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1996 DIGILAW 224 (RAJ)

Dhanna Ram Roopji v. State of Rajasthan

1996-02-28

B.R.ARORA

body1996
JUDGMENT 1. - These four appeals arise out of the order dated 17.3.1989 passed by the Additional District Judge, Jaisalmer, by which the learned Additional District Judge allowed the four applications filed by the defendant under section 34 of the Indian Arbitration Act, stayed the proceedings in the suit and referred the matter for arbitration. 2. Appellant M/s. Dhanna Ram Roopji is a registered partnership firm which submitted the tenders for the construction of the Rest House Ist Class, 76 V-type Quarters, III-type Quarters, cross and parallel roads at Canal Colony, Atulsar. The appellant's tenders, being the lowest, were accepted and the appellant was given the contract for the execution of the aforesaid works. Four separate agreements were executed. The appellant completed the work but certain amount, which was due, was not paid by the defendant to the appellant and, therefore, a notice under section 80 CPC was served on the defendant-respondent by registered A.D. on 17.8.1987. The defendant, after service of the notice, did not make payment and, therefore, the plaintiff-appellant filed four suits in the Court of the Additional District Judge, Jaisalmer for the recovery of the amount. Suit No. 14 of 1988 relates to the recovery of Rs. 43,698.86p., while Suits No. 15/88 relates to the recovery of Rs. 88,454.79p., suit No. 16 of 1988 relates to the recovery of Rs. 40,097.68p. and Suit No. 17 of 1988 relates to recovery of Rs. 32,147.82p. After the service of the summons on the defendant, the defendant filed applications under section 34 of the Indian Arbitration Act (for short, `the Act') before the trial Court. It was stated in the applications that the contract between the parties still subsists and in the agreement there is Clause No. 23, according to which in the case of any dispute relating to the contract, the dispute can be decided by way of arbitration and, therefore, the plaintiff should have taken the recourse to the arbitration proceedings, which according to Clause 23 were mandatory and the defendants are ready in getting the matter decided by arbitration and for that they are willing to perform any act. These applications were opposed by the plaintiff. The learned Additional District Judge, after hearing the arguments, allowed the applications, as stated above. It is against this order dated 17.3.1989 that the appellant has preferred these four appeals. 3. These applications were opposed by the plaintiff. The learned Additional District Judge, after hearing the arguments, allowed the applications, as stated above. It is against this order dated 17.3.1989 that the appellant has preferred these four appeals. 3. It is contended by the learned counsel for the appellant that for referring the dispute for arbitration and staying the proceedings, there must be existence of difference and dispute which is lacking in the present case. In support of this contention learned counsel for the appellant has placed reliance over : Dilip Construction Company v. Hindusthan Steel Limited, AIR 1973 MP 261 ; Mr. Bhonri Lal Hira Lal v. Prabhu Dayal, AIR 1980 Raj. 9 and Hindustan Copper Limited v. Assam Bearing Agency, AIR 1980 Delhi 238 . It is, also, contended that the readiness and willingness must be specifically averred in the application and that should be supported by an affidavit while in the present case the readiness and willingness have not been pleaded in the application. It is, also, contended that there is no dispute between the parties regarding the amount alleged in the suits. In support of his contention learned counsel for the appellant has placed reliance over : Union of India v. Thekedar Bhojraj, 1960 RLW 533 and Padma Ram v. Bhanwar Lal, AIR 1979 Raj. 84 . Learned counsel for the respondent, on the other hand, has supported the order passed by the Court below and submitted that the conditions required for the entertainment of the applications under section 34 of the Act are existing in the present cases and the learned Additional District Judge rightly exercised the powers in referring the matters to the Arbitrator and staying the proceedings. According to the learned counsel for the respondent-defendant, Clause 23 of the agreement is in a mandatory form and as the applications under section 34 of the Act were made, the applications were, therefore, rightly allowed by the learned Additional District Judge and the order passed by the trial Court does not require any interference. 4. I have considered the submissions made by the learned counsel for the parties. 5. It is true that if an agreement contained an arbitration clause then it should be respected. 4. I have considered the submissions made by the learned counsel for the parties. 