section 8 of the Arbitration Act for supplemental and incidental proceedings
including passing of interlocutory orders, there is no jurisdictional bar to
pass orders and directions. There is nothing to show that miscellaneous and
incidental proceedings cannot go on before the court.
29. Even a reading of section 5 and section 8 of the Arbitration Act does
not show that on a mere filing of an application under section 8 of the
arbitration act the court loses its jurisdiction to pass any further orders either
in the main proceedings or in the supplementary or incidental proceedings in
the said suit. No such interpretation can follow from a reading of section 5
and section 8 of the arbitration act.
IN THE HIGH COURT OF DELHI AT NEW DELHI
Pronounced on: 21.05.2018
CO.A(SB) 26/2008
MR. DEEPAK KHOSLA Vs UNION OF INDIA & ORS.
CORAM:
HON’BLE MR. JUSTICE JAYANT NATH
seeking to quash/strike down and/or declaring null & void and void ab initio
all the orders passed by the Company Law Board (herein referred to as
“CLB”) in Co. Pet. 114/2007 between 20.10.2008 and after 31.08.2007 as
being coram non judice.
2. The genesis of the present appeal relates to a land in Kasauli, Dist.
Solan, Himachal Pradesh. The land was owned by the appellant/family of
the appellant/respondent No.3. Some of the persons being part of the
Appellant Group entered into an MOU dated 21.12.2005 with Mr.Vikram
Bakshi. The project was a joint venture between the Appellant Group and
Bakshi Group. There was to be some transfer of share holding in favour of
Bakshi Group. Pursuant to the MOU, Mr.Vinod Surha and Mr.Wadia
Prakash, nominees of Mr.Vikram Bakshi were appointed as additional
directors of respondent No. 3 Company.
3. Disputes arose between the parties. Mrs. Sonia Khosla wife of the
appellant filed a petition under Sections 397 and 398 of the Companies Act,
1956 before the Company Law Board (CLB). The allegation of Mrs.Sonia
Khosla in the petition was that she held 49% shares in the Company which
have been reduced to 36% and that the affairs of the Company were being
managed in a manner being oppressive to the minority shareholders.
4. There are events that arose thereafter. According, to the appellant, Mr.
Wadia Prakash and Mr.Vinod Surha ceased to be directors of the Company
on 30.09.2006. Further, on 18.12.2007 in a purported meeting of the
Company held Mr. Deepak Khosla and Mr. R.K. Garg were appointed as
directors of the Company and the Board allotted 6.58 lakhs equity shares to
11 persons being part of the Appellant Group. The Bakshi Group of course
have stated that the alleged meeting of 18.12.2007 was illegal.
5. The CLB vide its order dated 31.01.2008 where the matter was
pending directed the parties to maintain status quo with regard to the
shareholdings and the directors of the Company as it existed on the date of
filing of the petition i.e. 13.08.2007.
6. Three appeals have been filed against the said order dated 31.01.2008
before this Court. Mr. R.P.Khosla, father of the appellant herein filed an
appeal being Co. A. (SB) No. 7/2008. This appeal was disposed of by order
dated 11.04.2008. The appeal was disposed of noting that both the parties
agree that Mrs.Sonia Khosla will withdraw Co. Pet. 114/2007 because the
arbitration clause had already been invoked. Both the parties therein agreed
that they shall maintain status quo with regard to the shareholdings and the
fixed assets of the respondent Company as it stood at the time of filing of the
petition before the CLB. Other directions were also agreed upon. The
submission of the learned counsel appearing for the Bakshi Group was noted
that they shall not oppose withdrawal of the company petition pending
before the CLB. It was also agreed that the functioning of respondent No. 3
Company shall be subject to orders to be passed by the Arbitral Tribunal.
Another appeal was filed by Mrs.Sonia Khosla being Co. Appeal (SB)
No. 6/2008. This was disposed of on 22.04.2008. This court noted that as the
matter is sub-judice before a panel of arbitrators, it would be appropriate that
the parties maintain status quo with regard to the composition of the Board
and shareholdings as it existed on the date of filing of petition by Mrs.Sonia
Khosla before the CLB i.e. 13.08.2007.
