The issue before us for consideration is whether filing of
an application for extension of time to file written statement
before a judicial authority constitutes – ‘submitting first
statement on the substance of the dispute’ or not.
In Rashtriya Ispat Nigam Ltd. and another v. Verma
Transport Co.(2006) 7 SCC 275
, interpreting the expression “first statement
on the substance of the dispute”, this Court has held as
under: -
“36. The expression “first statement on the
substance of the dispute” contained in Section 8(1)
of the 1996 Act must be contradistinguished with
the expression “written statement”. It employs
submission of the party to the jurisdiction of the
judicial authority. What is, therefore, needed is a
finding on the part of the judicial authority that the
party has waived its right to invoke the arbitration
clause. If an application is filed before actually
filing the first statement on the substance of the
dispute, in our opinion, the party cannot be said to
have waived its right or acquiesced itself to the
jurisdiction of the court. What is, therefore,
material is as to whether the petitioner has filed his
first statement on the substance of the dispute or
not, if not, his application under Section 8 of the
1996 Act, may not be held wholly
unmaintainable…..”
9. This Court in Rashtriya Ispat Nigam Ltd. (supra)
further held as under: -
“42. Waiver of a right on the part of a defendant to
the lis must be gathered from the fact situation
obtained in each case. In the instant case, the
court had already passed an ad interim ex parte
injunction. The appellants were bound to respond
to the notice issued by the Court. While doing so,
they raised a specific plea of bar of the suit in view
of the existence of an arbitration agreement. Having
regard to the provisions of the Act, they had, thus,
shown their unequivocal intention to question the
maintainability of the suit on the aforementioned
ground.”
In view of the law laid down by this Court, as above, we
find it difficult to agree with the High Court that in the present
case merely moving an application seeking further time of
eight weeks to file the written statement would amount to
making first statement on the substance of the dispute. In
our opinion, filing of an application without reply to the
allegations of the plaint does not constitute first statement on
the substance of the dispute. It does not appear from the
language of sub-section (1) of Section 8 of the 1996 Act that
the Legislature intended to include such a step like moving
simple application of seeking extension of time to file written
statement as first statement on the substance of the dispute.
Therefore, in the facts and circumstances of the present case,
as already narrated above, we are unable to hold that the
appellant, by moving an application for extension of time of
eight weeks to file written statement, has waived right to object
to the jurisdiction of judicial authority.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 12066 OF 2016
(Arising out of S.L.P. (C) No. 34016 of 2015)
Greaves Cotton Limited
V
United Machinery and Appliances
Dated:December 14, 2016.
Citation:(2017) 2 SCC 268
2. This appeal is directed against order dated 16.09.2015,
passed by the High Court of Judicature at Calcutta in GA No.
2998 of 2015 (in CS No. 2 of 2015), whereby said Court has
rejected the application moved under Section 5 read with
Section 8 of the Arbitration and Conciliation Act, 1996, to get
the dispute referred to arbitral tribunal.
3. Brief facts of the case are that appellant Greaves Cotton
are manufacturers of, inter alia, diesel engines. Respondent
United Machinery and Appliances are manufacturers of diesel
generator sets. An agreement containing arbitration clause
was executed between them for supply of diesel engines by the
appellant to the respondent for using the same in the diesel
gensets. Arbitration clause contained in Article 10.1 of
agreement dated 02.07.2007 (copy Annexure P-1) reads as
under: -
“10.1 Any dispute or difference whatsoever
arising between the parties out of or relating to the
construction, meaning, scope, operation or effect of
this Agreement or the validity or the breach thereof
shall be referred to a Sole Arbitrator to be appointed
by Greaves. The decision of the Arbitrator shall be
final and binding upon the parties. The venue of
arbitration shall be Mumbai. The arbitration
proceedings shall, in all other aspects, be governed
by the provisions of the Arbitration and Conciliation
Act, 1996 or any subsequent statutory enactment in
place thereof.”
