Ameet Lalchand Shah & Ors. v.

Rishabh Enterprises and Another (2018)

Rishabh Enterprises, entered into four agreements for the commissioning of the Photovoltaic
Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh:

i. Equipment and Material Supply Contract (dated 01.02.2012) between Rishabh and M/s
Juwi India Renewable Energies Pvt. Ltd;
ii. Engineering, Installation and Commissioning Contract (dated 01.02.2012) between
Rishabh and Juwi India;
iii. Sale and Purchase Agreement (dated 05.03.2012) between Rishabh and Astonfield
Renewable Pvt. Ltd; and
iv. Equipment Lease Agreement (dated 14.03.2012) between Rishabh and Dante Energy.
Of the above, only the third agreement dated 05.03.2012, was without an arbitration clause.

Disputes arose between the parties when Rishabh raised allegations of fraud and
misrepresentation against Astonfield – that it had induced Rishabh to purchase the Photovoltaic
products for a huge amount. Rishabh filed a police complaint on the basis of which an FIR was
registered. There was also an Income Tax investigation. Meanwhile, the opposite party issued
notice invoking Arbitration and nominated a retired judge as the sole arbitrator.

To counter this Arbitration notice, Rishabh filed a civil suit (commercial) before Delhi High
Court, leveling various allegations including fraud and misrepresentation. In this suit, besides
recovery, the main prayer was to seek a declaration of the contract as void due to serious fraud.

ISSUES
The Supreme Court framed two issues. The first issue is whether the four agreements are inter-
connected to refer the parties to arbitration though there is no arbitration clause in one such
agreement. The second issue is whether Arbitration can be refused on the ground of fraud
inflicted.
DECISION
As regards the first issue, the SC noted that there could be no doubt that all four agreements were
interconnected as they contained references to each other, and were executed with the same
ultimate objective in mind: commissioning of the Solar Plant. In the SC’s view, it was
Agreement 4 which was the main/principle agreement, and the Delhi HC had erred in
considering Agreement 3 as the main agreement. Having noted thus, the SC opined that in such a
case, where several parties were involved in a single commercial project, all parties could be
covered by an arbitration clause contained in the main agreement. The SC also examined the
language of Section 8 of the Arbitration Act as it stood after the amendment of 2015. It was
noted that, firstly, for a Section 8 application to be maintainable, it was no longer necessary for
the applicant to be a party to the arbitration agreement. The section was now equally applicable
to a person claiming “through or under” such party to the arbitration agreement. Secondly, the

1
threshold for referring parties to arbitration upon such application was now a prima facie
existence of a valid arbitration agreement. Thirdly, it was observed that the Law Commission
had itself stated in its 246th Report that the amendments to Section 8 had in fact been proposed
in the context of the SC’s ruling in Sukanya Holdings. Therefore, although the Delhi HC had
found that prima facie no valid arbitration agreement existed in Agreement 3, in the SC’s opinion
it had been regarding the wrong agreement as the primary one. As stated above, the SC found
Agreement 4 to be the principal agreement, which did contain an arbitration clause.

For the second issue, the SC considered the implications in the present case of the allegations of
fraud against the appellants, and their effect on the arbitration agreement in light of the
Ayyasamy case. The SC observed that in the Ayyasamy case, it had been laid down that only in
cases where ‘serious’ allegations of fraud had been levelled, would it be inapposite to refer a
dispute to arbitration. It had simultaneously been noted therein that the courts should not allow
parties to wriggle out of possible arbitrations by making simple allegations of fraud concerning
only internal affairs of parties. In Ayyasamy, the SC had also opined that “The commercial
understanding is reflected in the terms of the agreement between the parties. The duty of the
court is to impart to that commercial understanding a sense of business efficacy.” In the present
case, the SC did not find the allegations of fraud to be particularly egregious in nature, and
therefore sought to impart a sense of business efficacy to the commercial matter. Thus, the SC
referred all the parties to arbitration, and commercial suit filed by the Respondents was
considered disposed of on those terms.
Cheran Properties Lmt v. Kasturi Sons Lmt. (2018)
An agreement was entered on July 19, 2004 between Sporting Pastime India Limited (“SPIL”),
Kasturi Sons and Limited (“KSL”), KC Palanisamy (“KCP”) and Hindcorp Resorts Private
Limited (“Hindcorp”). Under the agreement, SPIL was to allot 240 lakh equity shares to KSL
against the book debts due by it to KSL. KSL offered to sell 243 lakh equity shares to KCP. KCP
agreed to take over the business, shares and liabilities of SPIL as per the Shareholders
Agreement (“SHA”).
Clause 14 of the SHA provided:
“KSL hereby recognizes the right of KCP and/or his nominees to sell or transfer their holding in
SPIL to any other person of their choice, provided the proposed transferees accept the terms and
conditions mentioned in this agreement for the management of SPIL and related financial
aspects covered by this agreement”.
The SHA also contained a provision for dispute resolution by arbitration.
On 17 August 2004, a letter was sent from KCP, acting as the authorized signatory of Cheran
Properties Limited (“Cheran”), to KSL stating as under (“Letter”):
“Re: SHARE PURCHASE AGREEMENT DT. 19. 7. 04

