Case Title: Bharat Heavy Electricals Ltd vs M/s Zillion Infraprojects Pvt Ltd

In the above case an interim award was rendered by the arbitrator based on admissions during CIRP proceedings; it was challenged by the appellant BHEL

👉 The appellant, Bharat Heavy Electricals, argued before the High Court that the alleged admissions mentioned as setoff in Form B, as submitted before the IRP in the CIRP proceedings, cannot be considered as a determinate amount or an unequivocal admission, till the same is adjudicated along with the Claims before the Arbitral Tribunal.

👉 The appellant pleaded that the amount awarded by the Arbitrator in its interim Award, is against the principles laid down in Order XII Rule 6 of cpc, which requires that the admission must be clear, unequivocal and categorical.

👉 Referring to the Apex Court’s decision in Union of India vs. Karam Chand Thapar & Bros. (Coal Sales) Ltd. (2004) 3 SCC 504 and the Delhi High Court’s decision in Amit Kumar Chopra vs. Narain Cold Storage & Allied Industries Pvt Ltd. 2014 (208) DLT 509, the Court observed that equitable set-off is different than the legal set-off. While Rule 6 Order VIII of CPC deals with legal set-off, equitable set-off is independent of the provisions of CPC.

👉 Mutual debts and credits or cross-demands, to be available for extinction by way of equitable set-off, must have arisen out of the same transaction or must be connected in their nature and circumstances. Further, the plea of equitable set-off cannot be raised as a matter of right, and that it is the discretion of the court to entertain and allow such a plea, the Court observed.

👉 Noting that equitable set-off is founded on the fundamental principles of equity, justice and good conscience, the bench took note that an equitable set-off is not to be allowed where protracted enquiry is needed for determination of the sum due.

👉Referring to the facts of the case, the bench concluded that the said set-off arises in the same business transactions between the parties. Further, it has been made in the proceedings relating to the claims/counter-claims filed by the parties against each other.

👉 The appellant, Bharat Heavy Electricals, further argued before the High Court that since the set-off amount also finds mention in the Counter-Claim/documents filed by it before the Arbitral Tribunal, the set-off cannot be looked into till the adjudication of the Claim and the Counter-Claim by the Tribunal.

👉 “The learned Arbitrator has judiciously exercised its jurisdiction under Section 31(6) of the Act, 1996 to give an interim Award on the basis of admission made by the appellant in Form B by way of set-off. There is no illegality, perversity or irrationality in the findings so returned by the learned Arbitrator which have been accepted by the learned District Judge,” it ruled.

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