Section 31A, Arbitration & Conciliation Act 1996: Regime For Costs

Section 31A (Regime for costs) is under Chapter VI (Making of arbitral award and termination of proceedings) of the Part I (Arbitration) of the Arbitration and Conciliation Act, 1996.

The contents of the section  is reproduced hereunder:—

“(1) In relation to any arbitration proceeding or a proceeding under any of the provisions of this Act pertaining to the arbitration, the Court or arbitral tribunal, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), shall have the discretion to determine—

  (a) whether costs are payable by one party to another;
  (b) the amount of such costs; and
  (c) when such costs are to be paid.

Explanation.—For the purpose of this sub-section, “costs” means reasonable costs relating to—
(i) the fees and expenses of the arbitrators, Courts and witnesses;
(ii) legal fees and expenses;
(iii) any administration fees of the institution supervising the arbitration; and
(iv) any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award.

(2) If the Court or arbitral tribunal decides to make an order as to payment of costs,—
  (a) the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party; or
  (b) the Court or arbitral tribunal may make a different order for reasons to be recorded in writing.

(3) In determining the costs, the Court or arbitral tribunal shall have regard to all the circumstances, including—
  (a) the conduct of all the parties;
  (b) whether a party has succeeded partly in the case;
  (c) whether the party had made a frivolous counterclaim leading to delay in the disposal of the arbitral proceedings; and
  (d) whether any reasonable offer to settle the dispute is made by a party and refused by the other party.

(4) The Court or arbitral tribunal may make any order under this section including the order that a party shall pay—
  (a) a proportion of another party’s costs;
  (b) a stated amount in respect of another party’s costs;
  (c) costs from or until a certain date only;
  (d) costs incurred before proceedings have begun;
  (e) costs relating to particular steps taken in the proceedings;
  (f ) costs relating only to a distinct part of the proceedings; and
  (g) interest on costs from or until a certain date.

(5) An agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event shall be only valid if such agreement is made after the dispute in question has arisen.”

Extra Notes for Readers

(1) Section 31A was newly inserted by the Arbitration and Conciliation (Amendment) Act, 2015 (w.e.f. 23 Oct 2015).

This page was last updated on 31st December, 2017.

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