New Delhi: Seven years after three Rajasthan power distribution companies began arbitration proceedings against HCL Infosystems over a technology contract, they have not concluded but the tribunal, comprising of one former Supreme Court judge and two former High Court judges, has already been paid approximately Rs 13 crore in fees.
On 27 May, in the case of Jaipur Vidyut Vitran Nigam Ltd. v. HCL Infosystems Ltd, the Rajasthan High Court called out “exorbitant” per‑session fees for the tribunal, repeated and lengthy adjournments, and a series of extensions that had allowed the proceedings to extend far beyond the statutory timeline.
Justice Sameer Jain noted that a per‑sitting fee structure, sporadic hearings, and a change of venue had the cumulative effect of transforming the arbitration into a form of “luxury litigation” that undermined the core principles of efficiency, economy and expedition.
The case serves as an example of a deeper problem within the arbitration ecosystem, one that the higher judiciary has been warning about for over a decade. Spiralling arbitration costs, especially in ad hoc, retired‑judge tribunals, risk turning arbitration into an elite, high‑stakes forum rather than a genuinely cheaper and speedier alternative to traditional litigation.
The problem
The Arbitration and Conciliation Act was enacted to consolidate Indian arbitration, in line with the model law developed by the United Nations Commission on International Trade Law (UNCITRAL).
Arbitration’s promise rests on three core advantages over litigation—privacy, speed, and cost reduction. Despite a clear policy push towards institutional arbitration which is conducted under the rules of a permanent arbitral institution, most Indian arbitrations are still conducted on an ad-hoc basis where the parties and the tribunal themselves decide the procedure, fees and timetable. Without a formal structure, ad-hoc tribunals—often chaired by retired Supreme Court and High Court judges—often lack transparency and institutional discipline.
In Union of India v. Singh Builders Syndicate (2009), the Supreme Court acknowledged that arbitrations conducted by retired judges are becoming increasingly prohibitively expensive and unpredictable. Further, the court observed that institutional arbitration, with pre-fixed and published fee schedules, could offer greater certainty and predictability of costs.
Chief Justice Surya Kant, at an Arbitration Conference in London on 5 June expressed concern at arbitrations becoming prohibitively expensive and inefficient. “Arbitration was built to be the answer to the pathologies of formal litigation, and it is now seemingly acquiring each of those very failings. In other words, the remedy has come to resemble the disease it was designed to cure,” he said, according to a Live Law report.
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Policy efforts
The 246th Law Commission Report in 2014 identified the need for a “mechanism to rationalise arbitration fee structures”. It noted that “one of the main complaints against arbitration in India, especially ad hoc arbitration, is the high costs associated with the same—including the arbitrary, unilateral and disproportionate fixation of fees by several arbitrators”.
Acting on the recommendations of the report, Parliament has enacted the 2015 and 2019 amendments to the A&C Act to create a statutory regime for costs, give structure to fee expectations, and push institutional arbitration over ad hoc.
The 2015 Amendment introduced Section 31A and the Fourth Schedule. Section 31A adopts a ‘costs follow the events’ approach, making the unsuccessful party the default bearer of the ‘reasonable costs of arbitration’, subject to the tribunal’s discretion. Crucially, in determining costs, the tribunal must consider conduct—including whether a party filed a frivolous counterclaim or rejected a reasonable settlement offer—making dilatory tactics directly consequential. The Fourth Schedule sets out a model fee grid for domestic arbitrations, with slabs linked to the ‘sum in dispute’.
In 2019, the institutional agenda was advanced with the creation of the Arbitration Council of India. Also, Section 11 was amended, requiring courts to have ‘due regard’ to the Fourth Schedule in fixing fees, particularly when appointing arbitrators in domestic ad-hoc arbitrations. Further, arbitral institutions were made the preferred mechanism for appointments.
The Justice B.N. Srikrishna High Level Committee was constituted in 2017 by the Ministry of Law and Justice with the stated aim to “review the institutionalisation of arbitration mechanism in India and suggest reforms”. The committee found that ad hoc arbitrations in India are often protracted and costly, with fees commonly charged ‘sitting‑by‑sitting’ and scanty procedural discipline.
The report warned that these proceedings tend to mirror litigation with fee practices that significantly increase overall costs and undermine arbitration’s supposed advantage of economy and speed. The committee recommended a deliberate shift towards institutional arbitration.
Supreme Court and High Court cases
In ONGC v. Afcons (2022), Attorney General K.K. Venugopal, appearing for the Public Sector Undertaking (PSU) Oil and Natural Gas Corporation Ltd. (ONGC), contended that fees initially agreed at Rs 10 lakh per arbitrator had, through additional charges, effectively ballooned to about Rs 80 lakh per arbitrator. He urged the court to curb “skyrocketing costs of arbitration”.
On the other hand, senior advocate Abhishek Manu Singhvi appearing for Afcons, contended that prolonged proceedings of “100 sittings” warranted increased fees. He further questioned whether it was realistic to expect retired judges to undertake arbitration work with what he characterised as low remuneration. During arguments, Justice Chandrachud pointedly questioned Singhvi on the acceptability of mid-arbitration fee revisions merely because of a change in the timeline or complexity of a case.
The court, in its judgment, drew a balance. It was held that arbitrators cannot unilaterally issue binding orders revising their fees. Fee fixation was held to be a matter of party autonomy and accordingly, must follow the contract or be agreed upon in consultation with the parties. However, the court also held that the Fourth Schedule is a model framework rather than a mandatory tariff in all arbitrations and will not apply where parties have agreed to a different fee regime.
