Dear, Pix, Mik and Vivek!
There are two cases:
1) Network Determined User Busy (NDUB);
2) User Determined User Busy (UDUB).
In case 1) there is no any signalling between MS-B and Network when MS-B is envolved in call and Call Waiting supplementari service is inactive.
If Call Waiting is active then network handles signalling on FACCH (Facility IE with Call Waiting indication).
Case 2) may arise when subscriber B rejects the second call with Call Waiting indication or when subscriber B not envolved in any call rejects a new call.