The plaintiff-respondent filed civil suit (CS No. 2 of 2015)
seeking decree for an amount of Rs.4,92,76,854/- towards the
loss and damages suffered by it on account of alleged breach
of contract on the part of defendant-appellant. The High
Court, in its original side, issued summons in the suit on
06.01.2015 to the appellant. On the other hand, the appellant
sent communication to the respondent claiming that it was the
respondent who has to pay outstanding dues of
Rs.1,04,53,103/- to the appellant. The appellant, in response
to the summons, on 07.07.2015 moved an application (copy
Annexure P-6) before the High Court seeking extension of time
for eight weeks to file written statement and invoked the
arbitration clause contained in the agreement dated
02.07.2007 by sending a letter dated 08.07.2015 (copy
Annexure P-7) to the respondent, in response to which, vide
communication dated 13.07.2015 (copy Annexure P-7), it
denied the claim of the appellant, and objected to invocation of
arbitration clause on the ground of pendency of civil suit
before the High Court. Thereafter, the appellant moved
Application GA No. 2998 of 2015 (copy Annexure P-10) under
Section 5 read with Section 8 of the Arbitration and
Conciliation Act, 1996 (for short “the 1996 Act”), in the suit
seeking reference of the disputes between the parties forming
the subject-matter of the suit, for arbitration, which is rejected
by the High Court on the ground that the appellant has, by
moving application for extension of time to file written
statement, waived its right to seek arbitration. Hence, this
appeal through special leave.
4. We have heard learned counsel for the parties.
5. Before further discussion, it is just and proper to refer to
relevant provisions of law applicable to the case. Section 5 of
the 1996 Act provides that notwithstanding anything
contained in any other law for the time being in force, in
matters governed by Part I, no judicial authority shall
intervene except where so provided in the said Part of the Act.
Sub-section (1) of Section 8 of the 1996 Act, as it existed prior
to 23.10.2015, provided that a judicial authority before which
an action is brought in a matter which is the subject of an
arbitration shall, if a party so applies not later than when
submitting his first statement on the substance of the dispute,
refer the parties to arbitration.
6. The issue before us for consideration is whether filing of
an application for extension of time to file written statement
before a judicial authority constitutes – ‘submitting first
statement on the substance of the dispute’ or not.
7. For appreciating the intention of the Legislature, it is
necessary for us to examine the change in law brought about
by the 1996 Act. In Manna Lal Kedia and ors. v. State of
Bihar and ors.1
, comparing the provisions contained in
Section 34 of the Arbitration Act, 1940 and Section 8 of the
1996 Act, High Court of Patna has opined as follows: -
“10. In terms of the Section 34 of the old Act a
party was required to apply for reference of the
dispute to the arbitrator before filing written
statement or taking any other step in the
proceeding. The words “or taking any other step”
were interpreted to include even application for
adjournment, for filing written statement. This
obviously created anomalies, not only frustrating
the objects of arbitration but also resulting in
injustice in many cases. In order to bring about
change in this regard in the New Act in Section 8
(1), provision has been made to the effect that the
party intending to go in for arbitration must do so in
his “first statement on the substance of the dispute”
and not later than that. In other words, only if in
the first statement on the substance of the dispute
he does not make such prayer that he is debarred
from making that prayer later. Section 8(1) of the
New Act is, thus, an Improvement upon the
provisions of Section 34 of the old Act…….”
1 AIR 2000 Pat 91
8. In Rashtriya Ispat Nigam Ltd. and another v. Verma
Transport Co.2
, interpreting the expression “first statement
on the substance of the dispute”, this Court has held as
under: -
“36. The expression “first statement on the
substance of the dispute” contained in Section 8(1)
of the 1996 Act must be contradistinguished with
the expression “written statement”. It employs
submission of the party to the jurisdiction of the
judicial authority. What is, therefore, needed is a
finding on the part of the judicial authority that the
party has waived its right to invoke the arbitration
clause. If an application is filed before actually
filing the first statement on the substance of the
dispute, in our opinion, the party cannot be said to
have waived its right or acquiesced itself to the
jurisdiction of the court. What is, therefore,
material is as to whether the petitioner has filed his
first statement on the substance of the dispute or
not, if not, his application under Section 8 of the
1996 Act, may not be held wholly
unmaintainable…..”
