The Delhi High Court, in the case RailTel Corporation of India Ltd. vs. Primatel Fibcom Ltd. (ARB.P. 2075/2024), has held that when arbitration proceedings are already underway between the parties, a separate notice under Section 21 of the Arbitration and Conciliation Act, 1996, is not required for raising counter-claims.
Background
The dispute arose from a Definitive Agreement dated 27.02.2018 between RailTel, a PSU, and Primatel, a private company, related to the RajNET project by RISL. The agreement included an arbitration clause (Clause 18.2), designating DIAC (Delhi International Arbitration Centre) as the arbitration forum.
Following disputes, Primatel invoked arbitration. On 14.03.2024, the Delhi High Court appointed a sole arbitrator under DIAC. During the proceedings, RailTel submitted its statement of defence but filed its counter-claim later on 11.11.2024, along with an application to condone the delay. The arbitrator dismissed it on 18.11.2024 for being late, without a hearing.
RailTel appealed under Section 37(2)(a) of the Act. Though the appeal was dismissed, the Court granted liberty to initiate independent arbitration proceedings, which the Respondent also accepted.
RailTel contended:
- The arbitrator dismissed the counter-claim without hearing, violating natural justice.
- The dismissal order didn’t address the merits of the claim.
- As per the Court’s liberty and Respondent’s concession in the earlier case, no fresh Section 21 notice is needed.
- Section 21’s intent—to inform the other party of disputes—was already fulfilled through the earlier arbitration.
Primatel opposed the petition, claiming:
- No Section 21 notice was issued by RailTel, which is a mandatory pre-condition for arbitration.
- The claims relate to RailTel's agreement with RISL, not directly with Primatel.
- The earlier counter-claim was delayed and rightly dismissed by the arbitrator.
- They denied consenting to a new arbitrator’s appointment without Section 21 compliance.
The Court emphasized that:
“The object of Section 21 is to ensure that the respondent is aware of the disputes referred to arbitration and is given an opportunity to respond.”
It noted that:
- The disputes were already part of an earlier arbitration initiated by Primatel.
- RailTel had tried to submit its claims as counter-claims, and Primatel was aware of them.
- A coordinate bench had already recognized the liberty granted to RailTel to initiate independent proceedings.
- The arbitration clause in the Definitive Agreement was valid and undisputed.
“A hyper-technical view cannot be adopted to defeat the Petitioner’s right to seek adjudication of its claims, especially when such adjudication has not taken place on merits.”
The High Court held that in this scenario, a separate Section 21 notice was not necessary. The ongoing arbitration and prior judicial proceedings had already satisfied the requirement.
“A separate notice under Section 21... would not be necessary only for the purposes of counter-claim which is not the mandate of the Arbitration and Conciliation Act, 1996.”
To avoid conflicting rulings, the Court directed that Dr. Justice Satish Chandra (Retd.), already adjudicating the main arbitration, should also hear the counter-claims.
The arbitration will continue under DIAC rules, and the arbitrator was asked to submit a disclosure under Section 12(2) of the Act. All rights regarding merits or maintainability of claims are left open for adjudication by the arbitrator.
Case Title – Railtel Corporation of India Limited v. Primatel Fibcom Limited
Case No. – ARB.P. 2075/2024
Appearance-
For Petitioner - Mr. Alok Singh, Mr. B.R. Menon, Mr. Jaivardhan Jeph, Advocates
For Respondent - Mr. Rohit Gandhi, Mr. Adhish Srivastava, Mr. Hargun Singh Kalra and Ms. Akshita Nigam, Advocates
Date – 22.04.2025
