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Supreme Court Ruling: Arbitration, Claims and Counterclaims Should Be Treated Separately

While giving its landmark verdict on the term ‘ Sum in dispute ‘ the Supreme Court recently observed that the term ‘sum in dispute’ which is enshrined in the Fourth Schedule of the Arbitration Act of course refers to sum in dispute and therefore, claims, as well as counterclaims, should be treated separately and not in total. 

The Bench of Justice DY Chandrachud and Justice Surya Kant observed that Arbitrators shall be entitled to charge a separate fee for the claim and counterclaim in an ad hoc arbitration proceeding, while the fee ceiling contained in the Fourth Schedule will apply to both, when the fee structure of the Fourth schedule has been made applicable to the ad hoc arbitration. While Justice Sanjiv Khanna differed from this analysis, the Judge observed  that the term ‘sum in dispute’ really means the sum total of both the claims and counterclaims of the fourth Schedule. The column provides the different categories of  amounts, corresponding to which the third column provides the relevant fee which the arbitrators can charge for that category. One argument was given that the word sum- in – dispute should be the cumulative sum of the claim and counter-claim made by the parties. The Court, while referring to this contention, observed that if such a stand  is taken, the arbitrators will charge a common fee for hearing both claim and counter-claim, and the ceiling prescribed in the Fourth Schedule will apply to their cumulative total.

The Court’s observation came in wake of its intervention in  ‘sum in dispute’ which  is mentioned  in the header of the second column in the Fourth Schedule. The column provides the different categories of the amounts, corresponding to which the third column provides the relevant fee which the arbitrators can charge for that category. On the one hand an argument was made  before the Court that the expression ―sum in dispute should be considered as the cumulative sum of the claim and counter-claim which are raised by the parties. 

 The   Court further observed that it should not be considered that the arbitrators would charge separate  fees for the claim and counterclaims, and hence, separate fee ceilings will apply to both in this case.. The Court made a reference to the Arbitration Act, Academic Discourse, various Judicial Pronouncements and the relevant provisions of CPC and thus held – 1) Claims and counter-claims are independent and distinct proceedings; 2) Remarkably, a  counter-claim is not a defense to a claim and its outcome is not contingent on the outcome of the claim;

 The single Judge bench of the highest court found that the alternative land offered to the writ petitioner is placed  at a very remote/far off area and is not cultivable and , therefore, a direction was issued to give possession of the land originally allotted to the writ petitioner. 

Anjani Kumar
Anjani Kumar
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