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Barath Buildings Constructions India Pvt Ltd, Rep. by its Director Bharath Vummidi, Chennai v/s G. Saminathan & Another

    Arb. O.P. (Comm. Div)No. 289 of 2021
    Decided On, 13 September 2022
    At, High Court of Judicature at Madras
    By, THE HONOURABLE MR. JUSTICE SENTHILKUMAR RAMAMOORTHY
    For the Petitioner: Azim Shehzed, Akhi Bhansali, Advocate. For the Respondents: S. Ravi & M/s. Gupta & Ravi, Advocates.


Judgment Text
(Prayer: This Petition has been filed under Section 34 of the Arbitration and Conciliation Act 1996 to set aside the Interim Arbitral Award dated 09.08.2021 passed by the Arbitral Tribunal comprised of the Sole Arbitrator, Hon'ble Mr.Justice D.Murugesan, Former Chief Justice, Delhi High Court in Application No.1 of 2001 in Arbitration Case No.1 of 2020.)

1. The petitioner assails an order of the Arbitral Tribunal dated 14.08.2021, which is labelled as an interim arbitral award dated 09.08.2021(the Order).

2. A Joint Development Agreement(JDA) was entered into between the petitioner and the respondents on 23.05.2012. Due to various reasons which are not germane for present purposes, the respondents cancelled the JDA on 05.01.2018. The property which formed the subject of the JDA was sold by the respondents on the same date. On 06.09.2019, the respondents issued a notice under Section 21 of the Arbitration and Conciliation Act, 1996(the Arbitration Act) with regard to disputes arising out of the JDA. Eventually, the Arbitral Tribunal was constituted on 20.07.2020 pursuant to orders passed in a petition (O.P.No.71 of 2020) under Section 11 of the Arbitration Act. The respondents filed the claim statement on 28.10.2020. In response thereto, the petitioner lodged the statement of defence on 10.12.2020. Upon completion of pleadings, issues were framed on 05.02.2021. Thereafter, the respondents filed the proof affidavit of C.W.1 and the petitioner filed the proof affidavit of R.W.1. C.W.1 was cross examined by learned counsel for the respondent. About one month after filing the proof affidavit of R.W.1, the counter claim was lodged by the petitioner on 29.03.2021. The respondents herein filed a reply and raised objections with regard to the maintainability of such counter claim. Eventually, by the Order, the Arbitral Tribunal rejected the application for permission to lodge the counter claim.

3. Learned counsel for the petitioner submitted that the claims and counter claims arise out of the JDA and are inter-linked. He stated that the counter claims are in respect of: (i) refund of the security deposit provided by the petitioner to the respondents at the time of execution of the JDA; (ii) expenses incurred by the petitioner inter alia towards preparing the land for construction purposes and applying for requisite permissions; and damages by way of compensation for the unlawful cancellation of the JDA.

4. By turning to paragraph 9 of the Order, he pointed out that the Arbitral Tribunal entered a finding that the counter claims fall within the ambit of the relevant arbitration clause. By drawing reference to paragraph 9 of the Order, he submitted that the Arbitral Tribunal concluded that the counter claims were not barred by limitation. After having concluded that the counter claims are within the scope of the arbitration clause and within the prescribed limitation period, learned counsel submitted that the conclusion that the counter claims are liable to be rejected on the ground of delay is patently erroneous and unsustainable. By adverting to the statement of defence, he submitted that the petitioner had indicated the counter claims therein and reserved the right to lodge the same.

5. His next contention was that the Order qualifies as an interim award because the counter claims were rejected by the Order. Learned counsel contended that any order that disposes of a matter finally is an interim arbitral award. Because it is an interim award, he further contended that a challenge is maintainable under Section 34 of the Arbitration Act. As a result of the Order, he contended that the petitioner was deprived of the opportunity to make the counter claims and establish the same through pleadings and evidence. Therefore, learned counsel submitted that the Order calls for interference.

6. In support of these submissions, learned counsel referred to and relied upon the following judgments:

(i) Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products (2018) 2 SCC 534(IFFCO), particularly paragraphs 8, 9 and 15 thereof for the proposition that any order by which the Arbitral Tribunal disposes of an issue between the parties finally qualifies as an interim award.

