India: Conundrum Around The Fourth Schedule Vis-À-Vis Section 38 Of The Arbitration & Conciliation Act, 1996


"The remedy for healthy development of arbitration in India is to disclose the fees structure before the appointment of arbitrators so that any party who is unwilling to bear such expenses can express his unwillingness. Another remedy is Institutional Arbitration where the arbitrator's fee is pre-fixed. The third is for each High Court to have a scale of arbitrator's fee suitably calibrated with reference to the amount involved in the dispute. This will also avoid different designates prescribing different fee structures. By these methods, there may be a reasonable check on the fees and the cost of arbitration, thereby making arbitration, both national and international, attractive to the litigant public. Reasonableness and certainty about total costs are the key to the development of arbitration. Be that as it may."1 The abovementioned observations of Justice R.V. Raveendran highlight that one of the primary concerns regarding arbitration in India prior to 2015 was the high costs associated with the same – including the arbitrary, unilateral and disproportionate fixation of fees by several arbitrators. In order to provide for a workable solution to the problem, the Law Commission of India, vide its 246th Report, recommended for a model schedule of fees for arbitrators, which was later introduced as the Fourth Schedule in the Arbitration & Conciliation Act ("Act") by way of amendment carried out w.e.f. October 23rd, 2015.


The Schedule IV does not specify whether the 'sum in dispute' mentioned therein would be the amount of the claim and the counter claim separately, or cumulatively. However, in Delhi State Industrial Infrastructure Development Corporation Ltd. (DSIIDC) Vs. Bawana Infra Development (P) Ltd.2 ,Hon'ble Justice Navin Chawla of the Delhi High Court interpreted the Fourth Schedule and observed that the model schedule of fee recommended by the Law Commission is based on the fee set by the Delhi International Arbitration Centre ("DIAC"). Since the fee schedule set by the DIAC specifically provides that the "Sum in dispute" shall include the counter claim made by any party. Therefore, the intent of the legislature and the purpose sought to be achieved clearly points to the conclusion that "Sum in dispute" would be a cumulative value of the claim and counter claim. It was further observed in the same judgment that, "Even in the general parlance, "sum in dispute" shall include both claim and counter claim amounts. If the legislature intended to have the Arbitral Tribunal exceed the ceiling limit by charging separate fee for claim and counter claim amounts, it would have provided so in the Fourth Schedule."3

It is pertinent to note that the proviso to Section 38 (1) of the Act provides that the Arbitral Tribunal may fix a separate amount of deposit for the claim and counter claim. Further, proviso to Section 38 (2) of the Act provides that in case of failure of a party to pay fee towards claim and counter-claim and where other party also does not pay the aforesaid share in respect of the claim or the counter-claim, the Arbitral Tribunal may suspend or terminate the arbitration proceedings in respect of such claim or counter-claim, as the case may be. Hence, it is clear that the Act has provided consequences of failure of parties to deposit the requisite fees.

The Hon'ble Delhi High Court in the matter of Chandok Machineries Vs. S.N. Sunderson and Co.4 endeavored to interpret Section 38 of the Act and held that a reading of Section 38 of the Act would show that the Arbitral Tribunal may fix separate amounts of deposit for the claim and the counter-claim. Para 39 of the judgment is reproduced here - "39. A reading of Section 38 would show that the Arbitral Tribunal may fix separate amounts of deposit for the claims and counter claims. Though the deposit is payable in equal shares by the parties, on the failure of a party to pay its share of the deposit, the other party may pay that share and in case of failure of the other party to pay the aforesaid share in respect of the claims or the counter claims, the Arbitral Tribunal may suspend or terminate the arbitration proceedings in respect of such claims or counter claims."

The above mentioned principle also found place in Gammon India Ltd. Vs.Trenchless Engineering Services (P) Ltd.5 wherein the Hon'ble High Court has held that the Arbitral Tribunal is entitled to a separate fee for the claim and the counter-claim.

An appropriate understanding of the applicability of Section 38 (1) was explained by Justice Navin Chawla at para 15 of the Bawana Infra case6 :

"15. Proviso to Section 38 (1) of the Act can only apply when the Arbitral Tribunal is not to fix its fees in terms of the Fourth Schedule to the Act. It would not have any bearing on the interpretation to be put to the Fourth Schedule. It is noted that as regards fee even under the Amended Act, the Arbitral Tribunal is free to fix its schedule of fee in an ad-hoc arbitration which is conducted without the intervention of the Court. Even where the Arbitral Tribunal is appointed by the Court under Section 11 of the Act, in absence of rules framed under Section 11 (14) of the Act, it is not in every case that the Arbitral Tribunal has to fix its fee in accordance with the Fourth Schedule to the Act. Therefore, the proviso to Section 38 (1) of the Act would have no bearing on the interpretation being put to the Fourth Schedule and the phrase "Sum in dispute" therein."


