Mere filing of an Arbitration Application does not loses Court's Jurisdiction [Case Law]

Arbitration and Conciliation Act, 1996 - Ss. 5 & 8 - On a mere filing of an application under section 8 of the arbitration act the court does not loses its jurisdiction to pass any further orders either in the main proceedings or in the supplementary or incidental proceedings in the said suit.

Held, Once an application is being filed under Section 8, the Court would first have to form a view as to whether the disputes which are pending between the parties are within the preview of the Arbitration Act and the matters which are subject matter of proceedings where the application under Section 8 is filed are covered by the arbitration agreement. The judicial authority has to hence first come to a conclusion that the requirements of Section 8 have been fulfilled before referring the parties to arbitration. Till pendency of the application under section 8 of the Arbitration Act for supplemental and incidental proceedings including passing of interlocutory orders, there is no jurisdictional bar to pass orders and directions. There is nothing to show that miscellaneous and incidental proceedings cannot go on before the court. Even a reading of section 5 and section 8 of the Arbitration Act does not show that on a mere filing of an application under section 8 of the arbitration act the court loses its jurisdiction to pass any further orders either in the main proceedings or in the supplementary or incidental proceedings in the said suit. No such interpretation can follow from a reading of section 5 and section 8 of the arbitration act.

IN THE HIGH COURT OF DELHI AT NEW DELHI

CORAM: HON’BLE MR. JUSTICE JAYANT NATH

Pronounced on: 21.05.2018

CO.A(SB) 26/2008

MR. DEEPAK KHOSLA ..... Appellant Through Mr.Deepak Khosla in person 

versus 

UNION OF INDIA & ORS. ..... Respondent Through Mr.P.Nagesh and Mr.Anand M.Mishra, Advs. 

JAYANT NATH, J.

1. This appeal is filed under Section 10 F of the Companies Act, 1956 seeking to quash/strike down and/or declaring null & void and void ab initio all the orders passed by the Company Law Board (herein referred to as “CLB”) in Co. Pet. 114/2007 between 20.10.2008 and after 31.08.2007 as being coram non judice.

2. The genesis of the present appeal relates to a land in Kasauli, Dist. Solan, Himachal Pradesh. The land was owned by the appellant/family of the appellant/respondent No.3. Some of the persons being part of the Appellant Group entered into an MOU dated 21.12.2005 with Mr.Vikram Bakshi. The project was a joint venture between the Appellant Group and Bakshi Group. There was to be some transfer of share holding in favour of Bakshi Group. Pursuant to the MOU, Mr.Vinod Surha and Mr.Wadia Prakash, nominees of Mr.Vikram Bakshi were appointed as additional directors of respondent No. 3 Company.

3. Disputes arose between the parties. Mrs. Sonia Khosla wife of the appellant filed a petition under Sections 397 and 398 of the Companies Act, 1956 before the Company Law Board (CLB). The allegation of Mrs.Sonia Khosla in the petition was that she held 49% shares in the Company which have been reduced to 36% and that the affairs of the Company were being managed in a manner being oppressive to the minority shareholders.

4. There are events that arose thereafter. According, to the appellant, Mr. Wadia Prakash and Mr.Vinod Surha ceased to be directors of the Company on 30.09.2006. Further, on 18.12.2007 in a purported meeting of the Company held Mr. Deepak Khosla and Mr. R.K. Garg were appointed as directors of the Company and the Board allotted 6.58 lakhs equity shares to 11 persons being part of the Appellant Group. The Bakshi Group of course have stated that the alleged meeting of 18.12.2007 was illegal.

5. The CLB vide its order dated 31.01.2008 where the matter was pending directed the parties to maintain status quo with regard to the shareholdings and the directors of the Company as it existed on the date of filing of the petition i.e. 13.08.2007.

