Delhi High Court: In a challenge to the orders passed by the sole arbitrator imposing costs of ₹ 50,000 and ₹70,000 on the petitioners, payable to the Arbitral Tribunal, a Single Judge Bench of Ajay Digpaul, J., stayed the operation of the impugned orders to the extent that they directed the petitioners to deposit the costs with the Tribunal. The Court observed that the issue concerning the imposition of costs payable to the Arbitral Tribunal, in the context of Section 31-A, Arbitration and Conciliation Act, 1996, warranted consideration. The Court clarified that the pending arbitral proceedings would continue in accordance with law.
The petitioners, who were the defendants in two arbitration proceedings, assailed the orders dated 3 October 2026 and 9 October 2026 passed by the Sole Arbitrator, whereby costs of ₹50,000 and ₹70,000, respectively, were imposed upon them, payable to the Arbitral Tribunal. The petitioners had moved applications seeking recall/modification of the earlier orders dated 29 August 2026 and 24 August 2026, respectively, whereby their right to file the statements of defence had been foreclosed, as well as condonation of a delay of six days in transmitting/filing the statements of defence. The Arbitral Tribunal allowed the applications seeking recall/modification, subject to costs of ₹25,000 and ₹35,000, respectively. The applications seeking condonation of delay were also allowed, subject to further costs of ₹25,000 and ₹35,000, respectively, payable to the Arbitral Tribunal.
The petitioners contended that the imposition of costs payable to the Arbitral Tribunal was contrary to Section 31-A, Arbitration and Conciliation Act, which empowers the Arbitral Tribunal to determine whether costs are payable by one party to another and the manner in which such costs are to be paid. It was submitted that the provision does not empower the Arbitral Tribunal to impose costs payable to itself. Reliance was placed on Modi Dairy v. Alfa Laval (India) Ltd., 2018 SCC OnLine Bom 15984, wherein the Bombay High Court held that an arbitrator, apart from charging fees, cannot direct any party to pay costs to the arbitrator itself, including for failure to file pleadings within the prescribed time or for granting an extension to file pleadings. The Court observed that the aspect of imposition of costs upon the petitioners, which were directed to be deposited before the Arbitral Tribunal, warranted consideration.
The Court stayed the operation of the impugned orders dated 3 October 2026 and 9 October 2026 to the extent that they directed the petitioners to deposit the costs imposed upon them with the Arbitral Tribunal, till the next date of hearing. The Court clarified that the proceedings pending before the Arbitral Tribunal shall proceed further in accordance with law. Notice was issued to the respondents, and the matter was listed for hearing on 25 November 2026.
[Jagdish Enterprises v. Bihani Manufacturing (P) Ltd., CM(M) 2326 of 2026, decided on 27-10-2026]
Advocates who appeared in this case:
For the Petitioners: Nikhil Rajput, Advocate
For the Respondent: Nabab Singh, Advocate
Buy Arbitration and Conciliation Act, 1996 HERE
