timeline for making of the award in the case of international commercial arbitration, thus, remains within the domain of the arbitrator and is outside the purview of judicial intervention.
109. At this stage, we may also refer to the provisions of Section 32 of the Arbitration Act, 1996, which provides the manner in which the arbitral proceedings shall be terminated by an arbitral tribunal, either with the making of the final award or by passing the order under Sub-section (2) of Section 32. Three clauses, i.e. (a), (b),
(c) of Sub-section (2) of Section 32 referred to the eventualities for the termination of arbitration proceedings and none would say that the arbitration proceedings shall stand terminated with the termination of the mandate of the arbitrator as prescribed in Section 29A(4).
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110. Coming to the instant case, though as per the contention of the respondents, the original period of 12 months for making of the award had expired on 31.01.2019, however, the arbitral proceedings continued thereafter and the award was made after the amendment was brought into Section 29A removing the rigors of the timeline of one year in the case of international commercial arbitration. The 2019 Amendment Act which came into force with effect from 30.08.2019 has been held to be remedial in nature by the Apex Court as it intended to meet the criticism over the timeline in its application to international commercial arbitrations. As the amendment made an exception for international commercial arbitrations with respect to the timeline of Section 29A, the arbitral tribunal cannot be held to be functus officio after 31.01.2019. The fact that no application was filed by any of the parties seeking extension of the mandate of the arbitral tribunal prior to 30.08.2019 or no such application was pending as on the effective date, will be of no relevance. In any case, even after the expiry of the mandate of the arbitral tribunal as on 30.01.2019, as alleged, the arbitral proceedings as a whole, cannot be said to have come to an end finally and hence, there was no question of revival.
111. In view of the above discussion, all arguments made by the learned Senior Counsels for the respondents on the issue of loss of mandate under Section 29A, in the facts Page 74 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined and circumstances of the instant case, are liable to be turned down.
(D) Issue Of Fee And Costs being Exorbitant : Whether Jurisdictional Error?
112. It was argued by Dr. Murlidhar, the learned Senior Counsel appearing for the claimants-appellants that the learned Single Judge has gone beyond the scope of Section 34 of the Act, 1996 in examining the allegations of the respondents about the fee fixed by the arbitral tribunal being exorbitant so as to render award passed in an international commercial arbitration, a nullity. The contention is that the learned Single Judge has committed a grave error of law in setting aside the award merely because one of the parties disagreed with the revised fee fixed by the arbitral tribunal rather deliberately failed to pay the same. If such a course is permitted in the arbitral proceedings, specifically in the case of an international commercial arbitration, it would be used as a tool by disagreeing party to frustrate the process of arbitration. The learned Single Judge has failed to appreciate that though the respondents have made allegations about the fee and cost being exorbitant, but did not avail the remedy of approaching the Court invoking the provisions under Section 39 (2) of the Arbitration Act, 1996 seeking for determination on the question of reasonableness of the fee fixed by the arbitrators.
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113. As per the submissions of the learned Senior Counsel for the appellants, the entire amount of fee and cost determined by the arbitral tribunal have been deposited by the appellants in respect of their claims and in case of any dispute relating to reasonableness of fee, the learned Single Judge, even while exercising power under Section 34, could have deliberated on the question of reasonableness of fee invoking Section 39 (2) of the Act, 1996. Referring to Section 31A of the Act, it was argued that the arbitral tribunal has discretion to determine the fee as well as costs, which is the expense incurred in connection with the court proceedings relatable to the arbitral award. The reasonability of the costs awarded by the arbitral tribunal in an international commercial arbitration is not open to scrutiny by a Court under Section 34 as it cannot be a matter of public policy. The learned Single Judge has grossly erred in law in concluding that the arbitral tribunal had lost its jurisdiction to adjudicate merely because the respondents had disagreed with the revision of fee.
114. It was argued that both the respondents were aware of the revised fee structure from the very first day when it was notified and were also conscious of the available remedy in case of their dissatisfaction with the fee structure. However, instead of taking recourse to the legal remedy, the respondents acting in a mala fide manner, tried to prolong the arbitration proceedings and adopted non-maintainable remedies. At one stage, they Page 76 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined filed frivolous petition under Article 226 of the Constitution before this Court on the misconceived grounds of Section 29A and fee of the arbitral tribunal. Having lost in the writ proceedings, they went to the Apex Court, where the special leave petitions filed by them were also dismissed. Now at the stage of Section 34/37, they cannot take advantage of their own wrong by seeking to set aside the arbitral awards on the grounds which could have been taken during the arbitral proceedings and not thereafter. Continued participation in the arbitral proceedings by using dilatory tactics and non-availing appropriate remedy would result in deprivation of the claim of the respondents to assail fixation of fee by the learned Arbitrators.
115. The contention is that the respondents even did not pay the agreed fees of the previous arbitrators and reference has been made to the e-mail dated 02.11.2018 sent by the arbitral tribunal consisting of the Presiding Arbitrator Mr.Justice M. B. Shah (Retd.) appointed by the Apex Court, wherein it was expressly stated that the respondents had not paid the fees of the arbitral tribunal and hence, they were directed to pay the same before 30.11.2018. It was contended that in fact, both the respondents never intended to pay any amount of arbitral fees and merely wanted to prolong the arbitral proceedings and with the view to misuse and abuse the process, ground of fee had been malafidely taken at the stage of Section 34 petition. Much emphasis has been Page 77 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined laid on the plea that the respondents not only failed to pay the revised fee but also did not pay the arbitrator's fee agreed by them. This conduct of the respondents clearly prove that they never intended to pay any amount towards the fee and costs in the arbitral proceedings and now, at the stage of Section 34, the issue with respect to increase of fee has been raised to agitate the violation of principle of Natural justice and lack of fairness on the part of the arbitral tribunal.
116. Placing the chronology of events, it was submitted before us that an e-mail dated 25.02.2019 was addressed by the Presiding Arbitrator wherein it was expressly stated that the arbitral tribunal shall consider the fee as per the scale of fee of the ICC Rules of Arbitration, which is a globally accepted standard of fee.
117. Inspite of being aware of the revised fee, the Counsel for one of the respondent namely Mr. N.K. Shah sent a letter dated 05.03.2019 requesting the arbitral tribunal to convene the hearing urgently and for disposal of the application under Section 17. The arbitral tribunal passed a detailed order dated 26.03.2019 communicating that since the respondents did not intend to make payment of their share of the arbitrators' deposit / fee in relation to claimant's claim, the claimant shall pay full amount of the deposits required and the respondents were permitted to raise their defence to the claimant's claim including a set off to the claimant's claim, if so entitled.
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118. It was clarified that if the respondents wish to raise any counter claims, they will have to make payment of the tribunal's required deposits, which will be separately assessed and notified. The power of refusal to entertain counter claim in case of non-deposits made by the party, lies with the tribunal as per Section 38 of the Arbitration Act, 1996. The submission is that as per the proviso to Sub-section (1) of Section 38, the tribunal may fix separate amount of deposit for the claim and counter claim. As per Sub-section (2), the deposits as an advance, referred to in Sub-section (1), are payable in equal shares by the parties. The second proviso to Sub- section (2) of Section 38 further provides that if the other party does not pay its share in respect to the claim or counter claim, the tribunal may suspend or terminate the arbitral proceedings with respect of such claim or counter claim, as the case may be.
119. It was further argued that once again on 28.10.2019, after a lapse of about more than 10 months of the fixation of arbitral tribunal's fee, the respondent No.1 expressed his consent to proceed with the matter on the date fixed, albeit without prejudice to his right to seek appropriate course with regard to the decision of the tribunal preventing to press his counter claim in the matter as he cannot afford the arbitral tribunal's fees. The contention, thus, is that the said statement itself shows that the respondent No.1 wanted to continue with Page 79 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the arbitral proceedings but without payment of any fee and yet sought for adjudication of counter claim.
120. For the first time, a formal application dated 07.11.2019 before the tribunal was filed, wherein the issue pertaining to arbitral tribunal's fee and expiry of mandate under Section 29A was raised. It was submitted that even the said application was filed by respondent No.2 namely Mr. K. Jhadwani, and the respondent No.1 namely Mr. N. K. Shah had not filed any such application. He is, thus, stopped from raising issue pertaining to the determination of fee by the arbitrator. Even otherwise, in the application dated 07.11.2019, Mr.K. Jhadwani has referred to the provisions of Section 14 seeking for declaration of the cessation of the arbitral proceedings, however, no formal application was filed before the competent court under Section 14 of the Act, 1996 either by respondent No.1 or respondent No.2 herein.
121. Referring to the record of the proceedings dated 09.11.2019 before the arbitral tribunal, it is submitted that during the course of hearing, when issue of exorbitant fee was agitated before the tribunal by the respondent No.1, the Presiding Arbitrator as well as the Co-arbitrators nominated by the respondents had categorically expressed their views that the fee was not exorbitant. In fact, the respondent No.1 Mr. N.K. Shah himself accepted that he was not disputing the fee of the arbitral tribunal but only debating about the costs. The Page 80 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined learned Senior Counsel for the appellants, would, thus, vehemently argue that even if the total amount of fee paid to the arbitral tribunal is calculated in comparison with the scale of fees as per the ICC Rules for Arbitration, the amount would be almost equal. Further, on 23.12.2019, the arbitral tribunal passed an order imposing costs upon the respondents seeking for postponement of its hearing at the last minute.
122. Referring to the arbitral award, it was argued that the arbitral tribunal did not insist on the fees for taking evidence on record but refused to grant time after allowing seven extensions over a period of nearly two years. The stand of the respondents that they were denied of leading evidence by the arbitral tribunal on account of non-payment of fee is, thus, without any basis. It was argued that the total tribunal's fee between June 2019 and April 2021 across 14 hearings was approx INR 5 Crores, which included inter alia taking evidence, hearing multiple applications of the parties, hearing final arguments, reading the entire arbitral record and writing the arbitral award. 50% share of the appellant would be INR 2.5 Crores. The collective share in such fees for both respondent Nos. 1 and 2 was INR 2.5 Crores, approx INR 1.25 Crores for each or approx INR 8.92 Lakhs per hearing, which comes to approx INR 2.98 Lakhs per arbitrator. By no stretch of imagination such fee in an international Commercial Arbitration can be said to be unreasonable, much less exorbitant.
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123. Reliance is placed on the decision of the Apex Court in Chennai Metro Rail Ltd. v. Transtonnelstroy Afcons (JV)28; ONGC Ltd. v. Afcons Gunanusa JV29 to submit that none of the respondent Nos.1 and 2 filed any application before the Court raising any dispute with respect to the fees of the arbitral tribunal and, therefore, they cannot be permitted to place reliance on the said decision, on the plea of disagreement with the fees structure of the arbitral tribunal.
124. The submission is that the present is a case where the issue of adjudicating on the reasonableness of the fee and costs has come up for consideration only before the Court after the arbitral award was passed. The provisions of Section 39 of the Arbitration Act, 1996 could have been invoked by the learned Single judge to consider the impact of the said provision to adjudicate on the question of reasonableness of fee and costs, had the Court was of the opinion that there was no consensus on the fee fixed and that it was exorbitant. In any case, any disagreement of one of the parties with the fee schedule fixed by the arbitral tribunal would not result in automatic termination of the arbitral proceedings itself, or would not attach invalidity to the arbitral award, on the ground of lack of jurisdiction of the arbitral tribunal to proceed to adjudicate.
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125. Referring to the judgment of ONGC v. Afcons29, it was argued that the said decision holds that either party can file an application under Section 14 of the Arbitration Act, 1996 for termination of mandate during continuance of the proceeding or under Section 39(2) for getting reasonable fee decided through the High Court after termination with the declaration of the award. In the instant case, no such remedy has been availed by the respondents and hence, they are estopped from raising such plea under Section 34 seeking for declaration of the award, a nullity.
126. Reliance is placed on the observations in Paragraph Nos.
'69', '118' , '119', '202' and '229' of the ONGC v. Afcons29 to submit that Section 39 (1) of the Arbitration Act, 1996 refers to unpaid cost of arbitration, which means the cost relating to the fees of the members of the tribunal and other expenses that are necessary for the conduct of the arbitral proceedings like expenses relating to traveling, accommodation and any other allowances. At the most, the respondents would have raised an issue with regard to the reasonableness of fee within the scope of Section 39 (2) and the learned Single Judge, while dealing with the application under Section 34 of the Act, 1996, could have decided the said issue.
127. Referring to the decision of the Apex Court in the case of NHAI v. Gayatri Jhansi Roadways Ltd. 30 , it was urged that the 4th Schedule attached to the Arbitration 30 [(2020) 17 SCC 626] Page 83 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Act, 1996 is not applicable to international commercial arbitration and, moreover, mere disagreement with fees does not terminate the mandate and at the most, could allow for substitution of arbitrators through a proper remedy.
128. Referring to the decision of the Apex Court in the case of Renusagar Power Co. Ltd. v. General Electric Co. 31, it was argued that the Apex Court therein has categorically refused interference in the arbitral award passed in international commercial arbitration when the same was challenged on the grounds of excessive costs awarded by the arbitral tribunal.
129. In rebuttal, it was vehemently argued by Mr.Saurabh Soparkar, the learned Senior Counsel appearing for the respondents that two previous arbitral tribunals in the present arbitral proceedings required to pay only approximately 1.55-1.6 Lacs per hearing for fee and expenses, which included secretariat/stenography, etc. After resignation of the Presiding Arbitrator Mr.Justice M.B. Shah appointed by the Apex Court, the new presiding arbitrator, after reconstitution of the third arbitral tribunal, sent an e-mail dated 24.01.2019 quoting the fee, which required the respondents to pay Rs.7.5 - 10 Lac per day; approximately, towards fee and expenses, which included secretariat/transcription, reading, traveling and deposits, etc. The respondent No.1 namely Mr.Niraj Shah sent a reply e-mail dated 31 [1994 Supp (1) SCC 644] Page 84 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 01.02.2019 clarifying that he was not in a financial position to pay more than Rs.50,000/- per day to the arbitrators, the fee which was being paid to the earlier tribunal and thus, requested the arbitrators to refuse assignment and withdraw from the matter.
130. On 04.02.2019, the claimant Mr.Atwal sent a letter through his lawyer indicating his undertaking to pay the amount as directed by the tribunal and within the timeline as prescribed, raising an issue that one of the parties cannot agree or disagree to the appointment of the presiding arbitrator when the appointment was made by the co-arbitrator nominated by the respondent No.1 Mr. Shah. Another e-mail dated 04.02.2019 was sent by respondent No.2 Mr.K. Jhadwani clarifying that he was not in a position to afford the tribunal's excessively high fees as suggested and quoted in the letter dated 24.01.2019. It was pointed out in the e-mail dated 08.02.2019 by the respondent that two former arbitrators had resigned because of the conduct of the claimant and financial difficulty in making advance payment of sum exceeding Rs.50,000/- per arbitrator was clearly expressed.
131. In reply thereto, in the communication dated 25.02.2019, the Presiding Arbitrator, referring to his appointment made by the co-arbitrators nominated by the parties, has stated that as to the fee and expenses, the tribunal was prepared to consider the application of the ICC's scale of fees and expenses and the parties Page 85 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined were required to revert within seven days if they would like the tribunal to pursue the proceedings. Willingness to pay the entire arbitral fee with respect of his claims was expressed by the claimant appellant Mr.Atwal and he also expressed reservation for paying the respondents' share of fee, should all the claims and counter claims be adjudicated. It was stated therein that the respondents cannot be permitted to pursue their counter claims without payment of arbitral fees.
132. In another e-mail dated 05.03.2019, respondent No.1 Mr. N. K. Shah reiterated his stand in the previous e- mail dated 01.02.2019 with regard to the high quantum of fees to the extent that he was not in a position to pay the arbitral fee stipulated beyond what has been fixed by the previous arbitrator. In an e-mail dated 26.04.2019, the Presiding Arbitrator had expressed its decision stating that the tribunal had been validly constituted; as the respondents did not intend to make payment of their share to the arbitrators' deposit/fees in relation to the claimant's claim, the claimant has to pay the full amount of the deposits. As regards the counter claim, it was mentioned that the respondents could not raise the same because of non-payment of fee. It was, however, clarified that if the respondents wish to raise any counter claim, they will have to pay the tribunal's required deposit, which will be separately assessed and notified.
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133. In response thereto, the claimant vide communication dated 04.05.2019 had agreed for the ICC's scale of fees to be paid in certain tranches as per tribunal's conveniences and directions, whereas the respondents in the communication dated 08.05.2019 indicated their readiness to make payment of fees of Rs.50,000/- per hearing, which was being paid to the earlier two Arbitral Tribunals' presided over by the former Judges of the Supreme Court. In the e-mail dated 23.05.2019, the Presiding Arbitrator referring to claimant's e-mail dated 15.03.2019 has decided to continue with the fee stated in the e-mail dated 24.01.2019 and that the respondents were prohibited from pursuing counter claims unless they make deposits of their share.
134. Referring to further communications between the Presiding Arbitrator, the claimants-appellants and the respondents from 06.06.2019 and 23.10.2020, it was argued on behalf of the respondents that the Presiding Arbitrator insisted on the fee schedule as per ICC's scale of fees fixed by him and that if payment was not made by one party, the other party would have to make payment on behalf of the non-paying party. Whereas, the respondent No.2 Mr.N.K. Shah repeatedly expressed his unwillingness/disagreement to the exorbitant fee fixed by the Presiding Arbitrator, unilaterally repeating that he did not have financial capacity to make payment beyond the fees fixed by the previous two arbitral tribunals.
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135. The submission of the learned Senior Counsel for the respondents is that the unilateral fixation of fees by the Presiding Arbitrator for the arbitral tribunal is in violation of the principle of party autonomy reaffirmed by the Apex Court in the case of ONGC v. Afcons29 in the matter of fixation of Arbitrator's fee. The Presiding Arbitrator acted with bias and prejudices in settling the fee of the arbitral tribunal, which was 10 times more than the previous fixed fees with the agreement of the parties. It was contended that the findings returned by the arbitral tribunal that in the proceedings before the Apex Court, the issue of unilaterally decided exorbitant fees has been adjudicated, is absolutely wrong. The fixation of fee unilaterally by the Arbitrator violates the most basic essential feature of the arbitration, which is party autonomy.
136. It was argued that in ONGC v. Afcons29, the Apex Court has clearly provided that if any party does not agree to the exorbitant fee fixed by the arbitrators, the Arbitrator(s) will have to walk away. The opinion drawn by the learned Presiding Arbitrator, in the instant case, that the arbitral tribunal had entered into the reference only when the issue of fee was agreed upon to be paid by the claimant is misleading, inasmuch as, there was no written agreement between the parties and the issue of fixation of exorbitant fee by the learned Presiding Arbitrator was being agitated by the respondent continuously. The arbitral proceedings, which could only Page 88 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined proceed after determination of the fee with the consent of the parties based on the core principle of party autonomy, became wholly without jurisdiction being in conflict with the public policy of India. Party autonomy, in any case, is supreme in arbitration. The reliance placed on the provisions of Section 39 (2) and (3) by the appellant to insist that the respondents were required to take recourse of the said provisions for fixation of fee by the Court when they were not agreeing with the fee fixed by the arbitral tribunal, is wholly misplaced.
137. With respect to the arguments of the learned Senior Counsel for the appellants about the unpaid fees of the previous tribunal, it was vehemently contended by the learned Senior Counsel for the respondents that the said claim is absolutely false.
138. Placing the decision of the Apex Court in the case of ONGC v. Afcons29, it was argued that the Apex Court has emphasised the principle of party autonomy in the determination of arbitrator's fee. It was held that party autonomy plays a central role in the determination of arbitrator's fee in the rules of international arbitral institutions and domestic legislation of the countries. The functional role of cost and fee is different while the arbitral tribunal has discretion to decide on the cost in general because they involve claim that one party has against another relating to resolution of a dispute arising from the arbitration agreement, fee of the arbitrators is an independent claim that the arbitrators have against Page 89 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the parties. However, there is no unilateral power reserved to the arbitrator(s) to fix or revise the fee on their own terms. Resolution of the fees payable to the arbitral tribunal by mutual agreement during the preliminary hearings is mandatory. While providing guidelines for the conduct of ad-hoc arbitrations in India, it was observed by the Apex Court that the arbitral tribunal must set out the component of its fees in the Terms of reference which would serve as a tripartite agreement between the parties and the arbitral tribunal. If all the parties and the arbitral tribunal agree to a fee, then that fee would be payable to the arbitrators. 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 a member of the tribunal should decline the assignment.
139. Placing the above, it was vehemently argued by the learned Senior Counsel for the respondents that invoking its power under Article 142 of the Constitution of India, the Apex Court therein has directed for adoption of the abovenoted guidelines for conduct of ad- hoc arbitrations in India, which is based on the core principle of party autonomy in arbitration proceedings. Such guidelines are binding on the arbitral tribunal even in case of an international commercial arbitration, inasmuch as, Part 1 of Arbitration Act, 1996 is applicable when the place of arbitration is in India. For the conduct Page 90 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined of the arbitral proceedings, the arbitral tribunal was bound by the provisions of Sections 18 to 33 as contained in Chapter V, as well as the miscellaneous provisions contained in Chapter X from Sections 38 to
43. The submission, thus, is that the issue raised by the respondents before the learned Single Judge about the act of the arbitrator in unilateral fixation of fee has correctly been answered in favour of the respondents herein.
140. Lastly, it was submitted that the bias in making the arbitral award is evident from the fact that the arbitral tribunal has awarded costs for payment of fee made by the claimant to lawyers and senior advocates, who have represented him before the High Court and the Apex Court in writ proceedings, special leave petitions and Section 11 proceedings and those who have not appeared in the arbitration proceedings. Such costs awarded by arbitral tribunal is de hors Section 31A of the Act' 1996.
141. It was argued that even the adjudicating courts have not ordered costs in those matters and rather in one of the matters filed under Section 9, the High Court had directed the claimant/appellant to pay costs to the respondents. Whereas the learned Arbitrator directed the respondents to cover the fees of senior advocates and lawyers engaged by the claimant in their cases. This act of the arbitral tribunal is nothing but an act of sitting in appeal over the decisions of the High Court or the Page 91 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Supreme Court on costs. No interference, as such, is called for in the decision of the learned Single Judge on the issue of cost and fee awarded by the arbitral tribunal and the rejection of counter claim on the ground of non- deposit of the arbitrators' fee.
Analysis:-
142. Considering the submissions of the learned counsels for the parties, we are required to exhaustively go through the legal position pertaining to determination of fee and cost by the arbitrator(s) considering the provisions of Sections 31(8), 31A, 38 and 39 of the Arbitration Act, 1996 in ONGC v. Afcons29. Justice D.Y. Chandrachud (as he then was), speaking for the majority, has dealt with the issue of determination of arbitrator's fee with the opening remark that the issue whether the remuneration of arbitrators has to be decided by the parties or by the arbitrator(s) has not been exhaustively addressed in India. Considering the position of international organisations and different national jurisdictions in respect of the legal regime governing the payment of remuneration to arbitrator(s), the broad principles formulated by the Apex Court were stated in Paragraph Nos. '72' and '73' as under:
"viii) Summary
72. Although there are jurisdictional differences, the following broad principles emerge from our discussion above:Page 92 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
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(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
(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 by the Courts who can reduce the fees if they are not reasonable.
73. 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 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."
143. Further considering the statutory scheme on payment of fees to arbitrator(s) in India, it was noted therein that the principle of party autonomy is entrenched in the international 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 Page 93 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined as well as by international instruments such as the New York Conventions and Model laws.
144. It was further observed that the Arbitration Act, 1996 recognises the principle of party autonomy in various provisions. It even allows the parties to derogate from the provisions of the Act on certain matters. The decisions in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.32 and Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. 33 have been referred therein to note that party autonomy is the "brooding and guiding spirit of arbitration and is the backbone of arbitration". Considering the cardinal principle of arbitration being party autonomy, the provisions of the Arbitration Act, 1996 were interpreted and the decision of the Apex Court in Gayatri Jhansi Roadways30 was noted to summarise the legal position in Paragraph Nos. '91' as under:-
"91. Based on the above discussion, we summarise the position as follows:
91.1. (i) In terms of the decision of this Court in Gayatri Jhansi Roadways [NHAI v. Gayatri Jhansi Roadways Ltd., (2020) 17 SCC 626 : (2021) 4 SCC (Civ) 773] 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 32 [(2016) 4 SCC 126] 33 [(2017) 2 SCC 228] Page 94 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 91.2. (ii) Since most High Courts have not framed rules for determining arbitrators' fees, taking into consideration Fourth Schedule to the Arbitration Act, the Fourth Schedule is by itself not mandatory on court-appointed arbitrators in the absence of rules framed by the High Court concerned. 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 situation where the purpose of introducing the Fourth Schedule 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. As we have discussed in Section C.2.1 (see paras 74 to 77, hereinabove), such a unilateral fixation of fees goes against the principle of party autonomy which is central to the resolution of disputes through arbitration. 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 (see paras 92 to 124, hereinbelow) of this judgment. Hence, this Court would be issuing certain directives for fixing of fees in ad hoc arbitrations where arbitrators are appointed by courts in Section C.2.4 (see paras 125 to 129) of this judgment."
145. Proceeding further referring to Sections 31, 31A, 38 and 39 of the Arbitration Act, 1996, governing the determination of cost of arbitration, it was held that the concept of costs and fees in arbitration must be distinguished. Fee constitutes compensation or Page 95 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 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". The relationship between the parties and the arbitrators is 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 arbitrator's fee. Typically, when arbitration is conducted under the aegis of an arbitral institution, the fees payable to the arbitrator(s) is fixed by the institution. The parties are not involved in negotiations with the arbitrator(s) to decide the fees. However, in ad-hoc arbitration, arbitrators' fee are arrived at through negotiations between the parties and the arbitrator(s). The primacy of the parties' agreement in determining the arbitrators' fee was also affirmed by the Apex Court in Gayatri Jhansi Roadways30 in Paragraph No. '14' as under:-.
"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 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 Roadways Ltd. [NHAI v. Gayatri Jhansi Roadways Ltd., 2017 SCC Page 96 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined OnLine Del 10285] is not a correct view of the law."
146. It was further noted that 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 answering the said question, referring to various foreign jurisdictions enabling the arbitral tribunal to fix the fee, typically subject to review by Courts, the Apex Court has further noted that while the fee represent the payment of remuneration to the arbitrator(s), costs refer to all the expenses incurred in relation to arbitration that are to be allocated between the parties upon assessment of certain parameters by the arbitral tribunal or the court. The purpose of awarding costs is to "indemnify the winning party".
147. It was, thus, discussed referring to Gary B Born on International Commercial Arbitration [3rd Edition 2021, Chapter 13] that the difference between the costs and fee is such that any decision of the arbitral tribunal relating to payment of fees to the members of the tribunal is not considered as an award since it does not resolve a claim between the parties; rather it resolves the claim between the arbitrator(s) against the parties.
148. It was then observed that since fees of the arbitrator(s) are not a claim that needs to be quantified at the end of Page 97 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the proceedings based, inter alia on the conduct of the parties and outcome of the proceedings, they can be determined at the initial stage when the arbitral tribunal is being constituted.
149. Referring to the provision of Section 38 (1) and (2), where the arbitrator(s) or arbitral tribunal is empowered to ask for the advance deposit and if such deposit is not made, the tribunal can suspend or terminate the proceedings, it was observed that Section 38 of the Arbitration Act, 1996 indicates that the purpose of demanding an advanced deposit is to simply secure the future expenses or the costs "relating to arbitration including arbitrators' fee". The arbitrator(s) may resign or cease their work until such payment is made. However, this principle cannot be extended to establish that the arbitrator(s) have a unilateral power to fix their own fees while demanding a deposit.
150. Referring to the scheme of Section 38 (3), it was held that the order on deposits under Section 38 is not a binding determination as to the costs including arbitrators' fee. It is a procedural order issued for the purpose of securing payment of future expenses.
151. On the scheme of Section 39 giving power to the arbitral tribunal to exercise lien over the arbitral award for the unpaid costs of arbitration and the remedy to a party to approach the Court for release of an award and the Court's power to inquire whether the costs demanded Page 98 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined are reasonable under Section 39(2), it was observed by the Apex Court that these costs would include the arbitrators' fee that have been previously agreed upon. While costs, in general, are to be decided at the discretion of the tribunal or the Court because they involve claim that one party has against another relating to resolution of the dispute arising from the arbitration agreement, fees of the arbitrator(s) are not a claim to be decided between the parties. It will be for the Court to decide whether the claim of the arbitrator(s) regarding their remuneration (fee) is reasonable. Referring to the scheme of Section 31 (8) read with Section 31-E, Section 38 and Section 39 (2) and (3), it was concluded in Paragraph Nos. '122', '123' and '124' as under:-
"122. Hence, sub-sections (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 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 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).Page 99 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
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123. To conclude, the Arbitral Tribunal while deciding the allocation of costs under Section 31(8) read with Section 31-A or advance of costs under 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 decisions [ 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 International Arbitration, Volume 2012 (Manz'sche Verlags-und Universitätsbuchhandlung; Manz'sche Verlags-und Universitätsbuchhandlung, 2012).] , which postulates that the arbitrators cannot be the judge of their own claim against parties regarding their remuneration. The principles of party autonomy and the doctrine of prohibition of in 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 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.
124. 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 Page 100 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined certain directives to govern the process of how fees payable to the arbitrator(s) have to be fixed in ad hoc arbitrations."
