Calcutta High Court (Appellete Side)
Maa Vaishno Devi Enterprise & Anr vs Samujjal Enterprise & Ors on 14 November, 2024
Author: Soumen Sen
Bench: Soumen Sen
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
APPELLATE SIDE
BEFORE:
The Hon'ble Justice Soumen Sen
And
The Hon'ble Justice Apurba Sinha Ray
FMAT (ARBAWARD) No.15 of 2024
With
CAN 1 of 2024
Maa Vaishno Devi Enterprise & Anr.
Vs.
Samujjal Enterprise & Ors.
For the Appellants : Mr. Debajyoti Basu, Adv.,
Mr. Triptimoy Talukder, Adv.,
Mr. Diptomoy Talukder, Adv.
Mr. D. Ghosh, Adv.
For the Respondent : Mr. Probal Kr. Mukherjee, Sr. Adv.,
Nos.1 to 6 Mr. Suhrid Sur, Adv.
Order dated : 14th November, 2024
Soumen Sen, J : (Oral)
The appeal is arising out of a judgment and order passed by the
learned 2nd Court at Barasat in connection with an application filed under
Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as the ‘said Act’).
The dispute between the parties is arising out of a registered
development agreement executed by and between the plaintiff, Samujjal
2
Enterprise, the opposite party no.1 herein and the appellants on 6th
January, 2014.
The appellant no.1 is a proprietorship firm represented by the
appellant no.2. Initially a development agreement was entered into
between the appellants with one Debjani Sarkar the original owner of the
property in question on 6th January, 2014. Subsequently the owner
transferred the property in favour of one Soma Singh on 19th May, 2015.
Soma Singh by a registered deed of sale dated 13th March, 2019 conveyed
the property in favour of the plaintiffs/respondents. The plaintiff is the
present owner of the property. The appellants alleged that Debjani Sarkar
could not have transferred her interest in the suit property in favour of 3rd
parties in supersession of the earlier agreement. It is submitted that the
development agreement with Debjani contains an Arbitration Clause.
Dispute arose between the present appellant and Debjani Sarkar in
respect of the development agreement. Debjani was attempting to transfer
her share and interest to the 3rd parties in breach of the said agreement.
It was on such consideration the appellants filed an application under
Section 9 of the said Act being Misc. case being no.173 of 2015 before the
learned Additional District Judge, Barasat in which proceeding Debjani
Sarkar appeared and during the pendency of the said application Debjani
Sarkar transferred the suit property in favour of Soma who subsequently
transferred the property in favour of the plaintiff and its partners. Debjani
executed the said conveyance as constituted attorney of Soma and
transferred the self-same property in favour of plaintiff and his partners.
3
The present plaintiff derived its title through Debjani and hence is bound
by the arbitration agreement. On such facts an application was filed
under Section 8 of the said Act for referring the parties to the dispute to
arbitration.
The said application was contested by the plaintiff being the
transferee from Soma Singh who had purchased the property from
Debjani Sarkar during the pendency of the proceeding under Section 9 of
the Arbitration and Conciliation Act.
The learned District Judge dismissed the application on the
ground that the subject matter of the action brought in by the plaintiffs
does not fall entirely within the ambit of the arbitration clause contained
in the development agreement on 6th January, 2014. Moreover, the
present plaintiff is not a party to the development agreement which
contains an arbitration clause. The learned Single Judge relied upon the
decision of the Hon’ble Supreme Court in Sukanya Holdings Pvt. Ltd. v.
Jayesh H. Pandya & Ors.1 and held that there is no provision for
splitting the cause or parties and referred the subject matter of the suit to
the arbitrator in view of the law laid down in the said decision. The
plaintiff is not a party to the arbitration agreement and it does not bind
the plaintiff. The subject matter of the arbitration agreement does not
include within itself the subject matter of the suit. The aforementioned
development agreement was executed for the purpose of defining the
1
(2003) 5 SCC 531: 2003 SCC OnLine SC 523
4
terms of development of the suit property which is not the subject matter
of contention in the present suit.
There is no provision under the Act for splitting cause or parties
before referring the parties to arbitration. Moreover, the appellant nos. 1
and 2 have preferred the said application under Section 8 of the
Arbitration and Conciliation Act long after the filing of their first statement
on the substance of dispute.