In the absence of a specific agreement to the contrary, the Fourth Schedule is the default framework that would apply. The court clarified that the Rs 30 lakh ceiling in the Fourth Schedule operates as an absolute cap per arbitrator. Further, claims and counter-claims are to be treated independently for fee computation, which means a tribunal can in principle charge separate fees on each, but subject always to the per arbitrator cap in Fourth Schedule governed arbitrations.
“As per ONGC Afcons which is the law of the land: fees can be anything in ad hoc arbitration but that’s because arbitrations are considered to be over within maximum 2 years as per mandate of the arbitration and conciliation act. The problem is not per session fees, more it is about number of sessions, its merely tareekh pe tareekh (date after date) issues which plague the courts have started plaguing the arbitrations too,” says Supreme Court lawyer Kartik Seth.
The court reaffirmed these principles in Chennai Metro Rail Ltd. v. Transtonnelstroy (2023). This case also dealt with mid-arbitration fee revisions. However, the court held that a fee disagreement does not constitute adequate grounds to invalidate a tribunal.
Judicial interpretation of fee structures has also been uneven. In NHAI v Gammon Engineers & Contractors (2018), the Delhi High Court ruling created a conflict with a coordinate bench’s ruling in Gayatri Jhansi Roadways Ltd. v. NHAI (2017) while holding that an arbitral tribunal cannot discard a fee mechanism fixed in the contract and replace it with Fourth Schedule tariffs instead. Holding the tribunal’s attempt at this as a breach of party autonomy, the court terminated its mandate.
On appeal, the Supreme Court agreed on the principle—that the Fourth Schedule is a suggestive framework and does not override a party-agreed fee structure—but reversed the termination of the arbitral tribunal. The court held that a fee dispute, however serious, does not go to the jurisdiction or impartiality of the tribunal.
In 2014, the Delhi High Court dissolved an arbitration tribunal on the grounds of excessive arbitration fees. In a petition filed by the Ministry of Health, the court expressed alarm at “exorbitant” fees paid to the retired judges on the arbitral tribunal adjudicating the dispute between the government and private companies. Further, the court appointed a sole arbitrator and mandated that the arbitration be held “entirely in accordance with the rules of Delhi International Arbitration Centre”.
A senior counsel, speaking on condition of anonymity, says “institutional arbitrations are the order of the day” and that courts are increasingly preferring arbitrations under the aegis of institutions such as the Delhi International Arbitration Centre.
“This keeps an institutional check on fees and timelines”, the counsel said, adding that in their experience, extensions of mandate are sought in “only two or three out of every ten such arbitrations”. They explain that in institutional arbitrations, fees are determined according to the Fourth Schedule and matters typically conclude within a year. In such a climate, they suggest that the Jaipur case may be an outlier or “one of its kind.”
The counsel noted, however, that courts sometimes appoint judges or senior advocates even in technical disputes where parties have proposed domain experts, though typically under institutional aegis.
The Jaipur case and the economics of delay
The Jaipur case highlights different aspects of the same problem—not merely how much arbitrators are paid, but also what parties get in return. In an earlier order, Justice Jain had termed it “appalling” that despite massive arbitral fees, the dispute remained unresolved.
The tribunal in this case adopted a session‑based fee model of Rs 2.5 lakh per arbitrator per sitting, amounting to Rs 7.5 lakh per session, outside the Fourth Schedule. Over time, this totalled to approximately Rs 13 crores in fees, exclusive of travel, accommodation and other costs. At the same time, the proceedings were repeatedly adjourned, hearings were fragmented with long gaps, and extensions under Section 29A (time‑limit provision for arbitral awards) were granted in a largely routine fashion.
Seth, who appeared with the Rajasthan Advocate General for the distribution companies (DISCOMs) in this case, says “The DISCOMs strongly opposed repeated extensions of the arbitral tribunal’s mandate under Section 29A, contending that the arbitration had effectively transformed into a procedurally indulgent and excessively expensive process contrary to the very objective of arbitration law”.
He adds that they also sought reduction and proportionate refund- related consequences in respect of arbitral fees already paid to the tribunal, contending that despite enormous expenditure and repeated extensions, the proceedings had remained inconclusive for years.
HCL advocated for the continuation of the tribunal proceedings, citing the technical complexity of the matter, a voluminous documentary record, the testimony of 22 witnesses, more than 160 sittings, and unexpected delays arising from the COVID-19 pandemic.
In its detailed order of 27 May, the Rajasthan High Court found that high per‑session fees, combined with discontinuous hearings and an out‑of‑state venue, had created “a perverse incentive structure” that escalated costs and undercut expedition. Justice Jain said “repeated and unwarranted adjournments, and fixation of disproportionately high fee structures, including session wise or ‘reading’ fees, has undermined the very spirit of arbitration”.
Further, the court reduced arbitrator fees retrospectively by 5 per cent per month from April 2025, ordered proportionate refunds to the parties, restrained the tribunal from charging anything beyond actual out‑of‑pocket expenses, and directed day‑to‑day hearings at the Jaipur Arbitration and Mediation Centre so that an award is delivered within 45 days.
Importantly, the court recognised that even consent to an expensive fee model “cannot be viewed in isolation from the statutory framework”, especially when the consequences are borne by public utilities and, ultimately, consumers.
Seth says that the majority of retired judges serving as arbitrators are “extremely competent and great arbitrators”, but “there are rotten apples everywhere”. He highlights that parties fear adverse orders and hence hesitate to raise complaints or objections against arbitrators who delay hearings with an eye on increased fees.
The Jaipur case delivers a warning – without active judicial oversight and self-discipline among arbitrators themselves, India’s experiment with arbitration risks devolving into exactly what Parliament sought to avoid—a high‑cost, slow‑moving “luxury litigation” that excludes the very litigants it was meant to empower.
(Edited by Nardeep Singh Dahiya)