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Jamuna Dass Rameshwar Dass and anr. Vs. Allahabad Bank and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAllahabad High Court
Decided On
Case NumberF.A.F.O. No. 106 of 1985
Judge
Reported inAIR1985All311
ActsArbitration Act, 1940 - Sections 34
AppellantJamuna Dass Rameshwar Dass and anr.
RespondentAllahabad Bank and ors.
Advocates:D.V. Jaiswal, Adv.
DispositionAppeal dismissed
Excerpt:
arbitration - stay of suit - section 34 of arbitration act, 1940 - condition - existence of written arbitration agreement between the parties - subject matter of the suit must be covered. - - the court below was not satisfied on the material brought before it that there existed any agreement between the parties. in the absence of any satisfactory evidence that there existed an arbitration agreement, the prayer for issue of a commission made before the court below as well as before us in the high court appeared to be only an attempt to forestall the hearing of the suit. we are satisfied from the affidavit filed on behalf of the bank that there is no such agreement as is claimed by defendant 2 to be in existence. the suit can be decided effectively and finally only in one proceeding...........contended that the normal rule of law is that if there exists an agreement, the court is bound to stay proceedings under section 34, and the delay which may happen in deciding the case by the arbitrator is immaterial. for the proposition that it was incumbent upon the court, when invited to stay the suit under section 34 of the arbitration act, to decide first of all whether there was a binding agreement for arbitration between the parties to the suit, reliance was placed on a decision of the supreme court in anderson wright ltd. v. mohan & co. : [1955]1scr862 .7. a party which wants a suit to be stayed has to establish affirmatively that there exists an arbitration agreement between the parties and the subject matter of the suit is covered by the same. in the instant case, defendant 2.....
Judgment:

K.C. Agrawal, J.

1. This is an appeal under Section 39(1)(v) of the Arbitration Act against the judgment of the First Additional Civil Judge, Kanpur, dt. 17-9-1984, rejecting the application of the appellants for stay of the Suit No. 161 of 1980, moved under Section 34 of the said Act.

2. Suit No. 161 of 1980 was filed by the Allahabad Bank against defendants 1 to 4. Defendant 2 is the sole proprietor of defendant 1 firm M/s. Jamunadas Rameshwardas, whereas defendant 4 Smt. Sushila Devi Bajaj is the proprietor of defendant 3 Hotel Sarika. She is the wife of defendant 2. The plaintiff claimed a decree for Rs. 3,78,018.70 Paise against defendants 1 and 2 with interest and for recovery of Rs. 5,39,284.04 Paise against defendants 2, 3 and 4. The basis of the claim was that defendants 1 and 2 had to pay the amount claimed against them on the ground of having taken advance from the Bank. With regard to defendants 3 and 4, the plaintiff pleaded that defendant 2 had guaranteed the dues of defendants 3 and 4. Accordingly, defendants 1 and 2 are liable to pay along with defendants 3 and 4, and, therefore, a joint decree for the amount due from defendants 3 and 4 was claimed as against defendant 2.

3. After the service of summons, defendants 1 and 2 moved an application for stay of the suit under Section 34 of the Arbitration Act on the ground that there was since an agreement between the plaintiff and the aforesaid two defendants, the suit was liable to be stayed. The application was not supported by any affidavit. Time and again, defendants 1 and 2 were given opportunity to file affidavit in support of this application. However, no affidavit having been filed, the application was rejected on 6-8-1982 by the learned Additional Civil Judge by observing that since the defendants had not filed any affidavit in support of their contention despite the order of the Court, the application had no force and was liable to be rejected. An application under Section 34 of the Arbitration Act is required to be supported by an affidavit for showing that the applicant was at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, and showing that the dispute is one which the parties have agreed to refer.

4. Defendant 2, thereafter, moved another application dt. 15-9-1982 with the same prayer of stay which had been made by them earlier. This time the application was supported by an affidavit. The application was contested by the Allahabad Bank, and the ground taken, amongst others, was that there was no arbitration agreement between the parties. The court below rejected the application by the impugned order dt. 17-9-1984 by holding that there was no arbitration agreement between the parties for deciding the dispute through arbitration. Against this judgment, the present appeal has been filed.

