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Sambhu Nath Rameshchandra Sarcar Vs. Surendra Manilal Jhaveri - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai High Court
Decided On
Case NumberO.C.J. Notice of Motion No. 752 of 1976
Judge
Reported in(1978)80BOMLR34
AppellantSambhu Nath Rameshchandra Sarcar
RespondentSurendra Manilal Jhaveri
Excerpt:
arbitration act (x of 1940), section 34 - code of civil procedure (v of 1908), order vi, rule 6--motion for stay of suit under the provisions of section 34 of the arbitration act--averments necessary to be made in affidavit of party seeking stay--whether by fling a consent praecipe and obtaining an adjournment from the prothonotary and senior master for the purpose of filing his written, statement, the defendant had abandoned the arbitration agreement and had expressed the unequivocal intention to have the disputes between the parties determined by the court.;for a notice of motion for stay of suit under section 34 of the arbitration act to be maintainable the affidavit in support of such motion must aver that the following conditions have been fulfilled : (1) the proceeding must have.....madon, j.1. this is a notice of motion taken out by the defendant for stay of the suit under section 34 of the arbitration act, 1940. this motion is resisted by the plaintiff on three grounds, namely, (1) that the affidavit in support of this notice of motion does not contain the necessary averments and, therefore, the motion is not maintainable on the ground that it does not make out any case entitling the defendant to obtain stay of the suit, (2) the defendant was not ready and willing at the date when the suit was filed to do all things necessary to the proper conduct of the arbitration, and (3) after the filing of the suit the defendant has not been ready and willing and has not remained ready and willing to do all things necessary to the proper conduct of the arbitration.2. in order.....
Judgment:

Madon, J.

1. This is a Notice of Motion taken out by the defendant for stay of the suit under Section 34 of the Arbitration Act, 1940. This Motion is resisted by the plaintiff on three grounds, namely, (1) that the affidavit in support of this Notice of Motion does not contain the necessary averments and, therefore, the Motion is not maintainable on the ground that it does not make out any case entitling the defendant to obtain stay of the suit, (2) the defendant was not ready and willing at the date when the suit was filed to do all things necessary to the proper conduct of the arbitration, and (3) after the filing of the suit the defendant has not been ready and willing and has not remained ready and willing to do all things necessary to the proper conduct of the arbitration.

2. In order to understand these contentions it is necessary to set out a few facts and dates. The plaintiff and the defendant entered into a partnership agreement on March 13, 1970 under which the partnership was deemed to have commenced from January 1, 1970 and was to be a partnership at will. Clause 27 of the said partnership agreement is the arbitration clause and is in the following terms:

27. If during the continuation of the said partnership or at any time afterwards any difference shall arise between the said partners or between any of them and the heirs, executors or administrators of the other partner or between their respective heirs, executors or administrators in regard to the construction or meaning of any of the terms and conditions herein contained or as to any division, act or thing to be made or done or omitted to be done in pursuance hereof as to any matter or thing relating to the said partnership or the affairs thereof, such difference shall be referred to the arbitration of two arbitrators, one to. be appointed by each party in difference (whether consisting of one or more person or persons), and in case of the said arbitrators being equally divided in their opinion, to an Umpire appointed by the said arbitrators before their entering on the consideration of the matter referred to them or in case of their default by the said parties in difference. The decision of the said arbitrators or the said Umpire (as the case may be) shall be binding upon all the parties.

By his attorneys' letter dated March 23, 1976 addressed to the plaintiff, the defendant, after making certain charges against the plaintiff, stated that by the said letter he was giving to the plaintiff notice dissolving the said partnership with effect from the midnight of March 31, 1976. The last three paragraphs of the said letter stated as follows:

Our client is getting the accounts of the partnership made up for the last year, i.e. upto 31st December, 1975, and also getting the accounts of the partnership made up upto 31st day of March, 1976, the date on which the partnership shall stand dissolved and the same is expected to be ready soon.

We are instructed by our client to request you to come down to Bombay at as early a date as possible so that the accounts of the partnership may be made up and the affairs of the partnership be wound up to the mutual satisfaction of the parties in accordance with law and the partnership agreement.

Please treat this as a notice of dissolution of the partnership.

