Prafulla Kumar Mukherjee v. Probhat Kumar Bhattacharyya
1975-10-01
KUMAR JYOTI SEN GUPTA, MANAS NATH ROY
body1975
DigiLaw.ai
JUDGMENT Roy, J. : This appeal from original order is directed against Order No. 17 dated September 27, 1966 made in Title Suit No.2 of 1966 by Shri S. S. Ganguli, Subordinate Judge, Purulia, whereby the petition by the Defendant Respondent under section 34 of the Arbitration Act was allowed and the connected proceeding has been stayed. 2. The plaintiff appellant as a sole proprietor, at all material times used to carryon the business of a contractor in the district of Purulia and other places under the name and style of United Construction Co. He has alleged that on or about March 19, 1962 the said firm submitted tenders for the purpose of construction of various types of residential quarters for the proposed township of the Bandel Thermal Power Station, Tribeni, Hooghly under the State Electricity Board and such tender being duly accepted, necessary work order was issued on March 30, 1962. He has further alleged that in terms of the said tender he has also deposited the earnest money amounting to Rs. 12,800/-. 3. It has also been alleged by the plaintiff-appellant that he was in the look out for having a suitable man to help and assist him in the supervision and completion of the said contract and the Defendant-Respondent, who was well suited for such purposes, having offered his services, he agreed to avail of the same and entrusted the said Respondent to secure and execute the contract and to do other preliminaries. He has further alleged that for the aforesaid purposes he had entrusted the said Respondent with advances and in fact he treated him as a partner for the contract in question. The plaintiff appellant has further stated that as the Defendant Respondent insisted for settling the terms, a deed of partnership for the contract in question was executed on July 12, 1962. Apart from clauses 3, 4, 5, 6, 8, 9, 11, 13 and 16 of the said partnership deed the clause which would be relevant for our consideration for the present case is clause 20, which is in the following terms : "20...That if there be any dispute or difference between the partners hereof in the matter of the partnership business the same shall be decided by arbitrators appointed by the parties hereof under the provisions of the Indian Arbitration Act". 4.
4. The plaintiff appellant has alleged that in terms of the said deed he duly advanced Rs. 45,000/- from time to time on account of working capital beside supplying machinaries and other things including implements and tools worth about Rs. 6000/-, for facilitating the execution of the contract works. He has also alleged to have made provisions for a further loan of Rs. 49,538.74 P from his own personal fund and that apart he secured a loan for Rs. 5,785/-. He has alleged that because of the experience and the fact that the Defendant-Respondent was staying nearer to the worksite than the Plaintiff-Appellant, he was given the sole charge of the construction works at the site. 5. It has further been alleged that in terms of the deed of partnership a Bank account in the firm's name was duly opened and generally the Defendant-Respondent alone operated the same till January 26, 1964. The plaintiff-appellant has also alleged that although the said account was generally operated by the Defendant-Respondent, he failed and neglected to submit accounts till October, 1964 inspite of repeated demands and reminders including notices duly served on and received by the said Defendant-Respondent. He has said that as a result of such failure and neglect of the said Respondent, the plaintiff-appellant had to institute Title Suit No. 2 of 1966 in the Court of the learned Subordinate Judge, Purulia for a declaration that the partnership in question stood dissolved on and from January 1, 1965, for rendition of accounts and other reliefs including a decree for a sum of Rs. 49,059.84 paise. 6. In that suit the Defendant-Respondent instead of and before filing the written statement, filed a petition under section 34 of the Arbitration Act on July 12, 1966, contending, inter alia amongst others that in view of the fact of the existence of a valid arbitration agreement, particulars whereof have been mentioned hereinbefore, the proceeding in the said suit and the hearing of the same should be stayed. The Defendant-Respondent of course made it clear that at the time when the proceeding commenced he was and still he is ready and willing to do all such things necessary to continue properly with the arbitration proceeding. It may be noted that the said petition under section 34 was not an affirmed one but the same was verified by the Defendant-Respondent, Shri Provat Kumar Bhattacherjee. 7.