Mr. Debajyoti Basu, the learned Counsel for the appellants has
strenuously argued that during the pendency of the application under
Section 9 of the Arbitration and Conciliation Act, 1996 transfers had been
made and the doctrine of lis pendens would apply. The present transferee
steps into the shoes of the original owner and she derived her title from
Debjani and accordingly she is bound by the arbitration clause.
The Apex Court in Cox and Kings Limited v SAP India Private
Limited & Anr.,2 observed that
170.1. The definition of “parties” under Section 2(1)(h) read with
Section 7 of the Arbitration Act includes both the signatory as
well as non-signatory parties;
170.2. Conduct of the non-signatory parties could be an
indicator of their consent to be bound by the arbitration
agreement;
170.3. The requirement of a written arbitration agreement under
Section 7 does not exclude the possibility of binding non-
signatory parties;
2
(2024) 4 SCC 1
5
170.9. The persons “claiming through or under” can only assert
a right in a derivative capacity;
230.4. The expression “claiming through or under” in Sections 8
and 45 is intended to provide a derivative right; and it does not
enable a non-signatory to become a party to the arbitration
agreement. The decision in Chloro Controls tracing the Group of
Companies doctrine through the phrase “claiming through or
under” in Sections 8 and 45 is erroneous. The expression
“party” in Section 2(1)(h) and Section 7 is distinct from “persons
claiming through or under them”. This answers the remaining
questions referred to the Constitution Bench” (emphasis
supplied)
In M/S Devtree Corp. Ltd v. M/S Bhumika North Gardenia3
decided on 24th July, 2024 the binding nature of the arbitration
agreement on a derivative title holder in a sale deed was considered and it
was held that a person who is not a party to the arbitration agreement,
and purchases the property from a person who is a party to the
agreement, is bound by the arbitration clause that is binding on his
vendors. It is stated:
“12. This being the position, the contention that as per the law
laid down in Cox and Kings supra, only a party who has signed
the arbitration agreement can be a party to the arbitration
proceeding or Section 9 proceeding is not acceptable. If a non-
signatory to the arbitration agreement is “claiming through or
under” the party to the arbitration agreement or if he has a
derivative right under a party to the agreement, then such party
is bound by the arbitration clause.
3
Miscellaneous First Appeal No. 2978 of 2024 (AA)
6
15. On a reading of Section 8(1) extracted above, it is evident
that not only a party to the arbitration agreement but also a
person claiming through or under a party can apply to refer the
matter to arbitration if a proceeding is brought before judicial
authority. This provision expressly recognises the right of the
“party or anyone claiming through or under him” to the
agreement to seek the resolution of a dispute through
arbitration. If a party or a person claiming through or under a
party to an arbitration agreement can apply to refer the matter
to arbitration, the converse also applies, i.e., anyone claiming
through or under the party to the arbitration agreement can be
subjected to the jurisdiction of the Arbitral Tribunal.
16. The agreement dated 16.10.2020 contains a binding
arbitration clause. The appellant/purchaser being the assignee,
steps into the shoes of the vendors of the agreement dated
16.10.2020, and takes the properties from vendors with all
rights and obligations attached to them. The transferee is not
bound by the obligations only if the person in whose favour the
obligations exist, agrees to waive such obligations. No such
waiver is claimed or asserted by the appellant.
18. For the reasons assigned above, this Court is of the view
that the appellant Company being a person who is not a party
to the arbitration agreement, and being the purchaser of the
properties from a person who is a party to the arbitration
agreement, is bound by the arbitration clause binding on its
vendor. It is not open to the appellant to contend that the
arbitration agreement which is binding on its vendors is not
binding on the appellant on a specious plea that it is not a
signatory to the arbitration agreement.” (emphasis supplied)On the question whether a person who purchases the property
which is the subject matter of a proceeding under Section 9 of the
7Arbitration and Conciliation Act, 1996 (for short ‘Act of 1996’) is bound by
the principle of lis pendens the Court held-
“19. Admittedly, the appellant purchased the properties when
the vendors were parties in a pending (earlier) proceeding,
under Section 9. The question is whether the transaction is hit
by the lis pendens principle.
