TMI Blog2023 (2) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent of the provisions of the Code of Civil Procedure; that the mutual debts and credits or cross-demands must have arisen out of the same transaction or to be connected in the nature of circumstances; that such a plea is raised not as a matter of right; and that it is the discretion of the court to entertain and allow such a plea or not. The concept of equitable set-off is founded on the fundamental principles of equity, justice and good conscience. Thus, set-off is an admitted amount adjustable from the due being claimed a person. The appellant herein, while giving a detailed statement of claims in Form B before the IRP, has also indicated that the set-off amount has to be paid by it to the respondent. It is a categorical admission by the appellant which requires no further adjudication, and there can be no evidence better than an admission. The scope of interference under Section 37 of the Act, 1996 is extremely limited. Sections 34 and 37 demand respect to the finality of the arbitral ruling and the party autonomy in having chosen to get their issues resolved through alternate forum of arbitration which would be thwarted if the courts were to accept the challenge to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny invoked arbitration in terms of Clause 33 of the General Instructions to Tenders and Contract dated 09.07.2010 and an Arbitrator was appointed. 4. The learned Arbitrator commenced the hearing on 05.11.2018 but thereafter, adjourned the proceedings sine die vide Order dated 12.02.2019 in view of the initiation of CIRP proceedings. The proceedings, however, were later resumed. The respondent filed its Statement of Claim for a sum of Rs. 22,24,10,826/- before the learned Arbitrator on 27.09.2019. 5. The appellant moved an Application under Section 14 of the Insolvency and Bankruptcy Code, 2016 on the ground that no pending proceedings can be continued once the petition against the Creditor Debtor/respondent was admitted by NCLT and requested that the arbitral proceedings be adjourned sine die till the continuation of Resolution Process by the adjudicating authority. The learned Sole Arbitrator on 12.02.2019 adjourned the proceedings sine die observing that the appellant herein being an Operational Creditor, may not be in a position to file its Counter-Claim before the Interim Resolution Professional (IRP) appointed by the Arbitral Tribunal, but there is no bar to the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to Section 2(c) of the Act, 1996 which defines Award to include interim Award . Reliance was also placed on Numero Uno International Ltd. vs. Prasar Bharti (MANU/DE/0199/2008) Gammon India Ltd. vs. Sankaranarayana Construction (Banglore) Pvt. Ltd. (MANU/TN/3737/2009), wherein the power to make an interim Award under Section 31(6) of the Act, 1996, is recognised. The learned Arbitral Tribunal rejected the plea of the appellant that the set-off amount cannot be held as an admission till it is adjudicated. The learned Arbitral Tribunal, thus, allowed the interim award in the sum of Rs. 69,03,671.85/- with the observations that it is only an interim Award and at the time of conclusion of arbitral proceedings, if any amount is eventually held payable between the parties, the adjustments can be made and the final Award shall take care of this aspect in order to do justice between the parties. 11. The interim Award has been challenged by the appellant under Section 34 of the Act, 1996 on the following grounds: (i) The amount awarded is against the principles as laid down in Order XII Rule 6 of CPC, 1908 which requires that the admission must be clear, unequivoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal on behalf of the respondent Company which is under moratorium under Section 14 of Insolvency Bankruptcy Code, 2016. 13. It is asserted that the learned Arbitrator has rightly placed reliance on Nimbus Communication Ltd. vs. Prasar Bharti Ors. (MANU/DE/0821/2016) and Numero Uno International Ltd. (supra) to hold that mere filing of the Counter-Claim does not denude the Arbitrator of its power to make an interim Award in the original suit/claim, if such an interim Award is otherwise justified. An interim Award does not in any manner prevent the Arbitrator from making the adjustment of the amount in the final Award, as has also been observed in the impugned Arbitration Award. 14. It was further asserted that the impugned interim Award does not suffer from any perversity or illegality and does not call for any interference under Section 34 of the Act, 1996. 15. The learned District Judge, after considering the rival contentions of the parties, dismissed the petition under Section 34 of the Act, 1996 as being without merit. 16. Aggrieved by the dismissal of the Objections under Section 34 of the Act, 1996, the appellant preferred the present Appeal under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2020 of the learned District Judge upholding the interim Award, the appellant has filed a Counter-Claim for an amount of Rs. 2,64,19,997.33/- before the learned Arbitrator which is pending adjudication. The set-off of Rs. 69,03,671.85/-, as mentioned in Form B filed by the appellant before the IRP, does not find any mention in the Counter-Claim thereby indicating that the appellant has accepted the judgement of the learned Arbitrator. The appeal is liable to be dismissed on this ground itself. 23. It is further asserted that the facts in hand are squarely covered by the judgements in Nimbus Communications Ltd. (supra), Numero Uno International Ltd. (supra), Cofex Exports Ltd. vs. Canara Bank MANU/DE/0500/1997, Gammon India Ltd. vs. Sankaranarayana Construction (Banglore) Pvt. Ltd. (MANU/TN/3737/2009) and Uttam Singh Dugal Co. Ltd. vs. Union Bank of India and Ors. (MANU/SC/0485/2000). There is no infirmity in the impugned Order dismissing the objections of the appellant and the appeal is liable to be dismissed. 24. Submissions heard. 25. To appreciate the grounds of challenge as raised by the appellant, it is pertinent to first define the scope of interference und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum owned by the creditor. In Union of India vs. Karam Chand Thapar Bros. (Coal Sales) Ltd. and Others, (2004) 3 SCC 504 , while referring to concept of set-off under Sub-rule (1) of Rule 6 of Order VIII CPC, 1908 the Apex Court stated thus: - What the rule deals with is legal set-off. The claim sought to be set off must be for an ascertained sum of money and legally recoverable by the claimant. What is more significant is that both the parties must fill the same character in respect of the two claims sought to be set off or adjusted. Apart from the rule enacted in Rule 6 above-said, there exists a right to set-off, called equitable, independently of the provisions of the Code. Such mutual debts and credits or cross-demands, to be available for extinction by way of equitable set-ff, must have arisen out of the same transaction or ought to be so connected in their nature and circumstances as to make it inequitable for the court to allow the claim before it and leave the defendant high and dry for the present unless he files a cross-suit of his own. When a plea in the nature of equitable set-off is raised it is not done as of right and nature of equitable set-off is rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be caused to either party if the claim/counter-claim is adjudicated together for final determination of the disputes. 36. The counter-claim is like an independent Suit filed by the appellant which needs independent adjudication. It may have now been filed before the learned Arbitrator before whom the Claims of the respondent are pending adjudication, but it cannot be overlooked that both the appellant as well as the respondent are required to prove their respective claims by adducing legally admissible evidence. The set-off as discussed above is an admission made by the appellant about the admitted amount that it has to pay to the respondent. Merely because, the set-off finds mention in the counter-claim/documents filed by the appellant, it does not take away the character of the set-off which is an admission of a liability. The argument thus raised, on behalf of the appellant that the set-off cannot be looked into till the adjudication of the claim and the counter-claim, is frivolous and not tenable. 37. A connected argument was raised that the admissions have not been made in these proceedings and cannot form basis of interim Award. The law on judgements on admissions as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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