Right under Sec.8 of Arbitration Act is not taken away merely because defendant files adjournment application for filing a Written Statement.

Important Judgment on Sec.8 of Arbitration Act.

"Mere filing of an application for extension of time to file written statement before a judicial authority does not constitute‘submitting first statement on the substance of the dispute" - Hon. Apex Court.

The Apex Court in its recent judgment  in the case of Greaves Cotton Limited  V/s. United Machinery and Appliances, has observed as above.

http://judis.nic.in/supremecourt/imgs1.aspx?filename=44393

Facts in short :

1. An agreement containing arbitration clause was executed between the parties for supply of diesel engines by the appellant to the respondent for using the same in the diesel gensets. Incase of any dispute, the matter was to be referred to the Sole Arbitrator, at Mumbai.

2. The plaintiff-respondent filed civil suit in Calcutta High Court  thereby seeking decree for an amount of Rs.4,92,76,854/- towards the loss and damages suffered by it on account of alleged breach of contract on the part of defendant-appellant.

3. In response to the suit summons, the Appellant- Defendant filed an application for adjournment to file Written statement and also invoked the arbitration clause contained in the agreement  by sending a letter to the Plaintiff. 

4. Thereafter the Appellant also field a separate application in High Court U/Sec.8 r/w Sec.5 of the Arbitration act.

5.However said Sec.8 application was rejected by the High Court on the ground that the appellant has, by moving application for extension of time to file written statement, waived its right to seek arbitration and hence the SLP was filed.

Held :

1. The Hon. Apex Court , relying on its earlier judgments Rashtriya Ispat Nigam Ltd. and another v. Verma Transport Co. ((2006) 7 SCC 275) and Booz Allen and Hamilton Inc. v. SBI Homes Finance Limited and others ((2011) 5 SCC 532), held that filing of an application without reply to the allegations of the plaint does not constitute first statement on the substance of the dispute. 

2.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.

4. the Apex Court further observed that the High Court has not looked into important 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.

Its an important judgment as practically in trial court such situations occur many times and time is wasted in deciding the scope of Sec.8.

Thanks and Regards

Adv. Rohit Erande

Pune.