Supreme Court of India
BOOZ-ALLEN & HAMILTON INC.versusSBI HOME FINANCE LTD. & ORS.
- Citation
- 2011 INSC 301
- Decided
- 15 April 2011
- Disposal
- Dismissed
- Bench
- R V RAVEENDRAN
Holding
The mortgage suit is non‑arbitrable; therefore the Section 8 application seeking reference to arbitration is dismissed.
Summary
The appellant, Booz‑Allen & Hamilton Inc., sought to refer a mortgage suit filed by SBI Home Finance Ltd. to arbitration under clause 16 of a tripartite deposit agreement. The High Court rejected the application, holding that the dispute was not covered by the arbitration clause, that the appellant had waived its right by filing a counter‑affidavit, and that the 20‑month delay showed submission to the court’s jurisdiction. The Supreme Court examined whether the suit’s subject matter fell within the arbitration agreement, whether the counter‑affidavit constituted a first statement on the substance of the dispute, whether the delay justified rejection, and whether the mortgage suit was arbitrable. It held that the dispute was covered by the arbitration clause but the counter‑affidavit was not a waiver, and that delay alone does not bar a Section 8 application. However, the suit involved enforcement of a mortgage – a right in rem – which is non‑arbitrable and must be decided by a public forum. Consequently, the application under Section 8 was dismissed and the appeal was dismissed.
Issues considered
- Whether the subject matter of the mortgage suit falls within the scope of the arbitration agreement in clause 16 of the deposit agreement.
- Whether the appellant’s detailed counter‑affidavit filed in opposition to an interim injunction amounted to a ‘first statement on the substance of the dispute’ thereby waiving the right to seek arbitration.
- Whether the 20‑month lapse between the appellant’s appearance and the filing of the Section 8 application justifies its rejection.
- Whether the dispute is ‘arbitrable’ or must be adjudicated by a public forum, given that it involves enforcement of a mortgage (right in rem).
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11, s. 34(2)(b), s. 48(2), s. 8
- Code of Civil Procedure, 1908s. Order 34, s. Order VIII Rule 1
- Companies Act
- Specific Relief Act, 1963
- Transfer of Property Act, 1882
Subjects
ArbitrationSection 8ArbitrabilityMortgage suitPublic forumRights in remRights in personamArbitration agreementInterim injunctionCivil Procedure
Judgment
(2011] 7 S.C.R. 310
A BOOZ-ALLEN & HAMILTON INC.
v.
SBI HOME FINANCE LTD. & ORS.
(Civil Appeal No. 5440 of 2002)
APRIL 15, 2011
B
[R.V. RAVEENDRAN AND J.M. PANCHAL, JJ.]
Arbitration and Conciliation Act, 1996:
c s.8 - Application filed by defendant u/s.8 in a pending
civil suit praying that the parties to the suit be referred to
arbitration - Parties to the suit were parties to an agreement
which contained a provision for settlement of disputes by
arbitration - Held: Even if there is an arbitration agreement
o between the parties, and even if the dispute is covered by the
arbitration agreement, the court where the civil suit is pending,
will refuse an application uls. 8, to refer the parties to
arbitration, if the subject matter of the suit is capable of
adjudication only by a public forum or the relief claimed can
E only be granted by a special court or Tribunal.
s. 8 - First statement on substance of dispute -
Defendant filed detailed affidavit opposing interim injunction
application filed by plaintiff in a pending suit - Later the
defendant filed application u/s. 8 praying that the parties to the
F suit be referred to arbitration - Whether the counter affidavit
filed by the defendant, in regard to the notice of motion for
temporary injunction, amounted to submission of first
statement on the substance of the dispute, and therefore the
defendant lost the right to seek reference to arbitration - Held:
G Not only filing of the written statement in a suit, but filing of
any statement, application, affidavit filed 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
H 310
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 311
FINANCE LTD. & ORS.
shows his intention to submit himself to the jurisdiction of the A
court and waive 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 B
interim order being made against him - In the instant case,
the counter affidavit filed by the appellant in reply to the notice
of motion (seeking appointment of a receiver and grant of a
temporary injunction) clearly stated that the reply affidavit was
being filed for the limited purpose of opposing the interim c
relief - Even in the absence of such a disclaimer, filing a
detailed objection to an application for interim relief cannot
be considered fo be submission of a statement on the
substance of the dispute resulting in submitting oneself to the
jurisdiction of the court. D
s. 8 - Defendant filed detailed affidavit opposing interim
injunction application filed by piaintiff in a pending suit - 20
. months thereafter, the defendant filed application u/s. 8
praying that the parties to the suit be referred to arbitration -
Whether the application u/s. 8 was liable to be rejected as it E
was filed nearly 20 months after entering appearance in the
suit - Held: Though s. 8 of the Act does not prescribe any time
limit for filing an application under that section, and only
states that. the application uls. 8 should be filed before
submission of the first statement on the substance of the F
dispute, the scheme of the Act and the provisions of the
section clearly indicate that the application thereunder should
be made at the earliest - A party who willingly participates in
the proceedings in the suit and subjects himself to the
jurisdiction of the court cannot subsequently tum round and G
say that the parties should be referred to arbitration in view
of the existence of an arbitration agreement- Whether a party
has waived his right to seek arbitration and subjected himself
to the jurisdiction of the court, depends upon the conduct of
such party in the suit - When plaintiffs file applications for H
312 SUPREME COURT REPORTS [2011] 7 $.C.R.
A interim relief like appointment of a receiver or grant of a
temporary injunction, the defendants have to contest the
application - Such contest may even lead to appeals and
revisions where there may be even stay of further proceedings .
in the suit - If supplemental proceedings like applications for
B temporary injunction on appointment of Receiver, have been
pending for a considerable time and a defendant has been
contesting such supplemental proceedings, it cannot be said
that the defendant has lost the right to seek reference to
arbitration - In the instant case, at the relevant time, the un-
C amended Rule 1 of Order VIII of CPC was governing the filing
of written statements and the said rule did not prescribe any
time limit for filing written statement - The plai(ltiff in the suit
had filed an application for temporary injunction and
appointment of Receiver and that was pending for some time
- Thereafter, talks were in progress for arriving at a settlement
0
out of court - When such talks failed, the defendant filed an
application u/s. 8 before filing the written statement or filing any
other statement which could be considered to be a
submission of a statement on the substance of the dispute -
Mere· passage of time between the date of entering
E appearance and date of filing the application u/s. 8, cannot
lead to an inference that a defendant subjected himself to the
jurisdiction of the court for adjudication of the main dispute -
The High Court was therefore not justified in rejecting the
application u/s. 8 on the ground of delay - Code of Civil
F Procedure, 1908 - Order VIII, Rule 1.
ss. 8 and 11 - Nature and scope of issues arising for
consideration in an application uls. 11 for appointment of
arbitrators and those arising in an application uls. 8, seeking
G reference of the parties to a suit to arbitration - Distinction
between - Held: Nature and scope of issues arising for
consideration in an application uls. 11 are far narrower than
those arising in an application u/s.8 - While considering an
application uls. 11, the Chief Justice or his designate would
H not embark upon an examination of the issue of 'arbitrabi/ity'
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 313
FINANCE LTD. & ORS.
or appropriateness of adjudication by a private forum, once A
he finds that there was an arbitration agreement between or
among the parties, and would leave the issue of arbitrability
for the decision of the arbitral Tribunal - If the arbitrator
wrongly holds that the dispute is arbitrable, the aggrieved party
will have to challenge the award by filing an application u/ B
s.34, relying upon sub-section 2(b)(i) of that section - But
where the issue of 'arbitrability' arises in the context of an
application uls. 8 in a pending suit, all aspects of arbitrability
have to be decided by the court seized of the suit, and cannot
be left to the decision of the Arbitrator.
c
ss.8, 34(2)(b) and 48(2) - Arbitrable disputes - Term
'arbitrability' - Meaning of - Jurisdiction of the arbitral tribunal
- Held: A dispute, even if it is capable of being decided by
arbitration and falling within the scope of arbitration
agreement, will not be 'arbitrable' if it is not enumerated in the D
joint list of disputes referred to arbitration, or in the absence
of such joint list of disputes, does not form part of the disputes
raised in the pleadings before the arbitral tribunal - Arbitral
tribunals are private fora chosen voluntarily by the parties to
the dispute, to adjudicate their disputes in place of courts and E
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 arbitral F
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 a public fora G
(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, uls. 8
of the Act, even if the parties might have agreed upon H
314 SUPREME COURT REPORTS [2011) 7 S.C.R.
A arbitration as the forum for settlement of such disputes -
Examples of non-arbitrab/e disputes stated.
s. 8 - Arbitrability of dispute - Claim for specific
performance - Agreement to sell/agreement to mortgage -
Held: An agreement to sell or an agreement to mortgage does
8
not involve any transfer of right in rem but create only a
personal obligation - Therefore if specific performance is
sought either in regard to an agreement to sell or an
agreement to mortgage, the claim for specific performance
will be arbitrable.
c
s. B - Arbitrability of dispute - Mortgage suits - Held: A
mortgage is a transfer of a right in rem - A suit for sale,
foreclosure or redemption of a mortgaged property, should
only be tried by a public forum, and not by an arbitral tribunal
D - Consequently, the court where the mortgage suit is pending,
should not refer the parties to arbitration - Even if some of
the issues or questions in a mortgage suit are arbitrable or
could be decided by a private forum, the issues in a mortgage
suit cannot be divided - The suit in question being one for
E enforcement of a mortgage by sale, it should be tried by the
court and not by an arbitral tribunal - Code of Civil Procedure,
1908 - Order 34.
