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Tarlok Singh Chauhan, J.—The defendants are the applicants, who have moved this application under Section 8 of the Arbitration Conciliation Act, 1996 on the ground that the agreement inter se the parties, which otherwise is binding upon the plaintiff, provides for adjudication of dispute by medium of arbitration in terms of the provisions made in the Memorandum of Understanding dated 31.10.2010. Alongwith the application the original Memorandum of Understanding has also been appended, wherein the arbitration clause reads as follows:
"........In the eventuality of any disputes between the parties if any, arising out of the present MOU, the same shall be settled by Arbitration under the Arbitration and Conciliation Act (as amended upto date)....."
On the strength of these averments, it has been prayed that further proceedings in the suit be ordered to be stayed and the dispute be referred to the Arbitrator.
In reply to the application, the plaintiff has averred that the defendants having repeatedly sought time to file written statement had in fact waived their right to file the present application. It is contended that the defendants were served in the suit for 29.11.2013 and requested an adjournment for filing written statement and four weeks'' time was initially granted to them, which period was further extended from time to time and finally on 14.7.2014 one week''s time was granted as last opportunity to file written statement. The defendants instead of filing the written statement filed the present application, but then having sought adjournment for filing written statement and having submitted to the jurisdiction of this Court they had waived their right to apply for transferring the matter to the Arbitrator.
I have heard the learned counsel for the parties and gone through the record of the case. The issue in the instant case is no longer res integra in view of the decision of a coordinate Bench of this Court (Justice Sanjay Karol) in Chaman Lal Versus Shree Gopal Impex (P) Ltd. and others, FAO No. 447 of 2007, decided on 25.3.2009 wherein it was held:--
"(7) Relationship between the plaintiff and defendant No. 1 is governed in terms of the agreement in question is not in dispute. Clause 10 of the Agreement contains an arbitration clause is also not in dispute. However, the question is as to whether in the absence of any binding agreement containing an arbitration clause inter se between the other parties to the suit, the trial Court could have allowed the application filed by defendant No. 1 under Section 8 of the Act and returned the plaint. Does the "judicial authority", in the present case the Civil Court, not have the jurisdiction to refer the disputes to the arbitration by appointing an Arbitrator?
(8) The plaintiff''s suit is for recovery of the amount for the value of the goods supplied by/through the plaintiff for and on behalf of defendant No. 1 to defendants No. 2 to 11, who admittedly were appointed sub-agents of defendant No. 1. Individual supplies have been effected to the defendants and defendants No. 2 to 11 are not party to the agreement dated 18.9.2002 entered into between the plaintiff and defendant No. 1.
(9) Relevant provisions of Section 8 and Section 11 of the Act are reproduced as under:--
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 arbitrate award made."
"11. Appointment of arbitrators.
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and-
(a) A party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) The two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties,-
(a) A party fails to act as required under that procedure; or
(b) The parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) A person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to-
(a) Any qualifications required of the arbitrator by the agreement of the parties; and
(b) Other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or Sub-section (6) to him.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or Sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant subsection shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7),(8) and (10) arise in an international commercial arbitration, the reference to Chief Justice" in those subsections shall be construed as a reference to the Chief Justice of India. (b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to Chief Justice in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court."
(10) The Apex Court in P. Anand Gajapathi Raju and Others Vs. P.V.G. Raju (Died) and Others, AIR 2000 SC 1886 : (2000) 4 JT 590 : (2000) 3 SCALE 330 : (2000) 4 SCC 539 : (2000) 2 SCR 684 : (2000) 2 UJ 1138 : (2000) AIRSCW 1489 : (2000) 3 Supreme 464 , has held that Section 8 is peremptory and it is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising therefrom.