3. On July 6, 1976 the plaintiff filed in this High Court a suit for dissolution and accounts and for winding up the affairs of the said firm. On July 12, 1976 the defendant took out this Notice of Motion. On August 2, 1976 the plaintiff filed in Court his affidavit in reply to the said Notice of Motion. This affidavit was affirmed on July 30, 1976 and a copy of the said affidavit was admittedly furnished to the defendant's attorneys prior to the affidavit being filed in Court. Thereafter by their letter dated August 10, 1976 the defendant's attorneys enclosed a consent praecipe for the postponement of the suit, requesting the plaintiffs attorneys to return the praecipe duly signed by them to enable them to file the same in Court in time. In the said letter the reason why the adjournment of the suit was required was mentioned as 'as our client wants time to file his written statement'. The said praecipe was returned by the plaintiff's attorneys duly signed by them along with their letter dated August 11, 1976. The said consent praecipe which was prepared by the defendant's attorneys was ad-; dressed to the Prothonotary and Senior Master and stated as follows:

Upon consent of the attorneys for the plaintiff hereunto subscribed, be pleased to adjourn the hearing of the Short Cause from the 17th August, 1976 to the 28th September, 1976 as our client, the defendant, wants time for his written-statement. This is the first adjournment by a praecipe.

In view of the consent given by the plaintiff's attorneys, the, Prothonotary adjourned the hearing of the suit as a Short Cause from August 17, 1976 to September 28, 1976.

4. When this Notice of Motion first reached hearing before me on August 18, 1976, an application was made on behalf of the plaintiff for leave to file a further affidavit in reply in view of the facts which had transpired subsequent to the taking out of the Notice of Motion and which I have recited above. The Motion was thereupon adjourned to August 20, 1976 and the leave asked for granted to the plaintiff. The plaintiff thereupon filed a further affidavit in reply made by the plaintiff's constituted attorney Dinesh Shantilal Bhat and affirmed on August 11, 1976. In this affidavit in reply, after referring to the said exchange of letters between the attorneys of the parties about the adjournment of the suit by consent and the said consent adjournment, it was contended that by his act in asking for time to file the written-statement the defendant should be deemed to have abandoned the enforcement of the arbitration agreement and that the Notice of Motion had become infructuous.

5. In order to appreciate the first contention raised on behalf of the plaintiff it is necessary to see the averments which have been made in the affidavit in support of the Notice of Motion made by the defendant. Paragraph 1 of this affidavit states that the plaintiff has filed this suit against the defendant for the reliefs which the said paragraph then proceeds to set out in extenso. The said paragraph refers to the fact that the plaintiff has made an application for a receiver and injunction and the Court had appointed an ad interim receiver. The third paragraph states that the parties were carrying on business as partners in the firm of Messrs. Bombay Scientific Glass Works upon terms and conditions contained in the said arbitration agreement dated March 13, 1970. After craving leave to refer to and rely upon the said partnership deed the affidavit states:

I say that according to Clause 27 of the Deed of Partnership it has been provided that in case of disputes and differences that may be arisen between the partners as regards the affairs and assets of the partnership, the same are required to be referred to the Arbitrators, one to be appointed by each, and ultimately to the Umpire. I say that the plaintiff has rushed to the Court without availing himself of the said provision mentioned in the Partnership Deed. The action of the plaintiff is premature and misconceived, and he has filed the above suit with a view to prejudice the Court against me and my sons. Even according to the plaintiff the firm has already been dissolved as appearing by my attorneys' letter dated 23rd March 1976, copy whereof is annexed and marked Ex. 'A' hereto.

6. Mr. Doctor, learned Counsel for the plaintiff, has submitted that an application for stay of the suit under Section 34 of the Arbitration Act is not maintainable until the defendant has made in his affidavit in support of the application the allegations which are necessary in order to obtain a stay of the suit. The conditions which are required to be fulfilled before a stay under Section 34 of the Arbitration Act can be granted have been enunciated by the Supreme Court in Anderson Wright Ltd. v. Moran & Co. : [1955]1SCR862 . Their Lordships of the Supreme Court stated (p. 55):

Thus in order that a stay may be granted under this section (that is, Section 34 of the Arbitration Act, 1940), it is necessary that the following conditions should be fulfilled:

(1) The proceeding must have been commenced by a party to an arbitration agreement against any other party to the agreement;

(2) the legal proceeding which is sought to be stayed must be in respect of a matter agreed to be referred;

(3) The applicant for stay must be a party to the legal proceeding and he must have taken no step in the proceeding after appearance. It is also necessary that he should satisfy the court not only that he is but also was at the commencement of the proceedings ready and willing to do every thing necessary for the proper conduct of the arbitration; and

(4) the court must be satisfied that there is no sufficient reason why the matter should not be referred to an arbitration in accordance with the arbitration agreement.