2
 In pursuance of the above Agreement, you have agreed to sell and our Group Companies, by
themselves and/or by their nominees have agreed to purchase shares in Sporting Pastime India
Limited of a face value of Rs. 2,430 lakhs, for a sum of Rs. 243.00 lakhs.
Accordingly, we send herewith seven Share Transfer Deeds duly executed by us and we request
you to execute the same and lodge them with Sporting Pastime India Limited together with
relevant Share Certificates for registering the transfers in the following names… [including
Cheran Properties Limited]”.
KCP failed to comply with its obligations under the Agreement. KSL and Hindcorp initiated
arbitration proceedings against KCP and SPIL. On December 19, 2009, the arbitral tribunal made
its award directing KCP and SPIL to return the share certificates of SPIL to KSL and Hindcorp.
Contemporaneously, KSL was directed to pay an amount of INR 3,58,11,000 together with
interest at 12% p.a. on a sum of INR 2,55,00,000.
KCP challenged this award under Section 34 of the A&C Act. The challenge was dismissed by
the High Court of Madras and subsequently by the Supreme Court. The award attained finality.
 Since the award attained finality, KSL initiated proceedings against Cheran (on the basis
that Cheran is a nominee of KCP) to execute the award which directed transmission of shares.
KSL approached the NCLT to seek rectification of the register of SPIL under Section 111 of the
Companies Act, 1956 to effectuate the transmission of shares. The NCLT held that that Cheran is
a nominee of KCP and holds shares on its behalf. As such, NCLT had jurisdiction to entertain
the proceedings against Cheran for rectification of the register in order to effectuate the
transmission of shares from Cheran to KSL. This position was upheld by the NCLAT and the
Madras High Court on appeal. The present decision of the Supreme Court was rendered in an
appeal filed by Cheran (“Appellant” / “Cheran”) against the decision of the High Court of
Madras. The appellant, Cheran, contended that it is not a signatory to the SHA, and hence, not a
party to the arbitration agreement under the SHA. Therefore, an arbitral award issued under the
terms of the SHA did not bind it.
ISSUES
The two issues before the SC in this case were as follows: a) Whether the Appellant was bound
by the Award, though it was neither a party to the arbitration agreement, nor a party in the
arbitral proceedings; b) Whether proceedings for enforcement of the Award would be
maintainable before the NCLT.
DECISION
With respect to the first issue, the SC relied on the decision of Chloro Controls Pvt. Ltd. v.
Severn Trent Water Purification Inc.1 and the English “group of companies doctrine”,
whereunder, depending on the nature of the transaction, an arbitration agreement which is
entered into by a company within a group of companies may bind non-signatory affiliates, if the
circumstances are such as to demonstrate the mutual intention of parties to bind both signatories
and non-signatories. The SC stated that the law has evolved to recognise that modern business

