JUDGMENT Mr. G.S. Sandhawalia J.(Oral) - This order shall dispose of Civil Revision No.746 of 2007 and 6904 of 2006 as common questions of law and facts are involved in both these petition. However, for dictating the judgment, facts have been taken from Civil Revision No.746 of 2007. 2. The issue which arises for consideration before this Court is that whether in view of the fact that the parties had an arbitration agreement interse whether the trial Court was justified in dismissing the application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) vide order dated 6.1.2007 on the ground that defence of the petitioner-defendant had already been struck off on the same day on account of not filing written statement in view of the mandatory provisions of Order 8 Rule 1 CPC. 3. A perusal of the paper-book would go on to show that the respondent-plaintiff filed a suit for mandatory injunction and consequential relief of permanent injunction on 30.8.2006 against the petitioner-financier on the ground that he was owner in possession of truck bearing No.HR-26-GA-1465 Model 1997. The truck had been financed to the tune of Rs. 2,00,000/- and instalments were to be paid at the rate of Rs.11,438/- per month. All the instalments had been paid and the last receipt dated 11.4.2006 was of Rs.17,000/-. Since the loan amount had been cleared, NOC was asked for. The petitioner-financier had asked for more amount and threatened to snatch the truck leading to filing of the civil suit in order to protect the possession of the vehicle. 4. It is pertinent to mention that in the plaint there was no reference to Clause 10.14 of the loan-cum-hypothecation agreement made on 21.6.2004 which provided all the disputes, differences and/or claims etc. were to be settled by the named arbitrator Mr. Navin Kumar. The case of the petitioner is that service was effected on 1.9.2006 and the petitioner-defendant had put in appearance on 20.9.2006 through counsel by filing power of attorney. Thereafter, case was adjourned to 23.10.2006. A perusal of the impugned order would go on to show that injunction was in operation in favour of the plaintiff which was extended on the said date. Thereafter, case was adjourned to 23.10.2006. A perusal of the impugned order would go on to show that injunction was in operation in favour of the plaintiff which was extended on the said date. On 23.10.2006 the date fixed since the Presiding Officer was not holding the Court the case was taken up on an earlier point of time i.e. on 19.10.2006 and adjourned to 24.11.2006. In a similar situation, the file had been taken up on 23.11.2006 since the Presiding Officer was to be on leave and the case was adjourned to 6.1.2007. On the said date, the impugned order was passed by coming to the conclusion that neither the written statement had been filed and nor the reply to the stay application had been filed. Adjournment was opposed by the counsel for the plaintiff, and on account of mandatory period for filing written statement having expired, the defence of the defendant-petitioner was struck off. On the same day, application under Section 8 of the Act was filed which was also dismissed on the ground that defendant had lost its right to move any application and issues were framed. Resultantly, the present revision petition has been filed and further proceedings were stayed before the trial Court vide order dated 24.9.2007. 5. A perusal of the application filed under Section 8 of the Act would go on to show that in view of the loan-cum-hypothecation agreement containing arbitration clause, the suit was not maintainable and therefore, the matter was liable to be referred to the Arbitrator. However, unfortunately the trial Court failed to even consider the application in its true perspective keeping in view the ambit of the Act. Sub Clause (1) of Section 8 of the Act provides that where an action is brought in matter which is subject matter of an arbitration agreement before submitting his first statement on the substance of the dispute, a party can apply for referring the matter to arbitration. Sub Clause (2) provides that the application is to be accompanied by the original arbitration agreement or a duly certified copy thereof. Section 8 of the Act reads as under:- “8. Sub Clause (2) provides that the application is to be accompanied by the original arbitration agreement or a duly certified copy thereof. Section 8 of the Act reads as under:- “8. Power to refer parties to arbitration where there is an arbitration agreement :- (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. 2. The application referred to in subsection (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. 3. Notwithstanding that an application has been made under subsection (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.” 6. Thus, there is no dispute regarding this fact that suit was filed. The plaintiff did not disclose the factum of arbitration clause. The sequence of the events above would go on to show that no effect opportunity was given to the defendant as such to put forth its case as noticed and the trial Court was not in session atleast on two occasions. Merely because the written statement had not been filed and period of almost four months had expired seems to be the reason which prevailed with the trial Court for striking off the defence. In the application under 8 of the Act, it has been specifically mentioned that certified true copy of the arbitration agreement was enclosed and the plaintiff had concealed the factum of arbitration clause. In such circumstances, this Court is of the opinion that the trial Court fell into grave error in striking off the defence. The provision regarding non filing of the written statement within prescribed period has been held to be directory and not mandatory. It is settled position of law that the period of 90 days is only directory and not mandatory and that rules of procedures are handmaids of justice and the extreme order of striking off the defence and not permitting the parties to lead defence is not to be resorted to at the first instance. Reference can be made to Kailash Vs. Nanhku & others 2005 (4) SCC 480 , Smt. Rani Kusum Vs. Reference can be made to Kailash Vs. Nanhku & others 2005 (4) SCC 480 , Smt. Rani Kusum Vs. Smt. Kanchan Devi & others 2005 (6) SCC 705 and Salem Advocate Bar Association, Tamil Nadu Vs. Union of India 2005 (6) SCC 344 wherein it has been held that the power of the Court to extend the time is not completely taken away. No costs were imposed to warn the defendant that his defence is likely to be struck off, before passing of the order. In such circumstances, part of the impugned order whereby defence was struck off is without any basis and the defendant should have been saddled with costs before passing the extreme order of striking off the defence. 