5. It is true that if an agreement contained an arbitration clause then it should be respected. It has been observed by Robertson that "Honest men dread arbitration more than to be dread law suits." The language of Section 34 of the Act contemplates that while considering and deciding the application under section 34 of the Act and for staying the proceedings, the Court is required to look at the plaint and to see : whether the requirements of Section 34 of the Act exist or not? Section 34 states that where any party to the arbitration or any person claiming under the matter commences any proceeding against the party to the agreement in respect of any matter, agrees to be referred, at any time prior to filing the written statement or taking any steps in the proceedings, applies to the judicial authority before whom the proceedings are pending, to stay the proceeding; and if he 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, at the time when the proceedings commence and still remains ready and willing to do all things necessary for the conduct of arbitration, such authority may make the order staying the proceedings. For exercising the powers under section 34 of the Act, the following conditions are necessary to be completed : (i) there must be a subsisting and binding arbitration agreement between the parties; (ii) the existence of difference or dispute is an essential condition for arbitrator's jurisdiction to act under the arbitration clause; and (iii) the defendant's readiness and willingness must be specifically averred and must be supported by an affidavit and (iv) the objection is taken at any time before filing of the written statement or taking any steps in the proceedings. 6. The first condition necessary for the exercise of the powers under section 34 of the Act is that there must be a subsisting and binding arbitration agreement between the parties. There is no dispute that a contract was executed between the parties and clause 23 of the agreement deals with the binding nature of the arbitration proceedings in the case of existence of dispute between the parties relating to the contract. There is no dispute that a contract was executed between the parties and clause 23 of the agreement deals with the binding nature of the arbitration proceedings in the case of existence of dispute between the parties relating to the contract. The first condition for exercise of the powers under section 34 of the Act, therefore, stands satisfied. 7. It is not in dispute that so far as the condition regarding making of the application for the stay of the proceedings and referring the matter for adjudication to the arbitration without filing the written statement of without taking any steps in the proceedings are concerned and this condition also stands satisfied as the applications were made by the defendants to refer the dispute without taking any proceedings and filing the written statement. 8. The question which requires consideration in the present case is : whether the other conditions for the staying of the proceedings and to refer the matter of dispute for arbitration : i.e. dispute a difference between parties exists or not? In the plaint, the plaintiff has nowhere stated that there is a dispute between the parties regarding the amount. It was averred in the plaint that the plaintiff was granted the contract for various construction work and the execution of the same was completed by the plaintiff but the payment has not been made and for the recovery of the balance amount, which was not paid, the suits were filed. It was nowhere stated in the plaint that the defendant has disputed the execution of the contract or completion of the work. The plaintiff, before filing the suits, served a notice under section 80 CPC on the defendants. The Chief Engineer, Indira Gandhi Nahar Project, Jaipur sent the notice to the Additional Chief Engineer, I.G.N.P., Jaisalmer and by his letter dated 7.11.1987 and 28.1.1988 asked him to settle the matter. The defendant did not deny or dispute the claim of the plaintiff. Even in the applications under section 34 of the Act, the defendant did not deny the claim of the plaintiff nor stated that there was a dispute regarding the amount. No reply to the notice under section 80 CPC was given by the defendant which, also, shows that there was no dispute regarding the amount or the execution of the work. 9. No reply to the notice under section 80 CPC was given by the defendant which, also, shows that there was no dispute regarding the amount or the execution of the work. 9. For reference of a dispute to the Arbitrator under the arbitration clause in an agreement, the difference or dispute is an essential condition. The jurisdiction of the Arbitrator depends on the existence of the dispute and not upon the existence of the claim. A failure to pay is not a difference or dispute. This pre-condition of the existence of dispute or difference is not existing in the present cases. 10. In : Dilip Construction Company v. Hindustan Steel Limited, AIR 1973 MP 261 it has been held by the Division Bench of the Madhya Pradesh High Court that:- "(i) The existence of a difference or dispute is an essential condition for the arbitrator's jurisdiction to act under an arbitration clause in an agreement; (ii) The jurisdiction of an arbitrator depends not upon the existence of a claim or the accrual of a cause of action, but upon the existence of a dispute. A dispute implies an assertion of a right by one party and repudiation thereof by another. (iii) A failure to pay is not a difference, and the mere fact that a party could not or would not play does not in itself amount to a dispute unless a party who chooses is not to pay raises a point of controversy regarding, for instance, the basis of payment or the time or manner of payment." 