When can Counter Claim can be filed?

Counter claim is the claim filed by a respondent against the claimant in the arbitration proceedings, after the
claimant initiated arbitration proceedings. Mostly counter claims are filed along with the Statement of
Defence by the Respondent or even later.
These counter claims mostly arise out of the contract period and some of them even after the contract period.
But once the other party chose to invoke arbitration the respondent, may also would like to make its claims
by way of a counter claim.

Limitation of Counter Claim.

That means the counter claim should be filed before the arbitral tribunal within three years from the date of
cause of action, to be within the limitation period. Hence in normal cases S.21 of the Arbitration and
Conciliation Act,1996 does not apply to cases relating to counter claims. Therefore, as per Section 3(2) of
the Limitation Act, 1963, the date on which the counter claim is made before the arbitrator shall be the date
for the "institution" of the Counter Claims.

CASE LAWS
Voltas Ltd vs Rolta India Ltd 
CIVIL APPEAL NO. 2073 OF 2014
Facts:
 The appellant and respondent entered into a civil construction contract for construction of two
buildings known as Rolta Bhawan II (RB-II) and Rolta Bhawan III (RB-II) and also for modification of
building Rolta Bhawan I(RB-I) previously constructed by the respondent.

 Dispute arose between Appellant and Respondent. The respondent terminated the contract.

 The appellant invoked the arbitration clause in respect of its claims against the respondent. 
As the respondent failed to appoint an arbitrator, it filed an application under Section 11  of the Arbitration
and Concillation Act, 1996 (for short “the Act”) before the High Court of Bombay for appointment of
arbitrator and the designated Judge appointed the sole arbitrator.
 The appellant filed its statement of claim claiming a sum of Rs.23,31,62,429.77 together with interest
at the rate of 15% per annum from the respondent. 
 The respondent, after filing its defence, filed the counter claim of Rs.333,73,35,026/- together with
interest at the rate of 18% per annum from the date of filing till payment/realization thereof. In the counter
claim the respondent justified the termination of the agreement and contended that it was entitled to damages
for breach of contract.
 After the counter claim was lodged, the appellant-herein filed its objections about the tenability of the
counter claim stating that the same was not maintainable and was also barred by limitation.

Issues

(i) Whether the counter claim, or a substantial part thereof, is barred by the law of limitation?

(ii) Whether the counter claim is not maintainable and beyond the scope of reference?”

Arbitration decision
After adumbrating to the facts the learned Arbitrator came to hold that the limitation for making a counter
claim is required to be asserted with reference to the date on which the cause of action arises and the date on
which the counter claim is filed.

After the interim award was passed by the learned Arbitrator, the respondent filed an application under
Section 34 of the Act for setting aside the decision of the learned Arbitrator rejecting the counter claims
made by it on the ground of limitation.

The counter claim was admittedly filed on 26th September, 2011 which was made beyond the period of
limitation. The arbitral proceedings commenced in respect of the counter claim only when the said counter
claim was lodged by the petitioner on 26th September, 2011. Even if the date of refusal on the part of the
respondent, to pay the amount as demanded by the petitioner by its notice dated 17th April, 2006 is
considered as commencement of dispute, even in such case on the date of filing the counter claim i.e. 26th
September, 2011, the counter claim was barred by law of limitation. In my view, thus the tribunal was
justified in rejecting the counter claim filed by the petitioner as time barred.”

Airone Charters Pvt. Ltd. vs Jetsetgo Aviation Services Pvt. Ltd.

Three Aircraft Charter Agreements (in short, "ACAs") dated 11th August, 2017, were executed between the
petitioner and the respondent.
Disputes arose. 
The respondent is the claimant therein, and the present petitioner, the respondent.
The Petitioner filed a petition under Section 11 of the Arbitration & Conciliation Act 1996, for
appointment of an Arbitrator,
Learned counsel for the Respondent had opposed the Petition and submitted that if the
Petitioner's Counter Claims were struck off from the record by the learned Arbitral Tribunal, which order
had attained finality, it is not open to the Petitioner to invoke arbitration  the very same Counter Claims,
especially when its petition under Section 29A of the Act stood rejected by the Court.
Learned counsel for the Respondent had also argued that no specific liberty to invoke arbitration qua the
said Counter Claims was granted to the Petitioner by the Court while permitting the Petitioner to withdraw
the petition under Section 29A of the Act.
A counter claim by a Respondent pre-supposes the pendency of proceedings relating to the disputes raised
by the claimant. The Respondent could no doubt raise a dispute (in respect of the subject matter of
the counter claim) by issuing a notice seeking reference to arbitration and follow it by an application under
Section 11 of the Act for appointment of Arbitrator, instead of raising a counter claim in the
pending arbitration proceedings.
The object of providing for counter claims is to avoid multiplicity of proceedings and to avoid divergent
findings. The position of a Respondent in an arbitration proceedings being similar to that of a Defendant in
a suit, he has the choice of raising the dispute by issuing a notice to the claimant calling upon him to agree
for reference of his dispute to arbitration and then resort to an independent arbitration proceedings or raise
the dispute by way of a counter claim, in the pending arbitration proceedings."
State of Goa vs. Praveen Enterprises
In State of Goa vs. Praveen Enterprises3, it was laid down that when the party against whom a claim is
made, also makes a claim against the claimant and seeks arbitration by serving notice of arbitration instead
of filing of a separate application under Section 11 of the Act, the limitation for such counter claim should be
computed as on the date on which the notice of such claim was served on the claimant and not on the date of
filing of counter claim.

The Supreme Court has clarified that the object of providing for counter claims is to avoid multiplicity of
proceedings and to avoid divergent findings. Keeping this object in view, the respondent in
an arbitration proceeding has a choice of raising the dispute (counter claim) by issuing a notice to
the claimant calling upon him to agree for reference of this dispute (counter-claim) to arbitration and then
resort to an independent arbitration proceedings or raise the dispute by way of a counter claim in the
pending arbitration proceedings. The only effect of such counter claim would be on the issue of
limitation."

A party invoking arbitration cannot bifurcate its claims, choosing to refer some claims at one stage and
others at another, if the contract requires arbitration to be invoked in respect of "all disputes"at the initial
stage.

Even in such a situation, however, the invocation of arbitration by one party to a contract and the
consequent reference of the claims of that party to arbitration would not require, of necessity, the opposite
party to also simultaneously refer its counter claims to arbitration. Such a requirement would create chaos
in the arbitral process. One may easily visualize a situation in which, for example, the claims of one party
(let us say, party A) may involve several contested facts and issues, whereas the claim of the other party
(say, party B) may be, for example, a simple claim for interest. Can it be said that party A would be bound
to refer, to arbitration, all its claims along with the reference to arbitration of the claims of party B? Even
if the arbitration clause between party A and party B requires all disputes to be referred to the Arbitral
Tribunal at one go, that, in my view, can only mean that all disputes raised by any one party would have to
be referred simultaneously to arbitration. The reference, by one party to the contract, of its disputes
to arbitration, cannot bind the other party to simultaneously, or even proximately, also refer its disputes
to arbitration, whether as claims or counter-claims.