Section 23(1): Submission of Statement of Claim and Defence

The claimant (the party bringing the dispute) must submit a statement of
claim to the arbitral tribunal. This statement must include:

1. Facts supporting the claim: These are the reasons or evidence that
explain why the claimant is seeking relief.

2. Points of disagreement: These are the specific issues or disputes

between the parties.

3. Relief or remedy sought: This is what the claimant wants as a result,

such as compensation or a specific action to be taken.
Likewise
The respondent (the defending party) must submit a statement of defence
that responds to the claimant’s statement of claim. It addresses the facts,
points of issue, and the relief the claimant is seeking.
And
The parties can agree to change or simplify the requirements for what
should be included in their statements.

Section 23(2): Submission of Documents

Both the claimant and the respondent have the right to submit all relevant
documents or evidence that support their claims or defences. This can
include contracts, emails, financial records, or any other material that helps
explain their side of the dispute.

Section 23(2A): Counterclaim and Set-Off

The respondent may also submit a counterclaim (a claim against the
claimant) or request a set-off (asking for compensation for something the
claimant owes the respondent).

These counterclaims or set-offs will be dealt with in the same arbitration

proceeding, as long as they are related to the original arbitration
agreement. This is important because it allows all issues between the
parties to be settled in one arbitration process, instead of starting a new
case for the counterclaim.

This amendment was introduced in 2015 to simplify the process.

Previously, some tribunals treated counterclaims as separate matters,
leading to additional costs and delays.

Section 23(3): Amendment of Claims or Defence

Either party (the claimant or respondent) can amend or add to their

statements of claim or defence during the arbitration process. This means
they can correct, update, or provide more details, but only with the approval
of the arbitral tribunal.

However, the tribunal may refuse to allow changes if the amendments are:

● Submitted too late in the process, causing delays.

● Considered inappropriate for the case or situation.

The term "claim" in this section does not just refer to monetary demands. It
also covers any right that the parties are disputing. For example, if the
dispute involves a contract, the claim could relate to the right to continue a
business relationship, not just financial compensation.

Section 23(4): Time Frame for Submission of Statements

Both the claimant and the respondent must submit their statements of claim
and defence within six months from the date when the arbitrators were
notified of their appointment.

This strict timeline helps ensure that the arbitration process moves forward
quickly and efficiently. By setting this six-month limit, the law aims to avoid
unnecessary delays, keeping the process effective and ensuring that
parties do not have to wait too long for a resolution to their dispute.

The six-month period includes the exchange of the initial statements,

ensuring that both sides present their case clearly and with full
documentation early on in the proceedings.

Case laws :

National Highway Authority of India vs. M/s. Patel Engineering Co.

Ltd. (2022):

Facts:

In this case, the National Highway Authority of India (NHAI) signed a

contract with M/s. Patel Engineering Co. Ltd. for the construction of a
national highway. During the execution of the project, disputes arose
concerning delays and additional costs. Patel Engineering initiated
arbitration proceedings and submitted a Statement of Claim, demanding a
sum of INR 10 crore and 50 lakhs for damages. However, Patel
Engineering made only a vague reference to “damages” without specifying
the details or how the damages were calculated.

Issue:

The key issue before the Supreme Court was whether a general claim for
“damages” without specifics, as submitted by Patel Engineering, was
sufficient under Section 23(1) of the Arbitration and Conciliation Act. The
Court needed to decide if the statement of claim required more details
about how the damages were incurred and the basis for the amount being
claimed.

Judgment:

The Supreme Court ruled that a bare reference to "damages" without

specifics in the Statement of Claim is not sufficient. The Court emphasized
the need for compliance with Section 23(1), which requires that the
claimant and respondent clearly state their respective cases with detailed
particulars. This means that the claimant must provide specific details, such
as:

● When, where, and how the dispute or contractual breach occurred.

● How the claimant suffered harm or damages.

● The method used to calculate the compensation or damages being

claimed.

In this case, Patel Engineering’s failure to specify these particulars in their

Statement of Claim was inadequate. The Court held that to meet the
requirements of Section 23(1), the statement must include a clear and
detailed description of the facts, breaches, and how the damages were
calculated.

The judgment clarified that vague claims are not acceptable in arbitration
proceedings, and the parties must ensure their claims are supported by
sufficient details to facilitate the arbitration process effectively. This ruling
reinforces the principle that the Statement of Claim under Section 23 must
be specific and detailed, not just a general assertion of damages.
 National Highway Authority of India vs. Transstroy (India) Limited
(2022):
Facts:

In this case, the National Highway Authority of India (NHAI) and Transstroy
(India) Limited were involved in a dispute over a highway construction
project. NHAI initiated arbitration against Transstroy, alleging various
breaches of the construction agreement. In response, Transstroy filed a
counterclaim, asserting that the design provided by NHAI was defective,
leading to extra costs and delays in the project.

Issue:

The key issue was whether Section 23(2A) of the Arbitration and
Conciliation Act requires that a counterclaim must be based on the same
facts as the original claim. The Court needed to determine the extent to
which counterclaims are allowed in arbitration proceedings.

Judgment:

The Supreme Court clarified that a counterclaim does not need to arise
from the exact same facts as the original claim. However, there is an
important condition: the counterclaim must fall within the scope of the
arbitration agreement that the parties had signed.