It may be noted that the said petition under section 34 was not an affirmed one but the same was verified by the Defendant-Respondent, Shri Provat Kumar Bhattacherjee. 7. In his verified petition of objection dated August 6, 1966 against the application under section 34 of the Arbitration Act, of the Defendant-Respondent, the plaintiff-appellant has contended inter alia, amongst others that the said application was not maintainable and the Defendant-Respondent, because of his conduct, had waived his right to have the matter arbitrated, as inspite of due notice under clause 20 of the deed in question, he has neither appointed his arbitrator nor taken any steps under or in terms of the said clause. Thus a prayer was made for rejecting the Defendant-Respondent's prayer for stay of the suit. 8. By order No. 17 dated September 27, 1966 the learned Subordinate Judge allowed the said application and stayed the proceedings in the suit under section 34 of the Arbitration Act. Such order was made after construing the said clause 20 of the partnership deed and as it was found that in the connected suit, in which there was some dispute arising out of the partnership business, the said Defendant-Respondent had invoked the arbitration clause at the first opportune moment and furthermore as the Defendant-Respondent's inaction or silence against the plaintiff-appellant's specific demand for arbitration prior to the commencement of the connected proceedings could not be considered as his unwillingness to have the matter in dispute arbitrated upon and furthermore even if the Defendant-Respondent was silent and inactive, such silence could not also be considered and construed as his unwillingness to have the matter arbitrated. Such finding was required to be arrived at because the Plaintiff-appellant specifically pleaded and alleged such unwillingness of the Defendant-Respondent, which was of course denied by him, and the more so when he specifically indicated that he was ready and willing to do all things necessary to the proper conduct of the arbitration proceedings. 9. In this Appeal against the said order, Mr.
9. In this Appeal against the said order, Mr. Hariprasanna Mukherjee, learned Advocate for the appellant, contended that the Defendant-Respondent not having nominated his arbitrator in terms of clause 20 of the Partnership Deed in question even after the admitted receipt of the necessary requisition from him and the more so when the Plaintiff-Appellant had duly nominated his Arbitrator, was not entitled to file the said application under section 34 and to ask for a stay of the proceedings in the suit and such in action on his part should operate as waiver of his right under the said agreement. In that view of the matter Mr. Mukherjee submitted that either the Plaintiff-appellant should have been allowed to have the dispute arbitrated by the sale arbitrator as nominated by him or no order should have be made for staying further proceedings in the connected suit. In support of his said submissions that in case of the failure of a party to take proper steps under the relevant clause for arbitration here in the instant case clause 20 of the deed in question the provisions of section 34 of the Arbitration Act should not be allowed to be invoked for having the proceedings in a suit stayed. Mr. Mukherjee, relied on the case of (1) Onkar Nath Jain v. H. P. Co-operative Cane Unions Federation Ltd. reported in A.I.R. 1971 Allahabad 569. In that case it has been held that there may be four kinds of arbitration clauses : (i) the clause may provide for arbitration by an arbitrator to be appointed by the plaintiff; (ii) it may provide for arbitration by an arbitrator to be appointed by the defendant ; (iii) it may provide for arbitration by an arbitrator to be dppointed by both; and (iv) it may provide for arbitration at the instance of either party, by an arbitrator named therein. It has further been held that where the suit is stayed on account of the second class of the arbitration clause, the stay order should be recalled if the defendant has failed to appoint an arbitrator within a reasonable time. If the arbitration clause is of the first variety, the stay order should not be recalled on the plaintiff's failure to appoint an arbitrator within a reasonable time. He cannot take advantage of his own wrong.
If the arbitration clause is of the first variety, the stay order should not be recalled on the plaintiff's failure to appoint an arbitrator within a reasonable time. He cannot take advantage of his own wrong. In the third class of cases, the Court may recall the stay order where it appears that the defendant has failed to take steps for starting the arbitration proceedings. In the fourth class of cases, the stay order should not be recalled even though the defendant has not taken the initiative to start the arbitration proceedings, for the proceedings could be started independently at the instance of the plaintiff himself. 10. Mr. Mukherjee also contended that relevant section of the Arbitration Act which has application in the facts of the present case is section 9 and more particularly the proviso to the same and not section 8 of the Arbitration Act. Relying on the proviso to section 9 Mr. Mukherjee reiterated his submissions that when the Plaintiff-Appellant has nominated his arbitrator and the Defendant Respondent has not done so even after the due receipt of 15 days necessary notice so the Plaintiff Appellant's action to continue with the arbitration proceeding by his sole arbitrator, if he had liked to do so would have been authorised. He submitted that such authority was there with the Plaintiff Appellant in addition to the right to bring a suit and as the latter course was elected, the learned Trial Court, in the facts of the admitted default and neglect by the Defendant Respondent to act in terms of the arbitration agreement and the relevant provisions of the Arbitration Act, should have directed the continuation of the suit instead of staying the same. Apart from the above arguments Mr.