20. The doctrine of lis pendens is based on a sound public
policy. It applies in a situation where the right over an
immovable property is directly or substantially in question in a
suit or proceeding which is not collusive. In such a situation, if
any transfer of immovable property which is the subject matter
of the suit or proceeding takes place, such transfer shall not
affect any decree or order to be made in the said suit or
proceeding.
22. The lis pendens doctrine envisaged under Section 52 of the
Act of 1882 is based on public policy. Under the said doctrine,
the transfer of property involved in a suit or proceeding is not
altogether barred. However, the transfer of property, if takes
place, will not affect the outcome of the suit or the proceeding
and any such transfer will be subject to the outcome of the suit
or proceeding.”
In a recent decision in Siddamsetty Infra Projects Pvt. Ltd. v
Katta Sujatha Reddy & Ors.4, decided on 8th November, 2024 the
Hon’ble Supreme Court has clearly observed “The purpose of lis pendens is
to ensure that the process of the court is not subverted and rendered
infructuous. In the absence of the doctrine of lis pendens, a defendant could
defeat the purpose of the suit by alienating the suit property. This purpose
4
2024 SCC OnLine SC 3214
8
of the provision is clearly elucidated in the explanation clause to Section 52
which defines “pendency”. Amending Act 20 of 1929 substituted the word
“pendency” in place of “active prosecution”. The Amending Act also included
the Explanation defining the expression “pendency of suit or proceeding”.
“Pendency” is defined to commence from the “date of institution” until the
“disposal”.” The doctrine of lis pendens would commence at the stage of
institution of the application under Section 9 of the said Act filed against
Debjani.
Mr. Basu has submitted that existence of the arbitration clause is
a sine qua non for referring the parties forming the subject matter of a
judicial action to arbitration and having regard to the fact that the
arbitration agreement between Debjani and the present appellants is not
in dispute nor the existence of the development agreement in view of the
decisions of the Hon’ble Supreme Court in Agri Gold Exims Ltd. Vs. Sri
Lakshmi Knits & Wovens & Ors. reported at (2007) 3 SCC 686, P.
Anand Gajapathi Raju & Ors. Vs. P.V.G. Raju (Dead) & Ors. reported
at (2000) 4 SCC 539 and Hindustan Petroleum Corpn. Ltd. Vs.
Pinkcity Midway Petroleums reported at (2003) 6 SCC 503 clearly
stating that Section 8 of the 1996 Act is peremptory in nature and where
there exists an arbitration agreement, the Court is under an obligation to
refer the parties to the arbitration agreement, the parties should have
been referred to arbitrator.
Mr. Basu has referred to Sections 8 and 11 of the Arbitration and
Conciliation Act and has argued that the nature of the enquiry are same
9as stated in DLF Home Developers Limited Vs. Rajapura Homes
Private Limited & Anr. reported at (2021) 16 SCC 743, Sanjiv
Prakash Vs. Seema Kukreja & Ors. reported at (2021) 9 SCC 732,
Mayavati Trading Pvt. Ltd. Vs. Pradyuat Deb Burman reported at
(2019) 8 SCC 714 and Pravin Electricals Private Limited Vs. Galaxy
Infra & Engineering Private Limited reported at (2021) 5 SCC 671.
The learned Counsel has drawn specific attention to the
observation in DLF Home Developers (supra) Paragraph 21 to argue that
the limited jurisdiction of the Court under Section 11 would not, however,
denude the Court of its judicial discretion to look beyond the bare
existence of an arbitration clause to cut the deadwood. It is submitted
that at the stage of deciding the application under Section 8, the Court is
not required to consider the merits of the matter and the limited
jurisdiction is only to find out the existence of an arbitration agreement.
Insofar as the finding of the learned Trial Court as to that the
appellants have filed the application under Section 8 at much belated
stage and after submitting its first statement on the substance of the
dispute, it is argued that the question of waiver is a question of fact and it
entirely falls within the jurisdiction of the arbitral tribunal to decide such
issue. Mr. Basu in this regard has referred to the decision of the Hon’ble
Supreme Court in M/s. Motilal Padampat Sugar Mills Co. Ltd. Vs.
