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Supreme Court of India

NATIONAL HIGHWAY AUTHORITY OF INDIAversusTRANSSTROY (INDIA) LIMITED

Citation
2022 INSC 680
Decided
11 July 2022
Disposal
Appeal(s) allowed

Holding

A counter‑claim filed by a respondent under Section 23(2A) is admissible if it falls within the arbitration agreement, and the contract’s dispute‑resolution clause must be interpreted to include such counter‑claims within the same arbitration, notwithstanding strict compliance with pre‑arbitration conciliation steps.

Summary

The National Highway Authority of India (NHAI) entered into an EPC contract with Transstroy (India) Limited, which was later terminated by NHAI for alleged breaches. The contractor invoked the arbitration clause, filing a claim, while NHAI reserved its right to claim damages and filed a counter‑claim under Section 23(2A) of the Arbitration and Conciliation Act, 1996. The arbitral tribunal rejected NHAI's application to place the counter‑claim on record, citing non‑compliance with the contract’s pre‑arbitration conciliation steps, and the Delhi High Court affirmed that order. NHAI appealed, arguing that Section 23(2A) expressly permits a respondent to file a counter‑claim if it falls within the arbitration agreement, and that a narrow reading of the contract would lead to parallel proceedings. The Supreme Court held that the contract’s dispute‑resolution clause must be interpreted pragmatically, allowing the counter‑claim as it was part of the same dispute and within the scope of Section 23(2A). Consequently, the Court quashed the tribunal’s and High Court’s orders and allowed NHAI to file its counter‑claim, directing that the time spent on the rejected applications not be counted towards the award deadline.

Issues considered

  • When does a respondent’s counter‑claim under Section 23(2A) of the Arbitration Act become admissible despite alleged non‑compliance with contractual pre‑arbitration conciliation procedures?
  • Whether the contractual dispute‑resolution clause (Clause 26) limits the scope of arbitrable matters to only those disputes formally notified under its pre‑arbitration steps.
  • Whether rejecting a counter‑claim on procedural grounds defeats the purpose of Section 23(2A) and leads to multiplicity of proceedings.

Legislation cited

Subjects

ArbitrationCounter‑claimSection 23(2A)EPC contractPre‑arbitration conciliationDispute resolution clauseMultiplicity of proceedingsNHAI

Judgment

948                      [2022]REPORTS
               SUPREME COURT    6 S.C.R. 948                [2022] 6 S.C.R.


A              NATIONAL HIGHWAY AUTHORITY OF INDIA
                                        v.
                      TRANSSTROY (INDIA) LIMITED
                         (Civil Appeal No. 6732 of 2021)
B                                 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
C
      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
D     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
E
      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.
F
            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
G     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
H     entertained. [Para 13][966-D-E]
                                     948
       NATIONAL HIGHWAY AUTHORITY OF INDIA v.                           949
             TRANSSTROY (INDIA) LIMITED

      1.2 Both the Arbitral Tribunal as well as the High Court          A
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         B
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]
                                                                        C
      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          D
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        E
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      F
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-      G
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

                                                                        H
950            SUPREME COURT REPORTS                        [2022] 6 S.C.R.


A     claim made by the NHAI in the proceedings arising out of the
      claims made by the Contractor is not allowed, it may lead to
      parallel proceedings before various fora. While passing the
      impugned judgment and order, the High Court lost sight of the
      said aspect, which ought to have been considered while
      considering the request on behalf of the NHAI to place on record
B
      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
C     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”. [Para 13.4][969-C-F]
D
            1.6 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, not permitting
E     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 said aspects, the High Court by the impugned
      judgment and order, and on narrow interpretation of Clause 26
F     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. [Para 13.5][969-G-H; 970-A-B]
G
           1.7 The order passed by the Arbitral Tribunal and the
      impugned judgment and order passed by the High Court are
      quashed and set aside. Consequently, the application submitted
      by NHAI to permit it to file the counter claim is allowed and the
      NHAI is permitted to file the counter claim, which the Arbitral
H
       NATIONAL HIGHWAY AUTHORITY OF INDIA v.                          951
             TRANSSTROY (INDIA) LIMITED

Tribunal to consider alongwith the Statement of Claim submitted        A
by the Contractor and the Statement of Defence of claim submitted
by the NHAI on its own merits. [Para 14][970-B-D]
      Gujarat State Cooperative Land Development Bank Ltd.
      v. P.R. Mankad and Ors. (1979) 3 SCC 123 : [1979] 2
      SCR 1023; Major (Retd.) Inder Singh Rekhi v. Delhi               B
      Development Authority (1988) 2 SCC 338 : [1988] 3
      SCR 351; State of Goa v. Praveen Enterprises, (2012)
      12 SCC 581 : [2011] 10 SCR 1026; Bharat Petroleum
      Corporation Limited v. Go Airlines (India) Limited
      (2019) 10 SCC 250; Silpi Industries Etc. v. Kerala State
      Road Transport Corporation and Anr. (2021) SCC                   C
      Online SC 439; Kolkata Metropolitan Development
      Authority v. Hindustan Construction Co. Ltd., (2017)
      SCC OnLine Cal 18978; M.K. Shah Engineers &
      Contractors v. State of MP. (1999) 2 SCC 594 : [1999]
      1 SCR 419; Nirman Sindia v. Indal Electromelts Ltd.,             D
      Coimbatore (1999) SCC OnLine Ker 149.
                      Case Law Reference
[1979] 2 SCR 1023               referred to        Para 4.2
[1988] 3 SCR 351                referred to        Para 4.2            E
[2011] 10 SCR 1026              referred to        Para 4.8
(2019) 10 SCC 250               referred to        Para 4.8
[1999] 1 SCR 419                referred to        Para 5.5
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6732              F
of 2021.
      From the Judgment and Order dated 27.02.2018 of the High Court
of Delhi at New Delhi in O.M.P. (COMM) No.459 of 2017.
      Ms. Madhavi Diwan, ASG, C. S. Chauhan, A. Venayagam Balan,
Advs. for the Appellant.                                               G