152. The Apex Court has, thus, upheld the principle of party autonomy while fixing Arbitrator's fee and has observed that if while fixing costs or deposits, the arbitral tribunal makes any finding relating to arbitrator(s) fees (in the absence of an agreement), it cannot be enforced in favour of the arbitrator(s). Any disagreeing party can approach the Court to review the fees demanded by the arbitrator(s). The Apex Court has issued directives governing fees of arbitrator(s) in ad-hoc arbitrations in the following paragraphs:
"125. 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, prior to the "written phase of the proceedings". Rules of certain international arbitral institutions provide for convening a preliminary meeting [ Rule 19.3, SIAC Rules] or case-management conference [ Article 24, ICC Rules] . The fees and expenses are typically addressed at this stage [ Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (6th Edn., 2015), Chapter 4, para 4.203 (Redfern and Hunter on International Arbitration)] . 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 how arbitrators are to be paid and reduce conflicts and litigation on this issue.Page 101 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
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126. 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 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 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, specifically with respect to the payment of remuneration, there must be a consensus on the fees to be paid.
127. 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. It is also possible that the arbitral proceedings may continue for much 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 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 Page 102 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 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 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 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.
128. 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 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. 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.Page 103 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
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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 agreement. However, if the Arbitral Tribunal considers that the fee 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 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, 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 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 Page 104 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 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 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 the 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.
6. 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 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.
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 Page 105 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Fourth Schedule and continue to do so at least once in a period of three years."
(Emphasis supplied)
153. From a careful reading of the above statement of law governing fees of arbitrators in ad-hoc arbitrations, we may note that the Apex Court in ONGC v. Afcons29 has laid emphasis on a consensus between the parties and the arbitrators/tribunals, which should be arrived at the preliminary stage in the matter of determination of the fee of the arbitrators'/tribunal. It is observed by the Apex Court that the issue of fees and expenses shall be typically addressed at an early stage of the dispute resolution process, prior to the "written phase of the proceedings". These preliminary hearings should also be conducted when the fees are specified in the arbitration agreement, inasmuch as, the fee fixed in the arbitration agreement may have become unrealistic estimate of the remuneration when the dispute between the parties arise, due to the passage of time of signing of the agreement.
154. It is categorically observed by the Apex Court that in the preliminary hearings, if all the parties and the arbitral tribunal agreed to a revised fee, (in case of the fee specified under the arbitration agreement), then that fee would be payable to the arbitrators, however, if any of the parties raises an objection to the fee being demanded by the arbitrator and no consensus can be arrived at between such a party and the tribunal, then Page 106 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the tribunal or the member of the tribunal should decline the assignments.
155. The reason being that the relationship between the parties and the arbitrator(s) is contractual in nature, specifically with respect to the payment of remuneration, there must be a consensus on the fees to be paid. Even the contingencies like revision of fee, which may take place after a number of sittings, should be discussed and determined during the preliminary hearing, where the parties and the arbitrator should stipulate that after a certain number of sittings, the fee would stand revised at a specified rate. No unilateral power is 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 parties and the arbitral tribunal, in the Terms of reference during preliminary hearing, shall fix the fee, revision of fee if to take place upon completion of specific number of sittings and such Terms of reference shall be a tripartite agreement between the parties and the arbitral tribunal subject to any amendment, revision, addition or modification with the consent of the parties.
156. It was, thus, held by the Apex Court in ONGC v.
Afcons29 that resolution of fee payable to the arbitral tribunal by mutual agreement during the preliminary hearing is necessary. Failing such an agreement, the arbitrator(s) who decline to accept the fee suggested by Page 107 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the parties (or any one of them) are at liberty to decline the assignment.
157. With respect to domestic arbitrations where fourth Schedule is applicable, it was noted that when one or both parties or the parties and the arbitral tribunal are unable to reach at a consensus, it is open to the arbitral tribunal to charge the fees as stipulated in the fourth Schedule, which would be the model fee schedule and can be treated as binding on all, being the default fee. Consequently, when an arbitral tribunal fixes the fee in terms of fourth Schedule, the parties should not be permitted to object the fee fixation. It was observed that fourth Schedule though is not applicable in the case of international commercial arbitration, however, the core principle of party autonomy is attracted and plays a substantial role in determination of the arbitrators' fee in a matter of international commercial arbitration.
158. As demonstrated before us, in the instant case, preliminary meetings of the first arbitral tribunal, constituted with the consent of the parties, were held on 29.08.2017, when the presiding arbitrator considering the statements of claims fixed fee directing the parties to pay Rs.3,00,000/- (Rs.1,50,000/- each) to each arbitrator towards reading fee and hearing fee was fixed as Rs.2,00,000/- per hearing (Rs.1,00,000/- each) for the arbitrators. Rs.50,000/- (Rs.25,000/- each) was to be paid to arbitrators towards expenses in drafting, preparation and finalisation of the awards. Resultantly, both the Page 108 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined claimant and respondents were required to pay an amount of Rs.5,50,000/- each. There is no dispute about the said determination of fee by the first arbitral tribunal.
159. The second arbitral tribunal presided by Justice M.B. Shah reiterated the fee fixed by the first tribunal in the preliminary hearing held on 03.10.2017. The third arbitral tribunal, however, made a statement of fee of the arbitral proceedings in the order of the presiding arbitrator dated 24.01.2019, wherein fees and expenses were fixed in Singapore Dollar with the observation that the payments fixed towards the meeting and hearing and the expenses to be incurred by each member of tribunal were to be made by each party and advance deposit for expenses was to be made by the parties to the extent of their share. It was also stated therein that, if one of the parties does not pay its share of the deposit within the time prescribed, the other party may do so on terms that the same would be recoverable costs from the non- paying party in any event.
160. The order also contemplates that in the event that any payment is not made on time, the tribunal may suspend arbitration in whole or in part or terminate it. However, upon payment being made, the tribunal shall be constituted and will enter into the reference to arbitration and commence work. To this determination of fee, specific objection was raised by the respondents with the emphasis on the fee fixed by the previous Page 109 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined arbitrators and referring to the e-mail dated 24.01.2019 of the Presiding Arbitrator, it was stated that the respondents were not in a position to make advance payment of sum exceeding SGD 50,000 (Singapore Dollars) per arbitrator.
161. As noted hereinbefore, the Presiding Arbitrator reiterated that the fee and expenses fixed by the tribunal in the e-mail dated 24.01.2019 was as per the standard norms and further expressed that the tribunal was prepared to consider the application of the ICC's scale of fees and expenses. The tribunal also requested the parties to revert back. Again, the respondents expressed their disagreement to the fee fixed by the Presiding Arbitrator. However the Presiding Arbitrator passed an order dated 26.04.2019 holding that the claimant shall have to pay the full amount of deposit required to pursue its claim to the members of the tribunal as respondents did not intend to make payment of their share of the arbitrators' fee in relation to the claimant's claim. It was further stated that there shall be no counterclaims as the respondents were not ready to deposit the arbitrators' fee and if they wish to raise any counter claim, they would have to pay the required deposits which shall be separately assessed and notified by the tribunal.
162. To this stand of the tribunal, acceptance/consent was communicated by the appellant vide e-mail dated 04.05.2019. We may note that an application under Section 19 of the Arbitration and Conciliation Act, 1996 Page 110 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined was filed by the respondent No.2 Mr N. K. Shah which was decided vide order dated 18.12.2020 holding that the tribunal had found that both the respondents have been afforded many extensions in time to file in their evidences without any conditions attached by the previous tribunals. But they have failed to avail the same on their own. In the e-mail dated 20.10.2019, the tribunal noted and considered that the respondent Nos. 1 and 2 had not given any evidence nor they chose to call any witness to give evidence on their behalf. Two further extensions were granted wide orders dated 20.10.2019 and 28.11.2019, which were subject to fair and reasonable conditions but the respondents failed to file their evidence within the stipulated time specified therein.
163. The prayer made by the learned counsel appearing for the respondents therein for extension of time to file evidence on behalf of the respondent Nos.1 and 2 had, thus, been rejected. The right to file evidence of the respondents was closed on the ground that tribunal did not find any justifiable or adequate reason to do so.
164. Noticing the above, we may record that much emphasis had been laid by the learned Senior Counsel for the appellant on the proceedings dated 09.11.2019 before the arbitral tribunal, wherein the respondent No.1 agitated that they were unable to pay huge fee because of financial crisis. The Presiding Arbitrator in a query pointed to the Co-arbitrator nominated by the Page 111 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined respondents had asked as to whether the fees are exorbitant by Indian standards and the Co-arbitrator retired Justice Nanavati responded to that "he would not call it exorbitant". The respondents, then, reiterated the fee which was fixed by the previous arbitral tribunal to which retired Justice Nanavati was a member. The Presiding Arbitrator, then, concluded the proceedings by saying that they have gone through the issue of fee before and that was the end of the arguments, the fees were not exorbitant and they accept the fee as supported by the Co-arbitrator, who was the retired Judge of the Supreme Court of India. On this statement of the Presiding Arbitrator, the response of respondent No.1 has been placed before us by the learned Counsel for the appellant to argue that the respondent No.1 had agreed to what was decided by the Presiding Arbitrator that "the fee was not exorbitant" when he responded by saying "As you decide Sir". It was urged that thereafter, the respondent no.1 only raised a dispute with regard to the costs and even submitted in the next sentence that "I am not talking about the tribunal fee. I am talking about their cost, what they are asking". The excerpts of the transcript of the proceedings dated 09.11.2019 held before the tribunal, placed before us by the learned counsels for both the parties, is relevant to be extracted hereinunder:-
"CHAIRMAN: Do you have anything to say? RESPONDENT NO. 1: Yes, sir. What Mr Dewan has suggested is that, you know, if we don't pay the Page 112 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined money or if we don't pay the cost, then our stage would be closed to cross-examine. First of all, regarding the cost, even we are not in a position, we are saying since 1 February that we are not able to pay the fees what even tribunal has said to us. We are unable to pay those huge fees because of the financial crisis. In that -
CHAIRMAN: Just a minute, can I ask -- because you keep repeating these emotive statements. Can I ask Justice Nanavati, are these fees exorbitant by Indian standards?
RET'D JUSTICE NANAVATI: No. I won't call it exorbitant.
RESPONDENT NO. 1: Sir, why I have repeated --
CHAIRMAN: No, I think that's the answer which is on the record. It is not an exorbitant fee.
Proceed on that basis.
RESPONDENT NO. 1: Sir, as per Mr Nanavati, he may be right that it is not exorbitant, but as per the last tribunal what order was passed, even Mr Nanavati was also there, it was Rs 50,000 and we -- [[ CHAIRMAN: We are not going into the -- RET'D JUSTICE NANAVATI: It was not Rs 50,000. RESPONDENT NO. 1: Rs 50,000 per day, sir. RET'D JUSTICE NANAVATI: No. RESPONDENT NO. 1: Yes.
RET'D JUSTICE NANAVATI: For your share.Page 113 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined RESPONDENT NO. 1: For single share? [ RET'D JUSTICE NANAVATI: It was 2 lakhs per day. RESPONDENT NO. 1: I agreed to it.
RET'D JUSTICE NANAVATI: That's right. RESPONDENT NO. 1: But 2 lakhs rupees per day not for a single person.
RET'D JUSTICE NANAVATI: Correct.
RESPONDENT NO. 1: This is for a single person. It is coming up to 10 lakhs rupees.
CHAIRMAN: And if it lasts for 50 days, how much? RESPONDENT NO. 1: Sorry?
CHAIRMAN: If it lasts for 50 days, 2 lakhs a day times 50.
RESPONDENT NO. 1: 2 lakhs rupees per 50, but 50, it never happen, sir.
CHAIRMAN: How do you know that won't happen? RESPONDENT NO. 1: And in the past --
CHAIRMAN: Anyway, I think -- we're not -- RESPONDENT NO. 1: Sir, let me move on -- CHAIRMAN: No, you listen now.
RESPONDENT NO. 1: Yes, sir.
CHAIRMAN: We have gone through this before and that's the end of the argument.
RESPONDENT NO. 1: Okay, fine.
CHAIRMAN: Mr Nanavati has said --
RESPONDENT NO. 1: Okay.Page 114 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined [[ CHAIRMAN: These are not exorbitant fees. Mr Nanavati is a Judge of the Supreme Court of India, retired judge, and we will accept that statement. Please --
RESPONDENT NO. 1: As you decide, sir. Regarding the cost part, what he has asked for, it is not possible for us to bear the cost. [ CHAIRMAN: That's a different matter. That has been gone through and done and dusted. [ RESPONDENT NO. 1: I'm not talking about the tribunal fees. I'm talking about their cost, what they are asking.
CHAIRMAN: Okay. Then concentrate on that. RESPONDENT NO. 1: I am concentrating on that only, sir, I'm not --
CHAIRMAN: No, you are mixing it up with the tribunal's fees.
RESPONDENT NO. 1: Anyway, sir --
CHAIRMAN: No, don't --
[[ RESPONDENT NO. 1: -- I'm not --
[ CHAIRMAN: Keep your concepts separate, otherwise there is confusion.
[ Page 115 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined RESPONDENT NO. 1: I'll do -- I will do that, sir. So, in that case, it is not possible for us to bear the cost, what they have said, because since 20 days we have repeatedly saying on the emails that from 7th onwards we are not available. My counsels are not available at all.
CHAIRMAN: So you can't bear the cost, then proceed.
RESPONDENT NO. 1: I can't bear the cost at this point of time, sir.
CHAIRMAN: Then proceed with the hearing. [ RESPONDENT NO. 1: Then before that, sir, proceed for the hearing, I have no hesitations, but I have to do the further international justice if I am given a time, that would be great, and if my application is rejected, then I will proceed no matter.
But secondly, I would like to put, as Mr Yeap said, put in an application that you need to -- because my whole basic thing is on this particular day, so consider this as my application and my prayer is that I want to know the commencement of the date, sir, for this particular thing.
[ CHAIRMAN: Do you need to repeat --
[ RESPONDENT NO. 1: He said to put it on application.
CHAIRMAN: Do you need to repeat questions which you have asked and which we have answered?Page 116 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined [[ RESPONDENT NO. 1: No. CHAIRMAN: If we may not want to answer, that is different. That is not an issue any more. [ MR YEAP: Can I also clarify that I never asked you to put in an application. I think it was Mr Nakul Dewan who mentioned, in the usual course of things, if parties want anything, they have to put in a formal application.
[[ It was not me who said it, and I just want it to be clarified for the record. No answer is required from you on that point.
[ RESPONDENT NO. 1: All right. No problem. [ CHAIRMAN: Okay. So the offer is they will agree to adjourn the proceedings provided that costs eventually are borne --
RESPONDENT NO. 1: But what costs, sir? [ CHAIRMAN: That's a question of detail. This is a question of principle. Look, you can keep arguing this way. It's not going to help anybody.
RESPONDENT NO. 1: Right, sir.
[ CHAIRMAN: And your answer is, no, we can't?Page 117 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined RESPONDENT NO. 1: If it is a marginal thing, then we can think it over. But if it is --
[ CHAIRMAN: There is no time to. Either yes or no. If you can't bear the cost, we will proceed with the hearing.
RESPONDENT NO. 1: Can I ask what costs they are expecting?
MR DEWAN: I think we need about half an hour to come and present to you the quantum of costs that we will be seeking, sir. Could we then stand this -- I am sorry, but I mean, all of this is coming as a bit of a surprise to us as well.
CHAIRMAN: Sure. Okay.
MR DEWAN: If we can stand this down for -- [ CHAIRMAN: You know where we are coming from? MR DEWAN: I absolutely appreciate that, and I thank you for it.
CHAIRMAN: Okay. They will come back to you on the costs so you know what they're thinking of. RESPONDENT NO. 1: Right, sir.
[ MR DEWAN: Thank you."
165. Going through the record of the proceedings of hearing before the arbitral tribunal held on 09.11.2019, we may record that respondent No.1 Mr Neeraj Shah, who was appearing personally on his behalf and on behalf of Page 118 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined respondent No.2, had agitated before the tribunal that he did not have any counsel and sought time to engage a proper counsel. While raising a question with regard to the date of commencement of the tribunal, the respondent No.1 also raised the issue about the fee being exorbitant and that he was not in a position to pay the exorbitant fee fixed by the arbitrator. However, on an endorsement made by the Co-arbitrator Justice Nanavati to the opinion of the Presiding arbitrator that fee was not exorbitant, the respondent No.1 submitted that he was not talking about the tribunal's fee and was talking about the cost which the tribunal was proposing to impose. The counsel for the claimant further insisted that the request to defer the hearing may be accepted subject to an order for indemnity cost and if the costs were not paid, the right to cross-examine claimant's witnesses by the respondents must be closed and the right of respondents to lead any further evidence be also closed so that the matter may proceed for final arguments. The Presiding Arbitrator did not accept those submissions though it was expressed that the respondents were not providing evidence and seeking adjournments only.
166. On this, the counsel for the appellant appearing before the arbitral tribunal emphasized that the claimants had already made expenses and the respondents were not paying anything. On these submissions of the learned counsel appearing for the appellants before the tribunal, Page 119 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the conversation as extracted hereinabove had started. As can be noted from the extracted portion of the conversation during the course of hearing between the Presiding Arbitrator and the respondent no.1, it is clear that the respondent No.1 had raised an issue about the fee and costs and further sought adjournment on the ground of non availability of his counsel from 7 th November onwards while stating that he was not in a position to bear the costs, at the relevant point of time. The Presiding Arbitrator then insisted to proceed with the hearing and in response thereto, the respondent No.1 submitted that the question of commencement of the date of the arbitral proceedings was required to be decided first. One of the Co-arbitrators Mr. Yeap, then expressed that if the parties want anything, they will have to move formal application. The Presiding Arbitrator, then, expressed that the complainant side was agreeable to adjourn the proceedings provided costs eventually were borne. During the course of conversation, respondent No.1 even asked for the costs the other side was expecting.
167. From the transcript of the proceedings held on 09.11.2019, as noted hereinabove, it is, thus, evident that there was no agreement or consent of the respondents on the fee fixed by the arbitral tribunal. The answer given by the respondent No.1, during the course of hearing, would not amount to any agreement or consent on the determination of fee. The stand of the Page 120 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined appellant that the respondent No.1 had agreed to the tribunal's fee and only disputed the costs, which the tribunal proposed to impose for adjournment, is neither here nor there.
168. To further clarify our view point, we may note the decision of the arbitral tribunal dated 15.01.2020 on the applications dated 07.11.2019 and 22.11.2019 filed by the respondents raising objections with regard to fee fixed by the arbitrator and on the applicability of Section 29 A. The Presiding arbitrator had opined that:-
"1. The parties having entered into an international agreement of a sizeable amount with an international arbitration clause. The resulting consequence in the event of a dispute (as has occurred here) is the appointment of international arbitrators and their fees. The fees of the Tribunal in this arbitration is in line with the fees of an international arbitrator arbitrating under the SIAC or the ICC rules and cannot be described as "herculean."
2. That in future questions which fall within the realm of the parties' own counsel should be addressed to them and not the Tribunal. This issue relating to the constitution of the Tribunal in respect of various purposes should be well within the competence of counsel to advice his clients. Further it is evident from the 1st Respondent's own statements at Page 87, Lines 10-14, of the transcripts of the hearing held on 8th November that he has already been advised by his counsel as to the relevant date.
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3. The issues relating to Section 29A will be dealt with by the Tribunal in its Final Award."
169. It is also evident from the record that though repeated communications were sent by the respondent nos. 1 and 2 turn by turn, raising the issue of determination of fee of the arbitrator(s), but the provisions of Section 14 of the Arbitration Act, 1996 had not been invoked by approaching the competent court seeking for termination of the mandate of the arbitrator on the ground that as no consent had been arrived on the question of fee determined by the arbitrator, the arbitral tribunal became de jure or de facto, unable to perform its functions. The respondent No.1 has not availed the remedy of approaching the Court for fixation of a reasonable fee of the arbitral tribunal nor moved any application or petition seeking termination of mandate under Section 14 on the ground that the arbitral tribunal had acted illegally in unilateral revision of fee or the fee revised by the arbitral tribunal was beyond its jurisdiction.
170. At the same time, during preliminary stage itself, in the e-mail dated 24.01.2019, the Presiding Arbitrator of the third tribunal (after reconstitution) made a statement of fee and expenses, to which objection was put forth by the respondents. On the objections of the respondent, the Presiding Arbitrator in the communication dated 25.02.2019 had expressed the desire of the tribunal to consider the ICC's scale of fee and expenses. However, Page 122 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the fact remains that in the present arbitral proceedings which was conducted in an ad-hoc arbitration, there was no fee stipulated in the arbitration agreement nor the revision of fee by the third arbitral tribunal, after its reconstitution with the substitute arbitrators, was with the agreement of the parties with the arbitrators. The fee fixed by the tribunal was unilateral on the premise that the present being a case of international commercial arbitration, the ICC's scale of fee would be the guiding factor.
171. We may record that in the instant case, there was no fixed schedule binding the parties on the question of fee and being an ad-hoc arbitration, the determination of fee was required to be made as a tripartite agreement between the parties and the arbitral tribunal as observed by the Apex Court in ONGC v. Afcons29.
172. The fixation of fee by the arbitral tribunal, in the instant case, has been considered to be arm-twisting the respondents in the midst of the dispute resolution process, by the learned Single judge. It was held that as there was no consensus between the parties and the arbitrators regarding the fee, which was to be paid to the members of the arbitral tribunal, the continuance of the arbitral tribunal inspite of the objections raised by the respondents resulted in forceful participation of the respondents in the entire proceedings.
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173. It may not be out of place to note here that the issue of sky-rocketing cost of arbitration which has been a matter of concern expressed by the Apex Court in its previous decisions, has been noted in ONGC v. Afcons29 by Justice Sanjeev Khanna in his separate judgment, wherein he has partly concurred with the decision of the majority on two principles, stated in Paragraph Nos. '192.1' to '192.3' as under:-
"192.1. 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;
192.2. Where the Court while appointing an arbitrator fixes the fee, the Arbitral Tribunal cannot ask for supplementary or higher fee; and 192.3. 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."
174. Even while expressing dissent in Paragraph No. '193' on the third principle laid by the majority that in absence of any agreement between the parties, or the parties and the arbitral tribunal, or the Court order fixing the fee, the arbitral tribunal is not entitled to fix a fee, though it was stated that as per the implied terms of the contract in the provisions of Arbitration and Conciliation Act, the arbitral tribunal can fix a reasonable fee, but it was also observed that such fixation can be questioned under Sub-section (3) of Section 39 of the Act, 1996 during the Page 124 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined pendency of the arbitration proceedings or in terms of Sub-section (2) of Section 39 in case the arbitral tribunal claims lien on the award. It was also noted by Justice Khanna, in his dissenting judgment, that there may be a situation when one party agrees to pay fee fixed or suggested by the arbitrator and the other party, who is unable to afford or reluctant to pay such a fee even though it is extravagant and beyond their paying capacity, invariably compelled to agree to such a fee, owing to the apprehension that any objection may prejudice his case or create a bias in favour of the other party. It was, then, observed that when an arbitrator is appointed by the Court without prior fixation of the fee, either of the parties might be at a disadvantage in such a position. Referring to the ad-hoc arbitrations in India, it was further observed that the courts have judicially acknowledged that frequent complaints regarding the cost of arbitration including high fees charged by the arbitrators, have adversely affected the efficiency and effectiveness of arbitration in India.
175. On the question as to "who decides the fee payable to the arbitral tribunal", it was observed by Justice Khanna that arbitration is contract-centric and is structured on party autonomy. The parties are free to agree upon the procedure on conduct of arbitration proceedings, which includes the right to fix the fees payable to the arbitrators. While the relationship between the parties and the arbitrator is based on the contract, the Page 125 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined arbitrator's status as a de jure adjudicator stems directly from the law. The relationship between the parties and the arbitral tribunal is both contractual and statutory. Consequently, the 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. The arbitral tribunal, while accepting an appointment, must accept the remuneration as fixed by the parties or as determined in the Court order appointing the tribunal. It was expressly noted in Paragraph No. '211' that a unilateral increase in fee is unacceptable. It was, further, observed that an arbitrator will not be usually entitled to increase his fee and expense unless the agreement on which it is constituted allows it to do so, or all parties voluntarily agree to enhancement. It was, thus, concluded that 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 re-write the agreement or ignore the Court order fixing the fee.
176. However, in a case where fee is not fixed on an agreement on a consensus between the parties or a court order, it was observed that the arbitral tribunal is entitled to fix the fee payable for conducting the arbitration, albeit the fee so fixed should be fair and reasonable. Even in his dissenting judgment, Justice Khanna, thus, has emphasized on the reasonableness of Page 126 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined fee and expenses appropriately to be determined by the arbitrator in such circumstances. On the question as to what would be "reasonable", it was held that it depends on the facts and what the national systems prescribe. The observations in Paragraph Nos. '218' and '219' of the separate judgment of Justice Khanna are also relevant to be extracted hereinunder:-
"218. 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 of payment at the preliminary stage, so that an unwilling party can express its unwillingness. No party should feel compelled to agree and therefore, 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 [Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust, (2012) 1 SCC 455 : (2012) 1 SCC (Civ) 275] that the parties before nomination should ascertain the fee structure from the prospective arbitrators is salutary.
219. At the same time, I would accept that fee fixation is a matter of 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 Page 127 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Arbitral Tribunal is entitled to fix the professional fee payable for adjudication, as without fee fixation, 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. [The term "reasonable" has been used in the Explanation to the pre-amended sub-section (8) to Section 31, and post-amendment Section 31-A 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.]"
177. Having exhaustively gone through the decision of the Apex Court in ONGC v. Afcons29, we feel it pertinent to record that there was no clarity on the law pertaining to issue of determination of fee or remuneration of arbitrator(s) applicable in India, in an international commercial arbitration at the relevant point of time, i.e. when the arbitral proceedings, in the instant case, were going on and concluded resulting into passing of the arbitral award dated 16.04.2021. The question about the powers of the arbitral tribunal to fix fee/remuneration of the arbitrator(s)/tribunal in the Indian legal landscape was settled for the first time with the decision of the Apex Court rendered on 30.08.2022 in ONGC v. Afcons29. However, we are also of the view that the reconstituted arbitral tribunal could not have revised their fee unilaterally, which was much more than the Page 128 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined earlier fees fixed by the previous tribunal, without the consent of the parties.
178. As clarified by the Apex Court in ONGC v. Afcons29, there is no enabling provision under the Arbitration Act, 1996 empowering the arbitrator to unilaterally fix its fee and enforce its order regarding fixation of fee. The order passed by the arbitral tribunal compelling respondent Nos.1 and 2 to pay the fee determined by it, is contrary to the cardinal principle of party autonomy which is the soul of arbitral proceedings. The primacy of parties' agreement in determination of arbitrator's fee was also affirmed by the Apex Court in Gayatri Jhansi Roadways30 decided on 10.07.2019, wherein the Apex Court had agreed to the principles laid down by the Delhi High Court that the arbitral fee fixed by the agreement between the parties must prevail over the fourth Schedule of the Arbitration Act, which was held not being mandatory. The Apex Court, in Gayatri Jhansi Roadways30 has clarified that changes in the language of Section 31 (8) read with Section 31A of the Arbitration Act, 1996 deals only with the costs generally and not with arbitrator's fee, and would not empower the arbitrator to decide on the question of its fee unilaterally.
179. In light of the principles stated by the Apex Court in ONGC v. Afcons29, resolution of fees payable to the arbitral tribunal by mutual agreement during the preliminary hearing was necessary and failing such an Page 129 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined agreement, the arbitrators, if not agreeable to the fees suggested by one of the parties, were at liberty to decline the assignment.
180. The learned Single judge has held that the forceful continuation of the arbitral proceedings by the reconstituted tribunal after unilateral revision of fee which was 10 times of the fee fixed by the previous arbitral tribunal, is completely against the spirit of the Arbitration Act, 1996.
181. We may also note that the respondents have refused to accede to the fees determined by the arbitral tribunal and have not made the advance deposits, as directed by the arbitral tribunal.
182. However, the question is whether the arbitral award can be held bad or to be declared nullity for unilateral determination of fee by the arbitrators being in excess of their authority or jurisdiction. We would like to answer this question along with the other issues raised challenging the merits of the award, in the later part of this judgment.
(E) Scope of Section 34/374: Principle Of Interference in the Award on the ground being in conflict with the Public Policy of India:-
183. As the present matter pertains to international commercial arbitration, we would like to deliberate, at this stage, on the question as to the scope of Section 34 and the powers of the Court to interfere with the arbitral Page 130 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined award under various heads of public policy. To understand the principles of interference on the merits of an arbitral award on the ground of being in conflict with the public policy of India or the fundamental policy of Indian law, we are required to go through the decisions of the Apex Court in Associate Builders v. DDA34, Ssangyong Engg. & Construction Co. Ltd. v. NHAI35 and Renusagar Power Co. Ltd.31.
184. On the scope of interference under Section 34 of the Arbitration Act, 1996, it was vehemently argued by the learned Senior Counsel for the appellants that as per the settled position of law by now, the Court does not sit in appeal over the arbitral award and the limited grounds of challenge acceptable to the Court in an international commercial arbitration is under Section 34 (2)(b)(ii), i.e. if the award is against the public policy of India. With the amendments brought in the Arbitration Act, 1996 with effect from 23.10.2015 by Act No.3 of 2016, the phrase 'public policy of India' contained in Section 34 has been clarified by providing in Explanation 1 to Section 34(2)(b)(ii) that an award is in conflict with the public policy of India, only if
(i) The making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or
(ii) It is in contravention of the fundamental policy of 34 [(2015) 3 SCC 49 : 2014 SCC On-line SC 937] 35 [(2019) 15 SCC 131 : 2019 SCC OnLine SC 677] Page 131 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Indian law; or
(iii) It is in conflict with the basic notions of morality or justice.
185. Explanation 2 inserted in Section 34(2)(b)(ii) by the same amendment further provides the test by clarifying that the question as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. Correspondingly, amendments were also brought in sub-section (2) of Section 48 providing conditions for enforcement of foreign awards in line with the aforesaid amendments made under Section 34 with the insertion of Section 34(2)(b)(ii) with Explanations 1 and 2.
186. It was noted by the Apex Court in Ssangyong Engg.35 that the above amendments were suggested on the assumption that other terms such as 'fundamental policy of Indian law' or conflict with 'most basic notion of morality or justice' would be widely construed.
