RAJASTHAN HC CRITICIZES EXORBITANT FEE STRUCTURE AND REPEATED ADJOURNMENTS BY ARBITRAL TRIBUNAL

JAIPUR: In a significant judgment aimed at curbing the rising costs and procedural inefficiencies within alternative dispute resolution mechanisms, the Rajasthan High Court has strongly condemned the practice of "luxury litigation." The Single Bench of Justice Sameer Jain observed that the inflation of arbitral costs combined with frequent, unmeritorious delays directly defeats the core legislative purpose of the Arbitration and Conciliation Act, 1996, which is to provide speedy and cost-effective justice.

The observations were made during the hearing of a petition under Section 29A of the Arbitration Act, filed in the matter of Jaipur Vidyut Vitran Nigam Ltd. & Ors. v. HCL Infosystems Ltd. The commercial dispute, which roots back to a 2009 tender agreement and was referred to arbitration in 2019, involves a substantial claim amount of approximately ₹528 crore.

The Perverse Incentive of Session-Based Billing
The High Court expressed deep dissatisfaction upon discovering that the arbitral tribunal had been charging an exorbitant fee of ₹7.5 lakh per sitting session. This amount was independent of additional expenditures, which included separate reading fees, luxury travel, premium accommodation, and secretarial expenses. Cumulatively, the parties had already expended nearly ₹13 crore solely on managing the tribunal's fees and administrative overheads without reaching a final resolution.

Justice Jain pointed out a systemic flaw in session-based billing structures when paired with a lack of procedural discipline. The court noted that scheduling brief, sporadic hearings spread far apart, while simultaneously charging high per-sitting fees, effectively creates a "perverse incentive" to prolong litigation.

The Bench clarified that while the principle of party autonomy allows litigants to mutually consent to a specific fee model at the start of proceedings, such private arrangements cannot override the statutory obligations of Section 29A. The law mandates that arbitration must be an efficient, time-bound remedy, and courts cannot permit financial exploitation under the guise of mutual consent.

Unauthorized Venue Changes and Judicial Overreach
The court further flagged that the tribunal had shifted the seat of arbitration from Rajasthan to New Delhi, ignoring the original contractual terms and placing an unfair logistical and financial burden on the state distribution companies. Furthermore, the High Court pulled up the lower Commercial Court for routinely granting lengthy extensions—some up to 20 months—under Section 29A without examining if there was genuine, sufficient cause for the delay.

Strict Directives and Fee Deductions
To rectify these systemic failures, the High Court issued a set of stringent, time-bound directives:

• Day-to-Day Hearings: The tribunal was ordered to resume hearings immediately on a day-to-day basis at the Jaipur Arbitration and Mediation Centre, with a strict mandate to conclude the entire process within a one-month window.
• Retroactive Fee Cut: Holding the tribunal accountable for the ongoing delay, the Court imposed a 5% monthly fee reduction, applied retroactively. The tribunal must issue these proportionate refunds to the parties before pronouncing the final award.
• Statutory Compliance: The Court directed that all future administrative fees and expenses must strictly comply with established statutory guidelines, eliminating unauthorized extra-legal charges.
  This ruling sends a clear message to the legal fraternity that the judiciary will actively step in to check escalating costs and enforce procedural discipline, ensuring arbitration remains an accessible and genuinely alternative pathway to justice

Discription: This copyright-free legal news article covers a landmark ruling by the Rajasthan High Court targeting procedural delays and escalating costs in arbitration. In Jaipur Vidyut Vitran Nigam Ltd. v. HCL Infosystems Ltd., Justice Sameer Jain strongly condemned "luxury litigation," highlighting an arbitral tribunal that charged an exorbitant ₹7.5 lakh per sitting, accumulating nearly ₹13 crore in fees without rendering an award. The Court ruled that session-based billing coupled with sporadic hearings creates a perverse incentive to prolong disputes, overriding party autonomy and violating the time-bound mandate of Section 29A. To enforce discipline, the High Court ordered immediate day-to-day hearings, restricted future expenses to statutory limits, and imposed a retroactive 5% monthly fee reduction as a penalty for the delay.