A separate fees to be fixed by the Arbitral Tribunal regarding claims and counter claims is not Res Integra. Under the Code of Civil Procedure, 1908, O.8 R. 6-A provides that the effect of counter claim shall be that of a cross-suit so as to enable the Court to pronounce a final judgment in the same suit, both on claims and counter claims. Thus, the settled principle of law is that when in a suit a counter-claim is filed, the defendant is required to pay separate court fee for the counter claim. The purpose of counter-claim is to avoid multiplicity of the proceedings. When counterclaim of the defendant is dismissed on adjudication, it forecloses the rights of the defendant subject to appeal and separate judgment is required to be pronounced under Rule 6A (2) by the Court with respect to counter claim.7 In other words, a defendant can claim any right by way of a counter-claim in respect of any cause of action that has accrued to him even though it is independent of the cause of action averred by the plaintiff and have the same cause of action adjudicated without.8 Thus, it is clear that counter claim is an independent suit and in this regard, separate court fee is required to be paid relegating the defendant to file a separate suit.

Thus, the position as to whether separate fees can be charged for claims and counter claims in the light of the Fourth Schedule to the Act has been explained by Justice Rajiv Shakdher in Paschimanchal Vidyut Vitran Nigam Limited V/s IL & FS Engineering & Construction Company Limited9 in the following words - "8.3 In this case, the admitted position is that none of the parties had approached the Court for appointment of an arbitrator in terms of the Arbitration Agreement obtaining between them. Parties had, it appears, agreed on the constitution of the Arbitral Tribunal. In these circumstances, in my view, the Court would have no role to play in fixing the fees of an Arbitral Tribunal as no such power is vested in the Court at present."

It is to be kept in mind that the Legislature is conscious of the fact that one model may not work for all domestic and ad hoc arbitrations. The fees scale could vary depending on the territory over which the concerned High Court exercises jurisdiction. The cost of living index and the nature and the value of claims that are lodged, would be factors that the concerned High Court may like to bear in mind while framing rules in respect of the fees that ought to be charged by an Arbitral Tribunal.


From the above observations of courts, it is clear that the Fourth Schedule of the Act is suggestive in nature. If it was otherwise, then there was no need for the legislature to provide under Section 11 (14) of the Act that the concerned High Courts should frame rules as may be necessary for determination of fees and the manner of its payment, albeit, after taking into account the rates specified in the Fourth Schedule. As far as adhoc Arbitrations are concerned, even under the Amended Act, the Arbitral Tribunal is free to fix its schedule of fee which is conducted without the intervention of the Court. The Fourth Schedule to the Act is not mandatory, but provides for a reasonable fee structure that may be adopted by the High Court in form of Rules, while appointing an arbitrator under Section 11 of the Act and may also be used by the parties and the arbitrators for arriving at a consensus on the fees payable to the Arbitral Tribunal.10 Reference to the Fourth Schedule is made for the purpose of fixing the maximum fee provided under the Fourth Schedule and not for saying that the 'sum in dispute' mentioned therein would include the fee for adjudicating counter-claim as well.


1. Sanjeev Kumar Jain vs. Raghubir Saran Charitable Trust and Ors. (2012 ) 1 SCC 455

2. 2018 (4) ArbLR 168 (Delhi)

3. Supra, Note 2

4. O.M.P. (COMM.) 321/2017

5. 2014 (3) MhLJ 946

6. Supra. Note 2

7. Bhajan Singh Vs. Jasvir Kaur (2016) 182 PLR 489 at Para 14

8. Jag Mohan Chawla and another Vs. Dera Radha Swami Satsang & Ors. (1996) 4 S.C.C. 699

9. O.M.P. (MISC.) (COMM.) 164/2018 decided on 16.08.2018.

10. National Highways Authority of India vs. Gammon Engineers and Contractor Pvt. Ltd. O.M.P. (T) (COMM.) 39/2018, IA Nos. 6559 and 9228/2018 Decided On: 20.07.2018

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