Court to Examine Applicability of Schedule IV in Ad-Hoc Arbitration Amidst Allegations of Bias
In a significant development, the Rajasthan High Court, Jaipur Bench, presided by Justice Sameer Jain, has ordered a detailed hearing into the controversy surrounding the arbitral fee structure in ad-hoc arbitration between HCL Infosystems Limited and Jaipur Vidyut Vitran Nigam Limited. The case, which involves claims of bias and procedural irregularities, has garnered attention due to its implications on arbitration practices.
The matter stems from a work order awarded back in 2009, followed by the constitution of a three-member Arbitral Tribunal in September 2019. The tribunal, formed without court intervention, initiated proceedings in August 2020. However, the fixation of an arbitral fee on an ad-hoc basis at Rs. 2,50,000/- per sitting for each arbitrator has been contested by the petitioners. HCL Infosystems Limited argues that this fee structure contravenes the guidelines established under Schedule IV of the Arbitration and Conciliation Act, 1996.
Justice Jain noted that the Supreme Court's precedent in the case of ONGC v. Afcons Gunanusa JV, 2022, clarifies that Schedule IV is not strictly applicable to ad-hoc arbitration. Despite this, the petitioners have incurred litigation costs of approximately Rs. 14.5 Crores and raised concerns about the independence and impartiality of the arbitrators. Allegations of bias were reportedly not addressed by the tribunal due to procedural shortcomings and lack of evidence.
Further complicating the proceedings, multiple extensions have been granted by the Commercial Court, with the latest extension order dated February 24, 2026, being challenged by the petitioners. The respondents, represented by Senior Counsel R.N. Mathur, argue that the delay in proceedings is attributable to the petitioner and that a brief extension will not cause prejudice.
Justice Jain emphasized the importance of time in arbitral proceedings and recognized the need for a comprehensive hearing due to the case's unique facts and potential ramifications. The court has directed the Advocate General to assist in the matter and called for records of extensions from the Commercial Court.
The case is scheduled for final disposal on May 4, 2026, as the court seeks to address critical questions concerning the applicability of Schedule IV, allegations of bias, and the legality of extension orders during pending applications.
Bottom line:-
Arbitral fee structure in ad-hoc arbitration not strictly governed by Schedule IV of the Arbitration and Conciliation Act, 1996, as per Supreme Court precedent. Allegations of bias in arbitral proceedings must be substantiated with evidence and raised before the appropriate forum.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 12, 13, 29A, Schedule IV
