Case: National Highway Authority of India Vs. Transstroy (India) Limited

respondent may, in support of his case, also submit a counterclaim or plead a set-off, along with its Statement of Defence for adjudication by the AT. The AT observes that the respondent has pleaded a set-off of Rs. 1.23 crores vide its Statement of Defence; while as regards the counterclaims, it has been stated therein that the respondent reserves its right to file the counterclaims. The respondent has not stated any applicable law in respect of reserving such right. In the above background, the AT observes that (i) during the proceedings the procedure and schedule for filing the pleadings were determined by the AT as agreed to by both the parties; that there is no mention therein for filing of the counterclaims by the respondent and (ii) the Statement of Defence has already been filed by the respondent, with set- off and without any counterclaim as per the procedure agreed to by and between the parties, except that the respondent has sue moto reserved its right to file counterclaim at a later date. Thereafter there is no application by the respondent for filing of any counterclaim. In the above circumstances, there is no question of having any date determined by the AT or agreed upon by the parties for filing the counterclaim by the respondent, and if there is no date fixed or agreed upon for filing of the counterclaims, the question of its extension does not arise. Therefore, the AT orders that the request for an extension of time for filing of the counterclaim made by the respondent is not in accordance with applicable law and is irrelevant in view of the factual circumstances as above. In view of the delay in filing of the SOD by the respondent, the claimant shall file its rejoinder thereon, if any, on or before 05.08.2017 and the statement of admission and denial of documents shall be filed by the parties on or before 11.08.2017i.e. the date of the next meeting of the AT. The above decision of the AT does not preclude the respondent from having another legal remedy in respect of its claims. The above Order is issued by the Presiding Arbitrator in consultation with and on behalf of the AT. 13.3 However, thereafter, when the NHAI filed the application under sub-section (2A) of Section 23 of the Arbitration Act, 1996 seeking to place on record its counter claim, by order dated 15.09.2017, the Arbitral Tribunal rejected the said application by observing that in the application for permitting the NHAI to place on record the counter claim, the NHAI has not stated anything about having made an attempt for such amicable settlement. However, it is required to be noted that from the very beginning, the NHAI reserved its right to claim the damages and even in the Statement of Defence also claimed such a set off of Rs.1.23 crores and also specifically stated therein that the NHAI reserved its right to file the counter claim. Therefore, on the grounds on which the Arbitral Tribunal had rejected the application of NHAI to place on record the counter claim can be said to be contrary to the intent between the parties to resolve the dispute (which was for termination of the Contract by the NHAI) through conciliation first. In the facts and circumstances of the case, by such a narrow interpretation, the Arbitral Tribunal has taken away the valuable right of the NHAI to submit counter claim, which is of a very huge amount thereby negotiating the statutory and contractual rights of the NHAI and paving way for a piecemeal and inchoate adjudication. 13.4 When there is a provision for filing the counter claim – set off, which is expressly inserted in Section 23 of the Arbitration Act, 1996, there is no reason for curtailing the right of the appellant for making the counter claim or set off. If we do not allow the counter claim made by the NHAI in the proceedings arising out of the claims made by the Contractor, it may lead to parallel proceedings before various fora. While passing the impugned judgment and order, the High Court has lost sight of the aforesaid aspect, which ought to have been considered while considering the request on behalf of the NHAI to place on record its counter claim. Clauses 26.1 and 26.2 have to be interpreted in a pragmatic and practical manner, as they require that the parties must at first try to settle, resolve and even try conciliation but when the procedure under Clauses 26.1 and 26.2 fails to yield desired result, in the form of settlement within the period specified in Clause 26.2, the Dispute can be resolved through arbitration in terms of Clause 26.3. Once any dispute, difference or controversy is notified under Clause 26.1, the entire subject matter including counter claim/set off would form subject matter of arbitration as any dispute which is not resolved in Clauses 26.1 and 26.2. 13.5 At this stage, it is required to be noted that as such there was no delay at all on the part of the NHAI initially praying for extension of time to file the counter claim and/or thereafter to file application under Section 23(2A) permitting it to place on record the counter claim. In the facts and circumstances of the case, we are of the opinion that not permitting the NHAI to file the counter claim would defeat the object and purpose of permitting to file the counter claim/set off as provided under Section 23(2A) of the Arbitration Act, 1996. Without appreciating the aforesaid aspects, the High Court has by the impugned judgment and order, and on narrow interpretation of Clause 26 has seriously erred in rejecting the application under Section 34/37 of the Arbitration Act, 1996 and confirming the order passed by the Arbitral Tribunal in not permitting the NHAI to file the counter claim. The High Court ought to have appreciated that permitting the NHAI to file the counter claim may avoid multiplicity of proceedings.