(ii) H.S.Bedi and ors. v. STCI Finance Limited, MANU/DE/2208/2020, particularly paragraph 29 thereof, for the proposition that an order rejecting a request for amendment of the statement of defence is an interim award.

(iii) Arun T.Gujrathi v. Angel Capital and Debt Market Ltd, MANU/MH/0228/2012, and, in particular, paragraph 7 thereof, with regard to the rejection of a counter claim and interference therewith.

(iv) National Highways Authority of India v. Abhijeet Angul Sambalpur Toll Road Limited, 2022 SCC Online Del 664, particularly paragraph 16 to 18 thereof, for the proposition that the rejection of a counter claim amounts to an interim award.

(v) Jai Jai Ram Manohar Lal v. National Building Material Supply Gurgaon, MANU/SC/0016/1969, particularly paragraph 5 thereof, for the proposition that rules of procedure are intended to be a handmaid to the administration of justice.

(vi) Sardar Hari Bachan Singh v. S.Har Bhajan Singh and others, MANU/PH/0038/1975, particularly paragraph 9 thereof, with regard to requirement of a liberal approach to applications for amendment of pleadings.

(vii) Gokul Projects v. Cyclone Energy Pvt. Ltd. MANU/DE/3698/2018, and, in particular, paragraphs 10 and 13 thereof for the proposition that counter claims should be allowed to be raised so as to avoid multiplicity of proceedings.

(viii) State of Goa v. Parveen Enterprises (State of Goa), MANU/SC/0812/2011, particularly paragraph 32(b) thereof, for the proposition that the arbitral tribunal has jurisdiction to entertain the counter claim, even though it was not raised at a stage prior to the pleadings stage before the tribunal.

7. Learned counsel also referred to the orders of the Hon'ble Supreme Court by which the limitation periods were extended in the wake of the COVID-19 pandemic. By drawing reference to the order dated 08.03.2021 In re: Cognizance for Extension of Limitation, MANU/SC/ 0158/21, he submitted that the Hon'ble Supreme Court concluded that the period between 15.03.2020 and 14.03.2021 shall stand excluded while computing the period prescribed under Section 23(4) and 29(A) of the Arbitration Act.

8. Mr.Ravi, learned counsel for the respondents, made submissions to the contrary. He opened his submissions by pointing out the sequence of events pertaining to the dispute. In particular, he pointed out that the notice of arbitration was issued on 06.09.2019; the Arbitral Tribunal was constituted after filing a petition under Section 11 of the Arbitration Act; the claim statement was filed on 28.10.2020; the statement of defence was filed on 10.12.2020, whereas the counter claim was lodged on 29.03.2021. In view of the factual situation, he submitted that the Order passed by the Arbitral Tribunal does not call for interference.

9. His next contention was that the said Order does not qualify as an interim award as per the Arbitration Act. By referring to Section 23(1) of the Arbitration Act, he pointed out that the statute mandates that the claim statement and statement of defence should be filed within the time limits fixed by the Arbitral Tribunal unless parties have agreed otherwise. In this case, he stated that the parties had not agreed on the time limits and, therefore, were bound by the time limits fixed by the Arbitral Tribunal. While admitting that a counter claim may be filed in terms of Section 23(2A), he submitted that such counter claim may be permitted to be lodged by the Arbitral Tribunal by taking into account the time limits fixed under the Arbitration Act. In particular, he pointed out that sub-section 4 of Section 23 mandates that the pleadings should be completed within a period of six months from the date(s) of appointment of the arbitrator(s) constituting the Arbitral Tribunal. According to learned counsel, the time limit of six months may have been extended by the order of the Hon'ble Supreme Court but such extension per se does not take away the discretion of the Arbitral Tribunal to decide whether leave should be granted for lodging the counter claim after taking into account the reasons and justifications provided in such regard.

10. By drawing reference to Sections 31(6) and 35 of the Arbitration Act, learned counsel contended that the order passed by the Arbitral Tribunal is a procedural order under Section 23 of the Arbitration Act and not an interim award. By way of substantiation, learned counsel submitted that it is open to the petitioner to institute independent arbitration proceedings with regard to the counter claims and that the impugned order would not operate as res judicata. Because it is not an interim award, he contended that this petition is liable to be dismissed as not maintainable.

