The Arbitration and Conciliation Act, 1996 (ACA) in India incorporates provisions aimed at ensuring the efficient and timely resolution of disputes through arbitration. Sections 29A, 31, and 31A of the ACA specifically address the crucial aspects of arbitrators' fees and the allocation of arbitration costs, introducing mechanisms to incentivize promptness and discourage unnecessary delays.

Section 29A: Rewarding Timeliness and Penalizing Delays in Award Issuance:

Recognizing the importance of expeditious dispute resolution, Section 29A of the ACA introduces a framework that links the arbitral tribunal's fees to the timeliness of the final award. This section aims to encourage tribunals to conclude proceedings and issue awards within a stipulated timeframe.

• Incentivizing Faster Resolution:
  To incentivize the arbitral tribunal to issue the final award promptly, the ACA includes a provision for additional fees. Specifically, if the arbitral tribunal renders the final award within six months from the date of completion of pleadings, they may be entitled to additional fees, provided there is a prior agreement between the parties to this effect. This provision acts as a positive reinforcement, rewarding tribunals for their efficiency and commitment to a swift resolution process. The exact quantum of these additional fees is left to the agreement between the parties, allowing for flexibility based on the complexity and nature of the dispute.
   
• Addressing Delays and Potential Penalties:
  Conversely, the ACA addresses the issue of delays in the arbitral process. Section 29A mandates that the arbitration should be completed within a period of twelve months from the date of commencement of the arbitral tribunal. This period can be extended by a further six months with the consent of the parties.
  
  However, if the arbitration is not completed within this extended period, and a party approaches the court for a further extension, the court is empowered to take into account the reasons for the delay. Significantly, if the court finds that the delay is attributable to the arbitral tribunal, it has the discretion to reduce the fees of the arbitral tribunal by up to five percent per month of such delay. This provision serves as a deterrent against unwarranted delays caused by the tribunal, ensuring accountability and promoting diligence in the arbitral process. The potential reduction in fees acts as a penalty, encouraging tribunals to manage the proceedings effectively and adhere to the prescribed timelines.
   
• Section 31 and 31A: Discretion in Allocating the Costs of Arbitration:
  Beyond the fees of the arbitral tribunal, the overall costs of arbitration encompass various expenses, including administrative fees, legal fees, and other incidental costs. Sections 31 and 31A of the ACA grant the arbitral tribunal the discretion to determine how these costs are to be borne by the parties, unless the parties have explicitly agreed otherwise.
   
• Tribunal's Discretionary Power:
  This discretionary power allows the tribunal to consider the specific circumstances of the case and make a fair and equitable allocation of costs. While the general principle in litigation often follows the "loser pays" rule, the ACA empowers the arbitral tribunal to deviate from this norm if the facts and circumstances warrant it.
   
• Factors Influencing Cost Allocation:
  • Frivolous Counterclaims Leading to Delays: If a party files a counterclaim that is found to be frivolous and causes unnecessary delays in the proceedings, the tribunal may consider imposing a greater share of the costs on that party. This discourages the use of dilatory tactics and promotes responsible conduct during arbitration.
  • Rejection of a Reasonable Settlement Offer: If one party unreasonably rejects a fair and reasonable settlement offer, thereby prolonging the arbitration and increasing expenses, the tribunal may take this into account when allocating costs. This provision incentivizes parties to engage in meaningful settlement negotiations and discourages obstructionist behaviour.
     
• Incentivizing Cooperation and Discouraging Delays:
  The tribunal's power to impose costs serves as a significant tool to encourage cooperation between the parties and their counsel. The prospect of bearing a larger share of the arbitration costs can deter parties from engaging in tactics that cause unnecessary delays or escalate expenses. By exercising this discretion judiciously, the arbitral tribunal can promote a more efficient and cost-effective resolution process.

Conclusion:
Sections 29A, 31, and 31A of the Arbitration and Conciliation Act, 1996, collectively establish a framework that aims to enhance the efficiency and fairness of arbitration proceedings in India. By linking the arbitral tribunal's fees to the timeliness of the award and granting the tribunal discretion in allocating the costs of arbitration, the ACA incentivizes promptness, discourages delays, and promotes responsible conduct by the parties. These provisions underscore the legislative intent to make arbitration a more effective and efficient mechanism for dispute resolution.

Written By: Md.Imran Wahab, IPS, IGP, Provisioning, West Bengal
Email: imranwahab216@gmail.com, Ph no: 9836576565