Section 8 arbitration objection must be decided first before interim relief is granted

Where a reference to arbitration is sought under Section 8 of the Arbitration and Conciliation Act, the forum must first address that objection and record prima facie reasons on its jurisdictional competence before granting interim relief. An interim order passed without dealing with the Section 8 application was held unsustainable and was set aside, with directions to decide the arbitration request and interim prayer together. The objection that the appeal was not maintainable because the company had not filed it was rejected, as the order operated against all respondents and the appellants were directly affected, giving them sufficient standing to challenge it.

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Issues: (i) Whether the Company Law Board could grant interim relief without first deciding, or at least recording prima facie satisfaction on, the application under Section 8 of the Arbitration and Conciliation Act, 1996; (ii) whether the appeal was not maintainable for want of filing by the company.

Issue (i): Whether the Company Law Board could grant interim relief without first deciding, or at least recording prima facie satisfaction on, the application under Section 8 of the Arbitration and Conciliation Act, 1996

Analysis: Once an application under Section 8 is filed, the statutory mandate requires the forum to examine whether the conditions for reference to arbitration are satisfied. An interim order passed without reasons, and without addressing the Section 8 request, does not disclose the necessary prima facie satisfaction on jurisdictional competence. Where arbitration is invoked, the forum must first decide the applicability of Section 8, and if the statutory conditions are met, the parties must be referred to arbitration. A bare interim arrangement cannot substitute that determination.

Conclusion: The interim order was unsustainable and was rightly set aside with a direction to decide the Section 8 application and the prayer for interim relief together.

Issue (ii): Whether the appeal was not maintainable for want of filing by the company

Analysis: The impugned order was directed against all respondents, and the appellants were directly affected by it. That gave them sufficient standing to challenge the order. The objection that the company itself had not preferred the appeal did not defeat maintainability on the facts of the case.

Conclusion: The appeal was maintainable.

Final Conclusion: The impugned order was quashed and the matter was remanded for fresh consideration of the Section 8 application along with the request for interim relief, with reasons to be recorded on the arbitration objection before any further interim order is passed.

Ratio Decidendi: When a reference to arbitration under Section 8 is sought, the forum must first address that objection and record reasons on its jurisdictional competence before granting interim relief.

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