Mr. Doctor's submission was that for a notice of motion for stay to be maintainable the affidavit in support of such motion must aver that these conditions have been fulfilled. In support of this submission Mr. Doctor has relied upon certain authorities of our High Court and an authority of the Madras High Court and a passage from Halsbury's Laws of England. Turning first to the authorities of our High Court, the first authority relied upon by Mr. Doctor was an un-reported judgment of a division Bench of this Court consisting of Chagla C.J., and Dixit J., in Rasiklal Mangaldas Mehta v. Bai Savita (1955) A.P. No. 30 of 1955. In that case a notice of motion taken out for stay of a suit filed for dissolution and accounts of a partnership was dismissed by the City Civil Court on the ground that the defendant had not averred anywhere that there were disputes which could be referred to arbitration. In appeal the division Bench upheld this order of dismissal. It rejected the contention of the appellant that the Courts should go through the affidavit made by the defendant and spell out from the various allegations made therein that there were disputes between the parties. Chagla C.J., speaking for the Court, observed:

If the defendant approaches the Court and wants the Court to hold its hands and not try a suit and stay it, it is for the defendant to aver all the allegations which are necessary in order to obtain a stay of the suit. The defendant has failed to make the necessary averments and on his application for stay he is bound to fail. But assuming the Court was indulgent and had permitted the defendant to make the necessary allegations even, in his affidavit in rejoinder, he has failed to do so.

Mr. Mehta, learned Counsel for the defendant, sought to distinguish this authority on the ground that the only proposition laid down by it was that it was necessary for a defendant to set out in his affidavit in support of the application for stay the disputes which had arisen between the parties and to aver that the said disputes were capable of being referred to arbitration in accordance with the arbitration agreement. I am unable to read the judgment of the division Bench in this narrow light. What was contended before the division Bench was that this was one of the necessary averments to be made, and what the division Bench in terms expressly held is that a defendant must aver all the allegations which are necessary in order to obtain a stay of the suit. If the division Bench intended to hold only that the defendant should, aver that there are disputes between the parties and that they fell within the scope of the arbitration clause, the division Bench would not have used the language which it did in the passage which I have quoted above but would have said so expressly.

7. The next authority relied upon by Mr. Doctor, learned Counsel for the plaintiff, was the judgment of a single Judge of this Court, Datar J., in Middle East Trading Co. v. N.N. Mills A.I.R.[1960] Bom. 292 : S.C. 60 Bom. L.R. In that case the affidavit in support stated that the defendants 'are ready and willing to do all things necessary for the proper conduct of the arbitration'. It, however, did not state that the defendants were ready and willing to do all things necessary for the proper conduct of the arbitration even at the time when the proceedings were commenced. After referring to the necessary conditions which should be fulfilled before a Court would stay the suit as enunciated by the Supreme Court in Anderson Wright Ltd. v. Moron & Co., referred to earlier, Datar J., proceeded to refer to the facts and pointed out that the further averment, namely, that the defendants were ready and willing even at the date of the commencement of the proceedings to do all things necessary for the proper conduct of the arbitration, was all the more necessary to be made in view of the facts of that case, and he referred to the division Bench judgment of this High Court which I have already mentioned earlier.. Mr. Mehta, learned Counsel for the defendant, contended that this being the decision of a single Judge was not binding upon me because it was contrary to the express wording of Section 34 of the Arbitration Act and that Datar J., had misread the Supreme Court judgment in Anderson Wright Ltd. v. Moran & Co. I fail to see anything in the said judgment which is contrary to the provisions of Section 34 of the Arbitration Act. It is true that Section 34 does not in express terms require that an application for stay should aver that the conditions which are necessary to be fulfilled are fulfilled in the particular case, but this in my opinion is a necessary corollary which flows from that section. It is after all a defendant who is invoking the Court's power of stay under Section 34 of the Arbitration Act. It is for him to satisfy the Court that the conditions of Section 34 have been fulfilled, and thereupon it is for the plaintiff to join the issues upon some or all of these conditions. This cannot be done unless and until the necessary pleadings are there. It is also incorrect to say that Datar J. misread the Supreme Court judgment. According to Mr. Mehta, Datar J. misread the Supreme Court judgment as laying down that these averments were necessary. This is not so. What Datar J. did was to point out the conditions which were essential to be fulfilled according to the Supreme Court and then proceeded to consider whether there were averments in the affidavits alleging that these conditions were fulfilled as required by the unreported decision of our division Bench.