     Nakul Dewan, Sr. Adv., Ms. Neelu Mohan, Ms. Kavita Jha,
Surekh Baxy, Parag Rai, Advs. for the Respondent.


                                                                       H
952            SUPREME COURT REPORTS                           [2022] 6 S.C.R.


A           The Judgment of the Court was delivered by
            M. R. SHAH, J.
             1. Feeling aggrieved and dissatisfied with the impugned judgment
      and order passed by the High Court of Delhi in OMP No.459 of 2017 by
      which the High Court has dismissed the said petition under Section 34 of
B     the Arbitration and Conciliation Act, 1996 (hereinafter referred to as
      “the Arbitration Act, 1996”) in which the appellant – National Highway
      Authority of India (hereinafter referred to as “NHAI”) prayed to set
      aside the Arbitral Award dated 15.09.2017 and also the order passed by
      the Arbitral Tribunal not entertaining and/or considering the counter claim
C     filed by the NHAI, the original petitioner – NHAI has preferred the
      present appeal.
             2. The facts leading to the present appeal and the case on behalf
      of the appellant – NHAI are as under:-
            2.1 That the NHAI and the respondent entered into a contract.
D     An Engineering Procurement and Construction (EPC) Agreement
      (hereinafter referred to as “Contract”) was executed between the parties
      on 13.11.2014 in respect of “improvement/augmentation of two laning
      with paved shoulders from km.94/000 to km.174/000 (design chainage
      from km.94/000 to km.174/000) of Karaikudi-Ramanathapuram Section
E     of National Highway No. 210 including 500m on SH-35 Madurai Road
      (near Devakottai Rasta Railway Station) in the State of Tamil Nadu on
      EPC mode (total design length 80.00kms) under NHDP PHASE-III”.
             2.2 According to the NHAI, the respondent/Contractor was in
      continuous breach of specific obligations under the Contract for which a
F     cure period notice was issued by the NHAI under Clause 23.1.1 of the
      Contract as far as back on 29.09.2015 calling upon the Contractor to
      cure the defaults within 60 days. The Contractor failed to cure the defects
      pointed out by the NHAI, thus, a notice of intention to terminate the
      Contract was issued by the NHAI on 12.04.2016 under Clause 23.1.2.
      The respondent/Contractor sent its reply dated 14.04.2016 to the NHAI’s
G     notice of intention to terminate the contract. Having found the reply
      totally unsatisfactory, the NHAI issued a termination notice dated
      22.07.2016 under Clause 23.1.2 of the Contract. It is the case on behalf
      of the appellant – NHAI that the NHAI specifically stated in the
      termination notice that “the same is without prejudice to the Authority’s
      right to claim damages for the Contractor’s failure to comply with the
H
        NATIONAL HIGHWAY AUTHORITY OF INDIA v.                                  953
       TRANSSTROY (INDIA) LIMITED [M. R. SHAH, J.]

unambiguous obligations casted upon it under the Contract and/or to             A
realize any dues, losses and damages whatsoever under the Contract or
under applicable laws, as the case may be”.
        2.3 On receipt of the termination notice, the respondent/Contractor
addressed a letter to the NHAI on 02.01.2017 to refer certain disputes
for amicable settlement under Clause 26.2 of the Contract. That thereafter,     B
the Contractor invoked the arbitration clause (Clause 26 of the Contract)
vide letter dated 09.02.2017 and nominated its Arbitrator and requested
the NHAI to nominate its Arbitrator so that the Presiding Arbitrator may
be appointed. The NHAI nominated its arbitrator by letter dated
10.03.2017 which was followed by the appointment of the Presiding
Arbitrator. Accordingly, the Arbitral Tribunal came to be constituted.          C
The Contractor filed the Statement of Claim on 15.05.2017. The NHAI
filed its statement of defence on 11.07.2017. It is the case on behalf of
the NHAI that both in the termination notice dated 22.07.2016 as well
as in the Statement of Defence dated 11.07.2017, the NHAI reserved
its right to claim damages and stated that it would file its counter claim      D
separately.
       2.4 On 13.07.2017, i.e., after two days of filing the Statement of
Defence by the NHAI, the NHAI sent a letter to the Arbitral Tribunal
seeking extension of time for filing the counter claim. Vide email dated
18.07.2017 the Arbitral Tribunal rejected the NHAI’s request seeking            E
extension of time for filing the counter claim and stated that no application
has been filed by the NHAI for filing counter claim. It appears that
thereafter the NHAI moved an application before the Arbitral Tribunal
under Section 23(2A) of the Arbitration Act to place its counter claim on
record. It appears that on the very same day, the NHAI filed its counter
claim before the Arbitral Tribunal. The Arbitral Tribunal rejected the          F
NHAI’s application permitting it to place on record the counter claim
vide order dated 15.09.2017, essentially on the ground that the procedure
under Clauses 26.1 and 26.2 had not been followed by the NHAI and
therefore, the counter claim was beyond the scope of arbitration
agreement and adjudication of the said dispute is not within the jurisdiction   G
of the Arbitral Tribunal.
      2.5 Feeling aggrieved and dissatisfied with the order passed by
the Arbitral Tribunal dated 15.09.2017 dismissing the application filed by
the NHAI seeking permission to place on record the counter claim and
holding that the dispute raised by the NHAI in the counter claim is not         H
954            SUPREME COURT REPORTS                           [2022] 6 S.C.R.


