Section 39 of the Arbitration and Conciliation Act, 1996 - Lien on Arbitral Award and Deposits as to Costs
Section 39 protects an arbitral tribunal where arbitration costs remain unpaid. Subject to Section 39(2) and any contrary provision in the arbitration agreement, the tribunal has a lien on the arbitral award for unpaid arbitration costs. The section also permits a party, in specified circumstances, to approach the Court for delivery of the award on depositing the demanded costs in Court.
Text of Section 39 - Lien on arbitral award and deposits as to costs
39. Lien on arbitral award and deposits as to costs.
(1) Subject to the provisions of sub-section (2) and to any provision to the contrary in the arbitration agreement, the arbitral tribunal shall have a lien on the arbitral award for any unpaid costs of the arbitration.
(2) If in any case an arbitral tribunal refuses to deliver its award except on payment of the costs demanded by it, the Court may, on an application in this behalf, order that the arbitral tribunal shall deliver the arbitral award to the applicant on payment into Court by the applicant of the costs demanded, and shall, after such inquiry, if any, as it thinks fit, further order that out of the money so paid into Court there shall be paid to the arbitral tribunal by way of costs such sum as the Court may consider reasonable and that the balance of the money, if any, shall be refunded to the applicant.
(3) An application under sub-section (2) may be made by any party unless the fees demanded have been fixed by written agreement between him and the arbitral tribunal, and the arbitral tribunal shall be entitled to appear and be heard on any such application.
(4) The Court may make such orders as it thinks fit respecting the costs of the arbitration where any question arises respecting such costs and the arbitral award contains no sufficient provision concerning them.
What Section 39 means
1. Lien on the arbitral award for unpaid costs
Section 39(1) gives the arbitral tribunal a lien over the award where arbitration costs remain unpaid. In practical terms, the tribunal may retain the award as security for those unpaid costs, subject to the statutory remedy in sub-section (2) and any contrary provision in the arbitration agreement.
2. Court remedy where the tribunal refuses to deliver the award
If the tribunal refuses to deliver the award unless the demanded costs are paid, a party may apply to the Court under Section 39(2). The Court may direct delivery of the award after the applicant deposits the amount demanded into Court. The Court may then inquire into the costs and determine what amount is reasonable.
3. Refund of excess amount deposited in Court
Where the amount deposited into Court exceeds the amount ultimately considered reasonable, the balance is to be refunded to the applicant. Section 39(2) therefore protects both the tribunal's legitimate entitlement to costs and the party's right to seek judicial scrutiny of the amount demanded.
4. Exception where fees were fixed by written agreement
Section 39(3) limits the remedy under sub-section (2). A party cannot invoke that provision where the fees demanded were fixed by a written agreement between that party and the arbitral tribunal. The tribunal is also expressly entitled to appear and be heard in proceedings under Section 39(2).
5. Court power where the award does not adequately deal with costs
Under Section 39(4), where a question arises concerning arbitration costs and the award does not contain sufficient provision regarding those costs, the Court may make such orders concerning the costs as it considers appropriate.
Meaning of "Court" under the Arbitration Act
For Part I of the Arbitration and Conciliation Act, 1996, the expression "Court" is defined in Section 2(1)(e). In general terms, it refers to the principal civil court of original jurisdiction in a district, including the High Court where it exercises ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if they had been the subject matter of a suit. For international commercial arbitration, the statutory definition assigns jurisdiction to the competent High Court.
Relationship with Sections 31A and 38
Section 39 forms part of the Act's wider framework dealing with arbitration costs. Section 31A contains the general statutory regime for costs, while Section 38 permits the tribunal to require deposits and supplementary deposits as advances towards expected arbitration costs.
The Supreme Court in Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV, Supreme Court of India, 30 August 2022 discussed Section 39 in the context of arbitral fees and explained that the tribunal's lien over the award operates as security for unpaid arbitration costs.
Official statutory reference
The official text of the Arbitration and Conciliation Act, 1996 is available through India Code, the Government of India legislative database.
Key points at a glance
- The arbitral tribunal has a statutory lien over the award for unpaid arbitration costs, subject to the Act and the arbitration agreement.
- A party may seek delivery of the award through the Court by depositing the amount demanded, where Section 39(2) applies.
- The Court may examine the costs and decide what amount is reasonable.
- Any excess amount remaining after the Court's determination is refundable to the applicant.
- The Section 39(2) remedy is unavailable to a party where the demanded fees were fixed by written agreement between that party and the tribunal.
- The tribunal has a statutory right to appear and be heard on an application under Section 39(2).
- The Court may make appropriate orders on arbitration costs where the award does not sufficiently provide for them.
This page provides general legal information. Questions concerning arbitral fees, agreed fee arrangements, court jurisdiction, retention of an award, or recovery of arbitration costs may depend on the arbitration agreement, procedural orders and the facts of the particular case.