Punjab State vs Firm Soni Construction Co.

R.S. Narula, J.—In March 1955 an agreement for construction of a ward in the V.J. Hospital in Amritsar was entered into between the State of Punjab and the respondent Messrs Soni Construction Company. Admittedly clause 25-A in this agreement enjoined on the parties the necessity to refer all disputed claims to arbitration, except for certain items, in which the decision of the Superintending Engineer was final. Certain variations in this document were affected by a new document on 13th August 1959. Though it was originally pleaded by the plaintiff in the proceedings, from which this revision petition has arisen, that the document dated 13th August 1959 constituted a new contract but that point was subsequently given up and it is no more in dispute that the arbitration clause contained in paragraph 25 of the agreement dated 14th March 1055 would be applicable to the present case. On 30th November 1962 the plaintiff-respondent filed a suit in the Court of the Senior Subordinate Judge, Amritsar, against the Punjab State for rendition of accounts in connection with the said works. Before filing the written statement in the suit the defendant-petitioner filed an application for stay of the suit u/s 34 of the Arbitration Act (10 of 1940) (hereinafter referred to as the. Act) in view of the arbitration agreement referred to above By order dated 7th November, 1963 Shri T.R. Handa the learned Subordinate Judge who was trying the suit granted the application and stayed the suit. On the point which is material to be decided before me i.e. the question whether the defendant had or had not been ready and willing at the time when the proceedings were commenced and till the time of making the application u/s 34 of the Act, to do all things necessary to the proper conduct of the arbitration, the learned Subordinate Judge held that no averment to that effect has been made in the petition for stay but that in view of the fact that the dispute between the parties had already been referred to arbitration by a document which was marked Exhibit A. 3, it was proved that this condition was satisfied. In an appeal by the plaintiff u/s 39 of the Act the learned Senior Subordinate Judge, Amritsar reversed the above finding, dismissed the application of State of Punjab for the stay of the suit and held that intact there had been no reference of the subject-matter of the suit to arbitration, that Exhibit A. 3 did not constitute a deed of reference of the matters covered by the arbitration agreement and that in the absence of the averment in the petition for stay to the effect that the defendant had always been and was still ready and willing to do everything necessary for the arbitration proceedings, the suit could not be stayed.

Mr. P.R. Jain the learned counsel for the petitioner who has argued this case very ably has urged that the Subordinate Judge was correct in holding that by document Exhibit A. 3 the dispute in question had in fact been referred to arbitration and that the learned Senior Subordinate Judge was not justified in reversing that finding. It appears that the document in question on the interpretation of which the decision of this point could depend, that is Exhibit A.3, was taken aback by the State of Punjab by an application of the Executive Engineer, Amritsar Provincial Division, and none of the parties are able to state what were the exact contents of that communication. In this view of the matter the finding of fact recorded by the first appellate Court about their having been no reference of the disputes involved in the present litigation to arbitration cannot be interfered with by one.

The only question that remains to be decided is as to what is the effect of the defendant not having even averred in his application on the point mentioned above. I am further informed by the learned counsel for the defendant that no affidavit to that effect was filed and no witness was examined by the defendant in section 34 proceedings. There was, therefore no material whatever before the Court below on which it could possibly be satisfied about the State fulfilling this necessary condition precedent for the stay of proceedings u/s 34 of the Act. In Anderson Wright Ltd. v. Moran and Company AIR 1935 S.C. 53, it was held that unless the applicant for stay u/s 34 of the Act succeeds in establishing that not only 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 a suit cannot be stayed under that provision. Their Lordships of the Supreme Court again held in Union of India (UOI) Vs. Birla Cotton Spinning and Weaving Mills Ltd., , that the judicial authority before whom an application u/s 34 of the Act is made can grant stay, if in addition to the three other conditions mentioned in that section, the authority is satisfied that the party applying is and has also been at all material times before the proceedings were commenced ready and willing to do all things necessary for the proper conduct of the arbitration and there is no sufficient reason for not referring the matter in accordance with the- arbitration agreement.

The learned Senior Subordinate Judge has relied on a judgment of the Bombay High Court in Middle East Trading Co. Vs. The New National Mills Ltd., wherein reliance was in turn placed on an unreported judgment of that Court in Rasiklal Mangal Dass v. Bai Savita A.F.O. 30 1955 decided on 27th July, 1955, A.F.O. 35 of 1965, decided by a Division Bench of the Bombay High Court on 27th July, 1955, A quotation from that unreported judgment has been reproduced in Middle East Trading Company case5 and may be quoted verbatim.

If the defendant approached the Court and wants the Court to hold its hands and not try a suit and stay it, it is for the defendant to aver all the allegations which are necessary in order to obtain a stay of the suit. The defendant has failed to make the necessary averments and on his application for stay he is bound to fail.

In view of this state of law it cannot be disputed that in order to have jurisdiction to exercise the discretion vested in the Court u/s 34 of the Act to stay a suit it is one of the conditions precedent for the Court concerned to be satisfied that the applicant for stay was at the time when the proceedings were commenced and continued till filing of the application to be ready and willing to do all things necessary to the proper conduct of the arbitration. On the record of this case there is absolutely no material on the basis of which the trial Court could possibly be satisfied of the existence of this condition precedent. In my view, therefore, the order of the learned Senior Subordinate Judge under revision is correct and the trial Court had no jurisdiction to grant the stay of the suit in this case.

There is another way of looking at the matter. This Court (Tek Chand, J.) has held in The Union of India v. Messrs. Narayan Cold Storage Ltd., Amritsar AIR 1958 P&H 21, that where discretion has been exercised by the trial Court in a particular manner in the matter of stay or refusing of stay u/s 34 of the Act, the appellate Court will not interfere with the decision unless it is either unjudicial or otherwise improper. Same observations with apply with greater force in a court of revision. There is absolutely no reason to interfere with the order in appeal passed by the Senior Subordinate Judge and for that additional reason I decline to interfere in this case. The learned counsel for the respondent has also invited my attention to the fact that in paragraph 9 of the plaint allegations of forgery against the Government Department had been made. That itself may mean nothing but I do not think that this is a proper ease where the suit should have been stayed by the trial Court. The revision petition therefore fails and is dismissed with costs. The parties may appear before the trial Court on 23rd August, 1965.