Amendment in section 8

In section 8 of the principal Act,

(i) for sub-section (1), the following sub-section shall be substituted, namely:

(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 to the arbitration agreement or any
person claiming through or under him, so applies not later than the date of submitting
his first statement on the substance of the dispute, then, notwithstanding any judgment,
decree or order of the Supreme Court or any Court, refer the parties to arbitration
unless it finds that prima facie no valid arbitration agreement exists.;

(ii) in sub-section (2), the following proviso shall be inserted, namely:

Provided that where the original arbitration agreement or a certified copy thereof is not
available with the party applying for reference to arbitration under sub-section (1), and the
said agreement or certified copy is retained by the other party to that agreement, then, the
party so applying shall file such application along with a copy of the arbitration agreement
and a petition praying the Court to call upon the other party to produce the original arbitration

agreement or its duly certified copy before that Court..The Hon'ble Supreme Court, in the
case of Rashtriya Ispat Nigam Ltd. V. Verma Transport Co. (Supra) cited by the learned
Counsel for the plaintiff, has interpreted section 8 of the Arbitration and Conciliation Act,
1996. In that case, in the application for injunction taken out by the plaintiff, the defendant
had filed a reply wherein he took a specific plea that as the subject matter of the suit is
covered by the arbitration agreement entered into between the parties, the suit was not
maintainable. The defendant subsequently filed an application for reference to arbitration
under section 8 of the Arbitration and Conciliation Act, 1996. The said application for
reference under section 8 was however, rejected by the Lower Court, inter alia on the
ground that since the defendant had already filed a reply to interim injunction on the
substance of the dispute prior in point of time, they had subjected themselves to the
jurisdiction of the Civil Court.

In Booz Allen and Hamilton Inc. v. SBI Homes Finance Limited and others, while
dealing with the question, this Court, in paragraph 19 of the judgment, has laid down the law
on the similar issue as under: -

19. Where a suit is filed by one of the parties to an arbitration agreement against the other
parties to the arbitration agreement, and if the defendants file an application under Section 8
stating that the parties should be referred to arbitration, the court (judicial authority) will have
to decide:

whether there is an arbitration agreement among the parties;

whether all the parties to the suit are parties to the arbitration agreement;
whether the disputes which are the subject-matter of the suit fall within the scope of
arbitration agreement;

whether the defendant had applied under Section 8 of the Act before submitting his first
statement on the substance of the dispute; and whether the reliefs sought in the suit are
those that can be adjudicated and granted in an arbitration. This Court in Booz Allen
and Hamilton Inc. (supra), has further observed in paragraph 25 as under: -

25. Not only filing of the written statement in a suit, but filing of any statement, application,
affidavit by a defendant prior to the filing of the written statement will be construed as
submission of a statement on the substance of the dispute, if by filing such
statement/application/affidavit, the defendant shows his intention to submit himself to the
jurisdiction of the court and waives his right to seek reference to arbitration. But filing of a
reply by a defendant, to an application for temporary injunction/attachment before judgment/
appointment of Receiver, cannot be considered as submission of a statement on the substance
of the dispute, as that is done to avoid an interim order being made against him. 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.

Smt. Kalpana Kothari v. Smt. Sudha Yadav and Ors. Even in this case, the Apex Court
while considering the scope of section 34 of the old Arbitration Act, 1940 and section 8 of the
new Arbitration Act, 1996 observed that in the new 1996 Act there is no provision
corresponding to section 34 of the old 1940 Act and section 8 of new 1996 Act mandates that
the judicial authority before which an action has been brought in respect of a matter which is
the subject matter of arbitration agreement shall refer the parties to arbitration if a party to
such an agreement applies not later than when submitting his first statement.