Rights - Right in rem and right in personam - Distinction
between - Held: A right in rem is a right exercisable against
F the world at large, as contrasted from a right in personam
which is an interest protected solely against specific
individuals - Co"espondingly, judgment in personam refers
to a judgment against a person as distinguished from a
judgment against a thing, right or status and Judgment in rem
G refers to a judgment that determines the status or condition
of property which operates directly on the property itself -
Generally and traditionally all disputes relating to rights in
personam are considered to be amenable to arbitration; and
all disputes relating to rights in rem are required to be
H adJudicated by courts and public tribunals, being unsuited for
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 315
FINANCE LTD. & ORS.
private arbitration - This is not however a rigid or inflexible A
rule - Judgment - Judgment in rem and judgment in
person am.
The scope of section 8 of the Arbitration and
Conciliation Act, 1996 arose for consideration in the
8
instant appeal.
Capstone Investment Co. Pvt. Ltd. (respondent no.2)
and RV Appliances Pvt. Ltd. (respondent No.3) were
owners of flat No.9A and 9B respectively situated at
"Brighton", Napien Sea Road, Mumbai. They borrowed C
loans from SBI Home Finance Ltd., (respondent no.1)
under two loan agreements by securing the said two flats
in favour of SBI. Under two leave and licence
agreements, Capstone and RV Appliances permitted the
appellant to use their respective flats, for a fixed term. A D
tripartite deposit agreement was also entered among RV
Appliances and Capstone as the first party, appellant as
the second p~rty and SBI as the third party. Under the
said agreement, the appellant paid a refundable security
deposit of Rs.6.5 ~crores to Capstone and RV Appliances E
(at the rate of Rs.3.25 crores for each flat). Out of the said
deposit of Rs.6.5 crores, a sum of Rs.5.5 crores was
directly paid to SBI on the instructions of Capstone and
RV Appliances towards repayment of the loan taken by
Capstone and Real Value. As a consequence, the loan F
due by Capstone to SBI in regard tQ flat No.9A was
cleared, but the loan taken by RV Appliances remained
due and outstanding. Capstone however. became a
guarantor for repayment of the amount due by RV
Appliances and flat No.9A was secured in favour of SBI G
and a charge was created in the shares relating to flat
No.9A belonging to Capstone In favour of SBI, as security
for repayment of the loan by R V Appliances.
Subsequently, RV Appliances made reference to
Board of Industrial and Financial Reconstruction (BIFR) H
316 SUPREME COURT REPORTS (2011) 7 S.C.R.
A under the Sick Industrial Companies (Special Provisions)
Act, 1985 and in pursuance of it, flat 98 was taken over
by the official liquidator. The appellant called upon the
licensors (Capstone and RV Appliances) to refund the
security deposit of Rs.6.5 crores, assuring that it would
B vacate and deliver up the licensed flats on receipt of the
deposit amount. Meanwhile, as the loan amount due by
RV Appliances was not repaid, SBI filed a mortgage suit
in the High Court against Capstone, appellant and RV
Appliances in regard to the mortgaged property (flat
c No.9A) for various reliefs (viz. enforcement of the
mortgage to recover the amounts due to it and delivery
of vacant possession of the flats) and thereafter also took
out a notice of motion seeking interim relief. The appellant
filed detailed counter affidavit in regard to the said notice
of motion for temporary injunction, however, did not file
0
its written statement in the suit. About 20 months
thereafter, the appellant filed an application under Section
8 of the Act praying that the parties to the suit be referred
to arbitration as provided in clause 16 of the deposit
agreement and consequently the suit be dismissed. The
E High Court dismissed the application on ground that (a)
Clause 16 of the deposit agreement (arbitration
agreement) did not cover the dispute which was the
subject matter of the claim by SBI against its borrowers
(Capstone and RV Appliances) and therefore, it was not
F open to the appellant to request the court to refer the
parties to arbitration; (b) the detailed counter affidavit filed
by the appellant, in regard to the notice of motion for
temporary injunction, amounted to submission of the first
statement on the substance of the dispute, before filing
G the application under section 8 of the Act and therefore
the appellant lost the right to seek reference to arbitration
and c) the application under section 8 of the Act was filed
nearly 20 months after the appellant filed the counter
affidavit opposing the application for temporary
H injunction, during which period the appellant had
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 317
FINANCE LTD. & ORS.
subjected itself to the jurisdiction of the High Court and A
that in view of the inordinate delay, the appellant was not
entitled to the relief under section 8 of the Act.
The said order of the High Court was challenged in
the instant appeal. This court while granting leave stayed
8
the further proceedings in the suit. On the contentions
urged the following questions arose for consideration of
this Court:
(i) Whether the subject matter of the suit fell within the
scope of the arbitration agreement contained in C
clause 16 of the deposit agreement;
(ii) Whether the appellant had submitted his first
statement on the substance of the dispute before
· filing the application under section 8 of the Act; 0
(iii) Whether the application under section 8 was liable
to be rejected as it was filed nearly 20 months after
entering appearance in the suit and;
(iv) Whether the subject matter of the suit was E
'arbitrable', that is capable of being adjudicated by a
private forum (arbitral tribunal); and whether the High
Court ought to have referred the parties to the suit
to arbitration under section 8 of the Act.
F
Dismissing the appeal, the Court
HELD:
Re : Question No.(i)
1. In this case, there is no dispute that all the parties G
to the suit are parties to an agreement which contains the
provision for settlement of disputes by arbitration. The
suit has been filed by SBI to enforce the mortgage to
recover the amounts due to it. In that context, 581 has also
H
318 SUPREME COURT REPORTS [2011] 7 S.C.R.
A sought delivery of vacant possession. The enforcement
of the charge/mortgage over the flat, realisation of sale
proceeds therefrom and the right of the appellant to stay
in possession till the entire deposit is repaid, are all
matters which are specifically mentioned in clause 16 as
B matters to be settled by arbitration. Therefore, the subject
matter of the suit falls within the scope of the arbitration
agreement. [Paras 14, 15] [337-F-H; 338-A-B]
S.B.P. and Co. vs. Patel Engineering Ltd. 2005 (8) SCC
C 618: 2005 (4)Suppl.SCR 688 - referred to.
Re : Question No.(ii)
2.1. The appellant filed a detailed affidavit oppo~ing
the application for interim injunction on 15.12.1999.
0 Thereafter the appellant filed the application under
section 8 of the Arbitration and Conciliation Act, 1996 on
12.10.2001. On the date of filing of the application under
section 8, the appellant had not filed the written statement.
Section 8 of the Act provides that a judici~I authority
E 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. [Para 1.6] [338-C-E]
F 2.2. Not only filing of the written statement in a suit,
but filing of any statement, application, affidavit filed by a
defendant prior to the filing of the written statement will
be construed as isubmission of a statement on the
substance of the dispute', if by filing such statement/
G application/affidavit, the defendant shows his intention to
submit himself to the jurisdiction of the court and waive'
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
H Receiver, cannot be considered as submission of a
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 319
FINANCE LTD. & ORS.
statement on the substance of the dispute, as that is done A
to avoid an interim order being made against him. [Para
17] [338-H; 339-A-B]
2.3. In this case, the counter affidavit dated
15.12.1999, filed by the appellant in reply to the notice of
8
motion (seeking appointment of a receiver and grant of
a temporary injunction) clearly stated that the reply
affidavit was being filed for the limited purpose of
opp9sing the interim relief. Even in the absence of such
a disclaimer, filing a detailed objection to an application C
for interim relief cannot be considered to be submission
of a statement on the substance of the dispute resulting
in submitting oneself to the jurisdiction of the court. [Para
18] . [340-B-C]
Rashtriya /spat Nigam Ltd vs. Verma Transport D
Company 2006 (7) SCC 275: 2006 (4) Suppl. SCR 332 -
referred to.
Re : Question No.(iii).
