The Rajasthan High Court has recently expressed significant concerns regarding the inefficiencies and excessive costs associated with arbitration proceedings in the case of Jaipur Vidyut Vitran Nigam Ltd. & Ors. v HCL Infosystems Ltd. The judgment, delivered on May 27 by Justice Sameer Jain, highlights issues such as exorbitant fees, frequent adjournments, and procedural excesses that compromise arbitration’s role as a swift dispute resolution mechanism.
The case in question involves protracted arbitration between Rajasthan DISCOMs and HCL Infosystems Ltd., with the High Court noting the hefty fees charged by the arbitral tribunal. In particular, each hearing session accrued a substantial fee of ₹7.5 lakh, excluding additional costs like reading fees and travel, which have amounted to nearly ₹13 crore in total for a dispute valued at approximately ₹528 crore.
The tribunal’s session-based fee structure, including charges for reading, coupled with non-continuous hearings, led to a spike in costs. Although the parties initially consented to this fee structure, the Court emphasized that such consent should align with statutory requirements, particularly Section 29A of the Arbitration and Conciliation Act, 1996, which mandates time-bound adjudication.
Judicial Intervention and Findings
Justice Jain’s judgment imposed strict timelines to curb inefficiencies and financial burdens, asserting that the arbitration process had become too formal, mirroring traditional court inefficiencies. The Court criticized the procedural delays and inflated fees as contrary to arbitration’s core purpose.
The arbitration stemmed from disputes over the Restructured Accelerated Power Development and Reforms Programme (R-APDRP), involving massive electricity infrastructure projects across Rajasthan. The proceedings had been ongoing since 2019, despite origins dating back to 2009, with the DISCOMs opposing further extensions under Section 29A due to the process’s procedural indulgence and exorbitant costs.
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In examining the Arbitration and Conciliation Act, 1996, the Court noted non-compliance with provisions like Section 24, mandating efficient hearing conduct, and Section 29A. It found a pattern of fragmented hearings and significant delays between sessions, ignoring previous judicial directions for timely resolution.
Corrective Measures and Directions
The High Court identified the arbitration as having devolved into what it termed “luxury litigation,” where excessive procedural indulgence and costs overshadow timely dispute resolution goals. It stressed the need for disciplined proceedings, highlighting that procedural discretion should expedite, not hinder, dispute resolution.
Moreover, the Court spotlighted the tribunal’s exorbitant ₹13 crore fees and criticized the venue shift from Rajasthan to New Delhi, which imposed unnecessary logistical and financial burdens.
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The Court also scrutinized the Commercial Court’s frequent extensions under Section 29A, which extended arbitration timelines without sufficient justification. It underscored that judicial intervention is warranted when procedural deficiencies undermine arbitration’s purpose.
Justice Jain directed the resumption of arbitration on May 31 at the Jaipur Arbitration and Mediation Centre, with a completion deadline of June 30 and an arbitral award within 15 days. The Court mandated fee regulation and barred additional financial burdens due to tribunal conduct or procedural lapses, with specific instructions for refunding portions of fees paid.
Legal representation included Advocate General Rajendra Prasad, with advocates Kartik Seth, Shilpa Saini, and Dhriti Laddha for Jaipur Vidyut Vitran Nigam Limited, and Senior Advocate RN Mathur, with advocates Shailesh Kapoor, Lokesh Atrey, and Sakshi Chaturvedi for HCL Infosystems Limited.
