The Supreme Court of India recently voiced severe concerns regarding the escalating costs and prolonged timelines associated with domestic arbitration proceedings. The apex court made critical observations indicating that extended proceedings severely undermine the core objective of alternative dispute resolution, which is designed to provide an expedited, cost-effective alternative to traditional court litigation.
A three-judge Bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi, and Justice V. Mohana expressed these views while hearing a batch of appeals stemming from a high-stakes commercial dispute between HCL Infosystems Limited and state-owned power distribution companies in Rajasthan, including Jaipur Vidyut Vitran Nigam Limited (JVVNL).
Genesis of the Commercial Dispute
The underlying legal conflict dates back to 2009, when HCL Infosystems was awarded contracts valued at approximately ₹528.20 crore under the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) for setting up IT and power infrastructure across Rajasthan.
Following disputes regarding contract performance and execution, arbitration was formally invoked in September 2019. Preliminary proceedings before a three-member arbitral tribunal began in July 2020. Over the next six years, the arbitral tribunal held as many as 198 sittings without delivering a final award. The three-member tribunal consisted of retired judicial officers: former Supreme Court Justice Deepak Verma, along with former High Court Justices Dinesh Chandra Somani and N. Kumar.
High Court Intervention and Fee Deductions
As the arbitration process dragged on despite multiple timeline extensions granted under Section 29A of the Arbitration and Conciliation Act, 1996, the Rajasthan High Court took strict exception to the delay. A single-judge Bench led by Justice Sameer Jain observed that the arbitration process arising from 2009 work orders had remained unresolved for years, creating structural inefficiencies and imposing an unnecessary financial strain on the parties.
The High Court noted that the parties had already expended nearly ₹13 crore solely in arbitral tribunal fees for a dispute valued at ₹528 crore. Holding the tribunal responsible for the timeline slips beyond April 30, 2025, the High Court issued a set of directives on May 27:
- Monthly Fee Cut: It mandated a 5 percent per-month reduction in the arbitral fees charged by the tribunal for every month of delay from April 30, 2025, onwards until the disposal of the matter, directing that any excess fee collected be refunded to the parties proportionally.
- Strict Conclusion Mandate: The High Court ordered the tribunal to conduct day-to-day sittings at the Jaipur Arbitration and Mediation Centre and deliver the final arbitral award within 45 days.
Arbitrators and Litigants Move Apex Court
Aggrieved by the supervisory directions, financial cutbacks, and characterization of their conduct, the members of the arbitral tribunal, alongside HCL Infosystems and JVVNL, approached the Supreme Court through special leave petitions.
The tribunal members argued before the top court that the Arbitration and Conciliation Act contains no explicit statutory framework empowering a High Court to order a retroactive reduction of arbitral fees or mandate fee refunds. HCL Infosystems challenged the tight timeline imposed for concluding the matter, while the power distribution utilities argued that if the tribunal was deemed responsible for delays, it ought to have been reconstituted entirely under Section 29A.
In initial orders issued on June 30 and July 6, a Bench of the Supreme Court granted interim relief by staying the Rajasthan High Court’s directive requiring the tribunal to refund a percentage of its fee. The court permitted the tribunal to continue its daily hearings but restrained it from pronouncing, uploading, or serving the final arbitral award pending final directions from the apex court.
Supreme Court Reiterates Concern Over Arbitration System
During subsequent hearings, the Supreme Court maintained a strong stance on the systemic issue of protracted arbitrations. Expressing dissatisfaction with the overall timeline, the Bench noted that despite factors such as the death and substitution of an arbitrator during the process, the overall delay remained unacceptable.
Justice Joymalya Bagchi made notable oral observations during the proceedings, remarking that arbitration was created to offer an efficient, convenient, and economical bypass to conventional legal suits. He remarked that if arguments in an arbitration continue across multiple years, the purpose of alternative dispute resolution is entirely defeated, adding that an ordinary civil suit might have reached a decree in a similar timeframe. The Bench clarified that while its remarks were directed at the systemic framework rather than individual arbitrators, the trend of lengthy arbitrations posed a serious threat to India's ambition of creating an arbitration-friendly environment.
Status and Broader Implications
Recognizing that the matter presents a vital opportunity to lay down institutional guidelines on arbitral delays, tribunal fee caps, and judicial intervention under Section 29A, the Supreme Court directed all contesting parties and the tribunal to submit written arguments within ten days.
Pending a final determination, the interim arrangement remains operational: the arbitral tribunal may proceed with its hearings, but the final award shall not be pronounced until explicit instructions are passed by the apex court. The final ruling is expected to clarify the extent of judicial authority in regulating arbitral fees and enforcing strict adherence to timeframes in Indian commercial arbitrations.
Discription: Members of a three-judge arbitral tribunal have approached the Supreme Court after the Rajasthan High Court ordered a 5% monthly reduction in their fees due to severe delays in resolving a 2009 contract dispute between HCL Infosystems and Rajasthan power distribution companies.
The arbitration, commenced in 2020, remained incomplete after 198 hearings, incurring over ₹13 crore in arbitral fees for a ₹528 crore claim. The High Court directed day-to-day sittings, a 45-day deadline for the final award, and fee refunds for ongoing delays.
While hearing the appeal, a Supreme Court Bench led by CJI Surya Kant expressed serious concern over the timeline, noting that the delay was "too long" and defeated the purpose of alternative dispute resolution. The apex court stayed the fee refund directive and allowed hearings to continue while restraining the final award's release.