3. Though section 8 of the Act does not prescribe E
any time limit for filing an application under that section,
and only states that the application under section 8 of the
Act should be filed before submission of the first
statement on the substance of the dispute, the scheme
of the Act and the provisions of the section clearly F
indicate that the application thereunder should be .made
I . .
at the earliest. Obviously, a party who willingly
participates in the proceedings in the suit and subjects
himself to the jurisdiction of the court cannot
subsequently turn round and say that the parties should G
be referred to arbitration in view of the existence of an
arbitration agreement. Whether a party has waived his
right to seek arbitration and subjected himself to the
jurisdiction of the court, depends upon the conduct of
such party in the suit. When plaintiffs file applications for H
320 SUPREME COURT REPORTS [2011] 7 S.C.R.
A interim relief like appointment of a receiver or grant of a
temporary injunction, the defendants have to contest the
application. Such contest may even lead to appeals and
revisions where there may be even stay of further
proceedings in the suit. If supplemental proceedings like
B applications for temporary injunction on appointment of
Receiver, have been pending for a considerable time and
a defendant has been contesting such supplemental
proceedings, it cannot be said that the defendant has lost
the right to seek reference to arbitration. At the relevant
c time, the unamended Rule 1 of Order VIII of the Code was
governing the filing of written statements and the said
rule did not prescribe any time limit for filing written
statement. In such a situation, mere passage of time
between the date of entering appearance and date of
filing the application under section 8 of the Act, can not
0
lead to an inference that a defendant subjected himself
to the jurisdiction of the court for adjudication of the
main dispute. The facts in this case show that the plaintiff
in the suit had filed an application for temporary
injunction and appointment of Receiver and that was
E pending for some time. Thereafter, talks were in progress
for arriving at a settlement out of court. When such talks
failed, the appellant filed an application under section 8
of the Act before filing the written statement or filing any
other statement which could be considered to be a
F submission of a statement on the substance of the
dispute. The High Court was not therefore justified in
rejecting the application on the ground of delay. [Para 19)
[340-0-H; 341-A-D]
G Re : Question No.(iv)
4.1. The nature and scope of issues arising for
consideration in an application under section 11 of the
Act for appointment of arbitrators, are far narrower than
those arising in an application under section 8 of the Act,
H seeking reference of the parties to a suit to arbitration.
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 321
FINANCE LTD. & ORS.
While considering an application under section 11 of the A
Act, the Chief Justice or his designate would not embark
upon an examination of ·the issue of 'arbitrability' or
appropriateness of adjudication by a private forum, once
he finds that there was an arbitration agreement between
or among the parties, and would leave the issue of B
arbitrability for the decision of the arbitral Tribunal. If the
arbitrator wrongly holds that the dispute is arbitrable, the
aggrieved party will have to challenge lhe award by filing
an application under section 34 of the Act, relying upon
sub-section 2(b)(i) of that section. But where the issue of c
'arbitrability' arises in the context of an application under
section 8 of the Act in a pending suit, all aspects of
arbitrability have to be decided by the court seized of the
suit, and cannot be left to the decision of the Arbitrator.
Even if there is an arbitration agreement between the
0
parties, and even if the dispute is covered by the
arbitration agreement, the court where the civil suit is
pending, will refuse an application ,under Section 8 of the
Act, to refer the parties to arbitration, if the subject matter
of the suit is cap~ble of adjudication only by a public E
forum or the relief claimed can only be granted by a
special court or Tribunal. [Para 20) [341-E-H; 342-A-B]
4.2. The term 'arbitrability' has different meanings in
different contexts. The three facets of arbitrability, relating
to the Jurisdiction of the arbitral tribunal, are as under: (i) F
whether the disputes are capable of adjudication and
settlement by arbitration? That is, whether the disputes,
having regard to their nature, could be resolved by a
· private forum chosen by the parties (the arbitral tribunal)
or whether they would exclusively fall within the domain G
of p~blic fora (courts); (ii) Whether the disputes are
covered by the arbitration agreement? That is, whether
the disputes are enumerated or described in the
arbitration agreement as matters to be decided by
arbitration or whether the disputes fall under the H
322 SUPREME COURT REPORTS [2011] 7 S.C.R.
A 'excepted matters' excluded from the purview of the
arbitration agreement; (iii) Whether the parties have
·referred the disputes to arbitration? That is, whether the
disputes fall under the scope of the submission to the
arbitral tribunal, or whether they do not arise out of the
B statement of claim and the counter claim filed before the
arbitral tribunal. A dispute, even if it is capable of being
decided by arbitration and falling within the scope of
arbitration agreement, will not be 'arbitrable' if it is not
enumerated in the joint list of disputes referred to
C arbitration, or in the absenc~ of such joint list of disputes,
does not form part of the disputes raised in the pleadings
before the arbitral tribunal. [Para 21] [342-C-H]
4.3. Arbitral tribunals are private fora chosen
voluntarily by the parties to the dispute, to adjudicate their
0
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
E arbitration unless the jurisdiction of.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
F cases, though not expressly reserved for adjudication by
a 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
G 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.
The well recognized examples of non-arbitrable disputes:
(i) disputes relating to rights and liabilities which give rise
H to or arise out of criminal offences; (ii) matrimonial
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 323
FINANCE LTD. & ORS.
disputes relating to divorce, judicial separation, restitution A
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 B
where the tenant enjoys statutory protection against
eviction and only the specified courts are conferred
jurisdiction to grant eviction or decide the disputes. [Para
22] [342-H; 343-A-E]
4.4. A right in rem is a right exercisable against the C
world at large, as contrasted from a right in personam
which is an interest protected solely against specific
individuals. Actions in personam refer to actions
determining the rights and interests of the parties
themselves in the subject matter of the case, whereas D
actions in rem refer to actions determining the title to
property and the rights of the parties, not merely among
themse.lves but also against all persons at any time
claiming an interest in that property. Correspondingly,
judgment in personam refers to a judgment against a E
person as distinguished from a judgment against a thing,
right or status and Judgment in rem refers to a judgment
that determines the status or condition of property which
operates directly on the property itself. Generally and
traditionally all disputes relating to rights in personam are F
considered to be amenable to arbitration; and all disputes
relating to rights in rem are required to be adjudicated by
courts and public tribunals, being unsuited for private
arbitration. This is not however a rigid or inflexible rule.
Disputes relating to sub-ordinate rights in personam G
arising from rights in rem have always been considered
to be arbitrable. [Para 23] [343-F-H; 344-A-C]
4.5. The Arbitration and Conciliation Act, 1996 does
not specifically exclude any category of disputes as
H
324 SUPREME COURT REPORTS [2011] 7 S.C.R.
A being not arbitrable. Sections 34(2)(b) and 48(2) of the Act
however make it clear that an arbitral award will be set
aside if the court finds that "the subject-matter of the
dispute is not capable of settlement by arbitration under
the law for the time being in force." [Para 24) [344-0)
B
4.6. An agreement to sell or an agreement to
mortgage does not involve any transfer of right in rem but
create only a personal obligation. Therefore if specific
performance is sought either in regard to an agreement .
C to sell or an agreement to mortgage, the claim for specific 1
performance will be arb1trable. On the other hand, a
mortgage is a transfer of a right in rem. A mortgage suit
for sale of the mortgaged property is an action in rem, for
enforcement of a right in rem. A suit on mortgage is not
a mere suit for money. A suit for enforcement of a
D mortgage being the enforcement of a right in rem, will
have to be decided by courts of law and not by arbitral
tribunals. The scheme relating to adjudication of
mortgage suits contained in Order 34 of the Code of Civil
Procedure, replaces some of the repealed provisions of
E Transfer of Property Act, 1882 relating to suits on
mortgages (section 85 to 90, 97 and 99) and also provides
for implementation of some of the other provisions of that
Act (section 92 to 94 and 96). Order 34 of the Code does
not relate to execution of decrees, but provides for
F preliminary and final decrees to satisfy the substantive
rights of mortgagees with reference to their mortgage
security. The provisions of Transfer of Property Act read
with Order 34 of the Code, relating to the procedure
prescribed for adjudication of the mortgage suits, the
G rights of mortgagees and mortgagors, the parties to a
mortgage suit, and the powers of a court adjudicating a
mortgage suit, make it clear that such suits are intended
to be decided by public fora (Courts) and therefore,
impliedly barred from being referred to or decided by
H private fora (Arbitral Tribunals). Some of the provisions
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 325
FINANCE LTD. & ORS.
which lead to such a conclusion are briefly referred to as A
fbllows:-
(i) Rule (1) of Order 34 provides that subject to the
provisions of the Code, all .persons having an
interest either in the mortgage security or in the right
8
of redemption shall have .to be joined as parties to
any suit relating to mortgage, whether they are
parties to the mortgage or not. The object of this rule
is to avoid multiplicity of suits and enable all
interested persons, to raise their defences or claims, C
so that they could also be taken note of, while
dealing with the claim in the mortgage suit and
passing a preliminary decree. A person who has an
interest in the mortgage security or right or
redemption can therefore make an application for
being impleaded in a mortgage suit, and is entitled D
to be made a party. But if a mortgage suit is referred
to arbitration, a person who is not a party to the
arbitration agreement, but having an interest in the
mortgaged property or right of redemption, can not
get himself impleaded as a party to the arbitration1 E
proceedings, nor get his claim deah with in the
arbitration proceedings relating to a dispute between
. the parties to the arbitration, thereby defeating the
scheme relating to mortgages in the Transfer of
Property Act and the Code. It will also lead to F
multiplicity of proceedings with likelihood of
divergent results.
