‘Arbitrator Who Halts Hearings Over Fee Dispute Automatically Loses Mandate’

The Bombay High Court has held that an arbitrator who suspends proceedings after unilaterally revising fees -- without party consent and without resigning -- automatically loses their mandate under Section 29A of the Arbitration and Conciliation Act, 1996.

Justice Somasekhar Sundaresan ruled in SS Trading Company v. SNC Trading Company that an arbitrator cannot indefinitely keep an arbitration stalled while insisting on enhanced fees not agreed to by the parties.

The Court noted that although the arbitrator was dissatisfied with the fee payments, he neither resigned nor continued the hearings. Instead, he froze the proceedings until increased costs were paid. This, the Court said, had no statutory backing.

The dispute stemmed from a 2019 agreement, with a sole arbitrator appointed in September 2022. After repeated delays by the respondent, the arbitrator imposed penalties of ₹10,000 per hearing per party. On April 20, 2023, he declared the tribunal “suspended till funds are arranged”, citing an unworkably low quoted fee.

Despite objections to the unilateral hike and multiple requests to resume hearings, the arbitrator fixed no further dates after June 2, 2023. He also sought an apology from the claimant, but never stepped down.

The Court held that fee proposals must be mutually agreed, and if parties reject a proposed increase, the arbitrator may either resign or continue and later exercise a lien over the award under Section 39. Keeping proceedings in limbo, however, is impermissible.

Since the arbitrator did neither, the Court ruled that the mandate had expired under Sections 14, 15 and 29A, as his conduct showed an unwillingness to complete the proceedings without delay.

As the arbitration agreement remains valid, the Court directed Presolv360 to appoint a new sole arbitrator within two weeks. All hearings will be conducted online unless the parties decide otherwise, and the fresh tribunal will continue from the stage where proceedings were abandoned.

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