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20. Learned senior counsel placed reliance on the judgment of the Supreme Court in the case of Union of India vs. Karam Chand Thapar & Bros. (Coal Sales) Ltd. & Ors., (2004) 3 SCC 504 and in particular paragraphs 17 and 18 and would submit that all the provisions of Order VIII Rule 6 of the CPC which deals with the legal set off cannot be extended to the plea of equitable set off. It is submitted that the Supreme Court has held that the 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 ought to be so connected in their nature and circumstances as to make it inequitable for the court to allow the claim before it and leave the defendant high and dry for the present unless he files a cross suit of his own. He submits that the learned arbitrator had discretion to entertain such plea of equitable set off which discretion ought to have been exercised judicially by the learned arbitrator.

28. It is submitted that though the petitioner had not already adjusted equitable set off as falsely alleged in the written statement filed before the learned arbitrator, the petitioner has subsequently admitted by filing a purshis before the learned arbitrator that the petitioner had not already made equitable set off in respect of its alleged claim from the amount due and payable to the respondent. He submits that admittedly the petitioner has not disputed the liability of the petitioner against the respondent insofar as Equipment Agreement which was the subject matter of this proceeding is concerned. He submits that insofar as the alleged financial condition of the respondent is concerned, the same is not relevant for the purpose of deciding the plea of equitable set off, as canvassed by the petitioner.

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34. A perusal of the record indicates that in the written statement filed in the present proceedings by the petitioner against the respondent, the petitioner had pleaded that the petitioner had already adjusted the claim of the petitioner against the respondent under the said MRLA from the amount due and payable to the respondent under the Equipment Agreement by way of equitable set off. This plea of the petitioner was denied by the respondent. The learned arbitrator therefore in one of the meeting directed the petitioner to clarify this issue as to whether the petitioner had already set off its claim against the respondent by way of equitable set off from the amount due and payable to the respondent under the Equipment Agreement. In response to the said direction, the petitioner filed the purshis before the learned arbitrator, clarifying that no such amount was already adjusted and/or set off by way of equitable set off from the amount due and payable to the respondent under the Equipment Agreement.

40. The Supreme Court has held in the case of Union of India vs. Karam Chand Thapar & Bros. (Coal Sales) Ltd. & Ors. (supra) that mutual debts and credits or cross-demands, to be available for extinction by way of equitable set off, must have arisen out of the arbp1517-14 same transaction or ought to be so connected in their nature and circumstances as to make it inequitable for the court to allow the claim before it and leave the defendant high and dry for the present unless he files a cross suit of his own. It is also held that the plea in the nature of the equitable set off is not done as of right and discretion lies with the Court to entertain and allow such plea or not. In the case of Bhupendra Narain Singh Bahadur vs. Maharaj Bahadur Singh & Ors.(supra), the Supreme Court has held that the plea in the nature of equitable set off is not available when the cross demand do not arise out of the same transaction.