ORDER
J.K. Maheshwari, J.
1. This order shall also govern disposal of Civil Revision No. 136 of 2008.
Both the revisions are filed under Section 115 of the Code of Civil Procedure, 1908 assailing the orders passed by the learned XI Civil Judge, Class-I, Indore rejecting the application of Section 8 of the Arbitration and Conciliation Act, 1996 read with Order VII, Rule 11 of CPC, filed by the applicant.
2. The facts which are not in dispute that petitioner, a multi-media system operator, has entered into an agreement with non-petitioner on 1-6-2006, whereby the cable lines belongs to them had taken by non-petitioner for operation for the period of three years with effect from 1-4-2006 as per the terms and conditions specified in the agreement. Clause 14 of the said agreement provides for arbitration to a dispute, if any, arises between the parties, which may be decided in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or by the Arbitrator Mahilpalji and Manish Dixitji, and their decision shall be agreeable to the both parties.
3. On arising some dispute of title, petitioner had filed a suit on 4-2-2008 for declaration and permanent injunction, wherein the relief for temporary injunction was refused by the trial Court and the appeal against the said order was also dismissed. However, the plaintiff has moved an application under Order 23, Rule 1 of CPC for withdrawal of the suit on 31-3-2008, but on the same date non-petitioner/defendant has filed the counter-claim against plaintiff; the trial Court has passed the order and permitted to withdraw the suit filed by plaintiff-petitioner, however, the counter-claim filed by defendant/non-petitioner remain pending. On the next date i.e. 9-4-2008 petitioner has moved an application under Section 8 of the Arbitration and Conciliation Act, 1996 read-with Sections 7 and 11 of the CPC, inter alia contended that as per Clause 14 of the agreement, the counterclaim cannot be continued and the parties may be directed to refer under the Arbitration and Conciliation Act for settlement of their dispute. The reply to the said application was filed on 22-4-2008 stating that because the petitioner had withdrawn his suit remaining unsuccessful in getting injunction even on having the knowledge of the arbitration clause, however, on behalf of petitioner such an application is not entertainable. It is further stated that once the plaintiff has filed his statement of substance and filed the suit, on objecting by defendant, the injunction was refused, ex consequentia the said suit was withdrawn by them. Now while trying counter-claim of defendant, application under Section 8 of the Act, to refer the parties for arbitration, is not entertainable, because it is amounting to approbate and reprobate the relief, which is not permissible, and the plaintiff is now estopped to take such plea.
4. By passing the order impugned on 5-5-2008, learned trial Court has rejected the application of petitioner filed under Section 8 of the Arbitration and Conciliation Act, and recorded the finding that he has waived his right to raise the objection to refer the parties to resolve the dispute as per arbitration clause specified in arbitration agreement. It is further held that because his application for temporary injunction was rejected by the trial Court in his suit, however, on withdrawal of the said suit and on entertaining the counter-claim such objection is not entertainable.
5. Shri B.L. Pavecha, learned senior counsel has argued that the compliance of Section 8 is peremptory to a judicial authority before whom action is brought to challenge, in a case, if it is the subject-matter of the arbitration agreement. It is further argued by him that the counter-claim was filed by the non-applicant on 31-3-2008 i.e. the date of withdrawal of the suit and the said counter-claim is required to be tried as suit. Thus, on the next date i.e. 9.-4-2008 the application under Section 8 of Arbitration and Conciliation Act was filed by him referring Clause 14 of the agreement and put forth that the dispute is arbitrable. Thus, petitioner had submitted the statement on the substance of the dispute, in the first instance on filing the counter-claim, therefore, the judicial authority before whom the lis is pending is mandatorily required to refer the parties for arbitration, departure on the plea of waiver or on the ground of approbate or reprobate the relief is not permissible. Reliance has been placed on a judgment of the Apex Court in the case of Smt. Kalpana Kothari v. Smt. Sudha Yadava reported in : AIR2002SC404 . While advancing the argument it is submitted that the Arbitration and Conciliation Act, 1996 was introduced after repealing the Arbitration and Conciliation Act, 1940. In the old Act Section 34 gives powers to stay the legal proceedings, while Section 8 of new Act confers powers to refer the parties to Arbitration, terminating the proceedings pending before the judicial authority. Under Section 34 it was a discretion vested with the Court to stay the legal proceedings if the Court is having reason to believe after satisfying himself. While in the Act of 1996 it is mandatory to the judicial authority to refer the parties to arbitration where there is an arbitration agreement, and if party so applies, on submitting his first statement on the substance of the dispute. In the present case on the first instance after entertaining the counter-claim petitioner has applied under Section 8 of the new Act to refer the parties for arbitration under agreement, however, the Court is having no option, except to refer the parties to take recourse under Arbitration and Conciliation Act. It is peremptory on the Court to refer the parties for arbitration without having any departure from the statutory provisions, however, learned trial Court has committed an error much less jurisdictional, while rejecting the application.
