Right Of A Party To File Counter Claims Exists Independently Of Any Liberty Granted To It By The Arbitral Tribunal: Delhi High Court

The Single Bench of Justice C. Hari Shankar held that the right of a party to file counter claims before the Arbitral Tribunal exists independently of any liberty granted to it by the Arbitral Tribunal.

During the course of arbitral proceedings, the petitioner National Highways Authority of India (NHAI) filed an application before the Arbitral Tribunal to raise a counter claim. The Arbitral Tribunal allowed the application and passed an order allowing the petitioner to submit the specified counter claim. Thereafter, the petitioner filed new counter-claims before the Arbitral Tribunal which was rejected by the Tribunal on the ground that liberty was granted to the petitioner for filing only the specified counter claim. NHAI filed a petition under Section 34 of the A&C Act before the Delhi High Court against the order of the Arbitral Tribunal refusing to adjudicate the fresh counter claims made by NHAI in the arbitral proceedings.

The petitioner NHAI submitted before the High Court that the Arbitral Tribunal could not have taken the view that it would not entertain any other counter-claim, except the specified counter claim with respect to which liberty was granted by the Tribunal. The respondent contested the maintainability of the petition and contended that the order of the Arbitral Tribunal rejecting to adjudicate upon the counter claims raised by the petitioner could not be regarded as an interim award, therefore, the petition filed under Section 34 was not maintainable.

Section 31(6) of the A&C Act gives the arbitral tribunal the power to make an interim arbitral award, at any time during the arbitral proceedings, on any matter with respect to which it may make a final arbitral award. Section 34 provides that a party may make an application to the Court to set aside an arbitral award rendered by the Arbitral Tribunal.

The High Court noted that the order passed by the Arbitral Tribunal did not state that the petitioner could only file a counter claim with respect to a specified amount/claim. The Court ruled that the order of the Arbitral Tribunal did not restrict the right of NHAI to file any other counter claim.

The High Court held that the right of a party to file counter claims before the Arbitral Tribunal exists independently of any liberty granted to it by the Arbitral Tribunal. The Court added that it is always open to the Arbitral Tribunal to reject the counter claims raised by the opposite party on merits, on limitation, or on the ground that they are not arbitrable within the scope of reference made to the Arbitral Tribunal. However, the Court ruled, the Arbitral Tribunal cannot take a view that it cannot entertain any counter-claim raised before it.

The Court ruled that decisions of the Arbitral Tribunal are amenable to challenge before the Court, either under Section 34 or Section 37 of the A&C Act. The Court added that Section 34 allows recourse to a Court against any arbitral award. The Court held that an "arbitral award", as defined under Section 2(1)(c) of the A&C Act, includes an interim award.

The Court held that since an interim award is also an "arbitral award" under Section 2(1)(c), an interim award passed by the Arbitral Tribunal can also be challenged before the Court under Section 34 of the A&C Act.

The Court noted that the Supreme Court in the case of Indian Farmers Fertilizer Cooperative Ltd versus Bhadra Products (2018) had ruled that though the A&C Act does not define "interim award", the provisions of Section 31(6) are wide in nature which confer jurisdiction to the Arbitral Tribunal to make an interim arbitral award on "any matter" with respect to which it may make a final arbitral award.

The High Court thus ruled that any matter on which the Arbitral Tribunal has the jurisdiction to pass a final award can also be the subject of an interim award made by it. The Court added that such an award passed by it in the interlocutory stage would constitute an "interim award" within the meaning of Section 31(6), which can be challenged before the Court under Section 34 of the A&C Act.

The Court held that the Arbitral Tribunal's order that the counter-claims raised were not maintainable, is a decision which the Arbitral Tribunal could make at the final stage of the proceedings, especially in view of Section 16 of the A&C Act which gives the Arbitral Tribunal the power to rule on its own jurisdiction. The Court ruled that such a decision, when taken at an interlocutory stage, would certainly constitute an "interim award" under the A&C Act.

The High Court thus set aside the order of the Arbitral Tribunal whereby the Tribunal had rejected to entertain the fresh counter-claims raised by the petitioner NHAI. The Court thus allowed the petition of the petitioner.

Case Title: National Highways Authority of India versus M/S Abhijeet Angul Sambalpur Toll Road Limited

Citation: 2022 LiveLaw (Del) 351

Dated: 28.02.2022 (Delhi High Court)

Counsel for the Petitioner: Ms. Aishwarya Bhati, ASG with Ms. Neetica Sharma and Mr. Nitin Chowdhary.

Counsel for the Respondent: Mr. Sandeep Bajaj, Devansh Jain and Vipul Jai