NATIONAL HIGHWAY AUTHORITY OF INDIA versus TRANSSTROY (INDIA) LIMITED

Citation: [2022] 6 S.C.R. 948 · Decided: 11-07-2022 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 6 S.C.R.
NATIONAL HIGHWAY AUTHORITY OF INDIA
v.
TRANSSTROY (INDIA) LIMITED
(Civil Appeal No. 6732 of 2021)
JULY 11, 2022
[M. R. SHAH AND SANJIV KHANNA, JJ.]
Arbitration and Conciliation Act, 1996:  s. 23(2A) – Statements
of claim and defence – Contract between appellant (NHAI) and the
respondent company – Dispute between the parties referred to the
arbitrator – Application u/s. 23(2A) by the appellant to permit them
to place on record its counter claim – Rejection of, by the tribunal
as also the High Court – On appeal, held: When there is a provision
for filing the counter claim-set off, which is expressly inserted in s.
23, there was no reason for curtailing the right of the appellant for
making the counter claim or set off – If the counter claim made by
the appellant is not allowed in the proceedings arising out of the
claims made by the respondent, it may lead to parallel proceedings
before various fora – It would defeat the object and purpose of
permitting to file the counter claim/set off as provided u/s. 23(2A) –
Furthermore, the appellant 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 – Thus, the High Court on a narrow interpretation
of Clause 26 of the Contract erred in rejecting the application –
Order passed by the arbitral tribunal and the High Court  quashed
and set aside.
Allowing the appeal, the Court
HELD: 1.1 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 of the Contract Agreement
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. [Para 13][966-D-E]
[2022] 6 S.C.R. 948
948
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1.2 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. [Para 13.1][966-E-F]
1.3 Even the Arbitral Tribunal while rejecting the application
of the NHAI for extension of time to file the counter claim did
not observe and/or rejected the application for extension of time
to file the counter claim on the ground that the said counter claim
would not be maintainable without following the process as
required under Clause 26 of the Contract agreement. [Para
13.2][966-G]
1.4 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, 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 did 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 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. [Para 13.3][968-F-H; 969-A-C]
1.5 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 the counter
NATIONAL HIGHWAY AUTHORITY OF INDIA v.
TRANSSTROY (INDIA) LIMITED
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SUPREME COURT REPORTS
[2022] 6 S.C.R.
claim made by the NHAI in the proceedings arising out of the
cla

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