Can a Counter-Claim Be Introduced in Arbitration by Amending the Statement of Defence After Framing of Issues? Clarification and Harmonisation with CPC Principles—Precedent for All Arbitration Proceedings

The Calcutta High Court clarifies that, in arbitral proceedings, a counter-claim may not generally be introduced by amending the Statement of Defence after issues are framed—mirroring the procedural position under Order 8 Rule 6A of the CPC. This judgment upholds existing Supreme Court precedent, harmonises procedural timelines under the Arbitration and Conciliation Act, 1996, and serves as binding authority for all courts and arbitral tribunals within jurisdiction.

Summary

Practical Impact

What’s New / What Lawyers Should Note

• Clear judicial affirmation that, akin to the “outer limit” under Order 8 Rule 6A CPC, counter-claims cannot generally be introduced after issues are framed in arbitration.
• Only in rare and exceptional cases may counter-claims be permitted until commencement of recording evidence of the claimant.
• Section 23(2A) and 23(3) of the Arbitration Act do not prescribe an explicit deadline for counter-claims, but courts will harmonise arbitral and civil procedural law to avoid prejudice and delay.
• Delay or omission in raising counter-claim must be explained satisfactorily; mere inadvertence is insufficient for such belated amendments.
• Arbitrators and parties should plan and plead all counter-claims early to avoid procedural bars and future challenge.
• The judgment is a ready precedent for resisting belated counter-claims and for objecting to Article 227 intervention against arbitrator’s procedural orders.

Summary of Legal Reasoning

• The Court first parsed Section 23 of the Arbitration and Conciliation Act, 1996, especially Section 23(2A), confirming that no statutory time limit is specified for filing counter-claims, as long as they fall within the arbitration agreement’s scope.
• It compared these provisions to Order 8 Rule 6A CPC, which—though not binding on arbitral proceedings—restricts counter-claims to those filed before issues are framed.
• The Court relied extensively on the Supreme Court’s decision in Ashok Kumar Kalra, which held that, even if limitation has not expired, a defendant is not absolutely entitled to file a counter-claim with substantive delay, and laid down illustrative factors for discretion, pegging the “outer limit” to the stage of framing issues.
• The Court observed that, though arbitral tribunals are not bound by the CPC, the overall procedural structure under the Arbitration Act (including Section 23(4) and Section 29A) supports speedy completion of pleadings.
• Accordingly, in arbitration, counter-claims should not be allowed after issues are framed, save rare exceptions up to commencement of evidence of the claimant.
• The Tribunal’s rejection of the amendment, made after closure of claimant’s evidence, was found justified; there was neither satisfactory explanation nor a subsequent event justifying the delay.
• The High Court also reaffirmed the settled law that Article 227 intervention lies only rarely where arbitral procedural orders are perverse or involve jurisdictional error; neither existed here.
• The Court distinguished NTPC Limited as inapplicable to the facts and issue at hand.
• Ultimately, the decision harmonises the interests of substantive justice and procedural expedition, confirming that amendments seeking to set up counter-claims at a late stage cannot be routinely allowed in arbitration.

Arguments by the Parties

Petitioner (Respondent in Arbitration):

• Filed affidavit evidence including documentary proofs relevant to the counter-claim; absence of counter-claim was inadvertent.
• All material for the counter-claim already on record; only formal amendment of SoD sought.
• Proposed amendment necessary for resolving the real controversy.
• Section 23(3) of the 1996 Act allows amendments at any stage; no bar post-trial commencement.
• Cited Life Insurance Corporation of India v. Sanjeev Builders Private Limited (2022) 16 SCC 1, arguing that amendments should be allowed to ensure effective adjudication.

Respondent (Claimant in Arbitration):

• Strong objection to maintainability under Article 227; Section 5 of the 1996 Act bars court interference except where expressly provided; Section 37 does not provide appeal against such orders.
• Supreme Court has consistently held Article 227 should not be invoked for interlocutory arbitral orders. Cited Deep Industries Ltd., Bhaven Construction, and Serosoft Solutions.
• Before the arbitrator, petitioners had relied on Order 6 Rule 17 CPC, not Section 23(3).
• The amendment application was rightly dismissed by the arbitrator.

Factual Background

The petitioner in this civil revision (respondent in the arbitration) sought to amend its Statement of Defence to introduce a counter-claim after the claimant’s evidence had been closed in arbitration proceedings conducted before a former High Court Judge as sole arbitrator. The arbitrator rejected the amendment application, finding no new event justifying the delay and that all necessary facts were previously known. The petitioner challenged this order under Article 227 of the Constitution before the Calcutta High Court.

Statutory Analysis

• Section 23(2A), Arbitration and Conciliation Act, 1996: Allows respondent to file counter-claim or set-off, provided it falls within arbitration agreement scope. No time-limit prescribed.
• Section 23(3): Permits amendment/supplementation of claim or defence during arbitration, subject to tribunal’s discretion regarding delay.
• Order 8 Rule 6A CPC: Allows counter-claims before defence/expiration of time-limit for delivering defence; outer limit is framing of issues.
• Both statutes do not explicitly prohibit counter-claims post-framing issues, but courts have interpreted an implied procedural bar.
• Section 23(4) and Section 29A, 1996 Act: Impose time schedules for completion of pleadings and award—contextualising the need for procedural discipline in amendments.

Dissenting / Concurring Opinion Summary

The Court referenced the partly concurring and dissenting opinion of Justice M.M. Shantanagoudar in Ashok Kumar Kalra, clarifying that—while counter-claims should not usually be permitted after issues are framed—in exceptional situations, such filing may be permitted till commencement of evidence. This nuanced position was adopted and harmonised with arbitral procedures.

Procedural Innovations

• The judgment harmonises the “outer limit” for counter-claims from the CPC into arbitration law, providing new procedural clarity for arbitrations.
• Reaffirms limited grounds for interference under Article 227 in arbitral procedural orders, i.e., only in case of perversity or jurisdictional error.

Alert Indicators

• ✔ Precedent Followed – Reaffirms and applies existing Supreme Court law (Ashok Kumar Kalra; Life Insurance Corporation of India v. Sanjeev Builders).

Citations

• Ashok Kumar Kalra v. Wing CDR. Surendra Agnihotri, (2020) 2 SCC 394
• Life Insurance Corporation of India v. Sanjeev Builders Private Limited, (2022) 16 SCC 1
• Deep Industries Ltd. v. ONGC, (2020) 15 SCC 706
• Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75
• Serosoft Solutions (P) Ltd. v. Dexter Capital Advisors (P) Ltd., (2025) SCC Online SC 22