6. Shri Pavecha, senior counsel has further placed reliance on a judgment in the case of Rashtriya Ispat Nigam Ltd. v. Verma Transport Co. reported in : AIR2006SC2800 and argued that petitioner has never waived his right to invoke the arbitration clause, and on entertaining the counter-claim on the first statement of the substance an objection under Section 8 of the Arbitration and Conciliation Act was before the judicial authority. So far as filing of the plaint and denial of injunction is concerned, it was the action on the suit filed by him and the said suit is not in existence due to withdrawal on 31-3-2008; now the counter-claim of defendant has to be treated as suit, therefore, at the first instance application was filed, in terms of the agreement dated 1-6-2006 referring the arbitration clause which cannot be rejected applying the principle of waiver. Shri Pavecha has further relied upon the judgment of Apex Court in the case of P. Anand Gajapathi Raju v. P.V.G. Raju (Dead), reported in : [2000]2SCR684 and argued that as per Section 8(1) of the Arbitration and Conciliation Act the power of the Court can be exercised, if there is an arbitration agreement, and a party to the agreement brings an action in a Court against the other party, which is a subject-matter of the arbitration agreement. On applying by other party for referring the parties to arbitration, on submitting his first statement on the substance of the dispute; the Court is mandatorily required to refer them for arbitration without departure. Thus, the Court must peremptorily require to comply the provisions of Section 8 of the Arbitration and Conciliation Act. In view of the judgments of the Apex Court it is prayed that the impugned order is liable to be set aside.
7. On the other hand A.K. Sethi, learned senior counsel appearing for non-petitioner, has placed reliance on a judgment of Karnataka High Court in the case of Ramkrishna Theatre Ltd. v. General Investments & Commerce Corporation Ltd. reported in AIR 2003 Kar 502 and argued that on due consideration of the judgment of P. Anand Gajapathi Raju : AIR 2000 SC 1886 (supra) and on availability of arbitration agreement, when a party has waived his right by filing the plaint now on entertain the counter-claim as per his objection he cannot be permitted to approbate or reprobate the relief, under the guise of objection under Section 8 of the Arbitration and Conciliation Act. In support of the said contention he has further placed reliance on the judgment of Punjab & Havana High Court in the case of Mukta Sharrria v. U.P. Industrial Corporation Association Ltd. reported in . On the basis of those judgments it is argued that once the petitioner has opted to invoice the jurisdiction of the civil Court by filing the suit; on filing the counter-claim by the non-petitioner-defendant, the application under Section 8 Arbitration and Conciliation Act is not entertainable and the Court below has rightly rejected the said application. Shri Sethi has also referred the provisions of Section 34 of the old Arbitration Act, whereby the discretion is vested with the Court to stay the proceedings and to refer the parties to arbitration on recording its satisfaction. He has further argued that by reading Sub-sections (1) and (3) of Section 8 of the New Act, the word 'shall' cannot be used in mandatory sense; he argues that even under the New Act the discretion is vested in a Court to refer the parties for arbitration if so applies, at the first instance by submitting statement of claim, therefore, it is not always mandatory to the Court to refer the parties for arbitration. The finding recorded by the trial Court of waiving the right by petitioner to invoke arbitration clause, as per agreement cannot be said to be unreasonable in the facts and circumstances of the present case, accordingly prayed for dismissal of revision petitions by upholding the order under challenge.
8. After having heard learned Counsel appearing for the parties and to appreciate the arguments as advanced relying on the provisions of Section 34 of Arbitration and Conciliation Act, 1940 (old Act) and Arbitration and Conciliation Act, 1996 (new Act) and to find out the legislative intent, it is necessary to quote those provisions, which reads as under:
Arbitration and Con- Arbitration andciliation Act 1940 (Old Conciliation Ordi-Act) nance, 1996 (NewAct)Section 34. Power to Section 8. Powerto stay legal proceedings refer parties to ar-where there is an arbi- bitration wheretration agreement. there is an arbitra-tion agreement.Where any party to an (1) A judicial au-arbitration agreement thority beforeor any person claiming which an actionis under him commences brought in a mat-any legal proceedings ter, which is theagainst any other subject of an arbi-party to the agreement tration agreement,or any person claiming, shall, if a party sounder him in respect applies not laterof any matter agreed to than when submit-be referred, any party ting his first state-to such legal proceed ment on h sub-ings may, at any time stance of the dis-before filing a written pute, refer the par-statement or taking ties to arbitration.any other steps in theproceedings, apply to (2) The arbitrationthe judicial authority referred to in Sub-before which the pro- section (1) shall notceedings are pending; be entertained un-and if satisfied that less it is accompa-there is no sufficient nied by the originalreason why the matter arbitration agree-should not be referred ment or a duly cer-in accordance with the tified copy thereof.arbitration agreementand that the applicant (3) Notwithstand-was, at the time when ing that an applica-the proceedings were tion has been madecommenced, and still under sub-sectionremains, ready and (1) and that the is-willing to do all things sue is pending be-necessary to the fore the judicialproper conduct of the authority, an arbi-arbitration, such au- tration may bethority may make an commenced or con-order staying the pro tinued and an ar-ceedings. bitral award made.