(11) The Apex Court in Smt. Kalpana Kothari Vs. Smt. Sudha Yadav and Others, AIR 2002 SC 404 : (2001) 3 ARBLR 487 : (2001) 9 JT 337 : (2001) 7 SCALE 560 : (2002) 1 SCC 203 : (2001) AIRSCW 5214 : (2001) 8 Supreme 402 , has further held the provisions of Section 8 to be all comprehensive and mandatory in character. The Court while contrasting the provisions of Sections 8, 20 and 34 of the Arbitration Act, 1940 and Section 8 of the 1996 Act held that even the new Act mandates that the judicial authority before which an action has been brought in respect of a matter, which is the subject-matter of an arbitration agreement, shall refer the party to arbitration if a party to such an agreement applies not later than when submitting his first statement. The new Act does not envisage the specific obtaining of any stay as was so provided under the old Act for the reason that not only the direction to make reference is mandatory but notwithstanding the pendency of the proceedings before the judicial authority or making of an application under Section 8(1) of the Act, the arbitration proceedings are enabled, under Section 8(3) of the 1996 Act to be commenced or continued and an arbitral award also made unhampered by such pendency.
(12) The said view was reiterated by the Apex Court in Agri Gold Exims Ltd. Vs. Sri Lakshmi Knits and Wovens and Others, (2007) 2 JT 602 : (2007) 2 SCALE 296 : (2007) 3 SCC 686 : (2007) 1 SCR 1161 .
In S.B.P. and Co. Vs. Patel Engineering Ltd. and Another, AIR 2006 SC 450 : (2005) 3 ARBLR 285 : (2005) 128 CompCas 465 : (2006) 2 CompLJ 7 : (2005) 5 CTC 302 : (2005) 9 JT 219 : (2005) 9 SCALE 1 : (2005) 8 SCC 618 : (2006) 1 UJ 156 : (2005) AIRSCW 5932 : (2005) 7 Supreme 610 , the Constitution Bench, while considering the scope of Sections 8 and 11 of the Act held as under:--
"The expression used in Section 8 is ''shall'' and the judicial authority is bound to refer the matter to arbitration once the existence of a valid arbitration clause is established. Thus, the judicial authority is entitled to, has to and bound to decide the jurisdictional issue raised before it, before making or declining to make a reference under Section 8. Section 11 only covers another situation: where one of the parties has refused to act in terms of the arbitration agreement, the other party moves the Chief Justice under Section 11 of the Act to have an arbitrator appointed and the first party objects, it would be incongruous to hold that the Chief Justice cannot decide the question of his own jurisdiction to appoint an arbitrator when in a parallel situation, the judicial authority under Section 8 can do so. Obviously, the highest judicial authority has to decide that question and his competence to decide cannot be questioned. If it is held that the Chief Justice has no right or duty to decide the question or cannot decide the question, it will lead to an anomalous situation in that a judicial authority under Section 8 can decide, but not a Chief Justice under Section 11, though the nature of the objection is the same and the consequence of accepting the objection in one case and rejecting it in the other, is also the same, namely, sending the parties to arbitration. The interpretation of Section 11 that has been adopted would not give room for such an anomaly."
(14) Hence, the Court below erred in law in arriving at its conclusion. I am also supported by a decision of this Court in Municipal Council, Mandi v. Kuldip Kumar and another, Latest HLJ 2007 (HP) 1281. The authority of the Hon''ble Chief Justice to appoint the arbitrator is not in issue at all. Right to move an application under Section 8 of the Act is independent and not linked to the same. The trial Court has totally misdirected itself by mixing the power of the Hon''ble Chief Justice to appoint an arbitrator and its own jurisdiction to pass appropriate orders in an application filed under Section 8 of the Act. The Court below could not have returned the plaint back to the plaintiff. Plaint can be returned or rejected only in accordance with the provisions of Order 7 Rule 10 or 11, CPC. Admittedly the controversy in issue does not fall within the ambit and scope of the said provisions.