A     within the scope of arbitration agreement and that the dispute sought to
      be filed is contractually not arbitrable and the adjudication of the said
      dispute is not within the jurisdiction of the Arbitral Tribunal, NHAI
      preferred the appeal under Section 34 of the Arbitration Act, 1996 before
      the High Court of Delhi.
B            2.6 Before the High Court, an objection was raised on behalf of
      the Contractor on maintainability of the application under Section 34 of
      the Arbitration Act, 1996. However, treating the order dated 15.09.2017
      passed under Section 16(2) of the Arbitration Act, 1996, the High Court
      has treated the proceedings before it as one under Section 37(2) of the
      Arbitration Act, 1996 while deciding on the admissibility of the counter
C     claim and thereafter has decided the same on merits.
            2.7 By the impugned judgment and order, the High Court has
      dismissed the said application and has confirmed the order passed by
      the Arbitral Tribunal dated 15.09.2017 rejecting the application submitted
      by NHAI to take the counter claim on record.
D
            2.8 Feeling aggrieved and dissatisfied with the impugned judgment
      and order passed by the High Court, the NHAI has preferred the present
      appeal.
            3. Ms. Madhavi Diwan, learned ASG has appeared on behalf of
E     the NHAI and Shri Nakul Dewan, learned Senior Advocate has appeared
      on behalf of the respondent – Contractor.
             4. Ms. Madhavi Diwan, learned ASG appearing on behalf of the
      NHAI has vehemently submitted that in the facts and circumstances of
      the case, the High Court has committed a grave/serious error in confirming
F     the order passed by the Arbitral Tribunal not taking on record the counter
      claim filed by the NHAI.
              4.1 it is further submitted by Ms. Diwan, learned ASG that, both,
      the Arbitral Tribunal as well as the High Court have failed to appreciate
      that the counter claim was based on common/overlapping cause of action.
      It is submitted that the arbitration invoked by the Contractor arose out of
G
      the very termination notice which had been issued by the NHAI.
      Therefore, the foundation of the Contractor’s case before the Arbitral
      Tribunal is the validity of such termination. Therefore, there was no
      question of seeking to hair split the dispute between the parties. It would
      lead to unnecessary multiplicity of proceedings and needless cost and
H
        NATIONAL HIGHWAY AUTHORITY OF INDIA v.                                  955
       TRANSSTROY (INDIA) LIMITED [M. R. SHAH, J.]

inconvenience when the evidence itself is also common because the               A
dispute arises out of the same transaction.
        4.2 It is further submitted by Ms. Diwan, learned ASG that as
such Clause 26 can be invoked by either party. It is submitted that Clause
26 of the Contract is self-explanatory, where it refers to ‘any dispute’,
difference or controversy being required to be attempted to be amicably         B
resolved in accordance with the conciliation procedure under Clause
26.2. It is submitted that the provision requires the same to be notified in
writing by either party. Likewise, Clause 26.2 states that either party
may call upon the Authority’s Engineer or such other person as the parties
may mutually agree upon to mediate and arrive at an amicable settlement.
It is submitted that the reason and the rationale behind permitting either      C
party to invoke Clause 26.1 is that by its very definition ‘a dispute’ is two
sided. On interpretation of the word ‘dispute’, reliance is placed upon
the decisions of this Court in the case of Gujarat State Cooperative
Land Development Bank Ltd. Vs. P.R. Mankad and Ors., (1979)
3 SCC 123 (para22) and Major (Retd.) Inder Singh Rekhi VS.                      D
Delhi Development Authority, (1988) 2 SCC 338 (para 4).
        4.3 Relying upon the aforesaid two decisions, it is further submitted
by Ms. Madhavi Diwan, learned ASG that in the present case, the word
“Dispute” has been used by the Contractor itself in its notice dated
02.01.2017 as well as in his letter dated 09.02.2017 whereby the                E
Contractor itself had referred the Termination Notice as an unilateral
decision from which a “Dispute” has arisen. It is submitted that thus, the
Dispute in the present case is with regard to the termination notice dated
22.07.2016 issued by the NHAI. It is submitted that therefore, it would
be a travesty of process to interpret “Dispute” as only allowing for the
claim made on behalf of the Contractor to be submitted to the process           F
contemplated under Clause 26. It is submitted that the Arbitral Tribunal
and 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. It is submitted that the language of Clause
26 itself contemplates that “either party” to the dispute may invoke this       G
procedure. It is submitted that therefore there can be no question of
duplication of very same process which has been invoked beforehand
and eventually culminated in arbitration process. It is submitted that the
second round under Clause 26 would in any event be an exercise in
futility in as much as very same issue would have been brought up namely
                                                                                H
956             SUPREME COURT REPORTS                            [2022] 6 S.C.R.


