Fees of Arbitration Act for MP Municipal Arbitration

Judgment dated 7.10.2026 of the High Court of Madhya Pradesh at Indore in Writ Appeal No.1908 of 2023 of Indore Municipal Corporation  Vs. Mahendra Kumar Vijayvargiya and others with connected writ appeal.

The respondent no.1 approached the District Court under Section 387 of the Municipal Corporation Act, 1956, against Indore Municipal Corporation for compensation in respect of demolition. 

In the said case, Three-Member Panchayat was constituted.  The respondent filed  claim for Rs.30,46,200/-.

The said Panchayat decided their fees as per the Arbitration and Conciliation Act, 1996 and directed the parties equally pay the same.  It was further directed that out of the fees payable to the Panchayat, 30% each will be paid to each of two Members and 40% to the Umpire / Sarpanch.

The Corporation had challenged the said order on two grounds – first that the fees is on higher side and secondly the respondent is liable to bear the entire fees since he has invoked section 387 proceedings.

The crux of the matter lies in Section 387 of the Municipal Corporation Act, 1956.

“(1)If an agreement is not arrived at with respect to any compensation or damages which are by this Act directed to be paid, the amount and if necessary the apportionment of the same shall be ascertained and determined by a Panchayat of three persons….”

Thus, Section 387 itself provides for arbitration.

This is how that as per section 2(4) of the Arbitration Act, its Part I applies to every arbitration under any other enactment including Section 387.

In other words, section 387 arbitration is consistent with Section 2(4) of the Arbitration Act.

As a result, the fees under Arbitration Act applied to the arbitration under Section 387 of the MC Act and fixed by Panchayat is legal.