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Arbitration & Commercial LawSupreme Court of India

National Highways Authority of India v. Gayatri Jhansi Roadways Limited

Civil Appeal · 2019 INSC 744Decided 10 Jul 2019
Civil Appeal No. 5383 of 2019
Justice Rohinton Fali Nariman · Justice Surya Kant

Background

Two related contracts between NHAI and private contractors contained arbitration clauses fixing a specific, modest fee structure for arbitrators. After a 2015 amendment to the Arbitration Act introduced a Fourth Schedule prescribing arbitrator fees, a dispute arose over whether arbitrators could charge fees under the Fourth Schedule instead of the lower contractually-fixed amount. In one case the arbitrators had followed a Delhi High Court ruling (Gayatri Jhansi Roadways) applying the Fourth Schedule, and a Single Judge had used this to terminate the arbitrators' mandate; in the connected case the High Court had taken the opposite view.

Decision Breakdown

The Supreme Court held that where a contract already specifies the fee payable to arbitrators, that agreed fee structure governs and is not overridden by Section 31(8) read with Section 31A of the Act (which deal with costs generally, not arbitrators' fees) or by the Fourth Schedule. It also held that the Delhi High Court's contrary ruling in Gayatri Jhansi Roadways was not a correct statement of law. However, since the arbitrators had merely followed the law as it then stood (per the Delhi High Court), they had done nothing wrong, and the Single Judge's order terminating their mandate was set aside: the arbitration was directed to proceed, with the time for passing the award extended by one year.

Lesson Learnt

When parties freely negotiate and fix the fee payable to an arbitrator in their contract, that agreement controls and generally cannot later be overridden by invoking the statutory fee schedule, but an arbitrator who follows binding precedent in good faith will not be penalised even if that precedent is later held wrong.

National Highways Authority of India v. Gayatri Jhansi Roadways Limited – Legal Case Shots | LegalAware