(15) As to what is the first statement on the substance of the dispute, it was considered by the Apex Court in Rashtriya Ispat Nigam Limited and Another Vs. Verma Transport Company, AIR 2006 SC 2800 : (2006) 3 ARBLR 210 : (2006) 7 JT 404 : (2006) 7 SCALE 565 : (2006) 7 SCC 275 : (2006) 4 SCR 332 Supp : (2006) 2 UJ 1118 : (2006) AIRSCW 3966 : (2006) 8 Supreme 196 , and it was held that the expression ''first statement on the substance of the dispute'' contained in Section 8(1) of the 1996 Act must be contra-distinguished with the expression ''written statement''. It implies 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, the party cannot be said to have waived its right or acquiesced himself 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. In view of the changes brought about by the 1996 Act, what is necessary is disclosure of the entire substance in the main proceeding itself and not taking part in the supplemental proceeding.
(16) Submission that the application was not maintainable as time to file the written statement had been sought is thus untenable.
(17) The Court was dealing with the case where the defendant had opposed the application for interim injunction and in these circumstances, it was held that the opposing prayer for injunction would not necessarily mean that substance of dispute stood disclosed in the main proceedings. Supplemental and incidental proceedings were held not part of the main proceedings.
(18) The Apex Court in Sukanya Holdings Pvt. Ltd. Vs. Jayesh H. Pandya and Another, AIR 2003 SC 2252 : (2003) 2 ARBLR 43 : (2003) 3 CompLJ 68 : (2003) 2 CTC 431 : (2003) 4 JT 58 : (2003) 4 SCALE 7 : (2003) 5 SCC 531 : (2003) 44 SCL 146 : (2003) 3 SCR 558 : (2003) 2 UJ 986 : (2003) AIRSCW 2209 : (2003) 3 Supreme 324 , has held as under:--
"15. The relevant language used in Section 8 is - "in a matter which is the subject matter of an arbitration agreement". Court is required to refer the parties to arbitration. Therefore, the suit should be in respect of ''a matter'' which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced -"as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section. The words ''a matter'' indicates entire subject matter of the suit should be subject to arbitration agreement."
In addition to this a similar proposition came up before the Hon''ble Apex Court in The Branch Manager, Magma Leasing and Finance Limited and Another Vs. Potluri Madhavilata and Another, AIR 2010 SC 488 : (2010) 1 CompLJ 684 : (2009) 12 JT 385 : (2009) 12 SCALE 668 : (2009) 10 SCC 103 : (2009) 14 SCR 815 : (2009) 9 UJ 4335 . The relevant paragraphs are reproduced as under:
"17. Section 8 reads thus:
"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 arbitrate award made.
An analysis of Section 8 would show that for its applicability, the following conditions must be satisfied:
(a) that there exists an arbitration agreement;
(b) that action has been brought to the court by one party to the arbitration agreement against the other party;
(c) that the subject-matter of the suit is same as the subject-matter of the arbitration agreement;
(d) that the other party before he submits his first statement of the substance of the dispute, moves the court for referring the parties to arbitration; and
(e) that along with the application the other party tenders the original arbitration agreement or duly certified copy thereof.
Section 8 is in the form of legislative command to the court and once the prerequisite conditions as aforesaid are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfillment of the conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration. There is nothing on record that the prerequisite conditions of Section 8 are not fully satisfied in the present case. The trial court, in the circumstances, ought to have referred the parties to arbitration as per arbitration Clause 22."