Mrs.Sonia Khosla filed a review against the order of this court dated
22.04.2008. This court on 06.05.2008 dismissed the said review petition
noting that the order was dictated in the presence of the counsel for both the
parties. Similarly, Mr. R.P.Khosla filed a review petition which was
dismissed as withdrawn on 06.05.2018. The appellant herein moved an
application being Co. Appl. 487/2008 in Co. Appeal No.7/2008. This court
on the said date i.e. 06.05.2008 noted the contention of the appellant that the
order disposing of the appeal dated 11.04.2008 should not bind the
appellant. This court took the said submission on record with liberty to the
appellant to take appropriate remedy as available to him in law.
7. The third appeal was filed by Mr.R.K. Garg who claimed that he was
prejudiced by the order of the CLB dated 31.01.2008 as he had been
removed as a director without a hearing. This company appeal being Co.
A(SB) 23/2009 came up for hearing on 13.04.2010 when this court issued
notice in the appeal and the application for condonation of delay and ordered
that the operation of the impugned order dated 31.01.2008 as far as it
cancels the shareholdings of the appellant and his directorship shall remain
stayed.
8. Against the said order dated 13.04.2010 and some other orders, an
SLP being SLP No. 23796-98/2010 was filed by Mr. Vikram Bakshi before
the Supreme Court. The SLP was disposed of by order dated 08.05.2014
with the directions to the CLB to decide Co. Pet. 114/2007 filed by Mrs.
Sonia Khosla within a period of six months. The CLB was also directed to
decide the application filed under Section 340 Cr.P.C. filed by Mrs. Sonia
Khosla. Similarly, the question as to whether Sh. R.K. Garg was validly
inducted as a director or not was to be gone into by the CLB and the
proceedings in the company appeal i.e. Co. Appeal (SB) No. 23/2009 filed
by Mr. R.K. Garg in the High Court were held to be otiose.
9. The present appeal is also emanating from the Company Petition No.
114/2007 that was filed by Mrs. Sonia Khosla. This appeal has been filed on
11.11.2008. It has been pleaded that there are two principal grounds on
which relief has been sought to declare null and void all the orders passed by
CLB in Co. Pet. 114/2007 between 20.10.2008 and after 31.08.2007. The
first ground is said to be lack of subject matter jurisdiction in relation to all
the orders passed after 31.08.2007 that being the date when notice was
issued on the application under Section 8 of Arbitration and Conciliation Act
filed by the Bakshi Group. The second ground urged is that there is a fraud
inasmuch as the order dated 31.01.2008 was passed despite patently false
averments contained in para 7 of Co.Application 1/2008 filed on
01.01.2008.
10. Regarding the first ground it has been strongly urged that on
31.08.2007 after verifying existence of an arbitration clause in the
agreement dated 31.03.2006, notice was issued in the application filed under
Section 8 of Arbitration Act filed by Mr.Vikram Bakshi which was prima
facie a judicial recognition of the merit of the said application and secondly
lack of jurisdiction of the CLB to deal with the matter. It is stated that
despite issue of notice on the said application under Section 8 of the
Arbitration Act on 31.08.2007, no decision was taken by the CLB on the
question of its jurisdiction and yet the CLB continued to pass orders after
orders. Reliance is placed on the judgment of the Madhya Pradesh High
court in State of M.P. vs. Harsh Mood Products Pvt. Gwalior Ltd, AIR
(1989) NOC 13 (MP) to contend that CLB had no jurisdiction to pass the
orders after 31.08.2007. It has also been pleaded that though the appellant
attended the hearings after 31.08.2007 but he has at no stage given a waiver
to his plea that unless the application under Section 8 of the Arbitration Act
application is decided by the CLB, it has no jurisdiction to pass any order till
date. It is further urged that if ever there is any waiver or acquiescence on
the part of the appellant, it is settled law that no waiver or consent can
confer jurisdiction on a court which inherently lacks it. An order passed
without jurisdiction is a nullity and void ab initio. Reliance is also placed on
the orders passed by the CLB dated 20.10.2008, 28.07.2008 where it is
pleaded that the Board has itself admitted that it does not have jurisdiction to
pass orders on any matters because the application under Section 8 of the
Arbitration Act is pending.