(ii) In passing a preliminary decree and final decree,
the court adjudicates, adjusts and safeguards the G
interests not only of the mortgagor and mortgagee
but also puisne/mesne mortgagees, persons entitled
to equity of redemption, persons having an interest
in the mortgaged property, auction purchasers,
persons in possession. An arbitral tribunal will not be
abJe to do so. H
326 SUPREME COURT REPORTS [2011) 7 S.C.R.
A (iii) The court can direct that an account be taken of
what is due to the mortgagee and declare the
amounts due and direct that if the mortgagor pays
into court, the amount so found due, on or before
such date as the court may fix (within six months
B from the date on which the court confirms the
account taken or from the date on which the court
declares the amount due), the petitioner shall deliver
the documents and if necessary re-transfer the
property to the defendant; and further direct that if the
c mortgagor defaults in payment of such dues, then the
mortgagee will be entitled to final decree for sale of
the property or part thereof and pay into court the
sale proceeds, and to adjudge the subsequent costs,
charges, expenses and interest and direct that the
D balance be paid to mortgagor/defendant or other
persons entitled to receive the same. An arbitral
tribunal will not be able to do so.
(iv) Where in a suit for sale (or in ;1 suit for foreclosure
in which sale is ordered), subsequent mortgagees or
E persons deriving title from, or subrogated to the
rights of any such mortgagees are joined as parties,
the court while making the preliminary decree for sale
under Rule 4(1 ), could provide for adjudication of the
respective rights and liabilities of the parties to the
F suit in a manner and form set forth in Fqrm Nos. 9,
10, and 11 of ·appendix 'D' to the Code with such
variations as the circumstances of the case may
require. In a suit for foreclosure in the case of an
anomalous mortgage, if the plaintiff succeeds, the
G court may, at the instance of any party to the suit or
any other party interested in the mortgage security or
the right of redemption, pass a like decree in lieu of a
decree for foreclosure, on such terms as it thinks fit.
But an arbitral tribunal will not be able to do.
H
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 327
FINANCE LTD. & ORS.
(v) The court" has the power under Rule 4(2), on good A
cause being shown and upon terms to be fixed by it,
from time to time, at any time before a final decree is
passed, extend the time fixed for payment of the
amount found or declared due or the amount
adjudged due in. respect of subsequent costs, 8
changes, expenses and interest, upon such terms as
it deems fit. The Arbitral Tribunal will have no such
power. [Para 27] [348-F-H; 349-A-H; 350-A-H; 351-A-
B]
4.7. A decree for sale of a mortgaged property as in C
the case of a decree for order of winding up, requires the
court to protect the interests of persons other than the
parties to the suit/petition and empowers the court to
entertain and adjudicate upon rights and liabilities of third
parties (other than those who are parties to the arbitration D
agreement). Therefore, a suit for sale, foreclosure or
redemption of a mortgaged property, should only be tried
by a public forum, and not by an arbitral tribunal.
Consequently, it follows that the court where the
mortgage suit is pending, should not refer the parties to E
arbitration. [Para 28] (351-E-F]
4.8. The appellant contended that the suit ultimately
raises. the following core issues, which can be decided
by a private forum: (i) Whether there is a valid mortgage F
or charge in favour of SBI? (ii) What is the amount due to
SBI? and (iii) Whether SBI could !!eek eviction of
appellant from the flat, even if it is entitled to enforce the
mortgage/charge? If the three issues referred by the
appellant are the only disputes, it may be possible to refer G
them to arbitration. But a mortgage suit is not only about
determination of the existence of the mortgage or
determination of the amount due. It is about enforcement
of the mortgage with reference to an immovable property
and adjudicating upon the rights and obligations of
H
328 SUPREME COURT REPORTS [2011] 7 S.C.R.
A several classes of persons, who have the right to
participate in the proceedings relating to the enforcement
of the mortgage, vis-a-vis the mortgagor and mortgagee.
Even if some of the issues or questions in a mortgage
suit (as pointed out by the appellant) are arbitrable or
B could be decided by a private forum, the issues in a
mortgage suit cannot be divided. [Para 29) [351-G-H; 352-
A-E]
Conclusion
C 5. Hi1ving regard to the finding on the question (iv) it
has to be held that the suit being one for enforcement of
a mortgage by sale, it should be tried by the court and
not by an arbitral tribunal. Therefore, the dismissal of the
application under section 8 of the Act is upheld, though
o for different reasons. [Para 30) [353-B-C]
Sukanya Holdings (P) Ltd. v. Jayesh HPandya 2003 (5)
sec 531: 2003 (3) SCR 558 - relied on.
Haryana Telecom Limited vs. Sterlite Industries India Ltd
E 1999 (3) SC~ 861; Olympus Superstructures Pvt Ltd vs.
Meena Vijay Khetan and Ors. 1999 (5) SCC 651: 1999 (3)
SCR 490; Keventer Agro Ltd vs. Seegram Comp. Ltd
(Decision of Calcutta High Court in APO 498 of 1997 etc.
dated 27 .1.1998) and Chiranjilal Shrilal Goenka vs. Jasjit
F Singh and Ors. 1993 (2) SCC 507:-1993 (2) SCR 454 -
referred to.
Black's Law Dictionary; Russell on Arbitration [22nd
edition, page 28, para 2.007 and 23rd edition, page 470,
G para 8.043) and Law and Practice of Commercial Arbitration
in England [2nd edition, 1989 edition and 2001
Companion Volume] by Mustill and Boyd - referred to.
Case Law Reference:
2005 (4) Suppl. SCR 688 Referred to Para 12
H
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 329
FINANCE LTD. & ORS.
2006 (4) Suppl,. SCR 332 Referred to Para 17 A
1999 (3) -SCR 861 Referred to Para 26.1
1999 (3) SCR 490 Referred to Para 26.2
1993 (2) SCR 454 Referred to· Para 26.3 B
2003 (3) SCR 558 Relied on Para 29
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5440 of 2002.
1 c
From the Judgment & Order dated 7.3.2002 of the.High
Court of Bombay at Bombay in Notice of Motion No. 2476 of
2001 in Suit No. 6397 of 1999.
lndu Malhotra, Shashi M. Kapila, Nupur Kanungo, Vikas
Mehta for the Appellant. D
Jaideep Gupta, Manu Nair, Kirat S. Nagra, Arun Mohan
(for _Suresh A. Shroff & Co.) for the Respondents.
The Judgment of the Court was delivered by
E
R.V.RAVEENDRAN, J. 1. The scope of section 8 of the
Arbitration and Conciliation Act, 1996 (Act, for short) arises for
consideration in this appeal by spe.cial leave.
2. Capstone Investment Co. Pvt. Ltd. (second respondent F
herein, for short "Capstone") and Real Value Appliances Pvt.
Ltd. (respondent No.3 herein, for short "RV Appliances") are
the owners of flat No.9A and 9B respectively situated at
"Brighton", Napien Sea Road, Mumbai. Capstone and RV
Appliances had borrowed loans from SBI Home Finance Ltd., G
(the first respondent herein, for short "SBI") under two loan
agreements dated 3.12.1994 by securing the said two flats in
favour of SBI.
3. Under two leave and licence agreements dated
5.4.1996, Capstone and RV Appliances permitted the appellant H
330 SUPREME COURT REPORTS (2011) 7 S.C.R.
A to use their respective flats, for the term 1.9.1996 to 31.8.1999.
Each licence agreement was signed, in addition to the licensor
and licensee, by the other flat owner (that is -RV Appliances in
respect of agreement relating to 9A and Capstone in respect
of agreement relating to 98) and SBI as confirming parties 1
B and 2.
4. On the same day (5.4.1996) a tripartite deposit
agreement was entered among RV Appliances and Capstone
as the first party, appellant as the second party and SBI as the
third party. Under the said agreement, the appellant paid a
C refundable security deposit of Rs.6.5 crores to Capstone and
RV Appliances (at the rate of Rs.3.25 crores for each flat).
Clause (E) of the said agreement confirmed ttiat the appellant
made the sa.id deposit and Capstone and RV Appliances
received the said deposit on the basis of the terms and
D conditions recorded in the two leave and licence agreements
and the deposit agreement; and that the three agreements .
together formed a single ir:itegral transaction, inseparable, co-
extensive and co-terminus in character. Out of the said deJ)osit
of Rs.6.5 crores, a sum of Rs.5.5 crores was directly paid to
E SBI on the instructions of Capstone and RV Appliances towards
repayment of the loan taken by Capstone and Real Value and
the balance of Rs.1 crore accounted in the manner indicated
therein. As a consequence, the loan due by Capstone to SBI
in regard to flat No.9A was cleared, but the loan taken by RV
F Appliances remained due and outstanding. Capstone however
became a guarantor for repayment of the amount due by RV
Appliances and flat No.9A was secured in favour of SBI and a
charge was created in the shares relating to flat No.9A
belonging to Capstone in favour of SBI, as security for
G repayment of the loan by R V Appliances. We extract below
the relevant portion of para SA of the agreement :
"However, notwithstanding the repayment of the dues of
Capstone Investment Co.Pvt.Ltd., the share Nos.4001 to
4250 of the Society and Flat No.9A shall continue to be
H
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 331
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
available to the Party of the Third Part as security of the A
remaining dues of Real Value Appliances Ltd., and in this
connection it is agreed that upon liquidating the dues of
Capstone Investment Co.Pvt.Ltd., and in order to make
available the said shares Nos.4001 to 4250 and Flat
No.SA as security, Capstone Investment Co.Pvt.Ltd. shall B
become a Guarantor for repayment of dues of Real Value
Appliances Pvt.Ltd. The Parties of the Third Part are
confirming that it has no objection to the Party of the
Second Part, its employee or officer occupying the Flats
and that as long as the balance of the principal amount and c
interest due thereon is paid by the Parties of the First Part
(or as per arrangement hereafter recorded) by the Party
of the Second Part to Party of the Third Part, the Parties
of the Third Part shall not enforce the mortgage and will
permit the Party of the Second Part, its employee or officer D
to occupy the said Flats."
