The Gujarat High Court recently quashed an arbitral award, noting that the tribunal could not insist on a fee ten times higher than what was initially set by earlier members [Neeraj Kumarpal Shah and Manbhupinder Singh Atwal].
Justice Bhargav D Karia stated that the tribunal had not addressed any issues raised by the respondents concerning the exorbitant fee, thus violating the principles of “party autonomy.”
“The Tribunal could not have continued with the arbitration proceedings given the repeated objections raised by respondent Nos. 1 and 2 regarding the exorbitant fees, which were almost 10 times higher than those fixed by the Tribunal at its inception. Therefore, the same falls 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 the late Justice GT Nanavati. Justice Nanavati had remarked that the heavy cost implications of non-Indian arbitrators require consideration.
“Merely because the members of the Tribunal were replaced and two members were situated outside India, the Tribunal could not unilaterally increase the fees with only the claimant’s consent, ignoring the repeated objections of respondent Nos. 1 and 2,” the Court said in its verdict dated July 5.
The Court added that the tribunal should have respected “party autonomy” and not proceeded solely on the claimant’s consent to pay the fees by justifying the fee as per international standards.
“The arbitrators acted with bias and prejudice by unilaterally fixing the fees, to which the claimant readily agreed but respondent Nos. 1 and 2 objected. This bias is evident from the events during the arbitration proceedings.”
The arbitral award related 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 (the original claimant), Shah, and others had set up C2R Project LLP in India, but due to alleged siphoning of funds provided by the NRI businessman, arbitration proceedings were initiated.
The arbitral award in question was passed in 2021 after changes in the 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 fees, the Court also considered another issue regarding the denial of the opportunity to present evidence by the respondent parties, including Kumarpal, due to non-payment of the determined fees.
Terming it arm-twisting, the Court rejected the argument that the tribunal’s action of not deciding the counterclaims could never be grounds to challenge the award.
However, the Court refused to interfere with the tribunal’s findings regarding misappropriation from the account of C2R.
Regarding the award of damages and loss of profit, the Court noted a split opinion, with Presiding Member Anantham and Yeap ruling in favor of the claimant and Justice Nanavati siding with the respondents.
The Court agreed with the minority view of Justice Nanavati, stating, “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 a 20% share of the claimant by computing total damages and loss of Rs. 419.80 crore alleged to have been suffered by respondent No. 4-LLP based on an estimate made by the Tribunal.”
It also ruled that the tribunal was not right in awarding costs, fees, and expenses totaling ₹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 the award).
Senior Advocate Saurabh N Soparkar, along with advocates Bhadrish Raju, Karan Shah, Ajit Nair, and Himanshu C Desai, appeared for Neeraj Kumarpal Shah (Arbitration Petition 23 against the award).
Senior Advocate Kamal Trivedi, with advocate Parth Contractor, represented Manbhupinder Singh Atwal (Arbitration Petition 110 for the execution of the award).
Senior Advocate Shalin Mehta and advocates Pranav Vyas, Pranjal Buch, and Manhan Singh Saini also appeared in the matter.
