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Mithailal Gupta Vs. Inland Auto Finance and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil;Arbitration
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. (First) Appeal No. 111 of 1965
Judge
Reported inAIR1968MP33
ActsArbitration Act, 1940 - Sections 34; Evidence Act, 1872 - Sections 3 and 59; Code of Civil Procedure (CPC) , 1908 - Order 19, Rule 2
AppellantMithailal Gupta
Respondentinland Auto Finance and ors.
Appellant AdvocateG.P. Singh, Adv.
Respondent AdvocateV.S. Pandit, Adv. for Respondent No. 1
DispositionAppeal allowed
Cases Referred and Heyman v. Darwins Ltd.
Excerpt:
.....of witnesses as well. in air 1961 madh pra 333 (supra), it has been held by this court that when an application under section 34 of the arbitration act is made, the issue about the existence of the arbitration agreement has to be decided by the court as best as it can on the material before it......facts with regard to the: execution of the hire purchase agreement. whenever there is an issue of fact, the fact to be asserted or denied in the answer to such issue is a fact in issue (per section 3 of the evidence act). it is the right of the parties to give evidence of the existence or non-existence of every fact in issue and such other facts as are declared in the evidence act as 'relevant facts'. (vide section 5 of the evidence act). the laws of evidence as to what is receivable or not are sounded on a compound consideration of what, abstractedly considered, is calculated to throw light on the subject in dispute, and of what is practicable. the object of a trial in every case is to ascertain the truth in respect of the matter. for this purpose it is necessary that the court should.....
Judgment:

Shiv Dayal, J.

1. This is an appeal from an order of stay passed under Section 34 of the Arbitration Act.

2. The appellant's suit, which has been stayed, is based on certain hire purchase agreements in respect of a motor truck bearing registration No MPA 1727. Then there are certain averments in the plaint with regard to motor vehicle No. MPA 2322 and yet another vehicle No. MPA 2979. For the purposes of this appeal, it is not necessary to state the details of those plaint averments. An agreement on a printed form was entered into between the plaintiff as the hirer, the first defendant as the owner and the second defendant as the guarantor. According to the plaintiff, he signed the agreement on a blank form. Under the said agreement, the first defendant acted as financier to enable the plaintiff to purchase a new Layland motor truck.

It advanced Rs. 30,000 to him, to which a sum of Rs. 9,000 was added as finance charges, being interest at the rate of 15 per cent per annum for two years on the whole sum of Rs. 30,000, total amount being Rs. 39,000. It was payable in 24 monthly instalments of Rs. 1624 each commencing on 24 January 1960. The plaintiff paid to the first defendant not only the entire amount of the 24 instalments, payable under the aforesaid agreement, but also Rs. 119.38 p. in excess. The suit is one for accounts in respect of the hire purchase agreement relating to motor truck No. 1727 and for a declaration that the plaintiff is entitled to exercise the option of purchase given to him under the agreements and could have cancelled the endorsement of hire purchase in favour of defendant 1 on the registration certificate of that vehicle.

3. Hire purchase agreement in respect of motor truck No. MPA 1727 contained the following arbitration clause:--

'III. All questions and matters in difference between the parties hereto or their representative touching the construction hereof or any act or thing in regard to the rights, duties and obligations or the enforcement or their performance including the failure to pay a claim under the several hereinbefore recited clauses and/or arising out of or relating to this Agreement or to the subject matter thereof shall in accordance with the Indian Arbitration Act X of 1940, or any statutory modification thereof be referred to the sole arbitrationof 'Shri R. L. Mehta, Advocate, 320 Kucha Ghasi Ram, Delhi,' or in the event of his refusal or inability to act as Arbitrator, to the arbitration of 'Shri K. K. Jain, Advocate Daryaganj, Delhi,' or his nominee at the option of the party raising the question or matter in difference. The said party shall give ten day's notice thereof to the other party. ..... The party raising thequestion or matter shall deposit Rs. 100 as arbitration fee with the Arbitrator . . '

The words and figures underlined(here into ' ') above are written ingreen ink in the printed form.

