Clause Agreements v. Rule of Law- What Prevails?
An agreement between parties to resort to arbitration is the basis for any arbitration procedure to be initiated without the intervention of court orders. Such an agreement usually entails the procedure for the arbitration, the settling of arbitration costs, and the clause under which arbitration can be invoked. However, a question of law that was unanswered until the 2019 verdict in Gammon Engineers and Contractor Pvt Ltd v. National Highways Authority of India was whether the rule of law overrides the agreed-upon arrangements between the concerned parties arbitration dispute.
Facts in Brief-
- Parties to the case had entered into a contract where an agreement to use arbitration for resolution of any dispute was entered into
- This agreement also entailed the fees payable to the arbitrators of the case, notified by a policy circular provided by the Respondent.
- The appellant shortly issued another circular that made changes to the clause regarding the payable fee. This change made the tremendous cost significantly higher than the initially agreed-upon terms.
- Arbitration was invoked on the grounds of the dispute that arose between the parties regarding the fee structure. Both parties stick to their original claims, whereby the appellant was adamant about only paying the fee agreed upon in the contract. The respondent wanted to follow the amended price as per the new government circular.
- A tribunal was constituted, and the first award (decision) regarding the matter was that parties were to follow the provisions laid down in the Fourth Schedule of the Arbitration and Conciliation Act, 2015, which revolved around the regulation of fees for the arbitral tribunal and arbitrators.
- A back and forth of petitions being filed in the High Courts was observed, which contested the decision of the arbitral tribunal and the matter reached the Supreme Court as the previous decision of upholding the fee structure under the Fourth Schedule of the Act was found to be dissatisfactory to the respondent of the case.
Judgment delivered by the Supreme Court regarding the issue held that the award of the arbitral tribunal, in this case, had no merit as the Arbitral Tribunal reserved the right to charge the fee which was mentioned in the agreement between the parties, the Court further stated that the maintenance of the Fourth Schedule of the 2015 Act was not mandatory.
While the provisions about the fee structure and payable fee to arbitrators and the arbitral tribunal are covered in the Act, the Apex Court upholding the terms of the agreement between the parties superior to the Fourth Schedule only point fingers towards the fact that the parties’ choice prevails over the rule of law when it comes to fees which are payable to the arbitral tribunal.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre shall not be responsible for any errors caused due to human error or otherwise.