Clause (3) of the Deposit agreement gave an option to the
appellant who opted to continue the licence in respect of the
two flats for a further period of two years beyond 31.8.1999,
by paying an additional deposit of Rs.2 crores (at the rate of E
Rs.1 crore for each flat). 'clause (11) enabled the appellant to
continue to use and occupy the flats so long as the amounts
paid by it as security deposit remained unpaid.
Clause (8) gave the option to the appellant to pay the F
amount due to the SBI on behalf of the borrowers to safeguard
its interest. Relevant portion of para 8 is extracted below:
"If any default is made by the Parties of the First Part in
paying any sum(s) due from time to time by them to the
Parties of the Third Part under the loan facility, the Party G
of the Second Part shall, to safeguard its interest in
retaining the right to use and occupy the said Flats, have
an option to pay-the Parties of the· Third Part the sum(s)
so becoming due and remaining unpaid by the Parties of
the First Part, on their behalf." H
332 SUPREME COURT REPORTS [2011) 7 S.C.R.
A Clauses (9) and (10) provide that at the end of the licence
period, Capstone and R V Appliances shall jointly and severally
be liable to refund the deposit amount along with interest
thereon from the date of expiry of the licence to date of actual
payment
B
Clause (16) of the deposit agreement provided for
arbitration and is extracted below:
"In case of any dispute with respect to creation and
enforcement of charge over the said shares and the said
Flats and realization of sales proceeds therefrom,
application of sales proceeds towards discharge of liability
of the Parties of the First Part to the parties of the Second
Part and exercise of the right of the Party of the Second
Part to continue to occupy the said Flats until entire dues
D as recorded in Clause 9 and 10 hereinabove are realized
by the party of the Second Part, shall be referred to an
Arbitrator who shall be retired Judge of Mumbai High
Court and if no such Judge is ready and willing to enter
upon the reference, any Senior Counsel practicing in
E Mumbai High Court shall be appointed as the Sole
Arbitrator. The Arbitrator will be required to cite rE;lasons
· for giving the award. The arbitration proceedings shall be
governed by the Arbitration and Conciliation Ordinance
1996 or the. enactment, re-enactment or amendment
F thereof. The arbitration proceedings shall be held at
Mumbai."
5. In or about July 1997 a reference was made by RV
Appliances to the Board of Industrial and Financial
Reconstruction (BIFR for short) under the Sick Industrial
G Companies (Special Provisions) Act, 1985 and in pursuance
of it, flat 9B was taken over by the official liquidator.
6. By letter dated 4.8.1999, appellant informed Capstone
and RV Appliances that it was not interested in exercising the
H option to renew the licences on expiry of the leave and licence
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 333
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
agreements on 31.8.1999 and called upon the licensors to A
refund the security deposit of Rs.6.5 crores, assuring that it
would vacate and deliver up the licensed flats on receipt of the
deposit amount. T~e appellant informed SBI and BIFR about it
by endorsing copies of the said letters to them. As there was
no confirmation from Capstone and RV Appliances that they B
would refund the sum of Rs.6.5 crores, the appellant wrote a
further letter dated 26.8.1999 stating that it would continue to
occupy the flats if the security deposit was not refunded.
7. As the loan amount due by RV Appliances was not
repaid, SBI filed a mortgage suit (Suit No.6397/1999) in the C
High Court of Bombay on 28.10.1999 against Capstone (first
defendant), appellant (second defendant), and RV Appliances
(defendant No.3) in regard to the mortgaged property (flat
No.9A) for the following reliefs:
D
(a) for a declaration that the 1st defendant as
mortgagor was due in a sum of Rs.8,46,10,731/-
with further interest on the principal sum at the rate
of Rs.16.5% per annum and additional interest for
delayed payment at the rate of 2% per month from E
1st September, 1999 till payment or realization;
(b) for a declaration that the amount and interest
mentioned in prayer (a) above is secured in favour
of the plaintiffs by a valid and subsisting mortgage F
of flat No.9A and three garages (suit premises);
(c) for a direction to the first defendant to pay to the
plaintiff the amount and interest in prayer (a) by such
date as may be fixed by the Court for redemption
of the mortgage and in the event of the first G
defendant failing to make payment by that date, the
suit premises be sold by and under the orders and
directions of the Court in enforcement and
realization of the mortgage thereon and the net
H
334 SUPREME COURT REPORTS [2011] 7 S.C.R.
A realization thereof be paid over to the plaintiff in or
towards satisfaction of its claim herein;
(d) for a personal decree against the first defendant to
the extent of any deficiency in sale realization;
B (e) that the second defendant be ordered to vacate the
suit premises and hand over possession thereof to
the plaintiff to enable the plaintiff effectively to
enforce and realize its security thereon."
c 8. On a notice of motion taken out by SBI seeking interim
relief, the High Court issued the following order on 25.11.1999
"The Defendant No.2 shall continue to occupy Flat No.9A
and garages Nos. 45 to 47 situate at Brighton, 680,
D Napean Sea Road, Mumbai but shall not create any third
party right or interest of an:, nature whatsoever in the said
flat nor shall hand over possession of the said flat to
defendant No.1 or 3 till further order.
E Mr. Dharmadhikari, learned counsel for first defendant
makes a statement that till further orders, the first defendant
shall not create any third party interest in the said flat No.9A
and garages Nos.45 to 47 nor shall alienate, dispose of
or transfer the said property till further orders. Statement
F of Mr. Dharmadhikari is accepted."
On 15.12.1999 the appellant filed a detailed reply to the
said notice of motion. It inter alia contended that SBI had a
contractual obligation towards the appellant as it had agreed
for the continuance of appellants' occupation till refund of the
G deposit. Capston"e also contested the application, denying the
existence of any mortgage or charge over flat No.9A.
9. The appellant however did not file its written statement
in the suit. The appellant claims that settlement talks were being
H held for some time but did not fructify into any settlement.
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 335
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
· Therefore, on 10.10.2001, the appellant took out a notice of A
motion praying that the parties to the suit be referred to
arbitration as provided in clause 16 of the deposit agreement
dated 5.4.1996 and consequently the suit be dismissed. The
said application was resisted by the SBI.
B
10. A learned single Judge of the High Court by impugned
order dated 7.3.2002 dismissed the application holding as
follows:
(a) Clause 16 of the deposit agreement (arbitration
agreement) did not cover the dispute which is the subject C
matter of the claim by SBI against its borrowers (Capstone
and RV Appliances) and therefore, it was not open to the
appellant to request the court to refer the parties to
arbitration.
D
(b) The detailed counter affidavit dated 15.12.1999 filed
by the appellant, in regard to the notice of motion for
temporary injunction, amounted to submission of the first
statement on the substance of the dispute, before filing the
application under section 8 of the Act and therefore the E
appellant lost the right to seek reference to arbitration.
(c) The suit was filed on 28.10.1999. The appellant filed
the counter affidavit opposing the application for temporary
injunction on 15.12.1999. The application under section 8
of the Act was filed on 10.10.2001 nearly 20 months F
thereafter, during which period the appellant had subjected
itself to the jurisdiction of the High Court. In view of the
inordinate delay, the appellant was not entitled to the relief
under section 8 of the Act.
G
The said order is challenged in this appeal by special
leave. This court while granting leave on 28.8.2002 stayed the
further proceedings in the suit.
11. The appellant contends that the parties to the suit were
H
336 SUPREME COURT REPORTS (2011] 7 S.C.R.
A all parties to the deposit agreement containing the arbitration
agreement. The claim of the SBI was for enforcement of the
charge/mortgage over flat No.9A and realization of the sale
proceeds therefrom, which was specifically mentioned as a
dispute which was arbitrable. Having regard to the clear
B mandate under section 8 of the Act, the court ought to have
referred the parties to arbitration. SBI supported the order
12. In S.8.P & Co. vs. Patel Engineering Ltd - 2005 (8)
SCC 618, this Court held thus :
C "When the defendant to an action before a judiciai authority
raises the plea that there is an arbitration agreement and
the subject matter of the claim is covered by the agreement
and the plaintiff or the person who has approached the
judicial authority for relief disputes the same, the judicial
D authority, in the absence of any restriction in the Act, has
necessarily to decide whe+her, in fact, there is in existence
a valid arbitration agreement and whether the dispute that
is sought to be raised before it is covered by the
arbitration clause. It is difficult to contemplate that the
E judicial authority has also to act mechanically or has merely
to see the original arbitration agreement produced before
it and mechanically refer the parties to an arbitration."