3
transactions are increasingly carried out through multiple agreements, and there may be
intrinsically related transactions within a corporate group. In holding a non-signatory bound by
an arbitration agreement, factors such as relationship of a third party to the signatory party,
commonality of the subject matter, and the composite nature of the transaction must be taken
into account.
The Court placed heavy reliance on the case of Chloro Controls to expound on the principles and
categories of relationships which would qualify a non-signatory to be a person claiming under a
party. The first category involved relationships entailing third-party beneficiaries, guarantors,
assignment and other transfer mechanisms of contractual rights. The legal basis to connect these
relationships is implied consent and good faith. The second category involves agent and
principal, apparent authority, piercing of veil, joint venture relations, succession and estoppel;
the legal basis being force of the applicable law. The third category involves group of
companies. The legal basis to connect an arbitration agreement entered by a company within a
group of companies with its non-signatory affiliates is mutual intention i.e. if the circumstances
demonstrate that the mutual intention of the parties was to bind both the signatory as well as the
non-signatory parties.
The SC also relied on section 35 of the Arbitration and Conciliation Act, 1996 (“Act”), which
states that an arbitral award “shall be final and binding on the parties and the persons claiming
under them respectively”. The SC found that the Letter had contained a clear reference to the
Agreement, and it was in pursuance of that Agreement that the group companies had agreed to
purchase the shares of SPIL. KCP had been acting in the capacity of the authorised signatory of
the Appellant and therefore, the Appellant had clear knowledge and intention that it would be
bound by the terms of the Agreement. Further, the Agreement itself provided that KCP could
transfer shares to its nominees only on the express condition that the nominee would abide by the
terms of the Agreement. Therefore, the SC found that the elements of section 35 of the Act were
sufficiently met, and that the Appellant was claiming under KCP. In the circumstances, the
Appellant would be bound by the Award, notwithstanding the fact that it was not a party to the
arbitration agreement or proceedings.
For, maintainability of proceedings before the NCLT was concerned, the SC opined that the
terms of the Award required transmission of the shares back to KSL, which could only be
effectuated by rectification of the register of SPIL. Therefore, the proceedings before the NCLT
were held maintainable.

Indowind Energy Ltd. v. Wescare (India) Lmt and Anr. (2010)

The first respondent, Wescare (India) Ltd, operates wind farms and generates power from wind
electricity generators. On February 24 2006 Subuthi Finance Ltd, the second respondent and the
promoter company of the appellant Indowind Energy Ltd, entered into an agreement with
Wescare for the transfer of assets worth Rs981.9 million from Wescare to Subuthi and its
nominee (ie, Indowind).

Clause 10 of the agreement provided for an arbitration clause, which read as follows:

4
"This AGREEMENT shall be governed by and interpreted in accordance with the laws of India.
The Parties submit to the exclusive jurisdiction of the court in the city of Chennai, Tamil Nadu.
Any dispute, difference, claims or questions arising under this agreement or concerning any
matter covered by this Agreement or touching upon this Agreement, the same shall be referred to
arbitration before a sole arbitrator to be appointed by consent of Seller, Buyer/IW. The
decision/award of the Sole Arbitrator shall be final and binding on all parties. The provisions of
the Arbitration and Conciliation Act, 1996 with such amendments there to as may be applicable,
shall apply to the proceedings. The venue of the arbitration shall be Chennai and the language
of the Arbitration shall be English."
Further, Clause 11 of the agreement related to approval of the agreement and read as follows:

"Notwithstanding anything to the contrary herein contained in this AGREEMENT this

agreement is expressly subject to the approval of the respective Boards of
Directors/Shareholders by the Seller, the Buyer and Indowind Energy Limited and if such
approval is not obtained either by the Seller, the Buyer or IW on or before 30th June 2006 this
AGREEMENT shall be null and void and of no effect whatsoever and all transactions done
under the agreement shall be reversed with all the costs and damages to the defaulting party."
The boards of directors of Wescare and Subuthi approved the agreement on February 28 2006
and March 1 2006 respectively. However, there was no such approval by the board of directors
of Indowind.

Disputes arose between Wescare on the one hand and Subuthi and Indowind on the other.
Consequently, Wescare approached the Madras High Court seeking interim relief under Section
9 of the Arbitration and Conciliation Act. The single judge of the high court dismissed the
applications, but clarified that nothing contained in the dismissal order should be construed as a
final finding on merits and that the arbitrator should be free to decide the issues raised before
him.

