Can a Counter Claim Be Introduced in Arbitration by Amending the Statement of Defence After Framing of Issues? Calcutta High Court Clarifies the Temporal Limits in Arbitration Practice

The Calcutta High Court affirms that, in arbitration proceedings, counter claims cannot ordinarily be introduced after framing of issues; only in exceptional cases may such claims be permitted until commencement of evidence. This judgment applies the Supreme Court’s jurisprudence to arbitration and upholds the existing procedural balance, providing binding authority within West Bengal and persuasive value for other jurisdictions and arbitrators.

Summary

Practical Impact

What’s New / What Lawyers Should Note

• The Calcutta High Court applies Supreme Court limits on counter claims (Order 8 Rule 6A CPC) to arbitration: generally, counter claims cannot be introduced after issues are framed.
• Only in exceptional cases, counter claims may be permitted until the commencement of recording of evidence of the claimant.
• Section 23(2A) of the Arbitration and Conciliation Act, 1996 allows counter claims without a strict time limit but does not give an unfettered right—tribunals and courts must balance delay, prejudice, and the progression of proceedings.
• Article 227 intervention against procedural orders of the arbitrator (like amendment refusals) is severely limited and allowed only for perverse or jurisdictionally defective orders.
• The decision reinforces the principle that efficiency and substantive justice in arbitration require discipline in procedural timelines for counter claims and amendments.

Summary of Legal Reasoning

• The Court analyzed Section 23(2A) and (3) of the Arbitration and Conciliation Act, 1996, noting that while the statute does not prescribe a clear timeline for the filing of counter claims, this omission does not translate into an unlimited right.
• The Court drew parallels with Order 8 Rule 6A CPC as interpreted by the Supreme Court in Ashok Kumar Kalra v. Wing CDR. Surendra Agnihotri, emphasizing that counter claims are not to be permitted after issues are framed except in exceptional situations.
• The Supreme Court has listed several factors to guide judicial discretion, including period and justification for delay, similarity of cause of action, prejudice, and abuse of process.
• The arbitral tribunal’s discretion not to allow belated amendments is preserved by Section 23(3), which expressly allows it to refuse amendments on grounds such as delay.
• Article 227 jurisdiction is not to be invoked to correct routine procedural orders of arbitral tribunals. Intervention is permitted only for perversity or jurisdictional error.
• The Court found no perverse or jurisdictional error in the arbitrator’s refusal to allow amendment after closure of evidence, especially as the facts sought to be introduced by counter claim were known earlier and delay was not satisfactorily explained.

Arguments by the Parties

Petitioner

• The evidence on record shows no dues after account closure; the amendment is necessary to present a counter claim already supported by documents on record.
• The omission to file a counter claim earlier was inadvertent.
• Section 23(3) of the Arbitration and Conciliation Act, 1996, allows amendments to the Statement of Defence at any stage, as there is no statutory bar against such amendments after commencement of trial.
• Relied on Life Insurance Corporation of India v. Sanjeev Builders Private Limited (2022) 16 SCC 1, arguing that amendments for effective adjudication and real controversy resolution should be permitted.

Respondent

• Challenged maintainability of the Article 227 petition; argued that Section 5 of the 1996 Act bars court intervention except as expressly provided for, and Section 37 only allows appeal in certain specified cases.
• Argued that the Supreme Court has prohibited Article 227 review of arbitral tribunal orders except in cases of perversity or jurisdictional error.
• Relied on Deep Industries Ltd. v. ONGC (2020) 15 SCC 706; Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd. (2022) 1 SCC 75, and Serosoft Solutions (P) Ltd. v. Dexter Capital Advisors (P) Ltd. (2025) SCC Online SC 22.
• Contended that petitioner’s arguments before the arbitrator did not invoke Section 23(3), but were based on Order 6 Rule 17 CPC, and that the arbitrator rightly rejected belated amendment of the defence.

Factual Background

The parties were engaged in an arbitration proceeding relating to multiple loan facilities. The respondent (petitioner before High Court) initially filed its Statement of Defence without asserting a counter claim. After the closure of the claimant’s evidence, the respondent sought to amend the Statement of Defence to include a counter claim, citing inadvertence and already-filed documents. The arbitral tribunal rejected the amendment application as being belated and unjustified. The respondent then sought to challenge this decision before the Calcutta High Court under Article 227 of the Constitution.

Statutory Analysis

• Section 23(2A) Arbitration and Conciliation Act, 1996: Allows a respondent to submit a counter claim if it falls within the arbitration agreement, with no explicit time limit stated.
• Section 23(3) Arbitration and Conciliation Act, 1996: Permits claim or defence amendments during arbitral proceedings, unless the tribunal considers the amendment inappropriate considering the delay.
• Order 8 Rule 6A CPC: Permits counter claims by defendants but restricts accrual to before filing of written statement or expiry of time for same; Supreme Court has determined outer limit is normally till framing of issues.
• Section 19 Arbitration and Conciliation Act, 1996: Confirms arbitration is not bound by the CPC, but procedural fairness and efficiency principles apply.

Dissenting / Concurring Opinion Summary

The judgment references the Supreme Court’s decision in Ashok Kumar Kalra v. Agnihotri, noting Justice M.M. Shantanagoudar’s partially concurring and dissenting opinion: while counter claims should not generally be permitted after framing of issues, in exceptional situations they may be allowed until commencement of claimant’s evidence.

Procedural Innovations

• The Court applied the Supreme Court’s factors for judicial discretion in accepting late counter claims/amendments from civil procedure to arbitration.
• Clarified that procedural orders of arbitral tribunals are not subject to high frequency of review; scrutiny under Article 227 is to be exercised rarely.

Alert Indicators

• ✔ Precedent Followed – The decision follows and applies established Supreme Court precedent concerning the timing and admissibility of counter claims in civil and arbitration proceedings.

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