Counterclaims Can Be Enforced Under Section 36 Of The A&C Act If The Part Of Award Favouring Judgment-Debtor Is Set Aside: Delhi High Court

The High Court of Delhi has held that the counterclaims allowed by the arbitral tribunal can be enforced under Section 36 of the A&C Act when the portion of the award granting larger sums to the judgment-debtor (claimant in the arbitration) is set aside.

The bench of Justice Jasmeet Singh reiterated that partial setting aside of an award is permissible under the Act, therefore, when the award qua the claims allowed is set aside, the award regarding the counterclaims remains valid and enforceable.

Facts of the Case

The execution petition was filed for the execution of an arbitral to the extent of it allowing the counterclaims of the decree-holder. The arbitral award was passed on 07.10.2019 and was modified on 18.12.2019. The award directed the decree-holder to pay the judgment debtor a sum of Rs. 46,75,96,572/-.

However, both parties challenged the award under Section 34 of the A&C Act, and it was partially set aside to the extent of the claims allowed in favour of the judgment-debtor. The finding regarding the counterclaims remained unaffected.

Contention of the parties

The decree-holder made the following submission(s) in favour of the petition:

• That it is entitled to recover the amount of its counterclaims awarded by the tribunal when the larger claims awarded in favour of the judgment-debtor are set aside.
• That the amount of counterclaim awarded in its favour is a decree enforceable in law and therefore, the execution petition is maintainable.

The judgement-debtor made the following submissions against the maintainability of the petiton:

• That the award of counterclaims of the decree-holder was only a set off against a larger claim allowed in favour of the judgment-debtor. It was not an award but only an entitlement which cannot be enforced under Section 36 of the A&C Act.
• That the modification/partial setting aside can only be done by the court hearing the Section 34 petition and not the executing court, therefore, the counterclaims cannot be independently enforced.

Analysis by the court

The court analyzed the provisions of the A&C Act and the Code of Civil Procedure, 1908, and held that as long as the part of an award which is proposed to be annulled is independent and stands unattached to the other part, the partial setting aside would be valid and justified.

The Court held that the counterclaims allowed by the arbitral tribunal can be enforced under Section 36 of the A&C Act when the portion of the award granting larger sums to the judgment-debtor (claimant in the arbitration) is set aside.

The Court reiterated that partial setting aside of an award is permissible under the Act, therefore, when the award qua the claims allowed is set aside, the award regarding the counterclaims remains valid and enforceable.

The court noted that the judgment-debtor has filed an application under 'Vivad Se Vishwas Scheme II' formulated by the government and the amount claimed therein is higher than the amount which is to be paid by the judgment-debtor herein. It held that the amount recoverable herein by the decree-holder shall be adjusted against the amount if any awarded under the said scheme, however, if the application by the judgment debtor is dismissed, the decree-holder shall be entitled to revive of the execution proceedings and claim the entire amount of counterclaims.

Accordingly, the Court disposed of the petition with above directions.

Case Title: M/s NHPC Ltd v. M/s Jaiprakash Associates Ltd

Citation: 2024 LiveLaw (Del) 252

Date: 14.02.2024

Counsel for the Decree-holder: Mr. Gauhar Mirza, Ms. Hiral Gupta and Ms. Sukanya Singh, Advs.

Counsel for the Respondent: Mr. Lovkesh Sawhney, Sr. Adv. with Mr. Rohit Kumar, Adv.

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