Arbitral Tribunal could not have unilaterally increased fee: Gujarat High Court

The Gujarat High Court recently quashed an arbitral award, observing that the tribunal could not have insisted on the payment of fee which was ten times more than what was fixed by the earlier members [Neeraj Kumarpal Shah and Manbhupinder Singh Atwal]..Justice Bhargav D Karia said the tribunal had not addressed any of the issues raised by the respondent parties in the proceedings with regard to the exorbitant fee and thus violated the principles of “party autonomy”.“The Tribunal could not have continued with the arbitration proceedings in view of repeated objections raised by respondent nos. 1 and 2 for exorbitant fees almost 10 times than that was fixed by the Tribunal at its inception and therefore, the same would fall within the purview of section 34(2) of the [Arbitration and Conciliation] Act for setting aside the award,” the Court held..The tribunal consisted of Presiding Arbitrator Dato Anantham Kasinather and members Andre Yeap and late Justice GT Nanavati. Pertinently, Justice Nanavati had said that the heavy cost implications of non-indian arbitrators requires consideration.“Merely because members of the Tribunal have been replaced by the parties and two members are situated out of India, Tribunal could not have unilaterally increased the fees with the consent of the claimant only ignoring the repeated objections of respondent nos. 1 and 2,” the Court said in the verdict dated July 5..The Court added that the tribunal ought to have accorded greater deference to the “party autonomy” and not proceeded only on the consent of claimant to pay the fees by justifying the fee as per international standards. “The arbitrators have acted with bias and prejudice by unilaterally fixing the fees to which the claimant readily agreed but respondent nos. 1 and 2 objected the same which is obvious from the events which have taken place during the arbitration proceedings”.The arbitral award had been passed in relation to a business dispute between Manbhupinder Singh Atwal, a Non-Resident Indian who owned a Defence Advisory and Consultancy company in Oman, and businessman Neeraj Kumarpal Shah. Atwal (original claimant), Shah and others had set up C2R Project LLP in India but due to alleged siphoning off funds provided by the NRI businessman, arbitration proceedings had been started.The arbitral award in question was passed in 2021 after changes in composition of the tribunal at different times. The matter then reached the High Court which finally heard it this year..Besides the issue of exorbitant fee, the Court also considered another issue pertaining to denial of opportunity of leading evidence by the respondent parties including Kumarpal for non-payment of the determined fees.Terming it arm twisting, the Court rejected the argument that action of tribunal in not deciding the counter claims can never be a ground to challenge the award.However, the Court refused to interfere with the tribunal’s findings regarding misappropriation from the account of C2R. .On award of damages and loss of profit, the Court noted that there was split opinion with President Member Anantham and Yeap ruling in favour of claimant and Justice Nanvati being in favour of the respondent parties.The Court agreed with the minority view of Justice Nanavati and said "no award could have been passed under the head damages of loss and profit to be paid by respondent no.1 to the claimant to the extent of 20% share of claimant by computing total damages and loss of Rs. 419.80 Crore alleged to have been suffered by respondent no.4-LLP on the basis of estimate made by the Tribunal.”It also said the tribunal was not right in awarding costs, fees and expenses totalling ₹14,27,29,234.65 and Singapore Dollar 984,454.87 to the claimant. .Advocates Masoom K Shah, Jay Shah, Dhruvin Dossani and Parth Thummar represented Kamal Sevaram Jadhvani (Arbitration Petition 24 against award).Senior Advocate Saurabh N Soparkar with advocates Bhadrish Raju, Karan Shah, Ajit Nair and advocate Himanshu C Desai appeared for Neeraj Kumarpal Shah (Arbitration Petition 23 against award). Senior Advocate Kamal Trivedi with advocate Parth Contractor represented Manbhupinder Singh Atwal (Arbitration Petition 110 for execution of award). Senior Advocate Shalin Mehta and advocates Pranav Vyas, Pranjal Buch and Manhan Singh Saini also appeared in the matter. .[Read Judgment]