In Brief
The National Highway Authority of India contracted with a construction company for highway improvement. After NHAI terminated the contract for breach, the contractor initiated arbitration. NHAI sought to file a counterclaim for damages but was rejected by the Arbitral Tribunal and High Court on the ground that the counterclaim did not follow the contractual pre-arbitral conciliation procedure. The Supreme Court allowed NHAI's appeal, holding that once a dispute is referred to arbitration, related counterclaims arising from the same transaction fall within the scope of the arbitration agreement under Section 23(2A) of the Arbitration Act, 1996, regardless of whether pre-arbitral procedures were formally completed. The Court emphasized that denying counterclaims based on hyper-technical procedural grounds defeats the statutory purpose of comprehensive dispute resolution and creates multiplicity of proceedings.
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