11. On a demurrer, by drawing reference to paragraphs 16 to 20 and 23 of the Order, he pointed out that the Arbitral Tribunal dealt extensively with the facts and circumstances under which the application for permission to lodge the counter claims was rejected. Therefore, he submitted that the Order does not call for interference as per the grounds for interference under Section 34 of the Arbitration Act. By referring to subclause (i) of Section 34(2)(a), he pointed out that it cannot be concluded that the petitioner was under any incapacity with regard to filing the counter claims earlier. In order to substantiate this contention, he referred to the statement of defence of the petitioner and pointed out that the amounts claimed by way of counter claims were quantified and specified at paragraph 17 thereof. He also submitted that no additional documents were filed in support of the counter claims. Consequently, he stated that the petitioner could have presented the counter claims within time but chose not to do so. Hence, it cannot be said that the petitioner was otherwise unable to present its case as per sub-clause(iii) of Section 34(2)(a).

12. Learned counsel for the respondents reiterated the sequence of dates and events to point out that the counter claims were lodged after the proof affidavit of R.W.1 was filed. By drawing reference to the judgment of the Hon'ble Supreme Court in Ashok Kumar Kalra v. Wing CDR, Surendra Agnihotri and others (2020) 2 SCC 394,(Ashok Kumar Kalra), particularly paragraph 18 thereof, he pointed out that the majority judgment concluded that a defendant should not be permitted to lodge the counter claim after issues are framed. By drawing reference to the minority judgment, he pointed out that the minority judgment also concluded that the discretion to permit filing of a counter claim should ordinarily not be exercised after issues are framed. Therefore, he submitted that the lodging of the counter claims by the petitioner after evidence was recorded in part should not be countenanced.

13. For all these reasons, he submitted that the Order does not call for interference by relying upon or distinguishing the following judgments:

(i) Shivhare Roadlines v. Gammon India Limited and others, MANU/MP/2206/2013, particularly paragraphs 25, 29 and 31 thereof, for the proposition that the arbitral tribunal is not entitled to permit a party to file the statement of defence after recording evidence because it would negate the mandatory provisions of Section 25(b) of the Arbitration Act.

(ii) Gammon India Limited v. M/s.Shivhare Roadlines and another, Civil Appeal Nos.5147 and 5148 of 2017, whereby the Hon'ble Supreme Court refused to interfere with the preceding order of the Madhya Pradesh High Court.

(iii) Punit A.Bhardwaj v. Rashmi Juneja, 2022 SCC Online 2691, particularly paragraphs 11 to 21 thereof, wherein the Delhi High Court concluded that the order rejecting the application for amendment of pleadings does not qualify as an interim award.

(iv) Rhiti Sports Management Pvt Ltd. v. Power Play Sports & Events Ltd., 2018 SCC Online Del 8678(Rhiti Sports Management), wherein the Delhi High Court concluded that any procedural order which does not finally settle a matter on which the parties are at issue would not qualify as an arbitral award.

(v) ONGC Petro Additions Limited v. Tecnimont S.P.A. and another, 2019 SCC Online Del 8976, wherein the Delhi High Court concluded that an order by which the arbitral tribunal refused permission to exhibit additional documents is not an interim award.

(vi) Lindsay International Private Limited v. IFGL Refractories Limited, 2021 SCC Online Cal 1979, wherein the Calcutta High Court concluded that an order rejecting an amendment application is not an interim award.

(vii) Punj. Lloyd Limited and another v. Oil and Natural Gas Corporation Ltd, 2016 SCC Online Bom 3749, particularly paragraph 17 thereof, for the proposition that a decision under Section 23(3) of the Arbitration Act does not qualify as an interim award.

(viii) JITF Water Infrastructure Limited v. Aquafil Polymers Company Private Limited, MANU/GJ/0359/2021, for the proposition that a writ petition is not maintainable against the order of the arbitral tribunal rejecting an application for cross examination of a witness.

