IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Arb. Case No. 21 of 2004 (O&M) Date of decision 30.3.2011 Punjab Agro Industries Corporation Ltd. ……petitioner Vs. Mota Singh Deol and others ……respondents CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA Present: - Mr. Anupam Singla, Advocate for the petitioner. Mr. Rakesh Bhatia, Advocate for applicant-respondents. Hemant Gupta, J (Oral) CM No. 25052-CII of 2010 Exemption is allowed as prayed for. CM No.25053-CII of 2010 Petitioner herein invoked the jurisdiction of this Court under Section 11 (4) of Arbitration and Conciliation Act 1996 for appointment of an Arbitrator in respect of the disputes arising out of an Agreement dated 10.9.1993 (Annexure P-2). Vide the aforesaid Agreement, petitioner entered into a Financial Collaboration Agreement with the respondent for starting Multi Oilseed Processing Unit in the State of Punjab. The petitioner invested an amount of Rs. 173 lacs in the equity capital of the Company. Respondent No. 1 had the option to purchase the equity shareholding of Rs. 173 lacs of the petitioner corporation in the Company within a period of 5 years from the date of commencement of commercial production at a price to be determined in terms of the Agreement. The Company started commercial Arb. Case No. 21 of 2010 production on 4.12.1997. Therefore, in terms of the Agreement, the petitioner sought that the respondent is to purchase equity shareholding of the petitioner. Since, the dispute arose in respect of purchase of equity shareholding of the petitioner, the petitioner appointed Shri Rakesh Khurana, AGM, PAIC as its Arbitrator in terms of Clause 35 of the said Agreement which is reproduced below: - 35. All differences and disputes between the parties hereto on any clause or matter herein contained or their respective rights, claims or liabilities hereunder or otherwise, howsoever, in relation to or arising out of this agreement, shall be referred to arbitration by two Arbitrators (one to be appointed by each party) who shall, before proceeding with the reference, appoint an Umpire and such Arbitration shall be governed by the Indian Arbitration Act, 1940 or any modification or re-enactment thereof for the time being in force.” In the present petition, this Court on 29.4.2010 noticed the fact that Shri Kuljit Singh Sidhu, Sr. Advocate of this Court has been nominated as an Arbitrator by respondent No. 1. Opportunity was given to the Arbitrators to appoint the Umpire within four weeks. It is thereafter, Hon’ble Mr. Justice A.L.Bahri (retd.) was appointed as an Umpire. The present application has been filed by respondent No. 1 herein for fixation of fees of the Arbitration Tribunal in view of the fact that the Arbitration Tribunal vide the order dated 6.9.2010 has fixed the following fee and expenses: - 1. Minimum Arbitration fee per Arbitrator Rs. 2 lacs. 2. Arbitration fee for each hearing per Arbitrator 15,000/- 3. Secretarial Expenses Rs. 750/- per hearing. 2 Arb. Case No. 21 of 2010 The Tribunal has also directed the parties to pay the minimum fee along with Secretarial expenses for five hearing in advance before the next day of hearing. It is in these circumstances, the applicant-respondent No. 1 sought the fixation of fee of the Arbitration Tribunal. Learned counsel for respondent has relied upon a judgment of Hon’ble the Supreme Court Union of India vs. M/s Singh Builders Syndicate 2009(4) SCC 523, wherein the issue of claim of higher fee by the Arbitrator has been noticed and a mechanism to meet out such expenses have been delineated. It was held to the following effect: - 10. Another aspect referred to by the appellant, however requires serious consideration. When the arbitration is by a Tribunal consisting of serving officers, the cost of arbitration is very low. On the other hand, the cost of arbitration can be high if the Arbitral Tribunal consists of retired Judge/s. When a retired Judge is appointed s Arbitrator in place of service officers, the government is forced to bear the high cost of Arbitration by way of private arbitrator’s fee even though it had not consented for the appointment of such non-technical non-serving persons as Arbitrator/s. there is no doubt a prevalent opinion that the cost of arbitration becomes very high in many cases were retired Judge/s are Arbitrators. The large number of sitting and charging of very high fees per