9. This Court in Rashtriya Ispat Nigam Ltd. (supra)
further held as under: -
“42. Waiver of a right on the part of a defendant to
the lis must be gathered from the fact situation
obtained in each case. In the instant case, the
court had already passed an ad interim ex parte
injunction. The appellants were bound to respond
to the notice issued by the Court. While doing so,
they raised a specific plea of bar of the suit in view
2
(2006) 7 SCC 275
of the existence of an arbitration agreement. Having
regard to the provisions of the Act, they had, thus,
shown their unequivocal intention to question the
maintainability of the suit on the aforementioned
ground.”
10. In Booz Allen and Hamilton Inc. v. SBI Homes
Finance Limited and others3
, while dealing with the
question, this Court, in paragraph 19 of the judgment, has
laid down the law on the similar issue as under: -
“19. Where a suit is filed by one of the parties to an
arbitration agreement against the other parties to
the arbitration agreement, and if the defendants file
an application under Section 8 stating that the
parties should be referred to arbitration, the court
(judicial authority) will have to decide:
(i) whether there is an arbitration agreement
among the parties;
(ii) whether all the parties to the suit are
parties to the arbitration agreement;
(iii) whether the disputes which are the
subject-matter of the suit fall within the scope
of arbitration agreement;
(iv) whether the defendant had applied under
Section 8 of the Act before submitting his first
statement on the substance of the dispute;
and
3
(2011) 5 SCC 532
(v) whether the reliefs sought in the suit are
those that can be adjudicated and granted in
an arbitration.”
11. This Court in Booz Allen and Hamilton Inc. (supra),
has further observed in paragraph 25 as under: -
“25. Not only filing of the written statement in a
suit, but filing of any statement, application,
affidavit by a defendant prior to the filing of the
written statement will be construed as “submission
of a statement on the substance of the dispute”, if
by filing such statement/application/affidavit, the
defendant shows his intention to submit himself to
the jurisdiction of the court and waives his right to
seek reference to arbitration. But filing of a reply by
a defendant, to an application for temporary
injunction/attachment before judgment/
appointment of Receiver, cannot be considered as
submission of a statement on the substance of the
dispute, as that is done to avoid an interim order
being made against him.”
12. In view of the law laid down by this Court, as above, we
find it difficult to agree with the High Court that in the present
case merely moving an application seeking further time of
eight weeks to file the written statement would amount to
making first statement on the substance of the dispute. In
our opinion, filing of an application without reply to the
allegations of the plaint does not constitute first statement on
the substance of the dispute. It does not appear from the
language of sub-section (1) of Section 8 of the 1996 Act that
the Legislature intended to include such a step like moving
simple application of seeking extension of time to file written
statement as first statement on the substance of the dispute.
Therefore, in the facts and circumstances of the present case,
as already narrated above, we are unable to hold that the
appellant, by moving an application for extension of time of
eight weeks to file written statement, has waived right to object
to the jurisdiction of judicial authority.
13. From the order impugned, it also reflects that before
disposing of application under Section 8 of the 1996 Act the
High Court has not looked into questions as to whether there
is an agreement between the parties; whether disputes which
are subject-matter of the suit fall within the scope of
arbitration; and whether the reliefs sought in the suit are
those that can be adjudicated and granted in arbitration. In
view of the above, we think it just and proper to request the
High Court to decide the application afresh in the light of law
laid down by this Court in para 19 of the judgment in Booz
Allen and Hamilton Inc. v. SBI Homes Finance Limited
and others (supra) except the point, which has already been
answered in the present case by us.
14. Accordingly the appeal is allowed. The impugned order,
passed by the High Court is set aside. The High Court is
requested to decide the application (GA No. 2998 of 2015 in
CS No. 2 of 2015) in the light of observation, as above. No
order as to costs.
……………….....…………J.
[J. Chelameswar]
.……………….……………J.