(emphasis supplied)
F 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 uudicial authority) will have to decide (i)
<3 whether there is an arbitration agreement among the parties;
(ii) whether all parties to the suit are parties to the arbitration
agreement; (ii) whether the disputes which are the subject
matter of the suit fall within the scope of arbitration agreement;
· (iv) whether the defendant had applied under section 8 of the
H Act before submitting his first statement on the substance of
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 337
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
the dispute; and (v) w.hether the reliefs sought in the suit are A
those that can be adjudicated and granted in an arbitration.
13. On the contentions urged the following questions arise
for our consideration :
(i) Whether the subject matter of the suit fell within the 8
scope of the arbitration agreement contained in
clause 16 of the deposit agreement?
(ii) Whether the appellant had submitted his first
statement on the substance of the dispute before c
filing the application under section 8 of the Act?
(iii)' Whether the application under section 8 was liable
to be rejected as it was filed nearly 20 months after
entering appearance in the suit?
D
(iv) Whether the subject matter of the suit is 'arbitrable',
that is capable of being adjudicated by a private
forum (arbitral tribunal); and whether the High Court
ought to have referred the parties to the suit to
arbitration under section 8 of the Act? E
Re : Question No.(i)
14. In this case, there is no dispute that all the parties to
the suit are parties to an agreement which contains the
provision for settlement of disputes by arbitration. Clause (16) F
which provides for arbitration provides for settlement of the
following disputes by arbitration : (a) disputes with respect to
creation of charge over the shares and flats; (b) disputes with
respect to enforcement of the charge over the shares and flats
and realization of sale proceeds therefrom; (c) application of G
the sale proceeds towards discharge of liability of Capstone
·and RV Appliances to the appellant; and (e) disputes relating
to exercise of right of the appellant to continue to occupy the
flats until the entire dues as stated in clauses 9 and 1O of the
deposit agreement are realised by the appellant. H
338 SUPREME COURT REPORTS [2011] 7 S.C.R.
A 15. The suit has been filed by SBI to enforce the mortgage
to recover the amounts due to it. In that context, SBI has also
sought delivery of vacant possession. The enforcement of the
charge/mortgage over the flat, realisation of sale proceeds
therefrom and the right of the appellant to stay in possession
B till the entire deposit is repajd, are all matters which are
specifically mentioned in clause 16 as matters to be settled by
arbitration. Therefore, the subject matter of the suit falls within
the scope of the arbitration agreement.
C Re : Question No.(ii)
16. The appellant filed a detailed affidavit opposing the
application for interim injunction on 15.12.1999. Thereafter the
appellant filed the application under section 8 of the Act on
12.10.2001. On the date of filing of the application under section
D 8, the appellant had not filed the written statement. Section 8
of the Act provides that 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
E dispute, refer the parties to arbitration. The High Court has held
that filing a detailed counter affidavit by a defendant setting out
its case, in reply to an application for temporary injunction,
should be considered to be the submission of the first statement
on the substance of the dispute; and that the application under
F section 8 of the Act having been filed subsequent to filing of
such first statement on the substance of the dispute, the
appellant's prayer for referring the parties to arbitration cannot
be accepted. The question therefore is whether filing a counter
to an application for temporary injunction can be considered
G as submitting the first statement on the substance of the dispute.
17. Not only filing of the written statement in a suit, but filing
of any statement, application, affidavit filed 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
H by filing such statement/application/affidavit, the defendant
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 339
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
shows his intention to submit himself to the jurisdiction of the A
court and waive 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 B ·
order being made against him. In Rashtriya /spat Nigam Ltd
vs. Verma Transport Company - 2006 (7) SCC 275, this
Court held that the expression 'first statement on the substance
of the dispute' contained in Section 8(1) of the Act is different
from the expression 'written statement', and refers to a c
submission of the party making the application under section
8 of the Act, to the jurisdiction of the judicial authority; and what
should be decided by the court is whether the party seeking
reference to arbitration has waived his right to invoke the
arbitration clause. This Court then proceeded to consider.
1 0
; whether contesting an application for temporary injunction by
. filing a counter, would amount to subjecting oneself to the
jurisdiction of the court. This Court observed :
"By opposing the prayer for interim injunction, the
restriction contained in Sub-section (1) of Section 8 was E
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 proceeding are not part of the main proceeding. F
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 G
Corporation of India vs. Yadav Engineer & Contractor -
1982 (2) sec 499, the distinction between the main
proceeding and supplemental proceeding must be borne
in mind ......... Waiver of a right on the part of a defendant
to the lis must be gathered from the fact situation obtaining H
340 SUPREME COURT REPORTS [2011] 7 S.C.R.
A in each case. In the instant case, the court had already
passed an ad interim ex pare injunction. The Appellants
were bound to respond to the notice issued by the Court."
18. In this case, the counter affidavit dated 15.12.1999,
B filed by the appellant in reply to the notice of motion (seeking
appointment of a receiver and grant of a temporary injunction)
clearly stated that the reply affidavit was being filed for the
limited purpose of opposing the interim relief. Even in the
absence of such a disclaimer, filing a detailed objection to an
application for interim relief cannot be considered to be
C submission of a statement on the substance of the dispute
resu!ting in submitti~g oneself to the jurisdiction of the court.
Re : Question No.Ciiil .
0 . 19. Though section 8 does not ·prescribe any time limit for
filing an application under that section, and only states that the
application under section 8 of the Act should be filed before
submission of the first statement on the substance of the
dispute, the scheme of the Act and the provisions of the section
clearly indicate that the application thereunder should be made
E at the earliest. Obviously, a party who willingly participates in
the proceedings in the suit and subjects himself to the
jurisdiction of the court cannot subsequently tum round and say
that the parties should be referred to arbitration in view of the
existence of an arbitration agreement. Whether a party has
F waived his right to seek arbitration and subjected himself to the
jurisdiction of the court, depends upon the conduct of such party
in the suit. When plaintiffs file applications for interim relief like
appointment of a receiver or grant of a temporary injunction,
the defendants have to contest the application. Such contest
G may even lead to appeals and revisions where there may be
even stay of further proceedings in the suit. If supplemental
proceedings like applications for temporary injunction on
appointment of Receiver, have been pending for a
considerable time and a defendant has been contesting such
H supplemental proceedings, it cannot be said that the defendant
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 341
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
has lost the right to seek reference to arbitration. At the relevant A
time, the unamended Rule 1 of Order VIII of the Code was
governing the filing of written statements and the said rule did
not prescribe any time limit for filing written statement. In such
a situation, mere passage of time between the date of entering
appearance and date of filing the application under section 8 B
of the Act, can not lead to an inference that a defendant
subjected himself to the jurisdiction of the court for adjudication
of the mai11 dispute. The facts in this case show that the plaintiff
in the suit had filed an application for temporary injunction and
appointment of Receiver and that was pending for some time. c
Thereafter, talks were in progress for arriving at a settlement
out of court. When such talks failed, the appellant filed an
application under section 8 of the Act before filing the written
statement or filing any other statement which could be
considered to be a submission of a statement on the substance
0
of the dispute. The High Court was not therefore justified in
rejecting the application on the ground of delay.
Re : question (ivl
20. The nature and scope of issues arising for E
consideration in an application under section 11 .of the Act for
appointment of arbitrators, are far narrower than those arising
in an application under section 8 of the Act, seeking reference
of the parties to a suit to arbitration. While considering an
application under section 11 of the Act, the Chief Justice or his F
designate would not embark upon an examination of the issue
of 'arbitrability' or appropriateness of adjudication by a private
forum, once he finds that there was an arbitration agreement
between or among the parties, and would leave the issue of
arbitrability for the decision of the arbitral Tribunal. If the G
arbitrator wrongly holds that the dispute is arbitrable, the
aggrieved party will· have to challenge the award by filing an
application under section 34 of the Act, relying upon sub-section
2(b)(i) of that section. But where the issue of 'arbitrability' arises
in the context of an appli~!'!Jion~under section 8 of the Act in a H
342 SUPREME COURT REPORTS [2011) 7 S.C.R.
A. pending suit, all aspects of arbitrability have to be decided by
the court seized of the suit, and cannot be left to the decision
of the Arbitrator. Even if there is an arbitration agreement
between the parties, and even if the dispute is covered by the
arbitration agreement, the court where the civil suit is pending,
B will refuse an application under Section 8 of the Act, to refer
the parties to arbitration, if the subject matter of the suit is
capable of adjudication only by a public forum or the relief
claimed can only be granted by a special court or Tribunal.
