Oil and Natural Gas Corporation Ltd. vs Afcons Gunanusa JV
Background
ONGC and its contractor Afcons Gunanusa JV were locked in a long-running ad hoc arbitration (with 54 hearing sittings held) in which the three-member arbitral tribunal, after initially fixing fees, later unilaterally revised its own fee to Rs. 1 lakh per sitting: a change ONGC never agreed to. This dispute, along with related appeals about whether "sum in dispute" in the Fourth Schedule of the Arbitration Act applies separately to a claim and a counter-claim, and whether the Rs. 30 lakh fee ceiling applies per arbitrator or to the whole tribunal, was referred to a three-judge bench because of the widespread practical confusion these fee questions were causing across ad hoc arbitrations in India.
Decision Breakdown
The Court held that arbitrators cannot unilaterally fix and enforce their own binding fees (doing so would make them "judges in their own cause," violating party autonomy) though a tribunal may still apportion costs between the parties or ask for an advance deposit, and can exercise a lien over delivering the award if genuinely unpaid; any party unhappy with excessive fees can approach a court under Section 39(2). The Court further held that the Fourth Schedule's fee ceiling of Rs. 30 lakh applies per individual arbitrator (not divided among the whole tribunal), that a sole arbitrator gets an extra 25% on top of the schedule's amount, and that fees for a claim and a counter-claim must be computed and capped separately rather than cumulatively. Exercising its special constitutional power under Article 142, the Court dissolved the existing three-member tribunal in the ONGC-Afcons dispute itself (given the total breakdown of consensus on fees) and directed constitution of a fresh tribunal, while also deciding the two connected civil appeals (one dismissed, one allowed) and dismissing the pending miscellaneous applications. Justice Sanjiv Khanna wrote separately, reaching the same practical outcome but flagging that the "per arbitrator" fee reading makes ad hoc arbitration unaffordably expensive for ordinary litigants and urging Parliament/the government to revise the Fourth Schedule.
Lesson Learnt
In arbitration, fees should be settled clearly and in advance by agreement between the parties and arbitrators: an arbitrator cannot later impose a fee on the parties unilaterally, and if a fee dispute becomes intractable, courts have the power (including reconstituting the tribunal) to step in and protect the fairness of the process.