2016 (12) TMI 689 - SC - Indian Laws

Rejection of application moved under Section 5 read with Section 8 of the Arbitration and Conciliation Act, 1996, to get the dispute referred to arbitral tribunal - 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? - Held that - 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. 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 (2012 (10) TMI 459 - SUPREME COURT ) except the point, which has already been answered in the present case by us.

Summary

Issues:
1. Rejection of application for arbitration reference under Section 5 read with Section 8 of the Arbitration and Conciliation Act, 1996.
2. Interpretation of whether filing an application for extension of time to file a written statement constitutes submitting the first statement on the substance of the dispute.

Analysis:
1. The appeal challenged the High Court's order rejecting an application under Section 5 read with Section 8 of the Arbitration and Conciliation Act, 1996, seeking reference to an arbitral tribunal. The dispute arose from an agreement between the appellant and respondent regarding the supply of diesel engines. The High Court rejected the application, stating that by seeking an extension of time to file a written statement, the appellant had waived its right to arbitration. The Supreme Court noted the relevant provisions of the 1996 Act, emphasizing that the judicial authority should refer parties to arbitration upon application. The issue was whether the appellant's actions constituted a waiver of arbitration rights.

2. The Supreme Court analyzed previous judgments to determine the interpretation of "submitting the first statement on the substance of the dispute." Referring to cases like Rashtriya Ispat Nigam Ltd. and Booz Allen and Hamilton Inc., the Court highlighted that filing an application for an extension of time to file a written statement does not amount to submitting the first statement on the substance of the dispute. The Court emphasized that the intention to submit to the court's jurisdiction is crucial in determining waiver of arbitration rights. It was clarified that merely moving an application for an extension of time without addressing the substance of the dispute does not constitute a waiver. The Court directed the High Court to reconsider the application in light of the legal principles laid down, emphasizing the need to assess the existence of an agreement, the scope of disputes, and the relief sought in arbitration.

3. The Supreme Court allowed the appeal, setting aside the High Court's order and instructing a fresh consideration of the application for arbitration reference. The Court highlighted the importance of following legal precedents and thoroughly evaluating the requirements for arbitration reference. The judgment emphasized the need for a comprehensive examination of the agreement, the nature of disputes, and the suitability of arbitration for resolving the issues raised. The Court's decision aimed to ensure a fair and just determination of the arbitration application, aligning with the principles established in relevant legal precedents.