Similar issue came up before another coordinate Bench of this Court (Justice Rajiv Sharma) in Shri Ram Transport Finance Co. Ltd. versus Thakur Dutt, CMPMO No. 76 of 2013, decided on 23.6.2014 wherein it was held:
"7. Their Lordships of the Hon''ble Supreme Court in Smt. Kalpana Kothari Vs. Smt. Sudha Yadav and Others, AIR 2002 SC 404 : (2001) 3 ARBLR 487 : (2001) 9 JT 337 : (2001) 7 SCALE 560 : (2002) 1 SCC 203 : (2001) AIRSCW 5214 : (2001) 8 Supreme 402 have held that section 8 of the Arbitration and Conciliation Act, 1996 mandates that the judicial authority before which an action has been brought in respect of a matter, which is the subject matter of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement. Their Lordships have held as under:
The first respondent herein has filed the civil suit for dissolution of the partnership and for accounts and also filed applications for the appointment of Receiver and for injunction. The defendants have initially filed applications in the suit before the Trial Court invoking the provisions contained in Section 34 of the Arbitration Act, 1940 and not only the applications filed by the first respondent before the Trial Court were rejected but the applications under Section 34 of the Arbitration Act by the appellants came to be allowed and further proceedings in the suit filed by the first respondent came to be stayed. No doubt, at the appellate stage, after filing a written application for dismissal of the applications filed by the appellants under Section 34 of the Arbitration Act, 1940, as not pressed in view of the repeal of the 1940 Act and coming into force of the 1996 Act and getting orders thereon, the appellants herein have once again moved the High Court under Section 8 of the Act, with a request for stay of proceedings before the High Court as well as the Trial Court, but the application came to be rejected by the learned Judge in the High Court that no such application could be filed, once the application earlier filed under 1940 Act was got dismissed as not pressed and also on the ground of estoppel, based on the very fact. We are of the view that the High Court did not properly appreciate the relevant and respective scope, object and purpose as also the considerations necessary for dealing with and disposing of the respective applications envisaged under Section 34 of the 1940 Act and Section 8 of the 1996 Act. Section 34 of the 1940 Act provided for filing an application to stay legal proceedings instituted by any party to an arbitration agreement against any other party to such agreement, in derogation of the arbitration clause and attempts for settlement of disputes otherwise than in accordance with the arbitration clause by substantiating the existence of an arbitration clause and the judicial authority concerned may stay such proceedings on being satisfied that there is no sufficient reason as to why the matter should not be referred to for decision in accordance with the arbitration agreement, and that the applicant seeking for stay was at the time when the proceedings were commenced and still remained ready and willing to do all things necessary to the proper conduct of the arbitration. This provision under the 1940 Act had nothing to do with actual reference to the arbitration of the disputes and that was left to be taken care of under Sections 8 and 20 of the 1940 Act. In striking contrast to the said scheme underlying the provisions of the 1940 Act, in the new 1996 Act, there is no provision corresponding to Section 34 of the old Act and Section 8 of the 1996 Act mandates that the Judicial Authority before which an action has been brought in respect of a matter, which is the subject-matter of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement. The provisions of the 1996 Act do not envisage the specific obtaining of any stay as under the 1940 Act, for the reason that not only the direction to make reference is mandatory but not withstanding the pendency of the proceedings before the Judicial Authority or the making of an application under Section 8(1) of the 1996 Act, the arbitration proceedings are enabled, under Section 8(3) of the 1996 Act to be commenced or continued and an arbitral award also made unhampered by such pendency. We have to test the order under appeal on this basis.
On the ground of estoppel and the conduct of the appellants in getting their earlier application made under Section 34 of the 1940 Act dismissed as not pressed that the applications under Section 8 of the 1996 Act were not countenanced by the High Court. The fact that the earlier application under the 1940 Act was got dismissed as not pressed in the teeth of the repeal of the said Act cannot, in our view, constitute any legal impediment for having recourse to and avail of the avenues thrown open to parties under the 1996 Act. Similarly, having regard to the distinct purposes, scope and object of the respective provisions of law in these two Acts, the plea of estoppel can have no application to deprive the appellants of the legitimate right to invoke an all comprehensive provision of mandatory character like Section 8 of the 1996 Act to have the matter relating to the disputes referred to arbitration, in terms of the arbitration agreement."