11. I have heard the appellant in person and learned counsel appearing for
the respondent. The appellant has made various submissions. However, the
broad contentions which can be culled out from his submissions are as
follows:-
(i) He submits that in view of the fact that Mr. Vikram Bakshi had
moved an application under Section 8 of the Arbitration Act on 31.08.2007,
the CLB ceased to have any jurisdiction to pass any further orders
subsequently till it first settles the fundamental issue of its own jurisdiction.
As it failed to do so all other orders passed subsequent to 31.08.2007 till
20.10.2008 are void ab initio and non-est. It is further pleaded that lack of
jurisdiction by the CLB is further proved by the orders passed by CLB itself
on 20.10.2008 and 28.07.2008 where the CLB has itself conceded that it
does not have jurisdiction to pass any orders.
(ii) It is pleaded that the appellant need not seek any declaration that the
said orders are void ab initio as they are deemed to be a nullity. Reliance is
placed on the judgment of the Supreme Court in Nawabkhan Abbaskhan vs
State of Gujarat, (1974) 2 SCC 121 to support the said contention.
(iii) It is further pleaded that this court may not go into the issue of
limitation at this stage. Reliance is placed on the orders passed by this court
on 13.04.2010 in Co. Appeal(SB) 23/2009 titled as “R.K. Garg vs. Union of
India” where Mr. R.K. Garg had filed an appeal against the order dated
31.01.2008 of the CLB. This Court had concluded that the contentions
raised in the appeal need to be gone into and issued notice in the appeal and
the application for condonation of delay and also passed interim orders. The
appellant submits that the said order binds this court being a judgment of a
Co-ordinate Bench. This Court is also bound to hear the matter.
12. I may note that in the written submissions that have been filed by
Mr.Deepak Khosla on 29.11.2017, he has submitted that judgment only on a
preliminary point has been reserved by this court on 20.11.2017, namely, as
to whether the appeal is barred by limitation. I may note that the submission
is incorrect as arguments have been heard in full. In fact, a perusal of the
written submissions itself shows that extensive averments have been made
on the merits of the appeal itself.
13. Learned Counsel appearing for the respondent has submitted as
follows:-
(i) That the basic object of this appeal is to challenge the order dated
31.01.2008.
(ii) That the present appeal is filed on 11.11.2008 and the same is hence
barred by limitation being beyond the period of 60+60 days and hence, is
liable to be dismissed at the outset. Learned counsel has relied upon the
judgment of the Punjab and Haryana High Court in Pawan Goel vs. KMG
Milk Food Ltd. & Ors., (2008) 142 Comp. Cas.441(P&H). The said High
Court had held that the limitation period prescribed under Section 10 F of
the Companies Act does not permit any further extension and Section 5 of
the Limitation Act would have no application. It has been pointed out that
the above judgment was confirmed by the Supreme Court in SLP(C) No.
17522/2008 dated 16.04.2010.
(iii) It is further stated that the entire gamut of facts was dealt with by the
Supreme Court in its judgment dated 08.05.2014 in SLP (Crl.) 6873/2010
and SLP (C) No.23796-23798/2010. The Court had held that the appeal
being Co. Appl.(SB) 23/2009 filed by Sh. R.K. Garg had become otiose.
The Court further directed the parties to maintain status quo and hence,
reiterated the order dated 31.01.2008. Hence, it is pleaded that the present
petition is misplaced.
14. I may first look at the judgment of the Supreme Court dated
08.05.2014. As already noted above, one of the orders that was challenged
in the Supreme Court was the order dated 13.04.2010 passed by this Court in
Co. Appeal(SB) 23/2009 which appeal was filed by Mr.R.K.Garg. This
appeal being Co. Appeal (SB) 23/2009 arose from the orders of the CLB
dated 31.01.2008 whereby the CLB had directed status quo with regard to
shareholdings and directors as it existed on the date of filing of the Co. Pet.
i.e. 13.08.2007.
