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2000 DIGILAW 694 (KAR)

Ratnakar Dattatreya Shetwal v. Krishna Traders

2000-10-16

H.N.TILHARI

body2000
ORDER Hari Nath Tilhari, J.—This revision under Section 115 of the Code of Civil Procedure arises from the judgment and order dated 2.1.1998, passed in Miscellaneous Appeal No. 35 of 1996. The notice of this revision had been issued to the Respondents. On behalf of Respondents 1A to 1C, Sri Jigjinni, has put in appearance. The notices had been served on Respondents 3, 4, 5, while service on Respondents 2 and 6 was dispensed with. 2. I have heard Sri R.D. Gokakar, learned Counsel for the revision Petitioner and Sri Jigjinni, learned Counsel for the Respondents 1(A) to 1(C). The facts of the case in nutshell are that, the Plaintiff-revision Petitioner filed Original Suit Number 583 of 1992, in the Court of Munsiff, Belgaum, for decree for dissolution of partnership firm, it is for dissolution of unregistered firm. 3. After service of notice or summons of the suit, the Defendants 1(A) to 1(C), put in appearance and filed application under Section 34 of the Arbitration Act, 1940, for stay of the proceedings of the suit taking the plea that the relief claimed in the suit for dissolution of the firm and for accounting is covered by Clause 12 of the Arbitration agreement, and therefore, under Section 34 of Arbitration Act, the proceedings of the suit should be stayed, and parties be made to approach the Arbitrator. This application was numbered, as I.A. No. III, in the Court of Munsiff. 4. The learned Munsiff considered the application, he observed that Defendants 1A to 1C, have been the partners of Defendant No. 1-firm, and that partnership firm was partnership at will and all the partners were under obligation not to carry on any other business separately in different names or in their individual names. The Trial Court also observed that the plaint contained allegations of fraud attributed to Defendants 1(A) to 1(C), and it opined that in the matter of dissolution of firm, particularly where there are allegations of fraud etc., it would not be just and proper to stay the proceedings, and apply Section 34. 5. The Trial Court appears to have taken the view, the dissolution of the firm is not a dispute between the parties, and it cannot be referred to an Arbitrator on the ground that there is an agreement in the Partnership Deed, to refer the matter of dispute to Arbitrator. 5. The Trial Court appears to have taken the view, the dissolution of the firm is not a dispute between the parties, and it cannot be referred to an Arbitrator on the ground that there is an agreement in the Partnership Deed, to refer the matter of dispute to Arbitrator. Having taken this view, the Trial Court rejected the application. 6. Feeling aggrieved from the judgment and Order of the Trial Court rejecting application under Section 34, of Arbitration Act the Defendants, namely, Nos. 1, 1A, 1B and 1C, preferred Miscellaneous Appeal Number 35 of 1996. The Lower Appellate Court allowed the appeal, and the application under Section 34 of the Arbitration Act. The Lower Appellate Court opined that the arbitration is the alternative format for speedy disposal of the matter, and that the matter of dissolution of partnership can also be taken to be a dispute arising under the agreement. It opined that the case was one fit for stay. It observed, that, it was contended that arbitration proceedings were taken earlier in the year 1991, as alleged by the Plaintiff, and the said proceedings remained pending for 7 years, and no progress was made, but it opined that there is no evidence on record to show that, as to who was responsible for not achieving the progress in the said Arbitration case. So, on that ground the present application under Section 34, could not be dismissed, and allowed the appeal and application, again on the above ground. 7. Feeling aggrieved from the judgment and order of the Appellate Court, the Plaintiff has come up in revision. 8. I have heard the learned Counsels for the parties, as mentioned above. 9. The learned Counsel for the revision Petitioner contended that the Appellate Court acted illegally, and with irregularity in allowing the appeal without applying its mind to the question: "Whether the applicant has satisfied the Court that he was at the time of the commencement of proceedings of the suit, and thereafter remained ready and willing to do all things necessary for proper conduct of arbitration. Those proceedings were initiated, according to the revision Petitioner, at the instance of the Plaintiff. There is no dispute at all about the point that those arbitration proceedings were initiated. Those proceedings were initiated, according to the revision Petitioner, at the instance of the Plaintiff. There is no dispute at all about the point that those arbitration proceedings were initiated. There is no dispute, there were arbitration proceedings, and delay was there, at whose instance, it was contended that there is nothing on record. The Respondents' Counsel contended that there is no material to show, whether the delay was at the instance of the Defendants, and there is no evidence to show, as Court below also indicates. Mr. Jigjinni, only pointed out that Plaintiff had not indicated about those arbitration proceedings, so it brought the fact of arbitration proceedings to the notice of the Court by way of application of Section 34 as well. 10. Those proceedings did not drag, Sri Jigjinni, submitted that he is not in a position to state, as to who was at fault, and for whose fault, the arbitration could not succeed, though it may not have been related to dissolution. Sri Jigjinni contended that it was for the Plaintiff to prove that the Defendant-applicant was not ready at all for arbitration proceedings. Learned Counsel contended, that, scope of jurisdiction of this Court under Section 115, is limited to jurisdictional error and not to error of law simpliciter. 