A right to set off itself will arise only if there is ascertained debt or a liability that has crystallised into a debt – Chennai Metropolitan Water Supply and Sewerage Board Vs. Chennai Water Desalination Ltd. – Madras High Court
Hon’ble High Court held that the right of the appellant is to recover damages on proof of breach. The DRP viz. Dispute Resolution Panel which is an Inter Departmental Mechanism, has concluded that the respondent was not at fault. The Arbitral Tribunal has not gone into the merits but it has only rejected the claim on the ground that it is barred by limitation. Therefore, the fact that there was a breach on the part of the respondent is yet to be established. Unless the breach is established, the right to claim damages cannot be said to have crystallised. If the appellant is allowed to set off the amount secured by the Bank Guarantee towards damages, it would definitely amount to allowing the appellant itself to decide as to who is in breach. The same cannot be done particularly when the claim has been rejected by the Arbitral Tribunal.
