Delhi HC holds Parties liable to pay enhanced fees under new Rules if arbitration proceedings commence after notification of the Rules
In the recent judgement of Food Corporation of India v. Indian Council of Arbitration And Anr.[1], the Division Bench of the Delhi High Court has ruled that FCI would be liable to pay ICA the amended fee as per the 2005 Rules for arbitration proceedings commenced in 2007 even though the arbitration may have been registered before the new Rules came into effect.
The judgement was rendered on May 25, 2015 by Justices S. Ravindra Bhat and R.K. Gauba. The matter had been remanded back to the Division Bench by the Supreme Court in appeal vide order dated 02.02.2015 after the writ petition filed by the Appellant had been dismissed by a learned Single Judge in 2014.
FCI sought a direction from the Court to the respondent (Indian Council of Arbitration) to conduct the arbitration proceedings on the basis of the schedule of fee in force at the time of registration of the arbitration case and appointment of arbitrators (in 2003) and not to demand the enhanced arbitration fee in accordance with the 2005 Rules. This issue was a point of contention in 325 arbitration cases pending at the ICA for which the total enhanced fee demanded by ICA was approximately Rs. 36,530,100.
FCI claimed that ICA should be bound by the fee structure as per the Rules in force at the time of registration of the arbitration proceedings. They argued that they had paid the complete fee and the commencement of the arbitration proceedings had been delayed because of ICA’s inaction. It is pertinent to mention herein that arbitration proceedings commenced only in 2007. By such time, however, the rules of arbitration had been amended by ICA twice, once in 2003, and then, again in 2005. Apparently, the arbitrators appointed earlier, in 2005, (at the time when the 2002 Rules were in force) were not inclined to take responsibility at the old rates of remuneration.
ICA contended that the delay was directly attributable to FCI who repeatedly deferred the arbitration proceedings and led evidence to prove the same. Furthermore, they argued that FCI had willingly chosen to avail the services of ICA and knocked on its doors for assistance, conscious of the fact that the Rules of the institution may be amended from time to time. Thus, it is unfair for FCI to belatedly deny arbitrators’ their due fees for services rendered during the period for which the new 2005 Rules had become effective.
The Court ruled in favor of ICA and held FCI accountable for the enhanced fees in accordance with ICA Rules of arbitration as amended on 01.01.2005. It was held that the arbitrators who took up the cases for adjudication some time in 2007 or thereafter cannot be denied the fee that would be payable to them for services rendered during the period for which 2005 Rules had become operative. The Court did, however, note that there may have been some merit in the objection raised by FCI to the amended fee being charged, if the arbitration proceedings had commenced before the Rules were amended.
[1] 2015 SCC OnLine Del 9695
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