In a recent order, the Calcutta High Court dismissed a plea by Gayatri Granites and its associates, who had approached the court under Article 227 of the Constitution. The company challenged an arbitral tribunal’s refusal to allow them to amend their defence in an ongoing arbitration against Srei Equipment Finance Ltd.
Background
The dispute arose out of a loan facility agreement. Srei, the lender, had initiated arbitration proceedings after alleging defaults. During the proceedings, Gayatri Granites filed its defence but did not include a counterclaim. Months later, after the evidence of Srei's witness was closed, the company sought to amend its statement of defence and introduce a counterclaim. The arbitrator rejected this move in June 2025, prompting the company to seek the High Court's intervention.
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Senior advocate Ratnanko Banerji, representing the petitioners, argued that the counterclaim was essential since their repayment records showed no outstanding dues. He pointed to Section 23 of the Arbitration and Conciliation Act, which allows parties to amend claims or defences during proceedings.
"The documents are already on record, and only a formal counterclaim needs to be added," he said.
On the other side, counsel for Srei Finance, Suddhasatva Banerjee, objected strongly. He stressed that courts should not interfere in arbitration except in rare cases. He reminded the bench of past Supreme Court rulings that discouraged High Courts from using their supervisory powers under Article 227 to meddle in interlocutory arbitral orders.
Court's Observations
Justice Hiranmay Bhattacharyya examined the provisions closely. The court noted that Section 23(2A) of the Arbitration Act does permit counterclaims but does not prescribe an unlimited timeline. Drawing from earlier Supreme Court judgments, the bench held that such claims should ordinarily be raised before the stage of evidence.
"The counter claim in an arbitration proceeding shall not be allowed to be filed after the issues are framed," the court observed,
Adding that only in exceptional situations could it be permitted till the start of evidence. Since Gayatri Granites had filed its amendment application after the claimant's evidence was closed, the judge found the request clearly delayed.
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The bench also remarked:
"The delay in filing the application of amendment has not been satisfactorily explained. An application to set up a counter claim cannot be allowed after commencement of evidence."
Decision
Concluding that the arbitrator's order was neither perverse nor jurisdictionally flawed, the court refused to interfere. The civil revision petition (C.O. 2449 of 2025) was dismissed, though without imposing costs.
With this, the High Court effectively signaled that arbitration timelines must be respected and that belated counterclaims cannot derail proceedings.
Case Title: Gayatri Granites & Ors. vs. Srei Equipment Finance Ltd.
Case Number: C.O. 2449 of 2025
