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Orissa Engineer and Erectors Vs. Andhra Pradesh State Electricity Board and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal against order No. 875 of 1981
Judge
Reported inAIR1983AP228
ActsArbitration Act 1940 - Sections 34
AppellantOrissa Engineer and Erectors
RespondentAndhra Pradesh State Electricity Board and anr.
Respondent AdvocateAnanthababu, standing counsel
Excerpt:
.....refusal are those where the parties seeking stay of the trial of the civil action had forsaken the arbitration agreement inasmuch as the appellant was not only ready and willing but was even anxious to go through the arbitration, it was siad the lower court's judgment should be reversed. 95/79 as well as o. too much of reference and even adherence to the decided cases in matters like this are surely calculated to yield wrong results. the court is required to be satisfied that there was no sufficient reason for the matter not being tried acording to the arbitration agreement in some cases this was elaborated to mean complicated questions of law. this language would clearly show that the conduct of the appellant prior to the institution of o. clearly establishes that the appellant was not..........1980 on the file of the vi addl. judge,city civil court hyderabad. that suit was filed by the a.p. state electricity board for recovery of a huge sum of rs. 60 lakhs and odd from the appellant as due towards damages for failure to perform a contract entered into by the appellant with the a.p. state electricity board on 15-5-1978 agreeing to supply electrical transforemers that agreement concluded between the a.p. state electricity board on one hand and the appellant on the other provided for claiming payment up to rs. 2 lakhs by the punjab national bank, bhuvansewar, orissa state towards damages which will become payable by the appellant in the event of his committing breach of that agreement the a.p. state electricity board had therefore sued botht he appellant in the event of his.....
Judgment:

P.A. Chowdary, J.

1. The appellant was one of the defendants in O.s. No. 1045 of 1980 on the file of the VI addl. Judge,city civil Court Hyderabad. That suit was filed by the A.P. State Electricity Board for recovery of a huge sum of Rs. 60 lakhs and odd from the appellant as due towards damages for failure to perform a contract entered into by the appellant with the A.P. state Electricity Board on 15-5-1978 agreeing to supply electrical transforemers that agreement concluded between the A.P. state electricity Board on one hand and the appellant on the other provided for claiming payment up to Rs. 2 lakhs by the punjab national Bank, Bhuvansewar, orissa state towards damages which will become payable by the appellant in the event of his committing breach of that agreement the A.P. state electricity Board had therefore sued botht he appellant in the event of his committing breach of that and the punjab national Bank, Bhuvaneswar for damages for the nonperformance of the agreement dt 15-5-1978 and also for the relief of a decree against the punjab national bank for recovery of Rs. 2 lakhs the appellant had filed I.A. No. 1369/80 under S. 34 of the Arbitration Act, 1940 seeking stay of the trial of the above-mentioned O.s. No. 1045 of 1980 onthe ground that the matter of dispute between the state Electricity Board and the appellant forming the subject of controversy in O.s. No. 1045 of 1980 should only be resolved and decided in the arbitration as provided for in the agreement between the parties entered into on 15-5-1978. That application was dismissed by the VI Additional Judge. City civil Court, Hyderabad on 14-9-1981 against which this appeal has been filed,

2. The lower Court, in refusing to stay the trial of the suit filed by the state electricity board and in dismissing the above mentioned I.A. No. 1369 of 1980, took into account the fact that the appellant herein had first filed O.s. No. 95 of 1979 on the file of the subordinate Judge's Court Bhuvaneswar for a declaration and a permanent injunction restraining the state Electricity Board from encashing the bank guarantee and subsequently filed O.S. No. 101 of 1979 for a reference of the dispute between the appellant and the state Electricity board to a single arbitrator to be appointed by the Court the lower Court considered these acts of commission on the part of the appellant as constituting justification for refusal to stay the trial of the suit filed by the state electricity Board on the ground that the appellant was not ready and willing to do all things necessary for the proper conduct of the arbitration. The lower Court referred to and relied upon several decisions of the Supreme Court but aminly followed a decision of this Court in Easun Engineering co. V. Andhra pradesh state Electricity Board (1977 Andh LT 734).

3. It is now argued for the appellant that the lower Court has erred in refusing to stay the trial of the above mentioned O.S. No. 1045 of 1980. It is said that, where the subject matter of a suit is governed by an arbitration clause the Court should normally direct the parties to settle their disputes through an arbitration, as agreed to and that therefore refusal to stay a suit filed by one of the parties in civil Court for the settlement of the same dispute should not be the rule but should be an exception. The exceptional circumstances, according to the argument of the learned counsel for the appellant that would justify such a refusal are those where the parties seeking stay of the trial of the civil action had forsaken the arbitration agreement inasmuch as the appellant was not only ready and willing but was even anxious to go through the arbitration, it was siad the lower court's judgment should be reversed. It may be mentioned that the appellant, after he had filed O.S. No. 95 of 1979 had also instituted O.S. No. 101 of 1979 on 27-8-1979 for appointment of a single arbitrator by the Court. That has been cited by the appellant in support of his claim that he has stood by the arbitration agreement on hte other hand. The learned counsel for the state Electricity Board contended that the institution of the above mentioned O.s. No. 95/79 as well as O.s. No. 101/79 should be counted as furnishing evidence of the fact that the appellant had abandoned the arbitration agreement and was not ready and willing to do all things necessary for the proper conduct of the arbitration and that therefore, the Court below was justified in refusing to stay the civil action. It was also argued by sri Anantha Babu. The learned counsel for the state electricity Board that O.S. No. 1045 of 1980 was filed not only against the appellant but also against the punjab national bank and that as the scope of the arbitration agreement could never reach and cover the punjab National Bank, the trial of the suit should not be stayed.

