1. The respondent-plaintiff had filed a suit against Union of India, appellant in this appeal, for recovery of Rs. 68,033.95, which includes interest of Rs. 25, 575.95 on the amount of Rs. 42, 458/- being the price of goods sold and delivered by the plaintiff of the defendant and which according to the plaintiff, have been wrongly rejected by the defendant by their rejection order dated 3rd October, 1975.
2. Prior to the suit, a notice under S. 80 of the Civil Procedure Code was served on the Union of India on 31-7-70. Even prior to that, a letter was served by the plaintiff on the defendant on 1st December 1975, through the General Manager of Western Railway requiring them to pay the suit amount and this letter was accompanied by a copy of the plaint which the plaintiff proposed to file. The Union of India was thus given due information by the plaintiff as far back as 1st December 1975, that the plaintiff would file a suit if the amount due is not received.
3. The suit is filed on 2-10-1978, which is almost the last day of limitation. Summons of the suit was served on Union of India on 27-10-1978. It was only on 9-12-1979 that Union of India took out a notice of motion for staying the suit under Section 34 of the Arbitration Act contending that the contract, in pursuance of which the goods were supplied by the plaintiff, was governed by an arbitration clause, No, 2900 contained in the Indian Railways Standard Conditions of Contract. this clause provides for an appointment of a sole arbitrator by the General Manager of the Zonal Railways for the purposes of referring all disputes and differences arising under the contract like the one in the instant case.
4. The learned Judge took the view that the letters which were exchanged between the parties, there is no indication given by the defendant of their readiness and willingness to refer the dispute to an arbitrator. The learned Judge took the view that no reply was given to notice under S. 80 of the Code of Civil Procedure and, in fact, the only document in which the defendant has indicated their readiness and willingness to refer the disputes and differences to arbitration was the affidavit filed by them in support of the notice of motion. The learned Judge, therefore, took the view that the defendant had not shown their readiness and willingness to refer disputes to arbitrator at the commencement of the suit and they were. therefore, not untitled to succeed in the notice of motion. The motion having been dismissed by the learned Judge, the Union of India has filed this appeal.
5. Mr. Dalal appealing on behalf of the appellant has mainly placed reliance on two decisions of the Supreme Court in support of his contention that mere inaction in not replying to a notice under S. 80 of the Code of Civil Procedure cannot be construed against the Union of India and it is argued that wince the decision of the learned single Judge was based mainly on the failure of Union of India to reply to the notice under S. 80 of the Code of Civil Procedure, the decision was liable to be set aside.
6. In Food Corporation of India v. Thakur Shipping Co. : 3SCR146 the Supreme Court has held that were a party to an arbitration agreement chooses to maintain silence in the face of repeated requests by the other party to take steps for arbitration, the case is not one of 'mere inaction' and failing to act when a party is called upon to documents so is a positive gesture signifying unwillingness or want of readiness to go to arbitration. It may be pointed out that this was not one of the decisions on which Mr. Thakkar appearing on behalf of the plaintiff has relied and the ratio of this decision is not attracted to the facts of the present case because it is not the case of the plaintiff that the plaintiff had at any time called upon the defendant to go to arbitration and that they having failed, it must be held that they were unwilling or not ready to go for arbitration.
7. The main decision on which reliance is placed by Mr. Dalal is a decision of the Supreme Court in State of Punjab v. Geeta iron & Brass Works Ltd. : 1SCR746 . This was an order delivered by the Supreme Court while rejecting a Special Leave Petition and while dealing with the question as to whether a mere failure to reply to a notice under S. 80 could be considered as a circumstance to indicate unwillingness on the part of the Union of India to go to arbitration, the Supreme Court observed as follows
'We make it clear however that as a matter of law mere silence on the part of the defendant when a notice under S. 80 C. P. C. is sent to him may not, without more, disentitle him to move under S. 34 and seek stay'.