6. Three appeals have been filed against the said order dated 31.01.2008 before this Court. Mr. R.P.Khosla, father of the appellant herein filed an appeal being Co. A. (SB) No. 7/2008. This appeal was disposed of by order dated 11.04.2008. The appeal was disposed of noting that both the parties agree that Mrs.Sonia Khosla will withdraw Co. Pet. 114/2007 because the arbitration clause had already been invoked. Both the parties therein agreed that they shall maintain status quo with regard to the shareholdings and the fixed assets of the respondent Company as it stood at the time of filing of the petition before the CLB. Other directions were also agreed upon. The submission of the learned counsel appearing for the Bakshi Group was noted that they shall not oppose withdrawal of the company petition pending before the CLB. It was also agreed that the functioning of respondent No. 3 Company shall be subject to orders to be passed by the Arbitral Tribunal.

Another appeal was filed by Mrs.Sonia Khosla being Co. Appeal (SB) No. 6/2008. This was disposed of on 22.04.2008. This court noted that as the matter is sub-judice before a panel of arbitrators, it would be appropriate that the parties maintain status quo with regard to the composition of the Board and shareholdings as it existed on the date of filing of petition by Mrs.Sonia Khosla before the CLB i.e. 13.08.2007. Mrs.Sonia Khosla filed a review against the order of this court dated 22.04.2008. This court on 06.05.2008 dismissed the said review petition noting that the order was dictated in the presence of the counsel for both the parties. Similarly, Mr. R.P.Khosla filed a review petition which was dismissed as withdrawn on 06.05.2018. The appellant herein moved an application being Co. Appl. 487/2008 in Co. Appeal No.7/2008. This court on the said date i.e. 06.05.2008 noted the contention of the appellant that the order disposing of the appeal dated 11.04.2008 should not bind the appellant. This court took the said submission on record with liberty to the appellant to take appropriate remedy as available to him in law.

7. The third appeal was filed by Mr.R.K. Garg who claimed that he was prejudiced by the order of the CLB dated 31.01.2008 as he had been removed as a director without a hearing. This company appeal being Co. A(SB) 23/2009 came up for hearing on 13.04.2010 when this court issued notice in the appeal and the application for condonation of delay and ordered that the operation of the impugned order dated 31.01.2008 as far as it cancels the shareholdings of the appellant and his directorship shall remain stayed.

8. Against the said order dated 13.04.2010 and some other orders, an SLP being SLP No. 23796-98/2010 was filed by Mr. Vikram Bakshi before the Supreme Court. The SLP was disposed of by order dated 08.05.2014 with the directions to the CLB to decide Co. Pet. 114/2007 filed by Mrs. Sonia Khosla within a period of six months. The CLB was also directed to decide the application filed under Section 340 Cr.P.C. filed by Mrs. Sonia Khosla. Similarly, the question as to whether Sh. R.K. Garg was validly inducted as a director or not was to be gone into by the CLB and the proceedings in the company appeal i.e. Co. Appeal (SB) No. 23/2009 filed by Mr. R.K. Garg in the High Court were held to be otiose.

9. The present appeal is also emanating from the Company Petition No. 114/2007 that was filed by Mrs. Sonia Khosla. This appeal has been filed on 11.11.2008. It has been pleaded that there are two principal grounds on which relief has been sought to declare null and void all the orders passed by CLB in Co. Pet. 114/2007 between 20.10.2008 and after 31.08.2007. The first ground is said to be lack of subject matter jurisdiction in relation to all the orders passed after 31.08.2007 that being the date when notice was issued on the application under Section 8 of Arbitration and Conciliation Act filed by the Bakshi Group. The second ground urged is that there is a fraud inasmuch as the order dated 31.01.2008 was passed despite patently false averments contained in para 7 of Co.Application 1/2008 filed on 01.01.2008.