A     whether termination of contract was lawful or not, which issue by then
      was already pending before the Arbitral Tribunal.
              4.4 It is further submitted that the Arbitral Tribunal as well as the
      High Court have failed to appreciate that it was the NHAI who was
      compelled to terminate the contract after providing sufficient opportunities
B     to the Contractor to cure the defects. The NHAI specifically reserved
      its right in the termination notice itself to claim damages which is a natural
      consequence of termination for Contractor’s failure to comply with its
      obligations. It is submitted that therefore the contention on behalf of the
      Contractor that the counter claim was by surprise or by way of
      counterblast be stated to be rejected.
C
             4.5 It is submitted that even it cannot be said that NHAI by
      submitting the counter claim has bypassed the procedure which the parties
      had agreed. It is submitted that there can be no question of bypassing
      the procedure when that stage has already passed in the present case. It
      is submitted that Clause 26 does not contemplate repeated invocation of
D     same procedure when there is an overlapping cause of action and the
      repetition of process would be completely meaningless.
              4.6 It is submitted that as per the settled position of law, rules or
      procedures are the handmaids and not the mistress of justice. The
      procedural provisions cannot be interpreted in a hyper-technical manner
E     to waste the time and resources of parties contrary to the letter and
      spirit of the Arbitration Act.
             4.7 It is vehemently submitted by Ms. Diwan, learned ASG that
      in the present case not taking on record the counter claim filed by the
      NHAI, the Arbitral Tribunal and the High Court both have lost sight of
F     the very object and purpose of Section 23(2A) which is meant to provide
      convenience to the parties in being able to file the entirety of their claim/
      counter claim, etc. before the Arbitral Tribunal. It is submitted that
      therefore, there was absolutely no reason for the High Court to have
      excluded the counter claim which was sought to be filed before the
G     Arbitral Tribunal by the NHAI within two days of filing of its Statement
      of Defense. It is submitted that Section 23 has been amended pursuant
      to the recommendation of the Law Commission of India in its Report
      No. 246 “to ensure that counter claims and set off can be adjudicated
      upon by an arbitrator without seeking a separate/new reference by the
      respondent so long as it falls within the scope of the arbitration agreement,
H
        NATIONAL HIGHWAY AUTHORITY OF INDIA v.                                 957
       TRANSSTROY (INDIA) LIMITED [M. R. SHAH, J.]

in order to ensure final settlement of disputes between parties and prevent    A
multiplicity of litigation”.
      4.8 Making above submissions and relying upon the decisions of
this Court in the case of State of Goa Vs. Praveen Enterprises, (2012)
12 SCC 581; Bharat Petroleum Corporation Limited Vs. Go
Airlines (India) Limited, (2019) 10 SCC 250; Silpi Industries Etc.             B
Vs. Kerala State Road Transport Corporation and Anr., 2021 SCC
Online SC 439 and the decision of the Calcutta High Court in the case
of Kolkata Metropolitan Development Authority Vs. Hindustan
Construction Co. Ltd., 2017 SCC OnLine Cal 18978 (against which
Special Leave Petition (C) Nos. 18443-18444 of 2018 were filed and
the same were dismissed by this Court by order dated 23.07.2018), it is        C
prayed to allow the present appeal and to direct the Arbitral Tribunal to
take on record the counter claim filed by the NHAI and adjudicate the
same in accordance with law.
      5. Present appeal is vehemently opposed by Shri Nakul Dewan,
learned Senior Advocate appearing on behalf of the respondent –                D
Contractor.
      5.1 Shri Nakul Dewan, learned Senior Advocate appearing on
behalf of the respondent – Contractor has made following broad
submissions in support of his prayer to dismiss the present appeal. He
has submitted as under:-                                                       E

      (i)     Clause 26 of the EPC Contract mandatorily required the
              parties to attempt to amicably settle the Disputes (identified
              and crystallised prior to the reference) as a pre-condition
              to the invocation of arbitration. That has not been done by
              the appellant – NHAI with respect to its counter claim.          F
      (ii)    The term “Disputes” defined and set out in Clause 26.1.1.
              has to be strictly construed to mean those disputes which
              were identified by any party and referred for conciliation
              under Clause 26.1.1 read with Clause 26.2. No such
              identification had been done by the appellant - NHAI for         G
              its counter claim, meaning thereby that they cannot be raised
              by the appellant - NHAI.
      (iii)   The mere reservation of rights would not entitle either party
              to bypass the contractually agreed mechanism under Clause
              26 of the EPC Contract.                                          H
958             SUPREME COURT REPORTS                            [2022] 6 S.C.R.