Their Lordships of the Hon''ble Supreme Court in Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity Midway Petroleums, AIR 2003 SC 2881 : (2003) 2 ARBLR 666 : (2003) 4 CompLJ 311 : (2003) 3 CTC 438 : (2003) 6 JT 1 : (2003) 135 PLR 746 : (2003) 5 SCALE 402 : (2003) 6 SCC 503 : (2003) 46 SCL 337 : (2003) 2 UJ 1299 : (2003) AIRSCW 3558 have held that where arbitration clause exists, court has a mandatory duty to refer dispute arising between the contracting parties to arbitrator. Civil court has No. jurisdiction to continue with the suit once an application under section 8 has been filed. Their Lordships have held as under:
"14. This Court in the case of P. Anand Gajapathi Raju and Others Vs. P.V.G. Raju (Died) and Others, AIR 2000 SC 1886 : (2000) 4 JT 590 : (2000) 3 SCALE 330 : (2000) 4 SCC 539 : (2000) 2 SCR 684 : (2000) 2 UJ 1138 : (2000) AIRSCW 1489 : (2000) 3 Supreme 464 has held that the language of Section 8 is peremptory in nature. Therefore, in cases where there is an arbitration clause in the agreement, it is obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore, it is clear that if, as contended by a party in an agreement between the parties before the Civil Court, there is a clause for arbitration, it is mandatory for the Civil Court to refer the dispute to an arbitrator. In the instant case the existence of an arbitral clause in the agreement is accepted by both the parties as also by the courts below but the applicability thereof is disputed by the respondent and the said dispute is accepted by the courts below. Be that as it may, at the cost of repetition, we may again state that the existence of the arbitration clause is admitted. If that be so, in view of the mandatory language of Section 8 of the Act, the courts below ought to have referred the dispute to arbitration.
The question then would arise: what would be the role of the Civil Court when an argument is raised that such an arbitration clause does not apply to the facts of the case in hand? Learned counsel for the appellant contends that it is a matter which should be raised before the arbitrator who is competent to adjudicate upon the same and the Civil Court should not embark upon an inquiry in regard to the applicability of the arbitration clause to the facts of the case. While learned counsel appearing for the respondent contends that since the applicability of the arbitration clause to the facts of the case goes to the very root of the jurisdiction of the reference to arbitration, this question will have to be decided by the Civil Court before referring the matter to arbitration even in cases where there is admittedly an arbitration clause. The answer to this argument, in our opinion, is found in Section 16 of the Act itself. It has empowered the Arbitral Tribunal to rule on its own jurisdiction including rule on any objection with respect to the existence or validity of the arbitration agreement. That apart, a Constitution Bench of this Court in Konkan Railway (supra) with reference to the power of the arbitrator under Section 16 has laid down thus :
"It might also be that in a given case the Chief Justice or his designate may have nominated an arbitrator although the period of thirty days had not expired. If so, the Arbitral Tribunal would have been improperly constituted and be without jurisdiction. It would then be open to the aggrieved party to require the Arbitral Tribunal to rule on its jurisdiction. Section 16 provides for this. It states that the Arbitral Tribunal may rule its own jurisdiction. That the Arbitral Tribunal may rule "on any objections with respect to the existence or validity of the arbitration agreement" shows that the Arbitral Tribunal''s authority under Section 16 is not confined to the width of its jurisdiction, as was submitted by learned counsel for the appellants, but goes to the very root of its jurisdiction. There would, therefore, be no impediment in contending before the Arbitral Tribunal that it had been wrongly constituted by reason of the fact that the Chief Justice or his designate had nominated an arbitrator although the period of thirty days had not expired and that, therefore, it had no jurisdiction."
(emphasis supplied)
It is clear from the language of the Section, as interpreted by the Constitution Bench judgment in Konkan Railway (supra) that if there is any objection as to the applicability of the arbitration clause to the facts of the case, the same will have to be raised before the concerned Arbitral Tribunal. Therefore, in our opinion, in this case the courts below ought not to have proceeded to examine the applicability of the arbitration clause to the facts of the case in hand but ought to have left that issue to be determined by the Arbitral Tribunal as contemplated in Clause 40 of the Dealership Agreement and as required under Sections 8 and 16 of the Act.
