N.K. Das, J.
1. The defendant in a suit for dissolution of partnership is in appeal against rejection of a petition under Section 34 of the Arbitration Act praying to stay the suit.
2. The plaintiffs and defendant constituted the partnership in the name and style of 'Shri Shibsankar Saha & Brothers.' The plaintiffs filed the suit for dissolution of the partnership and for rendition of accounts. There are charges of misappropriation of the partnership money and violation of the conditions of the partnership and mismanagement against the defendant who is the Managing Partner. A petition was filed for appointment of receiver on the allegation of mismanagement. The defendant took a couple of adjournments to file written statement and objection to the petition for appointment of receiver. Ultimately he filed a petition under Section 34 of the Arbitration Act. The main grounds (sic) on which the partnership deed provided for settlement of disputes by arbitration and hence the suit should be stayed and the matter should be left to the decision of the domestic forum.
3. The learned Subordinate Judge has rejected this petition on the ground that the defendant had already taken steps for progress of the suit and the allegation of misappropriation and mismanagement should be tried by a Civil Court which is discretionary on the part of the court either to stay or not according to the facts and circumstances of each particular case,
4. It is not disputed that the defendant had taken time to file written statement. It is contended by Mr. Mohanty, the learned counsel for the appellant, that the defendant had no sufficient time to get acquainted with the plaintiff's case and, as such, the petition under Section 34 of the Arbitration Act should be allowed even though the defendant had taken steps for progress of the suit and that would not stand in his way. Such a stand has not been taken in the petition filed before the court below. The defendant in his petition under Section 34 of the Arbitration Act has contended that the allegations against him came to his knowledge after the institution of the suit when he was served with summons in the case and those allegations are false and as there is a specific arbitration clause as per para 13 of the agreement, the plaintiffs have no locus standi to file the suit and also the charges and allegations against the defendant come under the purview of Clause 13 of the agreement. On these grounds, he has sought to stay further proceedings of the suit. From the contents of the petition, it would appear that all the allegations made by the plaintiffs were known to the defendant when he received the summons in the case. Even after receiving the summons and notice, he filed petition and asked the Court to grant time to file written statement and time was accordingly granted.
5. It is well settled that the leave to be granted by the Court under Section 34 of the Arbitration Act is discretionary, and a party cannot claim it as of right. In the Printers (Mysore) Private Ltd. v. Pothan Joseph, AIR 1960 SC 1156, 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. Ordinarily the Court would direct the parties to go before the tribunal of their choice and stay the legal proceedings instituted before it by one of them. 1 would be difficult, and it is indeed inexpedient, to lay down any inflexible rules which should govern the exercise of the said discretion. It has been further held in that case that if fraud or dishonesty is alleged against a party it may be open to the party whose character is impeached to claim that it should be given an opportunity to vindicate its character in an open trial before the court rather than before the domestic tribunal, and in a proper case the court may consider that fact as relevant, for deciding whether stay should be granted or not.
Relying on the decision Anderson Wright Ltd. v. Moran & Co., AlR 1955 SC 53, this Court in Dalai Raman v. Radhamohan Samantaray (1965) 31 Cut LT 596, has held that in order that a stay may be granted under Section 34 of the Arbitration Act, it is necessary that four conditions should be fulfilled, which are-
(i) the proceedings must have been commenced by a party to an arbitration agreement;
(ii) the legal proceeding which is sought to be stayed must be in respect of matter agreed to be referred to;
(iii) the applicant for stay must be a party to the legal proceedings and he must have taken no steps in the proceedings 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 everything necessary for the proper conduct of the arbitration, and
(iv) 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.
This Court also following the aforesaid decision Printers Private Limited case (supra) has held that the relief for stay of legal proceedings instituted in a Court cannot be claimed as a matter of right. Even if the conditions specified in the section are satisfied, the Court may refuse to grant stay if it is satisfied that there are sufficient reasons why the matter should not be referred in accordance with the arbitration agreement. The power to stay legal proceedings is thus discretionary. The discretion must, however, be properly exercised. No inflexible rule can, however, be laid down to govern the exercise of this discretion. It should be exercised according to commonsense and justice.