187. The Apex Court in Ssangyong Engg.35, while noticing the expansion of the term 'fundamental policy of India' construed by a three Judge Bench of the Apex Court in ONGC Ltd. v. Western Geco International Ltd. 36 , has held that the said judgment would expand the Court's power rather than minimise it and, thus, is contrary to the international practice. Clarification, thus, needs to be incorporated to ensure that the terms 36 [(2014) 9 SCC 263] Page 132 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 'fundamental policy of Indian law' is narrowly construed. Emphasising the insertion of Explanation 2 to Section 34(2)(b)(ii) and 246th Law Commission's Report, the statement of object and reasons of Arbitration and Conciliation (Amendment Bill), 2015, it was noted therein that the Law Commission recommended various amendments in the Act to facilitate and encourage alternative dispute mechanism, especially arbitration, for settlement of disputes in a more user-friendly, cost effective and expeditious disposal of cases since India is committed to improve its legal framework to obviate in disposal of cases. It is high time that urgent steps are taken to facilitate quick enforcement of contracts, easy recovery of monetary claims and award of just compensations for damages suffered and reduce pendency of cases in courts and hasten the process of dispute resolution through arbitration so as to encourage investment and economic activity.
188. It was, thus, clarified that the expression 'public policy of India' whether contained in Section 34 or in Section 48 would mean 'the fundamental policy of Indian law' as explained in Paras '18' and '27' of Associate Builders34, which in turn would revert to the understanding of this expression in Renusagar31. The extensive meaning to the expression given in ONGC Vs Western Geco36 has been done away.
189. However, insofar as the principle of natural justice are concerned, as contained in Section 18 and Section 34(2) Page 133 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
(a)(ii) of the Arbitration Act, 1996, it was held that the same continued to be grounds of challenge of an award as per the statement in Paragraph No. '30' of Associate Builders34. Paragraph Nos. '18', '27' and '30' of Associate Builders34 are relevant to be extracted herein under:-
"18. In Renusagar Power Co. Ltd. v. General Electric Co. [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , the Supreme Court construed Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961:
"7. Conditions for enforcement of foreign awards.--(1) A foreign award may not be enforced under this Act--
***
(b) if the Court dealing with the case is satisfied that--
***
(ii) the enforcement of the award will be contrary to the public policy."
In construing the expression "public policy" in the context of a foreign award, the Court held that an award contrary to
(i) The fundamental policy of Indian law,
(ii) The interest of India,
(iii) Justice or morality, would be set aside on the ground that it would be contrary to the public policy of India. It went on further to hold that a contravention of the provi- sions of the Foreign Exchange Regulation Act would be contrary to the public policy of India in Page 134 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined that the statute is enacted for the national eco- nomic interest to ensure that the nation does not lose foreign exchange which is essential for the economic survival of the nation (see SCC p. 685, para 75). Equally, disregarding orders passed by the superior courts in India could also be a contra- vention of the fundamental policy of Indian law, but the recovery of compound interest on interest, be- ing contrary to statute only, would not contravene any fundamental policy of Indian law (see SCC pp. 689 & 693, paras 85 & 95).
27. Coming to each of the heads contained in Saw Pipes [(2003) 5 SCC 705 : AIR 2003 SC 2629] judgment, we will first deal with the head "fundamental policy of Indian law". It has already been seen from Renusagar [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] judgment that violation of the Foreign Exchange Act and disregarding orders of superior courts in India would be regarded as being contrary to the fundamental policy of Indian law. To this it could be added that the binding effect of the judgment of a superior court being disregarded would be equally violative of the fundamental policy of Indian law.
30. The audi alteram partem principle which un- doubtedly is a fundamental juristic principle in In- dian law is also contained in Sections 18 and 34(2)
(a)(iii) of the Arbitration and Conciliation Act. These sections read as follows:
"18.Equal treatment of parties.--The parties shall be treated with equality and each party shall be given a full opportunity to present his case.
***
34.Application for setting aside arbitral award.
--
(1) *** Page 135 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined (2) An arbitral award may be set aside by the court only if--
(a) the party making the application furnishes proof that--
***
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise un-
able to present his case;"
190. Further, adverting to the grounds contained in Section 34(2)(a)(ii), it was observed by the Apex Court in Ssangyong Engg.35 that in Renusagar31, the Court dealt with the challenge to the foreign award under Section 7 of the Foreign Awards (Recognition and Enforcement) Act, 1961 (for short, 'the Foreign Awards Act') which has since been repealed by the Arbitration Act, 1996. While considering that Section 7 of the Foreign Awards Act contained grounds which were borrowed from Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1956 (the New York Convention), which is almost in the same terms as Sections 34 and 48 of the 1996 Act, the judgement in Renusagar31 is of great importance in understanding the parameters of judicial review when it comes to either foreign awards or international commercial arbitrations being held in India, the grounds for challenge/refusal to enforcement under Sections 34 and 48; respectively, being the same. It was further noted in Paragraph No. '45' in Ssangyong Page 136 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Engg.35 that after referring to New York Convention, the Apex Court in Renusagar31 delineated the scope of inquiry of grounds under Sections 34/48 (equivalent to the grounds under Section 7 of the Foreign Awards Act) to hold that:-
"45. After referring to the New York Convention, this Court delineated the scope of enquiry of grounds un- der Sections 34/48 (equivalent to the grounds under Section 7 of the Foreign Awards Act, which was con- sidered by the Court), and held : (Renusagar case [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , SCC pp. 671-72 & 681- 82, paras 34-37 & 65-66) "34. Under the Geneva Convention of 1927, in or- der to obtain recognition or enforcement of a for- eign arbitral award, the requirements of clauses (a) to (e) of Article I had to be fulfilled and in Article II, it was prescribed that even if the conditions laid down in Article I were fulfilled recognition and en- forcement of the award would be refused if the court was satisfied in respect of matters mentioned in clauses (a), (b) and (c). The principles which ap- ply to recognition and enforcement of foreign awards are in substance, similar to those adopted by the English courts at common law. (See Dicey & Morris, The Conflict of Laws, 11th Edn., Vol. I, p.
578.) It was, however, felt that the Geneva Conven- tion suffered from certain defects which hampered the speedy settlement of disputes through arbitra- tion. The New York Convention seeks to remedy the said defects by providing for a much more simple and effective method of obtaining recognition and enforcement of foreign awards. Under the New York Convention the party against whom the award Page 137 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined is sought to be enforced can object to recognition and enforcement of the foreign award on grounds set out in sub-clauses (a) to (e) of Clause (1) of Arti- cle V and the court can, on its own motion, refuse recognition and enforcement of a foreign award for two additional reasons set out in sub-clauses (a) and (b) of Clause (2) of Article V. None of the grounds set out in sub-clauses (a) to (e) of Clause (1) and sub-clauses (a) and (b) of Clause (2) of Arti-
cle V postulates a challenge to the award on merits.
35. Albert Jan van den Berg in his treatise The New York Arbitration Convention of 1958 : Towards a Uniform Judicial Interpretation, has expressed the view:
'It is a generally accepted interpretation of the Convention that the court before which the enforcement of the foreign award is sought may not review the merits of the award. The main reason is that the exhaustive list of grounds for refusal of enforcement enu- merated in Article V does not include a mis- take in fact or law by the arbitrator. Further- more, under the Convention the task of the enforcement judge is a limited one. The con- trol exercised by him is limited to verifying whether an objection of a respondent on the basis of the grounds for refusal of Article V(1) is justified and whether the enforcement of the award would violate the public policy of the law of his country. This limitation must be seen in the light of the principle of interna- tional commercial arbitration that a national court should not interfere with the substance of the arbitration.' (p. 269) Page 138 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
36. Similarly Alan Redfern and Martin Hunter have said:
'The New York Convention does not permit any review on the merits of an award to which the Convention applies and, in this respect, therefore, differs from the provisions of some systems of national law governing the chal- lenge of an award, where an appeal to the courts on points of law may be permitted.' (Redfern & Hunter, Law and Practice of Inter- national Commercial Arbitration, 2nd Edn., p.
461.)
37. In our opinion, therefore, in proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961, the scope of en- quiry before the court in which award is sought to be enforced is limited to grounds mentioned in Section 7 of the Act and does not enable a party to the said proceedings to impeach the award on merits.
***
65. This would imply that the defence of public pol- icy which is permissible under Section 7(1)(b)(ii) should be construed narrowly. In this context, it would also be of relevance to mention that under Article I(e) of the Geneva Convention Act of 1927, it is permissible to raise objection to the enforcement of arbitral award on the ground that the recogni- tion or enforcement of the award is contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon. To the same effect is the provision in Section 7(1) of the Protocol & Convention Act of 1837 which re- quires that the enforcement of the foreign award must not be contrary to the public policy or the law Page 139 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined of India. Since the expression "public policy" covers the field not covered by the words "and the law of India" which follow the said expression, contraven- tion of law alone will not attract the bar of public policy and something more than contravention of law is required.
66. Article V(2)(b) of the New York Convention of 1958 and Section 7(1)(b)(ii) of the Foreign Awards Act do not postulate refusal of recognition and en- forcement of a foreign award on the ground that it is contrary to the law of the country of enforcement and the ground of challenge is confined to the recognition and enforcement being contrary to the public policy of the country in which the award is set to be enforced. There is nothing to indicate that the expression "public policy" in Article V(2)( b) of the New York Convention and Section 7(1)( b)(ii) of the Foreign Awards Act is not used in the same sense in which it was used in Article I( c) of the Geneva Convention of 1927 and Section 7(1) of the Protocol and Convention Act of 1937. This would mean that "public policy" in Section 7(1)( b)(ii) has been used in a narrower sense and in order to at- tract the bar of public policy the enforcement of the award must invoke something more than the viola- tion of the law of India. Since the Foreign Awards Act is concerned with recognition and enforcement of foreign awards which are governed by the princi- ples of private international law, the expression "public policy" in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of In- dian law; or (ii) the interests of India; or (iii) justice or morality."
(emphasis supplied)"
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191. Referring to the above noted paragraphs of Renusagar31 in Ssangyong Engg.35, the Apex Court has further referred to the standard textbooks on International Arbitration in Paragraph No. '47' as under:-
"47. The same theme is echoed in standard textbooks on international arbitration. Thus, in International Commercial Arbitration by Gary B. Born (Wolters Kluwer, 2nd Edn., 2014) (Gary Born), the learned au- thor deals with this aspect of the matter as follows:
"[12] No Judicial Review of Merits of Foreign or Non-Domestic Awards in Recognition Actions It is an almost sacrosanct principle of international ar- bitration that courts will not review the substance of arbitrators' decisions contained in foreign or non-do- mestic arbitral awards in recognition proceedings. Virtually every authority acknowledges this rule and virtually nobody suggests that this principle should be abandoned. When national courts do review the mer- its of awards, they labour to categorize their action as an application of public policy, excess of authority, or some other Article V exception, rather than purport- ing to justify a review of the merits.
[a] No Judicial Review of Awards Under New York and Inter-American Conventions Neither the New York Convention nor the Inter-Amer- ican Convention contains any exception permitting non-enforcement of an award simply because the arbi- trators got their decision on the substance of the par- ties' dispute wrong, or even badly wrong. This is rea- sonably clear from the language of the Convention, which makes no reference to the possibility of a re- view of the merits in Article V's exhaustive list of the exclusive grounds for denying recognition of foreign Page 141 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined and non-domestic awards. There is also no hint in the New York Convention's drafting history of any author- ity to reconsider the merits of an arbitral award in recognition proceedings.
Likewise, the prohibition against review of the merits of the arbitrator's decision is one of the most funda- mental pillars of national court authority interpreting the Convention. This prohibition has repeatedly and uniformly been affirmed by national courts, in both common law and civil law jurisdictions. Simply put:"the court may not refuse to enforce an arbitral award solely on the ground that the arbitrator may have made a mistake of law or fact" [Karaha Bodas Co. LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [Karaha Bodas Co. LLC v. Perusa- haan Pertambangan Minyak Dan Gas Bumi Negara, 364 F 3d 274 (5th Cir 2004)] , F 3d at pp. 287-88]. Thus, in the words of the Luxembourg Supreme Court [Judgment of 24-11-1993 [(1996) 21 YB Comm Arb 617 (Luxembourg Cour Supérieure de Justice)] , YB Comm Arb at p. 623]:
"The New York Convention does not provide for any control on the manner in which the arbitrators decide on the merits, with as the only reservation, the re- spect of international public policy. Even if blatant, a mistake of fact or law, if made by the Arbitral Tri- bunal, is not a ground for refusal of enforcement of the tribunal's award."
Or, as a Brazilian recognition decision under the Con- vention held [Judgment of 19-8-2009, Atecs Mannes- mann GmbH v. Rodrimar S/A Transportes Equipamen- tos Industriais e Armazes Gerais [Atecs Mannesmann GmbH v. Rodrimar S/A Transportes Equipamentos In- dustriais e Armazes Gerais, (2010) 35 YB Comm Arb 330 (Brazilian Tribunal de Justiça)] , YB Comm Arb at p. 331]:
"These questions pertain to the merits of the arbitral award that, according to precedents from the Federal Supreme Court and of this Superior Court of Justice, Page 142 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined cannot be reviewed by this Court since recognition and enforcement of a foreign award is limited to an analysis of the formal requirements of the award."
Commentators have uniformly adopted the same view of the Convention [see for e.g. K.-H. Böckstiegel, S. Kröll & P. Nacimiento, Arbitration in Germany 452 (2007)]."
(emphasis supplied)
192. On the grounds of challenge under Section 34(2)(a)(iii), it was, thus, held that one of the grounds of challenge to an arbitral award is that the grieving party is unable to present its case. In order to understand the import of the said provision, Sections 18, 24(3) and 26 of the Arbitration Act'1996 were noted therein to record that the standard textbooks on the subject have stated that where materials are taken behind the back of the parties by the tribunal, on which the parties have had no opportunity to comment, the ground under Section 34(2)
(a)(iii) would be made out. It is thus noted in Paragraph Nos. '49' to '57' as under:-
"49. Under Section 34(2)(a)(iii), one of the grounds of challenge of an arbitral award is that a party is unable to present its case. In order to understand the import of Section 34(2)(a)(iii), Section 18 of the 1996 Act should also be seen. Section 18 reads as follows:
"18. Equal treatment of parties.--The parties shall be treated with equality and each party shall be given a full opportunity to present his case."
(emphasis supplied) Section 24(3) also states as follows:
"24. Hearings and written proceedings.--(1)-(2) * * * Page 143 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined (3) All statements, documents or other information supplied to, or applications made to the Arbitral Tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the Arbitral Tribunal may rely in making its decision shall be communicated to the parties."
Section 26 of the 1996 Act is also important and states as follows:
"26. Expert appointed by Arbitral Tribunal.--(1) Unless otherwise agreed by the parties, the Arbitral Tribunal may--
(a) appoint one or more experts to report to it on specific issues to be determined by the Arbitral Tribunal; and
(b) require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection.
(2) Unless otherwise agreed by the parties, if a party so requests or if the Arbitral Tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue. (3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report."
50. Section 24(3) is a verbatim reproduction of Article 24(3) of the UNCITRAL Model Law on International Commercial Arbitration (the UNCITRAL Model Law). Similarly, Sections 26(1) and (2) are a verbatim reproduction of Article 26 of the UNCITRAL Model Law. Sub-section (3) of Section 26 has been added by the Indian Parliament in enacting the 1996 Act.
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51. Sections 18, 24(3) and 26 are important pointers to what is contained in the ground of challenge mentioned in Section 34(2)(a)(iii). Under Section 18, each party is to be given a full opportunity to present its case. Under Section 24(3), all statements, documents, or other information supplied by one party to the Arbitral Tribunal shall be communicated to the other party, and any expert report or document on which the Arbitral Tribunal relies in making its decision shall be communicated to the parties. Section 26 is an important pointer to the fact that when an expert's report is relied upon by an Arbitral Tribunal, the said report, and all documents, goods, or other property in the possession of the expert, with which he was provided in order to prepare his report, must first be made available to any party who requests for these things. Secondly, once the report is arrived at, if requested, parties have to be given an opportunity to put questions to him and to present their own expert witnesses in order to testify on the points at issue.
52. Under the rubric of a party being otherwise unable to present its case, the standard textbooks on the subject have stated that where materials are taken behind the back of the parties by the Tribunal, on which the parties have had no opportunity to comment, the ground under Section 34(2)(a)(iii) would be made out.
53. In New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards -- Commentary, edited by Dr Reinmar Wolff (C.H. Beck, Hart, Nomos Publishing, 2012), it is stated:
"4. Right to Comment According to the principle of due process, the tribunal must grant the parties an opportunity to comment on all factual and legal circumstances that may be relevant to the arbitrators' decision- making.Page 145 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
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(a) Right to Comment on Evidence and Argu-
ments Submitted by the Other Party As part of their right to comment, the parties must be given an opportunity to opine on the evidence and arguments introduced in the proceedings by the other party. The right to comment on the coun- terparty's submissions is regarded as a fundamen- tal tenet of adversarial proceedings. However, in accordance with the general requirement of causal- ity, the denial of an opportunity to comment on a particular piece of evidence or argument is not prejudicial, unless the tribunal relied on this piece of evidence or argument in making its decision.
In order to ensure that the parties can exercise their right to comment effectively, the Arbitral Tri- bunal must grant them access to the evidence and arguments submitted by the other side. Affording a party the opportunity to make submissions or to give its view without also informing it of the oppos- ing side's claims and arguments typically consti- tutes a violation of due process, unless specific non- disclosure rules apply (e.g. such disclosure would constitute a violation of trade secrets or applicable legal privileges).
In practice, national courts have afforded Arbitral Tribunals considerable leeway in setting and ad- justing the procedures by which parties respond to one another's submissions and evidence, reasoning that there were "several ways of conducting arbi- tral proceedings". Accordingly, absent any specific agreement by the parties, the Arbitral Tribunal has wide discretion in arranging the parties' right to comment, permitting or excluding the introduction of new claims, and determining which party may have the final word.
(b) Right to Comment on Evidence Known to or Determined by the Tribunal The parties' right to comment also extends to facts Page 146 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined that have not been introduced in the proceedings by the parties, but that the tribunal has raised sua sponte, provided it was entitled to do so. For in- stance, if the tribunal gained "out of court knowl- edge" of circumstances (e.g. through its own inves- tigations), it may only rest its decision on those cir- cumstances if it informed both parties in advance and afforded them the opportunity to comment thereon. The same rule applies to cases where an arbitrator intends to base the award on his or her own expert knowledge, unless the arbitrator was appointed for his or her special expertise or knowl- edge (e.g. in quality arbitration). Similarly, a tri- bunal must give the parties an opportunity to com- ment on facts of common knowledge if it intends to base its decision on those facts, unless the parties should have known that those facts could be deci- sive for the final award."
(emphasis in original)
54. In Fouchard, Gaillard, Goldman on International Commercial Arbitration (Kluwer Law International, 1999) (Fouchard) it is stated:
"In some rare cases, recognition or enforcement of an award has been refused on the grounds of a breach of due process. One example is the award made in a quality arbitration where the defendant was never informed of the identity of the arbitra- tors hearing the dispute [Danish buyer v. German (FR) seller [Danish buyer v. German (FR) seller, (1979) 4 YB Comm Arb 258 (Oberlandesgericht Cologne)] ]. It also occurred in a case where vari-
ous documents were submitted by one party to the Arbitral Tribunal but not to the other party [G.W.I. Kersten & Co. B.V. v. Société Commerciale Raoul Duval et Co. [G.W.I. Kersten & Co. B.V. v. Société Commerciale Raoul Duval et Co., (1992) 19 YB Comm Arb 708 (Amsterdam Court of Appeals)] ], in another case where the defendant was not given the opportunity to comment on the report produced by the expert appointed by the tribunal [Paklito Inv. Ltd. v. Klockner East Asia Ltd. [Paklito Inv.
Page 147 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Ltd. v. Klockner East Asia Ltd., (1994) 19 YB Comm Arb 664 (Supreme Court of Hong Kong)] , Comm Arb at p. 671], and again where the Arbitral Tri- bunal criticized a party for having employed a method of presenting evidence which the tribunal itself had suggested [Iran Aircraft Indus- tries v. Avco Corpn. [Iran Aircraft Indus- tries v. Avco Corpn., 980 F 2d 141 (2nd Cir 1992)] ]."
55.Gary Born states:
"German courts have adopted similar reasoning, holding that the right to be heard entails two re- lated sets of rights : (a) a party is entitled to present its position on disputed issues of fact and law, to be informed about the position of the other parties and to a decision based on evidence or ma- terials known to the parties [see e.g. judgment of 5- 7-2011 [ 34 Sch 09/11, II(5)(c)(bb) (Oberlandes- gericht Munchen)] ]; and (b) a party is entitled to a decision by the Arbitral Tribunal that takes its posi- tion into account insofar as relevant [see e.g. judg- ment of 5-10-2009 [ 34 Sch 12/09 (Oberlandes- gericht Munchen)] ]. Other authorities provide comparable formulations of the content of the right to be heard [see e.g. Slaney v. International Ama- teur Athletic Foundation [Slaney v. International Amateur Athletic Foundation, 244 F 3d 580 (7th Cir 2001)] , F 3d at p. 592]."
56. Similarly, in Redfern and Hunter (supra):
"11.73. The national court at the place of enforce- ment thus has a limited role. Its function is not to decide whether or not the award is correct, as a matter of fact and law. Its function is simply to de- cide whether there has been a fair hearing. One mistake in the course of the proceedings may be sufficient to lead the court to conclude that there was a denial of justice. For example, in a case to which reference has already been made, a US cor- poration, which had been told that there was no Page 148 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined need to submit detailed invoices, had its claim re- jected by the Iran-US Claims Tribunal, for failure to submit detailed invoices! The US court, rightly it is suggested, refused to enforce the award against the US company [Iran Aircraft Industries v. Avco Corpn. [Iran Aircraft Industries v. Avco Corpn., 980 F 2d 141 (2nd Cir 1992)] ]. In different circum- stances, a German court held that an award that was motivated by arguments that had not been raised by the parties or the tribunal during the ar- bitral proceedings, and thus on which the parties had not had an opportunity to comment, violated due process and the right to be heard [see the deci- sion of the Stuttgart Court of Appeal dated 6-10- 2001 referred to in Liebscher, The Healthy Award, Challenge in International Commercial Arbitration (Kluwer law International, 2003), 406]. Similarly, in Kanoria v. Guinness [Kanoria v. Guinness, 2006 EWCA Civ 222] , the English Court of Appeal de- cided that the respondent had not been afforded the chance to present its case when critical legal arguments were made by the claimant at the hear- ing, which the respondent could not attend due to a serious illness. In the circumstances, the court de- cided that 'this is an extreme case of potential in- justice' and resolved not to enforce the arbitral award.
11.74. Examples of unsuccessful 'due process' de- fences to enforcement are, however, more numer- ous. In Minmetals Germany GmbH v. Ferco Steel Ltd. [Minmetals Germany GmbH v. Ferco Steel Ltd., 1999 CLC 647 (QB)] , the losing respondent in an arbitration in China opposed enforcement in England on the grounds that the award was founded on evidence that the Arbitral Tribunal had obtained through its own investigation. An English court rejected this defence on the basis that the re- spondent was eventually given an opportunity to ask for the disclosure of evidence at issue and com- ment on it, but declined to do so. The court held that the due process defence to enforcement was not intended to accommodate circumstances in Page 149 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined which a party had failed to take advantage of an opportunity duly accorded to it."
57. In Minmetals Germany GmbH v. Ferco Steel Ltd. [Minmetals Germany GmbH v. Ferco Steel Ltd., 1999 CLC 647 (QB)] , the Queen's Bench Division re- ferred to this ground under the New York Convention, and held as follows:
"The inability to present a case issue.--Al- though many of those States who are parties to the New York Convention are civil law jurisdictions or are those which like China derive the whole or part of their procedural rules from the civil law and therefore have essentially an inquisitorial system, Article V of the Convention protects the require- ments of natural justice reflected in the audi al- teram partem rule. Therefore, where the tribunal is procedurally entitled to conduct its own investiga- tions into the facts, the effect of this provision will be to avoid enforcement of an award based on find- ings of fact derived from such investigations if the enforcee has not been given any reasonable oppor- tunity to present its case in relation to the results of such investigations. Article 26 of the Cietac rules by reference to which the parties had agreed to ar- bitrate provided:
'26. The parties shall give evidence for the facts on which their claim or defence is based. The Arbitral Tribunal may, if it deems it necessary, make inves- tigations and collect evidence on its own initiative.' That, however, was not treated by the Beijing court as permitting the tribunal to reach its conclusions and make an award without first disclosing to both parties the materials which it had derived from its own investigations. That quite distinctly appears from the grounds of the court's decision -- that Ferco was, for reasons for which it was not respon- sible, unable "to state its view". Those reasons could only have been its lack of prior access to the Page 150 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined sub-sale award and the evidence which underlay it. I conclude that it was to give Ferco's lawyer an op- portunity to refute this material that the Beijing court ordered a "resumed" arbitration."
193. On the scope of grounds of challenge under Section 34(2)(a)(iv), it was observed in para '58' in Ssangyong Engg.35 that standard textbooks on the subject have held that the expression "submission to arbitration"
either refers to the arbitration agreement itself, or to disputes submitted to arbitration, and that so long as disputes raised are within the ken of the arbitration agreement or the disputes submitted to arbitration, they cannot be said to be disputes which are either not contemplated by or which fall outside the arbitration agreement. The detailed discussion in this regard are contained in Paragraph Nos. '58' to '67'. For the sake of brevity, we find it useful to reproduce paras '58', '67' and '68' only, which read as under :-
"58. So far as this defence is concerned, standard textbooks on the subject have held that the expression "submission to arbitration" either refers to the arbitration agreement itself, or to disputes submitted to arbitration, and that so long as disputes raised are within the ken of the arbitration agreement or the disputes submitted to arbitration, they cannot be said to be disputes which are either not contemplated by or which fall outside the arbitration agreement. The expression "submission to arbitration" occurs in various provisions of the 1996 Act. Thus, under Section 28(1)(a), an Arbitral Tribunal "... shall decide the dispute submitted to arbitration ...". Section 43(3) of the 1996 Act refers to "... an arbitration agreement to submit future disputes to arbitration ...". Also, it has been stated Page 151 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined that where matters, though not strictly in issue, are connected with matters in issue, they would not readily be held to be matters that could be considered to be outside or beyond the scope of submission to arbitration. Thus, in Fouchard (supra), it is stated:
"This provision applies where the arbitrators have gone beyond the terms of the arbitration agreement. It complements Article V, Para 1(a), which concerns invalid arbitration agreements. The two grounds are similar in nature : in both cases, the arbitrator will have ruled in the absence of an arbitration agreement, either because the agreement is void [as in sub-section
(a)] or because it does not cover the subject-
matter on which the arbitrator reached a decision [as in sub-section (c)]. For that reason, more recent arbitration statutes often either treat the two grounds as one, as in Article 1502 1° of the French New Code of Civil Procedure, or refer generally to the "absence of a valid arbitration agreement", as in Article 1065 of the Netherlands Code of Civil Procedure. However, Article V, Para 1(c) does not cover all the cases listed in Article 1502 3° of the French New Code of Civil Procedure, which provides that recognition or enforcement can be refused where "the arbitrator ruled without complying with the mission conferred upon him or her". That extends to decisions that are either infra petita and ultra petita, as well as to situations where the arbitrators have exceeded their powers in the examination of the merits of the case (for example, by acting as amiable compositeurs when that was not agreed by the parties, or by failing to apply the rules of law chosen by the parties). Generally speaking, such situations cannot be said to be outside the terms of the arbitration agreement within the meaning of the New York Convention. In practice, it is only where the terms of reference -- which, provided that they have been accepted by the Page 152 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined parties, can constitute a form of arbitration agreement -- set out the parties' claims in detail that arbitrators who have decided issues other than those raised in such claims can be said both to have ruled ultra petita and to have exceeded the terms of the arbitration agreement. If, on the other hand, the arbitration agreement is drafted in general terms and the claims are not presented in a way that contractually determines the issues to be resolved by the arbitrators, a decision that is rendered ultra petita would not contravene Article V, Para 1(c). It is important to note that the Convention provides that the refusal of recognition or enforcement can be confined to aspects of the award which fail to comply with the terms of the arbitration agreement, provided that those aspects can be separated from the rest of the award [Article V(1)(c)]. Once again, the courts have taken a very restrictive view of the application of this ground."
"67. In State of Goa v. Praveen Enterprises [State of Goa v. Praveen Enterprises, (2012) 12 SCC 581] (Praveen Enterprises), this Court set out what is meant by "reference to arbitration" as follows :
(SCC pp. 587-88, paras 10-11) "10. "Reference to arbitration" describes various acts. Reference to arbitration can be by parties themselves or by an appointing authority named in the arbitration agreement or by a court on an application by a party to the arbitration agreement.
We may elaborate:
(a) If an arbitration agreement provides that all disputes between the parties relating to the contract (some agreements may refer to some exceptions) shall be referred to arbitration and that the decision of the arbitrator shall be final and binding, the "reference" contemplated is the act of parties to the arbitration agreement, referring their disputes to an agreed arbitrator to settle the disputes.Page 153 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
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(b) If an arbitration agreement provides that in the event of any dispute between the parties, an authority named therein shall nominate the arbitrator and refer the disputes which required to be settled by arbitration, the "reference" contemplated is an act of the appointing authority referring the disputes to the arbitrator appointed by him.
(c) Where the parties fail to concur in the appointment of the arbitrator(s) as required by the arbitration agreement, or the authority named in the arbitration agreement failing to nominate the arbitrator and refer the disputes raised to arbitration as required by the arbitration agreement, on an application by an aggrieved party, the court can appoint the arbitrator and on such appointment, the disputes between the parties stand referred to such arbitrator in terms of the arbitration agreement.
