The Calcutta High Court, under Justice Bihas Ranjan De, recently clarified the powers of an arbitrator regarding the fixation of their remuneration. The court ruled that an arbitrator can set their own fee in consultation with the parties involved in arbitration. This decision is especially significant as it can be done even if it does not comply with the fee structure set out in the Fourth Schedule of the Arbitration and Conciliation Act, 1996, as long as both parties agree on the fee.
In the case before the court, disputes arose between Marco Francesco Shoes (India) Private Limited and P & P Business Private Limited over a sand block lease. The arbitration proceedings, initiated over a breach of agreement concerning non-payment of fees, led to the arbitrator setting a lump sum fee of ₹30 lakh. This was disputed by the petitioner, who filed a revision application under Article 227 of the Constitution, claiming that the fee was excessive and should have been based on the Fourth Schedule's model of ₹9.93 lakh.
The court noted that the Fourth Schedule is merely a guideline and not binding. It emphasized that when the parties have agreed on a fee contractually, the Fourth Schedule does not apply. The court highlighted that the arbitrator is granted the autonomy to fix their fee in such a case, and any agreement reached between the parties would take precedence over statutory structures.
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Challenge to Arbitrator's Fee
The petitioner, through counsel Mr. Partha Pratim Roy, argued that the unilateral fixation of the fee by the arbitrator violated the principles of party autonomy. He contended that the Arbitration and Conciliation Act does not grant arbitrators the authority to set enforceable orders regarding their fees unless agreed upon by the parties. However, the court disagreed, noting that the arbitrator's role allows for such discretion, especially when both parties are in agreement.
A key aspect of the case was whether the petitioner could challenge the arbitrator's decision on remuneration under Article 227 of the Constitution. The court clarified that the High Court’s jurisdiction in arbitration matters is limited, and a revision application under Article 227 cannot be filed simply because a party is dissatisfied with an arbitrator’s fee decision.
The court explained that Section 37(2) of the Arbitration and Conciliation Act only allows appeals in specific circumstances, not for issues like fee disputes. As such, the court concluded that the appropriate recourse for the petitioner was to challenge the final award under Section 34 of the Act, rather than invoking the supervisory jurisdiction of the High Court.
Ultimately, the court dismissed the revision application, reaffirming the minimal role of judicial intervention in arbitration matters. The decision underscores the autonomy of arbitrators in fixing their remuneration when parties have agreed to it and limits the scope of judicial review in such cases.
The case emphasizes the importance of respecting party autonomy in arbitration and provides clarity on how arbitrators can determine their fees in the absence of statutory restrictions.
Case Title: P & P Business Private Limited vs. Marco Francesco Shoes (India) Private Limited
Case Number: C.O.140 of 2023
Judgment Date: April 29, 2025