sitting, with several add- ons with out any ceiling, have many a time resulted in the cost of arbitration approaching or even exceeding the amount involved in the dispute or the amount of Award. When an arbitrator is appointed by a Court without indicating fees, either both parties or at least one party is at a disadvantage. Firstly, the parties feel constrained to agree to whatever fees is suggested by the Arbitrator even if it is high or beyond their capacity. Secondly, if a high fee is claimed by the Arbitrator and one party agrees to pay such fee, the other party, who is unable to afford such fee or reluctant to pay such high fee, is put to an embarrassing position. He will not be in a position to express his reservation or objection to the high fee, owing to an 3 Arb. Case No. 21 of 2010 apprehension that refusal by him to agree for the fee suggested by the arbitrator may prejudice his case or create a bias in favour of the other party who readily agreed to pay the high fee. It is necessary to find an urgent solution for this problem to save arbitration from the arbitration cost. Institutional arbitration has provide a solution as the Arbitrators’ fees is not fixed by the Arbitrators themselves on case to case basis, but is governed by a uniform rate prescribed by the institution under whose aegis the Arbitration is held. Another solution is for the court to fix the fees at the time of appointing the arbitrator, with the consent of parties, if necessary in consultation with the arbitrator concerned. Third is for the retired Judges offering to serve as Arbitrators, to indicate their fee structure to the Registry of the respective High Court so that the parties will have the choice of selecting an Arbitrator whose fees are in their ‘range’ having regard to the stakes involved. What is found to be objectionable is parties being forced to go to an arbitrator appointed by the Court and then being forced to agree for a fee fixed by such Arbitrator. It is unfortunate that delays, high cost, frequent and sometimes unwarranted judicial interruptions at different stages are seriously hampering the growth of arbitration as an effective dispute resolution process. Delay and high cost are two areas where the Arbitrators by self regulation can bring about marked improvement. Learned counsel for the petitioner states that keeping in view the facts and circumstances of the case, it is a case where a sole Arbitrator should be appointed rather than an Arbitral Tribunal of three members as such multi members Tribunal delays the conclusions of the proceedings keeping in view the availability of all the members of the Tribunal and increases the cost of Arbitration. Mr. Bhatia, learned counsel for respondent No. 1, on the other hand, seeks change of Umpire but does not agree for the settlement of dispute by a sole Arbitrator. 4 Arb. Case No. 21 of 2010 I have learned counsel for both the parties and examined the aforesaid judgment in Union of India’s case (supra). I am of the opinion that it is a case where the Agreement contemplating the settlement of dispute by Arbitral Tribunal consisting of one Arbitrator each to be appointed by the parties and the Umpire appointed by the Arbitrator should not be insisted upon in the facts of the present case. The process of settlement of disputes by the process of Arbitration is to cut down delay and to provide a mechanism for settlement of dispute in an informal manner and at a affordable cost. The claim of fee not in-commensurate with the nature of dispute between the parties is not uncommon. One cannot loose sight of the fact that an Arbitrator appointed by the party to a dispute generally tend to take view which is favourable to the party appointing them. Therefore, the ultimate decision is that of the Umpire. Therefore the appointment of an Arbitrator by each of the parties does not serve any purpose substantially except increasing the cost of arbitration proceedings and also to delay the same. In view thereof, the dispute between the parties is ordered to be settled by a sole Arbitrator. Hon’ble Mr. Justice N.K.Kapoor (Retd.) is appointed as a sole Arbitrator. Learned Arbitrator shall be entitled to fee not exceeding Rs. 55000/- per hearing and in aggregate for not more than ten hearings apart from the expenses of Rs. 50,000/- to be shared equally by both the parties. Disposed of. (HEMANT GUPTA) JUDGE 30.3.2011 preeti 5