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Food Corporation of India Vs. Kishan Lal Agarwal - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAllahabad High Court
Decided On
Case NumberF.A.F.O. No. 157 of 1979
Judge
Reported inAIR1980All181
ActsArbitration Act, 1940 - Sections 34
AppellantFood Corporation of India
RespondentKishan Lal Agarwal
Appellant AdvocateV.K.S. Chowdhuary, Adv.
Respondent AdvocateK.C. Khuliya and ;M.S. Negi, Advs.
DispositionAppeal dismissed
Excerpt:
.....the first condition was satisfied on the facts of this case it is clear that the corporation had filed application under section 34 of the act and was not willing and ready to do all things necessary for the proper conduct of the arbitration at the commencement of the proceedings. hence the application under section 34 of the act must fail on that ground. if there is no such averment nor there is any affidavit, the application under section 4 must fail .while making the aforesaid observations, the learned judges appear to emphasize that it is for the applicant under section 34 of the arbitration act who claimed that the proceedings should be stayed, to state before the court that he was at the commencement of the proceedings and still is ready and willing to do all that is necessary..........refusing its prayer made under section 34 of the arbitration art for staying the proceedings in a suit filed by respondent kishan lal agarwal.2. plaintiff kishan lal agarwal carried on the business in the name and style of m/s agarwal mills at kotdwara. according to him the defendant food corporation of india approached him for manufacturing 'bal ahar' (a high protein baby food) and the plaintiff accepted the offer on terms and conditions incorporated in the agreement executed by the parties on 26-10-1972. the period under the agreement was with the consent of the parties extended from time to time. the plaintiff continued to supply the goods in accordance with the terms of that agreement up to 28-2-76. according to clause 9 (6) of the said agreement, cards showing the formula of bal.....
Judgment:

H.N. Seth, J.

1. This first appeal by Food Corporation of India is directed against the order of the Civil Judge, Pauri dated 15-12-78, refusing its prayer made under Section 34 of the Arbitration Art for staying the proceedings in a suit filed by respondent Kishan Lal Agarwal.

2. Plaintiff Kishan Lal Agarwal carried on the business in the name and style of M/s Agarwal Mills at Kotdwara. According to him the defendant Food Corporation of India approached him for manufacturing 'Bal Ahar' (a high protein Baby Food) and the plaintiff accepted the offer on terms and conditions incorporated in the agreement executed by the parties on 26-10-1972. The period under the agreement was with the consent of the parties extended from time to time. The plaintiff continued to supply the goods in accordance with the terms of that agreement up to 28-2-76. According to Clause 9 (6) of the said agreement, cards showing the Formula of Bal Ahar had to be deposited inside each bag and another card on which batch number and date of production had to be inscribed was to be attached externally while stitching each gunny bag. These cards had to be supplied to the plaintiff by the defendant. As the defendant failed to supply the said cards the plaintiff himself arranged for and provided these cards and in that connection he spent an amount of Rs. 3900/-. The plaintiff did not supply the cards gratuitously and as the defendant received the benefit thereof it was liable to pay for it. However, the bill submitted by the plaintiff in this regard remained unpaid. This extra work was not covered by agreement executed by the parties. Besides this the plaintiff also submitted four other bills in connection with the aforesaid contract which also remained unpaid, Total amount due under the five bills comes to Rs. 94.680-95 which the defendant failed to pay despite demand and legal notice. The plaintiff deposited a sum of Rs. 10,000/- with the defendant by way of security and he was entitled to receive it back along with the interest. The plaintiff, therefore, claimed a decree for the following amounts:--

Rs. 94,680-95

Totalamount due under the five bills.

Rs. 30,274-00

interest on the aforesaid amount

Rs. 10.000/-

Security

Rs. 3.200/-

intereston security.

Total: Rs. 1,38,154-95

3. The defendant before filing its written statement, made an application under Section 34 of the Arbitration Act on 5-10-78 stating that Clause 22 of the agreement entered into by the parties laid down that the event of any dispute arising between them the same was to be referred to arbitration, This claim was binding on the parties and that the suit was accordingly liable to be stayed.

4. The plaintiff objected to the request made by the defendant and alleged that the circumstances appearing in the case indicated that the defendant had waived the arbitration clause. He also questioned the validity of the arbitration clause as also that of the procedure prescribed by it. He alleged that as the period of one year mentioned in the arbitration clause had expired, the dispute could not now be referred to arbitration and that the plaintiff has a right to get the same resolved through the court. Moreover, the case requires such careful handling which is not possible before an arbitrator and for these reasons it is not a fit case where the proceedings pending before the court should be stayed.