21. The term 'arbitrability' has different meanings in
C different contexts. The three facets of arbitrability, relating to the
jurisdiction of the arbitral tribunal, are as under : (i) whether the
disputes are capable of adjudication and settlement by
arbitration? That is, whether the disputes, having regard to their
nature, could be resolved by a private forum chosen by the
D parties (the arbitral tribunal) or whether they would exclusively
fall within the domain of public fora (courts). (ii) Whether the
disputes are covered by the arbitration agreement? That is,
whether the disputes are enumerat~d or described in the
arbitration agreement as matters to be decided by arbitration
E or whether the disputes fall under the 'excepted matters'
excluded from the purview of the arbitration agreement. (iii)
Whether the parlies have referred the disputes to arbitration?
That is, whether the disputes fall under the scope of the
submission to the arbitral tribunal, or whether they do not arise
F out of the statement of claim and the counter claim filed before
the arbitral tribunal. A dispute, even if it is capable of being
decided by arbitration and falling within the scope of arbitration
agreement, will not be 'arbitrable' if it is not enumerated in the
joint list of disputes referred to arbitration, or in the absence of
G such joint list of disputes, does not form part of the disputes
raised in the pleadings before the arbitral tribunal.
22. 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
H
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 343
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.)
the laws of the country. Every civil or commercial dispute, either A
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 arbitral tribunals is excluded
either expressly or by necessary implication. Adjudication of
certain categories of proceedings are reserved by the B
Legislature exclusively for public fora as a matter of public
policy. Certain other categories of cases, though not express!y
reserved for adjudication by a public fora (courts and Tribunals),
may by necessary implication stand exch,.1ded from the purview
of private fora. Consequently, where the cause/dispute. is c
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. The well recognized examples of
non-arbitrable disputes are : (i) disputes relating to rights and
0
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 E
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.
23. It may be noticed that the cases referred to above relate F
to actions in rem. A right in rem is a right exercisable against
the world at large, as contrasted from a right in personam which
is an interest protected solely against specific individuals.
Actions in personam refer to actions determining the rights and
interests of the parties themselves in the subject matter of the G
case, whereas actions in rem refer to actions determining the
title to property and the rights of the parties, not merely among
themselves but also against all persons at any time claiming
an interest in that property. Correspondingly, judgment in
personam refers to a judgment against a person as H
344 SUPREME COURT REPORTS (2011) 7 S.C.R.
A distinguished from a judgment against a thing, right or status
and Judgment in rem refers to a judgment that determines the
status or condition of property which operates directly on the
property itself. (Vide : Black's Law Dictionary). Generally and
traditionally all disputes relating to rights in personam are
B considered to be amenable to arbitration; and all disputes
relating to rights in rem are required to be adjudicated by courts
and public tribunals, being unsuited for private arbitration. This
is not however a rigid or inflexible rule. Disputes relating to sub-
ordinate rights in personam arising from rights in rem have
c always been considered to be arbitrable.
24. The Act does not specifically exclude any category of
disputes as being not arbitrable. Sections 34(2)(b) and 48(2)
of the Act however make it clear that an arbitral award will be
set aside if the court finds that "the subject-matter of the dispute
D is not capable of settlement by arbitration under the law for the
time being in force."
25. Russell on Arbitration [22nd Edition) observed thus
[page 28, para 2.007) :
E
"Not all matter are capable of being referred to arbitration.
As a matter of English law certain matters are reserved
for the court alone and if a tribunal purports to deal with
them the resulting award will be unenforceable. These
include matters where the type of remedy required is not
F one which an arbitral tribunal is empowered to give."
The subsequent edition of Russell [23rd Edition, page 470,
para 8.043) ) merely observes that English law does recognize
that there are matters which cannot be decided by means of
G arbitration. Mustil/ and Boyd in their Law and Practice of
Commercial Arbitration in England [2nd - 1989 Edition), have
observed thus :
"In practice therefore, the question has not been whether
a particular dispute is capable of settlement by arbitration,
H
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 345
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
but whether it ought to be referred to arbitration or whether A
it has given rise to an enforceable award. No doubt for this
reason, English law has never arrived at a general theory
for distinguishing those disputes which may be settled by
arbitration from those which may not. ...... .
B
Second, the types of remedies which the arbitrator can
·award are limited by considerations of public policy and
by the fact that he is appointed by the parties and not by
the state. For example, he cannot impose a fine or a term
of imprisonment, commit a person for contempt or issue C
a writ of subpoena; nor can he make an award which is
binding on third parties or affects the public at large, such
as a judgment in rem against a ship, an assessment of
the rateable value of land, a divorce decree, a winding-up
order. .. ."
D
[emphasis supplied]
Mustill and Boyd in their 2001 Companion Volume to the
2nd Edition of commercial Arbitration, observe thus (page 73)
E
"Many commentaries treat it as axiomatic that 'real' rights,
that is rights which are valid as against the whole wor/d,
cannot be the subject of private arbitration, although some
acknowledge that subordinate rights in personam derived
from the real rights may be ruled upon by arbitrators. The F
conventional view is thus that, for example, rights under a
patent licence may be arbitrated, but the validity of the
underlying patent may not.. ... An arbitrator whose powers
are derived from a private agreement between A and B
plainly has no jurisdiction to bind anyone else by a G
decision on whether a patent is valid, for no-one else has
mandated him to make such a decision, and a decision
which attempted to do so would be useless."
(Emphasis supplied) H
346 SUPREME COURT REPORTS [2011] 7 S.C.R.
A 26. The distinction between disputes which are capable
of being decided by arbitration, and those which are not, is
brought out in three decisions of this Court.
26.1) In Haryana Telecom Limited vs. Sterlite Industries
B India Ltd - 1999 (5) SCC 688, this Court held :
"Sub-section (1) of Section 8 provides that the judicial
authority before whom an action is brought in a matter, will
refer the parties to arbitration the said matter in
accordance with the arbitration agreement. This, however,
c postulates, in our opinion, that what can be referred to the
arbitrator is only that dispute or matter which the arbitrator
is competent or empowered to decide.
The claim in a petition for winding up is not for money. The
D petition filed under the Companies Act would be to the
effect, in a matter like this, that the company has become
commercially insolvent and, therefore, should be wound up.
The power to order winding up of a company is contained
under the Companies Act and is conferred on the court.
An arbitrator, notwithstanding any agreement between the
E
parties, would have no jurisdiction to order winding up of
a company. The matter which is pending before the High
Court in which the application was filed by the petition
herein was relating to winding up of the Company. That
could obviously not be referred to arbitration and,
F therefore, the High Court, in our opinion was right in
rejecting the application."
(Emphasis sunplied)
G 26.2) A different perspective on the issue is· found in
Olympus Superstructures Pvt Ltd vs. Meena Vijay Khetan
and others- 1999 (5) sec 651, where this Court considered
whether an arbitrator has the power and jurisdiction to grant
specific performance of contracts relating to immovable
H property. This Court held :
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 347
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
"We are of the view that the right to specific performance A
of an agreement of sale deals with contractual rights and
it is certainly open to the parties to agree - with a view to
shorten litigation in regular courts - to refer the issues
relating to specific performance to arbitration. There is no
prohibition in the Specific Relief Act, 1963 that issues B
relating· to specific performance of contract relating to
immovable property cannot be referred to arbitration. Nor
. is there such a prohibition contained in the Arbitration and
Conciliation Act, 1996 as contrasted with Section 15 of
the English Arbitration Act, 1950 or Section 48(5)(b) of the c
English Arbitration Act, 1996 which contained a prohibition
relating to specific performance of contracts concerning
immoveable property."
Approving the decision of the Calcutta High Court in
Keventer Agro Ltd vs. Seegram Comp. Ltd - (Apo 498 of 1997 D
etc. dated 27.1.1998), this Court held that disputes relating to
specific performance of a contract can be referred to arbitration
and Section 34(2)(b)(i) will not be attracted. This Court held :
"Further, as pointed in the Calcutta case, merely because E
there is need for exercise of discretion in case of specific
performance, it cannot be said that only the civil court can
exercise such a discretion. In the above case, Ms. Ruma
Pal, J. observed:
... merely because the sections of the Specific Relief F
Act confer discretion on courts to grant specific
performance of a contract Cloes not means that
parties cannot agree that the discretion will be
exercised by a forum of their choice. If the converse
were trae, then whenever a relief is dependent upon G
the exercise of discretion of a court by statute e.g.
the grant of interest or costs, parties should be
precluded from referring the dispute to arbitration."
This Court further clarified that while matters like criminal H
348 SUPREME COURT REPORTS (2011] 7 S.C.R.
A offences and matrimonial disputes may not be subject matter
of resolution by arbitration, matters incidental thereto may be
referred to arbitration :
"Reference is made there to certain disputes like criminal
offences of a public nature, disputes arising out of illegal
B
agreements and disputes relating to status, such as
divorce, which cannot be referred to arbitration. It has,
however, been held that if in respect of facts relating to a
criminal matter, (say) physical injury, if there is a right to
damages for personal injury, then such a dispute can be
c referred to arbitration (Keir v. Leeman) (1846) 9 Q.B, 371.