This brings us to consider the last question involved in this appeal, namely, the maintainability of the revision petition before the High Court under Section 115 of the CPC. The High Court by the impugned order has come to the conclusion that its jurisdiction to entertain a revision petition would only be available if the order impugned is such that if it is allowed to stand, it would occasion failure of justice or cause an irreparable injury to a party against whom the said order is made. In support of this finding, the High Court has relied upon certain judgments of this Court. Having perused the said judgments, we are of the opinion that the findings given in those judgment judgments do not apply to the facts of this case at all. We have come to the conclusion that the Civil Court had no jurisdiction to entertain a suit after an application under Section 8 of the Act is made for arbitration. Therefore, we are of the opinion that the trial court failed to exercise its jurisdiction vested in it under Section 115 of the C.P.C. when it rejected the application of the appellant filed under Sections 8 and 5 of the Act. In such a situation, refusal to refer the dispute to arbitration would amount to failure of justice as also causing irreparable injury to the appellant. For the said reason, we are of the opinion that the High Court has erred in coming to the conclusion that the appellant was not entitled to the relief under Section 115 CPC. CPC."
Their Lordships of the Hon''ble Supreme Court in Rashtriya Ispat Nigam Limited and Another Vs. Verma Transport Company, AIR 2006 SC 2800 : (2006) 3 ARBLR 210 : (2006) 7 JT 404 : (2006) 7 SCALE 565 : (2006) 7 SCC 275 : (2006) 4 SCR 332 Supp : (2006) 2 UJ 1118 : (2006) AIRSCW 3966 : (2006) 8 Supreme 196 have held that 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". Their Lordships have further held that it implies submission of the party to the jurisdiction of the judicial authority. Their Lordships have further held that if an application is filed before actually filing the first statement on the substance of the dispute, the party cannot be said to have waived its right or acquiesced itself to the jurisdiction of the court. Their Lordships have further held that in view of the changes brought about by the 1996 Act, what is necessary is disclosure of the entire substance in the main proceeding itself and not taking part in the supplemental proceedings. Their Lordships have further held that waiver of a right on the part of a defendant to the lis must be gathered from the fact situation obtaining in each case. In the case before the Hon''ble Supreme Court, the court had already passed and interim ex parte injunction and the appellants were bound to respond to the notice issued by the Court and while doing so, they raised a specific plea of bar of the suit in view of the existence of an arbitration agreement. Their Lordships have further held that filing of a reply to the injunction application could not have been a ground to refuse to entertain the plea taken by the appellants that the suit should be referred to the Arbitral Tribunal. Their Lordships have held as under:
"33. Filing of a reply to the injunction application could also not have been a ground to refuse to entertain the plea taken by the Appellants that the suit should be referred to arbitral tribunal particularly when in its reply to injunction application, the appellant categorically stated:
"1. That the present application under Order 39 Rules 1 and 2 read with Section 151 CPC is liable to be dismissed on the short ground that the plaintiff has himself admitted the existence of the arbitration clause and therefore, the present application under Order 39 Rules 1 and 2 read with Section 151 CPC is not maintainable and consequently the order of this Hon''ble Court is liable to be vacated."
The expression ''first statement on the substance of the dispute'' contained in Section 8(1) of the 1996 Act must be contra-distinguished with the expression ''written statement''. It employs submission of the party to the jurisdiction of the judicial authority. What is, therefore, is needed is a finding on the part of the judicial authority that the party has waived his 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 his right or acquiesced himself 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 at some details, a little later.
In Janki Saran Kailash Chandra (supra), 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-�-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.
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 proceeding 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 Corporation of India (supra), the distinction between the main proceeding and supplemental proceeding must be borne in mind.