Apart from the above arguments Mr. Mukherjee, after placing the pleadings and the relevant documentary evidence available from the records alternatively contended that in any event section 34 of the Arbitration Act had no application in the facts of the present case as the cause of action of the suit in question was not strictly and fully covered by the arbitration clause in question and the more so when the Defendant Respondent himself has in his letter of April 21, 1964 has claimed that since the partnership business is carrying on some constructional work, i.e. N-E.S. Block under P.W.D. construction at Purulia Bagmundi under the direct supervision of the Plaintiff Appellant, the accounts of that transaction should be taken into account in determining the respective dues at the time of the examination of accounts. He contended that since the dispute in the instant case related to the validity of a contract so even inspite of the wide nature and character of the arbitration agreement section 34 had no application. In support of this contention Mr. Mukherjee relied on the case of (2) Birla Jute Manufacturing Co. Ltd. v. Dulichand Pratapmull, reported in AIR 1953 Calcutta 450:91 CLJ 236 where in it has been held that however wide the terms of an arbitration agreement may be, a dispute as to the validity of a contract cannot be held to be within an arbitration agreement contained in the contract itself and such a dispute cannot be referred to arbitrators or dealt with by them under such an agreement on the basis that it is a "matter agreed to be referred". It has also been held in that case that section 34 confers a discretion on the Court, but it is only a discretion to stay or not to stay the suit after the conditions laid down in the section are found to be satisfied but it is not a discretion to stay the suit even if one of the conditions may be unsatisfied. These apart, Mr. Mukherjee submitted that the readiness and willingness of the Defendant-Respondent to do all things necessary to the proper conduct of the arbitration as has been alleged in the application under section 34 for staying the suit should not have been looked into or considered by the learned Trial Court as the said application was not on affidavit but the same was only a verified one.
In support of his contentions that such applications should be on solemn affirmation, Mr. Mukherjee relied on the case as (3) Srish Chandra Guha v. The Food Corporation of India, reported in 1975 (1) CLJ 269 . In that case it has been held that usually the only evidence before the Court as to the applicant's readiness and willingness, is his affidavit evidence which is verified as true to his knowledge and the Court has to act on such affidavit evidence. This readiness and willingness is one of the most vital factors on the basis whereof the Court has to exercise its discretion under section 34. Hence, if such averment is verified as submission then the Court cannot rely thereon and cannot be in a position to exercise its discretion in favour of granting stay. In that case it has further been held that the silence on the part of applicant prior to commencement of legal proceeding cannot go to prove that the applicant was not ready and willing to go to arbitration. 11. The above point of Mr. Mukherjee on the question of affirmation of the application in our view has very little substance. In the case of (3) Srish Chandra Guha v. The Food Corporation of India (supra) the relevant portion of the application dealing with the readiness and willingness of the applicant to continue with the arbitration proceeding was verified as "submissions" and as such it was held that since such "readiness and willingness" of the applicant is a fact which is within the knowledge of the applicant and as the Court will have to act on such statement so such statement cannot be relied on if they are verified not as "knowledge" but as "submission". Here in the instant case admittedly such relevant statement in paragraph 4 of the application has been verified as true to the knowledge of the Defendant-Respondent and as such the determination in the above mentioned case do not support the contentions of Mr. Mukherjee but in fact they are against him. We are further of the view that the argument of Mr.