8. Mr. Mehta further contended that the defendant's notice of dissolution showed that the defendant was at the date of the commencement of the proceedings ready and willing to do all things necessary for the proper conduct of the arbitration, and the very fact that the defendant had taken out a Notice of Motion for stay of the suit showed that he continued throughout ready and willing to do all things necessary for the proper conduct of the arbitration and that it was, therefore, not necessary to make any averments in that behalf in the affidavit in support of the Notice of Motion. I am unable to accept this submission of Mr. Mehta. It is true that the notice of dissolution does call upon the plaintiff to come to Bombay 'at as early a date as possible so that the accounts of the partnership may be made up and the affairs of the partnership be wound up to the mutual satisfaction of the parties in accordance with law and the partnership agreement.' According to Mr. Mehta, the reference to the partnership agreement means that if a dispute arose the matter should be referred to arbitration. I am unable to read this part of the notice of dissolution in the manner in which Mr. Mehta has invited me to do. Clause 25 of the said partnership agreement makes detailed provisions as to how the affairs of the said partnership are to be wound up in the event of dissolution of the said firm. What the defendant is, therefore, doing by this paragraph is to call upon the plaintiff to sit down with him and to make up accounts and wind up the affairs of the said partnership to the mutual satisfaction of both parties and in accordance with law and Clause 25 of the said partnership agreement. If this were done, the question of referring any disputes to arbitration cannot arise. By merely using the words 'in accordance with law and the partnership agreement' it does not mean that the defendant had expressed any readiness or willingness that should any dispute arise, the same should be determined by arbitration in accordance with the said partnership agreement. In the context of the said notice of dissolution the words 'the partnership agreement' used therein refer to the said Clause 25 of the partnership agreement and hot to the said Clause 27 which is the arbitration clause.

9. Even on the facts, this submission of Mr. Mehta is not justified. The said notice of dissolution is dated March 23, 1976. As appears from what is stated m the plaint, the defendant thereafter by his attorneys' letter dated May 17, 1976 sent a statement of account made up till May 8, 1976 and requested the plaintiff to appoint time for discussing the matter. It is further stated in the plaint that the plaintiff on various occasions called upon the defendant to give inspection of the books of account and pointed out that there were discrepancies in the said Statement of account submitted by the defendant. It was thereafter that on July 6, 1976 the plaintiff filed this suit. In this intervening period at no stage did the defendant state that if, the plaintiff was dissatisfied with the statement of account furnished by him or if he was contending that the defendant had manipulated the books, of account, these disputes should be referred to arbitration. Even assuming if it were possible to construe the said notice of dissolution as an expression, of readiness and willingness to have the disputes between the parties decided by arbitration, that could only be at or about the time when the said notice of dissolution was written and cannot apply to the time when the proceedings, namely the suit filed by the plaintiff, were commenced.

10. I may, however, mention that in his affidavit in reply the plaintiff has stated that before the filing of the suit the defendant was not at any time ready and willing to resolve the disputes with regard to the suit firm either amicably or by arbitration. In his affidavit in rejoinder while dealing with this allegation the defendant has stated, 'I deny that before the filing of the suit I was never ready and willing to, resolve the disputes with regard to the partnership in suit either amicably or by arbitration.' Even in this affidavit in rejoinder, therefore, what the defendant has alleged by this denial is that before the filing of the suit he was ready, and willing to resolve the disputes either by mutual agreement or, if necessary, by an arbitration, but has not stated that he was so ready and willing at the date when the proceedings were commenced or that after the commencement of the proceedings he has remained so ready and willing throughout. Mr. Mehta, learned Counsel for the defendant, has contended that it is not necessary for a defendant who is seeking a stay of suit under Section 34 of the Arbitration Act to make this averment in his affidavit in support of the notice, of motion, because the section does not impose any such condition upon him land that what the section requires is that the Court must be satisfied as to the defendant's readiness and willingness. An identical argument was made before Vimadalal J. in Air Control & Chemical Engineering Co. Ltd. v. Sheetal Ice Factory (1973) A.O. No. 158 of 1972 and was, rejected The relevant passage in the said judgment is as follows:

It was sought to be contended by Mrs. Manohar on behalf of the appellants that Section 34 does-not require that there should be an averment to that effect in the application, or in the affidavit in support of it, but merely requires that the court should be satisfied in regard to the readiness and willingness of the applicant at the material times. Even on principle, there is no substance in this contention of Mrs. Manohar for whenever a statutory provision lays down a certain condition for the granting of a relief, it is necessary for the plaintiff, or the applicant as the case may be, to make averments to the effect that those conditions have been satisfied, and unless such averments are contained in the plaint or the application, there would be really no cause of action if it is a plaint, or no case made out if it is an application, for one of the bundle of essential facts would be missing.

In am respectful agreement with this principle enunciated by Vimadalal J.

11. Mr. Mehta, learned Counsel for the defendant, next submitted that the conditions laid down by Section 34 of the Arbitration Act which have to be satisfied before a defendant can obtain a stay of the suit were conditions precedent and that under Order VI, Rule 6 of the Code of Civil Procedure, 1908, an averment of the performance or occurrence of all conditions precedent necessary for the case of the plaintiff or defendant is to be implied in his pleading. According to Mr. Mehta, this being the position, whenever an application for a stay of the suit was made, the affidavit in support of it should be so read as to imply in it that the defendant has satisfied all the conditions of Section 34 of the Arbitration Act and that if the plaintiff desired to contend that one or more of these conditions were not satisfied, it was for him to take up the point in his affidavit in reply. I am unable to construe the conditions laid down by Section 34 of the Arbitration Act as constituting conditions precedent. As pointed out by Vimadalal J. in the case above referred to, these are the essential facts with respect to which a defendant has to satisfy the Court before he can obtain a stay of the suit. These facts which the defendant has to prove and satisfy the Court about in order to entitle him to obtain a stay really correspond to the bundle of facts which go to make up a cause of action in a suit. If this argument of Mr. Mehta were to be accepted, it would follow that in a suit for damages for breach of a contract a plaintiff need not aver that a contract was arrived at or that a breach of it committed and that he suffered damages, because unless the Court found these facts the Court would be unable to give any relief to the plaintiff. Both Section 4(1) of the English Arbitration Act of 1950 and Section 4 of the Arbitration Act, 1889, which it repealed and reenacted, are in pari materia with our Section 34. With reference to the English section, the view consistently taken by the English Courts is that the readiness and willingness required by this section should be averred in the affidavit made in support of the application for stay. The position is thus stated in Halsbury's Laws of England, fourth edn., vol. II, Article 564, para. 564, p. 291, as follows:

564. Applicant ready and willing to arbitrate. The applicant must satisfy the court not only that he is, but also that he was at the commencement of the proceedings, ready and willing to do everything necessary for the proper conduct of the arbitration. He must also file an affidavit to this effect in support of his application for a stay, and unless the court is satisfied on the point the application to stay must be dismissed.

In support of his submission that no such averments are necessary Mr. Mehta relied upon the decision of a division Bench of the Andhra Pradesh High Court in Srivenkateswara Constructions v. Union of India : AIR1974AP278 . In that case the plea that the affidavit in support did not contain the necessary averments was not raised in the trial Court but was raised only in appeal against the order granting stay. The defendants' application in support of stay stated that the defendants were ready and willing to do all things necessary for the proper conduct of the arbitration but did not state that they were also so ready and willing at the time of the commencement of the suit. The division Bench of the Andhra Pradesh High Court held that Section 34 of the Arbitration Act did not contain any requirement as to any such specific averment being made in the application. The division Bench further pointed out that had the objection been raised in the lower Court, the defendants would have certainly adduced evidence and satisfied the Court about their readiness and willingness at the commencement of the proceedings. The division Bench further held that looking to the context in which the statement that the defendants were ready and willing to do all things necessary for the proper conduct of the arbitration was made, it would appear that the defendants were also ready and willing to go to arbitration even from the commencement of the suit. So far as the view of the Andhra Pradesh High Court that it is not necessary to aver the defendants' readiness and willingness in the affidavit in support of the application for stay is concerned, it is in conflict with the view taken by this High Court, and I am bound by decisions of this Court. The same view as was taken by this High Court has also been taken by the Madras High Court in Padmanabhan v. Srinivasan : AIR1967Mad201 . The relevant observation in that case are as follows (p. 202):

