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The controversy going for past 2 years came to its final decision when Rajasthan High Court issued an order for removal of Arbitrators mandate if he/she asks for an unwarranted fees in an Arbitral proceeding. This started when an Arbitrator in the case of HZL demanded the arbitration fees of Rs. 75 lakh which was opposed by the parties of the case. The parties prayed to the arbitrator to reconsider its fees in light of Schedule 4 of the Arbitration & Conciliation Act, 1996. The Arbitrator declined the prayer however offered a discount of Rs 20 lakh to the party. The aggrieved party moved to the Rajasthan HC for terminating the Arbitrators mandate which was subsequently declined by the court stating it as not maintainable. The petitioner approached the commercial court by filing an application for removal/substitution of the Arbitrator, which was pending and in the men time the Arbitrator passed an ex-parte award. This ex-parte award was brought to the notice of the Commercial court which further directed the High Court to revise the fees of the Arbitrator as the law doesn’t permits an Arbitrator to charge fees beyond the limit prescribed in Schedule 4 of the act however declined to remove the mandate of an Arbitrator.
The party moved to the HC by way of writ petition under Article 226 of the Indian Constitution against the order of the commercial court. The Court analyzed the scope of section 14 of the act which says the mandate of an Arbitrator can be removed if he becomes de facto or de jure – unable to perform his duties. The court further widened the meaning of de facto and said in its opinion if any conduct during the proceedings before the arbitrator leads to a doubt in the mind of a party regarding harm against it and qua the impartial conduct of proceedings before the arbitral tribunal, the said situation would fall within de facto inability of the arbitrator to perform his functions.The Court further observed that since beginning, the proceedings before the arbitrator have been continuing under the shadow of conflict concerning determination of fees to be paid to the arbitrator & since beginning the petitioner had been perpetually objecting the quantum of fees to be paid.
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