7. The other issue which arises for consideration irrespective of striking off defence is that whether the Court was under obligation to decide the application filed under Section 8 of the Act independently and merely delay could be a ground to dismiss the application. In the present case, the petitioner never filed written statement and therefore, it had not submitted to jurisdiction of the Court and nor had given up its right of arbitration. There was an injunction operating in favour of the plaintiff also. In P. Anand Gajapathi Raju and others Vs. P.V.G. Raju (Dead) and others (2000) 4 Supreme Court Cases 539, the Apex Court has held that the language of Section 8 is peremptory. Rather it has also gone on to hold that the application can also be filed after submission of the first statement and there is no bar on the Court referring the parties to arbitration keeping the legislative intention in mind if the parties do not raise objection. The relevant observations reads as under:- “7. A further question arises whether the Court is in these circumstances obliged to refer the parties to arbitration and if so with what effect. 8. In the matter before us, the arbitration agreement covers all the disputes between the parties in the proceedings before us and even more than that. As already noted, the arbitration agreement satisfies the requirements of Section 7 of the new Act. The language of Section 8 is peremptory. It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising therefrom. As already noted, the arbitration agreement satisfies the requirements of Section 7 of the new Act. The language of Section 8 is peremptory. It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising therefrom. There is no question of stay of the proceedings till the arbitration proceedings conclude and the Award becomes final in terms of the provisions of the new Act. All the rights, obligations and remedies of the parties would now be governed by the new Act including the right to challenge the Award. The Court to which the party shall have recourse to challenge the Award would be the Court as defined in clause (e) of Section 2 of the new Act and not the Court to which an application under Section 8 of the new Act is made. An application before a Court under Section 8 merely brings to the Courts notice that the subject matter of the action before it is the subject matter of an arbitration agreement. This would not be such an application as contemplated under Section 42 of the Act as the Court trying the action may or may not have had jurisdiction to try the suit to start with or be the competent Court within the meaning of Section 2 (e) of the new Act.” 8. The said view was reiterated in Hindustan Petroleum Corpn. Ltd. Vs. M/s Pinkcity Midway Petroleums (2003) 6 SCC 503 and Bharat Sewa Sansthan Vs. U.P. Electronics Corporation Limited, [2007(4) Law Herald (SC) 2641] : (2007) 7 SCC 737 . 9. Counsel for the petitioner was well justified to boost his argument that the delay is not a ground to deny the petitioner from filing the application under Section 8 of the Act since it is contended by the counsel for the respondent in the connected matter i.e. Civil Revision No.6904 of 2006 that the memorandum of appearance was filed on 1.12.2005 and the reply was not filed and the impugned order was only passed on 10.11.2006. In Booz Allen and Hamiltom Inc. Vs. SBI Home Finance Ltd. and others (2011) 5 SCC 532 , the issue regarding the delay was considered where the parties were in talk interse regarding the compromise which did not see the light of the day. In Booz Allen and Hamiltom Inc. Vs. SBI Home Finance Ltd. and others (2011) 5 SCC 532 , the issue regarding the delay was considered where the parties were in talk interse regarding the compromise which did not see the light of the day. The High Court declined the application under Section 8 of the Act on the ground of delay having been filed nearly 20 months after entering into appearance in the suit. The Apex Court on the said issue held that mere passage of time between the date of appearance and date of filing would not mean that the defendant had given up their right to file application under Section 8 and answered the question referred as under:- “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 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 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 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 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. At the relevant 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 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 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.” 10. Accordingly, keeping in view the principles laid down above, this Court is of the opinion that impugned orders in both the revision petitions dated 10.11.2006 and 6.1.2007 can not be justified and accordingly the same are set aside. The trial Court is directed to decide the application under Section 8 of the Act before proceeding further. 11. With the aforesaid observations, both the revision petitions are allowed. 12. A photocopy of this order be placed on the record of the connected case file. ---------0.B.S.0------------ —————————