Mukherjee but in fact they are against him. We are further of the view that the argument of Mr. Mukherjee that the application in question should not have been looked into or considered as the same was not an affirmed one has also no force and the Plaintiff-Appellant cannot also place much stress on such affirmation as his objection to the said application was also not an affirmed one but the same is also on mere verification. We hold that the statement regarding readiness and willingness of the Defendant-Respondent in his application in question having been verified as true to his knowledge, the learned Court below was justified in using the discretion under section 34 and more particularly when by such statement the Defendant-Respondent has duly discharged his onus to prove and establish his readiness and willingness to continue with or to act on the basis of the arbitration agreement and to complete the same. This apart, considering the averments in the application under section 34, the objection to the same, the documents and correspondences available from the record and after hearing Mr. Pyne, the learned Advocate for the Defendant-Respondent, we have no hesitation in holding that the dispute and the cause of action on the basis whereof the suit was filed do come within the purview of the arbitration clause viz., clause 20 of the agreement in question and the determinations in the case of (2) Birla Jute Manufacturing Co. Ltd. v. Dulichand Pratapmall (supra) have no application. 12. Mr. Pyne has made it clear before us that at all material times his client was and still he is ready and willing to do all things necessary to the proper conduct of the arbitration in question and we find that such statement has been duly incorporated in the application under section 34.
12. Mr. Pyne has made it clear before us that at all material times his client was and still he is ready and willing to do all things necessary to the proper conduct of the arbitration in question and we find that such statement has been duly incorporated in the application under section 34. In these state of affairs we are of the view that the Court is not powerless as under section 8 (a) of the Arbitration Act read with section 8 (2) it had and has the power to appoint an arbitrator with the same powers to act in the reference and to make an award as if he had been appointed by consent of al parties, when such appointment was not made within fifteen clear days after the service of notice, on the application of the party who gave such notice, after giving the other party an opportunity of being heard. Thus although the Court has a limited power to appoint an arbitrator in the cases as mentioned in clauses (a), (b) and (c) of section 8, even then the exercise of such power is discretionary. The word used in the section 8 (2) is “may”. But when the circumstances provided by the said section exist, the Court will always exercise its discretion by appointing an arbitrator and by regarding “may” as “must”. An arbitrator so appointed by the Court shall have all the powers as if he had been appointed by the parties. Apart from this section, the proviso to sub-section (b) of section 9 needs consideration. The said proviso does away with the hardship in case of failure to appoint an arbitrator within the stipulated time after the due notice and gives discretion to the Court to allow further time to the defaulting party to appoint an arbitrator “or to pass such other order as it thinks fit”. These words give to the Court the power to supersede arbitration if the justice of the case requires so. The words “or to pass such other order as it thinks fit” give indefinite power to the Court. That apart the language makes it clear that in any event the Court will give an opportunity to the defaulting party to appoint an arbitrator.
The words “or to pass such other order as it thinks fit” give indefinite power to the Court. That apart the language makes it clear that in any event the Court will give an opportunity to the defaulting party to appoint an arbitrator. So in the instant case the Court has the power to give an opportunity to the Defendant Respondent, who has admittedly committed a default to have an arbitrator appointed and in case of further default after such opportunity even to pass such other order as it thinks fir which may also include the appointment to be made by the Court. As indicated above Mr. Pyne has made it categorically clear that the Defendant-Respondent at all material times was and still is ready and wiling to nominate his arbitrator and in that view we feel that this appeal should be sent back to the learned Court below and the records should be transmitted to that Court at once with a direction to make all endeavors to give an opportunity to the Defendant Respondent to explain his conduct and to give him further opportunity to appoint an arbitrator if he gives satisfactory explanation of his default in having the arbitrator appointed within 3 months from the date of arrival of the records in that Court and thus and thereafter to proceed in accordance with law. 13. In view of the above, although the points as raised by Mr. Mukherjee fail the appeal is sent back to the learned trial Court after setting aside the impugned order with the directions as mentioned hereinbefore in addition to the further direction that if within a reasonable time from the date of the subsequent directions given by the Court pursuant to this determination, the Defendant-Respondent fails to satisfy the Court and refuses or neglects to appoint an arbitrator or if the learned Court below refuses to make an appointment by itself after the default, if any, by the Defendant Respondent, then this order will have no effect and the hearing of the suit will proceed after vacating the stay order passed on the application under section 34 of the Arbitration Act. But such stay order would continue if due and proper appointment of an arbitrator for and on behalf of the defendant-respondent is made. It is further ordered that the arbitrator already nominated by the Plaintiff-Appellant would continue.
But such stay order would continue if due and proper appointment of an arbitrator for and on behalf of the defendant-respondent is made. It is further ordered that the arbitrator already nominated by the Plaintiff-Appellant would continue. There will however be no order for costs. Sengupta, J. I agree.