4. The first defendant, by its application dated 30 January 1965, claimed stay of the suit under Section 34 of the Arbitration Act. It alleged that on 16 October 1964 and 9 November 1964, it gave two notices to the plaintiff specifying 20 November 1964 as the last date for the plaintiff to reply, but the plaintiff did not reply or comply with the notices. Thereupon, the first defendant made a reference to the arbitrator on 25 November 1964 to settle the matter between the plaintiff and defendant 1. The Arbitrator issued notice to the plaintiff on 11 December 1964 and fixed 28 December 1964 for hearing. The plaintiff avoided service and, having got scent of the matter, instituted the present suit on 23 December 1964. The Arbitrator then fixed 20 January 1965 and thereafter 10 February 1965 for hearing. The plaintiff opposed this application as false and frivolous. He denied the existence, genuineness and validity of the alleged arbitration agreement and stated: --

''(3) That the signature of the plaintiff-applicant and the defendant pro forma opposite party No. 2 were obtained on blank printed forms of agreement and blank sheets of papers in the circumstances already stated in the plaint, and the agreement in question must have been forged by the defendant opposite party No. 1 by making unlawful use of the blank forms of agreements and blank sheets of papers.

(4) That the plaintiff applicant never agreed to the nomination of Shri R. L. Mehta and/or Shri K. K. Jain as arbitrators, and was never told anything of the kind as alleged to have been told to him in the quotation from the alleged arbitration clause.

(5) That the plaintiff never agreed that Delhi Courts alone shall have jurisdiction in all matters arising out of relating to or in connection with the alleged agreement. .. .. .. '

We need not mention the question of law raised in the alternative therein. Mi-thailal plaintiff filed his affidavit in support of the application.

5. The plaintiff's reply was filed on 15 February 1965. On 8 March 1965, the learned trial Judge heard the parties onthe application of defendant 1 under Section 34 of the Arbitration Act and by his order dated 15 March 1965 stayed the suit. The plaintiff is aggrieved by that order.

6. Shri G. P. Singh, learned counsel for the appellant, raised three contentions before us: (1) The trial Court erred in not giving an opportunity to the parties to prove their allegations; (2) the dispute in suit does not fall within the purview of the arbitration clause; and (3) the trial Court should have exercised its discretion in not staying the suit having regard to the circumstances, particularly that it has been pending for the last three years.

7. From the above narration it is pa-tent enough that the parties have joined issues on certain facts with regard to the: execution of the hire purchase agreement. Whenever there is an issue of fact, the fact to be asserted or denied in the answer to such issue is a fact in issue (per Section 3 of the Evidence Act). It is the right of the parties to give evidence of the existence or non-existence of every fact in issue and such other facts as are declared in the Evidence Act as 'relevant facts'. (Vide Section 5 of the Evidence Act). The laws of evidence as to what is receivable or not are sounded on a compound consideration of what, abstractedly considered, is calculated to throw light on the subject in dispute, and of what is practicable. The object of a trial in every case is to ascertain the truth in respect of the matter. For this purpose it is necessary that the Court should be in a position to estimate, at its true worth, the evidence given by each witness. Proof, logically denned, is sufficient reason for assignment to a proposition as true (per Wharton). Practically considered, it is the establishment of facts in issue by proper legal means to the satisfaction of the Court (Best on Evidence). This is done by the production of evidence, the law relating to which is to all legal principles what logic is to reasoning, whatever subject it may be concerned about. Proof is the effect or result of evidence, while evidence is the medium of proof. Bentham used the word 'evidence' in its broadest sense:--

'Any matter of fact, the effect, tendency or design of which is to produce in the mind a persuasion, affirmative or dis-affirmative, of the existence of some other matter of fact.'

It seems properly from Section 3 of the Evidence Act that 'proof' means anything which serves, either immediately or mediately, to convince the mind of the truth or falsehood of a fact or proposition and as truths differ, the proof adapted to them also differ. Thus, as regards quid pro-bandum, it is incontestable that the appellant has the right to prove the above fact in issue and the facts relevant to it.

8. With regard to the modus probandi, attention is first attracted by Section 59, Evidence Act, which declares that all facts, except contents of a document, may be proved by oral evidence.

9. Then, as regards procedure, witnesses must be examined in open Court viva voce. Exceptions are:-- (1) Where there is an agreement to take evidence by affidavits, or (2) when there is an order of the Court to prove particular facts by affidavits, or (3) when there is an order for examination by interrogatories or before a Commissioner.

10. Rule 2 of the 19th Order of the Code of Civil Procedure enables evidence to be given by affidavit upon an interlocutory application. An affidavit must be confined to the particular facts to be proved and such facts as the witness is able from his own knowledge to prove. An affidavit differs from a deposition inasmuch as, in the latter, the opposite party has always an opportunity to cross-examine the deponent but an affidavit is taken ex parte. Where the adverse party desires production of the deponent for cross-examination, the Court should ordinarily order attendance of the deponent for cross-examination.

11. Thus, the trial Court was bound to adopt one of the two courses, that is, either record oral evidence, or order that the particular fact be proved by affidavits. Shri G. P. Singh and Shri Pandit agree that if this Court decides to remand the case, parties will file affidavits to prove their rival contentions.

