AI Structured Summary
Not yet generated for this judgment
Judgment
S. Mohan, J.—This is an application seeking stay u/s 34 of the Arbitration Act hereinafter referred to as ""The Act"". With regard to the six
contracts forming the subject-matter of the suit, items 1 and 3 are governed by the arbitration agreement, the warding of which is as follows:
...shall, in the first instance, be referred to arbitration of the Indian Chamber of Commerce, Calcutta....
With regard to the contracts relating to items 2, 4, 5 and 6 of the plaint Schedule, the relevant clause is to the effect:
...may, in the first instance, be referred to arbitration of the North India Chamber of Commerce, Allahabad....
Notwithstanding the difference between the first and the second clauses in so far as the first using the word ''shall'' and the second containing the
word ''may'', this is a fit case where a stay ought to be granted irrespective of the language used, because the intention of the parties was that the
matter should be referred to arbitration.
This is opposed by the respondent stating that though the suit notice was given as early as 22nd November, 1973, there was no reply from the
defendants (applicant). Merely because the arbitration clause concerning items 1 and 3 of the plaint schedule contract states ''shall'' it does not
mean, straightaway, that the discretion of the Court u/s 34 should be exercised especially when the value of these two contracts comes to only Rs.
17,407 91 and in such a case, the claim of the plaintiff should not be split up and one portion alone should not be referred to arbitration. The
matter came up on the undefended board on 9th October, 1974, consequent on the failure of the defendant to file the written statement in time,
and in such a case, they cannot pray that the discretion u/s 34 may be exercised in their favour. There is not even an averment in the affidavit in
support of the application for stay about the readiness and willingness to submit to arbitration. In support of these contentions, reliance is placed on
Jyoti Brothers Vs. Shree Durga Mining Co., , Shroff Brothers Vs. Bisheswar Dayal Meatle, Food Corporation of India Vs. Thakur Shipping Co.
and Others, and Middle East Trading Co. Bombay v. The Neu National Mills Ltd. Ahmedabad AIR 1960 Bom. 292.
In order to appreciate the respective contentions, a few dates require to be noted. From the summons issued, I find that the defendants were
served on 16th August, 1974 and the suit appeared on the undefended board on 9th October, 1974. It is the representation of the learned
Counsel for the applicant that on that date, he appeared before the Court and represented that he was going to prefer an application u/s 34. On a
perusal of the records, I am unable to see any endorsement to this effect, since the two endorsements are:
Written statement not filed - Submitted on 1st November, 1974"" and
110295 for stay of all further proceedings in the suit numbered as ""A 576 of 1975 - 27th February, 1975 adjourned to 20th March, 1975.
Under these circumstances, whether the defendants entered appearance and prayed for time to file written statement or not, is a moot question.
But, that need not detain us. The two clauses relating to Arbitration, use the words ''shall'' and ''may''. As regards the contracts relating to items 1
and 3, notwithstanding the use of the word ''shall'', I see no reason why the discretion u/s 34 must be exercised in favour of the applicant. In this
context, the observation in Jyoti Brothers Vs. Shree Durga Mining Co., , are relevant which is as follows:
Where an arbitration clause is : In the event of any dispute arising out of this contract the same can be settled by arbitration held by a Chamber of
Commerce at Madras, the clause means that after a dispute has arisen, the parties have further to agree that their dispute shall be referred to
arbitration and then to decide also which Chamber of Commerce at Madras, But the arbitration clause as it stands is not an arbitration agreement
and is not a present contract to submit disputes to arbitration. The word ''can'' in the clause cannot be construed as a kind of an option given to
either of the contracting parties.
This case fully applies to the arbitration clause relating to items 2, 4, 5 and 6 of the plaint schedule. But, as regards items 1 and 3, I do not find
even a formal averment, which has been held to be an essential requisite for a person seeking stay u/s 34, about his readiness and willingness to
submit to arbitration. I am fortified in my conclusion by referring to the decision in Middle East Trading Co., Bombay v. The New National Mills
Ltd., Ahmedabad1, wherein it was laid down as follows:
It is also necessary that he should satisfy not only that he is but also was at the commencement of the proceedings ready and willing to do
everything necessary for the proper conduct of the arbitration. Such an averment is all the more necessary in a case, where even though plaintiffs
had given notice to the defendants of their intentions to take legal steps the defendants did not reply nor stated that the dispute between them
should be referred to arbitration.
The position is somewhat similar in the instant case. I am unable to appreciate the distinction sought to be made out by the learned Counsel for the
applicant, that the notice dated 22nd November, 1973 did not clearly indicate that legal proceedings were about to commence and what is
demanded therein was the delivery of the goods. Certainly, that notice should have put him on the alert and if the defendants (applicant) were really
keen on arbitration, they should have at least replied stating so. That has not been done. About the readiness and willingness I may usefully refer to
the decision in Food Corporation of India v. Thakur Shipping Co. AIR 1960 Bom. 292, wherein it was laid down as follows:
An applicant for stay of legal proceedings under this section must satisfy the Court not only that the is but also was at the commencement of the
proceedings ready and willing to do everything necessary for the proper conduct of the arbitration. Thus the readiness and willingness must exist
not only when an application for stay is made but also at the commencement of the legal proceedings.
In the case on hand, long after the suit had been filed, certain letters were written, as late as 28th June, 1975, both to the Secretary, Indian
Chamber of Commerce, Ahmedabad and the Indian Chamber of Commerce, Calcutta, requesting a reference to arbitration relating to the suit,
contracts. Certainly, this is not ''readiness and willingness'' as contemplated u/s 34 of the Act or as laid down in the above two decisions. Therefore
these two letters are not of any assistants to the applicant by reason of which it would be open to him to contend that he was ready and willing for
arbitration.
I may now turn to the conduct of the parties. Here is a defendant who had enough time to file the written statement after he was served with the
said summons on 16th August, 1974. He did not do so and the time granted under the Original Side Rules had expired and therefore, the matter
was posted in the undefended board on 9th October, 1974. In such a case, assuming that he entered appearance and prayed for time only to file
this application, could it be said that there was no bona fides on his part or was he only attempting to circumvent the statutory provision u/s 34 and
take a chance later on. My answer is, more the latter. In such a case, as laid down in Shroff Brothers Vs. Bisheswar Dayal Meatle, , the discretion
should not be exercised, to quote the words of the learned Judge:
It is true that the section provides that application for stay u/s 34 can be made ""at any time before filing of written statement."" That in my view fixes
the time into the last date fixed for filing of the written statement under the provisions of the rules of the Original Side which I have mentioned
before. Otherwise the petitioner would simply wait till the date of expiry and without making any application for extension of time to file the written
statement formally, get extension, if it is permitted, to make an application u/s 34 of the Arbitration Act, 1940, beyond that, as if the time has not
expired or it has been by necessary implication extended by Court. That, in my view, would be extending the meaning of the words ""at any time
before filing of written statement"" in Section 34 of the Arbitration Act, 1940. In my view, what is required under the section is that the application
for stay must be made promptly and before the last date fixed for filing of the written statement under the provisions of the CPC or the rules of this
Court.
In the result, this application will stand dismissed with costs.
Time to file the written statement six weeks from today.