Mortgage enforcement by sale is not arbitrable; interim opposition did not waive arbitration rights.

An arbitration clause covering creation and enforcement of charge, realization of sale proceeds, and continued occupation was held to encompass the mortgage dispute, so the suit's subject matter fell within the clause. A counter affidavit filed only to oppose interim injunction did not amount to the first statement on the substance of the dispute, and mere lapse of time without such a statement did not bar a section 8 request. However, a mortgage suit for enforcement by sale is an action in rem requiring adjudication by a civil court through statutory decree procedure; it is not arbitrable and cannot be referred to arbitration under section 8, even where related matters are covered by the arbitration agreement.

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Issues: (i) whether the subject matter of the mortgage suit fell within the scope of the arbitration agreement; (ii) whether filing a counter affidavit to an application for interim injunction amounted to submission of the first statement on the substance of the dispute; (iii) whether the application under section 8 was liable to be rejected for delay; and (iv) whether a mortgage suit is arbitrable and could be referred to arbitration under section 8.

Issue (i): whether the subject matter of the mortgage suit fell within the scope of the arbitration agreement.

Analysis: The arbitration clause covered disputes regarding creation and enforcement of charge over the flats, realization of sale proceeds, application of those proceeds towards discharge of liability, and the appellant's right to continue occupation until the dues were realized. The suit sought enforcement of the mortgage, realization of sale proceeds, and vacant possession, all of which were within the express terms of the clause.

Conclusion: The subject matter of the suit fell within the scope of the arbitration agreement.

Issue (ii): whether filing a counter affidavit to an application for interim injunction amounted to submission of the first statement on the substance of the dispute.

Analysis: A statement or affidavit filed before the written statement may amount to submission on the substance of the dispute if it indicates submission to the court's jurisdiction and waiver of arbitration. A reply filed only to oppose interim relief does not have that effect, because it is confined to supplemental proceedings and is not a statement on the merits of the main dispute.

Conclusion: Filing the counter affidavit for opposing interim relief did not amount to submission of the first statement on the substance of the dispute.

Issue (iii): whether the application under section 8 was liable to be rejected for delay.

Analysis: Section 8 prescribes no fixed time limit apart from the requirement that the application be made before the first statement on the substance of the dispute. Mere lapse of time, when the defendant has only contested interim proceedings and no written statement or equivalent submission has been filed, does not by itself establish waiver of the right to seek arbitration.

Conclusion: The application under section 8 was not liable to be rejected on the ground of delay.

Issue (iv): whether a mortgage suit is arbitrable and could be referred to arbitration under section 8.

Analysis: A suit for enforcement of a mortgage by sale is an action in rem affecting not only the parties but also other interested persons, and the statutory scheme governing mortgage suits requires adjudication by a court through preliminary and final decrees. Such disputes are reserved for public fora and cannot be split so that only some issues are sent to arbitration.

Conclusion: A mortgage suit for sale of the mortgaged property is not arbitrable and cannot be referred to arbitration under section 8.

Final Conclusion: The application for reference to arbitration was rightly refused because the dispute, being a mortgage suit for enforcement by sale, had to be decided by the civil court and not by an arbitral tribunal.

Ratio Decidendi: A dispute concerning enforcement of a mortgage by sale is a right in rem, requires adjudication by a public forum, and cannot be referred under section 8 of the Arbitration and Conciliation Act, 1996 even if the underlying agreement contains an arbitration clause covering related matters.

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