(ix) Cinevistaas Ltd v. Prasar Bharti, 2019 SCC Online Del 7071(Cinevistaas) to contend that the reliance on the judgment of the Hon'ble Supreme Court in Shah Babulal Khimji v. Jayaben D.Kania (1981) 4 SCC 8(Shah Babulal Khimji) is misplaced in the context of the Arbitration Act which limits judicial interference to matters specified under the statute.

14. The rival contentions call for a decision on two issues. The first issue is whether the Order of the Arbitral Tribunal qualifies as an interim award as per the Arbitration Act. The second issue is whether the said order calls for interference under Section 34 of the Arbitration Act if it qualifies as an interim Award. The first issue is addressed before turning to the second issue.

15. The Arbitration Act does not define an interim award except to the limited extent of providing in Section 2(1)(c) that an arbitral award includes an interim award. Section 31(6) of the Arbitration Act enables an arbitral tribunal to pronounce an interim arbitral award on any matter with respect to which the arbitral tribunal may make a final arbitral award. Section 32 of the Arbitration Act, which deals with termination of proceedings, specifies that the arbitral proceedings shall be terminated by the final arbitral award or by an order in terms of sub-section 2 of Section 32. These provisions were examined by the Hon'ble Supreme Court in IFFCO. In paragraph 8 thereof, the Hon'ble Supreme Court noticed the wide language of Section 31(6) and, in particular, the use of the expression ''any matter'', and concluded that it subsumes all disputed issues between the parties. In paragraph 9, the Hon'ble Supreme Court noticed Section 32(1) and pointed out that arbitral proceedings are terminated by the final arbitral award and that the said statutory prescription indicates that there could be one or more interim awards, prior to a final award. Eventually, in the context of an order by which the question of limitation was disposed of finally, the Hon'ble Supreme Court held as under:

''15. Tested in the light of the statutory provisions and the case law cited above, it is clear that as the learned arbitrator has disposed of one matter between the parties i.e., the issue of limitation finally, the award dated 23.07.2015 is an ''interim award'' within the meaning of Section 2(1)(c) of the Act and being subsumed within the expression ''arbitral award'' could, therefore, have been challenged under Section 34 of the Act.''

16. The parties referred to and relied upon multiple judgments dealing with the question as to which orders of an arbitral tribunal qualify as interim awards and which do not. Before proceeding to analyze the law on the subject, it is pertinent to turn to the impugned order. The Arbitral Tribunal labelled the Order as the Interim Arbitral Award dated 09.08.2021. Therefore, without doubt, in the opinion of the Arbitral Tribunal, the Order qualified as an interim arbitral award. While the opinion of the Arbitral Tribunal on this issue may not be dispositive, it cannot be disregarded. In Rhiti Sports Management, the Delhi High Court analyzed the relevant provisions of the Arbitration Act. In paragraph 11 thereof, the Court noticed that recourse to courts in relation to arbitral proceedings is limited by virtue of Section 5 of the Arbitration Act. In paragraph 16, the Court referred to Section 32 of the Arbitration Act and held that the conclusion that a final arbitral award may be pronounced on a matter should be reached in order to conclude that the order qualifies as an interim award. In paragraph 17, the Court held that an arbitral award, either interim or final, should necessarily settle the matter on which the parties are at issue. In paragraph 18, it was held that a procedural order that does not settle the matter finally would not qualify as an arbitral award. I concur with the above conclusions.