10. Regarding the first ground it has been strongly urged that on 31.08.2007 after verifying existence of an arbitration clause in the agreement dated 31.03.2006, notice was issued in the application filed under Section 8 of Arbitration Act filed by Mr.Vikram Bakshi which was prima facie a judicial recognition of the merit of the said application and secondly lack of jurisdiction of the CLB to deal with the matter. It is stated that despite issue of notice on the said application under Section 8 of the Arbitration Act on 31.08.2007, no decision was taken by the CLB on the question of its jurisdiction and yet the CLB continued to pass orders after orders. Reliance is placed on the judgment of the Madhya Pradesh High court in State of M.P. vs. Harsh Mood Products Pvt. Gwalior Ltd, AIR (1989) NOC 13 (MP) to contend that CLB had no jurisdiction to pass the orders after 31.08.2007. It has also been pleaded that though the appellant attended the hearings after 31.08.2007 but he has at no stage given a waiver to his plea that unless the application under Section 8 of the Arbitration Act application is decided by the CLB, it has no jurisdiction to pass any order till date. It is further urged that if ever there is any waiver or acquiescence on the part of the appellant, it is settled law that no waiver or consent can confer jurisdiction on a court which inherently lacks it. An order passed without jurisdiction is a nullity and void ab initio. Reliance is also placed on the orders passed by the CLB dated 20.10.2008, 28.07.2008 where it is pleaded that the Board has itself admitted that it does not have jurisdiction to pass orders on any matters because the application under Section 8 of the Arbitration Act is pending.

11. I have heard the appellant in person and learned counsel appearing for the respondent. The appellant has made various submissions. However, the broad contentions which can be culled out from his submissions are as follows:-

(i) He submits that in view of the fact that Mr. Vikram Bakshi had moved an application under Section 8 of the Arbitration Act on 31.08.2007, the CLB ceased to have any jurisdiction to pass any further orders subsequently till it first settles the fundamental issue of its own jurisdiction. As it failed to do so all other orders passed subsequent to 31.08.2007 till 20.10.2008 are void ab initio and non-est. It is further pleaded that lack of jurisdiction by the CLB is further proved by the orders passed by CLB itself on 20.10.2008 and 28.07.2008 where the CLB has itself conceded that it does not have jurisdiction to pass any orders.

(ii) It is pleaded that the appellant need not seek any declaration that the said orders are void ab initio as they are deemed to be a nullity. Reliance is placed on the judgment of the Supreme Court in Nawabkhan Abbaskhan vs State of Gujarat, (1974) 2 SCC 121 to support the said contention.

(iii) It is further pleaded that this court may not go into the issue of limitation at this stage. Reliance is placed on the orders passed by this court on 13.04.2010 in Co. Appeal(SB) 23/2009 titled as “R.K. Garg vs. Union of India” where Mr. R.K. Garg had filed an appeal against the order dated 31.01.2008 of the CLB. This Court had concluded that the contentions raised in the appeal need to be gone into and issued notice in the appeal and the application for condonation of delay and also passed interim orders. The appellant submits that the said order binds this court being a judgment of a Co-ordinate Bench. This Court is also bound to hear the matter.

12. I may note that in the written submissions that have been filed by Mr.Deepak Khosla on 29.11.2017, he has submitted that judgment only on a preliminary point has been reserved by this court on 20.11.2017, namely, as to whether the appeal is barred by limitation. I may note that the submission is incorrect as arguments have been heard in full. In fact, a perusal of the written submissions itself shows that extensive averments have been made on the merits of the appeal itself.

13. Learned Counsel appearing for the respondent has submitted as follows:-

(i) That the basic object of this appeal is to challenge the order dated 31.01.2008.

(ii) That the present appeal is filed on 11.11.2008 and the same is hence barred by limitation being beyond the period of 60+60 days and hence, is liable to be dismissed at the outset. Learned counsel has relied upon the judgment of the Punjab and Haryana High Court in Pawan Goel vs. KMG Milk Food Ltd. & Ors., (2008) 142 Comp. Cas.441(P&H). The said High Court had held that the limitation period prescribed under Section 10 F of the Companies Act does not permit any further extension and Section 5 of the Limitation Act would have no application. It has been pointed out that the above judgment was confirmed by the Supreme Court in SLP(C) No. 17522/2008 dated 16.04.2010.

(iii) It is further stated that the entire gamut of facts was dealt with by the Supreme Court in its judgment dated 08.05.2014 in SLP (Crl.) 6873/2010 and SLP (C) No.23796-23798/2010. The Court had held that the appeal being Co. Appl.(SB) 23/2009 filed by Sh. R.K. Garg had become otiose. The Court further directed the parties to maintain status quo and hence, reiterated the order dated 31.01.2008. Hence, it is pleaded that the present petition is misplaced.