11. Reference to arbitration can be in respect of all disputes between the parties or all disputes regarding a contract or in respect of specific enumerated disputes. Where "all disputes" are referred, the arbitrator has the jurisdiction to decide all disputes raised in the pleadings (both claims and counterclaims) subject to any limitations placed by the arbitration agreement. Where the arbitration agreement provides that all disputes shall be settled by arbitration but excludes certain matters from arbitration, then, the arbitrator will exclude the excepted matter and decide only those disputes which are arbitrable. But where the reference to the arbitrator is to decide specific disputes enumerated by the parties/court/appointing authority, the arbitrator's jurisdiction is circumscribed by the specific reference and the arbitrator can decide only those specific disputes."
"68. A conspectus of the above authorities would show that where an Arbitral Tribunal has rendered an award which decides matters either beyond the scope of the arbitration agreement or beyond the disputes referred to the Arbitral Tribunal, as Page 154 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined understood in Praveen Enterprises [State of Goa v. Praveen Enterprises, (2012) 12 SCC 581] , the arbitral award could be said to have dealt with decisions on matters beyond the scope of submission to arbitration."
194. It was further held in Paragraph No. '76' on the expression "most basic notions of justice" in Explanation 1 to sub-clause (iii) of Section 34(2)(b) that when it comes to public policy of India, argument based upon "most basic notions of justice", it is clear that this ground can be attracted only in very exceptional circumstances, when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice.
195. In the facts of the said case in Ssangyong Engg.35, it was noted therein that the majority award had created a new contract for the parties by applying a unilateral circular and by substituting the workable formula under the agreement by another formula de hors agreement. That being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. It was held that such a course of conduct would be contrary to the fundamental principle of justice as followed in India and shocks the conscious of the Court. A note of caution was, however, added by stating that:-
Page 155 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined "76......However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment."
196. With the above observations in Ssangyong Engg.35 while setting aside the majority award, invoking the powers of the Apex Court under Article 142 of the Constitution of India, the minority award which allowed the claims based on the formula mentioned in the agreement between the parties, was upheld.
197. As noted hereinbefore in Renusagar31, it was held that the expression "public policy" covers the field not covered by the words "and the law of India", which follow the said expression, contravention of law alone will not attract the bar of public policy and something more than contravention of law is required. The scope of inquiry before the court is limited and does not enable a party to the proceedings to impeach the award on merits. The defence of Public Policy which is permissible to challenge the arbitral award should be construed narrowly.
198. As stated by the Gary B Born in his textbook on International Commercial Arbitration, "it is almost Page 156 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined sacrosanct principle of international arbitration that Courts will not review the substance of arbitrators' decisions contained in foreign or non-domestic arbitral awards in recognition proceedings. When the national Courts do review the merits of awards, they labour to categorize their action as an application of public policy, excess of authority, or some other Article V exception, rather than purporting to justify a review of the merits". The prohibition against review on merits of arbitrators' decision is one of the most fundamental pillars of national court authority interpreting the New York Convention. In the words of Luxembourg, Supreme Court (extracted hereinabove) in Paragraph No. '47' of Ssangyong Engg.35, the Court may not refuse to enforce an arbitral award solely on the ground that the arbitrator may have made a mistake of law or fact. "The New York Convention does not provide for any control on the manner in which the arbitrators decide on the merits, with as the only reservation, the respect of International Pubic Policy. Even if blatant, a mistake of fact or law, if made by the arbitral tribunal, is not a ground for refusal of enforcement of the tribunal's award". The grounds for refusal under Article V in the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York 1958) (2016 Edition) (the UNCITRAL Guide on the New York Convention) do not include an erroneous decision in law or in fact by the arbitral tribunal.
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199. It is held in Ssangyong Engg.35 that the expression "most basic notion of morality or justice" finds mention in Explanation 1, Sub clause (iii) to Section 34(2)(b)(ii) refers to, substantively or procedurally, some fundamental principle of justice which has been breached, and which shocks the conscience of the court. An international commercial arbitral award can be interfered with on that basis only when a Forum State's (India in this case) most basic notions of morality and justice are breached. In any case, the concept of "public policy of India" under the Act, 1996 encompasses a narrow scope. The term 'public policy', which was used in 1958 New York Convention and many other treaties, is not equivalent to the political stance or international policies of a State but comprised the "fundamental notions and principles of justice". The term 'public policy' used therein covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside the award. The High Court of Singapore in BAZ Vs. BBA37 as noted in Ssangyong Engg.35, has stated that:-
"72. And finally, in BAZ v. BBA [BAZ v. BBA, 2018 SGHC 275] , the High Court of Singapore stated:
"156. From the outset, it is important to reiterate that the public policy ground for setting aside or refusal of recognition/enforcement is very narrow in scope. The Court of Appeal has held that the ground should only 37 [2018 SGHC 275] Page 158 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined succeed in cases where upholding or enforcing the ar- bitral award would "shock the conscience", or be "clearly injurious to the public good or ... wholly of- fensive to the ordinary reasonable and fully informed member of the public", or violate "the forum's most basic notion of morality and justice" [PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA [PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA, (2007) 1 SLR (R) 597] , SLR para 59] (PT Asuransi). In Sui Southern Gas Co. Ltd. v. Habibullah Coastal Power Co. (Pte) Ltd. [Sui Southern Gas Co. Ltd. v. Habibul- lah Coastal Power Co. (Pte) Ltd., (2010) 3 SLR 1] (Sui Southern Gas), the High Court stated that to succeed on a public policy argument, the party "had to cross a very high threshold and demonstrate egregious cir- cumstances such as corruption, bribery or fraud, which would violate the most basic notions of morality and justice" (at [48]). The 1985 UN Commission Re- port states at para 297 that the term public policy "comprised the fundamental notions and principles of justice", and it was understood that the term "covered fundamental principles of law and justice in substan- tive as well as procedural respects". The 1985 UN Commission Report further explains that Article 34(2)
(b)(ii) of the Model Law "was not to be interpreted as excluding instances or events relating to the manner in which an award was arrived at".
157. It is clear that errors of law or fact, per se, do not engage the public policy of Singapore under Arti- cle 34(2)(b)(ii) of the Model Law when they cannot be set aside under Art 34(2)(a)(iii) of the Model Law (PT Asuransi [PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA, (2007) 1 SLR (R) 597] , SLR para 57), with the exception that the court's judi- cial power to decide what the public policy of Singa- pore is cannot be abrogated (AJU v. AJT [AJU v. AJT, (2011) 4 SLR 739] , SLR para 62 AJU v. AJT). ...
***
159. ... This balance is generally in favour of the pol- icy of enforcing arbitral awards, and only tilts in favour of the countervailing public policy where the violation of that policy would "shock the conscience"
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(emphasis supplied)"
200. Considering the parameters of legal challenge to an arbitral award in an international commercial arbitration within the scope of inquiry under Section 34(2)(b)(ii), we have to examine the grounds of challenge put forth by the respondents one by one considering the caution stated by the Apex Court in Ssangyong Engg.35 that the term 'public policy' encompasses a narrow scope. Keeping in mind of the above fundamental principle of enquiry and the provisions of Explanations 1 and 2 to Section 34 (1)(b)(ii), while entertaining the challenge, the grounds available in Clauses (i), (ii) and (iii) of Explanation 1 have to be tested on the touchstone of the express bar stated in Explanation 2 to Section 34(2)(b)
(ii).
201. We now proceed to deal with the grounds of challenge to the merits of the arbitral award one by one :-
(F) Grounds of Challenge to the Arbitral Award:-
(i) Non-Disclosure under Section 12(1):-
202. Proceeding further, noticing the grounds of challenge to the arbitral award, we may deal with the contentions of the learned senior counsel for the respondents about the Page 160 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined mandatory disclosure under Section 12(1) of the Act, 1996. It was argued that the learned single Judge while dealing with the contentions about the infraction on the part of the co-arbitrator Mr. Andre Yeap, nominated by the claimants in non-filing of the declaration under Section 12(5), has simply rejected the challenge on the grounds that it was raised for the first time before the Court under Section 34 and that the provision of Section 12(1) is derogable and non-compliance of the same would not make the award illegal.
203. It was argued by Mr. Kapil Sibal and Mr. Saurabh Soparkar, both the learned senior counsels appearing for the respondents that Section 12(5) of the Act, 1996 has an overriding effect, and the presence of any of the circumstances specified in the Seventh Schedule shall make any person ineligible to be an Arbitrator.
204. It was submitted that the proviso to sub-section(5) provides for waiver from the applicability of sub-
section(5) only by an express agreement in writing between the parties, subsequent to disputes having arising between them. The language employed in Section 12(1), however, casts an obligation upon a person who is approached in connection with his possible appointment as an Arbitrator to make a disclosure in writing of any of the circumstances existing in Clauses (a) and (b) of sub-section(1). The breach of the condition precedent for appointment of Arbitrator would result in making the award a nullity. The reason Page 161 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined being that a valid appointment of an Arbitrator is a pre- condition to attach validity to the award passed by it. The reasoning given by the learned Single judge that the issue of non-filing of a declaration under Section 12(1) was not raised before the Arbitral Tribunal and hence the same would stand waived, is wholly incorrect.
205. Reliance is placed on the decision of the Apex Court in Chief General Manager (PIC), Madhya Pradesh Power Trading Co. v. Narmada Equipments Pvt. Ltd.38 by Mr. Kapil Sibal, the learned senior advocate, to submit that the mandatory non-disclosure under Section 12(1) by a person at the time of his appointment as an Arbitrator, would make him ineligible to be appointed as an Arbitrator and, as such, such a person when entering into the reference would have no jurisdiction. Any award passed by such an Arbitrator would be nullity on the ground of inherent lack of jurisdiction. It was submitted that if the initial appointment itself is bad, the plea of inherent lack of jurisdiction can be taken at any stage and also in collateral proceedings. It was argued that it is well established principle of law that plea that the decree passed by the Court without jurisdiction is a nullity, could be set up whenever and wherever it is sought to be enforced or relied upon. Such a defect of jurisdiction cannot be cured even by the consent of the parties. The submission is that any waiver or consent of the parties would be of no consequence.
38 [(2021)14 SCC 548] Page 162 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
206. Mr. Saurabh Soparkar, the learned senior advocate has placed reliance on the Law Commission Report No. 246 for Amendments to the Arbitration and Conciliation Act, 1996, whereby Section 12(1) was substituted with effect from 23.10.2015, to submit that neutrality of Arbitrators, viz. their independence and impartiality, has been considered critical to the entire arbitration process. The Law Commission in its Report has noted while advocating for amendment of Section 12 that "the Arbitration Act does not lay down any other conditions to identify the 'circumstances' which give rise to justifiable doubts". Since the principles of impartiality and independence cannot be discarded at any stage of the proceedings, specifically at the stage of constitution of the arbitral tribunal, it would be incongruous to say that party autonomy can be exercised in complete disregard to these principles-even if the same has been agreed prior to the disputes having arisen between the parties. The Commission observed in paragraph No. 59 of its 246th report as under :-
"59. The Commission has proposed the requirement of having specific disclosures by the arbitrator, at the stage of his appointment, regarding existence of any relationship or interest of any kind which is likely to give rise to justifiable doubts. The Commission has proposed the incorporation of the Fourth Schedule, which has drawn from the Red and Orange lists of the IBA Guidelines on Conflicts of Interest in International Arbitration, and which would be treated as a "guide" to determine whether the circumstances Page 163 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined exist which give rise to such justifiable doubts. On the other hand, in terms of the proposed section 12(5) of the Act and the Fifth Schedule which incorporates the categories from the Red list of the IBA Guidenines (as above), the person proposed to be appointed as an arbitrator shall be ineligible to be so appointed, notwithstanding any prior agreement to the contrary. In the event such an ineligible person is purported to be appointed as an arbitrator, she shall be de jure deemed to be unable to perform his functions, in terms of the proposed explanation in section 14. Therefore, while the disclosure is required with respect to a broader list of categories (as set out in the Fourth Schedule, and as based on the Red and Orange list of the IBA Guidelines), the ineligibility to be appointed as an arbitrator (and the consequent de jure inability to so act) follows from a smaller and more serious sub-set of situations (as set out in the Fifth- Schedule, and as based on the Red list of the IBA Guidelines)."
207. It was, thus, stated that this amendment is intended to further goals of independence and impartiality in Arbitration, and only gives legislative colour to the phrase "independence or impartiality" as it is used in the Act itself.
208. Further reliance is placed upon the decisions of the Apex court in Voestalpine Schienen GmBH v. Delhi Metro Rail Corp.39 and Chennai Metro Rail Ltd.28 to argue that while taking note of the amendments to the Arbitration Act, 2015, the Apex Court in Voestalpine Schienen GmBH39 has underlined that the amendment was with the objective to induce neutrality to the Arbitrators, specially their independence and 39 [(2017) 4 SCC 665] Page 164 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined impartiality. The provision was incorporated to identify the circumstances that give rise to justifiable doubts about the independence or impartiality of the Arbitrator. Failure to make a disclosure by an Arbitrator would give rise to justifiable doubts about the independence and impartiality of the Arbitrator. The rules for disqualification or ineligibility are fairly clear. Reference has been made to the observations in paragraph Nos. 36, 37, 38, 39 and 40 in Chennai Metro Rail Ltd.28 to argue that Arbitrator(s) is/are under a duty to make a disclosure under Section 12(1) of the Arbitration Act, 1996. Since the Arbitrator performs judicial functions and actually act as a Judge, one way to satisfy the parties as to the Arbitrator's impartiality is disclosure.
209. It was argued that the requirement of disclosure is to ensure that there is no apparent bias. There is as such an obligation on the Arbitator(s) to make a disclosure which could give rise to real possibility of bias. Such disclosure allows the parties to consider the disclosed circumstances, obtain necessary advice and decide whether there is a problem with the involvement of the Arbitrator in the reference and, if so, whether to object or otherwise to act to mitigate or remove the problem. In India, the Parliament inserted the Fifth Schedule as a disclosure requirement, as an eligibility condition under Section 12(1) at the inception, i.e. at the stage of appointment. Explanation 2 to Clause (b) of Section 12(1) provides that such disclosure has to be in the form Page 165 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined specified in the Sixth Schedule. It was, thus, mandatory for the Arbitrator nominated by the claimant to make a disclosure in the form prescribed. As there is a failure on the part of the Arbitrator to meet with the pre- condition of disclosure, it would render the appointment itself ineligible and participation illegal, going to the root of the jurisdiction, divesting the person appointed of its authority to act as the Tribunal and thus, resulting into termination of the mandate of the Arbitrator.
210. Referring to the decision of the Supreme Court of United Kingdom in the case of Halliburton Company vs. Shubb Bermuda Insurance Ltd., where the Court was concerned with adhoc Arbitration governed by the laws of New York but seated in London, the observations in paragraph Nos. '55' and '56' were placed before us, which read as under:-
"55. The objective test of the fair-minded and informed observer applies equally to judges and all arbitrators. There is no difference between the test in section 24(1)(a) of the 1996 Act, which speaks of the existence of circumstances "that give rise to justifiable doubts as to [the arbitrator's] impartiality" and the common law test above. But in applying the test to arbitrators it is important to bear in mind the differences in nature and circumstances between judicial determination of disputes and arbitral determination of disputes.
56. First, judges resolve civil disputes in courts which are, as a general rule, open to the public; by contrast arbitration is a consensual form of dispute resolution which is generally conducted in private and of which there is very limited public oversight.Page 166 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined A person who is not a party to an arbitration may know nothing about the arbitration and may have no ready means of discovering its existence, the evidence adduced and the legal arguments advanced at it, or the award made. Arbitrators and the parties to an arbitration are generally under a duty of privacy and confidentiality which militates against such discovery, in the absence of disclosure. That puts a premium of frank disclosure."
211. Based on the said observations, it was argued by Mr. Soparkar that there was no means for the respondents to know about the Arbitrators and in absence of disclosure, which is mandatory to attach validity to the appointment, it was not possible for the respondents nor there was any occasion for the respondents to find out whether it was a case falling within the parameters of ineligibility as per the Fifth Schedule [(under section 12(1)] or the Seventh Schedule [Section 12(5)].
212. Referring to the observations of the Apex Court in Galada Power & Telecom Ltd. v. United India Insurance Company Limited40, it was urged that waiver cannot be inferred merely from the failure of the party to take objection. Waiver can be inferred only if and after it is shown that the party knew about the relevant facts and was aware of his right to take the objection. The contention is that there was no question of waiver under Section 12(5) or abandonment on the plea of ineligibility of the Arbitrator, inasmuch as, non-
40 [(2016) 4 SCC 161] Page 167 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined disclosure in the form prescribed in the Sixth Schedule as per Section 12(1) per se is bad.
213. Reliance is placed on the excerpts from the Commentary on the Law of Arbitration, Fourth Edition, Volume-I by Justice Indu Malhotra, wherein it is stated that :
"The Arbitration and Conciliation (Amendment) Act, 2015 has brought about extensive changes to the legislative scheme, some of which indirectly touch upon the width of Section 4. Section 12 ("Grounds of Challenge") has been re-stated by the amendment. The right to obtain disclosure from a proposed arbitrator under Section 12(1) is couched in a mandatory language. There can be no waiver of this requirement. It is the proposed arbitrator who would be aware of his own possible disqualifications. Sans disclosure, there is no knowledge, and sans knowledge it would be illogical to imply waiver. It may be recalled that the opening words of Section 4 are :"a party who knows that ......". However, once there is disclosure of a material fact, a party objecting to the eligibility of a proposed arbitrator is expected to do so forthwith. Failure, to do so may attract Section 4. Section 12(4) entitles a party to challenge an appointment even subsequent to participation in such appointment, if discovery of relevant grounds come to light subsequent to the appointment."
214. Further reliance is placed on the decision of the Apex Court in Lion Engineering Consultants v. State of Madhya Pradesh41 to argue that legal plea arising on undisputed facts can be raised by way of objection under Section 34 even if no such objection was raised under 41 [(2018) 16 SCC 758] Page 168 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Section 16 of the Act'1996. It was argued that Section 12(4) even allows a party to challenge the appointment of its own nominee Arbitrator once it becomes aware about disqualification on the ground of non-disclosure. This provision further illustrates the requirement of mandatory disclosure by the Arbitrator and the right of the parties to know any of the circumstances, if exist, under the grounds stated in the Fifth Schedule which gives rise to justifiable doubts as to the independence or impartiality of the Arbitrator. If the mandatory disclosure under Section 12(1) has not been made, the party can raise the plea of ineligibility whenever any such circumstance comes to the knowledge of the party at any stage whether Section 34 or Section 37 of the Act, 1996 or even in collateral proceedings for execution of the award, inasmuch as, the ineligibility of the Arbitrator makes the appointment nullity rendering him ineligible to enter into the reference and make an award. Such an award is to be held as nullity on the ground of inherent lack of jurisdiction of the Arbitrator. There is, thus, no question of abandonment or waiver in absence of disclosure, inasmuch as, the respondents were not aware of the existence of the circumstances.
215. Reliance is placed on the decision of the Constitution Bench of the Apex Court in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV)42 to submit that the said decision addressed the issue of non-disclosure in the following manner, 42 [(2025) 4 SCC 641] Page 169 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined "44. The 2015 amendment mandates arbitrators to make disclosures before their appointment in terms of the categories specified under the Fifth Schedule. The Fifth Schedule prescribes thirty-four categories that give rise to justifiable doubts as to the independence or impartiality of arbitrators. These categories are classified as follows: (i) the relationship of the arbitrator with the parties or counsel; (ii) the relationship of the arbitrator to the dispute; (iii) the arbitrator's direct or indirect interest in the dispute; (iv) previous services rendered by the arbitrator to one of the parties or other involvement in the case; (v) relationship between an arbitrator and another arbitrator or counsel; (vi) relationship between arbitrator and party and others involved in the arbitration, and
(vii) and other circumstances.
45.The 2015 amendment has incorporated Section 12(5) to provide for ineligibility of a person to be appointed as an arbitrator whose relationship with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in the Seventh Schedule. Section 12(5) reads thus:
"(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing."
46.The Seventh Schedule to the Arbitration Act divides the specified categories based on three factors: (i) arbitrator's relationship with the parties or counsel; (ii) the relationship of the arbitrator to the dispute; and (iii) arbitrator's direct or indirect Page 170 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined interest in the dispute. The categories that are relevant for the present reference are as follows:
"1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.
5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration."
47.Section 12(5) overrides any prior procedure for appointing the arbitrators agreed upon between the parties under Section 11(2) due to the non obstante clause. However, the proviso to Section 12(5) allows parties to waive the applicability of that provision after the dispute has arisen. The proviso secures "real and genuine party autonomy"
by allowing parties to waive the applicability of Section 12(5).
48.Section 12(5) does not prescribe a method to challenge the appointment of an ineligible person. Section 14 deals with the termination of the mandate of an arbitrator who is unable to perform their functions. A person who is ineligible to be appointed as an arbitrator in terms of Section 12(5) becomes de jure unable to perform functions according to Section 14. Resultantly, the mandate of such an ineligible person gets automatically terminated and they are liable to be substituted by another arbitrator under Section 14.
49.The disclosure requirement helps prevent the appointment of an unacceptable candidate. The duty of disclosure is a continuing requirement to:
(i) provide the information to any party who did not obtain it before the arbitrator's appointment; and
(ii) secure information about circumstances that only arise at a later stage of the arbitral proceedings, that is, new business affiliations or Page 171 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined share acquisitions."
216. On a pointed query made by the Court as to whether the circumstances, if any, exist to press the claim of the respondents giving rise to any justifiable doubts regarding impartiality of the Arbitrator, it was submitted that need for disclosure was even greater because of the fact that the professional fee of Mr. Andre Yeap, a nominee Arbitrator of the claimants, was paid to a Law Firm namely Rajah & Tann Singapore LLP. This fact was disclosed by the claimants in their written submissions. The profile of Mr. Andre Yeap in the compilation was placed before us to demonstrate that Mr. Andre Yeap was a Senior partner in the aforesaid Law firm, namely Rajah & Tann Singapore LLP and Head International Arbitration, Construction and Projects. Whereas son of the Presiding Arbitrator of the third tribunal namely Mr. Avinash Pradhan was the Deputy Head of Rajah & Tann Singapore's International Arbitration Practice and the Co-Head of South Asia Desk. The contention is that this position of Mr. Andre Yeap in the law firm which is the beneficiary of the arbitral fee clearly shows that Mr. Andre Yeap was having a dominant position over the Presiding Arbitrator Mr. Vinayak Pradhan whose son was working under Mr. Yeap as a Deputy Head of Rajah & Tann Singapore's International Arbitration Practice. Resultantly, Mr. Vinayak Pradhan, Presiding Arbitrator would have to be considered as sub-ordinate to Mr. Andre Yeap, the Co-Arbitrator, a nominee of the claimants.
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217. The contention, thus, is that the above circumstance would fall within the prohibited category in Clause 28 of the Fifth Schedule which reads that, "A close family member of the Arbitrator is a partner or employee of the law firm representing one of the parties, but is not assisting with the dispute". It was argued that Mr. Vinayak Pradhan, Presiding Arbitrator whose son Avinash Pradhan was associated with the law firm namely Tajah & Tann LLP, whose partner Mr. Andre Yeap was a Co-Arbitrator, which had received the arbitration fee, the relationship between the two arbitrators namely Vinayak Pradhan (Presiding Arbitrator) and Mr. Andre Yeap (nominee Arbitrator of the claimants) stands proved. This circumstance came to the knowledge of the respondents with the disclosure made by the claimants in their written statement about the payment of Arbitrator's fee and is enough to raise justifiable doubts regarding impartiality of the Arbitrator, more so when no such disclosure was made by any of the two Arbitrators, namely the Presiding Arbitrator or the nominee Arbitrator of the claimants.
218. In rebuttal of this argument, the learned senior counsel for the appellant would submit that the findings of the learned singe Judge that there is no violation of Sections 12 and 13 of the Act, 1996 and that non-compliance of the provisions of Section 12(1) would not make the award illegal, cannot be interfered with. Placing the record before us, it was contended that Mr. K. Jhadwani, Page 173 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined respondent No.2 herein, filed an application dated 01.02.2020 under Sections 12 and 13 of the Arbitration and Conciliation Act, 1996 raising apprehension regarding impartiality and independence of the Arbitrator of the Arbitral Tribunal on various grounds. However, none of the grounds stated therein meet the requirement of Sections 12 and 13 of the Act, 1996. The said application was rejected by the arbitral tribunal vide order dated 19.12.2020. The said respondent has not availed the remedy under Sections 14 and 15 of the Act, 1996 to raise the challenge to the order of rejection of his application on merits.
219. With regard to the respondent No.1, namely Mr. N.K.Shah, the transcript of the proceedings held on 15.02.2020 before the Arbitral Tribunal has been placed before us to demonstrate that the learned advocate appearing the respondent No.2 before the arbitral tribunal had specifically submitted that he did not wish to make any allegation against the Tribunal and no submissions would be made in that regard. The statement made by the learned advocate appearing for the respondent No.1 before the arbitral tribunal in the proceeding held on 15.02.2020, is relevant to be extracted hereinunder :-
"MR. VIRK: Yes. As a professional rule I don't argue sections 12 and 13 and I don't make allegations against any tribunal, no matter what the facts and circumstances, and it is for that reason that the respondent no.1 has also not filed a written reply.Page 174 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Therefore before this tribunal also, I will not make any submissions on 12 and 13. It has never been my practice to make any arguments on 12 and 13, and I don't wish to change that practice today"."
220. It was, thus, argued by the learned counsel for the appellant that the respondent No.1 expressly waived his right to take up the issue, if any, under Sections 12 and 13 of the Act, 1996 and, as such, now estopped from raising any grievance.
221. Reliance is placed on the observations made in paragraph Nos. 40 and 41 of the decision in Chennai Metro Rail Ltd.28 to argue that the Apex Court has rejected the concept of de jure ineligibility because of existence of justifiable doubts about impartiality or independence of the Tribunal on unenumerated grounds [or other than those outlined as statutory ineligibility conditions in terms of Section 12(5)] of the Act, 1996. It was expressly stated by the Apex Court that the Court can hardly conceive of grounds other than those mentioned in the Schedule, occasioning an application in terms of Section 12(3). Skipping the statutory route carefully devised by the Parliament can cast yet more spells of uncertainty upon the Arbitration process. The Apex Court has highlighted that the de jure condition cannot be used as a key which unlocks the doors that bar challenges, mid-stream, and should "not to unlock the gates which shuts the Court out" from what could potentially become causes of arbitrator challenge, during the course of arbitration proceedings, other than Page 175 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined on the ground the Act specifically provides for. The Apex Court has, thus, refused to carve out any circumstance other than those mentioned in the Schedule (Seventh Schedule) to Section 12(5) of the Act, 1996 so as to create a ground for challenge under Section 12(3) of the Act, 1996. The emphasis of the Apex Court is to ensure the certainty of the process and to churn out any potential challenge to the Arbitrator's eligibility by creating a circumstance other than those outlined in the Act itself.
222. Reliance is also placed on the decision of the High of Delhi in National Thermal Power Corporation Ltd. vs. Wig Brothers Builders and Engineers Ltd. 43 wherein the argument about the non-disclosure under Section 12(1) of the Act, 1996 has been rejected holding that the Arbitration Act does not provide that when no such ground exists, the Arbitrator has to give a written declaration in the negative that no such ground exists. Section 12(1) of the Arbitration and Conciliation Act, 1996 provides that disclosure has to be given by the Arbitrators only if there exists grounds which would give rise to justifiable doubts about his/her independence or impartiality.
223. Referring to the observations in para-13 of the decision of the Apex Court in HRD Corporation v/s. GAIL (INDIA) Limited44, it was argued that the Arbitrator 43 (2009 SCC OnLine DEL 911) 44 [(2018) 12 SCC 471] Page 176 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined has all obligation to make a specific disclosure regarding existence of any of the circumstance which is likely to give rise to justifiable doubts as narrated in the Fifth Schedule as per Section 12(1) of the Act, 1996, but there in no mandate for a disclosure in the negative where no such circumstance exists.
Analysis:-
224. To deal with the submissions made by the learned counsels for the parties on perusal of the record, we may first set out the statutory scheme contained in Sections 12 to 14 of the Act, 1996 :-
"Section 12 - Grounds for challenge (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,--
(a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-
matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and
(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.
Explanation 1.-The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable Page 177 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined doubts as to the independence or impartiality of an arbitrator.
Explanation 2.-The disclosure shall be made by such person in the form specified in the Sixth Schedule.
(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if--
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.
(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.Page 178 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Section 13 - Challenge procedure-
(1) Subject to sub-section (4) of section 12, the parties are free to agree on a procedure for challenging an arbitrator.
(2) Failing any agreement referred to in sub-section(1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section(3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
(5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.
(6) Where an arbitral award is set aside on an application made under sub-section(5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.
Section 14 - Failure or impossibility to act-
(1) The mandate of an arbitrator shall terminate if and he shall be substituted by another arbitrator, if--
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(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.
(3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12."
225. The Fifth, Sixth and Seventh Schedule corresponding to Section 12(1)(b) and Section 12(5); respectively, are also to be taken note of. However, for the sake of brevity, we are not extracting the said Schedules.
226. A reading of Section 12 of the Act, 1996 with the Statement, Object and Reasons for bringing amendments, as narrated in the Law Commission's 246 th Report extracted hereinabove, makes it clear that the requirement of having specific disclosure by the Arbitrator at the stage of his possible appointment regarding existence any of the circumstances enumerated in the Fifth Schedule, which is likely to give rise to justifiable doubts as to the independence or impartiality of the person so appointed as Arbitrator, is Page 180 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined with the sole objective to address the fundamental issue of neutrality of Arbitrator(s), which is critical to the functioning of the arbitral process. The Commission has proposed the incorporation of the Fourth Schedule (enumerated as Fifth Schedule under the Act, 1996) which is drawn from the red and orange lists of the IBA Guidelines on Conflicts of Interest in International Arbitrations to be treated as guiding for determining whether such circumstances would give rise to justifiable doubts in terms of the proposed Section 12(1) of the Act, 1996 and the Fifth Schedule (incorporated as Seventh Schedule under the Act, 1996) categories from the red list of IBA Guidelines were incorporated, which made the person proposed to be appointed as a Arbitrator to be ineligible to be so appointed, notwithstanding any prior agreement to the contrary as per Section 12(5) of the Act'1996.