A           (iv)   Section 23(2A) of the Act does not permit a counter claim
                   to be raised in a manner which is inconsistent with the
                   agreement of the parties.
             5.2 Elaborating above submissions, it is submitted by Shri Nakul
      Dewan, learned Senior Advocate appearing on behalf of the respondent
B     – Contractor that Clause 26 of the EPC Contract is clear and
      unambiguous. It lays down a two-step process prior to the invocation of
      the arbitration process. It is submitted that the EPC Contract does not
      contemplate parties directly raising claims by directly resorting to
      arbitration without going through the steps set out in Clause 26. It is
      submitted that Step 1 can be said to be “Notification of Disputes”. In the
C     event that a “dispute, difference, or controversy” has arisen between
      the parties, then it has to be “notified in writing’ to the other party. This
      notification can be done by any party which has a dispute. Such
      notification then gives rise to a “Dispute” defined and contemplated under
      Clause 26.1.1 of the EPC Contract
D             5.3 It is submitted that Step 2 is with respect to “Resolution by
      amicable settlement”. Under the Step 2, the parties are then required to
      attempt to amicably resolve the “Dispute” in accordance with the
      conciliation procedure set out at Clause 26.2. The mandatory requirement
      of conciliation is evident by the use of the word “shall” in Clause 26.1.1.
E     It is submitted that as per Clause 26.2, the dispute is required to be
      mediated by NHAI’s Engineer or such other person as mutually decided,
      which is called the Conciliator under the EPC Contract. Failing such
      mediation or without the intervention of the Conciliator, either party may
      refer the dispute to NHAI’s Chairman for amicable settlement, following
      the time-bound procedure set out in Clause 26.2.
F
             5.4 It is submitted that Step 3 is “Invocation of arbitration”. It is
      submitted that it is only on the failure to resolve the dispute amicably that
      the Dispute notified under Clause 26.1.1. is thereafter referred to
      arbitration. Clause 26.3.1 clearly lays down that any “Dispute, which is
      not resolved amicably as provided under Clause 26.1 and Clause 26.2”
G     shall be finally referred to arbitration. It is submitted that therefore only
      those Disputes which are not resolved after Steps 1, 2 and 3 alone, can
      be the subject matter of dispute before the Arbitral Tribunal.
            5.5 It is submitted that any interpretation permitting the parties to
      bypass the mechanism laid down in the EPC Contract, unless waived,
H
        NATIONAL HIGHWAY AUTHORITY OF INDIA v.                                 959
       TRANSSTROY (INDIA) LIMITED [M. R. SHAH, J.]

would amount to a rewriting of the contract. It is submitted that as           A
observed and held by this Hon’ble Court in the case of M.K. Shah
Engineers & Contractors Vs. State of MP. (1999) 2 SCC 594, a
pre-arbitral requirement is an essential facet of the arbitration clause.
Reliance is also placed on the decision of the Kerala High Court in the
case of Nirman Sindia v. Indal Electromelts Ltd., Coimbatore 1999
                                                                               B
SCC OnLine Ker 149. It is submitted that in the aforesaid decision,
the Hon’ble High Court of Kerala has held that “when the parties to a
contract agree to any special mode for resolution of the disputes arising
out of the agreement and they are bound to comply with the mode
prescribed under the agreement. Without resorting to the first step
provided for the resolution of the dispute in the agreement they cannot        C
jump to the second step or to the final step to settle the disputes between
the parties”.
       5.6 It is further submitted by Shri Nakul Dewan, learned Senior
Advocate appearing on behalf of the respondent – Contractor that the
mandatory and enforceable nature of contractually stipulated pre-              D
conditions to arbitration, which are aimed at dispute resolution through
mediation or negotiations, have also been held to be enforceable
internationally.
       5.7 It is submitted that therefore as Clause 26 of the EPC Contract
is mandatory in nature, no claim should be allowed to be introduced in a       E
manner contrary to the contractual mechanism may be by way of counter
claim.
       5.8 It is further submitted by Shri Nakul Dewan, learned Senior
Advocate appearing on behalf of the respondent – Contractor that in the
present case the parties have contractually defined and limited the term       F
“Dispute” at Clause 26.1.1 of the EPC Contract to mean any dispute,
difference, or controversy “notified in writing by either Party to the other
Party”. It is submitted that Clause 1.1 of the EPC Contract further sets
out that “words and expressions beginning with capital letters and defined
in this Agreement ... shall, unless the context otherwise requires, have
the meaning ascribed thereto herein ...                                        G
       5.9 It is submitted that therefore having contractually agreed to
only define notified disputes as “Disputes” and further restricting the
reference of only such “Disputes” to arbitration under Clause 26.3 as
only those which are notified by parties under Clause 26.1 and referred
                                                                               H
960             SUPREME COURT REPORTS                           [2022] 6 S.C.R.