14. I may first look at the judgment of the Supreme Court dated 08.05.2014. As already noted above, one of the orders that was challenged in the Supreme Court was the order dated 13.04.2010 passed by this Court in Co. Appeal(SB) 23/2009 which appeal was filed by Mr.R.K.Garg. This appeal being Co. Appeal (SB) 23/2009 arose from the orders of the CLB dated 31.01.2008 whereby the CLB had directed status quo with regard to shareholdings and directors as it existed on the date of filing of the Co. Pet. i.e. 13.08.2007.

15. As noted above, two other appeals had already been filed before this court against the order dated 31.01.2008 of the CLB, namely, the first appeal was filed by Mr.R.P. Khosla, father of the appellant being Co.Appeal (SB) 7/2008 which was disposed of on 11.04.2008. Mrs. Sonia Khosla also filed an appeal being Co. Appeal (SB) No. 6/2008 which was disposed of by this Court on 22.04.2008. The review petitions filed by both Mr. R.P. Khosla and Mrs.Sonia Khosla were also dismissed/disposed off on 06.05.2008.

16. Noting these gamut of facts and the background of the dispute, the Supreme Court disposed of the SLPs noting as follows:

“23. After considering the matter, we are of the opinion that it is not necessary to either enforce orders dated 31.1.2008 passed by the CLB or orders dated 11.4.2008 passed by the High Court. Fact remains that there has been a complete deadlock, as far as affairs of the Company are concerned. The project has not taken off. It is almost dead at present. Unless the parties re-concile, there is no chance for a joint venture i.e. to develop the resort, as per the MOU dated 21.12.2005. It is only after the decision of CLB, whereby the respective rights of the parties are crystallised, it would be possible to know about the future of this project. Even the Company in question is also defunct at present as it has no other business activity or venture. In a situation like this, we are of the opinion that more appropriate orders would be to direct the parties to maintain status quo in the meantime, during the pendency of the aforesaid company petition before the CLB. However, we make it clear that if any exigency arises necessitating some interim orders, it would be open to the parties to approach the CLB for appropriate directions.”

17. I may note that the appellant was a party to the said Special Leave Petition being arrayed as respondent no. 9. When the matter was heard by the Supreme Court, this appeal was pending in this court. However, before the Supreme Court, the appellant does not appear to have put forth any proposition or argument that the order of CLB that was under challenge, namely, the order dated 31.08.2008 and other orders were void ab initio on account of the fact that when the orders were passed, an application under Section 8 of Arbitration Act was pending adjudication before CLB. Keeping in view the fact that the Supreme Court has considered the entire gamut of facts and disputes and passed the directions, in my opinion the appeal of the appellant herein seeking to challenge the various orders passed by the CLB including order dated 31.01.2008 has become redundant. The directions passed by the Supreme Court on 08.05.2014 would apply to the disputes raised herein. The said order would override the orders of the CLB challenged on the stated ground by the appellant. The present appeal is hence infructuous.

18. However, I may also deal with the submissions raised by the appellant. The appellant challenges the orders from 31.08.2007 to 20.10.2008. On 20.10.2008 CLB had adjourned the matter sine die. It has been pleaded by the appellant that all the orders passed by the CLB after 31.08.2007 till 20.10.2008 are void ab initio. The present appeal has been filed on 11.11.2008. Section 10F of the Companies Act, 1956 reads as follows:

“10.F. Appeals against the order of the Company Law Board.-Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.]” As per the above provision, an appeal can be filed within 60 days from the date of the communication of the order. Condonation of delay up to another maximum period of 60 days is permissible on showing sufficient cause. Hence, no appeal can lie against an order of the Company Law Board to this court under Section 10F of the Companies Act after 120 days.

19. I may note that this court on 19.12.2008 had noted the submission of the appellant in person that he only assails the order dated 31.01.2008 passed by the CLB and that the appeal has been filed only on or around 04.11.2008 beyond the statutory period of limitation. The court also noted his submission that the appellant rests his challenge on the ground of lack of inherent jurisdiction and competence of the CLB to pass the impugned order and hence, the present appeal, even if it is beyond the period of limitation would not be barred.