New Delhi; [Prafulla C. Pant]
December 14, 2016.
an application for extension of time to file written statement
before a judicial authority constitutes – ‘submitting first
statement on the substance of the dispute’ or not.
In Rashtriya Ispat Nigam Ltd. and another v. Verma
Transport Co.(2006) 7 SCC 275
, interpreting the expression “first statement
on the substance of the dispute”, this Court has held as
under: -
“36. The expression “first statement on the
substance of the dispute” contained in Section 8(1)
of the 1996 Act must be contradistinguished with
the expression “written statement”. It employs
submission of the party to the jurisdiction of the
judicial authority. What is, therefore, needed is a
finding on the part of the judicial authority that the
party has waived its right to invoke the arbitration
clause. If an application is filed before actually
filing the first statement on the substance of the
dispute, in our opinion, the party cannot be said to
have waived its right or acquiesced itself to the
jurisdiction of the court. What is, therefore,
material is as to whether the petitioner has filed his
first statement on the substance of the dispute or
not, if not, his application under Section 8 of the
1996 Act, may not be held wholly
unmaintainable…..”
9. This Court in Rashtriya Ispat Nigam Ltd. (supra)
further held as under: -
“42. Waiver of a right on the part of a defendant to
the lis must be gathered from the fact situation
obtained in each case. In the instant case, the
court had already passed an ad interim ex parte
injunction. The appellants were bound to respond
to the notice issued by the Court. While doing so,
they raised a specific plea of bar of the suit in view
of the existence of an arbitration agreement. Having
regard to the provisions of the Act, they had, thus,
shown their unequivocal intention to question the
maintainability of the suit on the aforementioned
ground.”
In view of the law laid down by this Court, as above, we
find it difficult to agree with the High Court that in the present
case merely moving an application seeking further time of
eight weeks to file the written statement would amount to
making first statement on the substance of the dispute. In
our opinion, filing of an application without reply to the
allegations of the plaint does not constitute first statement on
the substance of the dispute. It does not appear from the
language of sub-section (1) of Section 8 of the 1996 Act that
the Legislature intended to include such a step like moving
simple application of seeking extension of time to file written
statement as first statement on the substance of the dispute.
Therefore, in the facts and circumstances of the present case,
as already narrated above, we are unable to hold that the
appellant, by moving an application for extension of time of
eight weeks to file written statement, has waived right to object
to the jurisdiction of judicial authority.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 12066 OF 2016
(Arising out of S.L.P. (C) No. 34016 of 2015)
Greaves Cotton Limited
V
United Machinery and Appliances
Dated:December 14, 2016.
Citation:(2017) 2 SCC 268
2. This appeal is directed against order dated 16.09.2015,
passed by the High Court of Judicature at Calcutta in GA No.
2998 of 2015 (in CS No. 2 of 2015), whereby said Court has
rejected the application moved under Section 5 read with
Section 8 of the Arbitration and Conciliation Act, 1996, to get
the dispute referred to arbitral tribunal.
3. Brief facts of the case are that appellant Greaves Cotton
are manufacturers of, inter alia, diesel engines. Respondent
United Machinery and Appliances are manufacturers of diesel
generator sets. An agreement containing arbitration clause
was executed between them for supply of diesel engines by the
appellant to the respondent for using the same in the diesel
gensets. Arbitration clause contained in Article 10.1 of
agreement dated 02.07.2007 (copy Annexure P-1) reads as
under: -
“10.1 Any dispute or difference whatsoever
arising between the parties out of or relating to the
construction, meaning, scope, operation or effect of
this Agreement or the validity or the breach thereof
shall be referred to a Sole Arbitrator to be appointed
by Greaves. The decision of the Arbitrator shall be
final and binding upon the parties. The venue of
arbitration shall be Mumbai. The arbitration
proceedings shall, in all other aspects, be governed
by the provisions of the Arbitration and Conciliation
Act, 1996 or any subsequent statutory enactment in
place thereof.”
