It is the paramount duty of the Arbitrator that he must stay neutral in arbitral proceedings to ensure delivery of a fair and equitable award which may serve the ends of justice. In a situation, wherein the Arbitrator unilaterally increases his fees and one of the parties accepts the increase wherein the other party resists, it gives rise to the likelihood of a bias in the mind of the Arbitrator against the party who was opposing the increase in fees. A division bench of the Supreme Court has recently decided to consider this issue of law.

This particularly intriguing issue was raised in the matter of Chennai Metro Rail Limited Administrative Building versus M/s Transtonnelstroy Afcons (JV) & Anr.¹wherein the Additional Solicitor General, Mr. N. Venkatraman, who was appearing on behalf of the Chennai Metro Rail Limited Administrative Building, raised this issue relying upon the judgement of Union of India v. Singh Builders Syndicate²and Oil and Natural Gas Corporation Ltd. V. Afcons Gunanusa JV³ and submitted that if an Arbitrator unilaterally increases his fees and if the same is opposed by one of the parties and accepted by the other party, there is a likelihood of bias in the mind of the Arbitrator against the party who opposed the increase in fees.

This submission was opposed by the Senior Advocate CA Sundaram by relying on the judgement of HRD Corporation (Marcus Oil and Chemical Division) v. Gail (India Limited Formerly Gas Authority of India Limited)⁴ and he submitted that if a case of the parties is based on bias, then it will be covered under Section 13 of the Arbitration and Conciliation Act, 1996⁵ and the only stage at which such a challenge could be raised is after the award is passed by the Tribunal. He further submitted that the case of bias would not fall under Section 14 of the Arbitration and Conciliation Act⁶ to automatically lead to the termination of the mandate of an Arbitrator.

To have a better understanding of the submission made by the Additional Solicitor General, we must have an overview of the opinion of the Supreme Court in both the judgments relied upon by him regarding this particular issue. In the case of Union of India v. Singh Builders Syndicate, the Supreme Court observed that if the Arbitrator is appointed by the court without indicating his fees, either of the parties or both the parties feel disadvantaged because the parties are either constrained to agree to whatever fees is fixed by the Arbitrator which might be beyond their paying capacity or if either of the parties is unable to afford the fees and resists the same, they are put to an apprehension that resisting the fees may create a prejudice in the mind of the Arbitrator against them or a bias towards the party who readily agreed to pay the fees of the Arbitrator. The Court further observed that Institutional arbitration has provided a solution as the Arbitrators’ fees is not fixed by the Arbitrators themselves but is governed by a uniform rate prescribed by the institution. Another plausible solution would be that the court that is appointing the Arbitrator may fix the fees of such Arbitrator at the time of appointing him, with the consent of both parties. The Court also suggested that the retired Judges who are offering to serve as an Arbitrator may indicate their fees to the registry of the respective High Court so that the parties may have the choice of selecting an Arbitrator whose fees is acceptable to them having regards to the stakes involved.

In the significant judgement of Oil and Natural Gas Corporation Ltd. V. Afcons Gunanusa JV, it was held by the Supreme Court that Arbitrators do not have the power to unilaterally fix their fees without the consent of the parties. 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 private claim against the parties regarding their remuneration.

In conclusion, the Supreme Court has observed in the present matter that this of law requires to be considered and decided expeditiously because it will have wider ramifications. After all, if there is a likelihood of any bias in the mind of the Arbitrator for either of the parties in the arbitration, it renders the entire arbitral process ineffective and hampers the very objective that the arbitral proceeding aims to achieve.

By - Prachi Pandey