12. The learned trial Court has held that there is no scope for directing the parties to produce oral evidence in order to decide the application under Section 34 of the Arbitration Act. It has further observed that there are indications in Century S. & M. Co. v. Motilal, AIR 1961 Madh. Pra. 333, that oral evidence cannot be allowed to be produced. It has, therefore, refused to be persuaded by the decision in Mathu Kutty v. Varee Kutty AIR 1950 Mad 64. Having said so, the learned District Judge proceeded to decide the question on the material before it, that is to say, the application of defendant 1 and the reply of the plaintiff, each of which was supported by an affidavit of the party making it. In the result, he refused to believe that there were blanks in the hire purchase agreement, when the plaintiff signed it and on that basis, as there is an arbitration clause in that agreement he stayed the suit. It is quite obvious that the learned District Judge did not bear in mind the distinction between an affidavit filed on a motion and an affidavit which is filed in order to prove a fact. In the latter case, affidavits may be filed not only of parties but also of witnesses as well.

13. An affidavit in support of an application is no evidence. It is intended merely to satisfy the Court, prima facie, that the allegations in the application are true so that the Court may issue notice to the opposite party and the Court may act upon it if the opposite party does not contest the allegations in the application. The result was that having denied an opportunity to the plaintiff to prove the issue of fact, he decided it merely on the averments made by the parties in the application under Section 34 of the Arbitration Act and the reply to it, Such a finding cannot be sustained.

14. The order under appeal makes reference to the following cases -- (1) Anderson Wright Ltd. v. Moran and Co., AIR 1955 SC 53; (2) AIR 1961 Madh Pra 333 (supra); and (3) AIR 1950 Mad 64 (supra). The decision of their Lordships in Anderson Wright Ltd., AIR 1965 SC 53 (supra) lays down four conditions, which must be fulfilled in order that stay may be granted under Section 34 of the Arbitration Act. That decision does not consider the question whether evidence should recorded, when the parties join issue on a question of fact relating to the very existence of agreement for arbitration. In AIR 1961 Madh Pra 333 (supra), it has been held by this Court that when an application under Section 34 of the Arbitration Act is made, the issue about the existence of the arbitration agreement has to be decided by the Court as best as it can on the material before it. The expression 'on the material before it' does not exclude the admission of oral evidence. The dictum merely speaks of the basis on which the issue is to be decided. That basis is the material before the Court. But in that case, the question whether oral evidence can also be part of the 'material before it', was not raised. As such, that decision does not furnish any guidance on the question which we are dealing with in this case. We are unable to agree with the learned District Judge that there are indications in that decision that oral evidence could not be allowed to be produced on a question of fact which foes to the root of an application under Section 34. In the Madras Case, the relevant observations are these:---

'The very foundation for the jurisdiction of the Court to stay the trial of a suit under Section 34 is the existence of an arbitration agreement. The applicant comes to the Court and asserts that there is such an agreement while the other side disputes the truth of such an agreement or admitting its truth pleads that it is invalid by reason of other vitiating circumstances which are open under law for the objector to raise and prove. I do not see any reason why in that event when the question was raised and the validity of the jurisdiction of the Court depends upon the result of its decision on that question, the Court should not try that issue.'

In the view that we have taken, the first contention of Shri G. P. Singh must be allowed. Setting aside the order of the trial Court, the parties must be given an opportunity to produce evidence accordingto the procedure which the trial Court would adopt in the light of this judgment.

15.With regard to the second contention, it is sufficient to refer to Union of India v. B.C.S. & W. Mills Ltd., AIR 1967 SC 688 and Heyman v. Darwins Ltd. 1942 AC 356, where the implications of the expression 'in respect of' or 'with regard to' or 'under the contract' have been stated. However, Shri G. P. Singh withdrew the contention during the course of the hearing.

16. It is maintained for the appellant that this is a fit case where the trial Court should have refused to exercise its discretion in favour of staying the trial of the suit, inter alia, because the suit has been pending for about three years. In our opinion, this question should be left to the trial court to consider, if an occasion for it arises.

17. The appeal is allowed. The orderof the trial Court staying the suit is setaside. The case shall go back to it for afresh decision on the application of defendant 1 under Section 34 of the ArbitrationAct, after giving an opportunity to theparties to produce evidence as indicated inthis order. Costs in this appeal shall abidethe fresh decision of the trial Court on theapplication of defendant 1, under Section 34of the Arbitration Act. Counsel's fee Rs.300.


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