20. Clearly, it follows from the order dated 9.12.2008 that the appellant has confined this present appeal to the challenge of order dated 31.1.2008 passed by the CLB. As the present appeal is filed on 11.11.2008, the appeal is clearly barred by limitation. In this context, reference may be had to the judgment of Punjab & Haryana High Court in Pawan Goel vs. KMG Milk Food Ltd. & Ors. (supra) which referred the judgment of the Supreme Court in Gopal Sardar v. Karuna Sardar: (2004) 4 SCC 252 and concluded that the maximum period available to the appellant for preferring an appeal to this Court under section 10F of the Companies Act is sixty+sixty days i.e. 120 days, subject to the condition that the appellant has shown sufficient cause for condonation up to sixty days beyond the prescribed period of sixty days. The provisions of Sections 4 to 24 of the Limitation Act were said to have no application. The relevant portion of the said judgment reads as follows:-

“30. From the dictum of the aforesaid judgments, it is abundantly clear that where particular statute does not apply to Section 5 of the Limitation Act expressly or even impliedly in a special or local law itself, it shall be presumed that the exclusion is express. Section 29(2) of the Act not only excludes the application of Section 5 of the Limitation Act but also other sections from Sections 4 to 24 (inclusive). Thus, Section 14 also stands excluded from its application for purposes of either condoning the delay or exclusion of the period on the ground envisaged therein notwithstanding existence of sufficient cause. Thus, even if the period spent before the Hon'ble Delhi High Court constitutes sufficient cause for extension of period under Section 5 read with Section 14 of the Limitation Act, these sections cannot be applied de hors proviso to Section 10F to extend the limitation beyond sixty days in addition to the original period of sixty days (total 120 days) for filing an appeal as proviso to Section 10F does not permit such extension. Applying this principle enumerated hereinabove and the discussion, the maximum period available to the appellant for preferring the appeal was sixty + sixty days, i.e., 120 days up to March 24, 2007, subject to the condition that the appellant has shown sufficient cause for condonation up to sixty days beyond the prescribed period of sixty days. As noticed above, the initial period of 60 days in filing the appeal under Section 10F expired on January 23, 2007 and the extended period under the proviso to Section 10F expired on March 24, 2007. Hence, even if the contention of the appellant is accepted that he calculated initial period of filing the appeal as 90 days and the part of the period spent in the Delhi High Court is also considered to be the sufficient cause, it cannot be extended beyond 120 days, i.e., March 24, 2007. The present appeal having been filed on May 16, 2007, is barred by time."

21. The above judgment was upheld by the Supreme Court in SLP(C) 17522/2008 dated 16.4.2010.

22. I may note that the appellant has submitted that this court is not to go into the issue of limitation and is bound by the order of this court dated 13.4.2010 in Company Appeal (SB) 23/2009 titled Shri R.K.Garg vs. Union of India. A perusal of the said order dated 13.4.2010 would show that this court had issued notice in the appeal and on the condonation of delay application as well as in the stay application. The court further passed interim orders that the impugned order dated 31.01.2008 passed by the CLB in so far as it has cancelled the shareholding of the appellant and the directorship would remain stayed. There is no finding recorded in the said order that the appeal can be heard and disposed of despite the fact that it was filed beyond the period of limitation. Even otherwise, the said order of this court dated 13.4.2010 was challenged in the Supreme Court in SLP No.6873/2010. The Supreme Court by its judgment dated 8.5.2014 noted that the proceedings being Company Appeal (SB) 23/2009 filed by Shri R.K.Garg in this court has become otiose. Clearly, the order of this court dated 13.4.2010 relied upon by the appellant is of no assistance to the appellant and cannot read to mean that the present appeal has to be heard even if it is barred by limitation.

23. Clearly, the present appeal is barred by limitation.

24. I may also examine the contention of the appellant that the orders in question of CLB are void ab initio. It has been strongly contended that on account of the pendency of the application under Section 8 of the Arbitration Act filed by Mr. Vikram Bakshi, the entire orders between 31.0.2007 and 20.10.2008 are void ab initio.