17. The underlying legislative policy behind the Arbitration Act is to enable parties to opt out of the public court system and instead resolve disputes through a consensual private forum, whose functioning is largely driven by party autonomy but is subject to light-touch regulation by statute. Since the intention is to encourage alternative dispute resolution and reduce the burden on the public court system, parties, who/which opted out of the public court system by contract, are not allowed to knock on the doors of the public court system except to the extent expressly provided for under the statute. Section 5 of the Arbitration Act embodies the above mentioned legislative policy. Learned counsel for the petitioner relied upon the judgment of the Hon'ble Supreme Court in Shah Babulal Khimji, which was also relied upon by the Delhi High Court in Cinevistaas. In Shah Babulal Khimji, the Hon'ble Supreme Court concluded that any order which determines matters relating to the substantive rights of parties qualifies as a judgment in terms of Clause 15 of the Letters Patent. If the said principle were to be extended and applied in the context of the Arbitration Act, most interim orders passed under Section 17 of the Arbitration Act (which are subject to appeal under Section 37) and many other orders would qualify as judgments and thereby as interim arbitral awards. In judgments such as Union of India v. Mohindra Supply Co., AIR 1962 SC 256, and Union of India v. Simplex Infrastructures Ltd. (2017) 14 SCC 225, which relate to the inapplicability of Clause 15 to appeals under the Arbitration Act,1940 and the Arbitration Act, respectively, it was held that the principles relating to appeals under Clause 15 of the Letters Patent cannot be extended and applied to appellate intervention in arbitration. By the same token, it cannot be extended to judicial intervention, in general, in arbitration. For such reason and to that extent, I do not subscribe to the view expressed in Cinevistaas.

18. This leads to the question as to what types of order qualify as interim arbitral awards. In IFFCO, the Hon'ble Supreme Court concluded that an order deciding the question of limitation qualifies as an interim arbitral award because the said question was determined finally. Learned counsel for the respondents contended with considerable vim and vigour that the expression interim arbitral award should be construed narrowly and that procedural orders should be excluded from its ambit. In principle, I agree. An arbitral tribunal may pass procedural orders relating to the filing of and amendment of pleadings, recording of evidence, framing of issues, submission of written and oral arguments and the like. If such procedural orders are subject to challenge under Section 34 of the Arbitration Act, it would undoubtedly lead to the filing of a large number of proceedings at the pre-final award stage and thereby derail the continued conduct of arbitral proceedings. There is no doubt that such an approach would defeat the object and purpose of the Arbitration Act and contravene Section 5 thereof.

19. While providing for light-touch regulation and considerable party autonomy, the Arbitration Act provides for judicial intervention in specified circumstances and for specified purposes. In the context of Section 34, a challenge is permissible provided the order is an interim or final arbitral award because both types of award fall within the scope of Section 2(1)(c). The self-evident follow-up question is: on what criteria does one identify an interim arbitral award? This is best understood by illustrations. The Arbitral Tribunal may frame issues or points for determination and choose to decide one or more such issues as preliminary issues. For instance, the issue relating to limitation or the admissibility of claims may be decided as a preliminary issue. Similarly, it is conceivable that an arbitral tribunal may choose to decide one or more claims or one or more counter claims before deciding the other claims or counter claims, as the case may be. As long as the decision of the arbitral tribunal in respect of any issue framed by the said tribunal or any claim or counter claim presented before such tribunal is a final and not interim decision, in my view, it qualifies as an interim arbitral award which may be challenged by way of a petition under Section 34. What about a decision by which permission to lodge a claim or counter claim is rejected? Because such decision has the effect of rejecting the claim or counter claim at the threshold, in my view, the decision would qualify as an interim arbitral award. In the converse situation, however, where one party is permitted to raise the claim or counter claim, there is no finality inasmuch as the said claim or counter claim may be opposed and contested by the counter party, including by challenging the final award. Therefore, such decision of the arbitral tribunal would not qualify as an interim award. In drawing this conclusion, I draw inspiration from the judgment of the Supreme Court in Chintels India Limited v. Bhayana Builders Private Limited (2021) 4 SCC 602, where it was held that an order rejecting an application to condone delay in filing a Section 34 petition, in contrast to an order by which delay is condoned, qualifies as an order rejecting an arbitral award because it shuts out the petitioner at the threshold and has the effect of disabling a challenge to the award. Section 16 of the Arbitration Act also illustrates this principle by providing for an appeal if the jurisdictional challenge is successful, in view of the consequent conclusion of proceedings, but not providing for such appeal if such challenge is rejected.