Now, it is no doubt true that the effect of these observations is that the mere failure to reply to a notice under S. 80 of the Code of Civil Procedure will not disentitle the Union of India or the defendant to move for stay of the suit under S. 34 of the Arbitration Act. But it is equally true that the same observation would indicate that coupled with other circumstances, a failure to reply to a notice under S. 80 could well be considered as a circumstance which would disable the defendant from asking for exercise of discretion under S. 34 of the Arbitration Act.
8. Now we are sitting in appeal over an order holding that the suit should not be stayed under the provisions of S. 34 of the Arbitration Act. The nature of jurisdiction which an appellate Court will exercise in such a matter is made clear by the Supreme Court in The Printers (Mysore) Private Ltd. v. Pothan Joseph : 3SCR713 . The observations of the Supreme Court are as follows
'Where the discretion vested in the court under S. 34 has been exercised by the trial court the appellate court should be slow to interfere with the exercise of the said discretion. In dealing with the matter raised before it at the appellate stage the appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion . If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. As is often said, it is ordinarily not open to the appellate court to substitute its own exercise of discretion for that of the trial judge; but if it appears to the appellate court that in exercising its discretion the trial court has acted unreasonably or capriciously or has ignored relevant facts and has adopted an unjudicial approach then it would certainly be open to the appellate court -- and in may cases it may be its duty -- to interfere with the trial court's exercise of discretion. In cases falling under this class the exercise of discretion by the trial court is in law wrongful and improper and that would certainly justify and call for interference from the appellate court. These principles are well established; but, as has been observed by Viscount Simon L. C. in Charles Osenton & Co. v. Johnston (1942) AC 130 'the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established and any difficulty that arises is due only to the application of well settled principles in an individual case'.
9. Having regard to this statement of law, it is, therefore, not enough for the appellant to show that we could have come to a different conclusion if the matter was before us in the first instance and we would have declined to exercise discretion under Section 34 of the Arbitration Act, What us necessary for the appellant to show is that the discretion has been exercised by the trial Court unreasonably, or that it has been exercised capriciously or the trial court has ignored relevant facts and has adopted an unjudicial approach. If the order of the learned single Judge is considered in the light of the position of law laid down by the Supreme Court, it is difficult for us to take the view that the discretion has been exercised either capriciously or unreasonably. S. 34 of the Arbitration Act requires that the Court must be satisfied, among other things, that the applicant who seeks the exercise if discretion under S. 34 was 'at the time when the proceedings were commenced, and still remains ready and willing to documents all things necessary for a proper conduct of arbitration'. In other words, it has to be established by a party applying for stay of the suit under S. 34 that he has been ready and willing to go to arbitration at the commencement of the proceedings in the suit. It is while considering this aspect of the question that the learned Judge of the trial Court has taken into account the whole conduct of the Union of India.
10. As already pointed out, as far back as 1st December 1975 the plaintiff had clearly issued a notice which was also in the nature of notice under S. 80 if the Code of Civil Procedure. Now all that has been done thereafter is that the claim of the plaintiff has been denied. it was open to the Union of India to tell the plaintiff that though they did not accept the claim, they were willing to go to arbitration which would have indicated that the Union of India was willing to take the matter to arbitration as it was contemplated by the arbitration clause. The inaction of the defendant after 31-7-78, though by itself could not have been used against them. It could certainly be considered in the light of the fact that for almost for a period of three years the defendant had not, at any stage, expressed their willingness to go to arbitration. The observations of the learned trial judge in para 9 are not based merely on the inaction of the Union of India to reply to notice under S. 80 but they are based on the conduct of the defendant prior to that date as disclosed by letters written on behalf of the Union. these circumstances cannot be held to be wholly irrelevant for the purpose of considering the question as to whether one of the essential conditions laid down by S. 34 of the Arbitration Act were satisfied or not viz., whether the defendant was willing to go to arbitration at the commencement of the proceedings. It does not, therefore, appear to us that there is any error in the order of the learned Judge to have declined to exercise discretion under S. 34 of the Arbitration Act.
11. The appeal therefore fails and is dismissed with costs. The amount of costs could be paid out of the deposit made by the appellant. Oral application for leave to appeal to Supreme Court, made by the Union, is rejected. The appellant shall now file their written statement within two months from today.
12. Appeal dismissed