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1986 DIGILAW 200 (ORI)

UNION OF INDIA v. JANARDAN MAHAPATRA

1986-06-18

D.P.MOHAPATRA

body1986
JUDGMENT D.P. Mohapatra, J. The principal question that arises for consideration in this appeal is whether on facts and in the circumstances of the case the Court below was right in holding that the application under S. 34 of the Arbitration Act (for short 'the Act') filed by the appellants was not maintainable. The respondent, Janardan Mohapatra, a contractor, was entrusted with execution of certain work for the Union of India represented by the Chief Engineer, M.E.S. (Lucknow). A written contract was entered into between the parties wherein it was stipulated that all disputes between the parties to the contract, other than those for which the decision of the C.W.E. or any other person is by the contract expressed to be final and binding, shall, after written notice by either party to the contract to the other of them, be referred to the sole arbitration of an Engineer Officer to be pointed by the authority mentioned in the tender documents and unless both the parties agreed in writing such reference shall not take place until after the completion of the works or termination or determination of the contract under condition Nos. 55, 56 and 57 thereof. The respondent alleging that certain disputes relating to the execution of the work had arisen between the parties, filed an application before the Subordinate Judge, Bhubaneswar under S. 20 of the Act and prayed for appointment of a suitable arbitrator and for reference of the disputes to the said arbitrator. Before filing their written statement in the case the appellants filed an application under S. 34 of the Act praying for stay of the proceeding. The stand taken by them was that the respondent - contractor should have moved the Engineer-in-Chief by notice for appointing an arbitrator as stipulated in the agreement before approaching the Court. The appellants stated further that they were ready and willing to refer dispute, if any, arising between the parties to an Engineering Officer appointed as arbitrator by the Engineer-in-Chief in accordance with the arbitration agreement. This application was rejected by the trial Court by order dated 28-8-1985. The said order is under challenge in the present appeal filed under S. 39(v) of the Act. Shri L. Rath, learned Standing Counsel (Central Government) appearing for the appellants contended that the Court below erred in rejecting the application under Section 34 of the Act as not maintainable. This application was rejected by the trial Court by order dated 28-8-1985. The said order is under challenge in the present appeal filed under S. 39(v) of the Act. Shri L. Rath, learned Standing Counsel (Central Government) appearing for the appellants contended that the Court below erred in rejecting the application under Section 34 of the Act as not maintainable. Shri Palit, learned counsel for the respondent, on the other hand contended that the impugned order is perfectly legal and proper and there is no scope for interfering with the same. Since the entire controversy in the case centres round the scope and interpretation of Section 34 of the Act, it would be convenient to quote the said section before proceeding further :- "34. Power to stay legal proceedings where there is an arbitration agreement :- 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 proceedings 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 proceeding; 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." The trial Court rejected the application under Section 34 of Act taking the view that the provision has no application to a proceeding under the Act, since the very purpose for which the provision is enacted is to compel to enforce agreement between the parties to refer disputes to arbitration. The view taken by the Court below is correct and proper. From the very language of the provisions of Section 34 of the Act it is manifest that the principle underlying the section is to force by an indirect method a contumacious party who agreed to arbitration. The view taken by the Court below is correct and proper. From the very language of the provisions of Section 34 of the Act it is manifest that the principle underlying the section is to force by an indirect method a contumacious party who agreed to arbitration. Where the parties to a dispute agree to refer it to arbitration and subsequently one of them brings a suit to enforce his rights, the remedy available to the defendants, as the section provides, is to apply for a stay of the suit. Then the burden lies on the plaintiff to show that some sufficient reason exists why the matter should not be referred to arbitration. The result of this provision is that when the Court is apprised that the suit has been instituted in contravention of an arbitration agreement, it has the discretion to stay the suit. It is provided in Section 34 of the Act that the applicant seeking stay of the suit must satisfy the Court that at the time when the proceedings were commenced and still he remains ready and willing to do all things necessary to the proper conduct of the arbitration. Thus it is apparent that the term "any legal proceedings" in the section obviously means a proceeding other than arbitration proceeding. The contention raised by Shri Rath that such a restricted interpretation should not be given to the term since the language of the section does not suggest so cannot be accepted. Acceptance of this contention would lead to absurdity as the provisions intended to enforce arbitration clause in the contract would be used as an instrument to stall a genuine attempt in that direction. Some of the decisions cited by the learned counsel for the parties during the hearing, may be noticed. The learned counsel cited the decisions reported in C. Rai v. Union of India (AIR 1957 J. and K. 27). Kamain Engineering Corpn Ltd. v. Madhya Pradesh Electricity Board, Jabalpur ( AIR 1964 M.P. 268 ). Dalai Raman v. Radhamohan Samantaray ((1965) 31 Cut L.T. 596), Union of India v. Surjeet Singh Atwal ( AIR 1970 S.C. 189 ) and Gokul Chandra Kanungo v. State of Orissa. ((1982) 44 Cut L.T. 463 = AIR 1983 N.O.C. 31), I have carefully perused these decisions. No doubt the decisions deal with the question of scope of Sections 20 and 34 of the Act. ((1982) 44 Cut L.T. 463 = AIR 1983 N.O.C. 31), I have carefully perused these decisions. No doubt the decisions deal with the question of scope of Sections 20 and 34 of the Act. But the principles laid down therein do not support the contention raised on behalf of the appellants. The Supreme Court in the case of Union of India v. Surjeet Singh Atwal, (supra) discussing the scope of Section 34 of the Act observed that it is only intended to make an arbitration agreement effective and prevent a party from going to Court contrary to his own agreement that the dispute is to be adjudicated by a private tribunal. The discussions in this decision as well as in the other decisions referred to above suggest that the provisions of Section 34 of the Act have application only to the proceedings other than those under the Act. It is well settled that the provisions under Section 20 of the Act vest wide discretion in the Court to appoint suitable arbitrator as well as formulate disputes for adjudication by the arbitrator. On the aforesaid discussions the position is clear that the Court below was right in holding that recoursed to Section 34 of the Act, cannot be taken to stay a proceeding under the said Act and in the present case under Section 20 of the Act. In the result, there is no merit in this appeal and the same is accordingly dismissed. There will be no order for costs of this appeal. Appeal dismissed.