A     to conciliation under Clause 26.2, no other interpretation, contrary to the
      written contract should be taken. That is because Courts give effect to
      the contractual bargain of the parties unless such bargain is contrary to
      statute or against public policy, neither of which exception has or can be
      pleaded in this case.
B            5.10 It is submitted that the submission on behalf of the NHAI
      that the counter claims arise out of the unlawful termination of the EPC
      Contract, and that it falls within the definition of “Dispute” and that the
      term “Dispute” ought to be widely construed to include the counter claims
      that may arise out of the termination of the EPC Contract is to be rejected
      outright. It is submitted that the use of the words “any Dispute” used in
C     Clause 26.3.1 also ought to be accordingly construed to mean only those
      matters which have been notified by the parties for amicable settlement
      under Clause 26.1.
              5.11 Now, so far as the assertion on behalf of the appellant –
      NHAI that having reserved its rights to raise counter claim at the stage
D     of termination as well as of filing its Statement of Defence, it is entitled
      to raise the counter claim and the submission that permitting the NHAI
      to file the counter claim would avoid multiplicity, it is submitted that the
      said assertion is without any basis. It is submitted that the mandatory
      nature of Clause 26 which required a party to crystallise and notify its
E     Dispute to the other party is a clause which seeks to ensure that only
      those claims that are notified get adjudicated.
             5.12 It is submitted that if the NHAI had any genuine claim, then
      it ought to have notified the respondent - Contractor in accordance with
      Clause 26.1.1 of the EPC Contract. The NHAI could have done so
F     even after the Contractor sought to refer the Disputes to arbitration
      where it ought to have sought the adjudication of its counter claims.
      However, it did not do so and instead, expressly sought to refer the
      “disputes under reference raised by the contractor”. Thus, waiving its
      rights to refer any counter claims to arbitration. It is submitted that that
      being the case, the NHAI should not be allowed to introduce a counter
G     claim of INR 208 crores through a circuitous interpretation of Section
      23(2A) of the Act.
             5.13 Now, so far as reliance placed upon Section 23(2A) of the
      Act relied upon on behalf of the NHAI, it is submitted that though Section
      23(2A) of the Act recognises the right of a respondent to raise counter
H
        NATIONAL HIGHWAY AUTHORITY OF INDIA v.                                   961
       TRANSSTROY (INDIA) LIMITED [M. R. SHAH, J.]

claims, the language of the statute is clear. In terms of Section 23(2A),        A
the Tribunal has jurisdiction over such counter claims, “if such counter
claim or set-off falls within the scope of the arbitration agreement.”
       5.13.1 It is submitted that in a given case the scope of the
arbitration agreement, as set out under Section 23(2A) of the Act, must
be ascertained by a conjoint reading of Sections 2(1)(b), 7 and 21 of the        B
Act read along with the arbitration clause. It is submitted that on a conjoint
reading of the aforesaid provisions of the Arbitration Act, 1996, it is
apparent that parties are fully entitled to choose which disputes get referred
to arbitration. The same is consistent with the recognition of the party
autonomy. It is submitted that in the present case, the parties have chosen
through the mechanism set out under Clause 26.1.1 read with Clause               C
26.3.1 that only those disputes notified by one party to the other and first
categorised under the head of a Dispute which cannot be “resolved
amicably” under Clause 26.2 can be referred to arbitration. It is submitted
that therefore a counter claim directly brought before the Tribunal without
having been categorised as a “Dispute” in terms of Clause 26.1 and that          D
too by bypassing the mandatory pre-conditions agreed between the parties
would fall outside the scope of the arbitration agreement as specified
under Section 23(2A) and hence beyond the jurisdiction of the Tribunal.
       5.14 Making above submissions, it is vehemently submitted that
in the present case, both the Arbitral Tribunal as well as the Hon’ble           E
High Court have not committed any error in not permitting the NHAI to
file the counter claim, which was filed straightaway before the Arbitral
Tribunal without following the procedure as required under Clause 26.
Therefore, it is prayed to dismiss the present appeal.
       6. We have heard the learned counsel for the respective parties           F
at length.
      7. The short question, which is posed for the consideration of this
Court is :
              Whether in the facts and circumstances of the case, the
       High Court as well as the Arbitral Tribunal have committed any            G
       error in rejecting the application submitted by NHAI under Section
       23(2A) of the Arbitration Act, 1996 not permitting the NHAI to
       take on record the counter claim?
      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               H
962             SUPREME COURT REPORTS                            [2022] 6 S.C.R.


A     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)
B
      of the Arbitration Act, 1996 to place its counter claim on record. In this
      factual background, the aforesaid issue/question posed for consideration
      of this Court is required to be considered.
             9. While answering the aforesaid question, the relevant clauses
      of the Contract between the parties and the relevant provisions of the
C     Arbitration Act, 1996 are required to be referred to.
            10. Clause 26 of the Contract is with respect to the dispute
      resolution. Clause 26.1 to Clause 26.3.1, which are relevant for our
      purpose are as under:-

D           “26.1 Dispute Resolution
            26.1.1     Any dispute, difference or controversy of whatever
                       nature howsoever arising under or out of or in relation
                       to this Agreement (including its interpretation) between
                       the Parties, and so notified in writing by either Party to
E                      the other Party (the “Dispute”) shall, in the first instance,
                       be attempted to be resolved amicably in accordance with
                       the conciliation procedure set forth in Clause 26.2.
            26.1.2     The Parties agree to use their best efforts for resolving
                       all Disputes arising under or in respect of this Agreement
F                      promptly, equitably and in good faith, and further agree
                       to provide each other with reasonable access during
                       normal business hours to all non-privileged records,
                       information and data pertaining to any Dispute.
            26.2       Conciliation
G                      In the event of any Dispute between the Parties, either
                       Party may call upon the Authority’s Engineer, or such
                       other person as the Parties may mutually agree upon
                       (the “Conciliator”) to mediate and assist the Parties in
                       arriving at an amicable settlement thereof. Failing
                       mediation by the Conciliator or without the intervention
H
  NATIONAL HIGHWAY AUTHORITY OF INDIA v.                                963
 TRANSSTROY (INDIA) LIMITED [M. R. SHAH, J.]

