Can arbitrators set their own fees? Supreme Court says no.

An arbitrator charged ₹5 crore. The contract said ₹50 lakh. The Supreme Court had to decide: who decides what an arbitrator earns? The answer, delivered on a June afternoon in 2022, landed like a hammer on a gavel — and sent a clear message to every arbitrator, every government company, and every private contractor in India.

Three government firms — ONGC, NTPC, and RVNL — had signed construction contracts with private players. Disputes arose. The contracts were referred to arbitration. And then the trouble began: the arbitral tribunals started fixing their own fees. In one case, the fee demanded was ten times what the contract had agreed. In another, the tribunal charged more than the Fourth Schedule of the Arbitration Act (a government-prescribed fee table for arbitrators) allowed. The government companies cried foul. The arbitrators said they had the power. The Supreme Court had to settle it.

When the fee notice arrived

ONGC had entered a construction contract with Afcons Gunanusa JV. The contract had a dispute resolution clause. When a dispute arose, it went to arbitration. The tribunal — a panel of arbitrators — issued a fee notice. The amount: ₹5 crore. The contract had capped the fee at ₹50 lakh. ONGC objected. The tribunal said it had the authority to decide its own fees. ONGC went to the Bombay High Court, arguing that the tribunal could not unilaterally fix fees beyond what the parties had agreed. The High Court dismissed the petition in October 2021, saying it lacked jurisdiction because this was an international commercial arbitration (a dispute involving parties from different countries). The courtroom fell silent as the order was read — ONGC's counsel stared at the thin file in his hands, the weight of the jurisdictional barrier sinking in. The only sound was the rustle of paper as the judge set the order aside.

NTPC faced a similar situation. Its contract with a private builder went to arbitration. The tribunal fixed a fee that exceeded the Fourth Schedule rates. NTPC approached the Delhi High Court under Sections 9 and 14 of the Arbitration Act (provisions that allow a party to challenge the tribunal's jurisdiction or seek interim relief). The High Court dismissed the petition in August 2021.

RVNL had the same fate — its petition under Section 14 was dismissed by the Delhi High Court in July 2020. The stack of contracts on the bench grew thicker as each government company's case was turned away. All three government companies then appealed to the Supreme Court.

The four questions the court had to answer

The Supreme Court clubbed the three matters together. The bench, led by Dr. Justice Dhananjaya Y Chandrachud, framed four core questions that would decide the fate of hundreds of arbitration disputes across India.

First: Can arbitrators fix their own fees? The bench leaned forward as counsel argued. The government companies said no — fees must be a matter of agreement between the parties and the arbitrators, or fixed by the court or an arbitral institution. The arbitrators argued that the Arbitration Act gave them the power to decide their own remuneration. The courtroom was still, save for the shuffle of papers as each side made its case.

Second: What does 'sum in dispute' mean? The Fourth Schedule is a table that prescribes a sliding scale of fees based on the amount in dispute. If the 'sum in dispute' is ₹1 crore, the fee is X. If it's ₹10 crore, the fee is Y. But what counts as the 'sum'? Is it only the claimant's claim, or does it include the counter-claim? The government companies said both should be added together. The arbitrators said each should be treated separately — which would mean a higher fee. The bench listened, the weight of the question hanging in the air.

Third: Does the ₹30 lakh ceiling cap the entire fee or only a component? The Fourth Schedule has a maximum fee of ₹30 lakh for disputes above a certain amount. But the wording was ambiguous: did this mean the total fee could not exceed ₹30 lakh, or that only the variable component (the part that changes with the dispute amount) was capped, while a fixed component could be added? The smell of old paper from the stacked files filled the air as the court considered the implications.

Fourth: Is the ceiling per arbitrator or per tribunal? If a three-member tribunal charges ₹30 lakh total, each arbitrator gets ₹10 lakh. But if the ceiling is per arbitrator, each can charge ₹30 lakh — tripling the cost. The government companies argued it was per tribunal. The arbitrators said it was per arbitrator. The bench heard both sides, the question of cost and fairness weighing on the proceedings.

What the law says — and doesn't say

The Arbitration and Conciliation Act, 1996, as amended, has several provisions that touch on fees. Section 11 deals with the appointment of arbitrators. Section 11(14) says High Courts can make rules for fee determination. Section 11(3A), inserted by the 2019 amendment, says fees shall be at the rates specified in the Fourth Schedule unless the parties agree otherwise. Section 31(8) and Section 31A deal with costs of arbitration. Section 38(1) and its proviso talk about deposits for costs. Section 39 gives the tribunal a lien on the award (the right to hold the award until fees are paid) and allows a court to review costs.

But none of these provisions explicitly say: "Arbitrators cannot fix their own fees." That silence was the battlefield. The arbitrators said the absence of a prohibition meant they had the power. The government companies said the scheme of the Act — which repeatedly emphasises party autonomy (the parties' right to decide the terms of their arbitration) — meant fees must be agreed, not imposed.

Why the court said no to self-fixing

The Supreme Court ruled against the arbitrators. The bench held that "arbitrators are not entitled to unilaterally determine their own fees." Fees must be a matter of agreement between the parties and the arbitrators, or fixed by the court or an arbitral institution. The court reasoned that the Arbitration Act is built on party autonomy — the parties choose the arbitrator, the procedure, and the fee. If an arbitrator could simply name a price, that autonomy would be meaningless. A party that agreed to arbitration expecting a certain cost could be blindsided by a fee that made the process uneconomical. The courtroom was still as the judgment was read — the smell of old paper from the stacked files filled the air, each page a reminder of the disputes that had led to this moment.

The court also looked at the Fourth Schedule's structure. It said the 'sum in dispute' includes both the claim and the counter-claim — they are to be cumulated, not treated separately. This meant that if a contractor claimed ₹5 crore and the government company counter-claimed ₹3 crore, the 'sum in dispute' was ₹8 crore, not two separate amounts of ₹5 crore and ₹3 crore. This reduced the fee base.

On the ₹30 lakh ceiling, the court clarified that it caps the entire fee — not just a component. So an arbitrator cannot charge ₹30 lakh as a variable fee and then add a fixed fee on top. The total fee for any dispute, regardless of its size, cannot exceed ₹30 lakh per arbitrator.

And on the per-arbitrator versus per-tribunal question, the court ruled that the Fourth Schedule ceiling applies to each individual arbitrator. So a three-member tribunal can charge up to ₹30 lakh per arbitrator — a total of ₹90 lakh — but no single arbitrator can charge more than ₹30 lakh. This was a compromise: it allowed tribunals to be compensated for the work of multiple members, but capped each member's individual fee.

What this means for every arbitration in India

For government companies and private contractors, this judgment is a shield. If an arbitrator demands a fee beyond what was agreed or what the Fourth Schedule prescribes, the party can now go to court and say: the Supreme Court has ruled that you cannot do this. The court also clarified that a party can challenge an arbitrator's fee demand under Section 14 of the Act (termination of the arbitrator's mandate) if the arbitrator insists on a fee that violates the law.

For arbitrators, the message is clear: you are not the master of your own fee. The fee must be agreed with the parties, or fixed by the court or institution. If you try to impose a fee, you risk having your mandate terminated and your award challenged.

THE PLAY: Before accepting an arbitration appointment, get the fee structure in writing — signed by all parties — or insist that the court or arbitral institution fix it; otherwise, any unilateral fee demand can be struck down.

The court ended where it began: with a contract, a dispute, and a fee that didn't match. Only now, the law has drawn the line.