We may notice that a distinction has been made between supplemental proceedings and incidental proceedings by one of us in Vareed Jacob Vs. Sosamma Geevarghese and Others, AIR 2004 SC 3992 : (2004) 5 SCALE 102 : (2004) 6 SCC 378 : (2004) 2 SCR 534 Supp : (2004) AIRSCW 4269 : (2004) 3 Supreme 637 .
Their Lordships of the Hon''ble Supreme Court in Agri Gold Exims Ltd. Vs. Sri Lakshmi Knits and Wovens and Others, (2007) 2 JT 602 : (2007) 2 SCALE 296 : (2007) 3 SCC 686 : (2007) 1 SCR 1161 have held that where there exists an arbitration agreement, the court is under an obligation to refer the parties to arbitration in terms of the arbitration agreement. Their Lordships have held as under:
"22. Section 8 of the 1996 Act is peremptory in nature. In a case where there exists an arbitration agreement, the court is under obligation to refer the parties to arbitration in terms of the arbitration agreement. [See Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity Midway Petroleums, AIR 2003 SC 2881 : (2003) 2 ARBLR 666 : (2003) 4 CompLJ 311 : (2003) 3 CTC 438 : (2003) 6 JT 1 : (2003) 135 PLR 746 : (2003) 5 SCALE 402 : (2003) 6 SCC 503 : (2003) 46 SCL 337 : (2003) 2 UJ 1299 : (2003) AIRSCW 3558 and Rashtriya Ispat Nigam Limited (supra)]. No issue, therefore, would remain to be decided in a suit. Existence of arbitration agreement is not disputed. The High Court, therefore, in our opinion, was right in referring the dispute between the parties to arbitration."
In the instant case, the execution of the agreement is not disputed. The only explanation given by the plaintiff in the reply filed to application under section 8 read with section 5 of the Arbitration and Conciliation Act is that the contents of the agreement have not been read over to him and he being rustic could not read the contents of the agreement.
Their Lordships of the Hon''ble Supreme Court in The Branch Manager, Magma Leasing and Finance Limited and Another Vs. Potluri Madhavilata and Another, AIR 2010 SC 488 : (2010) 1 CompLJ 684 : (2009) 12 JT 385 : (2009) 12 SCALE 668 : (2009) 10 SCC 103 : (2009) 14 SCR 815 : (2009) 9 UJ 4335 while interpreting clause 22 of the Higher Purchase Agreement have held that once the pre pre-requisite under section 8 of the Arbitration and Conciliation Act is satisfied there would no option left to the Court except to refer the matter to arbitration. Their Lordships have held as under:
In the instant case, clause 22 of the hire purchase agreement that provides for arbitration has been couched in widest possible terms as can well be imagined. It embraces all disputes, differences, claims and questions between the parties arising out of the said agreement or in any way relating thereto. The hire purchase agreement having been admittedly entered into between the parties and the disputes and differences have since arisen between them, we hold, as it must be, that the arbitration clause 22 survives for the purpose of their resolution although the contract has come to an end on account of its termination.
The next question, an incidental one, that arises for consideration is whether the trial court must refer the parties to arbitration under Section 8 of the Act, 1996.
Section 8 reads thus:
"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."
An analysis of Section 8 would show that for its applicability, the following conditions must be satisfied: (a) that there exists an arbitration agreement; (b) that action has been brought to the court by one party to the arbitration agreement against the other party; (c) that the subject matter of the suit is same as the subject matter of the arbitration agreement; (d) that the other party before he submits his first statement of the substance of the dispute, moves the court for referring the parties to arbitration; and (e) that along with the application the other party tenders the original arbitration agreement or duly certified copy thereof.
Section 8 is in the form of legislative command to the court and once the pre--requisite conditions as aforestated are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfillment of conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration.
There is nothing on record that the pre--requisite conditions of Section 8 are not fully satisfied in the present case. The trial court, in the circumstances, ought to have referred the parties to arbitration as per arbitration clause 22.