11. I have applied my mind to the contentions raised by the learned Counsels for the parties. There can be no disputes, as to the proposition of law to the effect that the jurisdiction of this Court under Section 115 Code of Civil Procedure is limited, and where it is established that order amounts to a case decided, and no appeal did lie from the order of this Court or to the subordinate Court, and that applicant, coming before the Court under Section 115, does satisfy the Court that order impugned suffers from jurisdictional error, as well as it has tendency to cause substantial and material injustice or injury, then only this Court may be required to, and can exercise its power under Section 115 Code of Civil Procedure. 12. The jurisdiction and power to grant stay under Section 34 of Arbitration Act, is circumscribed by the terms and conditions specified therein, unless those conditions are established, the proceedings or suit in exercise of powers under Section 34, cannot be stayed. 13. 12. The jurisdiction and power to grant stay under Section 34 of Arbitration Act, is circumscribed by the terms and conditions specified therein, unless those conditions are established, the proceedings or suit in exercise of powers under Section 34, cannot be stayed. 13. Section 34 of Arbitration Act reads as under: 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 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 proper conduct of the arbitration, such authority may make an order staying the proceedings. The basic ingredients for the application of the provisions of Section 34 of the Arbitration Act, and making application for stay being granted thereunder are: (i) That the proceedings of the suit must be between parties, who are parties to an arbitration agreement, in other words, that, party commencing the legal proceedings by way of suit etc., and party against whom suit or other proceeding is commenced, both these parties must be parties to an agreement called arbitration agreement, and (ii) that the subject-matter of dispute or the difference or dispute arising between the parties must relate to the subject, agreed to be referred by parties to arbitration. (iii) That the applicant moving the application under Section 34, must be party to suit or legal proceeding, and (iv) he must move the application before filing of written statement or, as well as before taking any other steps in the proceedings, namely, the suit, to the Judicial Authority concerned before which the proceedings or suit is pending for stay. (v) The Judicial Authority has got to be satisfied, that there is no sufficient reason why matter should not be referred in accordance with arbitration agreement to Arbitrator. (v) The Judicial Authority has got to be satisfied, that there is no sufficient reason why matter should not be referred in accordance with arbitration agreement to Arbitrator. (vi) That the applicant making application under Section 34, must establish and satisfy the Judicial authority that he (the applicant) was, at the time when the judicial proceedings, sought to be stayed, were commenced, and thereafter till the date of moving the application, and decision on that application under Section 34, is and has always been ready and willing to do all things necessary for the proper conduct of arbitration. Reference in this regard may be made to the decisions of the Hon'ble Supreme Court in the case of Anderson Wright Ltd. Vs. Moran and Company, AIR 1955 SC 53 and to another decision of Hon'ble Supreme Court in the case of Rachappa Gurudappa Bijapur Vs. Gurudiddappa Nurandappa and Others, AIR 1989 SC 635 . 14. In the just above case of Rachappa Gurudappa Bijapur their Lordships lay it down the law under Section 34 of Arbitration Act in para-4 of their judgment at Page 637 of the report as under: 4. An analysis of the aforesaid section makes it clear that in order to have proceedings stayed, there must be an arbitration agreement between the parties covering the disputes in question. The section stipulates that in order that stay may be granted under the Section it is necessary that the following conditions are fulfilled: (i) The proceedings must have been commenced by a party to an arbitration agreement against any other party to the agreement; (ii) The legal proceeding in this case the suit which is sought to be stayed must be in respect of a matter agreed to be referred; (iii) the applicant for stay must be party to the legal proceedings; the suit in this case; (iv) The applicant must have taken no steps in the proceedings after appearance; (v) the applicant must satisfy that only the applicant was, at the time when proceedings were commenced, ready and willing to do every thing necessary for proper conduct of arbitration and (vi) The Court must be satisfied that there was no sufficient reason why the matter should not be referred to arbitration. 15. 