5. The trial court pointed out that before a party can obtain an order for staying a suit in accordance with the provisions contained in Section 34 of the Arbitration Act, it has to satisfy the court that it was, at the time when the proceedings were commenced, and still is ready and willing to do all things necessary to the proper conduct of the arbitration. It observed that in the instant case the defendant did not make any such allegation in its application dated 5-8-1978. It also did not file any affidavit stating this fact. In the connection it relied upon the decision of Madras and Bombay High Courts in the cases of N.C. Padmanabhan v. S. Srinivasan, (AIR 1967 Mad 201), and Middle East Trading Co. Bombay v. New National Mills Ltd., Ahmedabad, (AIR 1960 Bom 292) and held that the defendant had failed to satisfy the court that it was at the time when the suit was filed and still willing to do all things necessary to the proper conduct of the arbitration proceeding. The suit therefore could not be stayed. It also held that Clause 22 neither specified the arbitrator nor the place and it was not definite. For this reason also the proceedings could not be stayed. Moreover, as a part of the dispute between the parties related to a matter not covered by the arbitration Agreement the case fell outside the purview of Section 34 of the Arbitration Act and the proceedings were not liable to be stayed.

6. Learned counsel appearing for the appellant contended before us that all the three reasons given by the Civil Judge for refusing to stay the proceedings in the suit are untenable and that the court should have made an order staying further proceedings in the suit,

7. According to the learned counsel, the trial court erred in holding that the defendant is not entitled to stay of proceedings as it did not, in the application filed by it state that it was at the time when the proceeding commenced and is still willing to do every thing necessary for the proper conduct of the arbitration proceedings. In support of this submission he relied upon certain observations made by learned Judges of the Andhra Pradesh High Court in Srivenkateswara Construction v. Union of India, (AIR 1974 Andh Pra 278), which according to him showed that in the opinion of those Judges an application under Section 34 of the Arbitration Act was not to fail merely on the ground that it did not recite that the applicant was when the proceedings were initiated, prepared and willing to do every thing necessary for the proper conduct of arbitration proceedings,

8. Before we proceed to deal with the cases cited at the bar, we would like to say that the learned counsel for the appellant is not right in contending that the trial court has rejected the application merely on the ground that the application under Section 34 of the Arbitration Act, filed by the appellant, didnot contain the allegation that it was when the proceedings were initiated and is still willing to do every thing for the proper conduct of arbitration proceedings. A fair reading of the order under appeal shows that in the opinion of the court it was for the defendant to satisfy the court about such willingness on his part. As the defendant neither mentioned this fact in the application filed by it nor did it produce any evidence, like an affidavit, making such an allegation, it could not be said that the defendant has succeeded in showing that it is still willing to do everything for the proper conduct of the arbitration proceedings. The trial court rejected the application as it was not satisfied about the existence of this precondition for making an order under Section 34 of the Arbitration Act.

9. In the case of Anderson Wright Ltd. v. Moran and Co., (AIR 1955 SC 53), the learned Judges to the Supreme Court observed that the one of the necessary conditions to be fulfilled before a stay could be granted under Section 34 was that the applicant for stay must be a party to the legal proceeding and he was must have taken no step to the proceeding after appearance. It was also necessary that he should satisfy not only that he is but was also at the commencement of the proceedings ready and willing to do everything necessary for the proper conduct of the arbitration. This view was reaffirmed by the court in the case of Food Corporation of India v. Thakur Shipping Co., (AIR 1975 SC 469).

10. In the case of Middle East Trading Co. v. New National Mills Ltd., (AIR 1960 Bom 292), Datar, J. of Bombay High Court observed thus:--

'The Notice of Motion for the stay of suit was taken out under Section 34 of Arbitration Act. It is necessary that the affidavit which is filed in support of such Notice of Motion must set out and over all the conditions mentioned in Section 34. If the defendant appears in court and asks for the stay of suit under Section 34, it is incumbent upon him to aver all the requirements of the section which are necessary in order to obtain stay of the suit.'

These observations made by Datar, J., are fully in consonance with the observations made by the Supreme Court in Anderson Wright's case (supra). All that the learned Judges seem to have emphasized is that before the defendant can expect to obtain an order under Section 34 ofthe Act, staying further proceeding in the suit, there should be some evidence to satisfy the court about the existence of preconditions necessary for making the stay order as contemplated by Section 34 of the Act, such as by making requisite averment in an affidavit filed in support of such motion (for normally it is such averment made in the affidavit that would constitute legal evidence on the basis of which the court could be in a position to satisfy itself about the existence of the condition necessary for making the order under Section 34 of the Act).