227. In the event, such an ineligible person is purported to be appointed as an Arbitrator, he shall be de jure deemed to be unable to perform his functions in terms of the proposed explanation in Section 14 therein, in the Law Commission report.
228. As noted by the Apex Court in HRD Corporation44, after the 2016 amendment Act, a dichotomy is made by the Act between the persons to become "ineligible to be appointed as Arbitrators" and "persons about whom justifiable doubts exist as to their independence or impartiality". It was observed therein that since Page 181 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined ineligibility goes to the root of the appointment, Section 12(5) of the Act, 1996 read with the Seventh Schedule make it clear that if the Arbitrator falls in any of the categories specified in the Seventh Schedule, he becomes "ineligible to act as an Arbitrator". Once the Arbitrator becomes ineligible, under Section 14(1)(a) of the Act, 1996 he then becomes de jure unable to perform his functions, inasmuch as, in law he is regarded as ineligible. In order to determine whether an Arbitrator is de jure unable to perform his functions, it is not necessary to go to the Arbitral Tribunal under Section
13. The reason being that such a person would lack inherent jurisdiction to proceed any further and hence an application may be filed under Section 14(2) to the Court to decide on the termination of his/her mandate on the ground of ineligibility.
229. As opposed to this, in a challenge where grounds stated in the Fifth Schedule are disclosed, which give rise to justifiable doubts as to the Arbitrator's independence or impartiality, such doubts as to the independence or impartiality have to be determined as a matter of fact in the facts of the particular challenge by the Arbitral Tribunal under Section 13. If the challenge is not successful, the Tribunal must continue with the arbitral proceedings under Section 13(4) and make an award. The party challenging the Arbitrator's appointment on the grounds contained in the Fifth Schedule, may make Page 182 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined an application for setting aside the Arbitral Award in accordance with Section 34 on the aforesaid grounds.
230. While considering the object and purpose of insertion of the Fifth and Sixth Schedules in light of the paras 59 and 60 of the Law Commission Report, the Apex Court in HRD Corporation44 has noted in paragraph Nos. '13', '14' and '15' as under :-
"13. Confining ourselves to ineligibility, it is important to note that the Law Commission by its 246 th Report of August, 2014 had this to say in relation to the amendments made to Section 12 and the insertion of the Fifth and Seventh Schedules:
"59. The Commission has proposed the requirement of having specific disclosures by the arbitrator, at the stage of his possible appointment, regarding existence of any relationship or interest of any kind which is likely to give rise to justifiable doubts. The Commission has proposed the incorporation of the Fourth Schedule, which has drawn from the Red and Orange lists of the IBA Guidelines on Conflicts of Interest in International Arbitration, and which would be treated as a "guide" to determine whether circumstances exist which give rise to such justifiable doubts. On the other hand, in terms of the proposed section 12 (5) of the Act and the Fifth Schedule which incorporates the categories from the Red list of the IBA Guidelines (as above), the person proposed to be appointed as an arbitrator shall be ineligible to be so appointed, notwithstanding any prior agreement to the contrary. In the event such an ineligible person is purported to be appointed as an arbitrator, he shall be de jure deemed to be unable to perform his functions, in terms of the proposed explanation to section 14. Therefore, while the disclosure is required with respect to a broader list of categories (as set out in the Fourth Schedule, Page 183 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined and as based on the Red and Orange lists of the IBA Guidelines), the ineligibility to be appointed as an arbitrator (and the consequent de jure inability to so act) follows from a smaller and more serious sub-set of situations (as set out in the Fifth Schedule, and as based on the Red list of the IBA Guidelines).
60. The Commission, however, feels that real and genuine party autonomy must be respected, and, in certain situations, parties should be allowed to waive even the categories of ineligibility as set in the proposed Fifth Schedule. This could be in situations of family arbitrations or other arbitrations where a person commands the blind faith and trust of the parties to the dispute, despite the existence of objective "justifiable doubts"
regarding his independence and impartiality. To deal with such situations, the Commission has proposed the proviso to section 12 (5), where parties may, subsequent to disputes having arisen between them, waive the applicability of the proposed Section 12 (5) by an express agreement in writing. In all other cases, the general rule in the proposed section 12 (5) must be followed. In the event the High Court is approached in connection with appointment of an arbitrator, the Commission has proposed seeking the disclosure in terms of section 12 (1) and in which context the High Court or the designate is to have "due regard" to the contents of such disclosure in appointing the arbitrator."
14. The enumeration of grounds given in the Fifth and Seventh Schedules have been taken from the IBA Guidelines, particularly from the Red and Orange Lists thereof. The aforesaid guidelines consist of three lists. The Red List, consisting of non-waivable and waivable guidelines, covers situations which are "more serious"
and "serious", the "more serious" objections being non- waivable. The Orange List, on the other hand, is a list of situations that may give rise to doubts as to the arbitrator's impartiality or independence, as a consequence of which the arbitrator has a duty to Page 184 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined disclose such situations. The Green List is a list of situations where no actual conflict of interest exists from an objective point of view, as a result of which the arbitrator has no duty of disclosure. These guidelines were first introduced in the year 2004 and have thereafter been amended, after seeing the experience of arbitration worldwide. In Part 1 thereof, general standards regarding impartiality, independence and disclosure are set out.
15.General Principle 1 reads as follows:
"IBA Guidelines on Conflicts of Interest in International Arbitration (1) General Principle:
Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so until the final award has been rendered or the proceedings have otherwise finally terminated." On "conflicts of interest", guidelines laid down are as follows: "(2) Conflicts of Interest
(a) An arbitrator shall decline to accept an appointment or, if the arbitration has already been commenced, refuse to continue to act as an arbitrator, if he or she has any doubt as to his or her ability to be impartial or independent.
(b) The same principle applies if facts or circumstances exist, or have arisen since the appointment, which, from the point of view of a reasonable third person having knowledge of the relevant facts and circumstances, would give rise to justifiable doubts as to the arbitrator's impartiality or independence, unless the parties have accepted the arbitrator in accordance with the requirements set out in General Standard 4.
(c) Doubts are justifiable if a reasonable third person, having knowledge of the relevant facts and circumstances, would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching his or her decision.Page 185 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
(d) Justifiable doubts necessarily exist as to the arbitrator's impartiality or independence in any of the situations described in the Non-Waivable Red List.
231. A careful reading to the said paragraphs indicate that the Fifth and Seventh Schedule have been taken from the IBA Guidelines, particularly from the red and orange list thereof. As noted by the Apex Court, the red list consisting of non-waivable and waivable guidelines covers the situations which are "more serious" and "serious", the "more serious" objections being non- waivable. The orange list, on the other hand, is the list of situations that may give rise to doubts as to the arbitrator's impartiality or independence, as a consequence of which the arbitrator has a duty to disclose such situation which are the general standards regarding impartiality, independence and disclosure as set out in Section 12(1) & (5) read with the Fifth and Seventh Schedules.
232. There cannot be two opinion about the principle that the independence and impartiality of the Arbitrator are the hallmarks of any arbitration process. Section 12 has been amended with the objective to infuse neutrality of Arbitrators viz. their independence and impartiality. The amended provision is incorporated to identify the circumstances "which give rise to justifiable doubts about the independence and impartiality of the Arbitrator". The Fifth Schedule of the Act enumerates the grounds which may give rise to justifiable doubts of Page 186 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined this nature whereas the Seventh Schedule mentions those circumstances which would attract the provisions of sub-section (5) of Section 12 of the Act, 1996 and nullify any prior agreement to the contrary. The item Nos. 1 to 19 of the Fifth Schedule are identical with the items 1 to 19 of the Seventh Schedule. It is noted by the Apex Court in HRD Corporation44 that the only reason that these items also appear in the Fifth Schedule is for the purposes of disclosure by the Arbitrator, as unless the proposed Arbitrator discloses in writing his involvement in terms of item Nos. 1 to 34 of the Fifth Schedule, such disclosure would be lacking, in which case, the parties would be put at a disadvantage as such information is often within the personal knowledge of the Arbitrator only. It was observed that it is for this reason that it appears that item Nos. 1 to 19 also appear in the Fifth Schedule.
233. There cannot be a dispute that an award rendered in an International Commercial Arbitration is also subject to the same test for setting aside under Section 34 of the Act, 1996 (if rendered in India or enforcement is sought under Section 48, as a foreign award, as the case may be). The only difference is that in an arbitral award made in India governed by Part-I, arising out of an arbitration in an International Commercial Arbitration, the ground of "patent illegality" under Section 34 (2A) of the Act'1996 would not be available.
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234. It is further remarked by the Apex court in HRD Corporation44 that the items contained in the Schedules owe their origin from IBA Guidelines which are to be construed in light of the general principles contained therein-that every Arbitrator shall be impartial and independent of the parties at the time of accepting his/her appointment. Doubts as to the above are only justifiable if a reasonable third person having knowledge of the relevant facts and circumstances would reach the conclusion that there is likelihood that the Arbitrator may be influenced by the factors other than the merits of the case in reaching his/her decision. This test requires taking a broad commonsensical approach to the items stated in the Fifth and Seventh Schedules. This approach would, therefore, require a fair construction of the words used therein, neither tend to enlarge or restrict them unduly.
235. In light of the above stated position of law in the manner of construction of the words used in different categories as aligned in the Fifth and Seventh Schedules, we may note that the grounds stated to assail the independence and impartiality of the Arbitrator in order to seeking to attach invalidity to the Arbitral Tribunal's award, must be any one or more of the circumstance enumerated in the Fifth and Seventh Schedules. In the instant case, as per own case of the respondents herein, Article 28 of the Fifth Schedule would be attracted. From a careful reading of the circumstance enumerated in Article 28 of Page 188 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the Fifth Schedule, it is difficult for us to accept the contention of the learned Senior counsel for the respondents that the facts of the present case give rise to the said circumstance raising justifiable doubts about the impartiality or independence of the Arbitrator. In our considered opinion, the fact that Mr. Andre Yeap, nominated as co-Arbitrator, was a partner in Rajah Tann LLP (a law firm) wherein the son of Mr. Vinayak Pradhan, the third Presiding Arbitrator, worked as a Deputy Head of the Department of International Practices, cannot be brought under the umbrella of the circumstance enumerated in item No.28 of the Fifth Schedule, so as to consider it as a circumstance of relationship between one Arbitrator with another Arbitrator.
236. A careful reading of Item No.28 indicates that in case a close family member of the Arbitrator is a partner or employee of the law firm representing one of the parties, even if he is not assisting with the dispute, it would be a circumstance, which obligates the Arbitrator to make a disclosure under Section 12(1) of the Act, 1996. In the instant case, Rajah Tann (law firm) is not representing any of the parties in the arbitration proceedings. A close family member of the third Presiding Arbitrator, working in the law firm wherein Mr. Andre Yeap (a co-Arbitrator) was a partner, cannot be a circumstance creating conflict of interests to be brought within the scope of item No.28. Any such effort by us would go beyond the Page 189 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined principle of fair construction of the words used in the Fifth Schedule and would tend to enlarge its scope unduly. Further, none of the circumstances enumerated in item Nos. 1 to 19 of the Seventh Schedule have been brought before us so as to make out a case of ineligibility of the Arbitrator rendering the award a nullity on the ground of inherent lack of jurisdiction.
237. With the aid of the decision of the Apex Court in HRD Corporation44, it may not be out of place to note that the item No. 28 of the Fifth Schedule is pertaining to orange list, which casts a duty upon an Arbitrator to disclose such situation. The non-disclosure, only in case of existence of any such circumstance, can give rise to a ground of challenge for setting aside of the arbitral award in accordance with Section 34 of the Act, 1996, if raised, but in the facts of the instant case, no such ground demonstrably exists.
238. Further, the mandatory requirement of disclosure within the meaning of Section 12(1) is necessary in a case of existence of any such situation either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject matter in dispute, where financial, business, professional or other kinds, which is likely to give rise to justifiable doubts as to the independence or impartiality of the Arbitrator. The explanation (1) to sub-section(1) of Section 12 provides the grounds stated in the First Schedule to be guidance in determining whether such situation exists.
Page 190 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined The requirement of disclosure in the form specified in the Second Schedule as per explanation-2 is only in the event of existence of any such circumstances. A perusal of the details of the forms specified in the Seventh Schedule also indicates that the Arbitrator is required to disclose circumstances as enumerated in Clauses (a) and (b)of sub-section(1) of Section 12 of the Act, 1996. The Fifth Schedule is a guidance in determination of the circumstances, which if exist, and has not been disclosed by the Arbitrator in writing in the form specified in the Sixth Schedule, may lead to a ground of challenge of his appointment. The procedure prescribed in Section 13 may be taken recourse of by any party on becoming aware of any circumstance existing in sub-section(1) of Section 12 read with the Fifth Schedule.
239. No such challenge has been made in the instant case and the argument is that in absence of any disclosure on the part of the Arbitrator, which is mandatory even if no such circumstance exist, the respondents were not in a position to raise any challenge. We are not impressed with this submission of the learned senior counsel for the respondents from the careful reading of Section 12 keeping in mind that the statutorily enumerated conditions in terms of Section 12(5) do not exist in the instant case and that it is not possible for the Court to enlarge the scope of the circumstance enumerated in item No.28 of the Fifth Schedule in terms of Section 12(1). In our considered opinion, the said category Page 191 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined enumerated in the Fifth Schedule is not attracted in the facts of the present case leading to any situation giving rise to justifiable doubts as to the independence or impartiality of the Arbitrator. Any such attempt of the Court to enlarge the scope of Article No. 28 of the Fifth Schedule to bring in the circumstance placed herein under the umbrella of the said enumerated grounds, would amount to making an exception skipping the statutory route carefully devised by the Parliament leading to uncertainty in the arbitration process. We desist from doing so keeping in the spirit of the law of procedure in the arbitration proceedings, so as to attach certainty to the procedure and finality to the arbitral award.
240. All arguments raised by the learned senior counsel for the respondents assailing the arbitral award on the grounds enumerated in the Fifth Schedule under Section 12(1) of the Act, 1996 are, therefore, liable to be turned down. Moreover, arbitral award was rendered by the fourth arbitral tribunal constituted on 09.09.2020, after death of the Presiding arbitrator Mr. Vinayak Pradhan.
241. It is not a case of ineligibility of the arbitrators and no circumstance to raise doubt upon the impartiality of the presiding arbitrator Mr. Vinayak Pradhan could be made out. No challenge was made by invoking the provisions of Section 13 of the Act' 1996 before the arbitral tribunal on the ground of non-disclosure. The ground of mandatory non-disclosure under Section 12(1) raised in Page 192 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the proceeding under Section 34, is nothing but an afterthought and cannot be sustained to attach invalidity to the award.
(ii) Plea of violation of Principles of Natural Justice and Bias :Violation of Section 18 of the Act' 1996
242. It was argued by the learned senior advocate for the respondents that the arbitral tribunal had committed an error by rendering the award after having received full fee from the claimants without adjudicating the counter- claim of the respondents. The submission is that the fee determined by the arbitral tribunal was per hearing, and not as per the claim. Even if it is accepted for a moment that the fee as fixed/revised by the Tribunal was to be paid by the respondents to the extent of their share though they were disputing the unilateral fixation of fee, the rejection of counter-claim outrightly on account of the objections raised by the respondents about the quantum of fees fixed by the Tribunal, resulted in denial of equality and full opportunity to the respondents to present their case.
243. Referring to the paragraph No. 123 of the decision of the Supreme Court in ONGC v/s. Afcons29, it was argued that the Supreme Court in its majority decision has concluded that the arbitral tribunal while deciding the allocation of costs under Section 31(8) read with Section 31A or advance of costs under Section 38 cannot issue any binding or enforceable orders regarding their own Page 193 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined remuneration. The Apex Court has held therein that any such order of the Tribunal would violate the principle of party autonomy and doctrine of prohibition of in rem squam decisions, which postulates that the Arbitrators cannot be the judge of their own claim against the parties regarding their remuneration.
244. It was placed that though the principle of party autonomy and doctrine of prohibition of in rem squam decisions do not restrict the arbitral tribunal for apportioning the costs between the parties (including the Arbitrator/s remuneration) since this is merely reimbursement of the expenses that the successful party has incurred in participating in the arbitral proceedings, but while fixing the costs or deposits as per the provisions of Section 31(8) read with Section 31A or advance of costs under Section 38, the arbitral tribunal if makes any finding relating to Tribunal's fees (in absence of an agreement), it cannot be enforced in favour of the Arbitrators. The aggrieved party can approach the Court to review the fees demanded by the Arbitrator.
245. With these observations in paragraph No. 123 of the decision in ONGC v/s. Afcons29 placed before us, it was vehemently argued by the learned senior counsel for the respondents that the conduct of the arbitral tribunal in refusing to entertain the counter-claim on the premise that the Arbitrator(s) fee fixed by the Tribunal, even in absence of any agreement between the parties or the parties and the Arbitrators, would be binding on the Page 194 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined party objecting to the said determination namely the respondents herein.
246. The learned single Judge, while deciding the said issue, has held that the Tribunal could not have non-suited the respondents for non-payment of fee by refusing to entertain their counter-claims that too while accepting the full fee from the claimants on the condition that the Tribunal would not adjudicate the counter-claim, which shows bias on the part of the Tribunal. It was observed by the learned single Judge that, in any case, once there was a dispute with respect to the fee determined by the arbitral tribunal and the respondents were not aggreable to the demand of the exorbitant fee determined by it, the Tribunal or Members of the Tribunal could have declined the assignment. However, they could not have continued with the proceedings ignoring the repeated objections raised by the respondents with regard to the quantum of fee determined by them.
247. Placing the above findings returned by the learned single Judge on the issue of rejection of counter-claim, it was argued on behalf of the respondents that the Tribunal has literally arm-twisted the respondents by holding that if they want to raise any counter-claim, they would be required to deposit the required fees. The refusal to decide the counter-claim causes serious prejudice to the respondents resulting in violation of principles of natural justice.
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248. Reference has been made to the provisions of Section 18 of the Arbitration Act, 1996 to contend that violation of the Section 18, which provision is based on fundamental principles of law of equality and equal and full opportunity to both the parties to present their case in an arbitral proceedings, constitutes a ground of challenge to the arbitral award under Section 34(2)(a)(ii).
249. The learned senior counsel for the respondents has further placed the e-mail dated 20th October, 2019 sent by the Presiding Arbitrator referring to the e-mail dated 17.10.2019 from the claimants' counsel, to assert that the Tribunal had put a condition for permitting the respondent Nos. 1 and 2 to file affidavits in examination- in-chief only if such applications were accompanied with written undertakings from the said respondents that they were aggreable to extension of time to the delivery of the award by the Tribunal upto 9 months. This act of the Tribunal, as urged vehemently by the learned senior counsel for the respondents, was an act of coercion of the respondents forcing to consent to the extension of the mandate of the arbitral tribunal. In addition to the fact that counter-claim was not permitted to be perused because of non-agreement to the fee unilaterally fixed by the Arbitrator, the act of the Arbitrator in coercing the respondents to agree to extension of the mandate as a condition for permission to file affidavits in examination- in-chief, is a glaring evidence of real bias on the part of the Tribunal.
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250. Further, in addition to the above circumstances, the Tribunal while fixing the costs has also awarded fees/costs for lawyers engaged by the claimants for appearing in the matters before the High Court and Supreme Court in the proceedings drawn by the parties, contrary to Section 31A. By including the costs and fee for those senior advocates who did not appear in the arbitral proceedings and had been engaged by the claimants for the litigation drawn by them before the High Court or the Supreme Court between November, 2019 to December, 2020, a total amount of INR 2,82,47,114/- and odd has been computed under the heads "the Counsel/Consultant/Expert's fee".
251. Placing the Appendix-'A' to the arbitral award at page Nos. '771 to 773' of the paper book of the First Appeal No. 2819 of 2024 (under Section 37 of the Act, 1996 before us), it was submitted that an exorbitant amount under the head fee and expenses to the tune of total INR 14,27,33,429.65 = SGD 984,454.87 was computed, towards fee, legal expenses and other expenditure incurred by the claimants in the arbitration proceedings.
252. It was further argued that even the counter-claim filed by the respondent No.2 Mr. Kamal Jhadwani on behalf of C-2R LLP has been rejected on account of non-agreement to fee determined by the Arbitrator, unilaterally. One of the most startling part of the decision of the Tribunal is that though the claims made against the respondent No.2, Mr. Kamal Jhadwani were rejected, but he has been Page 197 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined made liable jointly and severally to pay the costs on the premise that the respondent No.2 along with the respondent No.1 worked in concert in breach of their fiduciary obligations, which has caused failure of the business ventures that the partners of C-2R were contemplating to accomplish from the outset. The respondent No.2 has been held to be liable to bear the costs of claimants: the costs and expenses of the parties including the costs and expenses of the legal team and counsels of the claimants, respondent No.3 and 4; and the arbitration proceedings including the Arbitrators, on a full indemnity basis. This award against the respondent No.2 is completely in breach of the principles of natural justice and is proof of the real bias on the part of the Arbitral Tribunal.
253. The decision of the Constitution Bench of the Apex Court in M/s. ECI SPIC SMO MCML42 has been placed before us to argue that equality in the arbitration proceedings, as prescribed in Section 18 is the "due process clause of arbitration". Section 18 contained in Chapter-V of the Arbitration Act, 1996, which deals with the conduct of the arbitration proceedings, provides that (i) the parties shall be treated with equality & (ii) each party shall be given a full opportunity to present his case. Section 18, thus, incorporates two principles in the due process of arbitration proceedings: (i) equal treatment of the parties and (ii) a right to fair hearing to all the parties. It was held by the Apex Court in M/s. ECI SPIC SMO MCML42 Page 198 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined that Section 18 is based on Article 18 of the Model Law. Article 18 [initially paragraph No.3 of Article 19] deals with the freedom of parties to determine the rules of procedure. It was later formed into separate article considering its overall importance. It is, thus, meant to distinguish two distinct issues, namely the party autonomy to determine the rules of procedure and fairness of arbitral proceedings. It was observed therein that by placing paragraph No.3 of Article 19 in a separate article in the form of Article 18 in the Model Laws, the importance of procedural fairness was emphasized therein over party autonomy to determine the procedural rules. It was held that, "55. Article 18 constitutes a fundamental principle that is "applicable to the entire arbitral proceedings." The Working Group has also stated that the principles of equality and fairness "should be observed not only by the arbitral tribunal but also by the parties when laying down any rules of procedure." It was the understanding of the Working Group that the principle of equality of parties applies to arbitral proceedings in general, including aspects such as the composition of arbitral tribunal. Article 18 also operates as a limitation on Article 19 which provides broad autonomy to both the parties and, in the absence of an arbitration agreement, to the arbitral tribunal when determining the procedure to be followed in conducting the arbitral proceedings. It imposes a duty on the arbitral tribunal to ensure fairness in the arbitral process."
254. Another principle of equality at the stage of appointment of the Arbitrator was deliberated by the Apex Court considering the statement of law in ONGC vs. Afcons29 to hold that though the Arbitrator's relationship with the Page 199 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined parties is contractual and the rights and obligations of an Arbitrator are principally the result of their contractual relation with the parties, but since the arbitral tribunals perform a quasi-judicial function and because it substantially determines the rights and liabilities of the competing parties through adjudicative means, it is the bounden duty of the arbitral tribunal to act judicially to arrive at their decisions based on procedural and substantive laws.
255. It was held therein that although the Arbitration Act recognizes autonomy of the parties to decide on all aspects of arbitration and it also lays down a procedural framework to regulate the composition of the arbitral tribunal and conduct of the arbitral proceedings. But the provisions incorporated in Section 12(5) and Section 18 are recognition of the well established principle that quasi-judicial proceedings should be conducted consistent with the principles of natural justice and the arbitral tribunal is to follow the principles of equality and fairness during the conduct of the arbitral proceedings. It was, thus, observed in paragraph No. 64 as under :-
"64.Since arbitral proceedings have "trappings of a court", the law requires arbitral tribunals to act objectively and "exercise their discretion in a judicial manner, without caprice, and according to the general principles of law and rules of natural justice."115 An arbitral award can be set aside if the composition of the arbitral tribunal or the arbitral procedure violates the mandatory provisions of the Arbitration Act, including Sections 12 and 18. Thus, Page 200 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the Arbitration Act emphasizes that the substance of the law cannot be divorced from the procedure."
256. It was held that arbitral tribunals can inspire confidence in their adjudicatory process by conducting a fair and impartial hearing and providing sufficient and cogent reasons for their decisions. Given the adjudicatory functions performed by the arbitral tribunals, the decisions which emanate from them must be grounded in a process that is independent and impartial.
257. Referring to the decision of the Apex Court in Union of India v. Vedanta Ltd.45 , it was noted therein that fair and equal treatment of the parties is a non-derogable and mandatory provision, on which the entire edifice of alternative dispute resolution mechanism is based. The purpose of Section 18 is to give arbitral process a semblance of judicial proceedings by infusing principles of equality and fairness. The principle has to be followed in all procedural contexts of arbitral proceedings, including the stage of appointment of the Arbitrators. This principle means that no party may be given preference in the arbitrator-selection process regardless of how strong its bargaining power may be.
258. Considering the concept of equality under Article 14 of the Constitution of India, it was observed in paragraph Nos. '71', '73' and '75' of M/s. ECI SPIC SMO MCML42 as under :-
45 [(2020) 10 SCC 1] Page 201 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined "71. Arbitration is an adversarial system. It relies on the parties to produce facts and evidence before the arbitral tribunal to render a decision. Procedural equality is generally considered to contain the following indicia: (i) equal capability of parties to produce facts and legal arguments; (ii) equal opportunities to parties to present their case; and (iii) neutrality of the adjudicator. In an adversarial process, formal equality is important because it helps secure legitimate adjudicative outcomes and create a level playing field between parties.
73. The 2015 amendment has introduced concrete standards of impartiality and independence of arbitrators. One of the facets of impartiality is procedural impartiality. Procedural impartiality implies that the rules constitutive of the decision-
making process must favour neither party to the dispute or favour or inhibit both parties equally. Further, a procedurally impartial adjudication entails equal participation of parties in all aspects of adjudication for the process to approach legitimacy. Participation in the adjudicatory process is meaningless for a party against whom the arbitrator is already prejudiced. Equal participation of parties in the process of appointment of arbitrators ensures that both sides have an equal say in the establishment of a genuinely independent and impartial arbitral process.
75. Independence and impartiality of arbitral proceedings and equality of parties are concomitant principles. The independence and impartiality of arbitral proceedings can be effectively enforced only if the parties can participate equally at all stages of an arbitral process. Therefore, the principle of equal treatment of parties applies at all stages of arbitral proceedings, including the stage of the appointment of arbitrators."
259. The Apex Court in ECI SPIC SMO MCML42 has further elaborated on two principles of natural justice: (i) no one Page 202 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined shall be a judge of their own cause (nemo judex in causa sua), (ii) no decision shall be given against a party without affording a reasonable opportunity of being heard, to lay emphasis that an Arbitrator should be disinterested and unbiased. It was, thus, concluded that though the arbitration is a private dispute settlement mechanism, yet it is a statutorily subject to the principles of equality and fairness contained under the Arbitration Act. Section 18 of the Arbitration Act mandates the equal treatment of parties and fairness in arbitral proceedings, as a mandatory principle governing the conduct of arbitration. Thus, the resolution of the disputes arising in a private contractual relationship, is subject to certain inherent principles which a quasi- judicial bodies like arbitral tribunal is required to adhere to. Resolution of private disputes following the minimum statutory standards of equality and fairness is essential not only in the interest of justice but also to uphold the integrity of arbitration in India.
260. With these words, it was held by the Apex Court in ECI SPIC SMO MCML42 that the principle governing the doctrine of bias is that a member of a judicial body with a predisposition in favour of or against any party to a dispute and whose position in relation to the subject matter or a disputing party is such that a lack of impartiality would be assumed to exist, should not be a part of tribunal composed to decide the dispute. This principle is applicable to authorities who have to act Page 203 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined judicially in deciding rights and liabilities and bodies discharging quasi- judicial functions. It was, thus, observed in paragraph Nos. '88' and '89' as under:-
"88. .........A quasi-judicial authority empowered to decide a dispute between opposing parties "must be one without bias towards one side or the other in the dispute." A member of a tribunal which is called upon to try issues in judicial or quasi-judicial proceedings must act impartially, objectively, and without bias.
89.Bias is generally classified under three heads: (i) legal interest, which means a judge is "in such a position that a bias must be assumed"; (ii) pecuniary interest; and (iii) personal bias. A pecuniary or proprietary interest, however small, automatically disqualifies a person. A person who has an interest in the outcome of an issue that is to be resolved would be acting as a judge in their own cause. The question is not whether a judge has some link with parties involved in a cause before the judge but whether the outcome of that cause could realistically affect the judge's interest. This principle has been authoritatively stated by the House of Lords in Dimes v. Grand Junction Canal. In that case, the Lord Chancellor decreed in favour of a canal company in which he held substantial shares. The House of Lords observed that the principle that no person should be judge in their own cause "is not to be confined to a cause in which he is a party, but applies to a cause in which he has an interest."
261. With the discussion on the applicability of the fundamental principles of equality and fairness infused in Section 18 of the Arbitration Act, 1996, with the aid of the above decisions, it was argued by the learned senior counsel for the respondents that various circumstances during the course of conduct of arbitration proceedings, Page 204 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined of the instant case if taken together, would give rise to a case of real likelihood of bias, where the conduct of the Arbitrators is such which creates a suspicion that there has been improper interference with the course of justice. It was argued that applying the principles of nemo judex in causa sua, the determination of bias does not depend upon actual proof of bias rather the conduct of the Arbitrator in the facts and circumstances of the instant case proves that there is a real possibility of bias.
