RASHTRIYA ISPAT NIGAM LIMITED AND ANR. versus M/S VERMA TRANSPORT COMPANY

Citation: [2006] SUPP. 4 S.C.R. 332 · Decided: 08-08-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
RASHTRIYA !SPAT NIGAM LIMITED AND ANR. 
v. 
M/S VERMA TRANSPORT COMPANY 
AUGUST 8, 2006 
B 
[S.B. SINHA AND DALVEER BHANDARI, JJ.] 
Arbitration and Conciliation Act 1966-Section 8. 
C 
Contract with arbitration clause for reference of matter relating to 
D 
contract-Termination of contract-Reference to arbitration by judicial 
authority-Held Where existence of arbitration agreement is admitted, matter 
relating to termination of contract are dispute arising out of contract attracting 
arbitration agreement-Jn such circumstances judicial authority is statutorily 
mandated to refer the matter to arbitration. 
First statement on substance of dispute-Meaning of-Held-it is to be 
contra-distinguished with 'written statement'-lt employs submission of party 
to jurisdiction of judicial authority and waive off their right to invoke arbitration 
clause-This cannot be implied by filing of application before filing of such 
E first statement-What is necessary is disclosure of entire substance in main 
proceeding itself and not taking part in supplemental proceeding-In/acts of 
the case, held that by filing reply to prayer for interim injunction restriction 
of Section 8(1) was not attracted-It was especially so as it questioned 
mainatainability of injunction and the party was bound to file it since court 
had already passed an ad interim ex parte injunction against them-Section 
F 94 of the Code of Civil Procedure. 
G 
H 
Notice in terms of arbitration agreement-Necessity of-Held-For 
maintaining application under Section 8 of the Act I 966 Act, service of notice 
under arbitration agreement is not mandatory especially if that stage was yet 
to be reached-What is necessary is existence of an arbitration agreement. 
Contract-Blacklisting of vendor-Notice to show cause-Effect of--
Held-Mere issuance of show cause notice would not mean that vendor has 
been blacklisted-At this stage, no final decision is taken and vendor can file 
its reply and satisfj; ;Jendee that no case has been made out of their blacklisting. 
332 
RASHTRIY A !SPAT NIGAM LTD. v. VERMA TRANSPORT COMPANY 
J 3 3 
Appellant entered into a consignmen,t agency contract with A 
respondent, a partnership firm. The contract had an arbitration clause 
whereby, inter alia, matter in relation to the contract were to be referred 
to arbitration. Appellant alleged that AV, a partner of respondents, 
conspired with some of their officials to obtain payments at inflated rates 
on a false plea of a levy of fee by transport union. They also alleged that B 
with a view to avoid termination of contract, AV resigned from the 
respondent firm, but was replaced by his family members and continued 
to be in complete control. Appellants terminated contract of respondent 
and issued a show cause notice to AV as to why he and his firm should 
not be black listed. 
Respondent-firm filed a suit for grant of permanent injunction 
restraining appellants from blacklisting them or terminating the contract. 
On an application for injunction trial court directed the parties to maintain 
status quo in regard to the termination of the contract as also the order of 
blacklisting. Application of appellant under Section 8 of the Arbitration 
c 
and Conciliation Act 1996 was rejected by the trial court on the grounds D 
that (i) they had filed a reply to injunction application and sought time to 
file written statement, which showed that they entered their defence of 
suit and thereby subjected themselves to its jurisdiction (ii) appellants 
black listed the respondent without giving them any notice regarding any 
dispute or difference, which was mandatory Against this, revision E 
application of appellants before High Court was dismissed as non-
maintainable. 
Appellants contended that filing an opposition to the interim 
injunction would not preclude a defendant from filing an application under 
Section 8 of the 1996 Act. 
F 
Allowing the appeals, the Court 
HELD: 1. The application filed by the appellants under Section 8 of 
the Arbitrational and Conciliation Act 1996 was maintainable. (352-C) 
2.1. The existence of a valid arbitration agreement between the 
parties stands admitted. There cannot also be any dispute that the matter 
relating to termination of the contract would be a dispute arising out of a 
contract and, thus, the arbitration agreement contained in the contract 
would be squarely attracted. Once the conditions precedent contained in 
G 
the said proceedings are satisfied, the

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