Limitation of Counterclaims Arbitration Notice Arrests Madras HC Observes

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Bench of Justice Mr Sundar heard a motion under section 34 of the Arbitration and Conciliation Act 1996 challenging an arbitral award made by a three-member arbitral tribunal.

The Madras High Court recently ruled that the statute of limitations with respect to counterclaims would end on the date when the defendant issued the notice of arbitration and the date of filing of the counterclaims would be immaterial.

Bench of Justice Mr Sundar heard a motion under section 34 of the Arbitration and Conciliation Act 1996 challenging an arbitral award made by a three-member arbitral tribunal.

The contested award also dismissed the contractor’s counterclaim on the grounds that the counterclaim was also time-barred. The contractor attacked the part of the contested award which dismissed the counterclaim by saying that the contractor’s counterclaim was not barred by statute of limitations.

The Court noted that limitation being a facet of public policy, an error of limitation clearly left an award stricken by Article 34(2)(b)(ii) read with clause (ii) of the explanation 1.

The Court observed that “In light of the JGEngineering case law, it is clear that the dismissal of the CMWSSB (Chennai Metropolitan Water Supply and Sewerage Board) claim by the contested award which is severable will remain unaffected and, in other words, the decisive finding regarding the CMWSSB’s request to be estopped within the meaning of paragraph 54 of the award under appeal shall, among other things, not be disturbed. The award under appeal is set aside insofar as it dismisses the contractor’s counterclaim.”

The Court noted that if the CMWSSB’s claim for damages was unsuccessful, it followed as a consequence that the contractor was entitled to recover the amount of the bank guarantee.

If the CMWSSB’s claim for damages fails, it follows accordingly that the contractor is entitled to recover the amount of the bank guarantee“, noted the Court.

The request was now granted.

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