Subsequently, Wescare filed an application under Section 11(6) of the act seeking appointment
of an arbitrator under the terms of the arbitration agreement between the parties. Subuthi resisted
the application, claiming that no transaction had taken place between Wescare and Subuthi and
hence there was no reason for the dispute, and that consequently the appointment of an arbitrator
was inconsequential. Indowind, on the other hand, claimed that as it was not a party to the main
agreement and had not ratified the same, there was no arbitration agreement between Wescare
and Indowind.

Through its decision dated August 1 2008, the high court allowed the application under Section
11(6) and appointed a sole arbitrator to arbitrate the disputes between the parties. Aggrieved by
the decision, Indowind preferred a special leave to appeal and approached the Supreme Court.

ISSUE
There were two issues before the Supreme Court. The first was whether an arbitration clause
between two parties can be considered as a binding arbitration agreement on a person that is not

5
a signatory to the agreement. The second was whether a company could be said to be a party to a
contract containing an arbitration agreement, even though it did not sign the arbitration
agreement, on account of subsequent conduct.

DECISION
While relying on Section 7 of the act, the Supreme Court observed that two conditions must be
met for an agreement to be a valid arbitration agreement within the meaning of Section 7: the
agreement must be between the parties to the dispute and must relate to or be applicable to the
dispute.

Applying these conditions to the facts of the case, the court observed that Indowind had not
entered into the main agreement (ie, the agreement dated February 24 2006) and had expressed
no intention of entering into an arbitration agreement. Further, there was no exchange of
statements of any claim or defence and no exchange of letters, telegrams or other means of
telecommunication that provided any record of an arbitration agreement between the
parties. Therefore, in the absence of an arbitration agreement between Wescare and Indowind, no
claim against or dispute with Indowind could have been the subject matter of reference to an
arbitrator.

With reference to the second issue, the court observed that Subuthi and Indowind were two
independent companies incorporated under the Companies Act 1956. Each company was a
separate and distinct legal entity, and the mere fact that the two companies had common
shareholders or common boards of directors did not make the two companies a single entity. The
court further held that the mere existence of common shareholders or directors could not lead to
an inference that one company was bound by the acts of the other.

The court reasoned that if the director who signed on behalf of Subuthi was also a director of
Indowind, and if the parties' intention was for Indowind to be bound by the agreement, nothing
had prevented Wescare from insisting that Indowind be made a party to the agreement and
requesting that the director who signed for Subuthi also sign on behalf of Indowind. Further, the
facts that the parties carefully and consciously avoided making Indowind a party, and that the
director of Subuthi, although a director of Indowind, was careful not to sign the agreement on
behalf of Indowind, all revealed that the parties did not intend Indowind to be a party to the
agreement.

Therefore, the mere facts that Subuthi described Indowind as its nominee or as a company
promoted by it, or that the agreement was purportedly entered into by Subuthi on behalf of
Indowind, did not make Indowind a party in the absence of Indowind's ratification, approval,
adoption or confirmation of the agreement dated February 24 2006.

A further important point was that Clause 11 of the agreement dated February 24 2006 clearly
stated that the agreement would be null and void and of no effect whatsoever unless it was

6
expressly approved by the respective boards of directors or shareholders of Wescare, Subuthi and
Indowind. Indowind's board of directors had not approved the agreement.

Therefore, the court held that if an arbitration clause is found in an agreement between two
parties, it cannot be considered a binding arbitration agreement on a person who is not a
signatory to the original agreement.

Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private
Limited and Anr (2016)

An application under Section 11 of the Arbitration and Conciliation Act, 1996 ('Act') was filed
by Reckitt India for appointment of an arbitrator pursuant to an agreement between Reckitt India
and Reynders India ('Agreement'). Reckitt India also impleaded a Belgian based affiliate of
Reynders India (Reynders Belgium) despite it being a non-signatory to the Agreement. Both
Reynders India and Reynders Belgium were constituents of the same group of companies known
as Reynders Label Printing Group (Reynders Group). The application was accordingly filed
before the Supreme Court on the premise that Reynders Belgium was an entity incorporated in a
country other than India and consequently, this was an international commercial arbitration.

