# 7 S.C.R. 310 BOOZ-ALLEN & HAMILTON INC v. SBI HOME FINANCE LTD. & ORS

- **Citation:** [2011] 7 S.C.R. 310
- **Court:** Supreme Court of India
- **Decided:** 2011-04-15
- **Case number:** Civil Appeal No. 5440 of 2002
- **Bench:** R.V. Raveendran, J.M. Panchal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/7-s-c-r-310-booz-allen-hamilton-inc-v-sbi-home-finance-ltd-ors-27793
- **Pages:** 44

## Headnote

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 t

## Text

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A
B
(2011] 7 S.C.R. 310
BOOZ-ALLEN & HAMILTON INC.
v.
SBI HOME FINANCE LTD. & ORS.
(Civil Appeal No. 5440 of 2002)
APRIL 15, 2011
[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 unC 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
0 - Thereafter, talks were in progress for arriving at a settlement
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.
ss.8, 34(2)(b) and 48(2) - Arbitrable disputes -
Term
'arbitrability' - Meaning of - Jurisdiction of the arbitral tribunal
c
- 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 -
8
Held: 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 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
0 of motion for temporary injunction, however, did not file
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.
Dismissing the appeal, the Court
HELD:
Re : Question No.(i)
F
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
A
B
320
SUPREME COURT REPORTS
[2011] 7 S.C.R.
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 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
0
filing the application under section 8 of the Act, can not
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
E
F
injunction and appointment of Receiver and that was
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
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
0
voluntarily by the parties to the dispute, to adjudicate their
disputes in place of courts and tribunals which are public
fora constituted under the laws of the country. Every civil
or commercial dispute, either contractual or noncontractual, 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
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[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
F
not relate to execution of decrees, but provides for
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 arbitration
1
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
A
B
c
D
E
F
G
H
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SUPREME COURT REPORTS
[2011) 7 S.C.R.
(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
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
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
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
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
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
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.
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-AB]
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
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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; 352A-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:
H
2005 (4) Suppl. SCR 688 Referred to
Para 12
BOOZ-ALLEN & HAMILTON INC. v. SBI HOME
329
FINANCE LTD. & ORS.
2006 (4) Suppl,. SCR 332 Referred to
Para 17
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
2003 (3) SCR 558
Relied on
Para 29
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5440 of 2002.
A
B
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
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.
E
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
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(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, coextensive and co-terminus in character.