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]8. At the outset, it is required to be noted that in the present case, the NHAI submitted the Statement of Defence on 11.07.2017 in which the NHAI reserved its right to claim damages and stated that it would file its counter claim separately and after two days only, i.e., on 13.07.2017, sent a letter to the Arbitral Tribunal seeking extension of time for filing the counter claim, which came to be rejected by the Arbitral Tribunal vide e-mail on 18.07.2017. That thereafter, immediately the NHAI moved an application before the Arbitral Tribunal under Section 23(2A) of the Arbitration Act, 1996 to place its counter claim on record.It is required to be noted that in the present case, the cause for the dispute between the parties was the termination of the contract by the NHAI. As far as the said dispute of termination of notice was required to be resolved amicably as per the procedure prescribed under Clauses 26.1 and 26.2 of the Contract Agreement. It may be true that in a given case, the Dispute may include the claims and/or counter claims, but, at the same time, the main dispute can be said to be termination of the contract, which as observed hereinabove was required to be resolved through conciliation after following the procedure as above.13. Therefore, thereafter, it is not open for the Contractor to contend that the counter claim was without following the procedure as required in Clauses 26.1 and 26.2 and, therefore, may not be taken on record. On a true and fair interpretation of Clause 26, failure to resolve the dispute (in the present case, the termination of the Contract by the NHAI), the arbitration proceedings would be maintainable. That does not mean that only a claim and/or counter claim as sought to be contended on behalf of the Contractor now would alone be entertained.13.1 Both the Arbitral Tribunal as well as the High Court have failed to appreciate the difference between the expressions claim, which may be made by one side and Dispute, which by its definition has two sides.13.3 However, thereafter, when the NHAI filed the application under sub-section (2A) of Section 23 of the Arbitration Act, 1996 seeking to place on record its counter claim, by order dated 15.09.2017, the Arbitral Tribunal rejected the said application by observing that in the application for permitting the NHAI to place on record the counter claim, the NHAI has not stated anything about having made an attempt for such amicable settlement. However, it is required to be noted that from the very beginning, the NHAI reserved its right to claim the damages and even in the Statement of Defence also claimed such a set off of Rs.1.23 crores and also specifically stated therein that the NHAI reserved its right to file the counter claim. Therefore, on the grounds on which the Arbitral Tribunal had rejected the application of NHAI to place on record the counter claim can be said to be contrary to the intent between the parties to resolve the dispute (which was for termination of the Contract by the NHAI) through conciliation first. In the facts and circumstances of the case, by such a narrow interpretation, the Arbitral Tribunal has taken away the valuable right of the NHAI to submit counter claim, which is of a very huge amount thereby negotiating the statutory and contractual rights of the NHAI and paving way for a piecemeal and inchoate adjudication.13.4 When there is a provision for filing the counter claim – set off, which is expressly inserted in Section 23 of the Arbitration Act, 1996, there is no reason for curtailing the right of the appellant for making the counter claim or set off. If we do not allow the counter claim made by the NHAI in the proceedings arising out of the claims made by the Contractor, it may lead to parallel proceedings before various fora. While passing the impugned judgment and order, the High Court has lost sight of the aforesaid aspect, which ought to have been considered while considering the request on behalf of the NHAI to place on record its counter claim. Clauses 26.1 and 26.2 have to be interpreted in a pragmatic and practical manner, as they require that the parties must at first try to settle, resolve and even try conciliation but when the procedure under Clauses 26.1 and 26.2 fails to yield desired result, in the form of settlement within the period specified in Clause 26.2, the Dispute can be resolved through arbitration in terms of Clause 26.3. Once any dispute, difference or controversy is notified under Clause 26.1, the entire subject matter including counter claim/set off would form subject matter of arbitration as any dispute which is not resolved in Clauses 26.1 and 26.2.13.5 At this stage, it is required to be noted that as such there was no delay at all on the part of the NHAI initially praying for extension of time to file the counter claim and/or thereafter to file application under Section 23(2A) permitting it to place on record the counter claim. In the facts and circumstances of the case, we are of the opinion that not permitting the NHAI to file the counter claim would defeat the object and purpose of permitting to file the counter claim/set off as provided under Section 23(2A) of the Arbitration Act, 1996. Without appreciating the aforesaid aspects, the High Court has by the impugned judgment and order, and on narrow interpretation of Clause 26 has seriously erred in rejecting the application under Section 34/37 of the Arbitration Act, 1996 and confirming the order passed by the Arbitral Tribunal in not permitting the NHAI to file the counter claim. The High Court ought to have appreciated that permitting the NHAI to file the counter claim may avoid multiplicity of proceedings.