During pre-negotiations stage, the Reckitt India shared a draft of agreement along with its code
of conduct and anti-bribery policy with the R1. This email was reverted by one Mr Frederik
Reynders who as per the Petitioner was the promotor of Reynders Etiketten NV (R2) which is
one of the group companies of Reynders Label Printing Group and is established under the laws
of Belgium.

In this email, Mr Frederik Reynders wrote “please find attached the contract with some
comments of our HQ in Belgium”. In the same email, Mr. Reynders also stated
that for Clause 9.1 of the draft Agreement, “I will provide you with an document of our
Insurance to inform you about our maximum coverage”. As per the Petitioner, this made R2 a
party to the agreement entered into between R1 and Petitioner.
In deciding the application, the Court had to, inter alia, consider whether it was manifest from
the correspondence exchanged between the parties, culminating in the Agreement, that the
relationship envisaged in the Agreement was between Reckitt India and the Reynders Group and
whether it was a clear intention of the parties to bind both the signatory as well as non-signatory
party ie Reynders Belgium.

Reckitt India referred to a clause in the Agreement whereby Reynders Belgium agreed to
indemnify Reckitt India in case of any loss or damage caused on account of acts and omissions
by Reynders India, therefore arguing that Reynders Belgium formed an integral party to the
Agreement which contained an arbitration clause. Reckitt India further argued that Reynders
Belgium was a part of the exhaustive negotiations in relation to execution of the Agreement. To
further this point, it pointed to correspondence from a Mr Frederik Reynders, purportedly a

7
promoter of Reynders Belgium, and who was allegedly acting for and on behalf of Reynders
Belgium while the Agreement was being finalised; therefore, indicating Reynders Belgium's con-
sent to arbitration. Reckitt India argued that Reynders Belgium was the disclosed principal on
whose behalf Reynders India had executed the Agreement.

Reynders Belgium submitted that it had no presence or operation in India and was not involved
in the negotiation, execution and/or performance of the Agreement; neither was there any privity
of contract between itself and Reckitt India. It further argued that Reynders India and Reynders
Belgium were only part of the Reynders Group, which was an internationally operating group of
seven printing companies, each with their own separate legal entities operating from different
offices. Both Reynders India and Reynders Belgium had a common holding company being
Reynesco NV. Reckitt Belgium also clarified that Mr Frederik Reynders wasn't the promoter of
Reynders Belgium and was only an employee of Reynders India.

DECISION

Having considered the submissions of both sides, the Court held that the burden was on Reckitt
India to establish that Reynders Belgium had an intention to consent to the arbitration agreement
and be a party there-to, even if it was for the limited purpose of its obligations to indemnify
Reckitt India for damages and loss caused due to acts and omissions of Reynders India. This
burden, the Court found, had not been successfully discharged by Reckitt India.

The Court found that Reynders Belgium was neither the signatory to the arbitration agreement
nor did it have any causal connection with the process of negotiations preceding the Agreement
or the execution thereof. From the facts placed before it, it found that Mr Frederik Reynders was
only an employee of Reynders India, who acted in that capacity during the negotiations
preceding the Agreement, and was in no way associated with Reynders Belgium.

Having considered the facts on record, it therefore held that Reynders Belgium was neither a
party to the Agreement nor had it given its assent to the arbitration agreement and that the fact of
Reynders Belgium and Reynders India belonging to the same group of companies made no
difference.

Having held that Reynders Belgium could not be made party to the arbitration, technically, the
Court could therefore no longer grant reliefs under the application filed on the premise of an
international commercial ar-bitration. However, in the interest of justice and possibly by virtue
of the consent of Reynders India, it went ahead and appointed an arbitrator to conduct domestic
commercial abitration between Reckitt India and Reynders India.

Sukanya Holdings Pvt Lmt. V. Jayesh H. Pandya

8
A suit for dissolution of partnership firm and accounts and challenging the conveyance deeds
executed by the partnership firm in favour of M/s West End Gymkhana Ltd. was filed by
Respondent 1. On the same day, an arbitration petition under Section 8 of the Act was filed by
the appellant, another partner in the firm. The High Court rejected the petition taking the view
that in the suit from the relief of dissolution and accounts, the plaintiff has prayed other reliefs.
All the defendants to the suit are not parties or partners in the partnership firm and the terms of
the partnership deed including the arbitration clause are not binding on them. Only part of the
subject-matter could at the most be referred to arbitration. Further, there is no power conferred
on the court to add parties who are not parties to the agreement in the arbitration proceedings.
The court also negative the alternative prayer for referring part of the subject matter in respect of
those parties who are parties to the partnership agreement which contains arbitral clause on the
ground that such procedure is not contemplated under the Act.