262. In order to press the argument pertaining to the breach of principles of natural justice and bias, the circumstances which were placed before us by the learned senior counsel for the respondents to assert the existence of unequal treatment of parties are :-
(a) the counter-claim was not decided because of non-payment of fees;
(b) non-disclosure by the Arbitrators under Section 12 read with the Sixth Schedule;
(c) Unilateral fixation of exorbitant fee aggregable only to the claimant;
(d) denial of opportunity to the respondents to lead evidence by making permission to lead evidence subject to the condition of extension of mandate of the Arbitrator;
(e) awarding of legal costs for lawyers engaged by the claimants who had appeared before the High Page 205 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Court and the Supreme Court and not in the arbitral proceedings;
(f) the act of Arbitrator in not deciding the counter- claim filed by the respondent No.2 Kamal Jhadwani on behalf of the LLP;
(g) inspite of rejection of claims against the respondent No.2 namely Mr. Kamal Jhadwani, he has been directed to pay 'costs' to the claimants.
The issue (b) has already been deliberated in the foregoing part of this judgement.
(a) & (d) - Non-adjudication of Counter claims of the respondents and denial of opportunity to lead evidence :-
263. The contention is that the Members of the arbitral tribunal have become the judge of their own cause by unilaterally determining the fee and coercing the respondents to agree to the fees or else counter-claim would be rejected. These instances of lack of impartiality on the part of the arbitral tribunal, which is mandated to act impartially, objectively and without bias, make the whole arbitral award susceptible. The submission is that the arbitral award is liable to be set aside on the ground of bias as rightly held by the learned single Judge while allowing Section 34 application. No error can be said to have been committed in holding that the action of the Tribunal in not deciding the counter-claim and denial of Page 206 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined opportunity to the respondents to lead evidence resulted into violation of principles of natural justice.
264. In rebuttal, it was submitted by the learned senior counsel for the appellant, assailing the reasoning given by the learned single Judge on the issue of denial to pursue counter-claim, that it is well settled legal position that the claims and counter-claims are independent of each other and both are distinct and independent legal proceedings under Order VIII Rule 6(A) of the Code of Civil Procedure, 1908. The counter-claim is treated to be an independent claim in respect of cause of action accruing to the defendant against the plaintiff before or after the filling of the suit. Even if a case where the defendants sets up a counter-claim, if the suit of the plaintiff is stayed, discontinued or dismissed, the counter-claim may nevertheless be proceeded with. As interpreted by the Apex Court in ONGC vs. Afcons29, a counter-claim is not the defence to a claim and its outcome is not contingent on the outcome of the claim.
265. It was submitted that Section 38 of the Arbitration Act, 1996 further makes it clear that separate deposits are to be made for a claim and counter-claim in an arbitration proceedings and these deposits are in relation to the costs of the arbitration, which includes the fees of the Arbitrators. Under the proviso to Section 38(1), the arbitral tribunal can direct separate deposits for the claim and counter-claim. The contention is that the second proviso to sub-section(2) of Section 38 is clear Page 207 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined and categorical to the effect that if the other party fails to pay the share of its deposit/Arbirator's fee to the arbitral tribunal with respect to the claim and/or counter-claim, the same may result in suspension/termination of arbitral proceedings qua the claim and/or counter-claim.
266. It was argued by the learned senior counsel for the appellants that for the fact that the appellants had deposited full fee including share of the respondents for adjudication of their claims, it cannot be agitated that the arbitration tribunal was bound in law to adjudicate upon the counter-claims, which were independent claims of the respondents, in absence of there being any payment for adjudication of their counter-claims. The plea of bias for refusal to adjudicate the counter-claims is too far fetched as there was no question of consideration of the counter-claims because the respondents had not deposited fee for their claims as counter-claims. The plea of violation of principles of natural justice in the arbitration proceedings, is wholly misconceived.
267. Placing the procedural orders of the arbitral tribunal between 1.2.2018 to 18.12.2020, it was further argued on behalf of the appellants that the respondents had sufficient time to lead the evidence. The record of the proceedings indicate that repeated adjournments were sought by the respondents, which were even refused by the previous Arbitral tribunal in the proceedings held on Page 208 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 01.02.2018 and 05.04.2018. It was placed that in the proceedings conducted by the then Presiding Arbitrator Mr. Justice M. B. Shah (retired), it was recorded that the respondents were seeking long dates to be scheduled for the arbitral meetings, which would delay the proceedings. On 07.06.2018, the request made for adjournment of the scheduled date by the respondent's counsel on the ground of personal difficulty, was refused. The Secretary of the Tribunal presided by Justice M.B.Shah (retired) sent an e-mail recording that the arbitration proceedings have been sufficiently delayed and the respondent No.2 was directed to appear in person before the arbitral tribunal after all his counsels withdrew.
268. The record of the consolidated meetings of the 6 th to 10th arbitral meetings of the re-constituted Tribunal (second tribunal) held from 27th to 31st August, 2018 indicate that a new counsel engaged by the respondent No.2 filed an amendment application dated 27.08.2018 to the main application dated 19.09.2017 filed by him under Section 17 of the Arbitration Act, 1996 (after one year), which was strongly objected by the claimant.
269. A further perusal of the record of the said proceedings indicates that the learned advocate appearing for the respondent No.1 had cross examined the claimant's witness-1, namely Mr. M.S.Atwal, the claimant himself, from 27th to 31st August, 2018 and his cross- examination on behalf of the respondent No.1 was over.
Page 209 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Immediately thereafter, the learned counsel for the respondent No.2 cross-examined the said witness and recording of cross-examination of the claimant Mr. M.S.Atwal was completed and hence he was discharged. The Tribunal recorded in the consolidated minutes of the said meeting that apart from respondent No.3, remaining respondents had not filed the affidavits of their witnesses in lieu of examination-in-chief and hence, it was directed that the parties who were yet to file such affidavits of their witnesses, shall file the same without any further delay on or before 25.09.2018, failing which it would be presumed that they had waived their rights to file the same.
Analysis:
270. From the perusal of the above material on record, it is pertinent to note that seven opportunities were given to the respondent Nos. 1 and 2 during approximately two years period between 02.02.2018 to 28.11.2020 to file their evidences. The last date (7 th opportunity) was granted to the respondent No.1 to file his evidence by 5.12.2019. Because of non-cooperation of the respondent No.1, the rights of both respondent No.1 and 2 to file their evidence was formally closed by the tribunal recording the previous events. After the right of the respondent No.1 to file evidence was closed, an application dated 10.12.2020 was moved by the respondent No.1 seeking to file evidence which was contested by the claimants by filing his reply on Page 210 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 11.12.2020. The said application was dismissed with costs by the arbiral tribunal by a reasoned order dated 18.12.2020. The respondent No.1 filed three applications for recalling the witnesses, namely the claimant Mr. M.S.Atwal and a witness produced by the claimants for further cross-examination and recalling of one more witness produced by the claimants for cross- examination. These three applications were also dismissed by the Tribunal by same order dated 18.12.2020. No plausible submissions could be made by the learned senior counsel appearing for the respondents about this conduct of the respondents in not co-operating or non-participating in the proceedings before the arbitral tribunal.
271. It may not be out of place to record, at this juncture, that the presiding Arbitrator of the third arbitral tribunal Mr. Vinayak Pradhan passed away on 08.03.2020 and the fourth arbitral tribunal was constituted on 09.09.2020 with Mr. K. Anantham as the Presiding Arbitrator jointly appointed by the Co-Arbitrators. The fourth arbitral tribunal which gave the arbitral award assailed by the respondents was comprised of Mr. G.T.Nanavati (nominated member of the respondents), Mr. Andre Yeap (nominated arbitrator by the appellants) and Mr. K. Anantham (as Presiding Arbitrator jointly appointed by the co-arbitrators of the parties).
272. From the record of the proceedings noted hereinabove, it is evident that since the inception of the arbitration Page 211 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined proceedings in the year 2017, repeated adjournments were sought by the respondent No.1 and with the Constitution of the third arbitral tribunal by Presiding Arbitrator Mr. Vinayak Pradhan though repeated objections were taken about the fee revised by the Arbitrator but no proceeding under Section 14 of the Arbitration Act, 1996 was initiated before a Court of law seeking for determination of a reasonable fee of the Arbitrator on the plea that the fee fixed by it was exorbitant. The arbitration proceedings continued as the objections of the respondent on the quantum of fee were turned down by the arbitral tribunal. However, non-participation of the respondents in the arbitral proceedings since its inception even before the second tribunal, has been proved from the record. The plea that the award suffers from violation of principles of natural justice on account of refusal of sufficient opportunity to the respondents to lead their evidence, thus, is liable to be turned down.
273. As regards the challenge to the award on the plea that the counter-claim was not decided because of non- payment of the fee, and the same has resulted in breach of principles of natural justice and shows bias on the part of the abitral tribunal, we may record from the law laid down by the Apex Court in ONGC v/s. Afcons29, that in the petition filed under Section 14 of the Arbitration Act, 1996, the issue was as to whether in the statutory framework of the Arbitration Act, 1996, the Page 212 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined tribunal is empowered to fix separate fees and ask for separate amount of deposit each for the claims and counter-claims. On analysis of the definition of the claim and counter-claim in the statutory framework of the Arbitration Act and the provisions of Order VIII pertaining to the written statement, set-off and counter- claim in the Code of Civil Procedure, 1908, it was held by the Apex therein that, "162. 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 counterclaims are independent and distinct proceedings;
(ii) A counterclaim is not a defence to a claim and its outcome is not contingent on the outcome of the claim;
(iii) Counterclaims 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
(iv) The dismissal of proceedings in relation to the original claim does not affect the proceedings in relation to the counterclaim.
163. We must now consider these principles in the context of the interconnection between Section 31(8), Section 31-A and Section 38(1) and the Fourth Schedule to the Arbitration Act. On a combined reading of Section 31(8), Section 31-A and Section 38(1), it is clear that : (i) separate deposits are to be made for a claim and counterclaim 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 Page 213 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined calculated separately for a claim and counterclaim -- 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 counterclaim, and by the fact that the latter constitutes proceedings independent and distinct from the former.
164. If this interpretation were to be discarded in favour of construing "sum in dispute" as a cumulation of the claim amount for the claim and counterclaim, 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 counterclaim. These are based on the cost of arbitration defined by a conjoint reading of Sections 31(8) and 31-A, which includes the arbitrators' fee. Hence, if the arbitrators were to charge a common fee for both the claim and counterclaim, they would have to then equitably divide that 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 counterclaim, as the case may be. If the claim was to be dismissed in such a manner, it would lead to an absurd situation 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 counterclaim. Third, under Section 23(2-A), the only requirement of a counterclaim is that it should arise out of the same arbitration agreement as the claim. However, the cause of action of a counterclaim may be entirely different from the claim and possibly far more complex. Therefore, determining the arbitrators' fee on a combined basis for both the claim and counterclaim would thus not match up to the separate effort they would have to put in for each individual dispute in the claim and counterclaim.
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274. A reading of the same, thus, clearly indicates that within the scheme of the Arbitration Act, 1996 as contained in Section 31(8), 31A and Section 38(1), separate deposits are to be made for the claim and counter- claim in an arbitration proceedings. It was held that the determination of fee, even if under the Fourth Schedule (as in the case of Domestic Arbitration) should also be calculated separately for the claim and counter-claim. The term "sum in dispute" as occurring in the Fourth Schedule refers to independent claim amounts for the claim and counter- claim. Under the proviso to Section 38(1), the arbitral tribunal can provide for separate deposits for claim and counter-claim. It was observed that such an interpretation is supported by the definition of claim and counter-claim and by the fact that the counter-claim constitutes the proceedings independent and distinct from the claim. Sub-section(1) of Section 38 empowers the arbitral tribunal to fix the amount of deposit or the supplementary deposit, as the case may be, as an advance for the costs referred to in sub- section(8) of Section 31. The arbitral tribunal, thus, 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' occurring in Section 38, would obviously include the fees and expenses of the arbitral tribunal.
275. It was observed by Justice Khanna in his separate judgment that this position is beyond doubt in view of the language of the proviso to sub-section(1) of Section Page 215 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 38 and the language and words of sub-section(2) and sub-section(3) to Section 38. Sub-section(2) states that costs referred to in sub-section(1) shall be payable by the parties in equal share. The first proviso to sub- section(2), however, provides that if one party fails to pay his share of the deposit, the other party may pay that share whereas the second proviso states that where the other party does not pay his share in respect of the claim or the counter-claim, the arbitral tribunal may suspend or terminate the proceedings in respect of such claim or counter-claim. Though the costs including fee of the Arbitrators would be payable in advance and shared equally by the parties, but these payments during the course of the arbitration proceedings are treated as advance and in terms of sub-section(3) to Section 38. The arbitral tribunal upon termination of the arbitral proceeding, must render an account to the parties of the deposits received. Unexpended balance has to be returned to the party or the parties, as the case may be, who had made the payment.
276. From the reading of sub-section(2) to Section 38 with the 1st and 2nd proviso thereof and proviso to sub- section(1) of Section 38, it is clear that asking of deposit for the counter-claim by fixing separate fee being independent and distinct proceedings from the claim, is contemplated under the scheme of the Arbitration Act. There may be a situation where arbitral tribunal may fix separate fee for the claim and counter-claim and ask for Page 216 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined a separate amount of deposit for the claim and counter- claim payable in equal share of the parties, and in case one party fails to pay his share of deposit in respect of claim and counter-claim, the other party may make the deposit in respect of claim and counter-claim. Simultaneously, it is also open for the arbitral tribunal to suspend or terminate the proceedings in respect of such claim or counter claim in case other party does not pay its share in respect of the claim or counter-claim.
277. In the instant case, the arbitral tribunal had suspended the arbitral proceedings in respect of the counter-claim, inasmuch as, the respondents who filed their counter- claims were not agreeing to the fee per sitting determined by the Arbitrator. The deposits made by the claimants agreeing to the fee determined by the Arbitrator was with respect to his claims. Admittedly, no fee was deposited by the respondents as advance in respect of their counter-claims and the Presiding Arbitrator in its order dated 26.04.2019 has specifically stated that the counter-claim will not be entertained unless the respondents make deposit of their share to the fee determined by the tribunal. It was clarified that in case the respondents wish to raise the counter-claim, they will have to pay tribunal's fee which will be separate assessment and notified. It is evident that during the continuance of the arbitral proceedings, the respondents did not agitate the issue before the Court by taking recourse to the remedy under Section 14 seeking termination of the mandate of the Arbitrator on the Page 217 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined ground that by unilateral fixation of fee, the arbitral tribunal became de jure or de facto unable to perform its functions. The termination of arbitration proceedings, in the instant case, occurred on the pronouncement/making of the arbitral award in terms of Section 32. The contention of the learned senior counsel for the respondents that since the counter-claims had not been entertained by the arbitral tribunal, it would render the whole arbitral proceedings invalid having been conducted in violation of the principles of natural justice enshrined in Section 18 of the Arbitration Act, 1996 is too far-fetched and unacceptable.
278. The counter-claim being independent claims put forth by the respondents, they were required to see that adjudication was made on the dispute about the deposit of fee demanded by the Arbitrator(s). In case of any dispute about the quantum of fee, recourse to the appropriate legal remedy was required to be taken. The award cannot be said to be suffering from violation of Section 18 of the Arbitration Act' 1996, because the arbitral tribunal had suspended the proceedings of the counter claims for non-deposit of the tribunal's fee by the respondents. It cannot be accepted that the order passed by the Tribunal in that regard would amount to coercion or lead to real likelihood of bias.
279. In any case, the decision on the claim of the appellants in the award would have no bearing on the counter-claim put forth by the respondents which were independent Page 218 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined claims and could even be raised in separate proceedings. As per the law pertaining to claim and counter-claim, as noted hereinabove, a counter claim is not a defence to a claim and its outcome is not contingent on the outcome of the claim. Counter-claims are permitted to be raised in the same proceedings as claims, in order to avoid multiplicity of the proceedings. Even dismissal of the proceedings in relation to the original claim, does not affect the proceedings in relation to the counter-claim.
280. For the above discussion, the challenge to the arbitral award on the ground of plea of bias and violation of principles of natural justice for non-adjudication of the counter-claim is not falling within the parameters of judicial review when it comes to the award rendered in an International Commercial Arbitration within the scope of Section 34(2)(b)(ii). The defence of violation of public policy of India is not available to the respondents on the plea of violation of principles of natural justice, in the facts and circumstances of the present case.
(c) Unilateral fixation of the fee agreeable to the claimant's only :- Violation of Natural Justice & Bias
281. Coming to the challenge to the arbitral award on the plea of being contrary to the Public Policy of India because of unilateral fixation of fee by the arbitral tribunal, we are not convinced with the arguments of the learned senior counsel for the respondents to attach invalidity to the arbitral award. In this regard, reference be again made to the majority judgment of the Apex Page 219 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Court in ONGC vs. Afcons29 strongly relied by the learned senior counsel for the respondents, wherein the Apex Court had declared the law that the Arbitrators do not have the power to unilaterally determine their fee.
282. At the outset, we may note the conclusion drawn by the majority in paragraph Nos. '187.1' and '187.2' on the issue of power of the Arbitrators for unilateral determination of fee :-
"187.1. 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 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 31-A 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 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 arbitrators if it believes the fees are unreasonable under Section 39(2);
187.2. 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 later stage, this Page 220 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Court has issued certain directives to govern proceedings in ad hoc arbitrations in Section C.2.4 (see paras 125 to 129);"
283. A reading of the conclusion drawn by the Apex Court in ONGC v/s. Afcons29 makes it clear that any order made by the Arbitrators to unilaterally determine fee would not be a binding and enforceable order, inasmuch as, the Arbitrator(s) cannot be a judge of their own private claim against the parties regarding their remuneration. While arbitral tribunal has the discretion to apportion the cost (including Arbitrators' fee and expenses) between the parties in terms of Section 31(8) and 31(A) of the Arbitration Act and also demand for advance deposit in accordance with Section 38, any findings relating to Arbitrator's fee in absence of an agreement between the parties and the Arbitrators, if made, while fixing the cost or deposits, it cannot be enforced in favour of the Arbitrators. At the most, the arbitral tribunal can exercise lien over the delivery of the arbitral award in case of outstanding payments by exercising powers under Section 39(1) and the party aggrieved can approach the Court to review the fee demanded by the Arbitrators, if it believes the fee being unreasonable, by invoking the remedy under Section 39(2) of the Act, 1996.
284. As noted hereinbefore, even in the dissenting judgment of Jus. Khanna on the power of the Arbitrator to fix a reasonable fee, in absence of any agreement between the parties or the parties and the arbitral tribunal or a Page 221 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Court order fixing the fee, emphasis has been laid that the Arbitrator is nevertheless entitled to reasonable fee based either on an implied terms 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, in case of no agreement with the parties.
285. The result of this discussion is that unilateral fixation of fee by the Arbitrator cannot be enforced against the party who did not agree to such determination. The aggrieved party can still request the Court to review the fee demanded by the Arbitrators, if it believes that the fees are exorbitant or unreasonable. Even upon termination of the arbitral proceedings with the making of the award, as per sub-section(3) of Section 38, the Arbitrator is bound to render an account of costs including the fee paid to them. In case of any outstanding balance, the Arbitrator may exercise lien on the arbitral award and the issue pertaining to reasonableness of fee fixed by the Arbitrator may be adjudicated by the Court as per sub-section(3) of Section 39, wherein even the arbitral tribunal shall be entitled to appear and be heard in the event of any such application is filed under sub-section(3).
286. In light of the statutory provisions and the statement of law by the Apex Court in ONGC vs. Afcons29 that the order passed by the Arbitrators unilaterally deciding the fee cannot be enforced in favour of the Arbitrators. At Page 222 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the most, the claim of the respondents about the unilateral determination of fee being exorbitant could have been addressed by the Court in exercise of powers under Section 34 of the Act, 1996, inasmuch as, the Court is empowered to look into the reasonableness of fee fixed by the Arbitrator, in case, it reaches at the conclusion that the award is valid and binding upon the parties. Any order of fixing or revising the fee determined by the Arbitrator, if passed by the Court under Section 34, would not amount to revisiting the arbitral award on merits as the order of fixation of fee is not an award of claim of the parties and has been held to be unenforceable in favour of the Arbitrator as an award.
287. Further, from the record of the proceedings of the arbitral tribunal, in the instant case, no circumstance(s) to press the plea of bias in determination of fee by the Presiding Arbitrator of the third arbitral tribunal could be brought before us. The learned single Judge has, thus, erred in holding that the Tribunal has lost its mandate to adjudicate the claim of the claimants because of its act of unilaterally determining the tribunal's fee. The opinion drawn by the learned single Judge that the Arbitrators have acted with bias and prejudice by unilaterally fixing the fee to which the claimant had readily agreed, but the respondent Nos. 1 and 2 had objected and the same is obvious from the events which have taken place during the arbitral proceedings, is wholly devoid of any material on record.
Page 223 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined The learned Single judge while attaching illegality to the award or making comment on the jurisdiction of the tribunal in unilateral determination of fee being against the core principle of party autonomy, has failed to appreciate that this situation was remedial in nature. Even during the course of arbitration proceedings, in case the respondents were aggrieved by determination of fee of the Arbitrators, they were free to take recourse to the legal remedy under Section 14 of the Act, 1996. Further, even after declaration of the award with the termination of arbitration proceedings, the order of fixation of fee by the arbitral tribunal cannot be enforced in favour of the Arbitrators, as it cannot be considered as an award. It is still open for the respondents agitating quantum of fee fixed by the arbitral tribunal to seek for review/revision of the fee determined by the Arbitrators and it is also open for the Court to determine the reasonableness of the Arbitrator's fee, as there is no agreement between the parties and the Arbitrator, in the instant case. In any eventuallity, it can not be demonstrated before us that the respondents have been put to any disadvantage on account of revision of fee by the Arbitrator. The rejection of the counter claim, which was an independent claim and was further not pursued by the respondents by taking recourse to the remedy available in law, will have no bearing on the issue of determination of the fee by the arbitrator.
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288. As noted hereinbefore, the respondents were agitating the issue of fee and also simultaneously participating in the arbitral proceedings. They have cross-examined the claimant and his witnesses and also moved applications for recall of the witnesses to whom they had already cross-examined. No evidence was produced by the respondents since inception of the proceedings inspite of seven opportunities granted by the four arbitral tribunals constituted with the substituted Arbitrators from time to time. With the constitution of the second arbitral tribunal in the year 2018, the arbitral proceedings commenced on the agreed amount of fee fixed by the first tribunal to which respondents have no objection. Even then the respondents did not produce any evidence at that point of time.
289. We, thus, reached at an irrestible conclusion that the act of the arbitral tribunal in unilateral fixation of fee/revision of fee (which is objected as exorbitant by the respondents) would not make the award itself as invalid being opposed to the public policy of India and this violation, in breach of party autonomy, cannot be said to be such which would shock the conscience of the Court so as to hold the award, in its entirety, being in conflict with the Public Policy of India. The question of lack of jurisdiction of the Arbitrator, in entering into the merits of the claim does not arise at all.
290. Accepting the contention of the respondents that on the objections by the respondents, the Arbitrator(s) have no Page 225 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined option but to walk out of arbitration proceedings as they have lost jurisdiction to adjudicate, will set a dangerous precedent as it would give a baton to one party to frustrate the arbitration proceedings by mere disagreeing with the fee fixed by the Arbitrators without taking recourse to the legal remedy for agitating it further (before the Court). Further, the plea that by unilateral fixation of exorbitant fee, the arbitral tribunal had denied the equal opportunity of hearing to the respondents, could not be substantiated.
291. In view of the above discussion, all the arguments made by the learned senior counsel appearing for the respondents to assail the validity of the award on the plea of it being contrary to the public policy of India on violation of Section 18 of the ACt'1996 and bias are, liable to be turned down. The award of determination of claims of the claimants can be separated from the order of the Arbitrator(s) for fixation of fee of the arbitral tribunal which does not form part of the arbitral award, inasmuch as, it cannot be enforced in favour of the Arbitrators in view of the law laid down by the Apex Court in ONGC vs. Afcons29 on the doctrine of prohibition of in rem suam decision, i.e. "No one can be judge of his own cause".
Conclusion on the plea of Bias - Violation of Section 18 of the Act' 1996
292. Further, on the issue of violation of Section 18 of the Act, 1996 to substantiate the breach of principles of Page 226 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined natural justice and bias, the contention of the learned senior counsel for the respondents on various circumstances noted hereinbefore during the course of arbitration, are not sufficient to hold that the arbitral tribunal had conducted the proceedings in breach of principles of natural justice. The very premise of inferring bias on the ground of rejection of counter- claim, unilateral fixation of exorbitant fee aggreable only to the claimants and denial of opportunity to the respondents to lead the evidence, seems rather tenuous and lie on a slippery slope. The use of strong language or deprecating the conduct of the respondents by the arbitral tribunal in the award by itself does not furnish a firm basis to infer bias/prejudice. Other grounds (e), (f) and (g) to assert bias of the tribunal are issues to challenge the merits of the award which will be dealt later.
293. Suffice it to say that any error of law or facts per se do not engage public policy under Section 34(2)(b)(ii) and the award cannot be set aside under the said provision on the ground of mistake of law and fact. Under no circumstances, can the Court interfere with the arbitral award on the ground that justice has not been done in the opinion of the Court, inasmuch as, that would be an entry into the merits of the dispute which is contrary to the ethos of Section 34 of the Act, 1996.
294. As noted hereinbefore, the declaration of law by the High Court of Singapore in BAZ37 noted with approval in Page 227 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Ssangyong Engg.35, the balance is generally in favour of the policy of enforcing arbitral awards, and it only tilts in favour of the countervailing public policy where the violation of policy would "shock the conscience" or would be contrary to "the forum's most basic notion of morality and justice". While striking the balance, it is important for the Court to consider both the subject nature of the public policy, the degree of violation of that public policy and the consequences of the violation.
295. The aforesaid grounds of challenge to the merits of the award, therefore, are turned down being devoid of force.
(G) Merits of the claims :-
296. Now we are left with the grounds of challenge to the merits of the arbitral award on the claims, namely (i) the award of claim of the appellant for payment of a sum of INR 22.19 crores together with interest at the rate of 12% per annum from 12.03.2021 to the date of payment;
(ii) the damages for an amount of INR 84 crores with interest at the rate of 12% p.a. from 25.09.2017 till the date of payment; (iii) award of cost on full indemnity basis in favour of the claimant and M/s.C2R Projects LLP and another partner, to be paid by the respondents no.1 and 2 herein jointly and severally. The cost to the total amount of INR 14,27,33,429.65 (SGD 984,454.87) as set out in the Appendix 'A' to the award has been ordered to be paid by the respondents, which includes (i) the sum of INR 1,12,79,291.25 (SGD 35,820) and SGD 229,693 Page 228 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined ordered to be paid pursuant to the order dated 23.12.2019; (ii) the fees and expenses of the tribunal already paid by the claimants as of the date of the award; (iii) the cost and expenses incurred by respondents no.2 and 4 as of 07.01.2021, which have been borne by the claimants. The Tribunal has awarded the full legal cost and expenses incurred by the claimants in relation to the arbitration and related court proceedings, including the legal cost and expenses of the legal team of the claimant, respondents no.3 and 4, the fee and expenses of the Tribunal, the fee incurred by the EPIQ Global, i.e. all such expenses which have been borne by the claimants amounting to (a) INR 14,27,33,429.65 and (b) SGD 984,454.87 as set out in Appendix 'A' of the written submissions of the claimant.
(a) Award of INR 22.19 crores with interest for misappropriation of funds of LLP :-
297. The learned Single judge has refused to interfere in the findings of the Tribunal on the award of claim of the sum of INR 22.19 crores together with interest at the rate of 12% p.a. on the ground that the findings of fact returned by the Tribunal to reach at the conclusion that respondent no.1 is guilty of misappropriating the sum of INR 22.19 crores from the account of respondent no.4 M/s. C2R Projects LLP and that such sum was utilized without knowledge and approval of the remaining partners and in breach of LLP agreement by making false misrepresentation and forging the minutes of Page 229 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined meeting dated 18.07.2015, cannot be disturbed within the limited scope of Section 34 of the Act' 1996, inasmuch as, re-appreciation of evidence as a court of appeal is impermissible. The learned Single judge has also turned down the challenge to the merits of the award on the ground that the respondent no.4- M/s.C2R Projects LLP is not a claimant for recovery of the amount of INR 22.19 crores allegedly misappropriated by respondent no.1 from the account of the LLP, noticing that the claimant was having majority share holding of LLP after the respondent no.1 Mr. N.K. Shah was expelled from the LLP for misappropriation of its funds.
298. As regards the award of INR 84 crores towards damages and loss of profits together with interest, the learned Single judge has expressed agreement with the minority dissenting opinion of the learned arbitrator late Mr. Justice G.T. Nanavati (retired) relying upon clause 34(A) read with clause 21 of the LLP agreement providing for limited liability/indemnification between the parties or to the LLP. It was held that no award could have been passed under the head of "damages for Loss of Profit" to be paid to the claimant, to the extent of 20% share of the claimant, by computing total damages and loss of INR 419.80 crores alleged to have been suffered by the respondent no.4 LLP, on the basis of the estimate made by the tribunal, which was on hypothesis of not happening of some events in future as per the oral evidence of the expert examined by the claimant. It was Page 230 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined further held that such estimate made by the Tribunal in arriving at a figure of loss of future profits relying on the expert report would amount to making of the award for the purpose of profiteering. The impugned award for damages of loss and profits has been held to be highly speculative being without any basis.
