Case: Greaves Cotton Limited Vs. United Machinery And Appliances

Respondent United Machinery and Appliances are manufacturers of diesel generator sets. An agreement containing arbitration clause was executed between them for supply of diesel engines by the appellant to the respondent for using the same in the diesel gensets. Arbitration clause contained in Article 10.1 of agreement dated 02.07.2007 (copy Annexure P-1) reads as under:Any dispute or difference whatsoever arising between the parties out of or relating to the construction, meaning, scope, operation or effect of this Agreement or the validity or the breach thereof shall be referred to a Sole Arbitrator to be appointed by Greaves. The decision of the Arbitrator shall be final and binding upon the parties. The venue of arbitration shall be Mumbai. The arbitration proceedings shall, in all other aspects, be governed by the provisions of the Arbitration and Conciliation Act, 1996 or any subsequent statutory enactment in placeplaintiff-respondent filed civil suit (CS No. 2 of 2015) 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. The High Court, in its original side, issued summons in the suit on 06.01.2015 to the appellant. On the other hand, the appellant sent communication to the respondent claiming that it was the respondent who has to pay outstanding dues of Rs. 1,04,53,103/- to the appellant. The appellant, in response to the summons, on 07.07.2015 moved an application (copy Annexure P-6) before the High Court seeking extension of time for eight weeks to file written statement and invoked the arbitration clause contained in the agreement dated 02.07.2007 by sending a letter dated 08.07.2015 (copy Annexure P-7) to the respondent, in response to which, vide communication dated 13.07.2015 (copy Annexure P-7), it denied the claim of the appellant, and objected to invocation of arbitration clause on the ground of pendency of civil suit before the High Court. Thereafter, the appellant moved Application GA No. 2998 of 2015 (copy Annexure P-10) under Section 5 read with Section 8 of the Arbitration and Conciliation Act, 1996 (for short "the 1996 Act"), in the suit seeking reference of the disputes between the parties forming the subject-matter of the suit, for arbitration, which is 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. Hence, this appeal through special leave.

Court's reasoning:
12. In view of the law laid down by this Court, as above, 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.13. From the order impugned, it also reflects that 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 (supra) except the point, which has already been answered in the present case by us.