Arbitration and Conciliation Act, 1996 — S.8 — “First statement on the substance of the dispute” — Meaning
Expression “first statement on the substance of the dispute” in S.8 refers to the first substantive pleading filed in the very suit in which reference to arbitration is sought — Institution of a separate civil suit by the same party in another court, on a different cause of action, cannot be treated as submission of first statement in the later suit — No waiver of arbitration clause.
[Paras 19–21, 33–37, 49(1)–(3)]
Arbitration and Conciliation Act, 1996 — S.8 — Waiver of arbitration clause — When arises
Waiver depends on conduct of party in the proceedings before the same judicial authority — Filing of a prior suit for defamation in another court does not amount to waiver of arbitration clause in a subsequent recovery suit governed by arbitration agreement — Trial court erred in holding waiver.
[Paras 26–27, 34–37, 49(2)–(3)]
Arbitration and Conciliation Act, 1996 — S.8 — Filing of application — Timing
Application under S.8 filed before submission of written statement in the suit is maintainable — Written statement is ordinarily the first statement on substance of dispute — Application filed prior thereto cannot be rejected as belated.
[Paras 18–21, 33, 35–37, 49(2)]
Arbitration and Conciliation Act, 1996 — S.8 — Effect of unstamped / insufficiently stamped arbitration agreement
Objection relating to non-stamping or deficit stamping of agreement does not fall for determination at S.8 stage — Non-stamping is a curable defect — Arbitration agreement not rendered void or unenforceable — View in N.N. Global Mercantile no longer good law in view of Constitution Bench decision in Interplay between Arbitration Agreements and Stamp Act.
[Paras 38–41, 49(4)]
Arbitration and Conciliation Act, 1996 — S.8 — Scope of judicial scrutiny — Arbitrability
At referral stage, court’s jurisdiction is limited — Court may refuse reference only where arbitration agreement is ex facie non-existent, invalid, or dispute is manifestly non-arbitrable — In cases of doubt, reference must be made — Arbitrability issues ordinarily for arbitral tribunal.
[Paras 42–47, 49(5)]
Arbitration and Conciliation Act, 1996 — S.37 — Appeal — Interference with refusal to refer to arbitration
Order refusing reference to arbitration on erroneous grounds of waiver and stamping is legally unsustainable — Appellate court justified in setting aside such order and remanding for fresh consideration.
[Paras 48–50]
ANALYSIS OF LAW AND FACTS
1. Nature of Proceedings
The appeal under Section 37 of the Arbitration and Conciliation Act, 1996 challenged the order of the II Additional Senior Civil Judge, Visakhapatnam, rejecting an application under Section 8 seeking reference of parties to arbitration in a suit for recovery of amounts.
[Paras 1–2, 6–9]
2. Factual Background
The respondent/plaintiff filed O.S. No. 368 of 2022 for recovery of amounts arising out of transportation of goods governed by consignment notes containing an arbitration clause. The appellant/defendant applied under Section 8 to refer the dispute to arbitration.
[Paras 3–4, 22–25]
3. Trial Court’s Reasoning
The trial court rejected the Section 8 application on two grounds:
(i) the appellant had waived the arbitration clause by earlier filing S. No. 1777 of 2022 (a defamation suit) before the City Civil Court, Mumbai; and
(ii) the consignment notes were unstamped, rendering the arbitration clause unenforceable.
[Paras 7–9]
4. Meaning of “First Statement on the Substance of the Dispute”
The High Court undertook an elaborate analysis of Section 8, relying on Rashtriya Ispat Nigam Ltd. and Booz Allen, and held that the “first statement” must relate to the same proceedings in which reference is sought.
A statement made in a different suit, before a different court, on a distinct cause of action, cannot constitute the first statement in the later suit.
[Paras 19–21, 33–37]
5. No Waiver by Filing Defamation Suit
The earlier Mumbai suit was for damages for defamation, whereas the Visakhapatnam suit was for recovery of amounts under consignment notes. The Court held that filing the former could not amount to waiver of arbitration in respect of the latter.
[Paras 34–37, 49(3)]
6. Stamping Objection — Effect of Constitution Bench Ruling
The Court held that the trial court’s reliance on N.N. Global Mercantile was erroneous in view of the Constitution Bench decision in Interplay between Arbitration Agreements and the Stamp Act, which clarified that stamping objections cannot be decided at the S.8 stage.
[Paras 38–41, 49(4)]
7. Arbitrability and Limited Judicial Review
Applying Vidya Drolia and M. Hemalatha Devi, the Court reiterated that arbitrability questions are to be examined only within a narrow, prima facie framework at the referral stage, and not by conducting a mini-trial.
[Paras 42–47, 49(5)]
8. Final Decision
The appeal was allowed. The impugned order dated 19-09-2023 was set aside, and the trial court was directed to reconsider the Section 8 application on merits in accordance with law.
[Paras 49–50]
Ratio Decidendi
For the purposes of Section 8 of the Arbitration and Conciliation Act, 1996, the “first statement on the substance of the dispute” means the first substantive pleading filed in the same suit in which reference to arbitration is sought. Filing of a separate suit in another court on a different cause of action does not amount to waiver of the arbitration clause. Objections relating to stamping of the arbitration agreement are not to be decided at the referral stage.
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