The plaintiff-respondent filed civil suit (CS No. 2 of 2015)
seeking decree for an amount of Rs.4,92,76,854/- towards the
loss and damages suffered by it on account of alleged breach
of contract on the part of defendant-appellant. The High
Court, in its original side, issued summons in the suit on
06.01.2015 to the appellant. On the other hand, the appellant
sent communication to the respondent claiming that it was the
respondent who has to pay outstanding dues of
Rs.1,04,53,103/- to the appellant. The appellant, in response
to the summons, on 07.07.2015 moved an application (copy
Annexure P-6) before the High Court seeking extension of time
for eight weeks to file written statement and invoked the
arbitration clause contained in the agreement dated
02.07.2007 by sending a letter dated 08.07.2015 (copy
Annexure P-7) to the respondent, in response to which, vide
communication dated 13.07.2015 (copy Annexure P-7), it
denied the claim of the appellant, and objected to invocation of
arbitration clause on the ground of pendency of civil suit
before the High Court. Thereafter, the appellant moved
Application GA No. 2998 of 2015 (copy Annexure P-10) under
Section 5 read with Section 8 of the Arbitration and
Conciliation Act, 1996 (for short “the 1996 Act”), in the suit
seeking reference of the disputes between the parties forming
the subject-matter of the suit, for arbitration, which is rejected
by the High Court on the ground that the appellant has, by
moving application for extension of time to file written
statement, waived its right to seek arbitration. Hence, this
appeal through special leave.
4. We have heard learned counsel for the parties.
5. Before further discussion, it is just and proper to refer to
relevant provisions of law applicable to the case. Section 5 of
the 1996 Act provides that notwithstanding anything
contained in any other law for the time being in force, in
matters governed by Part I, no judicial authority shall
intervene except where so provided in the said Part of the Act.
Sub-section (1) of Section 8 of the 1996 Act, as it existed prior
to 23.10.2015, provided that a judicial authority before which
an action is brought in a matter which is the subject of an
arbitration shall, if a party so applies not later than when
submitting his first statement on the substance of the dispute,
refer the parties to arbitration.
6. The issue before us for consideration is whether filing of
an application for extension of time to file written statement
before a judicial authority constitutes – ‘submitting first
statement on the substance of the dispute’ or not.
7. For appreciating the intention of the Legislature, it is
necessary for us to examine the change in law brought about
by the 1996 Act. In Manna Lal Kedia and ors. v. State of
Bihar and ors.1
, comparing the provisions contained in
Section 34 of the Arbitration Act, 1940 and Section 8 of the
1996 Act, High Court of Patna has opined as follows: -
“10. In terms of the Section 34 of the old Act a
party was required to apply for reference of the
dispute to the arbitrator before filing written
statement or taking any other step in the
proceeding. The words “or taking any other step”
were interpreted to include even application for
adjournment, for filing written statement. This
obviously created anomalies, not only frustrating
the objects of arbitration but also resulting in
injustice in many cases. In order to bring about
change in this regard in the New Act in Section 8
(1), provision has been made to the effect that the
party intending to go in for arbitration must do so in
his “first statement on the substance of the dispute”
and not later than that. In other words, only if in
the first statement on the substance of the dispute
he does not make such prayer that he is debarred
from making that prayer later. Section 8(1) of the
New Act is, thus, an Improvement upon the
provisions of Section 34 of the old Act…….”
1 AIR 2000 Pat 91
8. In Rashtriya Ispat Nigam Ltd. and another v. Verma
Transport Co.2
, interpreting the expression “first statement
on the substance of the dispute”, this Court has held as
under: -
“36. The expression “first statement on the
substance of the dispute” contained in Section 8(1)
of the 1996 Act must be contradistinguished with
the expression “written statement”. It employs
submission of the party to the jurisdiction of the
judicial authority. What is, therefore, needed is a
finding on the part of the judicial authority that the
party has waived its right to invoke the arbitration
clause. If an application is filed before actually
filing the first statement on the substance of the
dispute, in our opinion, the party cannot be said to
have waived its right or acquiesced itself to the
jurisdiction of the court. What is, therefore,
material is as to whether the petitioner has filed his
first statement on the substance of the dispute or
not, if not, his application under Section 8 of the
1996 Act, may not be held wholly
unmaintainable…..”