Similarly, it has been held that a husband and wife may,
refer to arbitration the terms on which they shall separate,
because they can make a valid agreement between
themselves on that matter ......... ."
D
26.3) In Chiranjilal Shrila/ Goenka vs. Jasjit Singh and
Ors.- 1993 (2) sec 507.this court held that grant of probate is
a judgment in rem and is conclusive and binding not only the
parties but also the entire world; and therefore, courts alone will
E have exclusive jurisdiction to grant probate and an arbitral
tribunal will not have jurisdiction even if consented concluded
to by the parties to adjudicate upon the proof or validity of the
will.
27. An agreement to sell or an agreement to mortgage
F does not involve any transfer of right in rem but create only a
personal obligation. Therefore if specific performance is sought
either in regard to an agreement to sell or an agreement to
mortgage, the claim for specific performance will be arbitrable.
On the other hand, a mortgage is a transfer of a right in rem.
G A mortgage suit for sale of the mortgaged property is an action
in rem, for enforcement of a right in rem. A suit on mortgage
is not a mere suit for money. A suit for enforcement of a
mortgage being the enforcement of a right in rem, will have to
be decided by courts of law and not by arbitral tribunals. The
H scheme relating to adjudication of mortgage suits contained in
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 349
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
Order 34 of the Code of Civil Procedure, replaces some of the A
repealed provisions of Transfer of Property Act; 1882 relating
to suits on mortgages (section 85 to 90, 97 and 99) and also
provides for implementation of some of the other provisions of
that Act (section 92 to 94 and 96). Order 34 of the Code does
not relate to execution of decrees, but provides for preliminary B
and final decrees to satisfy the substantive rights of mortgagees
with reference to their mortgage security. The provisions of
Transfer of Property Act read with Order 34 of the Code, relating
to the procedure prescribed for adjudication of the mortgage
suits, the rights of mortgagees and mortgagors, the parties to c
a mortgage suit, and the· powers of a court adjudicating a
mortgage suit, make it clear that such suits are intended to be
decided by public fora (Courts) and therefore, impliedly barred
from being referred to or decided by private fora (Arbitral
Tribunals). We may briefly refer to some of the provisions which 0
lead us to such a conclusion.
(i) Rule (1) of Order 34 provides that subject to the
provisions of the Code, all persons having an interest
either in the mortgage security or in the right of redemption
shall have to be joined as parties to any suit relating to .E
mortgage, whether they are parties to the mortgage or not.
The object of this rule is to avoid multiplicity of suits and
enable all interested persons, to raise their defences or
claims, so that they could also be taken note of, while
dealing with the claim in the mortgage suit and passing a F
preiiminary decree. A person who has an interest in the
mortgage security or right or redemption can therefore
make an application for being impleaded in a mortgage
suit, and is entitled to be made a party. But if a mortgage
suit is referred to arbitration, a person who is not a party G
to the arbitration agreement, but having an interest in the
mortgaged property or right of redemption, can not get
himself impleaded as a party to the arbitration
proceedings, nor get his claim dealt with in the arbitration
proceedings relating to a dispute between the parties to H
350 SUPREME COURT REPORTS [2011] 7 S.C.R.
A the arbitration, thereby defeating the scheme relating to
mortgages in the Transfer of Property Act and the Code.
It will also lead to multiplicity of proceedings with lilselihood
of divergent results.
(ii) In passing a preliminary decree and final decree, the
B
court adjudicates, adjusts and safeguards the interests not
only of the mortgagor and mortgagee but also puisne/
mesne mortgagees, persons entitled to equity of
redemption, persons having an interest in the mortgaged
property, auction purchasers, persons in possession. An
c arbitral tribunal will not be able to do so.
(iii) The court can direct that an account be taken of what
is due to the mortgagee and declare the amounts due and
direct that if the mortgagor pays into court, the amount so
D found due, on or before such date as the court may fix
(within six months from the date on which the court
confirms the account taken or from the date on which the
court declares the amount due), the petitioner shall deliver
the documents and if necessary re-transfer the property to
E the defendant; and further direct that if the mortgagor
defaults in payment of such dues, then the mortgagee will
be entitled to final decree for sale of the property or part
thereof and pay into court the sale proceeds, and to
adjudge the subsequent costs, charges, expenses and
F interest and direct that the balance be paid to mortgagor/
defendant or other persons entitled to receive the same.
An arbitral tribunal will not be able to do so.
(iv) Where in a suit for sale (or in a suit for foreclosure in
which sale is ordered), subsequent mortgagees or persons
G deriving title from, or subrogated to the rights of any such
mortgagees are joined as parties, the court while making
the preliminary decree for sale under Rule 4(1 ), could
provide for adjudication of the respective rights an_d
liabilities of the parties to the suit in a manner and form
H set forth in Form Nos. 9, 10, and 11 of appendix 'D' to the
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 351
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
Code with such variations as the circumstances of the case A
may require. In a suit for foreclosure in the case of an
anomalous mortgage, if the plaintiff succeeds, the court
may, at the instance of any party to the suit or any other
party interested in the mortgage security or the right of
redemption, pass a like decree in lieu of a decree for B
foreclosure, on such terms as it thinks fit. But an arbitral
tribunal will not be able to do.
(v) The court has the power under Rule 4(2), on good
cause being shown and upon terms to be fixed by it, from
time to time, at any time before a final decree is passed, C
extend the time fixed for payment of the amount found or
declared due or the amount adjudged due in respect .of
subsequent costs, changes, expenses and in'terest, upon
such terms as it deems fit The Arbitral Tribunal will have
no such power. D
28. A decree for sale of a mortgaged property as in the
case of a decree for order of winding up, requires the court to
protect the interests of persons other than the parties to the suit/
petition and empowers the court to entertain and ~djudicate E
upon rights and liabilities of third parties (other than those who
are parties to the arbitration agreement). Therefore, a suit for
sale, foreclosure or redemption of a mortgaged property,
should only be tried by a public forum, and not by an arbitral
tribunal. Consequently, it follows that the court where the F
mortgage suit is pending, should not refer the parties to
arbitration.
29. The appellant contended that the suit ultimately raises
the following core issues, which can be decided by a private
forum: (i) Whether there is a valid mortgage or charge in favour G
of SBI? (ii) What is the amount due to SBI? and (iii) Whether
SBI could seek eviction of appellant from the flat, even if it is
entitled to enforce the mortgage/charge? It was submitted that
merely because mortgage suits involve passing of preliminary
decrees and final decrees, they do not get excluded from H
352 SUPREME COURT REPORTS [2011] 7 S.C.R.
A arbitrable disputes. It is pointed out that the arbitral tribunals
can also make interim awards deciding certain aspects of the
disputes finally which can be equated to preliminary decrees
granted by courts, and the final award made by the arbitrator,
after detailed accounting etc. could be compared to the final
B decree by courts. It is therefore contended that there is no
impediment for the parties to mortgage suits being referred to
arbitration under section 8 of the Act. If the three issues referred
by the appellant are the only disputes, it may be possible to
refer them to arbitration. But a mortgage suit is not only about
c determination of the existence of the mortgage or determination
of the amount due. It is about enforcement of the mortgage with
reference to an immovable property and adjudicating upon the
rights and obligations of several classes of persons (referred
to in para 27 (ii) above), who have the right to participate in
the proceedings relating to the enforcement of the mortgage,
0
vis-a-vis the mortgagor and mortgagee. Even if some of the
issues or questions in a mortga~':! suit (as pointed out by the
appellant) are arbitrable or could be decided by a private forum,
the issues in a mortgage suit cannot be divided. The following
observations of this court in a somewhat different context, in
E Sukanya Holdings (P) Ltd. v. Jayesh H.Pandya - 2003 (5)
sec 531 are relevant:
"The next question which requires consideration is-even
if there is no provision for partly referring the dispute to
F arbitration, whether such a course is possible under
Section 8 of the Act? In our view, it would be difficult to
give an interpretation to Section 8 under which bifurcation
of the cause of action that is to say the subject matter of
the suit or in some cases bifurcation of the suit between
G parties who are parties to the arbitration agreement and
others is possible. This would be laying down a totally new
procedure not contemplated under the Act. If bifurcation of
the subject matter of a suit was contemplated, the
legislature would have used appropriate language to
permit such a course. Since there is no such indication in
H
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME 353
FINANCE LTD. & ORS. [R.V. RAVEENDRAN, J.]
the language, it follows that bifurcation of the subject matter A
of an action brought before a judicial authority is not
allowed."
Conclusion
30. Having regard to our finding on question (iv) it has to 8
be held that the suit being one for enforcement of a mortgage
. by sale, it should be tried by the court and not by an arbitral
tribunal. Therefore we uphold the dismissal of the application
under section 8 of the Act, though for different reasons. The
appeal is accordingly dismissed. We however make it clear that C
we have not recorded any finding, nor expressed any opinion,
on the merits of the claims and disputes in the suit.
8.8.B. Appeal dismissed.
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