9. The comparative reading impliedly draw the distinction and scope of the both Sections. Section 34 of old Act gives power of staying of the legal proceedings, while Section 8 of new Act gives power to the Court to refer the parties for arbitration as an imperative, if there is an arbitration agreement. Under Section 34 either party may file an application to stay the legal proceedings before filing of the written statement or taking any other step in the proceedings. It further confer discretion to the Court for recording its satisfaction to stay the legal proceedings, but at the same time under Section 8 if there is an arbitration agreement, and a party at his first instance submits his statement on the substance of dispute, the Court is duty bound to refer the parties for arbitration. Thus, in the new Act, in place of staying the legal proceedings, the Court has to terminate proceedings by referring the parties to arbitration and the said award shall remain unhampered as specified under Sub-section (3) of Section 8 of the Act. In the aforesaid contingencies, the Court is bound to enforce the spirit of Section 8 mandatorily without any exception. In the said context the authorities cited by learned senior counsel appearing for the parties required to be appreciated. The Apex Court while dealing the issue in the case of P. Anand Gajapathi Raju AIR 2000 SC 1886 (supra) in the year 2000 has observed that the language of Section 8 is peremptory, therefore, it is obligatory for the Court to refer the parties to arbitration in terms of the arbitration agreement, if there is an arbitration agreement; and a party to the agreement brings an action in the Court for reference, as the subject-matter of the action is the same as the subject-matter of the arbitration agreement; and applies at first instance to submit his statement on the substance of the dispute.
10. In the case of Smt. Kalpana : AIR2002SC404 (supra) Hon'ble the Supreme Court while dealing with the scope of Section 34 of the old Act and Section 8 of the new Act observed that the old Act provides for filing of an application to stay legal proceedings initiated by any party and arbitration agreement against any other party to such agreement, in derogation of the arbitration clause and attempts of settlement of the dispute otherwise than in accordance with the arbitration clause by constituting the existence of arbitration clause, thereon the authority concerned may stay such proceedings on being satisfied that there is no sufficient reason as to why the matter should not be referred to for decision in accordance with the arbitration agreement but the applicant, who applies for stay is ready and willing to do for things necessary to the proper conduct of arbitration. The said proceedings having nothing to do with actual reference of the arbitration of the disputes because it was left to be taken care of under Sections 8 and 20 of the old Act. It is further observed that striking the contrast to the said scheme underlying the provisions of the old Act, in the new Act, 1996 there is no provision corresponding to Section 34 of the old Act. Section 8 of the new Act mandates judicial authority before which an action has been brought in respect of the matter, which is the subject-matter of an arbitration agreement. In such a case it shall refer the parties to arbitration if a party to such an agreement applies not later when submitting his first statement. The provisions of the new Act do not envisaged the specific obtaining of any stay as under the old Act. For the reason that not only the discretion to make reference is mandatory but notwithstanding pending of the proceedings before the judicial authority or making of an application under Section 8(1) of the new Act, the arbitration proceedings are enabled under Section 8(3), to remain continue unhampered by pendency of proceedings. The Apex Court has further observed that the new Act constitutes a recourse and to avail the avenues to go into arbitration under the arbitration agreement. The plea of estoppel having no application to deprive the applicant of the legitimate right to invoke comprehensive provisions of the mandatory character of Section 8 of the New Act and if the matter relating to the dispute referred to arbitration in terms of the arbitration agreement.
11. In an another case, of Rashtriya Ispat Nigam Ltd. : AIR2006SC2800 (supra) the Supreme Court has dealt with the issue of waiver of right to invoke the arbitration clause in the context of the expression 'the first statement of substance of the dispute' contra-distinguished to 'written statement'. It was held that if an application is filed before actually filing the first statement on the substance of the dispute the party cannot be said to have waived its right or acquiesced itself to the jurisdiction of the Court, however, it may be gathered from the material, whether the party moving an application under Section 8 has filed its first statement on the substance of the dispute or not, if not the application is not maintainable. The Court has further held that merely disclosure of the defence while praying for injunction would not necessarily mean to waiver; which relates to the supplemental and incidental proceedings. The waiver to opt for under the arbitration agreement on the part of the defendant to the lis can be gathered from the facts and situation obtaining in each case.