In this case:

While NHAI’s claim was based on alleged breaches by Transstroy,

Transstroy’s counterclaim was related to the design defects in the same
construction project.

The Court ruled that the counterclaim, though based on different facts, was
connected to the same project and contractual relationship. Therefore, the
counterclaim was admissible under Section 23(2A).
Two-Pronged Test for Counterclaims:
The Court established a two-pronged test to assess the admissibility of
counterclaims in arbitration:

1. Connection to the Original Dispute:

The counterclaim must be related to the initial dispute, even if it arises from
different facts. It must stem from the same contract, parties, or legal
relationship.
In this case, both the claim and counterclaim were related to the same
highway construction project under the contract between NHAI and
Transstroy.

2. Scope of the Arbitration Agreement:

The counterclaim must be within the limits of the arbitration agreement

between the parties.
The arbitration clause in this case covered all disputes related to the
construction project, including the design defects raised by Transstroy. As
such, the counterclaim was within the tribunal's authority.

Harinarayan Bajaj vs. M/S Sheth Securities Pvt. Ltd. (2014) case
related to Section 23(3) of the Arbitration and Conciliation Act, 1996:

Facts:

In this case, Harinarayan Bajaj initiated arbitration against M/S Sheth

Securities Pvt. Ltd., a stockbroking firm, for allegedly violating various
securities laws and mismanaging his investment portfolio. During the
arbitration proceedings, Bajaj sought to amend his Statement of Claim by
adding details of more investment accounts that he argued had been
mismanaged by Sheth Securities. These additional accounts were not part
of the original Statement of Claim when the arbitration process began.
Issue:

The main issue was whether Section 23(3) of the Arbitration and
Conciliation Act allows the Arbitral Tribunal to permit amendments to the
Statement of Claim during arbitration. The Court needed to determine
under what circumstances the tribunal could allow Bajaj to alter his claim
and include additional investment accounts.

Judgment:

The Supreme Court set forth a two-tiered criterion that the Arbitral Tribunal
should follow when deciding whether to allow amendments during the
course of arbitration proceedings:

1. Reasonableness of the Delay:

The Court held that the tribunal should first consider whether there was a
reasonable justification for Bajaj’s delay in adding new accounts.

If Bajaj had access to the information regarding these accounts when he

initially filed the claim but chose not to include them, the delay might be
seen as unjustified.

However, if new information surfaced after the claim was filed, leading
Bajaj to amend his claim, this could be considered a valid reason for the
delay.

2. Prejudice to the Other Party:

The second factor the tribunal should consider is the potential prejudice to
Sheth Securities. The tribunal must assess whether allowing the
amendment would place Sheth Securities at a disadvantage by introducing
new claims late in the process.
Specifically, the tribunal would consider whether Sheth Securities would
need more time or resources to respond to these new accounts, which
could delay the proceedings or affect their ability to prepare an adequate
defence.

If the amendment would lead to significant harm or prejudice, the tribunal

may decide not to allow it.

Bhatia International Ltd. & Ors. vs. Bulk Carriers Pvt. Ltd. (2002) case,
focusing on Section 23(3) of the Arbitration and Conciliation Act, 1996:

Facts:

This case involved a contractual dispute between Bhatia International Ltd.

and Bulk Carriers Pvt. Ltd. regarding a charter party (a contract for the
hiring of a ship). Bhatia initiated arbitration against Bulk Carriers, making
several claims related to the contract. During the arbitration proceedings,
Bhatia sought to amend the Statement of Claim to include a new legal
argument challenging a specific clause in the charter party, which had not
been an issue earlier in the case.

Issue:

The core issue was whether Section 23(3) allows a party to amend the
Statement of Claim to include new legal arguments during arbitration.
Specifically, the Court needed to decide whether the Arbitral Tribunal could
use its discretion to permit the addition of fresh legal arguments that had
not been raised at the beginning of the proceedings.

Judgment:

The Supreme Court reaffirmed that the Arbitral Tribunal has discretion
under Section 23(3) to allow amendments to statements during arbitration,
including the introduction of new legal arguments. However, the Court laid
down certain principles to guide the exercise of this discretion:
1. Timing and Fairness:

While parties generally have the right to amend their claims, the Court
emphasized that introducing new legal grounds late in the proceedings
could prejudice the other party.

In this case, allowing Bhatia to introduce a new legal argument could place
Bulk Carriers at a disadvantage, as they might need additional time to
reassess their defence and respond to the new legal point.

2. Impact on the Proceedings:

The Court noted that the tribunal must consider whether allowing the
amendment would disrupt the flow of the arbitration. If the new legal
argument would cause significant delays or complicate the case, the
tribunal may reject the amendment.

However, if the new argument raises a significant legal issue that is

relevant to the case and can be debated fairly without causing prejudice to
the other party, the tribunal may allow the amendment to ensure that all
legal issues are addressed.

3. Tribunal's Discretion:

The tribunal's discretion is crucial in determining whether to allow

amendments based on the specific circumstances of the case.

The Court also recognized that the tribunal may need to consider whether
an extension of time is necessary to ensure fairness in the proceedings.