Bombay High Court Rules Arbitrators Lose Mandate If Proceedings Are Suspended Over Fee Disputes
Court says arbitrators cannot stall hearings by demanding higher fees without party consent
Mandate ends under Section 29A if arbitrator neither resigns nor continues hearings
By Our Legal Reporter
New Delhi: November 21, 2025:
The Bombay High Court has delivered a landmark ruling in arbitration law, holding that an arbitrator who suspends proceedings due to disputes over fees automatically loses their mandate. The judgment, delivered by Justice Somasekhar Sundaresan, clarifies that arbitrators cannot keep proceedings in “suspended animation” while insisting on enhanced fees not agreed to by the parties.
Background of the Case
The case arose from a dispute between SS Trading Company and SNC Trading Company, where the appointed arbitrator unilaterally revised his fees and suspended proceedings until the parties agreed to pay the increased amount.
The parties objected, arguing that the arbitrator had no authority to halt proceedings over fee disagreements. They approached the Bombay High Court, seeking clarity on whether such conduct was permissible under the Arbitration and Conciliation Act, 1996.
Court’s Observations
- Arbitrators cannot suspend proceedings simply because they are dissatisfied with fee payments.
- If unhappy with fees, the arbitrator may resign from the tribunal.
- Alternatively, the arbitrator may continue hearings and later exercise a lien on the award until fees are settled.
- By suspending proceedings indefinitely, the arbitrator fails to discharge their mandate, which then automatically terminates under Section 29A of the Arbitration Act.
The court emphasized that arbitration is meant to provide speedy resolution of disputes. Allowing arbitrators to stall proceedings over fee disputes undermines the very purpose of arbitration.
Section 29A Explained
Section 29A of the Arbitration and Conciliation Act sets strict timelines for completion of arbitration proceedings. If arbitrators fail to conduct hearings or deliver awards within the prescribed period, their mandate automatically terminates.
In this case, the arbitrator’s refusal to proceed without enhanced fees amounted to a failure to conduct hearings, triggering termination of mandate under Section 29A.
Importance of the Ruling
- Reinforces the principle that arbitration must be efficient and fair.
- Prevents arbitrators from using fee disputes as leverage to stall proceedings.
- Protects parties from being trapped in indefinite delays caused by arbitrators’ unilateral decisions.
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Legal experts note that the ruling strengthens confidence in arbitration as a dispute resolution mechanism, ensuring that arbitrators remain accountable.
Options Available to Arbitrators
- Resign from the tribunal if they feel compensation is inadequate.
- Continue hearings and later exercise a lien on the award until fees are paid.
Suspending proceedings, however, is not permissible.
Broader Implications
- Arbitrators must respect fee agreements and cannot unilaterally revise them.
- Parties gain protection against arbitrary suspension of proceedings.
- Arbitration institutions may need to strengthen fee structures and guidelines to avoid disputes.
For businesses, the judgment provides reassurance that arbitration will remain a reliable and timely method of resolving disputes.
Public Reaction
The decision has been welcomed by corporate lawyers and arbitration practitioners. Many see it as a progressive step that ensures efficiency and fairness in arbitration.
At the same time, some arbitrators have expressed concern that fee disputes are common and need clearer institutional mechanisms. They argue that while the ruling protects parties, it may discourage arbitrators from accepting cases with inadequate fee structures.
Previous Judicial Stance
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The Bombay High Court’s ruling builds on earlier judicial pronouncements emphasizing the need for efficiency in arbitration. Courts have consistently held that arbitrators must adhere to timelines and cannot delay proceedings without valid reasons.
This judgment goes further by explicitly stating that suspending proceedings over fee disputes results in automatic loss of mandate.
Conclusion
The Bombay High Court’s ruling in SS Trading Company v. SNC Trading Company marks a crucial development in arbitration law. By holding that arbitrators lose their mandate if they suspend proceedings over fee disputes, the court has reinforced the principles of efficiency, fairness, and accountability in arbitration.
The judgment ensures that arbitration remains a reliable mechanism for dispute resolution, protecting parties from indefinite delays and safeguarding the integrity of the process.
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As arbitration continues to grow in India, this ruling will serve as a guiding precedent, reminding arbitrators that justice cannot be stalled over disagreements about fees.
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