12. The judgment relied upon by other side of Karnataka High Court in the case of Ramkrishna Theatre AIR 2003 Kar 502 (supra) as well as the judgment of Punjab & Haryana High Court in the case of Mukta Sharma (supra), having no application to the facts of the present case. In those cases, the dispute was of ejectment, whereunder by issuing notice, as per the arbitration agreement plaintiff/landlord had made a request to defendant/tenant to go into arbitration, which was not acceded to and refused in reply to the notice, but on filing the suit by the landlord an objection was raised by tenant to refer the dispute for arbitration and the suit may be dismissed. In the said context the principle of waiver was uphold by the High Court. But in the present case there is no refusal by petitioner to refer the dispute to arbitration, thus, the factual scenario of the case in hand is entirely different.
13. In view of the foregoing, it is apparent that Section 8 of the New Act have some departure from Section 34 of the old Act. Section 34 gives power to stay the legal proceedings where there is an arbitration agreement by vesting a discretion to the judicial authority, while Section 8 mandates the judicial authority under the statute to refer the matter for arbitration if it is covered by the arbitration agreement and applied for at the first instance submitting the statement on the substance of the dispute. Thus, on commencement of the new Act the judicial authority is mandatorily required to refer the dispute in terms of the arbitration agreement, and such award shall remain unhampered by any proceedings in the Court under Section 8(3) of the new Act. Therefore, the hallmark of the difference of Section 34 of the old Act and Section 8 of the new Act is of vesting the discretion to the judicial authority for stay, but under the new Act it is mandatory to refer the parties as per agreement. Under the old Act it is a stay of the proceedings but under the new Act the proceedings shall be terminated and the award shall remain unhampered.
14. In the context of the said legal position the facts of the present case required to be appreciated. It is undisputed that an arbitration agreement dated 1-6-2006 was entered in between the parties, wherein Clause 14 provides for arbitration, as per the provisions of Arbitration and Conciliation Act, 1996. Undisputedly, applicant had filed a suit for declaration and permanent injunction on 4-2-2008, wherein the relief of temporary injunction was refused, later on 31-3-2008 the suit was permitted to be withdrawn by the Court. But because on the same date counter-claim was filed by the defendant/non-petitioner, which was entertained treating it as suit, therefore, on the first date i.e. 9-4-2008 petitioner has applied under Section 8 of the Arbitration and Conciliation Act to refer the parties for arbitration. The said application was rejected by the order impugned upholding the plea of waiver and presuming that the action of petitioner is amounting to approbate or reprobate the relief. In the present case the suit filed by applicant was withdrawn on 31-3-2008 in view of an arbitration agreement entered between the parties. When the counter-claim of the, defendant was entertained by the Court, then immediately on the next date i.e. 9-4-2008, petitioner has filed an application under Section 8 of the New Act showing his unequivocal intention questioning the maintainability which was rejected by the order impugned. So far as refusal of the application of temporary injunction is concerned, it is suffice to say those are supplemental or incidental proceedings and the part of the main suit, which was already withdrawn and not the part of the present proceedings, therefore, on such basis, wherein no written statement was filed till withdrawal, the plea of defendant of waiver cannot be accepted. It is the trite law that merely withdrawal of the suit without decision on merit, the subject-matter on the pretext does not debar the plaintiff to take defence for the subject-matter. The principle of res judicata applies to bring a fresh suit for the same cause of action, thus, in view of the foregoing it is clear that immediate on the next date of entertaining the counterclaim of the defendant, petitioner has submitted his objection under Section 8 of the New Act to refer the parties for arbitration under the Arbitration agreement. Therefore, it qualifies the expression specified under Section 8 i.e. 'first statement on the substance of the dispute'. However, in the facts and circumstances of the present case, the rejection if objection of the petitioner, upholding the plea of waiver cannot be sustained and the findings recorded by the learned trial Court in the order impugned is liable to be set-aside.
15. Accordingly and in view of the discussion as made hereinabove the order impugned dated 5-5-2008 passed in both the cases rejecting the application under Section 8 of the Arbitration and Conciliation Act is set aside, and the dispute, if any between the parties in hereby referred in terms of arbitration agreement.
16. In consequence thereto the suit or the counter-claim of defendant pending in the trial Court be treated as consigned to record. In the facts and circumstances of the case, parties to bear their own costs.