15. That it is for the applicant, moving application under Section 34 of Arbitration Act, to satisfy the Court that he at the time of commencement of proceedings in the suit as well as subsequent, thereto till the matter under Section 34 comes before the Court at last for consideration and disposal, was, is and has been ready and willing to do all things necessary for proper conduct of arbitration. When I so observe I find support for my above view from the decisions of Hon'ble Supreme Court in the case of Food Corporation of India Vs. Thakur Shipping Co. and Others, AIR 1975 SC 469 , as well as to the decision in the case of Rachappa Gurudappa Bijapur Vs. Gurudiddappa Nurandappa and Others, AIR 1989 SC 635 . Their Lordship in Food Corporation of India Vs. Thakur Shipping Co. and Others, AIR 1975 SC 469 , after having referred to their earlier decision in Anderson Wright Ltd. Vs. Moran and Company, AIR 1955 SC 53 , observed and lay it down: In Anderson Wright Ltd. Vs. Moran and Company, AIR 1955 SC 53 this Court enumerating the conditions that should be fulfilled before stay may be granted under Section 34 notes as one of the conditions: The conditions that applicant for stay "should satisfy the Court not only that 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". It is thus quite clear on authorities and from the terms of Section 34 that readiness and willingness must exist not only when application for stay is made but also at the commencement of the legal proceedings. 16. So far as, whether there is any other sufficient cause is concerned, as to why matter should not be referred, it may be said that burden is on the other side, the other side I mean to say opposite party's obligation to satisfy that there is reason why the proceedings be not stayed. But, so far as the above last part is concerned, namely s to readiness and willingness on the part of the applicant, he has to satisfy and bald allegations are not sufficient. But, so far as the above last part is concerned, namely s to readiness and willingness on the part of the applicant, he has to satisfy and bald allegations are not sufficient. The applicant in application must show his conduct, as to what he has done to show his readiness, and willingness to perform his part of doing things necessary for proper conduct of arbitration, the same has to be examined in the light of the facts of the case. 17. The Plaintiff's allegation has been that, Plaintiff had given notice under Section 43, for dissolution and sought accounts. A reading of paragraphs 5 and 9 of the plaint reveal, that, Plaintiff issued the notice for dissolution of the firm, i.e., to all the three partners, and of his intention to dissolve the firm under Section 43 of Partnership Act and inspite thereof the Defendants did not do anything neither rendered account nor complied with the notice. That notice was given on 3rd March, 1992, as per plaint allegations. The suit was filed in June 1992. 18. The learned Counsel contended that Defendant could not file the written statement, as the application under Section 34, had to be made without filing written statement as well as without taking any steps in the suit. That may be so. But in his application under Section 34, seeking stay, the duty of the applicant was to indicate if he was ready when the suit was filed, and he continued to be ready to do all things necessary for that purpose at all the times thereafter. That atleast Defendant could have in his application under Section 34, ought to have stated what did he do after the notice was issued in March 1992. 19. Defendant could have indicated that notice alleged to have been issued by the Plaintiff was served or not served on him, and if was served; Whether he gave a reply to the effect that the proper proceeding to be taken were to be before the Arbitrator, and he could have suggested for an appointment of Arbitrator, or if he did not receive the notice, he could have as well said that he did not receive the notice at all, but he has always has been ready to do all that was or has been necessary to be done for due progress of arbitration and for that purpose. There is nothing in the application under Section 34, nor in the affidavit thereto to indicate his conduct to specify and establish prima facie the correctness of averment made. 20. When he himself can indicate as to when arbitration proceedings had taken place earlier, then what was there to prevent him to state that and indicate his readiness and willingness to do all that was and has been necessary for due progress of Arbitration as well to have shown that there was nothing on his part which resulted in the failure of earlier Arbitration. 21. If notice alleged was not served at all, on the Defendant-applicant under Section 34 and suit had been filed without notice, though he has always been ready and willing to do all that was necessary for the purpose of progress of Arbitration then at least, he could have stated that or if notice had been served on him he could and should have given reply asking the Plaintiff to have recourse before Arbitrator by joint efforts by appointing jointly the Arbitrator. Nothing of this sort has been indicated in the application, so, the bald allegation in the application that he was ready and willing, and he has always been so ready and willing as required does not satisfy this requirement of Section 34 of Arbitration Act. 22. The Lower Appellate Court did not apply its mind to this aspect of the matter, it only had gone to the question; Whether the matter of dissolution of partnership could be taken to be, covered by arbitration agreement, although the attention of the Court was invited to earlier arbitration proceedings; It simply said there is no evidence. It was the duty of the Appellate Court to have atleast called upon the applicant to explain, his conduct after issue of notice. Nothing have been done, in my opinion, the order passed by the 1st Appellate Court allowing the appeal and the application under Section 34, suffers from jurisdictional error and the earlier conduct of arbitration proceedings was delayed and remained pending for 7 years and odd, and it discloses that no useful purpose will be served by staying the suit or asking the parties to move for arbitration. 23. The revision as such is allowed with costs. 23. The revision as such is allowed with costs. The order of the Appellate Court is set aside, as it suffers from jurisdictional error, and the appellate order granting stay of the proceedings of the suit is hereby set aside.