I have no hesitation in holding that the averment extracted above does not satisfy the requirements of Section 34. A party who invokes Section 34 must specifically allege that he was, not only, at the commencement of the suit quite ready and willing to have the dispute resolved by arbitration proceedings, but that he is throughout ready and willing for such arbitration and do everything necessary for the proper and successful conduct of the arbitration proceedings. The readiness and willingness to do everything necessary for the proper conduct of the arbitration proceedings should cover the entire period both before the commencement of the suit and thereafter. The readiness of the defendant should not be a matter of implication but there should be a clear, unambiguous and specific averment to that effect in an affidavit filed by the applicant for the stay of the suit.

Mr. Mehta, learned Counsel for the defendant, however, urged that this was a decision of a single Judge and the view taken was contrary to the view expressed by a division Bench of the same High Court in Anglo Persian Oil Co. v. Panchapakesa Aiyar A.I.R. [1942] Mad. 336. The division Bench case, however, was not on the point of what averments are necessary to be made in an application for stay. It was on the point of the onus of proof, and the Court held that where there was a submission for reference to arbitration and a defendant made an application for stay of the suit filed by the other side, in order to refuse the stay the Court must be satisfied that there was no sufficient reason why the matter should not be referred to arbitration in accordance with the submission, that is, in other words that the onus is on the party resisting the application for stay, to show some sufficient reason why in that particular case the parties should be relieved from the obligation which they had contracted, namely, to have their disputes decided by arbitration, and not before the ordinary tribunals of the land. The division Bench of the Madras High Court then proceeded to cite instances in which the Court would not stay the suit, as for example, when there were serious allegations of fraud or where the point involved was a novel or difficult point of law and the Court was satisfied that such point was bound to come back to it by way of a special case to decide it or where a Court came to the conclusion that sending the case to the arbitrators would involve a waste of time and money. This case, as mentioned earlier, did not deal with what averments are required to be made in an application for stay. It dealt with the onus of proof with respect to one particular matter only. Under the latter part of Section 34 of the Arbitration Act there are two things about which the Court has to be satisfied, (1) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the arbitration agreement, and (2) that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration. The first satisfaction, so far as the defendant is concerned, would be a negative thing because if the onus of that were to rest upon the defendant, he would have to prove the non-existence of all facts the existence of which would disentitle him from obtaining stay. The second satisfaction is about the readiness and willingness of the defendant himself, and it would be, so far as the defendant is concerned, the proving of a positive fact. The division Bench of the Madras High Court was concerned only with the first satisfaction mentioned above and not with the second satisfaction. That the onus of satisfying the Court that a defendant was ready and willing and remained ready and willing, as required by Section 34 of the Arbitration Act, rests upon the defendant has been held by the Supreme Court in Anderson Wright Ltd. v. Moran & Co., referred to earlier, in which their Lordships of the Supreme Court stated,.It is also necessary that he (that is, the defendant) 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;...

(p. 55)

In Union of India v. Bhojraj [1960] 10 Raj. 1244, a division Bench of that High Court held that the party applying for stay of a suit must show and satisfy the Court about his readiness and willingness both before and after the commencement of the proceedings to go to arbitration. In the case before me the defendant has not averred any readiness and willingness in his affidavit in support. Even by the denial quoted above from his affidavit in rejoinder, all that he has stated is that before the commencement of the suit he was ready and willing to have the disputes resolved by arbitration. He has further nowhere set out the disputes which have arisen between the parties or the fact that they fell within the scope and ambit of the arbitration clause. Even his reference to Clause 27 of the arbitration agreement, which contains the arbitration clause, is merely to state that under that clause it was provided that disputes and differences which may arise between the partners as regards the affairs and assets of the partnership are required to be referred to arbitration. Mr. Mehta, learned Counsel for the defendant, however, submitted that the defendant had annexed to his affidavit in support a copy of his attorneys' letter dated March 23, 1976 from which what the disputes were would emerge. According to the affidavit in support, however, this letter has been annexed only to show that it was not the plaintiff but the defendant who had dissolved the partnership. Mr. Mehta has further submitted that the plaint in this suit shows what the disputes between the parties were and that they were of a nature which were covered by the arbitration clause. The division Bench of this High Court consisting of Chagla C.J. and Dixit J. in Rasiklal Mangaldas Mehta v. Bai Savita, referred to earlier, was also invited to look at the affidavit in support and to spell out from the various allegations made therein that there were disputes between the parties. This invitation was rejected by Chagla C.J. in the following word's:

Now, Mr. Kapadia wants us to take a magnifying glass, look at the affidavit made by the defendant and spell out from the various allegations made therein that there are disputes between the parties. We do not see why we should do this.

The learned Chief Justice then proceeded to make the observations which I have quoted earlier in my judgment. Mr. Mehta next submitted that the very fact that the suit had been filed showed that there were disputes between the parties. Undoubtedly, people do not go to a Court of law and file suits when there are no disputes existing, but from this it does not follow that these are the disputes which fall within the ambit of an arbitration agreement. The division Bench consisting of Chagla C.J. and Dixit J. was not and could not be unaware of the fact that suits are filed when there are disputes. They, however, refused to make out a case for a defendant who had not made it out himself in his application for stay by taking upon themselves the unusual task of reading an affidavit so as to imply in it various things which it did not contain, and I prefer to follow in their footsteps.

12. So far as the second point is concerned, there is no averment made either in the defendant's affidavit in support or in rejoinder that he was ready and willing to go to arbitration at the time when the proceedings were commenced. There is nothing even to show on the record that he was so willing. It is for the defendant to satisfy the Court on this point, and in the absence of both averments and evidence I must hold that the defendant has failed to satisfy the Court on this point.

13. So far as the third point, namely, about the continued readiness and willingness of the defendant, is concerned, Mr. Doctor, learned Counsel for the plaintiff, has relied upon the consent praecipe for adjournment of the suit filed by the defendant in order to enable the defendant to file his written-statement in Court, Relying upon this fact Mr. Doctor has submitted that by filing this consent praecipe and obtaining an adjournment from the Prothonotary and Senior Master for the purpose of filing his written-statement the defendant has given a go-by to or abandoned the arbitration agreement and has expressed the unequivocal intention to have the disputes between the parties determined by this Court. In support of this submission Mr. Doctor relied upon the judgment of K.K. Desai J., as he then was, in Kamani etc. Ld. v. Societe De Traction etc. (1963) 66 Bom. L.R. 758. In that case, after the application for stay was made the defendant filed his written-statement and counter-claim. The application for stay was made under Section 34 of the Arbitration Act, 1940, as also under Section 3 of the Arbitration (Protocol and Convention) Act, 1937, as also under Section 151 of the Code of Civil Procedure, 1908. Dealing with the effect of the filing of the written-statement and counter-claim on the prior application for stay made by the defendant, K.K. Desai J. held that the scheme of Section 34 of the Arbitration Act was that the defendant was not entitled to a stay if he filed a written-statement or took any other step in the proceedings before making his application under that section. He further held that the scheme also was that the defendant who had applied for stay must be continuously ready and willing to do all things necessary for the proper conduct of the arbitration and that the intent of these provisions obviously was that if the defendant took any steps even subsequent to his application for stay of the suit, which might be considered as his own steps in the proceedings or his own independent steps to proceed with the matter in Court, to that extent his application would be prejudiced, for such a step would be evidence that he had not continued to remain ready and willing to do all things necessary for the proper conduct of the arbitration, K.K. Desai J. then held that having regard to the intent and purpose of Section 34 of the Arbitration Act it was clear that any party who filed a written-statement and more so a counter-claim was not and could not be entitled to obtain a stay of the suit. Mr. Mehta, learned Counsel for the defendant, tried to distinguish this authority first on the ground that this was an application for stay under Section 3 of the Arbitration (Protocol and Convention) Act, 1937. As I have mentioned earlier, this was an application both under Section 34 of the Arbitration Act as also under Section 3 of the Arbitration (Protocol and Convention) Act and also under Section 151 of the Code of Civil Procedure. Mr. Mehta next tried to distinguish this case on the ground that what was filed in that suit was a written-statement and counterclaim and not just a written-statement. The judgment of K.K. Desai J. refers both to the filing of a written-statement as also to the filing of a written-statement and counter-claim, even though subsequent to the filing of the application for stay, as facts disentitling the defendant from obtaining a stay of the suit. Mr. Mehta also relied upon a decision of the Acting Judicial Commissioner's Court of Sind-Aston A.J.C. in Me. Kenzies, Ltd. v. Sulleman & Co. A.I.R [1933] Sin 75. Relying upon an earlier decision of the same Judicial Commissioner's Court, Aston A.J.C. held that the motion for an adjournment to file a written-statement subsequent to the application for stay would be no bar to it. The earlier decision relied upon in that case is not available, and I am unable, therefore, to know or appreciate the reasoning upon which it was given. Mr. Mehta also relied upon the statement in Halsbury's Laws of England, fourth edn., second vol., para. 563 at p. 290, that a request by letter for extension of time for pleading did not amount to taking a step in the proceedings. The authority cited in Halsbury's Laws of England in support of this proposition is Brighton Marine Palace and Pier, Limited v. Woodhouse [1893] 2 Ch. 486. In that case prior to the application for stay the defendant's solicitors wrote to the plaintiffs' solicitors asking for an extension of time to put in a statement of defence, and on the following day the plaintiffs' solicitors gave their consent thereto in writing. This was not an application made to the Court but was merely an extension of time obtained by exchange of letters between solicitors. This case came to be considered by Kania J., as he then was, in Radbone v. Juggilal Kamalapat (1942) 45 Bom. L.R. 402. In that case Kania J. held that where the defendant's attorneys do not merely write to the plaintiff's attorneys to obtain their consent but a further step is taken, namely, a consent praecipe is filed with the Prothonotary to grant an extension for filing the written-statement, in pursuance of which the Prothonotary passes an order granting time, it amounts to taking a step in the proceedings by the defendant within the definition of that expression in Section 34 of the Arbitration Act. In arriving at this conclusion Kania J. considered not only the decision in Brighton Marine Palace and Pier, Limited v. Woodhouse, above referred to, but also other English authorities and observed that according to the reported decisions a mere exchange of letters did not amount to taking a step in the proceedings, while anything done in the nature of an application was considered as taking a step in the proceedings. Mr. Mehta, learned Counsel for the defendant, sought to distinguish the decision of Kania J. on the ground that the step which was taken in that case was before the taking out of a notice of motion for stay, while in the present case the consent application for adjournment was made after the Notice of Motion was taken out. To my mind, this makes no difference. A step in the proceedings, whether it be taken before the filing of the application for stay or after, disentitles the defendant from obtaining stay. If he has taken a step in the proceedings before making his application, it would so disentitle him on the ground that it clearly shows that he was at that time not ready and willing to have the disputes decided by arbitration. Since the readiness and willingness of the defendant is to be shown not only at the time when the proceedings commenced but has to be shown throughout, any step in the proceedings, that is, any act taken in relation to the proceedings which show that the defendant desires that the proceedings or the suit should proceed in Court, would equally negative his allegation of continued readiness and willingness, and would on the contrary show that the defendant was not ready and willing or did not continue to remain ready and willing to have the matters in dispute decided by arbitration.

14. Mr. Mehta, learned Counsel for the defendant, next submitted that the filing of a written-statement in Court was not a step in the proceeding, not at least in any event after the application for stay was made, because even if the suit was stayed and the matters referred to arbitration, the defendant would have to file his written-statement in the arbitration proceedings. It is unnecessary for me to pronounce, upon a proposition of law put so baldly and generally. The reason why a defendant files his written-statement would best be known to the defendant himself. In the case before me when this point was taken in the further affidavit in reply the defendant has in his affidavit in rejoinder in unequivocal and categorical terms given the reasons why he filed the written-statement. He has stated, 'I say that the said praecipe for adjournment was filed for reasons mentioned in the said praecipe.' The reason mentioned in the said praecipe is that time was required for filing the written-statement. The normal and natural meaning of this is that time was required for filing the written-statement in Court in order to defend the suit and not that time was required to file the written-statement so that the written-statement should be availed of in case the matters were referred to arbitration.

15. I accordingly hold that the defendant did not remain ready and willing to do all things necessary for the proper conduct of the arbitration.

16. For the reasons stated above, I uphold all the three contentions taken on behalf of the plaintiff and dismiss this Notice of Motion with costs.


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