20. What about the rejection of a request for amendment of pleadings so as to introduce new pleadings or enlarge or modify a claim or counter claim? This is a hard question because the rejection of such request also shuts the door on the party seeking the amendment and the only recourse is by way of challenging the award. The Arbitration Act deals with such situation by providing for a liberal approach to a request for amendment in Section 23(3), albeit subject to the discretion to reject for delay. While the legislative mechanism is not fool proof; on balance, the optout justifies non-intervention in this situation except where the amendment relates to the enlargement or modification of a claim or counter claim. In my view, the limited carve-out for amendments relating to claims or counter claims is justified by their centrality in the adjudication process. Would an order refusing to frame an issue or refusing to admit specific oral or documentary evidence qualify as an interim arbitral award? Subject to party autonomy, the arbitral tribunal is conferred with considerable discretion in the conduct of proceedings, as evidenced by provisions such as Section 19. The legislative mechanism to deal with grievances, in such situations, is that a successful challenge may be mounted under Section 34 against the final award, if the aggrieved party can establish that such decisions incapacitated it or rendered such party unable to present its case or resulted in vital evidence not being considered. Undoubtedly, this could lead to parties being driven to de novo arbitration in the odd case and cause prejudice. Given the legislative mandate of limited judicial intervention in arbitral proceedings, in my view, on balance, notwithstanding the likelihood of prejudice in a small proportion of cases, such decisions do not qualify as interim awards but may be challenged in course of challenging the final arbitral award on applicable grounds under Section 34. The above principles should be applied to this case.

21. In the case at hand, the petitioner lodged counter claims after indicating the same in the statement of defence and reserving the right to lodge the same. Upon the respondents raising an objection in relation thereto, the petitioner filed an application for leave to lodge the counter claims. The said application was rejected by the Order under challenge. As a consequence of this Order, the request for permission to lodge the counter claims was decided finally. Consequently, in terms of Section 35 of the Arbitration Act, the said decision is final and binding unless challenged in the manner specified in Section 34. The nomenclature adopted by the Arbitral Tribunal was Interim Arbitral Award and, as stated earlier, this cannot be disregarded. Thus, I conclude that the Order under challenge qualifies as an interim arbitral award under the Arbitration Act. This leads to the question whether the Order calls for interference under Section 34.

22. Section 34 of the Arbitration Act provides for challenges under sub-section 2 on the following grounds that do not entail a review on merits: violation of the principles of natural justice or improper constitution of the Arbitral Tribunal or exceeding the scope of reference or improper procurement. Apart from these grounds, on the merits, interference is permitted either on the ground of violation of the fundamental policy of Indian law or the most basic notions of morality or justice or, in the context of a domestic award, on the ground of patent illegality. Sub-clause (i) of Section 34(2)(a) provides for interference if a party was under some incapacity. Sub-clause (iii) thereof provides for interference if a party was otherwise unable to present his case. Sub-section 2A provides for a challenge on the ground of patent illegality. The above provisions are relevant in the present context and warrant consideration.

23. As contended by learned counsel for the petitioner, the Arbitral Tribunal entered a categorical finding that the counter claim falls within the scope of the Arbitration Agreement. The conclusions, in this regard, at paragraph 16, in relevant part, read as under:

''...As per Section 23(2A) of the Act, the applicant may also submit a counter claim or plead a set off if they fall within the scope of the Arbitration Agreement. Of course the counter claims fall with the ambit of the dispute in question...''

24. The Arbitral Tribunal also entered a finding that the counter claims are within the period of limitation and answered the first question framed by the Tribunal in favour of the petitioner. Paragraph 9 of the order is relevant, in this regard, and reads, in relevant part, as under:

''....In the event the period between 15.03.2020 and 17.01.2021 is excluded, the counter claim would be well within the period of limitation. Hence, the contention of the learned counsel for the respondents merits no consideration and is liable to be rejected.''

In order to test whether the counter claims are barred by limitation, the Arbitral Tribunal should have arrived at the date from which limitation would run. This, in turn, would depend on the nature of relief claimed: for instance, a counter claim founded on alleged breach of contract would be governed by Article 55 of the Schedule to the Limitation Act, 1963, and time would run from the date of breach. The next question would be until when time runs and the answer to this question in the context of counter claims is contained in State of Goa, where it was held that it is the date of notification of counter claim in a Section 21 notice to the counter party or, in the absence of such notification, the date of lodging the counter claim. Of course, by virtue of the extension orders of the Supreme Court, the COVID period should be excluded while reckoning the three year limit, and a further ninety days should be added to the limitation period. Such exclusion was also done through the same orders and eventually resulted in the exclusion of the period running from 15.03.2020 to 28.02.2022 with a further period of 90 days if the limitation would have expired during the above period. Thus, though the decision on limitation is in the petitioner's favour and is probably the correct outcome, the decision is evidently and patently based on erroneous considerations.