5. It is admitted case of the appellants that defendants 1 and 2 had not filed the written agreement alleged to have been entered into between them and the plaintiff, which had made a provision for dispute being referred to the arbitrator. The defendants had on 6-8-1982 applied for issue of a commission to Delhi for obtaining the agreement which was at that time in possession of C.B.I. Defendant 2 claimed that while seizing the account books and other papers, C.B.I. had taken the agreement also in its possession. The application had been rejected on 6-8-1982.

6. In the appeal, learned counsel for the appellants urged that it was incumbent on the court below to have issued the commission and obtained the agreement from C.B.I. for the purpose of deciding the application under Section 34 and since that had not been done, defendants 1 and 2 had been denied the opportunity to prove the agreement to which they were entitled to. He contended that the normal rule of law is that if there exists an agreement, the Court is bound to stay proceedings under Section 34, and the delay which may happen in deciding the case by the arbitrator is immaterial. For the proposition that it was incumbent upon the court, when invited to stay the suit under Section 34 of the Arbitration Act, to decide first of all whether there was a binding agreement for arbitration between the parties to the suit, reliance was placed on a decision of the Supreme Court in Anderson Wright Ltd. v. Mohan & Co. : [1955]1SCR862 .

7. A party which wants a suit to be stayed has to establish affirmatively that there exists an arbitration agreement between the parties and the subject matter of the suit is covered by the same. In the instant case, defendant 2 did not file the agreement. According to him, copy of the agreement was in possession of the Allahabad Bank. No effort was, however, made for summoning the same from the Bank, instead time was whiled away by making the application for summoning of the papers from possession of the C.B.I. Before us, learned counsel for the appellants had also made a prayer, in the alternative, for appointment of an Advocate Commissioner for getting the copy of the agreement. The court below was not satisfied on the material brought before it that there existed any agreement between the parties. In the court below, defendant 2 took adjournments after adjournments for filing an affidavit in support of the application under Section 34 of the Arbitration Act. It was at a late stage that the defendant 2 applied for the issue of a commission. The application was rejected. In the absence of any satisfactory evidence that there existed an arbitration agreement, the prayer for issue of a commission made before the court below as well as before us in the High Court appeared to be only an attempt to forestall the hearing of the suit. The plaintiff Allahabad Bank took a definite case in the court below and also before us that there did not exist any agreement. We are satisfied from the affidavit filed on behalf of the Bank that there is no such agreement as is claimed by defendant 2 to be in existence. One fails to understand why did defendant 2 not apply for summoning of the agreement from possession of the Allahabad Bank if he was sure of its existence and one copy of the same being with the Bank. The Allahabad Bank is a public body and it is not possible to accept the suggestion of the learned counsel for the appellants that the Bank would have refused to produce it since the same was likely to go against the plaintiff. This submission has no legs to stand.

8. There is another ground on which we find the application liable to be rejected. It is true, as was suggested by the learned counsel for the appellants, that the said ground had not been given by the court below, but as a court of appeal we are entitled to take the same into consideration. The ground is that out of the four defendants, admittedly, defendants 3 and 4 have filed a written statement and the suit is proceeding on merits against them. Neither have defendants 3 and 4 pleaded any arbitration agreement nor did they apply for stay of the suit under Section 34. If the suit is stayed on the application of defendants 1 and 2, the result would be that two proceedings would simultaneously go on; and in the court below where the suit is pending as against defendants 3 and 4, and the other before the arbitrator. Furthermore, the allegations made in the plaint against defendants 1 to 4 are inter-mixed and mingled. The suit can be decided effectively and finally only in one proceeding. Two proceedings are likely to give rise to two inconsistent results. Dealing with this controversy, Russell in his book on Arbitration, Twentieth Edition, at page 193, observes :

'The Court's exercise of its discretion, however, will of course depend upon whether it is convenient to try the different parts of the dispute separately. Thus a stay will normally be entirely refused where only a 'subordinate and trifling' part of the dispute is agreed to be referred, or where two claims one inside and one outside the agreement turn upon substantially the same facts, or the arbitrator can only decide the amount of the claim and not the liability. Where the arbitration clauses have resulted in a situation where some issues must be litigated and some arbitrated, the balance of convenience and the grave risk of inconsistent findings, might well operate to prevent a stay of court proceedings.'