15. As noted above, two other appeals had already been filed before this
court against the order dated 31.01.2008 of the CLB, namely, the first appeal
was filed by Mr.R.P. Khosla, father of the appellant being Co.Appeal (SB)
7/2008 which was disposed of on 11.04.2008. Mrs. Sonia Khosla also filed
an appeal being Co. Appeal (SB) No. 6/2008 which was disposed of by this
Court on 22.04.2008. The review petitions filed by both Mr. R.P. Khosla
and Mrs.Sonia Khosla were also dismissed/disposed off on 06.05.2008.
16. Noting these gamut of facts and the background of the dispute, the
Supreme Court disposed of the SLPs noting as follows:
“23. After considering the matter, we are of the opinion that it is
not necessary to either enforce orders dated 31.1.2008 passed by the
CLB or orders dated 11.4.2008 passed by the High Court. Fact
remains that there has been a complete deadlock, as far as affairs of
the Company are concerned. The project has not taken off. It is
almost dead at present. Unless the parties re-concile, there is no
chance for a joint venture i.e. to develop the resort, as per the MOU
dated 21.12.2005. It is only after the decision of CLB, whereby the
respective rights of the parties are crystallised, it would be possible
to know about the future of this project. Even the Company in
question is also defunct at present as it has no other business
activity or venture. In a situation like this, we are of the opinion that
more appropriate orders would be to direct the parties to maintain
status quo in the meantime, during the pendency of the aforesaid
company petition before the CLB. However, we make it clear that if
any exigency arises necessitating some interim orders, it would be
open to the parties to approach the CLB for appropriate directions.”
17. I may note that the appellant was a party to the said Special Leave
Petition being arrayed as respondent no. 9. When the matter was heard by
the Supreme Court, this appeal was pending in this court. However, before
the Supreme Court, the appellant does not appear to have put forth any
proposition or argument that the order of CLB that was under challenge,
namely, the order dated 31.08.2008 and other orders were void ab initio on
account of the fact that when the orders were passed, an application under
Section 8 of Arbitration Act was pending adjudication before CLB. Keeping
in view the fact that the Supreme Court has considered the entire gamut of
facts and disputes and passed the directions, in my opinion the appeal of the
appellant herein seeking to challenge the various orders passed by the CLB
including order dated 31.01.2008 has become redundant. The directions
passed by the Supreme Court on 08.05.2014 would apply to the disputes
raised herein. The said order would override the orders of the CLB
challenged on the stated ground by the appellant. The present appeal is
hence infructuous.
18. However, I may also deal with the submissions raised by the
appellant. The appellant challenges the orders from 31.08.2007 to
20.10.2008. On 20.10.2008 CLB had adjourned the matter sine die. It has
been pleaded by the appellant that all the orders passed by the CLB after
31.08.2007 till 20.10.2008 are void ab initio. The present appeal has been
filed on 11.11.2008. Section 10F of the Companies Act, 1956 reads as
follows:
“10.F. Appeals against the order of the Company Law
Board.-Any person aggrieved by any decision or order of the
Company Law Board may file an appeal to the High Court within
sixty days from the date of communication of the decision or
order of the Company Law Board to him on any question of law
arising out of such order:
Provided that the High Court may, if it is satisfied that the
appellant was prevented by sufficient cause from filing the
appeal within the said period, allow it to be filed within a further
period not exceeding sixty days.]”
As per the above provision, an appeal can be filed within 60 days from the
date of the communication of the order. Condonation of delay up to another
maximum period of 60 days is permissible on showing sufficient cause.
Hence, no appeal can lie against an order of the Company Law Board to this
court under Section 10F of the Companies Act after 120 days.
19. I may note that this court on 19.12.2008 had noted the submission of
the appellant in person that he only assails the order dated 31.01.2008
passed by the CLB and that the appeal has been filed only on or around
04.11.2008 beyond the statutory period of limitation. The court also noted
his submission that the appellant rests his challenge on the ground of lack of
inherent jurisdiction and competence of the CLB to pass the impugned order
and hence, the present appeal, even if it is beyond the period of limitation
would not be barred.