State of Uttar Pradesh & Ors. reported at (1979) 2 SCC 409,
Paragraph 5 in which it was observed that “it is elementary that waiver
is a question of fact and it must be properly pleaded and proved”. It is,
10
thus, argued that in the event in the arbitration proceeding the plaintiffs
plead waiver and could establish that the appellants have their right, the
arbitral tribunal shall decide such question and it is not required to be
gone into at this stage.
Even if, we accept the binding nature of the arbitration on the
plaintiff as a subsequent transferee and form an opinion that the present
plaintiff is a successor in interest of Debjani and hence bound by the
arbitration agreement following the ratio in Cox and Kings (supra) and
Devtree (supra) the appellants have to cross the hurdle of explaining the
reason for not pursuing arbitration against Debjani. Moreover, in the
present proceeding a written statement has been filed by the appellants in
which the appellants have dealt with the allegations in the plaints on
merits.
Mr. Basu has drawn our attention to the orders passed in the
proceeding initiated by the appellants under Section 9 of the Arbitration
and Conciliation Act and the pleadings between the parties.
It appears that dispute arose by and between the parties
consequent upon revocation of the development agreement and general
power of attorney by Debjani on 21st April, 2015. The application under
Section 9 was filed before the learned District Judge, North-24 Parganas,
Barasat on 4th July, 2015. On that date the order was passed directing
the parties to maintain status quo in respect of the schedule premises till
17th July, 2015 and Debjani was directed to show cause within 10 days
from the date of receipt of the order as to why the petitioners’ prayer for
11
an interim injunction shall not be granted. Prior to the said application,
the property was transferred by Debjani in favour of Soma Singh by way
of a registered deed of conveyance dated 19th May, 2015. As on that date
the property was not under any litigation. During the pendency of the
proceeding, Debjani filed an affidavit in which in paragraph 13 she has
disclosed such transfer and also return of the consideration amount on
24th April, 2015. She has further alleged that the cancellation was dully
published in a newspaper on 26th April, 2015. It was upon completion of
all such formalities, the property was sold in favour of Soma on 19th May,
2015. Accordingly, as on the date of the order, Debjani was not the owner
of the property and the order of injunction has no binding effect on Soma
and similarly there was no embargo upon Soma to transfer the property in
favour of the third parties, namely, the present plaintiffs. However, these
events may not have much relevance but referred to only for the purpose
of completeness. It has a limited application in the sense that under
Section 9(2) of the Arbitration and Conciliation Act, the arbitral
proceeding is required to commence within a period of 90 days from the
date of such order or within such further time as the Court may
determine. However, Mr. Basu has pointed out that this was introduced
by way of an amendment on 23rd October, 2015 and proceeding has been
initiated prior to the date of amendment and, accordingly, the embargo
may not operate against the petitioners. However, the unamended
Section came up for consideration before this Court and in a decision
reported in 2008 (1) CHN 854 (National Small Industries Corporation
Vs. Tulip Electricals Pvt. Ltd.), in which it has been clearly stated that
12
arbitration proceeding has to commence within a reasonable time, failing
which, it shall be presumed that the applicant is not interested to proceed
with the arbitration proceeding.
Admittedly no arbitration proceeding has commenced till date with
no notice under Section 21 being served upon Debjani or the subsequent
transferees. In fact, Soma Singh was not substituted in the said
proceeding and there are many incurable lapses for which the matter
cannot be referred to arbitration. Apart from the aforesaid, the application
under Section 8 is required to be filed not later than the date of
submitting first statement on the substance of the dispute. The
expression “applies not later than the date of submitting his first
statement on the substance of the dispute” have been considered in
Rashtriya Ispat Nigam Ltd. and Another v Verma Transport Co.5,
Booz Allen and Hamilton Inc. v SBI Home Finance Limited and
Others6 and SSIPL Lifestyle Private Limited v Vama Apparels (India)
Private Limited and Another7 in which it has been categorically stated
that if on a perusal of the pleadings it appears that the dispute has been
dealt with on merits then it can be safely presumed that the defendant is
not willing to invoke the arbitration clause.