9. In Halsbury's Laws of England, Vol. 2, para 566, the same conclusion has been drawn on the basis of a decision in Taunlon-Collins v. Cromie, (1964) 2 All ER 332. In this case, there was an arbitration agreement between the building owner and the contractors. The architect was not a party to it. When the application was made for stay by the contractors, the same was dismissed. In appeal, Lord Denning, M, R. held : --

'All in all, the undesirability of two separate proceedings is such that I should have thought that it was a very proper exercise of discretion for the official referee to say that he would not stay the claim against the contractors. Everything should be dealt with in one proceeding before the official referee.'

Pearson, L.J, agreeing with Lord Denning, M. R., said :

'The other principle is that a multiplicity of proceedings is highly undesirable for the reasons which have been given. It is obvious that there may be different decisions on the same question and a great confusion may arise.........'

10. Apart from the additional reason which we have given above, we have found that the stay was rightly refused by the court below as written agreement had not been established. It is true that a court is bound to determine on the application whether or not there is an arbitration agreement in force, however difficult that task may be, and notwithstanding that the proceedings are interlocutory. In the instant case, on the material brought by defendants 1 and 2 on the record, no other conclusion was possible than what has been arrived at by the court below.

11. In the Printers (Mysore) Pvt. Ltd. v. Pothan Joseph : [1960]3SCR713 , the Supreme Court has held that the power to stay legal proceedings under Section 34 is discretionary, and so a party to an arbitration agreement against whom legal proceedings have been commenced cannot by relying on the arbitration agreement claim the stay of legal proceedings instituted in a court as a matter of right. However, the discretion vested in the court must be properly and judicially exercised.

12. in the present case, we have not found any ground to hold that the court below acted illegally, unreasonably or capriciously or has ignored relevant facts and has adopted unjudicial approach. Hence, we do not find any ground to interfere. In fact, the decisions in Printers (Mysore) Pvt. Ltd. v. Pothan Joseph (supra) and Anderson Wright Ltd. v. Mohan and Co. : [1955]1SCR862 (supra) relied upon by the appellants do not advance their case. These decisions help the plaintiff. The Court below has not committed any breach of judicial principles or of law in rejecting the application under Section 34.

13. For the duty of the Court to ascertain the existence of arbitration agreement, counsel for the appellants relied upon (1) Anderson Wright Ltd. v. Mohan and Co. (supra), (2) Centi.ry Spinning and . v. Motilal Dhariwal : AIR1961MP333 , and (3) Soorajmull Nagarmull v. Asiatic Trading Co. : AIR1978Cal239 . In the instant case, the court below gave full opportunity to the appellants to prove the agreement, but they did not do so. These decisions are, therefore, of no assistance to the appellants.

14. In Ram Bahadur Thakur v. Thakur Das & Sons : AIR1958All522 , the facts were different. In that case, all the defendants had not applied for stay. Repelling the argument of the plaintiff that all of them should have done so, this Court held that if all the defendants are hound by the submission clause, it was not necessary for all of them either to apply for stay or to show their willingness. In the present case, the facts are different. Defendants 3 and 4 are contesting the suit.

15. For meeting the point of res judicata, the appellants' counsel placed reliance on (1) Jagdish Chandra Deo v. Gour Hari Mahto , (2) Ramesh Chand v. Board of Revenue : AIR1973All120 , and (3) Charan Dass v. Thakur Dass Mast Ram . Since we are not required to deal with these decisions.

16. At the time of admission of this appeal the Allahabad Bank had put in appearance through Sri Rajeshwari Prasad, Advocate, and had filed a counter-affidavit, to which rejoinder had also been filed. We have had the advantage of hearing both the learned counsel appearing for their clients in this appeal.

17. For the reasons given above, we dismiss the appeal summarily.


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