20. Clearly, it follows from the order dated 9.12.2008 that the appellant
has confined this present appeal to the challenge of order dated 31.1.2008
passed by the CLB. As the present appeal is filed on 11.11.2008, the appeal
is clearly barred by limitation. In this context, reference may be had to the
judgment of Punjab & Haryana High Court in Pawan Goel vs. KMG Milk
Food Ltd. & Ors. (supra) which referred the judgment of the Supreme
Court in Gopal Sardar v. Karuna Sardar: (2004) 4 SCC 252 and concluded
that the maximum period available to the appellant for preferring an appeal
to this Court under section 10F of the Companies Act is sixty+sixty days i.e.
120 days, subject to the condition that the appellant has shown sufficient
cause for condonation up to sixty days beyond the prescribed period of sixty
days. The provisions of Sections 4 to 24 of the Limitation Act were said to
have no application. The relevant portion of the said judgment reads as
follows:-
“30. From the dictum of the aforesaid judgments, it is
abundantly clear that where particular statute does not apply to
Section 5 of the Limitation Act expressly or even impliedly in a
special or local law itself, it shall be presumed that the
exclusion is express. Section 29(2) of the Act not only excludes
the application of Section 5 of the Limitation Act but also other
sections from Sections 4 to 24 (inclusive). Thus, Section 14 also
stands excluded from its application for purposes of either
condoning the delay or exclusion of the period on the ground
envisaged therein notwithstanding existence of sufficient cause.
Thus, even if the period spent before the Hon'ble Delhi High
Court constitutes sufficient cause for extension of period under
Section 5 read with Section 14 of the Limitation Act, these
sections cannot be applied de hors proviso to Section 10F to
extend the limitation beyond sixty days in addition to the
original period of sixty days (total 120 days) for filing an appeal
as proviso to Section 10F does not permit such extension.
Applying this principle enumerated hereinabove and the
discussion, the maximum period available to the appellant for
preferring the appeal was sixty + sixty days, i.e., 120 days up to
March 24, 2007, subject to the condition that the appellant has
shown sufficient cause for condonation up to sixty days beyond
the prescribed period of sixty days. As noticed above, the initial
period of 60 days in filing the appeal under Section 10F expired
on January 23, 2007 and the extended period under the proviso
to Section 10F expired on March 24, 2007. Hence, even if the
contention of the appellant is accepted that he calculated initial
period of filing the appeal as 90 days and the part of the period
spent in the Delhi High Court is also considered to be the
sufficient cause, it cannot be extended beyond 120 days, i.e.,
March 24, 2007. The present appeal having been filed on May
16, 2007, is barred by time."
21. The above judgment was upheld by the Supreme Court in SLP(C)
17522/2008 dated 16.4.2010.
22. I may note that the appellant has submitted that this court is not to go
into the issue of limitation and is bound by the order of this court dated
13.4.2010 in Company Appeal (SB) 23/2009 titled Shri R.K.Garg vs. Union
of India. A perusal of the said order dated 13.4.2010 would show that this
court had issued notice in the appeal and on the condonation of delay
application as well as in the stay application. The court further passed
interim orders that the impugned order dated 31.01.2008 passed by the CLB
in so far as it has cancelled the shareholding of the appellant and the
directorship would remain stayed. There is no finding recorded in the said
order that the appeal can be heard and disposed of despite the fact that it was
filed beyond the period of limitation. Even otherwise, the said order of this
court dated 13.4.2010 was challenged in the Supreme Court in SLP
No.6873/2010. The Supreme Court by its judgment dated 8.5.2014 noted
that the proceedings being Company Appeal (SB) 23/2009 filed by Shri
R.K.Garg in this court has become otiose. Clearly, the order of this court
dated 13.4.2010 relied upon by the appellant is of no assistance to the
appellant and cannot read to mean that the present appeal has to be heard
even if it is barred by limitation.