In Booz Allen (supra) the Supreme Court dealing with the
unamended Section 8 of the Act held as under:
5 (2006) 7 SCC 275
6 (2011) 5 SCC 532
7 2020 SCC OnLine Del 1667
13“29. Though Section 8 does not prescribe any time limit for
filing an application under that section, and only states that the
application under Section 8 of the Act should be filed before
submission of the first statement on the substance of the dispute,
the scheme of the Act and the provisions of the section clearly
indicate that the application there under should be made at the
earliest. Obviously, a party who willingly participates in the
proceedings in the suit and subjects himself to the jurisdiction of the
court cannot subsequently turn round and say that the parties
should be referred to arbitration in view of the existence of an
arbitration agreement. Whether a party has waived his right to seek
arbitration and subjected himself to the jurisdiction of the court,
depends upon the conduct of such party in the suit.”
As observed in Rashtriya Ispat Nigam Ltd. (supra):
“36. 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.
38. 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
14Section 34 of the 1940 Act vis-a-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 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.”
Further in SSPIL Lifestyle (supra), it was opined that:
“27. Thus, before going into the question as to whether there
is a limitation period prescribed for filing of the Section 8 application,
this Court wishes to examine the significance of the amendment in
the provision, if any. As observed earlier, under the unamended
provision, the objection as to the existence of the arbitration clause
could be taken anytime (i) prior to the filing of the written statement
(ii) in the written statement (iii) along with the written statement. So
long as the written statement was not filed, Section 8 application
could be filed. The Legislature has now made a conscious change by
using the language “not later than the date of”. The use of the word
‘date’ itself signifies precision. A perusal of the various amendments
brought about in 2016 Amendment Act show that the intention was
15to tighten the time limit within which arbitration proceedings should
commence and conclude. For example, under Section 9, previously,
no limitation was fixed for commencement for invoking arbitration
after seeking interim relief. However, in the amended provision,
within 90 days after the interim order is passed, the arbitral
proceedings have to be commenced. Similar amendments have been
brought about in Section 11. Section 29A provides that the award in
matters other than international commercial arbitration may be
made as expeditiously as possible and an endeavour may be made
to dispose of the matter within a period of twelve months from the
date of completion of pleadings. Section 29 B provides for the
adoption of a fast track procedure and the award under this section
shall be made within a period of six months from the date of the
arbitral tribunal enters upon the reference. Thus, the entire
emphasis in the 2016 amendments have been to speeden arbitral
proceedings. It is in this context that the change of language in
Section 8 from “when” to the “date of” is to be construed. In the
opinion of this Court, the words ‘not later than the date of
submitting’ means that the date of submitting the statement on the
substance of the dispute i.e. the written statement in a civil suit, is
the outer limit for filing of a Section 8. Hence, in effect, there is a
limitation period which is prescribed.
29. As per the above findings of the Supreme Court, though
the Court found that there was no time limit fixed for filing an
application under Section 8, there was an obligation to move such
an application “at the earliest”. Under the unamended provision, if
parties were contesting supplemental proceedings or were in talks of
settlement etc., a Section 8 application could be moved anytime
before the filing of the written statement. While in the unamended
provision, the emphasis was on filing of the first statement on the
substance of the dispute, now the emphasis is on the date of
submitting the first statement. Under the unamended Act, the same
16
was a period and that too an unascertained period, it is not so
under the amended Act.
31. Viewed in the background of the amendments in the CPC
including the recent amendments in CPC in the context of the
Commercial Courts Act, 2015 and the amendments in the Arbitration
Act, 2016, this Court concludes that the amendment is a conscious
step towards prescribing a limitation period for filing the Section 8
application. The mention of the word “date” in the amended
provision means that it is a precise date and usually incapable of
ambiguity. The same is a crystallized date and not a ‘period’ prior to
the filing of the first statement on the substance of the dispute. The
entire intention is that those parties who wish to proceed for
arbitration ought to do so with alacrity and speed and not merely
procrastinate.”
In the instant case, we have read the written statement in which
we do not find a single sentence regarding the arbitration agreement or
that the written statement was filed reserving the right of the present
appellants to file an application under Section 8 of the Arbitration and
Conciliation Act. Even a reference to such arbitration agreement coupled
with a plea of lack of jurisdiction to decide the suit in view of existence of
an arbitration agreement has not been stated or specifically pleaded. It is
well settled by a catena of decisions that where a party has waived his
right to seek arbitration and subjected himself to the jurisdiction of the
court he cannot later turn around and apply for reference under Section
8. Moreover, the said application was filed at a much belated stage.
17
In TRL Krosaki Refractories Ltd. v Lindsay International
Private Limited8, decided by one of us (Soumen Sen, J) the Court
observed as follows-
“Section 4 of the Act refers to rights which are non-derogable.