In Dalai Raman case the defendants applied for time to file written statement and it was held that the acts on the part of the defendants clearly displayed an unequivocal intention on their part to proceed with the suit, and to give up their right to have the matter disposed of by arbitration clause of the agreement and the application for time to file written statement constituted steps in the proceedings. For the aforesaid finding, this Court relied on Ford's Hotel Co. Ltd. v. Bartlett, (1896) A C. 1, and Union of India v. Hans Rai Gupta & Co. AIR 1957 All 91.
Considering a large number of decisions of different High Courts as well as two decisions of the Supreme Court, this Court has held in Bankey Behari Lal v. Hiren-dralal Adhikari, (1972) 1 Cut WR 264 that when there are charges of fraud, misconduct, and/or misappropriation against the defendant, the matter is a fit one for being 'tried in Court and the arbitration proceeding is not a suitable one.
The Supreme Court in The State of U. P., v. Janki Saran Kailash Chandra AIR 1973 SC 2071, has held that taking other steps in the suit proceedings connotes the idea of doing something in aid of the progress of the suit or submitting to the jurisdiction of the Court for the purpose of adjudication of the merits of the controversy in the suit and no discretion is available where application for adjournment for filing a written-statement is moved as it amounts to a step in the proceeding.
6. The Supreme Court as well as this Court are consistently of the view that if the defendant asks for adjournment to file written statement, it amounts to taking steps in the proceedings of the suit and, as such, he is not entitled to the discretion of the Court for stay of the suit under Section 34 of the Act.
Considering the facts and circumstances of the present case in the light of the aforesaid principle, it is abundantly clear and also not disputed that the defendant had already asked for adjournment to file his written statement and he was also aware of the contents of the plaint. Therefore, he is not entitled to the discretion of the Court for stay of the suit exercising powers under Section 34 of the Arbitration Act. The trial Court has rightly held that when the defendant has taken steps for progress of the suit, the petition for stay should not be granted and the Court was not inclined to exercise its discretion in favour of the defendant.
7. In the case of Printers Private Limited (supra), it has also been held that it is not ordinarily open to the appellate Court to substitute its own exercise of discretion for that of the trial judge; but if it appears to the appellate Court that in exercising its discretion the trial Court has acted unreasonably or capriciously or has ignored relevant facts and has adopted an unjudicial approach then it would certainly be open to the appellate Court -- and in many cases it may be its duty -- to interfere with the trial Court's exercise of discretion. In cases falling under this class the exercise of discretion by the trial Court is in law wrongful and improper and that would certainly justify and call for interference from the appellate Court. The same view has also been reiterated by the Supreme Court in the case of Uttar pradesh Cooperative Federation Ltd. v. Sunder Bros., Delhi, AIR 1967 SC 249. It has been held in that case that where the discretion vested in the Court under Section 34 has been exercised by the lower Court, the appellate Court would be slow to interfere with the exercise of their discretion. In dealing with the matter raised before it at the appellate stage, the appellate Court would normally not be justified in interfering with the exercise of the discretion under appeal solely on the ground that if it had considered the matter at the trial stage it may have come to a contrary conclusion. If the discretion has been exercised by the trial Court reasonably and in a judicial manner the fact that the appellate Court would have taken a different view may not justify such interference with the trial Court's exercise of discretion. If it appears to the appellate Court that in exercising its discretion the trial Court has acted unreasonably or capriciously or has ignored relevant facts, then it would be open to the appellate Court to interfere with the trial Court's exercise of discretion. For this view, the Supreme Court has relied on Charles Osenton & Co. v. Johnston, 1942 A. C. 130.
In the instant case, from the order of the trial Court, it does not appear that the Court in exercising its discretion has acted unreasonably or capriciously or that relevant facts have been ignored or an unjudicial approach has been made. The discretion exercised by the trial court does not appear to be wrong in law or improper. In view of the dictum of the Supreme Court as stated above, there is no compelling reason to interfere with the decision of the trial Court.
8. In the result, the appeal fails and is dismissed. In the circumstances of the case, there will be no order as to costs.