23. Clearly, the present appeal is barred by limitation.
24. I may also examine the contention of the appellant that the orders in
question of CLB are void ab initio. It has been strongly contended that on
account of the pendency of the application under Section 8 of the Arbitration
Act filed by Mr. Vikram Bakshi, the entire orders between 31.0.2007 and
20.10.2008 are void ab initio.
25. Section 5 and 8 of the Arbitration Act prior to the amendment of 2015
reads as follows:-
“5. Extent of judicial intervention.—Notwithstanding anything
contained in any other law for the time being in force, in
matters governed by this Part, no judicial authority shall
intervene except where so provided in this Part.”
.....
8. Power to refer parties to arbitration where there is an
arbitration agreement.—
"(1) A judicial authority before which an action is brought in a
matter which is the subject of an arbitration agreement 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.
(2) The application referred to in sub-section (1) shall not be
entertained unless it is accompanied by the original arbitration
agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under
sub-section (1) and that the issue is pending before the judicial
authority, an arbitration may be commenced or continued and
an arbitral award made."
26. Hence, a judicial authority before which an action is brought which is
the subject matter of an arbitration agreement, the Court shall refer the
parties to arbitration. The Supreme Court in Sukanya Holdings (P) Ltd. vs.
Jayesh H.Pandya and Anr., (2003) 5 SCC 531 while interpreting Section 8
held as follows:-
"12. For interpretation of Section 8, Section 5 would have no
bearing because it only contemplates that in the matters
governed by Part I of the Act, the judicial authority shall not
intervene except where so provided in the Act. Except Section
8, there is no other provision in the Act that in a pending suit,
the dispute is required to be referred to the arbitrator. Further,
the matter is not required to be referred to the Arbitral Tribunal,
if: (1) the parties to the arbitration agreement have not filed any
such application for referring the dispute to the arbitrator; (2) in
a pending suit, such application is not filed before submitting
first statement on the substance of the dispute; or (3) such
application is not accompanied by the original arbitration
agreement or duly certified copy thereof. This would, therefore,
mean that the Arbitration Act does not oust the jurisdiction of
the civil court to decide the dispute in a case where parties to
the arbitration agreement do not take appropriate steps as
contemplated under sub-sections (1) and (2) of Section 8 of the
Act.
13. Secondly, there is no provision in the Act that when the
subject-matter of the suit includes subject-matter of the
arbitration agreement as well as other disputes, the matter is
required to be referred to arbitration. There is also no provision
for splitting the cause or parties and referring the subject-matter
of the suit to the arbitrators.
14. Thirdly, there is no provision as to what is required to be
done in a case where some parties to the suit are not parties to
the arbitration agreement. As against this, under Section 24 of
the Arbitration Act, 1940, some of the parties to a suit could
apply that the matters in difference between them be referred to
arbitration and the court may refer the same to arbitration
provided that the same can be separated from the rest of the
subject-matter of the suit. The section also provided that the suit
would continue so far as it related to parties who have not
joined in such application."
27. Similarly, in Booz Allen and Hamilton Inc. vs. SBI Home Finance
Ltd. and Ors., (2011) 5 SCC 532, the Supreme Court held as follows:-
"35. The Arbitral Tribunals are private fora chosen voluntarily
by the parties to the dispute, to adjudicate their disputes in place
of courts and tribunals which are public fora constituted under
the laws of the country. Every civil or commercial dispute,
either contractual or non-contractual, which can be decided by a
court, is in principle capable of being adjudicated and resolved
by arbitration unless the jurisdiction of the Arbitral Tribunals is
excluded either expressly or by necessary implication.
Adjudication of certain categories of proceedings are reserved
by the legislature exclusively for public fora as a matter of
public policy. Certain other categories of cases, though not
expressly reserved for adjudication by public fora (courts and
tribunals), may by necessary implication stand excluded from
the purview of private fora. Consequently, where the
cause/dispute is inarbitrable, the court where a suit is pending,
will refuse to refer the parties to arbitration, under Section 8 of
the Act, even if the parties might have agreed upon arbitration
as the forum for settlement of such disputes.
