National Highway Authority of India Vs Transstroy (India) Limited (Supreme Court)
The counter-claim of a party cannot be rejected for the simple reason that the claims were not notified prior to initiating arbitration.
Facts of the Case:
The National Highway Authority of India and Transstroy (India) Limited entered into an Engineering Procurement and Construction Agreement on November 13, 2014 for the upgrade of the Karaikudi-Ramanathapuram Section of National Highway No. 210 in Tamil Nadu, including 500m on SH-35 Madurai Road.
Due to NHAI’s belief that the Respondent had broken specified contract requirements, on September 29, 2015, it gave the Respondent 60 days to correct any defaults. This was done in accordance with clause 23.1.1 of the contract.
On April 12, 2016, the NHAI issued a notice of intention to terminate the Contract pursuant to Clause 23.1.2 of the Contract because the Respondent had failed to repair the defaults. On April 14, 2016, the Respondent replied to the same.
NHAI on finding the reply unsatisfactory issued a termination notice on July 22, 2016 under Clause 23.1.2 of the Contract, wherein NHAI allegedly stated “the same is without prejudice to the Authority’s right to claim damages for the Contractor’s failure to comply with the unambiguous obligations casted upon it under the Contract and/or to realize any dues, losses and damages whatsoever under the Contract or under applicable laws, as the case may be”.
The Respondent wrote to NHAI on January 2, 2017, after receiving the termination notice, requesting that certain disputes be forwarded for amicable resolution in accordance with Clause 26.2 of the Contract. The Respondent referred the dispute to arbitration by letter dated February 9, 2017, and the Arbitrator was chosen. Respondent had also asked NHAI to choose their arbitrator, and as a result, NHAI named its arbitrator in a letter dated 10.03.2017.
After the Arbitral Tribunal (“Tribunal”) was established, the Respondent submitted its Statement of Claim to the Tribunal on May 15, 2017, and NHAI submitted its Statement of Defence on July 11, 2016. In this document, NHAI declared that it had retained the right to sue for damages and that it would file its counterclaim separately.
After submitting its Statement of Claim, NHAI requested an extension from the Tribunal in a letter that was submitted on July 13, 2017. The Tribunal denied the request in an email dated on July 18, 2017, on the grounds that the NHAI had not submitted an application to have its counterclaim entered into the record.
Following that, NHAI filed an application according to Section 23(2A) of the Arbitration and Conciliation Act, 1996 (the Act), to once more register its counterclaim. The Tribunal denied NHAI’s request in an order dated 15.9.2017 on the grounds that NHAI had not followed the procedure outlined in Clauses 26.1 and 26.2 of the Contract. The Tribunal believed that as the dispute outlined in the counterclaim fell beyond the purview of arbitration, the Tribunal could not render a decision on it.
Aggrieved from the decision of Arbitral Tribunal NHAI under Section 34 of the Arbitration and Conciliation Act appeal the decision given by it to the Hon’ble High Court of Delhi. The High Court upheld the decision made by the Tribunal on September 15, 2017, and dismissed the application brought forth under Section 34.
Dissatisfied from the decision of hon’ble High Court NHAI appealed the decision to the Supreme Court of India.
Issues Raised:
