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1973 DIGILAW 45 (ORI)

KRUSHNA CHANDRA DAS v. FOOD CORPORATION OF INDIA

1973-03-07

S.K.RAY

body1973
JUDGMENT : S.K. Ray, J. - This appeal arises out of an order of stay of trial of suit passed u/s 34 of the Arbitration Act by the Subordinate Judge. Cuttack, in M.S. No. 428 of 1971. 2. Plaintiff-Appellant had entered into a purchasing agency agreement with the Food Corporation of India (Defendant in the suit) in respect of paddy for the Kharif year 1968-69. Pursuant of this agreement the Appellant acted as the purchasing non-miller agent of the Defendant and, as such, purchased paddy and delivered the same to the miller agent of the Defendant during the Kharif year 1968-69. The Plaintiff submitted bills to the Food Corporation of India for payment on the volume purchases of paddy so made by him. He was paid 9% of the bill amount and the balance 10% was not paid. The balance 10% of his bill, according to him, amounted to Rs. 9, 206. 80 p. He, therefore, issued a notice on 17-2-1969 for payment of the same. This notice was by the party himself subsequently, as reply was not received, a fresh notice was sent through a pleader u/s 80, Code of Civil Procedure. To that also no reply was given. Accordingly, he filed the present suit (M.S. No. 428 of 1971) in the Court of the Subordinate Judge, Cuttack on 4-12-1971 for recovery of Rs. 12, 166 80 p. inclusive of Rs. 2, 560/-as interest and Rs. 400/-, his security deposit. 3. The Defendant appeared on receiving suit notice and filed an application u/s 34 of the Arbitration Act for staying the suit. The ground was that the dispute between the parties was an arbitrable issue under Clause 14 of the Purchasing Agency Agreement. The trial Court after hearing the parties has granted stay of further proceeding of the suit u/s 34 of the Arbitration Act. Hence, this appeal. 4. The ground was that the dispute between the parties was an arbitrable issue under Clause 14 of the Purchasing Agency Agreement. The trial Court after hearing the parties has granted stay of further proceeding of the suit u/s 34 of the Arbitration Act. Hence, this appeal. 4. Section 34 of the Arbitration Act runs as follows: Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceeding may at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the Applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings. It provides that if the Court is satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the Applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, then the order of stay may be passed. This also presupposes existence of an arbitration agreement between the parties in pursuance of which the dispute may be referred to Arbitration. If for any reason there can be no arbitration, then the agreement ceases to be effective. It has been held by the Supreme Court in the case of The Printers (Mysore) Private Ltd. v. Potaan Joseph AIR 1960 S.C. 1155, that: The power to stay legal proceedings in discretionary and so a party to an arbitration agreement against whom legal proceedings have been commenced cannot by relying on the arbitration agreement claim the stay of legal proceedings instituted in a Court as a matter of right. It is, however, clear that the discretion vested in the Court must be properly and judicially exercised. It is, however, clear that the discretion vested in the Court must be properly and judicially exercised. Ordinarily where a dispute between the parties has by agreement between them to be referred to the decision of a domestic tribunal the Court would direct the parties to go before the tribunal of their choice and stay the legal proceedings instituted before it by one of them. As in other matters of judicial discretion, so in the case of the discretion conferred on the Court by Section 34 it would be difficult and it is indeed inexpedient, to lay down any inflexible rules which should govern the exercise of the said discretion. No test can indeed be laid down the automatic application of which will help the solution of the problem of the exercise of judicial discretion. As was observed by Bowen L.J. in Gardner v. Lay (1885) 29 Ch.D. 58, that discretion, like other judicial discretion, must be exercised according to common sense and according to justice. 5. Clause 14 of the arbitration agreement runs as follows: 14. Arbitration: All disputes and differences arising out of or in any way touching or concerning this agreement whatsoever (except as to any matter the decision of which is expressly provided for in the agreement) shall be referred to the sole arbitration of the Collector. Provided further that any demand for arbitration in respect of any Claim (s) from the Agents etc under the agreement shall be in writing and made within one year of the date of termination or completion (expiry of the period) of the agreement and where such demand is not made within that period the Claim (s) of the agreements etc shall be deemed to have been waived and absolutely barred and the Corporation shall be discharged and released of all liabilities under the agreement in respect of those claims. The Arbitrator may, from time to time with the consent of the parties enlarge the time for making and publishing the award. Subject as aforesaid the Indian Arbitration Act, 1940. Shall apply to the arbitration proceedings under this clause. It is clear from the terms of the arbitration clause extracted above that it will operate for one year after the termination of the agreement. The duration of this agreement being from 1-12-1967 to 31-10-1968 it expired on 31-10-1968. Subject as aforesaid the Indian Arbitration Act, 1940. Shall apply to the arbitration proceedings under this clause. It is clear from the terms of the arbitration clause extracted above that it will operate for one year after the termination of the agreement. The duration of this agreement being from 1-12-1967 to 31-10-1968 it expired on 31-10-1968. According to Arbitration Clause 14 of the agreement any demand for arbitration shall be made within one year of the date of termination of the agreement. That one year expired on 31-10-69 and the arbitration clause became inoperative thereafter. One of the essential conditions for application of Section 34 is that there must be an arbitration agreement in existence at the time that acclimation is made. In the instant case, as indicated above the arbitration clause having ceased to be operative, it must be taken that there was no subsisting arbitration agreement. In the circumstances, the order of stay of further proceedings in the suit is unjustified and it is accordingly set aside. There is another aspect of the matter from the stand point of which the exercise of discretion by the trial Court in staying the suit u/s 34 of the Arbitration Act appears to be injudicious. Mr. Mohanty produced certificate from the District Officer, Food Production of India wherein a sum of Rs. 9, 206.80 p. is acknowledged to be due to the Plaintiff. If so, there will be no subsisting dispute for adjudication in the suit, and therefore the trial Court should not have stayed the suit before the Defendant filed his written statement disputing the claim. In result, the appeal is allowed with costs.