25. The second question framed by the Arbitral Tribunal was whether the counter claim could be entertained and accepted in terms of Section 23(4) of the Arbitration Act. Section 23(4) is as under:

“(4) The statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing, of their appointment.”

Thus, it prescribes a time limit of six months for completion of pleadings. With regard to this question, learned counsel for the petitioner pointed out that the only conclusion that could have been drawn by the Arbitral Tribunal is that the counter claim could be entertained in terms of Section 23(4) of the Act because of the exclusion of the period specified in the order of the Hon'ble Supreme Court while calculating the time limit in Section 23(4). In re Cognizance for Extension of Limitation, order dated 08.03.2021, at paragraph 3, the Hon'ble Supreme Court held as under:

''3. The period from 15.03.2020 till 14.03.2021 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act,1996, Section 12A of the Commercial Courts Act,2015 and provisos (b) and (c) of Section 138 of the Negotiable Instrument Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.''

26. The Supreme Court concluded, in the above order, that the period between 15.03.2020 and 14.03.2021 shall stand excluded from the time limit specified in Section 23(4) of the Arbitration Act. By subsequent orders, which were issued after the Order impugned herein, including the last order dated 10.01.2022, the excluded period was extended up to 28.02.2022. In this case, the Arbitral Tribunal was constituted on 20.07.2020, which falls within the excluded period. If the Hon'ble Supreme Court's order of 08.03.2021 is applied to the facts of this case, upon excluding the COVID period, the six month limit would run from 15.03.2021 till 14.09.2021. If the last order is reckoned, it would run from 01.03.2022 until 31.08.2022. Therefore, the question, as framed, can only be answered in favour of the petitioner because the Supreme Court orders squarely answers this question. For reasons set out above, the conclusion on the second question is patently erroneous. Since it was contended by learned counsel for the respondents that the second question should not be construed literally but as encompassing the Arbitral Tribunal's discretion to reject for failure to show sufficient cause, the said aspect is examined.

27. After concluding that the counter claims are within the period of limitation, the Arbitral Tribunal proceeded to examine if they should be entertained. The Arbitral Tribunal noticed that the petitioner had filed the statement of defence notwithstanding the pandemic. The Arbitral Tribunal also considered the reasons set out in the application for permission to lodge the counter claim and concluded that no reasons, other than the pandemic, were specified therein for the failure to lodge the counter claims earlier. On such basis, the Arbitral Tribunal concluded that the counter claims were made belatedly without acceptable reasons and , therefore, beyond the ambit of Section 23(2A) and Section 23(4) of the Arbitration Act.

28. Unlike Order VIII Rule 6(A) of CPC, Section 23(2A) does not specify an express time limit with reference to the filing of the counter claim. Learned counsel for the respondents contended that such time limit is, nonetheless, implicit in the stipulation of a six month period for completion of pleadings under sub-section 4 of Section 24. I agree. Ordinarily, the time limit of six months prescribed in sub-section 4 of Section 23 applies to all pleadings before an arbitral tribunal, whether by way of claim, counter claim or statement of defence. However, as stated earlier, the entire Covid period, 15.03.2020 to 28.02.2022, was excluded from the time limit under subsection 4 by orders passed by the Hon'ble Supreme Court. Therefore, the lapse of the time limit of six months, without reckoning the Supreme Court's orders, should not have resulted in the rejection of the application of the petitioner.

29. In Ashok Kumar Kalra, the Hon'ble Supreme Court considered the factors that should be taken into consideration while deciding whether to permit a counter claim to be lodged. The said factors are set out in paragraph 21 of the said judgment, which reads, in relevant part, as under:

''(i) Period of delay.

(ii) Prescribed limitation period for the cause of action pleaded.

(iii) Reason for the delay.

(iv) Defendant's assertion of his right.

(v) Similarity of cause of action between the main suit and the counterclaim.