25. Section 5 and 8 of the Arbitration Act prior to the amendment of 2015 reads as follows:-

“5. Extent of judicial intervention.—Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.” ..... 8. Power to refer parties to arbitration where there is an arbitration agreement.— "(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

26. Hence, a judicial authority before which an action is brought which is the subject matter of an arbitration agreement, the Court shall refer the parties to arbitration. The Supreme Court in Sukanya Holdings (P) Ltd. vs. Jayesh H.Pandya and Anr., (2003) 5 SCC 531 while interpreting Section 8 held as follows:-

"12. For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matters governed by Part I of the Act, the judicial authority shall not intervene except where so provided in the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the arbitrator. Further, the matter is not required to be referred to the Arbitral Tribunal, if: (1) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that the Arbitration Act does not oust the jurisdiction of the civil court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under sub-sections (1) and (2) of Section 8 of the Act. 13. Secondly, there is no provision in the Act that when the subject-matter of the suit includes subject-matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject-matter of the suit to the arbitrators.

14. Thirdly, there is no provision as to what is required to be done in a case where some parties to the suit are not parties to the arbitration agreement. As against this, under Section 24 of the Arbitration Act, 1940, some of the parties to a suit could apply that the matters in difference between them be referred to arbitration and the court may refer the same to arbitration provided that the same can be separated from the rest of the subject-matter of the suit. The section also provided that the suit would continue so far as it related to parties who have not joined in such application."

27. Similarly, in Booz Allen and Hamilton Inc. vs. SBI Home Finance Ltd. and Ors., (2011) 5 SCC 532, the Supreme Court held as follows:-

"35. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. 36. The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes."

28. Similarly, in Rashtriya Ispat Nigam Ltd. & Anr. vs. Verma Transport Co., (2006) 7 SCC 275, the Supreme Court held as follows:-

"35. This aspect of the matter was considered by this Court in Food Corpn. of India v. Yadav Engineer & Contractor [(1982) 2 SCC 499 : (1983) 1 SCR 95] . Therein this Court opined that interlocutory proceedings are only incidental proceedings to the main proceedings and, thus, any step taken in the interlocutory proceedings does not come within the purview of the main proceedings, stating: (SCC p. 512, para 12)

“When ex parte orders are made at the back of the party the other party is forced to come to the court to vindicate its right. Such compulsion cannot disclose an unambiguous intention to give up the benefit of the arbitration agreement. Therefore, taking any other steps in the proceedings must be confined to taking steps in the proceedings for resolution of the substantial dispute in the suit. Appearing and contesting the interlocutory applications by seeking either vacation thereof or modification thereof cannot be said to be displaying an unambiguous intention to acquiesce in the suit and to waive the benefit of the arbitration agreement. Any other view would both be harsh and inequitous and contrary to the underlying intendment of the Act. The first party which approaches the court and seeks an ex parte interim order has obviously come to the court in breach of the arbitration agreement. By obtaining an ex parte order if it forces the other party to the agreement to suffer the order, or by merely contesting be imputed the intention of waiving the benefit of arbitration agreement, it would enjoy an undeserved advantage. Such could not be the underlying purpose of Section 34. Therefore, in our opinion, to effectuate the purpose underlying Section 34 the narrow construction of the expression „taking any other steps in the proceedings‟ as hereinabove set out appears to advance the object and purpose underlying Section 34 and the purpose for which the Act was enacted.” 

36. The expression “first statement on the substance of the dispute” contained in Section 8(1) of the 1996 Act must be contradistinguished with the expression “written statement”. It employs submission of the party to the jurisdiction of the judicial authority. What is, therefore, needed is a finding on the part of the judicial authority that the party has waived its 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 its right or acquiesced itself 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 in some detail, a little later. xxx 38. In Janki Saran Kailash Chandra [(1973) 2 SCC 96] 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 Section 34 of the 1940 Act vis-à-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 proceedings 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 Corpn. of India [(1982) 2 SCC 499 : (1983) 1 SCR 95] the distinction between the main proceeding and supplemental proceeding must be borne in mind."