11. Ram Murti, J. in the case of N. C. Padmanabhan v. S. Srinivasan, (AIR 1967 Mad 201), observed that in such cases 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. Affidavits in support of the prayer made in an application are filed with a view to place on record evidence on which a court of law can act. What Ram Murti, J. has in the aforesaid case, laid down is that there must be a clear and unequivocal evidence in respect of facts on proof of which a party can claim that the proceedings in the suit should be stayed.

12. Similar view was expressed by a Division Bench of the Patna High Court in the case of Sass Construction & Power Co. Ltd. v. Fertilizer Corporation of India, (AIR 1979 Pat 14), where it observed thus :--

'Before filing an application under Section 34 of the Act, the applicant must satisfy these conditions, namely,

1. .....

2. the applicant was at the time when the proceeding commences and is still ready and willing to do all things necessary for the proper conduct of the arbitration. In the present case the first condition was satisfied on the facts of this case it is clear that the Corporation had filed application under Section 34 of the Act and was not willing and ready to do all things necessary for the proper conduct of the arbitration at the commencement of the proceedings. Hence the application under Section 34 of the Act must fail on that ground. The applicant is also required to make necessary averment that not only he is ready at present but he was ready and willing to participate in the arbitration proceeding.

These facts must be supported by an affidavit. If there is no such averment nor there is any affidavit, the application under Section 4 must fail .....'

While making the aforesaid observations, the learned Judges appear to emphasize that it is for the applicant under Section 34 of the Arbitration Act who claimed that the proceedings should be stayed, to state before the court that he was at the commencement of the proceedings and still is ready and willing to do all that is necessary for the proper conduct of the arbitration and also to adduce evidence in support of such a case so that the court, if it accepts the evidence, may be satisfied about the existence of the preconditions for staying proceedings in the suit. How the statement is to be made would necessarily depend upon the practice and procedure prevailing in a particular court. 'Some courts may require that such statement should be made in the application and the facts stated in the application should be supported by an affidavit. Rules of some other court and the practice prevailing therein may require that the application for such purpose may only contain the prayer and the facts on the basis of which the relief is claimed may be stated in the affidavit constituting evidence of the fact entitling the applicant to the relief claimed by him. If an applicant neither puts forward such case in accordance with the rules and the practice of the court nor does he produce any evidence in support of the allegation that he was at the commencement of the proceedings and still is ready and willing to do every thing necessary for the proper conduct of arbitration proceeding, his request under Section 34 of the Act staying the proceedings in the suit certainly deserves to be rejected.

13. In Srivenkataswara Constructions v. Union of India, (AIR 1974 Andh Pra 278), the application under Section 34 of the Arbitration Act filed by the defendant praying that the proceedings be stayed was allowed by the trial court. The plaintiff went up in appeal before Andhra Pradesh High Court, there he for the first time, took the plea that the defendant's application under Section 34 of the Act deserved to be rejected as it did not contain an allegation to the effect that he was at the commencement of the proceeding ready and willing to do every thing for the proper conduct of the arbitration proceeding. The High Court opined that as the plaintiff neither raised this plea before the High Courtnor did it press it at the time of the argument, it should not be allowed to raise it at the appellate stage for if he had raised this plea at the appropriate stage, the defendant could have adduced evidence and satisfied the court about his readiness and willingness at the commencement of the proceedings. Of course the court also observed that on a plain reading of Section 34 of the Act it did not find that there is any requirement that such a specific allegation with regard to the existence of a condition precedent for making of an order under Section 34 of the Act must be contained in the application filed for the purpose. However, the court further observed that if the petitioner makes such an averment the court may consider that averment before being satisfied about its correctness. It also looked into the record and observed that the evidence in the case indicated that the defendant was ready and willing for the arbitration before the suit.

14. As we read the judgment there is nothing in it which counters the proposition that before a defendant can obtain an order under Section 34 of the Arbitration Act staying proceedings in a suit, he should, in a manner consistent with rules and the procedure of the court, tell it that the conditions specified in the section for enabling the court to stay the proceedings in the suit, exists and thereafter to satisfy it about the existence of such conditions with reference to evidence for the purpose available on the record.

15. In the result, we find that in the case before us the trial court was, in the absence of any averment in the application, as also of any evidence to show that the appellant was at the commencement of the proceedings and is still ready and willing to do every thing for the proper conduct of the arbitration proceedings, quite justified in rejecting the application filed by the appellant for staying the proceedings in the suit.

16. Since however, the application filed by the applicant was liable to be rejected on the aforesaid preliminery ground, it was not at all necessary for the trial court to have gone into and expressed any opinion on the question as to whether the arbitration clause in the agreement entered into between the parties was vague and whether the controversy involved in the suit fell outside the ambit of the arbitration clause. We also refrain from expressing any opinion on this controversy.

17. In the result, we find no merit in this appeal which fail and is dismissed with costs.


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