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 8. The words 'a
matter' indicates entire subject matter of the suit should be subject to arbitration agreement.

The next question which requires consideration is even if there is no provision for partly
referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act?
In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of
the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the
suit between parties who are parties to the arbitration agreement and others is possible. This
would be laying down a totally new procedure not contemplated under the Act. If bifurcation of
the subject matter of a suit was contemplated, the legislature would have used appropriate
language to permit such a course. Since there is no such indication in the language, it follows
that bifurcation of the subject matter of an action brought before a judicial authority is not
allowed.

Rashtriya Ispat Nigam and anr v. Verma Transport Co. (2006)

The Appellant No.1 is a Public Sector Undertaking. It is engaged, inter alia, in the business of
manufacturing and marketing of iron and steel products. The Respondent is a partnership firm. It
is engaged in the business of consignment agents. It has its office at Jalandhar. A contract was
entered into by and between the parties hereto in regard to the handling and storage of iron and
steel materials of the Appellant at Ludhiana. The Appellants contend that one Shri Anil Verma,
Partner of the Respondent-Firm had constituted various firms and companies and obtained
several consignment agency contracts from the Appellant pertaining to Delhi, Faridabad,

9
Chandigarh and Ludhiana etc. who conspired with certain officials of the Appellants and
obtained payments @ Rs.140/- per M.T. in place of Rs.36/- per M.T. on a false plea that the
Transport Union at Bahadurgarh did not permit transportation of goods without levy of a fee of
Rs.100/- per M.T. on transportation of such goods. An investigation was conducted by the
Central Bureau of Investigation and a criminal case was initiated against Shri Anil Verma and
the concerned officials of the Appellants. Allegedly, with the object of presenting a clean image
to the Appellants and with a view to avoid termination of all the contracts by them, a plea was
put forth that Shri Anil Verma had resigned from the partnership firm as also from his other
firms/companies. According to the Appellants, the said Shri Anil Verma was replaced by his
family members as a partner of the said firm but he continued to be in complete control over the
firms/companies. The contract of the Respondent was terminated by the Appellants on
23.05.2002. On the same day, a show cause notice was also issued to Shri Anil Verma as to why
he and his firms/companies should not be black listed.

The Respondent-Firm, however, filed a for grant of permanent injunction restraining the
Appellants herein from in any manner blacklisting the Respondent-Firm or terminating the
consignment agency contract. On an application for injunction having been filed, the Civil Judge,
Junior Division, directed the parties to maintain status quo in regard to the status of the
Respondent-Plaintiff herein qua termination of the contract as also the order of blacklisting. The
Appellants appeared to have sought for time to file written statement. They also filed a rejoinder
to the counter affidavit to the application for injunction wherein it took a specific plea that the
subject-matter of the suit being covered by the arbitration agreement entered into by and between
the parties, it was not maintainable. On 07.06.2002, they filed an application under Section 8 of
the 1996 Act, which was rejected by the Civil Judge, Junior Division by an order dated
03.10.2002, holding : The applicants/defendants have already filed a reply to application u/o 39
Rules 1 and 2 read with Section 151 CPC and sought 15 days time to file written statement
clearly proves that the process of the suit has already begun and the defendants have already
entered into a defence of the suit meaning thereby they have subjected themselves to the
jurisdiction of the Civil Court.

ISSUE

Whether filing a reply to the interim injunction proceedings will mean “submitting his first
statement on the substance of the dispute” and forgoing the arbitration proceedings?

DECISION

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

10
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 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 the instant case, the court had already passed an
ad interim ex pare injunction. The Appellants were bound to respond to the notice issued by the
Court. While doing so, they raised a specific plea of bar of the suit in view of the existence of an
arbitration agreement. Having regard to the provisions of the Act, they had, thus, shown their
unequivocal intention to question the maintainability of the suit on the aforementioned ground.

11