9. This Court in Rashtriya Ispat Nigam Ltd. (supra)
further held as under: -
“42. Waiver of a right on the part of a defendant to
the lis must be gathered from the fact situation
obtained in each case. In the instant case, the
court had already passed an ad interim ex parte
injunction. The appellants were bound to respond
to the notice issued by the Court. While doing so,
they raised a specific plea of bar of the suit in view
2
(2006) 7 SCC 275
of the existence of an arbitration agreement. Having
regard to the provisions of the Act, they had, thus,
shown their unequivocal intention to question the
maintainability of the suit on the aforementioned
ground.”
10. In Booz Allen and Hamilton Inc. v. SBI Homes
Finance Limited and others3
, while dealing with the
question, this Court, in paragraph 19 of the judgment, has
laid down the law on the similar issue as under: -
“19. Where a suit is filed by one of the parties to an
arbitration agreement against the other parties to
the arbitration agreement, and if the defendants file
an application under Section 8 stating that the
parties should be referred to arbitration, the court
(judicial authority) will have to decide:
(i) whether there is an arbitration agreement
among the parties;
(ii) whether all the parties to the suit are
parties to the arbitration agreement;
(iii) whether the disputes which are the
subject-matter of the suit fall within the scope
of arbitration agreement;
(iv) whether the defendant had applied under
Section 8 of the Act before submitting his first
statement on the substance of the dispute;
and
3
(2011) 5 SCC 532
(v) whether the reliefs sought in the suit are
those that can be adjudicated and granted in
an arbitration.”
11. This Court in Booz Allen and Hamilton Inc. (supra),
has further observed in paragraph 25 as under: -
“25. Not only filing of the written statement in a
suit, but filing of any statement, application,
affidavit by a defendant prior to the filing of the
written statement will be construed as “submission
of a statement on the substance of the dispute”, if
by filing such statement/application/affidavit, the
defendant shows his intention to submit himself to
the jurisdiction of the court and waives his right to
seek reference to arbitration. But filing of a reply by
a defendant, to an application for temporary
injunction/attachment before judgment/
appointment of Receiver, cannot be considered as
submission of a statement on the substance of the
dispute, as that is done to avoid an interim order
being made against him.”
12. In view of the law laid down by this Court, as above, we
find it difficult to agree with the High Court that in the present
case merely moving an application seeking further time of
eight weeks to file the written statement would amount to
making first statement on the substance of the dispute. In
our opinion, filing of an application without reply to the
allegations of the plaint does not constitute first statement on
the substance of the dispute. It does not appear from the
language of sub-section (1) of Section 8 of the 1996 Act that
the Legislature intended to include such a step like moving
simple application of seeking extension of time to file written
statement as first statement on the substance of the dispute.
Therefore, in the facts and circumstances of the present case,
as already narrated above, we are unable to hold that the
appellant, by moving an application for extension of time of
eight weeks to file written statement, has waived right to object
to the jurisdiction of judicial authority.
13. From the order impugned, it also reflects that before
disposing of application under Section 8 of the 1996 Act the
High Court has not looked into questions as to whether there
is an agreement between the parties; whether disputes which
are subject-matter of the suit fall within the scope of
arbitration; and whether the reliefs sought in the suit are
those that can be adjudicated and granted in arbitration. In
view of the above, we think it just and proper to request the
High Court to decide the application afresh in the light of law
laid down by this Court in para 19 of the judgment in Booz
Allen and Hamilton Inc. v. SBI Homes Finance Limited
and others (supra) except the point, which has already been
answered in the present case by us.
14. Accordingly the appeal is allowed. The impugned order,
passed by the High Court is set aside. The High Court is
requested to decide the application (GA No. 2998 of 2015 in
CS No. 2 of 2015) in the light of observation, as above. No
order as to costs.
……………….....…………J.
[J. Chelameswar]
.……………….……………J.
New Delhi; [Prafulla C. Pant]
December 14, 2016.
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