36. The well-recognised examples of non-arbitrable disputes
are: (i) disputes relating to rights and liabilities which give rise
to or arise out of criminal offences; (ii) matrimonial disputes
relating to divorce, judicial separation, restitution of conjugal
rights, child custody; (iii) guardianship matters; (iv) insolvency
and winding-up matters; (v) testamentary matters (grant of
probate, letters of administration and succession certificate);
and (vi) eviction or tenancy matters governed by special statutes
where the tenant enjoys statutory protection against eviction
and only the specified courts are conferred jurisdiction to grant
eviction or decide the disputes."
28. Similarly, in Rashtriya Ispat Nigam Ltd. & Anr. vs. Verma
Transport Co., (2006) 7 SCC 275, the Supreme Court held as follows:-
"35. This aspect of the matter was considered by this Court in
Food Corpn. of India v. Yadav Engineer & Contractor [(1982)
2 SCC 499 : (1983) 1 SCR 95] . Therein this Court opined that
interlocutory proceedings are only incidental proceedings to the
main proceedings and, thus, any step taken in the interlocutory
proceedings does not come within the purview of the main
proceedings, stating: (SCC p. 512, para 12)
“When ex parte orders are made at the back of the party
the other party is forced to come to the court to vindicate
its right. Such compulsion cannot disclose an
unambiguous intention to give up the benefit of the
arbitration agreement. Therefore, taking any other steps
in the proceedings must be confined to taking steps in the
proceedings for resolution of the substantial dispute in the
suit. Appearing and contesting the interlocutory
applications by seeking either vacation thereof or
modification thereof cannot be said to be displaying an
unambiguous intention to acquiesce in the suit and to
waive the benefit of the arbitration agreement. Any other
view would both be harsh and inequitous and contrary to
the underlying intendment of the Act. The first party
which approaches the court and seeks an ex parte interim
order has obviously come to the court in breach of the
arbitration agreement. By obtaining an ex parte order if it
forces the other party to the agreement to suffer the order,
or by merely contesting be imputed the intention of
waiving the benefit of arbitration agreement, it would
enjoy an undeserved advantage. Such could not be the
underlying purpose of Section 34. Therefore, in our
opinion, to effectuate the purpose underlying Section 34
the narrow construction of the expression „taking any
other steps in the proceedings‟ as hereinabove set out
appears to advance the object and purpose underlying
Section 34 and the purpose for which the Act was
enacted.”
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. We would deal with this question
in some detail, a little later.
xxx
38. In Janki Saran Kailash Chandra [(1973) 2 SCC 96] an
application for time to file written statement was considered to
be a step in the proceedings. We have noticed hereinbefore the
respective scope of Section 34 of the 1940 Act vis-à-vis the
scope of Section 8 of the 1996 Act. In view of the changes
brought about by the 1996 Act, we are of the opinion that what
is necessary is disclosure of the entire substance in the main
proceeding itself and not taking part in the supplemental
proceeding.
39. By opposing the prayer for interim injunction, the restriction
contained in sub-section (1) of Section 8 was not attracted.
Disclosure of a defence for the purpose of opposing a prayer for
injunction would not necessarily mean that substance of the
dispute has already been disclosed in the main proceeding.
Supplemental and incidental proceedings are not part of the
main proceeding. They are dealt with separately in the Code of
Civil Procedure itself. Section 94 of the Code of Civil
Procedure deals with supplemental proceedings. Incidental
proceedings are those which arise out of the main proceeding.
In view of the decision of this Court in Food Corpn. of
India [(1982) 2 SCC 499 : (1983) 1 SCR 95] the distinction
between the main proceeding and supplemental proceeding
must be borne in mind."
What follows from the above judgment is that once an application is
being filed under Section 8, the Court would first have to form a view as to
whether the disputes which are pending between the parties are within the
preview of the Arbitration Act and the matters which are subject matter of
proceedings where the application under Section 8 is filed are covered by
the arbitration agreement. The judicial authority has to hence first come to a
conclusion that the requirements of Section 8 have been fulfilled before
referring the parties to arbitration. Till pendency of the application under
section 8 of the Arbitration Act for supplemental and incidental proceedings
including passing of interlocutory orders, there is no jurisdictional bar to
pass orders and directions. There is nothing to show that miscellaneous and
incidental proceedings cannot go on before the court.