In the result, appeal must succeed and is allowed. The impugned order dated April 30, 2007 passed by the High Court affirming the order dated December 4, 2006 passed by the First Additional Senior Civil Judge, Vijayawada is set aside. I.A. No.490/2006 in O.S. No.19/2006 is restored to the file of the First Additional Senior Civil Judge, Vijayawada for passing an appropriate order in the light of the observations made hereinabove. Since the respondent has not chosen to appear, no order as to costs."
Their Lordships of the Hon''ble Supreme Court in Booz Allen and Hamilton Inc. Vs. SBI Home Finance Ltd. and Others, AIR 2011 SC 2507 : (2011) 2 ARBLR 155 : (2011) 5 JT 198 : (2011) 5 SCALE 147 : (2011) 5 SCC 532 : (2011) 2 UJ 1472 : (2011) AIRSCW 3089 have held that filing of objections/counter affidavit opposing application for interim relief does not amount to a statement on substance of dispute. Their Lordships have held as under:
"25. Not only filing of the written statement in a suit, but filing of any statement, application, affidavit filed 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 waive 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.
18. In this case, the counter affidavit dated 15.12.1999, filed by the appellant in reply to the notice of motion (seeking appointment of a receiver and grant of a temporary injunction) clearly stated that the reply affidavit was being filed for the limited purpose of opposing the interim relief. Even in the absence of such a disclaimer, filing a detailed objection to an application for interim relief cannot be considered to be submission of a statement on the substance of the dispute resulting in submitting oneself to the jurisdiction of the court."
In the present case also, notice was issued in the main civil suit and also in the application under order 39 rule 1 and 2 of the Code of Civil Procedure. Statement has been made by the G.P.A. on behalf of defendant in an application under section 39 rule 1 and 2 of the Code of Civil Procedure. The application itself was disposed of, as noticed above, on the basis of statement made on 1.11.2012. The statement made by the G.P.A. on behalf of the defendant in proceedings under order 39 rule 1 and 2 of the Code of Civil Procedure cannot be termed as disclosure of statement substance of the dispute. It could only be termed at the most as incidental proceedings. Defendant has never disclosed the substance of the dispute in the main proceedings. Supplemental and incidental proceeds are not part of main proceedings."
In view of the aforesaid exposition of law, it can safely be concluded that the issues raised in this application have been squarely answered by not only the Hon''ble Apex Court but also by this Court wherein it has been categorically held that Section 8 of the Act is peremptory and it is, therefore, obligated for the Court to refer the parties to arbitration in terms of their arbitration agreement. It has further been held that the expression ''first statement on the substance of the dispute'' implies 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 have waived its right to invoke the arbitration clause. It has further been held that even if an application is filed before actually filing the first statement on the substance of the dispute, even then it cannot be said that the party has waived his right or acquiesced himself to the jurisdiction of the Court. The Courts have gone to the extend of holding that even if the written statement is filed or reply to application is filed, the same would not amount to waiver of right or acquiesce to the jurisdiction of the Court.
Reverting to the facts of the present case, the respondents had only sought repeated adjournments for filing written statement which in terms of the law laid down by the Hon''ble Supreme Court as also this Court cannot be said to be ''first statement on the substance of the dispute'' or in other words a waiver of its right or acquiesce to the jurisdiction of the Court.
In view of the aforesaid discussion, the application is accordingly allowed. Accordingly, Shri Nimish Gupta, Advocate is appointed as an Arbitrator whose remuneration is fixed at Rs. 2,00,000/- to be shared equally by both the parties to the lis. The Arbitrator shall entered reference within a period of 15 days and conclude the proceedings expeditiously and in no event later than 31st December, 2015.
The application is disposed of in the aforesaid terms.
Civil Suit No. 4072 of 2013
In view of the order passed in OMP No. 296 of 2014, the suit is not maintainable and the plaint is ordered to be returned to the plaintiff. It is, however, made clear that the plaintiff shall be entitled to the refund of Court fee in accordance with law. The parties to bear their own costs. Decree sheet be drawn accordingly.