4. It may be mentioned that the matter was tried on the basis of the evidence and the facts mentioned above are not in controversy.

5. The only question that arises is whether on the facts and in the circumstances of this case, the Court should stay the trial of the suit instituted by the state Electricity Board against the appellant and the punjab National Bank. Normally such question it must be emphasised, should be decided on the facts of each case considering the decided cases merely as an illustration of a general principle embodied in S. 34 of the Arbitration Act. Too much of reference and even adherence to the decided cases in matters like this are surely calculated to yield wrong results. The basic principle is that the parties must be held to their agreement embodying the arbitration clause other things being equal a party to an arbitration agreement should be referred to arbitration and any suit instituted by a party shall be stayed for the settlemetn of arbitral claims and controversies. This is nothing more than giving effect to the terms of the agreement freely entered into between the parties. But considering the fact that it is one of the inalienable dogmas of the anglo saxon Jurisprudence, access to the civil Court should not be lightly denied to a citizen.

Section 34 of the Arbitration Act provides for conditions and circumstances under which a Court may refuse to stay the trial of the civil action. Those conditions and circumstances, as enumerated. In S. 34 of the arbitration Act are (1) the satisfaction of the Court that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement ; and (2) the applicant seeking the stay of the civil action was ready and willing both at the time of hte commencement of the civil action and subsequently to do all things necessary for the proper conduct of the arbitration, of these two conditions the first condition is designedly framed in negative terminology. The Court is required to be satisfied that there was no sufficient reason for the matter not being tried acording to the arbitration agreement In some cases this was elaborated to mean complicated questions of law. But it must be noted that the framing of the condition itself by the statute shows that the Court should tilt normally in support of hte arbitration agreement. The second circumstance of the condition is the conduct of the applicant seeking the ouster of civil court's jurisdiction. That conduct should be a conduct showing readiness and willingness to do all things necessary for the proper conduct of the arbitration at the time of the commencement of the civil action and subsequently. This language would clearly show that the conduct of the appellant prior to the institution of O.s. No. 1045 of 1980 on 22-10-1980 cannot be decisive. In the view of the matter, the somewhat great reliance placed by the lower Court on the institution of O.S. No. 95 of 1979 by the appellant cannot be approved. But, even omitting that from the consideration. The question still remains whether the appellant can be considered to be ready and willing on the date when the civil action was instituted by the state electricity board to do all things necessary for the proper conduct of the arbitration. This question which as mentioned above, shoulc be decided wholly with the help of facts, appears to admit only a negative answer in favour of the state electricity board and against the appellant. The appellant, who had filed O.s. No. 101 of 1979 on 27-8-1979 and which is still pending on the file of Bhubaneswar Court stated in para 35 of his plaint that the mode of appointment of arbitratior prescribed in the arbitration agreement is cumbersome and the proceeding of arbitration would not be expeditious as the number of arbitrators is too many and as there is no arbitrator appointed by the parties under the said agreement. The relief sought in that suit was for the appointment of an arbitrator by the Court. Both the pleadings and the prayer constitute a direct and open repudiation of the terms of the arbitration agreement which provided for the appointment of three arbitrators one by each party and another by the president of the Institute of Engineering, New Delhi. The appellant plaintiff repudiated this procedure provided for in the arbitration agreement by calling it cumbersome and inexpedient. He also asked the Court for a relief which would in effect supersede this provision and substitute it by the appointment of a single arbitrator. This circumstance which was existing on the date of the commencement of O.S. No. 1045 of 1980 and which should therefore be taken into account by the Court for the purpose of S. 34 of the arbitration Act. Clearly establishes that the appellant was not ready and willing to do all things necessary for the proper conduct of the arbitration for that reason alone we should hold that the appellant was not entitled to seek the benefit of the arbitration agreement

6. In view of the above it is not necessary to consider the second contention raised by sri Ananta Babu that O.s. NO. 1045 of 1980 cannot be statyed because that suit was filed not only against the appellant but also against the punjab National bank.

7. In the above references to all decided cases is omitted.

8. In the result, the appeal fails and is accordingly dismissed with costs.

9. Appeal dismissed.


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