29. Even a reading of section 5 and section 8 of the Arbitration Act does
not show that on a mere filing of an application under section 8 of the
arbitration act the court loses its jurisdiction to pass any further orders either
in the main proceedings or in the supplementary or incidental proceedings in
the said suit. No such interpretation can follow from a reading of section 5
and section 8 of the arbitration act.
30. In fact in the present case, it is Mrs.Sonia Khosla who has moved the
petition before CLB ignoring the arbitration agreement. Interim orders were
prayed for and were granted to Mrs.Sonia Khosla. It was Mr.Vikram
Bakshi, one of the respondents who filed the application under Section 8 of
the Arbitration Act stating that there is an arbitration agreement and the
parties should resolve their disputes by the arbitration process. These
proceedings cannot be said to be non-est and void ab initio as is sought to be
argued.
31. I may note that no specific argument has been addressed as to the
nature of the proceedings that have taken place between the said two dates,
namely, 31.08.2007 to 20.10.2008. I may look at some of the orders passed
by the CLB which are sought to be assailed in the present proceedings on the
ground of being void ab initio.
25.09.2007: CLB noted that the application would be heard on
12.10.2007 and reply be filed.
26.10.2007: CLB noted that hearing on arbitration agreement
concluded and order has been reserved.
12.11.2007: CLB adjourned the matter to 26.11.2007.
26.11.2007: CLB imply noted that the compromise efforts have failed.
24.12.2007: CLB noted that an application had been mentioned by the
petitioner and stay was sought regarding the Board Meeting to be
conveyed on 26.12.2007. The application was directed to be heard on
28.02.2008. CLB directed the respondent therein to defer the Board
Meeting till disposal of the application.
03.01.2008: CLB again noted that an application has been mentioned.
Interim orders were passed though no board meeting by either side be
held.
08.01.2008: CLB noted that the order has been reserved on Co. Appl.
1/2008
31.01.2008: CLB noted that the order had been reserved on Co. Appl.
68/2008, 69/2008 & 70/2008.
31.01.2008: The order dated 31.01.2008 has been pronounced which
has already been explained above.
14.02.2008: CLB notes that the application has been mentioned. CLB
clarified that with reference to order dated 31.01.2008, the restraint
order dated 24.12.2007 and 03.01.2008 stand vacated.
13.03.2008: Additional applications were mentioned. It was directed
that the Board Meeting held today shall be subject to decision of the
C.P.
25.03.2008: Matter was simply adjourned.
26.03.2008: Parties sought adjournment.
28.07.2008: CLB heard applications filed by the appellant under
Section 340 Cr.P.C. These applications relate to Section 340 Cr.P.C.
and not to the main proceedings.
32. I do not feel the need to further elaborate the details of other orders
passed by CLB. It is manifest that these are all supplementary and incidental
proceedings and the said orders cannot be said to be void ab initio merely
because an application was filed by Mr.Vikram Bakshi under Section 8 of
the Arbitration Act and was pending adjudication. CLB did not cease to have
jurisdiction.
33. I may also note that it is not clear as to how the appellant is in any
manner concerned or connected with the controversy regarding the
application filed under Section 8 of the Arbitration Act by Mr.Vikram
Bakshi before the CLB. The petition before CLB was not filed by him. It is
also the case of the appellant as stated in the present appeal that he is not a
party to the agreement dated 31.03.2006 or to the ensuing arbitration
proceedings. Hence, it is obvious that the appellant is not concerned with the
arbitration proceedings/application.
34. There is no merit in this present appeal and the same is dismissed.
35. All pending applications being Co.Appl.1230/2008, 1231/2008-
1233/2008, 1445/2008, 25/2009, 26/2009, 733/2009, 1505/2009, 145/2010,
679/2010, 1059/2010, 3985/2016, 3986/2016, 1790-1792/2017 also stand
dismissed.
JAYANT NATH, J.
MAY 21, 2018
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