(vi) Cost of fresh litigation.

(vii) Injustice and abuse of process.

(viii) Prejudice to the opposite party.

(ix) And facts and circumstances of each case.

(x) In any case, not after framing of the issues.''

30. On examining the above factors, it is clear that the Court concluded that the period of delay, the limitation period, the similarity of cause of action between the suit claim and counter claim, cost of fresh litigation, prejudice to the opposite party, etc. are the key considerations. Although the said factors were formulated in the context of Order VIII Rule 6-A CPC, the said principles are broadly relevant while deciding whether to entertain a counter claim in arbitration also. In this case, the claim was filed on 28.10.2020. The statement of defence was filed on 10.12.2020. Issues were framed on 05.02.2021 and the counter claim was lodged on 29.03.2021. Thus, in terms of length of time, it cannot be said that there is considerable delay. As regards the limitation period, as noticed earlier, the Arbitral Tribunal, albeit by erroneously referring to Section 23(4), concluded that the coun

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ter claims were within the limitation period. Turning to similarity of causes of action, the counter claims relate to the refund of the security deposit, the expenses allegedly incurred by the petitioner prior to the termination of the JDA and alleged damages caused due to the termination of the JDA. All these counter claims arise out of the JDA and the termination thereof. Therefore, they are closely linked to the claims made by the respondents herein. The conclusion of the Supreme Court that the counter claim should not be presented after issues are framed was cited by learned counsel for the respondent. The said conclusion was drawn, however, in a statutory context (sub-section (1) of Order VIII Rule 6A), in which, if construed literally, a counter claim is permitted only until expiry of the time limit for filing the written statement. In the context of Section 23(2A) of the Arbitration Act, in my view, the fact that the arbitration is at the post-issues stage is a material consideration but not an embargo for receiving the counter claims. 31. The question that remains is whether the above reasons are sufficient to interfere with the impugned Order. As noticed earlier, the Arbitration Act enables a party to sustain a challenge if the party satisfies the court that it was unable to present its case before the arbitral tribunal or if the award is patently illegal. The patent errors in the Order with regard to both the questions framed by the Arbitral Tribunal were discussed earlier. In the case at hand, by the rejection of the counter claims at the threshold, the petitioner has been deprived of the opportunity of presenting its counter claims for adjudication by the Arbitral Tribunal. While it was contended that the rejection on the ground of delay does not constitute res judicata, the petitioner may nevertheless face an uphill battle to overcome defences built on limitation if fresh proceedings are instituted. Besides, it becomes impossible to consider the claims and counter claims in a consolidated proceeding and make adjustments in the award, if both parties succeed. From the facts on record, there is no doubt that the counter claims were lodged belatedly. Equally, it cannot be said that the petitioner adduced entirely convincing reasons for the failure to lodge the counter claims earlier. The mandate of Section 29(A) of the Arbitration Act should also not be completely lost sight of. As a result of the lodging of the counter claims at this belated stage, even if the Covid period, 15.03.2020 to 28.02.2022, is excluded, it becomes very difficult for the Arbitral Tribunal to conclude proceedings within the time limit specified in sub-section 1 of Section 29(A). Nonetheless, Section 29(A) enables parties to extend the time limit by consent and also confers power on the court to extend the mandate of the Arbitral Tribunal. As regards prejudice to the respondents herein, the prejudice by way of delay may be off-set to a reasonable extent by an appropriate order for payment of costs. It is also possible to put the petitioner on terms with regard to the expedited conclusion of arbitral proceedings. In a challenge under Section 34, it is not appropriate for the court to interfere with the discretion of the Arbitral Tribunal with regard to the above matters, which are best dealt with by the Arbitral Tribunal. It is sufficient to record that the facts and circumstances justify interference with the Order under Section 34 of the Arbitration Act. 32. For the reasons stated above, the interim award dated 09.08.2021 is set aside. The petitioner shall be entitled to the benefit of Section 43(4) of the Arbitration Act, as regards the entire duration from the presentation of the counter claim before the Arbitral Tribunal until the date of this order, if an application to receive the counter claims is presented once again before the Arbitral Tribunal. In the facts and circumstances, there will be no order as to costs.
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