11. Relying upon the decision of the Division Bench of Madhya Pradesh in the aforesaid Court, the learned Single Judge of the Delhi High Court, in Hindustan Copper Ltd., Jhunjhunu v. Assam Bearing Agencies, AIR 1980 Delhi 238 held that:- "In the absence of the allegation made in the application under section 34 of the Arbitration Act regarding the dispute or difference between the parties arising out of or in connection with the contract or in relation to any matter connected therewith, it is not for the Court to ask the defendant to spell them. It is the defendant to allege specifically the dispute or difference. One of the ingredients of Section 34 of the Arbitration Act is that the defendant must show that it was ever ready and willing to do every thing necessary for the proper conduct of the arbitration. It is the defendant to allege specifically the dispute or difference. One of the ingredients of Section 34 of the Arbitration Act is that the defendant must show that it was ever ready and willing to do every thing necessary for the proper conduct of the arbitration. Without specifying the dispute, it cannot be said in the present case that the defendant was ever ready or was willing to do everything necessary to refer the said dispute to arbitration. Silence on the part of the petitioner-defendant, after the receipt of the legal notice, also, shows its unwillingness. In the present case I hold that the dispute or the difference was neither obvious nor was it apparent from the application which was rightly rejected." 12. The Single Bench of this Court in : M/s. Bhonrilal Hira Lal v. Prabhu Dayal, AIR 1980 Raj. 9 held that:- "Under Section 34 of the Arbitration Act, the following conditions must co-exist:- (i) there must be a subsisting and binding arbitration agreement capable of being enforced between the parties; (ii) the subject matter in dispute in the proceedings sought to be stayed must be within the scope of arbitration agreement; and (iii) the petition must be made to the judicial authority by a party to the arbitration agreement or some person claiming under him at the earliest stage of the proceedings, i.e., before the filing of the written statement or taking any other step in the proceedings." 13. Thus, for reference of a matter for arbitration the existence of the dispute is a condition precedent. In the present case there is no averment either in the application or anywhere which could show that there is a dispute or difference between the parties. This condition is, therefore, not satisfied. 14. The next condition which requires to be satisfied is the readiness and willingness of the defendant. Whether in the present case the defendant, in their application, have specifically made averment to this effect or not, has to be seen. In para No. 3 of the application what has been stated by the defendant is that the defendant, in accordance with the condition of the arbitration clause, is ready and willing to do things necessary to the proper conduct of the arbitration proceedings. In para No. 3 of the application what has been stated by the defendant is that the defendant, in accordance with the condition of the arbitration clause, is ready and willing to do things necessary to the proper conduct of the arbitration proceedings. The averments made by the defendant in the application read as under:- " ;g fd eqnk;yk ekfQd 'krZ vkfcZVs~'ku (Arbitration) ls fookn fu.kZ; djokus o mlds fy, gj t:jh dk;Z djus ds fy, bPNqd o rS;kj gSA " Section 34 of the Act requires that the specific averment has to be made by the defendant that the applicant was, at the time when the proceedings commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration. The defendant, in the applications, has nowhere stated that they were ready and willing to do all things necessary. What they have stated in the application is that "now they are ready and willing to do all the things for arbitration proceedings". In this view of the matter this condition, also, does not stand satisfied. 15. In this view of the matter, as the conditions No. 2 & 3, which are necessary and are the pre-conditions for the exercise of the powers under section 34 of the Act, are not satisfied in the present case, though conditions No. 1 & 4 stand satisfied, the learned Additional District Judge was, therefore, not justified in referring the matter for arbitration and staying the proceedings. The order, passed by the learned trial Court for referring the matter to the arbitration and staying the proceedings, therefore, deserves to be quashed and set-aside. 16. In the result, all the four appeals are allowed. The order dated 17.8.1989 passed by the learned Additional District Judge, Jaisalmer, referring the matter for arbitration and staying the proceedings, is quashed and set-aside. In the facts and circumstances of the case I leave the parties to bear their own costs. The office is directed to immediately send the record to the trial Court.Appeal allowed. *******