If it appears to the court that the petitioner with the knowledge of the
arbitration clause had participated in a suit or other proceeding and
invited an adjudication of the dispute on merits other than by way of
arbitration, it would be unwise to refer the parties to arbitration
merely on the basis that there is a valid arbitration agreement
between the parties as it would disentitle such party to apply to the
court for reference of the dispute to arbitration. The doctrine of
election in this context would mean the choice of forum. The Civil
Court ordinarily has plenary jurisdiction to decide all civil disputes.
The parties by agreement cannot confer a jurisdiction on a civil court
which it otherwise does not possess. However, the parties may in
an agreement decide the choice of forum. In the instant case, the
parties have agreed to decide their dispute arising out of the
purchase order to be resolved in arbitration. In a given situation
where notwithstanding the existence of arbitration agreement, if a
party approaches a civil court and the other party does not object to
the jurisdiction of such civil court on the ground of lack of jurisdiction
due to agreed choice of forum, the party forfeits or loses its right to
question the jurisdiction of the civil court later on after the said party
surrenders to the jurisdiction of that court. The submission of
jurisdiction to that court would disqualify a party from seeking a
remedy in a different forum as he has acted in derogation of agreed
procedure. This is what Section 4 of the Act recognizes and if a
party has acted in derogation of the agreement which contains an
arbitration clause, the said party would be considered to have
waived its right to claim adjudication in arbitration. One of the8
A.P. No. 969 of 2017
18circumstances under which a party is precluded from referring the
dispute of arbitration, and as a necessary corollary to it – to seek an
appointment of an arbitrator, is whether the said party has
submitted his first statement on the substance of the dispute before
making an application for referring the dispute forming subject
matter of the suit to arbitration. However, this consideration is not a
matter to be gone into at the Section 11 stage and could be a
relevant factor in deciding an application under Section 8 or before
the arbitrator as in my view, it concerns the competence of the
arbitral tribunal to decide the referred dispute. The plea of waiver is
not a relevant consideration at this stage and hence not decided.
Such question of waiver would depend upon evidence to be adduced
before the arbitrator or before the Court in an application under
Section 8 of Act as the case may be.”
The SLP against the said judgment was dismissed on 15 th
February 2019 being Special Leave to Appeal (C) No. 4285 of 2019
(Lindsay International Private Limited v TRL Krosaki Refractories Limited).
The decision in M/s. Motilal Padampat Sugar Mills (supra) has
no manner of application as in deciding the present matter, we are
required to be consider Section 4 read with Section 8 of the Arbitration
and Conciliation Act, 1996. Both the Sections, if read together, would
clearly show that if it appears to the Court at the stage of deciding an
application under Section 8 that the applicant has acted in derogation of
his right which would, inter alia, include delivering defence on merits
either in the form of a written statement or “first statement on the
substance of the dispute”, it would clearly evince an intention not to
proceed with the arbitration and forfeit the right in future to claim
arbitrator.
19
In view of the fact that the appellants have delivered their defence
on merits without reserving the right to refer the dispute to arbitration it
can be safely concluded that they have acted in derogation of the right
under the arbitration agreement. Accordingly, we do not interfere with the
order of the learned Single Judge for the reasons recorded in this order.
Mr. Basu has submitted that any other recourse to safeguard the
interest of the appellants may not be foreclosed by this order. Reminding
ourselves that a judgment is an authority for what it decides and not what
logically follows from it, legal remedies, if any, available to the appellants
cannot be foreclosed by this judgment. In this judgment, we are only
deciding the matter with regard to the maintainability of the application
under Section 8 of the Arbitration and Conciliation Act.
The appeal and the application fail. However there shall be no
order as to costs.
Urgent Photostat certified copy of this order, if applied for, be given
to the parties upon compliance of all formalities.
(Soumen Sen, J.)
(Apurba Sinha Ray, J.)