        of the Conciliator, either Party may require such Dispute       A
        to be referred to the Chairman of the Authority and the
        Chairman of the Board of Directors of the Contractor
        for amicable settlement, and upon such reference, the
        said persons shall meet no later than 7 (seven) business
        days from the date of reference to discuss and attempt
                                                                        B
        to amicably resolve the Dispute. If such meeting does
        not take place within the 7 (seven) business day period
        or the Dispute is not amicably settled within 15 (fifteen)
        days of the meeting or the Dispute is not resolved as
        evidenced by the signing of written terms of settlement
        within 30 (thirty) days of the notice in writing referred       C
        to in Clause 26.1.1 or such longer period as may be
        mutually agreed by the Parties, either Party may refer
        the Dispute to arbitration in accordance with the
        provisions of Clause 26.3.
26.3    Arbitration                                                     D
26.3.   “Any Dispute, which is not resolved amicably as provided
        in clause 26.1 & 26.2 shall be finally settled by arbitration
        as set forth below:
i)      The Dispute shall be finally settled by arbitration in
        accordance with the Arbitration & Conciliation Act, 1996,       E
        or any statutory amendment thereof. The Arbitral tribunal
        shall consist of 3 Arbitrators, one each to be appointed
        by NHAI and the Contractor. The third Arbitrator shall
        be chosen by the two Arbitrators so appointed by the
        Parties and shall act as Presiding Arbitrator. In case of       F
        failure of the two Arbitrators, appointed by the parties
        to reach upon a consensus within period of 30 days from
        the appointment of the Arbitrator appointed subsequently,
        the Presiding Arbitrator shall be appointed by the
        Chairman of the Executive Committee of the Indian
        Roads Congress.                                                 G
ii)     Neither party shall be limited in the proceedings before
        such Tribunal to the evidence or arguments before the
        other party /Independent consultant.

                                                                        H
964                SUPREME COURT REPORTS                        [2022] 6 S.C.R.


A           iii)       Arbitration may be commenced during or after the
                       Contract Period, provided that the obligations of NHAI
                       and the Contractor shall not be altered by reason of the
                       arbitration being conducted during the Contract Period.
            iv)        If one of the parties fails to appoint its Arbitrator in
B                      pursuance of Sub-Clause (1) above, within 30 days after
                       receipt of the notice of the appointment of its Arbitrator
                       by the other party, then the Chairman of the Executive
                       Committee of the Indian Roads Congress, shall appoint
                       the Arbitrator. A certified copy of the order of the
                       Chairman of the Executive Committee of the Indian
C                      Roads Congress making such an appointment shall be
                       furnished to each of the parties.
            v)         Arbitration proceedings shall be held at Delhi, India, and
                       the language of the Arbitration Proceedings and that of
                       all documents and communications between the parties
D                      shall be English.
                                  xxxxxxxxxxxxxx”
            11. Section 23 of the Arbitration Act, 1996 as amended by Act
      No. 3 of 2016 is as under:-
E           “23. Statements of claim and defence.—(1) Within the period
            of time agreed upon by the parties or determined by the arbitral
            tribunal, the claimant shall state the facts supporting his claim, the
            points at issue and the relief or remedy sought, and the respondent
            shall state his defence in respect of these particulars, unless the
F           parties have otherwise agreed as to the required elements of those
            statements.
                   (2) The parties may submit with their statements all
            documents they consider to be relevant or may add a reference
            to the documents or other evidence they will submit.
G                  (2A) The respondent, in support of his case, may also submit
            a counter-claim or plead a set-off, which shall be adjudicated upon
            by the arbitral tribunal, if such counter-claim or set-off falls within
            the scope of the arbitration agreement.
                 (3) Unless otherwise agreed by the parties, either party
H           may amend or supplement his claim or defence during the course
        NATIONAL HIGHWAY AUTHORITY OF INDIA v.                                  965
       TRANSSTROY (INDIA) LIMITED [M. R. SHAH, J.]

      of the arbitral proceedings, unless the arbitral tribunal considers it    A
      inappropriate to allow the amendment or supplement having regard
      to the delay in making it.
             (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,   B
      in writing of their appointment.”
        12. Thus, from the aforesaid, it may be seen that Clause 26 –
Dispute Resolution Clause, i.e., Clause 26.1 and Clause 26.2, are in the
nature of conciliation. Both the parties are given opportunity to resolve
the dispute amicably and efforts are to be made through conciliation to         C
resolve the “Dispute” and thereafter the “Dispute”, which is not resolved
amicably, shall have to be finally settled by the arbitration. The words
used are “any dispute, difference or controversy of whatever nature
howsoever arising under or out of or in relation to this agreement between
the parties……..”. It is required to be noted that in the present case, the
cause for the dispute between the parties was the termination of the            D
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               E
termination of the contract, which as observed hereinabove was required
to be resolved through conciliation after following the procedure as above.
In the present case, the communication dated 02.01.2017 addressed by
the Contractor to the Chairman, NHAI, it was stated as under:-
      “Due to this unilateral action of the Authority a Dispute has arisen      F
      between the parties to the agreement. As the dispute has already
      arisen, it is required the dispute to be referred to the Chairman of
      the Authority in accordance with the Clause 26.2 of the Contract
      Agreement for an amicable settlement.”
       12.1 Even in the notice invoking arbitration dated 09.02.2017, it is     G
stated as under:-
      “However the Authority has terminated the Contract Agreement
      and invoked the performance Bank Guarantee of Rs.21.00 Cr.
      Due to this unilateral and illegal action of the Authority by a Dispute
      has arisen between the parties to the agreement.                          H
966              SUPREME COURT REPORTS                          [2022] 6 S.C.R.