299. As regards awarding of cost fee and expenses as per Appendix 'A' to Appendix 'G', totaling to INR 14,27,33,429.65 and SGD 984,454.87, it was held by the learned Single Judge that such costs computed by the Tribunal is contrary to the provisions of Section 31A of the Arbitration Act' 1996 dealing with the regime of cost. While giving expansive meaning to Explanation (iv) to Section 31A of the Act' 1996, the Tribunal has illegally awarded cost for legal proceedings between the parties instituted before the High Court and Supreme Court, by including the said cost within the scope of "any other expenses incurred in connection with arbitral or court proceedings and the arbitral award". The Tribunal by awarding the cost for the fee of the counsels who had appeared on behalf of the claimant before the High Court and the Supreme Court in various legal proceedings drawn by the respondents, has violated the provisions of Section 31A of the Act by travelling beyond the scope of the said provision. It was, thus, held by the learned Single judge that the award passed by the Tribunal towards the cost of INR 14,27,33,429.65 and SGD 984,454.87 to the claimant would cause Page 231 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined miscarriage of justice and would be in contravention of the fundamental principle of law resulting into violation of the public policy of India.
300. While holding so, the learned Single judge taking note of the scope of interference under Section 34 of the Arbitration Act' 1996, has rejected the arguments of the parties for partially setting aside of the award, holding that the entire arbitral award is to be set aside on the grounds of jurisdiction in view of the findings arrived by it on the issues raised by the parties.
301. Pressing the arguments pertaining to the grounds of challenge on the merits of the award made before the learned Single judge, the submission of Mr. Saurabh Soparkar, learned Senior counsel for the respondents is about the maintainability of the claim of the claimant, itself. The notice invoking the Arbitration Clause 35 of the LLP agreement dated 10.11.2016 has been placed before us along with the Statement of claim of the claimant to submit that the notice invoking arbitration clause addressed to Mr. N.K. Shah was sent on behalf of three partners namely Mr. M.S. Atwal, Mr. Kamal Jhadwani and Mr. Dinesh Shivanna. It was stated therein that the respondent no.1 Mr. N.K. Shah in flagrant breach of his fiduciary duties and in blatant breach of the position of trust he was placed in by the other partners, has ostensibly, on behalf of M/s.C2R Projects LLP, transacted on various occasions, contrary to the terms of the LLP agreement and without Page 232 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined concurrence of other partners, took unanimous decisions against the letter and spirit of the Partnership agreement. It was stated that disputes and differences have arisen between partners in following the obligation of the partners under the LLP agreements. These disputes inter alia deal with the recovery of monies misappropriated and siphoned off by the respondent no.1 as also damages for various breaches of the LLP agreement, which include but are not limited to the effect and impact of the possible statutory violations, misrepresentations, which have resulted solely from various acts of omissions and commission by the respondent no.1. The statement of claim filed by the claimant Mr.M.S. Atwal contains the prayer to direct the respondent no.1 to pay the amount of INR 22.19 crores to the LLP, being the money embezzled, siphoned and misappropriated from the LLP account, whereas claim of damages towards the loss of return on investment and loss of profits, etc. was sought to be made in favour of the claimant Mr. M.S. Atwal.
302. Placing the above, it was argued by the learned Senior counsel for the respondent no.1 that under the scheme of the LLP Act, 2008, the LLP is a body corporate formed and incorporated as a legal entity separate from that of its partners. With its incorporation by registration under Section 12 of the LLP Act, 2008, a LLP is capable of suing and being sued in or by its name. The right to sue, thus, lies with the LLP for its claim (s). As per Section Page 233 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 2(n), "Limited Liability Partnership" means a partnership formed and registered under the LLP Act' 2008. The Limited Liability Partnership agreement (LLP agreement) as defined in Section 2(o) means any written agreement between the partners of LLP or between the LLP and its partners, which determines the mutual rights and duties of the partners and their rights and duties in relation to that LLP.
303. The LLP agreement originally arrived at on 10.02.2015 between three persons namely Mr. N.K. Shah, Mr. Kamal Jhadwani and Mr. Dinesh Shivanna outlined obligations and the liability of partners in clauses 19 and 21, extracted herein as under :-
"19. OBLIGATIONS OF PARTNERS:
Each partner shall:
(a) Be just and faithful to other partners in the transactions relating to LLP/business;
(b) Diligently attend to the business of the LLP and devote his/her full time and attention thereto;
(c) Pay his separate debts and indemnify the other partners and assets of the LLP against the same and all other proceedings, costs, claims or demands in respect thereof;
(d) Give full information and truthful explanations of all matters relating to the affairs of the LLP to all the partners at all time:
(e) Comply with all the provisions of the I.LP Act and regulations, rules framed or to be framed thereon;Page 234 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
(f) No partner shall without the consent of all the other partners.
(i) Lend money or give credit of the goods of the LLP to whom the other partners.have previously forbidden him to trust;
(ii) Mortgage, charge or assign his share in the assets or profits of the LLP;
(iii)Draw, accept or endorse any bill of exchange or promissory note on account of the LLP;
(iv) Engage, remove or dismiss any apprentice, employee of the LLP;
(v) Give any security or promise for the payment of money on account of the LLP except in the ordinary course of business.
(vi)Give bail, bond or guarantee or become surety for any person or do or knowingly suffer any thing to be done where the LLP property may be endangered;
(vii)Buy, order or contract any property or goods for the LLP exceeding 5.00 Lacs.
(viii) Sign any cheque on behalf of the LLP to, a sum exceeding 5.00 Lacs.
(ix) Compromise or compound or, release or, discharge any debt due to the LLP."
"21. LIABILITY OF PARTNERS :
The liability of the partners shall be limited as provided in the LLP Act, 2008 and as set forth in this LLP agreement. Partners shall not be obligated to restore by way of capital contribution or otherwise any deficit in its capital account or the capital account of any other partner (if such deficit occur)."Page 235 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
304. Clause 27 of the LLP agreement provides for breach of agreement, clause 31 outlines defaults and remedies and clause 34 about limitation on liability/indemnification are also relevant to be extracted hereinunder :-
"27. BREACH OF AGREEMENT:
A material breach of this LLP agreement by a partner (the "breaching partner") which breach has not, after notice by the other partner ("non- breaching partner") and a reasonable opportunity for cure the scope of such cure to be conclusively established by the binding arbitration provisions of this LLP agreement), been cured by such partner within the time provided for by the arbitrator. If it is determined by the arbitrator that a material breach did occur and a satisfactory remedy cannot be instituted in the opinion of the non-breaching partner, the non-breaching partner has the right to request dissolution of the LLP pursuant to this agreement."
"31. DEFAULTS AND REMEDIES:
(A) DEFAULTS:
If a partner materially defaults in the performance of its obligations under the LLP agreement, and such default is not cured with in 10 (ten) days after notice of such default is given by a partner to the defaulting partner for a default that can be cured by the payment of money. or within thirty (30) days after notice of such default is given by a-partner to the defaulting partner for any other default, then the non-defaulting partners shall have the rights and remedies described in article hereunder in respect of the default.
(B) REMEDIES:
If a partner fails to perform its obligations under Page 236 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined this agreement, any other partner shall have, in addition to any rights and remedies provided hereunder, all such rights and remedies as are provided at law or in equity.
(C) NO WAIVER:
No consent or waiver, express of implied, by a partner to or of any breach or default by another partner in the performance by such other partner of its obligations under this agreement shall constitute a consent to or waiver of any similar breach for default by any other partner. Failure by a partner to complain of any act or omission to act by another partner, or to declare such other partner in default. irrespective of how long such failure continues, shall not constitute a waiver by such partner of its rights under this agreement."
"34. LIMITATION OF LIABILITY/ INDEMNIFICATION :
(A) LIMITED LIABILITY:
Except as expressly provided herein, neither partner will be liable to the other partner or to the LLP with respect to any subject matter of this agreement under any contract, negligence, strict liability or other legal or equitable theory for (i) any special, indirect, incidental. consequential or punitive damages or lost profits or (ii) cost of procurement of substitute goods or services.
(B) INDEMNIFICATION BETWEEN THE
PARTNERS:
Neither partner shall indemnify the other partner or LLP or its respective officers, directors, employees and its respective successors, heirs and assigns ("indemnities") for any loss, claim, damage, liability or action except to the extent resulting from its respective gross negligence or willful wrongdoing. This paragraph does not limit either Page 237 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined partner's other remedies available to its under the laws.
(C) PROCEDURE:
An indemnity that intends top claim indemnification under this agreement shall promptly notify the other partner (the "Indemnitor") in writing of any loss, claim, damage, liability or action in respect of which the indemnitee intends to claim such indemnification, and the indemnitor shall have the right to participate in, and, to the extent the indemnitor so desires, to assume the defense thereof with counsel of its own choice.
(D) LIMITATION OF INDEMNITY:
The indemnity clause in this agreement shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is made without the consent of the indemnitor, which consent shall not be withheld unreasonably. The failure to deliver written notice to the indemnitor within a reasonable time after the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnitor of any liability to the Indemnitee under this article.
(E) COOPERATION:
At the Indemnitor's request, the indemnitee. under this article and its employees and agents, shall cooperate fully with the indemnitor and its legal representatives in the Investigation and defense of any action. claim or liability covered by this Indemnification and provide full information with respect thereto.
(F) PROCEEDING OTHER THAN BY LLP:
The LLP will Indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or Page 238 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the LLP, by reason of the fact that he is or was a partner, officer, employee of the LLP, or Is or was serving as a manger of LLP against expenses, including attorneys' fees, Judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith: and in a manner which he reasonably believed to be in or not opposed to the best interests of the LLP. and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was Unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner, which he reasonably believed to be in or not opposed to the best interest of the LLP, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.
(G) PROCEEDING BY LLP:
The LLP will indemnify any person who was or is a party or is. threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the LLP to procure a judgment in its favor by reason of the fact that he is or was a partner, officer, employee of the LLP against expenses, Including amounts paid In settlement and attorney's fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if The acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the LLP. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction: after exhaustion of all appeals therefrom, to be liable to the LLP. or for amount paid In settlement to the LLP, unless and only to Page 239 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the extent that the court in which the action or suit was brought or other court of competent Jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
(H) MANDATORY ADVANCEMENT OF
EXPENSE:
The expense of partners, designated partner and officers incurred in defending a civil or criminal action, suit or proceeding must be paid by the LLP as they are Incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by o' on behalf of the: partner, designated, partner of officer to repay the amount if it is ultimately determined by a court of competent Jurisdiction that he is not entitled to be indemnified by the LLP. The provisions of this article do not affect any rights to advancement: of expenses to which personnel of the LLP other than partners. designated partner or officers may be entitled under any contract or otherwise.
(I) EFFECT AND CONTINUATION:
The Indemnification and advancement of expenses authorized in or ordered by a court pursuant to above article, inclusive:
(i) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the agreement or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court or for the advancement:
of expenses made pursuant to this agreement, may not be made to or on behalf of any partner, designated partner or officer if a final adjudication establishes that his acts or omission involved Page 240 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.
(ii) Continues or a person who has ceased to be a partner, officer, employee of agent and Inures to the benefit his heirs, executors and administrators.
(J) NOTICE OF INDEMNIFICATION AND
ADVANCEMENT:
Any indemnification of; or advancement of expenses to, a partner of officer in accordance with this article, if arising out of a proceeding by or on behalf of the LLP, shall be reported in writing to the partners.
305. Upon induction of the claimant/appellant Mr. M.S. Atwal, an addendum to LLP agreement was made on 27.02.2015 whereby Mr. Atwal was inducted as partner of LLP with his share in remuneration being 20%. There is a categorical clause in the said addendum that except as modification made thereby, the partnership deed dated 10.02.2015 shall be read and construed as having been executed between the partners and newly inducted partner. With another addendum to LLP agreement dated 24.10.2016, the percentage of contribution of four partners in the LLP was changed and the contribution in the LLP of Mr. N.K. Shah was raised upto 53% and of Mr. Atwal to the extent of 37%. The contributions of two other partners, namely Kamal Jhadwani and Mr. Dinesh Shivanna were reduced to 3% and 7%; respectively. The other terms and conditions mentioned in the Page 241 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined addendum dated 18.05.2016 recorded that as per the earlier agreement, newly introduced partner Mr. M.S. Atwal had to bring his share on or before 15.04.2016. Mr. N.K. Shah was devoting his full time for the LLP business development, hence all the partners had decided to change his share as per the above percentage. It was also mentioned that Mr. Kamal Jhadwani had not fulfilled his contribution promise and hence, all the partners had decided to change his share, whereas Mr. Dinesh Shivanna was a technical partner, hence, all the agreed provisions were not applicable to him.
306. Further that the proposed contribution as mentioned in the table therein (noted hereinabove) is based on mutual decision of all the partners. It may be noted that a new LLP agreement was executed only after expulsion of respondent no.1 on 26.10.2016 and the notice invoking the arbitration clause was sent immediately thereafter on 10.11.2016.
307. Placing the above referred clauses of the original LLP agreement dated 10.02.2015 pertaining to the obligations and liability of the partners, it was argued by the learned Senior counsel for the respondent no.1 that Section 23 provides that the mutual rights and duties of the LLP and its partners shall be governed by the LLP agreement between the partners or between the LLP and its partners. Section 26 of the LLP Act further provides that every partner of the LLP is an agent of the Page 242 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined LLP for the purposes of business of the LLP, but not of other partners. Sections 27 and 28 of the LLP Act further make it clear that two partners of LLP cannot sue each other in individual capacity for any wrongful act or omission of the other partner causing loss to the LLP and right to sue lies with the LLP, which is a legal entity on its own being a Body Corporate. Section 30 provides for unlimited liability of the LLP and partners in cases of fraud against its creditors. Section 23(4) read with the first Schedule to the LLP Act' 2008 is a default rule with regard to the matters relating to mutual rights and duties of partners and LLP and its partners applicable in absence of any agreement in such matters. Item nos. 4 and 5 of the first Schedule to the LLP Act' 2008 provide that every partner shall indemnify the LLP for any loss caused to it by his fraud in the conduct of the business of the Limited Liability Partnership; and that every partner may take part in the management of the LLP; respectively.
308. It was argued by the learned Senior counsel that clause 21 of the LLP agreement states that the liability of the partners shall be limited as provided in the LLP Act, 2008 and set forth in the LLP agreement, however, there is no inter se indemnity clause to indemnify the other partner. As there is no clause to indemnify the other partner in the LLP agreement, the entire claim of the claimant seeking for indemnification of his claims was unacceptable. The issue pertaining to the Page 243 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined maintainability of the claims made by the claimant Mr. M.S. Atwal on behalf of the LLP goes to the very root of the matter. Even otherwise, the respondent no.1 Mr. N.K. Shah was expelled from the LLP as partner on 24.10.2016 and a new LLP agreement was executed on 26.10.2016, the arbitration clause 35 of the LLP agreement dated 10.02.2015 which was invoked against the respondent no.1, thus, would not be applicable. The reason being that the arbitration against an ex-partner was not maintainable in the eye of law. Moreover, the notice invoking arbitration dated 10.11.2016 was not issued on behalf of the LLP, rather it was by the partners of the previous LLP, on their own behalf.
309. Reliance is placed on the decision of the Gujarat High Court in Nation v. Deputy State Tax Commissioner 46 to submit that there is a distinction between a LLP and a regular partnership firm regarding the liability of its partners. Reliance is placed on the decision of the Apex Court in Shubh Shanti Services Ltd. v. Manjula S. Agarwalla47 to argue that the Apex Court has held therein that a director of the Company acting on its behalf, cannot file any action without any proper authorisation.
310. It is, thus, argued that since there is no resolution of the LLP authorising the claim of Mr. A.S. Atwal to sue on behalf of the LLP, the arbitration proceeding with 46 [2019 SCC OnLine Guj 5476] 47 [(2005) 5 SCC 30] Page 244 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined respect to the statement of claim was not maintainable. It was further argued that in case the claim was filed on behalf of the LLP, the LLP being an Indian legal entity it would have been a case of domestic arbitration rather than an international commercial arbitration, which would have an effect on the remedy for challenging the award under Section 34 of the Act, inasmuch as, the ground of "patent illegality" to assail the award would have been available.
311. On the merits of the findings returned by the Court under Section 34 with regard to the award of INR 22.19 crore on the ground of misappropriation by the respondent no.1 from the accounts of LLP, it was argued on behalf of the respondents that the learned Single judge has erred in not interfering with the findings in the award citing the limited scope of Section 34, though the respondent no.1 in the affidavit filed in examination-in- chief clearly demonstrated that he had not siphoned off any money. It was submuitted that all the findings of siphoning off of INR 22.19 crore are actually ex parte and one-sided. The contention that the arbitral tribunal has not adverted to the evidence produced by the respondent no.1 in the examination-in-chief by way of his affidavit. The learned Single judge has gravely erred in law in ignoring this aspect of the matter.
312. The learned Senior counsel for the appellant, however, pressed upon his argument about the maintainability of the cross appeal and the scope of interference under Page 245 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Section 37 of the Arbitration Act' 1996 to submit that the concurrent findings in the decisions of the arbitral tribunal and the Court under Section 34 on the issue of maintainability of the claims and the award of INR 22.19 crore holding respondent no.1 guilty of misappropriation, cannot be interfered with in the scope of Section 37, which is narrower than Section 34. In any case, re-appreciation of evidence is impermissible.
Analysis:-
313. Considering the submissions of the learned counsels for the parties and perused the record, we may note that the arbitral tribunal has returned a finding on appreciation of the evidence on record that the respondent no.1 is guilty of misappropriating the sum of INR 22.19 crores from the accounts of C2R Projects LLP, which has led to the dispute leading to arbitration proceedings. It was held that the illegal withdrawal of sum from the account of M/s.C2R Projects LLP without the authority of the partners of LLP is breach of the fiduciary duties of respondent no.1 to his partners and C2R Projects LLP, by virtue of sub-clauses (a), (d) and (f) (viii) of clause 19 of the LLP agreement. The conclusion is that the withdrawal and utilisation of the sum of Rs.22.19 crores by respondent no.1 from the account of M/s. C2R Projects LLP was without the knowledge and approval of the remaining partners and in breach of the LLP agreement. The respondent no.2 Mr. Kamal Jhadwani, however, is not guilty of misappropriating the funds of Page 246 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined M/s. C2R Projects LLP. It was found that there was no evidence to suggest that the funds of M/s. C2R Projects LLP misappropriated by respondent no.1 reached the hands of respondent no.2.
314. Suffice it to say that these findings of fact based on the evidence on record cannot be re-appreciated within the scope of section 34 of the Arbitration Act' 1996 nor there is any challenge to the same. The only ground of challenge to the merits of the award, as noted herein above, is the plea that the LLP being an independent legal entity from that of its partners, the claims could not have been filed by the appellant on behalf of the LLP.
315. At the outset, we do not find any substance in the said submission from a careful reading of the LLP agreement, addendums to the LLP agreement dated 27.02.2015 and 18.05.2016, which outlined the duties and responsibilities of the partners of LLP. We may record that the LLP agreement which governs the mutual rights and duties of the partners of LLP and the mutual rights and duties of the LLP and its partners, has been entered into between the partners of LLP incorporating the LLP for conducting its business. Initially, three persons came together to incorporate LLP for the business of the partnership with the initial capital contribution. The obligations of partners aligned in clause 19 (extracted above) provide that each partner shall be liable to give full information relating to the affairs of the LLP to all the partners and shall be just and faithful to the Page 247 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined transactions relating to the LLP business. No person is authorised to buy, order or contract for any property or goods for the LLP or sign any cheque on behalf of the LLP for a sum exceeding 5.00 lacs. Clause 21 though provides for liability of the partners being limited to the LLP Act' 2008 and as set forth in the LLP agreement, but in case of breach of agreement, the dispute and differences, whatsoever, if arise between the partners, touching the affairs of the LLP, can be resolved through the process of arbitration, subject to the provisions of the Arbitration Act' 1996, as set out in clause 35 of the LLP agreement. From the addendum to the LLP agreement dated 18.05.2016, it is evident that Mr. N.K. Shah was given charge by noticing that he would devote full time for LLP business development.
316. From a reading of Section 23 of the LLP Act' 2008 and clauses of the LLP agreement noted hereinabove, it can be seen that mutual rights and duties of partners of LLP are aligned in the LLP agreement and for breach of obligations, one partner or LLP can sue the other. Insofar as the extent of liability of LLP as aligned in Section 27 of the LLP Act' 2008, the LLP is liable for the wrongful act or omission on the part of a partner in the course of business of LLP or that its authority. The reading of Section 26 further makes it clear that any partner of LLP, for the purpose of its business, is an agent of the LLP. Placing these two provisions, it was argued by the learned Senior counsel for the Page 248 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined respondents that a partner cannot sue in the name of LLP as its agent. However, the fact remains that the claimant and the respondents being partners of LLP, their mutual rights and obligations having been aligned in the LLP agreement, any dispute between them shall be governed by the LLP agreement itself. In the instant case, in breach of clause 19 of the LLP agreement, the respondent no.1 Mr. N.K. Shah who was in fiduciary duties to his partners in blatant breach of the position of trust he was placed in by the others, had ostensibly, on behalf of LLP transacted money contributed by the appellant Mr. M.S. Atwal for conducting business of LLP, without any authorisation of LLP or intimation to the partners. The finding of misappropriation of the sum of INR 22.19 crores by the respondent no.1 is unimpeachable.
317. In this scenario, the Statement of claim made by the claimant requiring the respondent no.1 to make good the amount of INR 22.19 crores to the account of LLP being the money embezzled, siphoned and misappropriated from the LLP account cannot be said to be non- maintainable. The claim of the appellant Mr. M.S. Atwal who was the partner of LLP making the prayer for recovery of the amount misappropriated by the respondent no.1 from the account of LLP and to make good the same after expulsion of respondent no.1 from the LLP cannot be rejected at the threshold on the arguments of maintainability. The submissions of the Page 249 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined learned Senior counsel that such a claim could only be made by the LLP being a legal entity on its own or the Statement of claim was filed by the claimant on behalf of the LLP, are wholly devoid of force.
318. We do not find any infirmity in the decision of the arbitral tribunal in holding the respondent no.1 liable to pay INR 22.19 crores to the LLP together with interest of 12% p.a. from 11.02.2016 till the date of payment, by concluding that respondent no.1 owe a fiduciary duty to the partners of LLP and to the LLP in the management of the funds of the LLP, during the time when the partners trusted him to operate the account of the LLP due to the respondent no.1 being sole partner based in Ahmedabad. The findings of the arbitral tribunal that the provisions of Clause 21 of the LLP agreement read with item no. 4 of the First Schedule to the LLP Act' 2008 and Section 23(4) of the LLP Act' 2008 afford the legal basis for the tribunal to make an order as prayed for by the claimant on behalf of the LLP, cannot be said to suffer from any jurisdictional error so as to make the award contrary to the fundamental principle of law in India within the meaning of Section 34(2)(b)(ii) of the Arbitration Act' 1996. It is settled that any mistake of fact and law would ipso facto be not sufficient to hold the award, invalid in law.
319. With the above, we do not find any good ground to entertain the challenge to the merits of the award for refund of the misappropriated amount of INR 22.19 Page 250 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined crores along with interest against respondent no.1. No error can be said to have been made by the learned Single judge in upholding the said part of the award.
(b) Award of damages to the tune of Rs. 84 Crores for Loss of Profits:-
320. The next issue on the merits is the award of claim of INR 84 crores towards damage with 12% interest by the Tribunal. The learned Senior counsel appearing for the appellant has relied upon the law pertaining to scope of interference in an arbitral award under Section 34/37 of the Arbitration Act' 1996 to submit that the award of damages is based on appreciation of the material evidence on the record. Sufficient opportunity was granted to the respondents to cross examine the appellant on the quantum of damages as also the expert who has given an exhaustive report dated 20.07.2018 about the damages sought by the appellant in the Statement of claim before the arbitral tribunal. The expert report based on independent and most credible sources of information, both Government and private auditing entities assessing losses, suffered in respect of various proposed business of M/s. C2R Projects LLP, is such a form of detailed analysis which cannot be examined by this Court as it would amount to re- appreciation of the entire evidence, which is strictly prohibited under Section 34 of the Act' 1996.
321. The learned Single judge has, however, tread a path in the prohibited territory of questioning the merit of the Page 251 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined arbitral award while concluding and giving reasons for holding that the respondents are not liable to pay damages. Clause 34(A) and 34(B) of the LLP agreement with the LLP addendum dated 27.02.2015 have been wrongly read and misinterpreted by the learned Single judge in holding that the minority view of the tribunal is correct, which is patently erroneous and self-contrary as it exceeds the scope of Section 34 of the Act' 1996. The submissions relatable to the award being beyond clause 34(A) of the LLP agreement being relatable to Section 28(3) of the Arbitration Act' 1996 and the alleged misinterpretation of the terms of LLP agreement by the tribunal are impermissible to be raised within the scope of Section 34/37. The learned Single judge has committed a grave error of law in interfering with the arbitral award on the premise that another possible interpretation of LLP agreement would have been a better option as against the settled law of interference in the arbitral award. It is not the case of the respondent that there was no evidence at all in respect of the damages claimed by the appellant. The arbitral tribunal was presented with direct and the best form of evidence backed by globally accepted standards of calculating the loss of profits which is directly attributable to the fraudulent misrepresentation on the part of the respondents no.1 and 2. The contention is that if clause 34(A) of the LLP agreement is not interpreted to include the liability arising out of the wrongdoings of the respondents no.1 and 2, the provisions of section 30 of Page 252 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the LLP Act' 2008 dealing with unlimited liability in case of fraud, would be rendered otiose.
322. It was, thus, submitted that once the allegations of misappropriation are found to be correctly decided by the arbitral tribunal and the award of the claim of INR 22.19 crores was upheld by the learned Single judge, the consequential findings of the arbitral tribunal towards damages for the loss of anticipated profits could not have been interfered with as they have been arrived at considering the fraud committed by respondent nos.1 and 2.
323. Reliance is placed on the decision of the Apex Court in McDermott International Inc. v. Burn Standard Co. Ltd.48 to submit that the methodology for computation of damages adopted by the arbitral tribunal is one of the recognised methods which is permissible as held by the Apex Court in the said decision. The reasoning given by the learned Single judge for interfering in the findings of the arbitral tribunal of computation of damages is against the spirit and ethos of Section 34 of the Arbitration Act' 1996. The learned Single judge has erred in ignoring the settled principle of law that the categorical findings of fact arrived at by the tribunal are not to be interfered with, to set aside the award as a court of appeal.
48 [(2006) 11 SCC 181] Page 253 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
324. It was urged that the damages in case of breach of contract can be measured by the profits which the claimant would have made in the ordinary course if the contract had been performed. Further, a loss of profit is a distinct head of damages which can be sought independent of other damages. The position of law enunciated in Puri Construction (P) Ltd. v. Larsen & Toubro Ltd.49 and State of Uttarakhand v. Hill Ways Engineering Co.50 has been placed to substantiate the said submissions. It was contended that as held by the Apex Court in McDermott International Inc.48, the arbitral tribunal is the best judge of quantification of damages based on the expert evidence and this court is not empowered to reappreciate the evidence under Section 34/37 of the Act' 1996. The arbitral tribunal is the best judge also in the matter of interpretation of the terms and conditions of the award and the Court cannot substitute the opinion of the arbitrator or the arbitral tribunal, while making scrutiny under Section 34 of the Act' 1996.
325. In reply thereto, supporting the opinion of the learned Single judge, it was argued by the learned Senior counsel for the respondents that the LLP agreement dated 10.02.2015 had provided for an express prohibition against the claim for damages and the interpretation of clause 34(A) by the tribunal in its majority decision by reading clause 34(B) into it, is a 49 [2015 SCC OnLine Del 9126] 50 [2016 SCC OnLine Utt 560] Page 254 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined result of wrong understanding of the said clauses. The majority view that clause 34(A) does not operate to limit or exempt the partner's liability inter se, where the partner(s) against whom claim is made are guilty of willful wrongdoings based on the literal interpretation of "wrongful doing" in clause 34(B), is a wrong reading of the clauses of the LLP agreement. The minority view that there was limitation on the liability in clause 34(A) of the LLP agreement and no partner will be liable to the other partner or to the LLP for the types of damages mentioned in the said clause including for loss of profit is the most plausible view and is correct as such. Clause 34(B) covers indemnification for actual losses on willfull wrongdoing when a partner incurs third party liability on behalf of LLP and not intra-partner disputes. The arbitral tribunal in awarding damages to the claimant for failing to follow up adequately or for lack of effort on the part of respondent no.1 in setting up the business of LLP, indicates a complete lack of understanding to the terms and conditions of the LLP agreement. Inefficiency, in any case, cannot be a reason to make an award for the loss of profit in view of the categorical Clause 34(A) of the LLP agreement. By awarding damages of INR 84 crores, the tribunal, in fact, has re- written the contract.
326. It was further argued that in the statement of claim, the claimant has prayed for award of damages by way of loss of profit to the tune of Rs.23 odd crores and the said Page 255 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined claim was never amended, yet shockingly the tribunal had awarded loss of profit to the tune of INR 84 crores.
Analysis:-
327. Considering the above submission, we may record that the LLP agreement in clause 34 outline limitation of liabilities/indemnification. Sub-clauses (A) and (B) of clause 34 have been extracted hereinabefore for ready reference.
