Case Note & Summary
The High Court of Bombay was seized of three applications under Section 11 of the Arbitration and Conciliation Act, 1996, filed by Abhijeet Infrastructure Ltd., M/s Ganpati Builders and Developers and others, and Education Design Architects India Pvt. Ltd., respectively. In each case, the designate judge had allowed the applications and appointed arbitrators, but directed the applicants to deposit process costs ranging from Rs.5,000 to Rs.7,500. The present common judgment addressed the legality of these directions. The applicants contended that the imposition of processing costs lacked statutory backing and was contrary to law, while the respondents defended the directions, relying on the schemes framed under Section 11(10) of the Act, particularly Clause 12 of the Appointment of Arbitrators by the Chief Justice of Bombay High Court Scheme, 1996, and the Appointment of Arbitrator by Chief Justice of India Scheme, 1996. These clauses required the party making a request to pay costs for processing, with amounts varying. The court noted that the schemes were formulated before the Act came into force in 1996 and at a time when orders under Section 11 were considered administrative in nature. However, after the Supreme Court's decision in S.B.P. & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618, such orders are judicial. The court observed that the Arbitration Act contains no provision requiring parties to pay costs for processing requests; the liability is limited to court fees and process fees under applicable rules. The court also considered the wide disparity in fees across different High Courts, indicating the lack of statutory foundation. Consequently, the direction to deposit processing costs was held unsustainable. The court ordered deletion of the direction for payment of process fees/costs for processing the request in all three matters.
Headnote
A) Arbitration - Appointment of Arbitrator - Processing Costs for Section 11 Applications - Arbitration and Conciliation Act, 1996, Section 11, Section 11(10) - The High Court examined whether applicants under Section 11 are liable to pay processing costs as demanded under Clause 12 of schemes framed under Section 11(10). The Court held that the Arbitration Act itself does not provide for such costs; the schemes were framed prior to the Act and at a time when the order was treated as administrative, but after the Supreme Court's decision in S.B.P. & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618 declaring it a judicial order, only court fees and process fees as per applicable rules are required. The direction to deposit costs for processing requests was found unsustainable and was deleted. (Paras 2-5)
Issue of Consideration
Whether the applicants who have filed applications under Section 11 of the Arbitration and Conciliation Act, 1996 are liable to pay processing costs as demanded under Clause 12 of the schemes framed under Section 11(10), and whether the direction to deposit such costs is sustainable.
Final Decision
The direction with regard to payment of process fees/costs for processing the request is deleted in all three applications. The court held that there is no statutory provision for such costs under the Arbitration Act, and the orders being judicial, only court fees and process fees as per applicable rules are payable.
Law Points
- Appointment of arbitrators under Section 11 of the Arbitration and Conciliation Act
- 1996
- processing costs under schemes framed under Section 11(10)
- judicial nature of order after S.B.P. & Co. v. Patel Engineering Ltd.
- distinction between court fees/process fees and processing costs
- statutory basis for costs
Case Details
2013 LawText (BOM) (07) 204
Miscellaneous Civil Application (Arbitration) Nos. 142/2012, 791/2012, 1090/2012
S.P. Bodalkar, B.P. Maldhure, S.S. Godbole, S.G. Jagtap, C.S. Dhore, Shyam Dewani
Abhijeet Infrastructure Ltd.; M/s Ganpati Builders and Developers & Others; Education Design Architects India Pvt. Ltd.
State of Maharashtra & Others; M/s Surmee Agencies Pvt. Ltd. & Others; Mr. Deepak Jain
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Nature of Litigation
Applications under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of arbitrators, with a common challenge against the direction to pay processing costs.
Remedy Sought
Deletion of directions to deposit process costs as imposed by earlier orders in each application.
Filing Reason
Despite the applications being allowed and arbitrators appointed, the designate judge directed the applicants to pay processing costs, which the applicants contended was without legal basis.
Previous Decisions
MCA No. 142/2012: Order dated 12.10.2012 allowed application and appointed arbitrator with direction to deposit costs. MCA No. 791/2012: Order dated 05.04.2013 allowed application and appointed arbitrator by consent with direction to deposit costs. MCA No. 1090/2012: Order dated 03.05.2013 allowed application and appointed arbitrator with direction to deposit costs.
Issues
Whether applicants under Section 11 of the Arbitration and Conciliation Act, 1996 are liable to pay processing costs as demanded under Clause 12 of schemes framed under Section 11(10).
Submissions/Arguments
Applicants argued that the Act does not empower imposition of processing costs and that only court fees and process fees are payable as per applicable rules.
Respondents relied on the schemes and defended the imposition of processing costs.
Ratio Decidendi
There is no statutory provision in the Arbitration and Conciliation Act, 1996 that requires applicants under Section 11 to pay costs for processing requests. The schemes framed under Section 11(10) were made before the Act came into force and at a time when the order was considered administrative. After the Supreme Court's ruling in S.B.P. & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618, declaring such orders judicial, only court fees and process fees as per applicable rules are permissible. Directions to deposit processing costs under such schemes are unsustainable.
Judgment Excerpts
In all these matters after hearing both the parties, the designate Judge has allowed the applications and appointed the arbitrators. However, all the applicants have been directed to deposit the process fee ranging from Rs.5,000/ to Rs.7,500/ in the respective matters.
There is nothing to show in the Act, whereby parties/applicants are liable to pay costs for processing request.
It is relevant to note that prior to the judgment of the Supreme Court in the case of S.B.P. & Co. Versus Patel Engineering Limited & another the order of Chief Justice and/or designate Judge was treated as an 'Administrative Order'. Now, after the aforesaid judgment, it is declared to be a 'Judicial Order'.
In the result, I am inclined to delete the direction of costs as imposed in all these matters.
Procedural History
Three separate applications under Section 11 of the Arbitration and Conciliation Act, 1996 were filed. In each, the designate judge passed orders allowing the applications and appointing arbitrators, but directed the applicants to deposit process costs. The applicants challenged these directions, leading to a common hearing. The High Court heard the applications together and delivered a joint judgment, ultimately deleting the cost directions.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 11, Section 11(10)