A           In accordance with the Clause 26.3.1 of the Contract Agreement
            “Any dispute which is not resolved amicably as provided in Clause
            26.1 & 26.2 shall be finally settled by arbitration as set forth below”
            i)   The Dispute shall be finally settled by arbitration in accordance
                 with the Arbitration & Conciliation Act, 1996, or any statutory
B                amendment thereof. The Arbitral tribunal shall consist of 3
                 Arbitrators, one each to be appointed by NHAI and the
                 Contractor. The third Arbitrator shall be chosen by the two
                 Arbitrators so appointed by the Parties and shall act as
                 Presiding Arbitrator.
C           ii) Accordingly we are nominating Shri D Sree Rama Murthy,
                as our arbitrator, whose consent is enclosed herewith. We
                humbly request you to nominate your arbitrator so that the
                third arbitrator shall be appointed by the two arbitrators so
                appointed by the Parties and shall act as Presiding Arbitrator.”

D            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
E     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
F     has two sides.
             13.2 At this stage, it is required to be noted that 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
G     that the said counter claim would not be maintainable without following
      the process as required under Clause 26 of the Contract agreement.
      The order dated 18.07.2017 passed by the Arbitral Tribunal rejecting the
      application submitted by NHAI for extension of time to file the counter
      claim is as under:-
H
 NATIONAL HIGHWAY AUTHORITY OF INDIA v.                                967
TRANSSTROY (INDIA) LIMITED [M. R. SHAH, J.]

“This has reference to the respondent’s letter dated July 13, 2017     A
making request for extending the lime by 4 weeks for filing of the
counterclaims. In this connection the AT has to remind the
respondent that at the time of first and preliminary meeting held
on 20.04.2017, while fixing the schedule for filing of pleadings by
the parties, the AT had specifically brought the fact to the notice
                                                                       B
of both the parties including the respondent, vide para 12.0 of the
minutes of the said meeting, that the present arbitral matter is
covered under the Act of 1996 as amended in year 2015 and
therefore the adjudication is to be completed within one year and
therefore the directions given by the AT shall be complied with
within the time frame indicated without being required to seek         C
any postponement or extension of time. Further the last date for
filing of the SOD was determined in consultation with the
respondent to be on or before 30.06.2017. The SOD was however
filed by the respondent on 11.07.2017 after seeking an extension
of time for 2 weeks. The AT had granted the said extension with
                                                                       D
a view to give the respondent a reasonable opportunity to present
its case. Now the respondent is seeking an extension of time for
filing of the counterclaims.
It may be mentioned here that the claimant has, vide its email
dated 18.07.2017, objected to grant of any extension of time for
filing of the counterclaims for the reasons stated therein,            E

The AT has given thought to request made by the respondent
taking into consideration the procedure and schedule of filing of
pleadings agreed upon by both the parties as detailed in the
Proceedings of the AT dated 20.04.2017 and the Act of 1996 as
amended in year 2015.                                                  F

The AT observes that sub-sections 23(2) and 23(2A) of the
amended Act of 1996, read together provide that the 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-         G
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.                                                            H
968            SUPREME COURT REPORTS                           [2022] 6 S.C.R.


A           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
B
            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
C           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
D
            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
E           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
F           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
G     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
H
        NATIONAL HIGHWAY AUTHORITY OF INDIA v.                                  969
       TRANSSTROY (INDIA) LIMITED [M. R. SHAH, J.]

its right to file the counter claim. Therefore, on the grounds on which the     A
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
                                                                                B
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,          C
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          D
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       E
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           F
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       G
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
                                                                                H
970                SUPREME COURT REPORTS                       [2022] 6 S.C.R.


A     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.
B
              14. In view of the above and for the reasons stated above, the
      order passed by the Arbitral Tribunal dated 15.09.2017 and the impugned
      judgment and order passed by the High Court deserve to be quashed
      and set aside and are accordingly quashed and set aside. Consequently,
      the application submitted by NHAI to permit it to file the counter claim
C     is hereby allowed and the NHAI is permitted to file the counter claim,
      which the Arbitral Tribunal to consider alongwith the Statement of Claim
      submitted by the Contractor and the Statement of Defence of claim
      submitted by the NHAI on its own merits. In view of the delay occasioned
      by the impugned orders, we direct that the period between 18.07.2017
D     till 11.07.2022 shall be excluded for computing the period for passing of
      the award under Section 29A of the Arbitration Act, 1996.
            Present Appeal is accordingly Allowed. However, in the facts
      and circumstances of the case, there shall be no order as to costs.
              Pending applications, if any also stand disposed of.
E

      Nidhi Jain                                                     Appeal allowed.




F




G




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