328. A reading of sub-clause (A) and sub-clause (B) of Clause 34 of the LLP agreement and applying them together to hold that sub-clause (A) does not exclude liability for gross negligence or willful wrongdoing on the part of a partner which includes fraud and fraudulent misrepresentation, is a clear misreading and misapplication of two provisions by the majority in the award. We may reiterate Section 23 of the LLP Act' 2008, which provides that mutual rights and duties of the partners of the LLP shall be governed by the LLP agreement between the partners. Clause 34(A) and 34(B) of the LLP agreement operate in two different fields. On the one hand, clause 34(A) restricts liability of partners towards each other or to the LLP with respect to any special, indirect, incidental consequential or punitive damages. Whereas Clause 34(B) restrains indemnification by one partner to other partner or LLP for any loss, claim, damage, liability or action, except to the extent resulting from its respective gross negligence Page 256 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined or willful wrongdoing which cannot override Clause 34(A). We find substance in the submission of the learned counsel for the respondents that Clause 34(B) of the LLP agreement covers indemnification for actual losses on willful wrongdoing when a partner incurs third party liability and not intra-partner disputes. In any case, this clause cannot be invoked to incur liability of damages for the loss of profits, specially barred in clause 34(A) of the LLP Agreement. Clause 21 of the LLP agreement also clarify that the liability of the partner shall be limited as provided in the LLP Act' 2008 and as set forth in the LLP agreement. When the partners themselves provided limitation on the liability against each other in the written agreement given to them, no partner can be held liable to the other partner or the LLP for the damages mentioned in Clause 34(A), which includes punitive damages or "lost profits".
329. We are in respectful agreement with the learned Single judge and the minority view of the arbitral tribunal that "loss of profit" being specifically excluded from the liabilities which one partner would otherwise incur because of any wrongful act or inaction on his part as partner of the LLP while conducting the affairs of LLP, the arbitral tribunal had no power to award the damages to the tune of INR 84 crores or any other sum by way of 'loss of profits'. There being a valid and binding agreement between the parties, the same shall have to be given its full effect and when the agreement outlining Page 257 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the mutual rights and liabilities of the partners restricts the claim of any liability towards the "loss of profit", the attempt of the majority (of tribunal) in reading the provisions of Clause 34(B) into the provisions of Clause 34(A) of the LLP agreement, would amount to creation of a new contract for the parties, foisting a liability which the parties to the agreement have not bargained to bear. Such a course of conduct would be contrary to the fundamental principles of law and justice of this country and is hit by Section 34(2)(b)(ii) of the Arbitration Act'1996. In our considered opinion, this issue falls within the exception carved out by the Apex Court in Ssangyong Engg.35 , making the award contrary to the public policy of India.
330. In view of the above discussion, we do not find any error in the decision of the learned Single Judge that under the LLP Agreement dated 10.02.2015 as also the LLP Act' 2008, the award of damages for alleged "loss of profit" was impermissible. Moreover, there was no claim of LLP, which itself is a separate legal entity to make good any loss of profit or damages to it, if any. It was rightly held by the learned Single judge that the claim of LLP, if any, would be a case of domestic arbitration and nothing prevented the LLP from initiating independent arbitration proceedings, with regard to its claim, if advised.
331. Noticing the above, we do not find any reason to delve on the methodology adopted by the arbitral tribunal to Page 258 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined compute the damages to the tune of Rs. 419.80 crores payable to the LLP for the "loss of profits" by relying upon the report of the expert referring to the judgment of the Apex Court in McDermott International Inc.48 Suffice it to say that such computation made by the tribunal is based on misreading and misinterpretation of Clause 34(A) and Clause 34(B) of the LLP agreement and contrary to the limits of liability agreed upon by the partners against each other in the LLP agreement dated 10.02.2015, and the adjudication of damages by the tribunal amounted to re-writing the contract.
(c) Award of Costs and Expenses etc. :-
332. Having gone through the award on the subject of costs, we may note that the claim of the claimant before the arbitral tribunal was about the legal costs incurred by him in the pursuit of the present arbitral proceedings, which inter alia included counsel fee, tribunal's fee, fee towards logistics such as travel, stay, transcription service and venue bookings for arbitration hearings until February 2020, tranch of hearings and also the logistic cost towards transcription service during the virtual hearings scheduled in November and December 2020. The claimant sought for payment of all costs of arbitration including the tribunal's fee, which was paid solely by the claimant.
333. Apart from the above, the claimant also prayed to award legal costs incurred by him in pursuing six (6) set of Page 259 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined legal proceedings directly related or out of the present arbitration proceedings. These costs include counsel and senior counsel fee, travel and stay costs towards all outstation case hearing, which necessitated claimant's counsel to travel to Ahmedabad.
334. The Tribunal while considering the claim towards costs made by the claimant has taken note of the proceedings initiated by the respondent no.1 under sections 9 and 37 of the Arbitration Act' 1996 and the proceedings related thereto before the higher courts (High Court and Supreme Court). There is a reference of the criminal proceeding initiated by the respondent no.1 based on making forged minutes of meeting dated 18.07.2015. Having noticed that all the proceedings were decided at one or other point of time, it was held by the tribunal that the respondents no.1 and 2 commenced not less than six (6) proceedings, several of which were pursued upto the Apex Court. The litigation initiated by respondents were with the primary objective of delaying and/or thwarting this arbitration. The respondents pursued the litigations before the courts while simultaneously persisting their submissions about the loss of mandate by the tribunal on the expiry of 12 months. The action of respondents no.1 and 2 was malafide in pursuing the litigation with the strategy, which makes it evident that they maintained their jurisdictional objection throughout the arbitration with an idea to stall the arbitration proceedings.
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335. It was also noted by the Tribunal that the respondents had repeatedly applied to the Tribunal for extension of time to comply with the orders of the tribunal for filing of their affidavit in evidence and these extensions were granted as both the respondents filed lengthy defence and counter claims. However, the respondents were neither interested to file their affidavit in evidence nor cooperated in the arbitration proceedings. The respondent no.1 conveniently terminated the services of his counsels from time to time and insisted the tribunal to postpone the hearing fixed for the convenience of the parties to accommodate him to engage new counsel. The applications were filed with a view to prolong the arbitration when the tribunal was in the process of completing the cross-examination of last two witnesses. There was a pattern to the conduct of respondent no.1 to prolong the arbitration, which was being held in his hometown when most of the others travelled from other parts of India and thereby drained the resources of the claimant since the delay hardly resulted in any costs to the respondent no.1. The tribunal has noted that this deplorable conduct on the part of the respondent no.1 is best illustrated when his counsel applied for the postponment of hearing dates scheduled between 7/15.11.2019 and which was finally held for the period 7/9.11.2019. While obtaining adjournments for the remaining dates for hearing, the respondent no.1 had agreed to pay all costs and expenses of the parties, the Page 261 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined witnesses, the arbitrators and administrative expenses, but has failed to pay a single penny.
336. When confronted with an application dated 22.11.2019 filed by the claimant seeking to recover such costs and expenses, the respondent no.1 filed reply to the application dated 29.11.2019 flatly refusing to pay such costs and once again questioning the mandate of the tribunal to continue with the arbitration. The claimant made all arrangements for arbitral proceedings to continue in Ahmedabad. The effort was made by respondent no.2 who joined respondent no.1 in filing a petition in the month of February 2020 seeking a writ of quo warranto to question and terminate the mandate of the arbital tribunal in the ongoing arbitral proceedings. The arbitral proceedings were stayed vide order dated 12.02.2020 passed by this Court. However, on a Special Leave Petition filed by the claimant, by order dated 14.02.2020, the Apex Court enabled the proceedings to continue. The finding, thus, is that on the one hand, the respondent no.1 had embezzled an amount of INR 22.19 crores of the claimant's investment from M/s. C2R Projects LLP and on the other hand, he not only failed to cooperate in the proceedings before the arbitral tribunal, by not producing the documents of LLP, which were in his possession, but also fabricated and forged the minutes of meeting of the LLP dated 18.07.2015. The attempt made by respondent no.1 with the cooperation of respondent no.2 to rely on the forged Page 262 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined minutes was with a view to unduly influence the tribunal to reject the claim of the claimant by illegal means.
337. The tribunal has, thus, concluded that the respondent no.1 is not only guilty of failing to cooperate and assist the tribunal in resolving the dispute arising from the claimant's claim in an expeditious manner, but has intentionally engaged in a conduct designed to prolong the arbitration with the intention to cause financial ruin to the claimant. Such conduct on the part of the respondent no.1 has greatly enhanced the legal costs and expenses incurred by the claimant and the remaining respondents (other than respondent no.1 in this arbitration). The respondent no.1 shall, therefore, bear the costs and expenses of the parties, the costs and expenses of their legal team and the respective counsels of the claimant, respondents no.3 and 4 and the arbitration proceedings including the arbitrators, on full indemnity basis. The learned Single judge while setting aside the award of costs has simply read the provisions of Section 31A of the Arbitration Act' 1996 to hold that the costs awarded by the tribunal is contrary to the provisions of Sections 31A of the Act' 1996 dealing with the regime of costs. The tribunal has given expansive meaning to Explanation (v) to sub-section (1) of Section 31A "any other expenses incurred in connection with the arbitral or court proceedings and the arbitral award"
and construed it to widen the scope of Section 31A, which was impermissible.Page 263 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
338. The learned Single judge has, thus, concluded that considering the scope of Section 31A in the matter of award of costs by the arbitral tribunal, it was held by the learned Single judge that the entire approach of the tribunal to compute the costs, on the face of it, is contrary to Section 31A of the Act' 1996 and the Tribunal was not justified in awarding costs, fee and expenses as per Appendix-A to Appendix-G. With the above, the learned Single judge had not gone into the details of computation of costs made by the tribunal and set aside the award of costs by saying that it would result into miscarriage of justice and the entire approach of the tribunal is perverse and patently illegal. At the outset, we may record that "patent illegality" is not a ground to set aside an international commercial arbitral award.
339. Be that as it may, coming to the regime of costs as aligned in Section 31A of the Arbitration Act' 1996, it is clear that the arbitral tribunal shall have discretion to determine the costs. The Explanation to Section 31A(1) would make it clear that costs means reasonable costs relating to -
(i) the fees and expenses of the arbitrators, Courts and witnesses;
(ii) legal fees and expenses;
(iii) any administration fees of the institution supervising the arbitration; and Page 264 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
(iv) any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award.
340. The provision, thus, indicates that the discretion vested in the arbitral tribunal should not be arbitrary one and the arbitral tribunal shall exercise its discretion judiciously and costs also must be reasonable one and should not be unreasonable one.
341. As regards reading of Explanation (iv) to sub-section (1) of Section 31A of the Act' 1996 by the learned Single judge to arrive at the finding that expenses incurred in connection with the court proceedings could not have been awarded by the arbitral tribunal, we may note that at the first blush we found us in consonance with the said opinion. However, on a thorough inquiry in the matter of determination of costs in arbitration proceedings under Section 31A, we may note that Section 31A(3) provides an arbitral tribunal or the court 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;
(c) whether the party had made a frivolous counterclaim leading to delay in the disposal of the arbitral proceedings; and Page 265 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined
(d) whether any reasonable offer to settle the dispute is made by a party and refused by the other party."
342. This is accompanied by the general rule under Section 31A(2) which states that the unsuccessful party has to bear the costs of the successful party in arbitration proceedings. The Apex Court in the case of ONGC vs. Afcons29 has noted that Section 31A of the Act' 1996 provides that the arbitral tribunal or the court has the discretion to determine the costs of arbitration, which includes, inter alia, reasonable costs relating to fees and expenses of arbitrators, courts and witness. While elaborating on the concept of costs and fees in arbitration, it was noted by the Apex Court that the legal regime on costs under the Arbitration Act has been set out with the observations of the Law Commission of India 246th report where it had recommended changes to the regime of costs to provide a statutory recognition to "loser pays" principle. It was noted in paragraph '100", as under :-
"100. The above interpretation of this Court is in harmony with the observations of the Law Commission in LCI 246th Report [ Law Commission of India, "Amendments to the Arbitration and Conciliation Act 1996" (246th Report, August 2014) available at <https://lawcommissionofindia.nic.in/reports/report
246.pdf> last accessed on 29-6-2022 ("LCI 246th Report")] 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:Page 266 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined "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 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 exception or the parties otherwise agree (only after the dispute 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 compliance with contractual obligations."
343. It was further noted in paragraphs ' 105', '106' and '107' as under :-
"105. In contrast, costs are typically compensation payable by the losing party to the winning party for the expenses the latter incurred by participating in the proceedings [ 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)] . In Salem Advocate Bar Assn. (2) v. Union of India [Salem Advocate Bar Assn. (2) v. Union of India, (2005) 6 SCC 344] , this Court has defined costs in a similar manner in the context Page 267 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined of litigation : (SCC p. 369, para 37) "37. Judicial notice can be taken of the fact that many unscrupulous parties take advantage of the fact that either the costs are not 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 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 recording reasons therefor. 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 and wherever necessary make requisite rules, regulations or practice direction so as to provide appropriate guidelines for the subordinate courts to follow.
106. 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 Arbitration [ Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (6th Edn., 2015), Chapter 4, para 4.203 (Redfern and Hunter on International Arbitration)] has classified the various components of costs under the following headings [ Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (6th Edn., 2015), Chapter
9.] :
Page 268 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined "• 'costs of the tribunal' (including the charges for administration 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, 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 incidental expenses incurred by the tribunal in respect of the case [ Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (6th Edn., 2015), Chapter
9.] . Fees of arbitrators constitute a component of the diverse elements which make up the costs that are payable by one party to another.
107. The purpose of awarding costs is to "indemnify the winning party". The "loser pays" principle apportions the costs between the parties through the costs follow the event "CFE" method. The primary purpose of the CFE method is to "make the claimant whole" [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)] . The CFE method has been statutorily recognised in some national legislations. The English Arbitration Act provides that "unless Page 269 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined 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 relation to whole or part of the costs" [ Section 61(2), English Arbitration Act.] . 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."
344. It has been noted that "loser pays" principle is a common approach followed for awarding costs. 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 decision "in circumstances in which the application of such a general principle would be inappropriate". The Arbitration Act while providing statutory recognition to the principle of "loser pays" in Section 31A(2) as the general principle of allocating costs, which can be derogated from at the discretion of the tribunal, provided it records its reasoning in writing. It is observed by the Apex Court in paragraph '110, thus, as under :-
"110. 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 31-A(3) provides that an Arbitral Tribunal or the Court has to take into account the following factors for determining costs:Page 270 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined "31-A. (3)(a) the conduct of all the parties;
(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."
This is accompanied by the general rule under Section 31-A(2) that the unsuccessful party has to bear the costs of arbitration."
345. Thus, it can be seen that Section 31A(1) of the Act' 1996 allows for reasonable costs to be recovered from the losing party and the test of reasonableness of costs claimed by the claimant taking into consideration all the factors to determine reasonableness would vary and such an assessment cannot be brought into a straitjacket formula. The issues in determining the reasonable costs vary with the costs of fees and expenses incurred by the successful party including the legal fee and expenses incurred by the successful party; the fee and expenses of the arbitrators, courts and witnesses; any administration fees of the institution supervising the arbitration; and any other expenses incurred in connection with the arbitral or court proceedings and the arbitral award.
346. The only question which can be agitated by the losing party, upon whom costs has been imposed is that the arbitrator has failed to exercise its discretion in a judicious manner.
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347. It is settled that the word "discretion" connotes necessarily an act of a judicial character, and is used with reference to discretion exercised judicially. It implies the absence of a hard and fast rule, and requires an actual exercise of judgment and a consideration of the facts and circumstances which are necessary to make a sound, fair and just determination, and a knowledge of the facts upon which the discretion may properly operate. When it is said that something is to be done within the discretion of the authorities, that something is to be done according to the rules of reason and justice and not according to private opinion; according to law and not humour. It only gives certain latitude or liberty accorded by statute or rules, to a judge as distinguished from a ministerial or administrative official, in adjudicating on matters brought before him [Ref : Aero Traders (P) Ltd. v. Ravinder Kumar Suri51].
348. The discretion, as Lord Mansfield stated it in classic terms in the case of John Wilkes [(1970) 4 Hurr 2528 at 2539], means "sound discretion guided by law. It must be governed by rule, not by humour; it must not be arbitrary, vague and fanciful".
349. Considering the above, we are required to answer as to whether the exercise of discretion and award of costs by the arbitrator, in the instant case, violates the "fundamental policy of Indian law" within the meaning of 51 (2004) 8 SCC 307 Page 272 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Section 34(2) (b)(ii) of the Arbitration and Conciliation Act' 1996. The discretion exercised by the arbitral tribunal in awarding costs, is such, which would shock the conscience of the Court. We may note that the arbitration proceedings being of international commercial arbitration, the ground of "patent illegality"
or "perversity" appearing on the face of the award as set out in sub-section (2)(a) of Section 34 of the Arbitration and Conciliation Act' 1996 is not available. We have to fallback to the principles laid down by the Apex Court in Ssangyong Engg35 wherein the Apex Court has given a word of caution that judicial interference with an arbitral award in an international commercial arbitration on the plea of "contravention with the fundamental policy of Indian law" or "in conflict with the most basic notions of justice or morality" can be attributed only in very exceptional circumstances when the conscience of the Court is shocked by the infraction of fundamental notions or principles of justice. Under no circumstance can any court interfere with the arbitral award on the ground that the justice has not been done in the opinion of the Court, inasmuch as, such an attempt would be an entry into the merits of the dispute which is contrary to the ethos of Section 34 of the Act' 1996.
350. Applying the test set out in Ssangyong Engg35, the high threshold for the application of the "most basic notions of justice" test, we are of the considered opinion that this standard is not satisfied merely on the ground that Page 273 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the arbitrator had given expansive meaning to the provisions of Section 31A by awarding costs of litigation drawn in higher courts, such as High Court or the Supreme Court. By including them in the expression "any other expenses incurred in connection with the arbitral or court proceedings and the arbitral award", the discretion exercised by the arbitrator with the findings noted hereinabove to award costs of litigation on full indemnity basis to the successful party considering the conduct of the respondent no.1 cannot be said to be unreasonable which shocks the conscience of the Court to hold the award being contrary to the public policy of India within the meaning of Section 34(b)(ii) of the Act' 1996. With the above, we are afraid to agree with the opinion drawn by the learned Single judge to set aside the award of costs.
351. As regards the computation towards costs incurred by the claimant, the claims have been set out in full in the written statement for the counsel for the claimant and no submission has been made by the learned Senior counsel for the respondents to attack the same. We, therefore, hold that the decision of the tribunal for award of costs incurred by the claimant in conducting the arbitration proceedings and Court proceedings relating to the arbitration proceedings, on full indemnity basis, while exercising its discretion under Section 31A of the Act' 1996, cannot be said to be contrary to the public policy and cannot be interfered as such.Page 274 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined (H) - Doctrine of Severability -When claims are distinct :-
352. We, therefore, reach at the conclusion that apart from the arbitral award for damages of INR 84 crores towards "loss of profit" along with 12% interest p.a. passed in favour of the claimant, the award for all other claims of the claimant awarded by the arbitral tribunal cannot be interfered with.
353. Thus, we reached at the stage where we have to address the issue as to whether the award passed in a arbitral proceedings can be severed to save the valid part of the award while setting aside the invalid one.
354. The question about severability of the arbitral award has been addressed by the Constitution bench of the Apex Court in a recent decision in Gayatri Balasamy v.
ISG Novasoft Technologies Ltd.52 Referring to Section 34(2)(a) (iv), it was noted therein that the provision permits the Court to sever the non-arbitrable portions of an award from arbitrable ones. This serves a two-fold purpose: First, it aligns with Section 16 of the Act' 1996, which affirms the principle of kompetenz kompetenz, that is, the arbitrators' competence to determine their own jurisdiction. Secondly, it enables the Court to sever and preserve the "valid" part(s) of the award while setting aside the "invalid" ones. It was noted that it cannot be argued that the Court is not empowered to undertake such a segregation. It was 52 [2025 SCC OnLine SC 986] Page 275 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined held that the power conferred under the proviso to Section 34(2)(a)(iv) is clarificatory in nature. The authority to sever the "invalid" portion of an arbitral award from the "valid" portion while remaining within the narrow confines of Section 34 is inherent in the Court's jurisdiction while setting aside of an award. It was held that it would be incongruous to hold that power to set aside would only mean power to set aside the award in its entirety and not in part. A contrary interpretation would not only be inconsistent with the statutory framework but may also result in valid determinations being unnecessarily nullified. However, a caveat was added by saying that partially setting aside of the award may not be feasible when the "valid" and "invalid" portions are legally and practically inseparable. In simpler words " valid" and "invalid" portions must not be interdependent or intrinsically intertwined. If that is so, the award cannot be set aside in part.
355. The observations of the Apex Court in paragraphs '32' to '37' on the principles of severability of awards are relevant to be extracted hereinunder :-
"32. In the present controversy, the proviso to Section 34(2)(a)(iv) is particularly relevant. It states that if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the arbitral award which contains decisions on matters non-submitted may be set aside. The proviso, therefore, permits courts to sever the non-arbitrable portions of an award from arbitrable ones. This serves a two-fold purpose. First, it aligns with Section 16 of the 1996 Page 276 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined Act, which affirms the principle of kompetenzkompetenz -- that is, the arbitrators' competence to determine their own jurisdiction. Secondly, it enables the court to sever and preserve the "valid" part(s) of the award while setting aside the "invalid" ones. Indeed, before us, none of the parties have argued that the court is not empowered to undertake such a segregation.
33. We hold that the power conferred under the proviso to Section 34(2)(a)(iv) is clarificatory in nature. The authority to sever the "invalid" portion of an arbitral award from the "valid" portion, while remaining within the narrow confines of Section 34, is inherent in the court's jurisdiction when setting aside an award.
34. To this extent, the doctrine of omne majus continet in se minus--the greater power includes the lesser--applies squarely. The authority to set aside an arbitral award necessarily encompasses the power to set it aside in part, rather than in its entirety. This interpretation is practical and pragmatic. It would be incongruous to hold that power to set aside would only mean power to set aside the award in its entirety and not in part. A contrary interpretation would not only be inconsistent with the statutory framework but may also result in valid determinations being unnecessarily nullified.
35. However, we must add a caveat that not all awards can be severed or segregated into separate silos. Partial setting aside may not be feasible when the "valid" and "invalid" portions are legally and practically inseparable. In simpler words, the "valid" and "invalid" portions must not be inter- dependent or intrinsically intertwined. If they are, the award cannot be set aside in part.
36. The Privy Council, in Pratap Chamaria v. Durga Prasad Chamaria, addressed this issue with the following pertinent observations:Page 277 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025
NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined "...If, however, the pronouncement of the arbitrators is such that matters beyond the scope of the suit are inextricably bound up with matters falling within the purview of the litigation, in that case, the court would be unable to give effect to the award because of the difficulty that it cannot determine to what extent the decision of the subject-matter of the litigation has been affected and coloured by the decision of the arbitrators in regard to matters beyond the ambit of the suit...."
Thus, the power of partial setting aside should be exercised only when the valid and invalid parts of the award can be clearly segregated--particularly in relation to liability and quantum and without any corelation between valid and invalid parts.
37. We would now proceed to examine, the permissibility and scope of the court's modification powers, within the parameters of Section 34 of the 1996 Act. In doing so, we will distinguish the court's power of modification from : (i) the court's power of setting aside an award; (ii) the arbitrator's power under Section 33 to correct, reinterpret, and/or issue an additional award; and
(iii) the power of the court to remand the award to the arbitrator under Section 34(4)."
356. In his separate judgment, while concurring with the majority view on point of severance, Mr. Justice K.V. Vishwanathan has held that severance as a concept is is recognized intrinsically in Section 34 itself. The consistent view of the Apex Court has been when there are several claims adjudicated and if awards on a few claims fall foul of Section 34, such standalone claims falling foul of Section 34 can be set aside as long as they are capable of being severed without affecting the other Page 278 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined parts of the award. In other words, if the claims falling foul of Section 34 are not inseparably intertwined with the good portion of the award, the award can be severed. Referring to the J.G. Engineers (P) Ltd. vs. Union of India & Anr.53, it was noted therein that if an award deals with and decides several claims separately and distinctly, even if the court finds that the award in regard to some items is bad, the court will segregate the award on items which did not suffer from any infirmity and uphold the award to that extent.
357. It was observed that the proviso placed in Section 34(2)
(a)(iv) is not only an acknowledgment of partial setting aside not being a concept foreign to the setting aside power but also of parts of the award being legitimately viewed as separate and distinct. The proviso itself envisages parts of an award being severable, capable of segregation and being carved out. The proviso is, in fact, the clearest manifestation of both an award being set aside in part as well as an award comprising of distinct components and parts.
358. Referring to the decision of the Delhi High Court in National Highways Authority of India vs. Trichy Thanjavur Expressway Ltd.54, it was noted therein that the award may comprise a decision rendered on multiple claims. Each claim though arising out of a composite contract or transaction may be founded on distinct facts and flowing from separate identifiable 53 [(2011) 5 SCC 758] 54 [2023 SCC OnLine Del 518] Page 279 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined obligations. Just as claims may come to be preferred resting on a particular contractual right and corresponding obligation, the decision which an arbitral tribunal may render on a particular claim could also be based on a construction of a particular covenant and, thus, stand independently without drawing sustenance on a decision rendered in the context of another. If such claims be separate, complete and self-contained in themselves, any decision rendered thereon would hypothetically be able to stand and survive irrespective of an invalidity which may taint a decision on others. As long as a claim is not subordinate, in the sense of being entwined or interdependent upon another, a decision rendered on the same by the arbitral tribunal would constitute an award in itself. While awards as conventionally drawn, arranged and prepared may represent an amalgam of decisions rendered by the arbitral tribunal on each claim, every part thereof is, in fact, a manifestation of the decision rendered by it on each claim that may be laid before it. The award rendered on each such claim rules on the entitlement of the claimant and the right asserted in that regard. One could, therefore, validly, subject of course to the facts of a particular case, be entitled to view and acknowledge them as binding decisions rendered by the arbitral tribunal on separate and distinct claims.
359. It was, thus, held by Mr. Justice Vishwanathan that the power to set aside will include the power to partially set Page 280 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined aside and sever the portions of the award which fall foul of Section 34, subject to the riders noted as under :-
"The power to partially sever an offending part of the award would ultimately depend on whether the said decision is independent and distinct and whether an annulment of that part would not disturb or impact any other finding or declaration that may have been returned by the AT. The question of severability would have to be decided bearing in mind whether the claims are interconnected or so intertwined that one cannot be segregated from the other. This for the obvious reason that if the part which is sought to be set aside is not found to stand independently, it would be legally impermissible to partially set aside the award. A partial setting aside should not lead to a component of the award being rendered vulnerable or unsustainable. It is only when the award relates to a claim which is found to stand on its own and its setting aside would not have a cascading impact that the Court could consider adopting the aforesaid mode."
(I) Conclusion :-
360. Noticing the above position of law, we find that the award of claim of the sum of INR 22.19 crores together with interest @ 12% p.a. upheld by us, is separable from the award of damages for "loss of profit" to the tune of INR 84 crores along with interest @ 12% p.a., which has been held invalid being contrary to the fundamental policy of Indian law and most basic notions of justice within the scope of Section 34(2)(b)(ii). The award of damages for "loss of profit" of INR 84 crores with interest is held invalid being beyond the competence of the arbitral tribunal in view of Clause 34(A) of the LLP Page 281 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined agreement and is severed from the valid parts of the award, as held hereinbefore.
361. With the above, the arbitral award dated 16.04.2021 is upheld, in part, for the following claims :-
(a) Award in favour of the claimant-appellant and respondent no.4 and order to respondent no.1 to pay M/s.C2R Projects LLP the sum of INR 22.19 crores together with interest at the rate awarded by the arbitral tribunal.
(b) Award of costs as imposed by the arbitral tribunal upon the respondents no.1 and 2 jointly and severally in relation to the arbitration proceedings towards all the costs and expenses incurred by the claimant on a full indemnity basis.
362. Lastly, on the question of determination of reasonable fees of the arbitrator, though we have found that the determination under the order dated 24.01.2019 by the Presiding arbitrator was unilateral and that we have power to fix a reasonable fee of the arbitrators being Court, in view of Section 39 (2) and (3) of the Arbitration Act' 1996, but we could not convince ourselves to the submission of the respondents that the third arbitral tribunal could not have demanded fee more than the amount fixed by the first two tribunals. The fact remains that much time (approx 2 years) had elapsed from the fixation of fee by the first tribunal. The revision of fee by Page 282 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025 NEUTRAL CITATION C/FA/2819/2024 CAV JUDGMENT DATED: 13/06/2025 undefined the third tribunal further cannot be said to be unreasonable as it was fixed considering the ICC scale of fee as a guiding factor. In the panel of three arbitrators, two were international arbitrators and the respondents had consented to their appointment. The fee fixed by the Presiding Arbitrator of the third arbitral tribunal, as such, cannot be held to be unreasonable or unfair.
(J) - Operative Portion :-
363. With the above, the appeals under Section 37 of the Arbitration Act' 1996 filed by the claimant are partly allowed. The arbitral award dated 16.04.2021 is upheld, in part, and is set aside to the part indicated to the above extent.
364. The judgment and order dated 05.07.2024 passed by the learned Single judge in setting aside the arbitral award, in its entirety, on the ground of jurisdictional error, is hereby set aside.
365. The appeals filed by the respondents under Section 37 of the Arbitration Act' 1996 stand disposed of in the above terms.
366. Resultantly, the Arbitration Petition No.110 of 2022 filed by the claimant for execution of the arbitral award, which has been disposed of by the learned Single judge in view of the setting aside of the award in its entirety, is hereby revived. Office is directed to list the said petition before the appropriate bench. No order as to costs.
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367. All pending civil applications, if any, are accordingly disposed of.
FURTHER ORDER After delivery of the judgement, on the request made by Mr. Saurabh Soparkar, the learned Senior advocate appearing for the respondents, the effect and operation of this judgment is stayed for a period of Eight (8) weeks from today. We may note the objection raised by Mr. Parth Contractor, learned advocate appearing for the appellant to the said request.
(SUNITA AGARWAL, CJ ) (PRANAV TRIVEDI,J) BIJOY B. PILLAI/ SAHIL RANGER/C.M. JOSHI Page 284 of 284 Uploaded by BIJOY B. PILLAI(HC00202) on Wed Jun 18 2025 Downloaded on : Thu Jun 19 21:25:07 IST 2025