IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Arbitration Application No. 5 of 2009 With MCC No. 44 of 2010 M/s Yamuna Gas & Chemicals Ltd. ..……… Applicant Versus Uttarakhand Power Corporation Ltd. And another ……… Respondents. Hon’ble Tarun Agarwala, J. Heard Shri L.P. Naithani, the learned senior counsel assisted by Shri B.D. Upadhyaya, the learned counsel for the Uttarakhand Power Corporation and Shri Yakesh Anand, the learned counsel assisted by Shri Jagdish Bisht, the learned counsel for M/s Yamuna Gas & Chemicals Ltd. An application u/S 11 of the Arbitration and Conciliation Act, 1996 was filed by M/s Yamuna Gas & Chemicals Ltd. for an appointment of an Arbitrator upon the failure of the Power Corporation in appointing an Arbitrator in terms of Clause 23 of the agreement dated 8th March, 2004. It was alleged that the total claim to be recovered from Uttarakhand Power Corporation was approximately Rs. 6.14 crores which included compound interest. The Court by an order dated 24th June, 2009 appointed Justice Vijendra Singh, former Chief Justice of Punjab and Haryana High Court, as a single member arbitral tribunal to adjudicate upon and settle the dispute between the parties. Based on the aforesaid order, the Arbitrator entered into a reference and notified the parties to file their claim petitions by an order dated 8th August, 2009. The Arbitrator indicated his fees structure, namely, that he would charge a reading fee and also a fee payable per sitting by each party and, in the event, the arbitration is to take place outside 2 his place of residence, the travelling fare and other expenses would also be incurred by the parties. By the said order, the Arbitrator fixed Rs. 50,000/- towards the administrative expenses. The Arbitrator also directed the parties to deposit a sum of Rs.1 lac which would be adjusted towards the reading fee and fee per sitting. The Arbitrator indicated that the reading fee and the fee per sitting would be finalized after the statement of the claim has been filed. On 26th September, 2009, the learned counsel for the Uttarakhand Power Corporation, while handing over a cheque of Rs. 75,000/- in terms of the order passed by the Arbitrator, submitted that the fee indicated by the Arbitrator was on the higher side. The Arbitrator, in its order dated 26th September, 2009, indicated that the fee had only been fixed tentatively and would be finalized after the statement of the claim is filed. By an order dated 31st October, 2009, the Arbitrator fixed Rs. 25,000/- as the arbitration fee per hearing to be paid by each party. On 19th December, 2009, the Power Corporation filed a counter claim on the basis of which the Arbitrator fixed Rs. 15,000/- per hearing for each party on the counter claim. As a result of the aforesaid orders, the Arbitrator has fixed Rs. 40,000/- per hearing per sitting to be paid by each party. The reading fee has not as yet been finalized and tentatively a sum of Rs.50,000/- has been fixed towards administrative expenses. A modification application No.44 of 2010 has been filed on behalf of Power Corporation praying that the Hon’ble Court may modify its order dated 24th June, 2009 and fix the fee of the Arbitrator and the venue of the arbitration proceedings. Shri L.P. Naithani, the learned Senior Counsel submitted that he is confining the modification application to the fixation of the fee of 3 the Arbitrator. The learned counsel submitted that the opposite party is a Power Corporation and is a public sector organization and is unable to pay the fee fixed by the Arbitrator. The learned Counsel submitted that the fee fixed by the Arbitrator was on the higher side and that the said fee should be modified and re-fixed by the Court. In support of his submission, the learned counsel has placed reliance upon a decision of the Supreme Court in Union of India Vs. Singh Builders Syndicate, (2009) 4 SCC 523. On the other hand, the learned counsel for the claimant M/s Yamuna Gas Chemicals Ltd. submitted that the fee fixed by the Arbitrator is appropriate but is not averse by the re-fixation of the fee by the Court. The Supreme Court in Union of India (Supra) indicated that the object of alternate dispute resolution process was to have an effective disposal of the dispute through a private forum. The Supreme Court considered the financial aspect of the arbitration proceedings and observed that where the arbitration is by a Tribunal consisting of a serving officer, the cost of the arbitration is very low but where the Tribunal consists of a retired Judge, the cost of arbitration becomes very high and the Government, at times, is forced to bear the high cost of arbitration. The Supreme Court observed that a solution should be found to save the arbitration proceedings from high arbitration cost and one such solution indicated by the Supreme Court was that the Court should fix the fee at the time of appointing the Arbitrator. The Supreme Court held as under :- “20. 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). 4 21. When a retired Judge is appointed as Arbitrator in place of serving 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 where retired Judge/s are Arbitrators. The large number of sittings and charging of very high fees per sitting, with several add-ons, without 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 the award. 22. 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 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. 23. It is necessary to find an urgent solution for this problem to save arbitration from the arbitration cost. Institutional arbitration has provided 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.” 5 In the light of the aforesaid, this Court finds that the Court while appointing an Arbitrator did not fix any fee of the Arbitrator and left it to the Arbitrator to determine his own fee and the procedure for the arbitration proceedings. The Arbitrator in his discretion has fixed Rs. 25,000/- and 15,000/-, i.e., Rs. 40,000/- as fee per sitting per party and has tentatively fixed Rs.50,000/- towards administrative charges and that a reading fee would be fixed at a subsequent stage after pleadings are completed. Having heard the learned counsel for the parties, this Court is of the opinion that it would not be appropriate for the Court to fix the fee of the Arbitrator at this stage, especially, when the Arbitrator has fixed his own fee. The Court has, however, considered the modification application of the opposite party and disposes of the application with a direction that the Uttarakhand Power Corporation will move an appropriate application for re- fixation of fee for hearing, reading fee, administrative charges, etc. before the Arbitrator requesting the Arbitrator to reconsider its decision and re-fix the fee in the light of the judgment of the Supreme Court in the case of Union of India (Supra). If such an application is moved, it is desired that the Arbitrator would reconsider his decision and pass appropriate orders on the next date fixed which is 29th May, 2010. If the opposite party is still aggrieved by the order passed by the Arbitrator, it would be open to the opposite party to move an appropriate application before the appropriate forum. A certified copy of this order shall be made available to the learned counsel for the parties on the payment of usual charges within 48 hrs. (Tarun Agarwala, J.) Dated 17.05.2010 Shiv