What follows from the above judgment is that once an application is being filed under Section 8, the Court would first have to form a view as to whether the disputes which are pending between the parties are within the preview of the Arbitration Act and the matters which are subject matter of proceedings where the application under Section 8 is filed are covered by the arbitration agreement. The judicial authority has to hence first come to a conclusion that the requirements of Section 8 have been fulfilled before referring the parties to arbitration. Till pendency of the application under section 8 of the Arbitration Act for supplemental and incidental proceedings including passing of interlocutory orders, there is no jurisdictional bar to pass orders and directions. There is nothing to show that miscellaneous and incidental proceedings cannot go on before the court.

29. Even a reading of section 5 and section 8 of the Arbitration Act does not show that on a mere filing of an application under section 8 of the arbitration act the court loses its jurisdiction to pass any further orders either in the main proceedings or in the supplementary or incidental proceedings in the said suit. No such interpretation can follow from a reading of section 5 and section 8 of the arbitration act.

30. In fact in the present case, it is Mrs.Sonia Khosla who has moved the petition before CLB ignoring the arbitration agreement. Interim orders were prayed for and were granted to Mrs.Sonia Khosla. It was Mr.Vikram Bakshi, one of the respondents who filed the application under Section 8 of the Arbitration Act stating that there is an arbitration agreement and the parties should resolve their disputes by the arbitration process. These proceedings cannot be said to be non-est and void ab initio as is sought to be argued.

31. I may note that no specific argument has been addressed as to the nature of the proceedings that have taken place between the said two dates, namely, 31.08.2007 to 20.10.2008. I may look at some of the orders passed by the CLB which are sought to be assailed in the present proceedings on the ground of being void ab initio.

25.09.2007: CLB noted that the application would be heard on 12.10.2007 and reply be filed. 

26.10.2007: CLB noted that hearing on arbitration agreement concluded and order has been reserved. 

12.11.2007: CLB adjourned the matter to 26.11.2007. 26.11.2007: CLB imply noted that the compromise efforts have failed. 

24.12.2007: CLB noted that an application had been mentioned by the petitioner and stay was sought regarding the Board Meeting to be conveyed on 26.12.2007. The application was directed to be heard on 28.02.2008. CLB directed the respondent therein to defer the Board Meeting till disposal of the application. 

03.01.2008: CLB again noted that an application has been mentioned. Interim orders were passed though no board meeting by either side be held.

08.01.2008: CLB noted that the order has been reserved on 31.01.2008: CLB noted that the order had been reserved on Co. Appl. 68/2008, 69/2008 & 70/2008. 

31.01.2008: The order dated 31.01.2008 has been pronounced which has already been explained above. 

14.02.2008: CLB notes that the application has been mentioned. CLB clarified that with reference to order dated 31.01.2008, the restraint order dated 24.12.2007 and 03.01.2008 stand vacated. 

13.03.2008: Additional applications were mentioned. It was directed that the Board Meeting held today shall be subject to decision of the C.P. 25.03.2008: Matter was simply adjourned. 

26.03.2008: Parties sought adjournment. 

28.07.2008: CLB heard applications filed by the appellant under Section 340 Cr.P.C. These applications relate to Section 340 Cr.P.C. and not to the main proceedings.

32. I do not feel the need to further elaborate the details of other orders passed by CLB. It is manifest that these are all supplementary and incidental proceedings and the said orders cannot be said to be void ab initio merely because an application was filed by Mr.Vikram Bakshi under Section 8 of the Arbitration Act and was pending adjudication. CLB did not cease to have jurisdiction.

33. I may also note that it is not clear as to how the appellant is in any manner concerned or connected with the controversy regarding the application filed under Section 8 of the Arbitration Act by Mr.Vikram Bakshi before the CLB. The petition before CLB was not filed by him. It is also the case of the appellant as stated in the present appeal that he is not a party to the agreement dated 31.03.2006 or to the ensuing arbitration proceedings. Hence, it is obvious that the appellant is not concerned with the arbitration proceedings/application.

34. There is no merit in this present appeal and the same is dismissed.

35. All pending applications being Co.Appl.1230/2008, 1231/2008-1233/2008, 1445/2008, 25/2009, 26/2009, 733/2009, 1505/2009, 145/2010, 679/2010, 1059/2010, 3985/2016, 3986/2016, 1790-1792/2017 also stand dismissed.