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Voc Industrial Workers Co-operative Housing Society and ors. Vs. M. Karuppuswami - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtChennai High Court
Decided On
Case NumberSecond Appeal No. 259 of 1974
Judge
Reported inAIR1978Mad91
ActsArbitration Act, 1940 - Sections 34
AppellantVoc Industrial Workers Co-operative Housing Society and ors.
RespondentM. Karuppuswami
DispositionAppeal dismissed
Cases ReferredBawa Chattagir v. Natanomal
Excerpt:
.....act is to exercise a discretion, one way or the other, when an application is made before it for stay of the suit for ensuring the arbitration to be taken up. the defendants cannot complain of this course, considering that they were given ample opportunity of filing their written statement. natanomal, 4 ind cas 359, put the matter in proper perspective in the following passage- the act (arbitration act, 1899) contemplates a business-like procedure on the part of those desiring to refer, and the whole object of the legislature will be frustrated if it is to be utilised as a means of prolonging litigation indefinitely .i construe the order staying proceedings for such reasonable time as would enable the defendants to get an arbitration carried through .defendants have already had an..........appeal relates to a suit stayed by the trial court under section 34 of the arbitration act. the stay of suit was granted to enable the parties to go to the arbitrator for resolving the dispute which was the subject-matter of the suit. the arbitration, however, became infructuous. the second appeal raises the question as to how the trial court should have proceeded in the circumstances stated above. 2. the suit in this case was filed in the district munsif court, coimbatore,by a building contractor against a cooperative building society and two of its principal office-bearers. the suit was for accounts. the defendants entered appearance in the suit, but did not file any written statement. they moved the court, instead, for an order staying the suit under section 34 of the arbitration.....
Judgment:

Balasubrahmanyan, J.

1. This second appeal relates to a suit stayed by the trial court under Section 34 of the Arbitration Act. The stay of suit was granted to enable the parties to go to the arbitrator for resolving the dispute which was the subject-matter of the suit. The arbitration, however, became infructuous. The second appeal raises the question as to how the trial court should have proceeded in the circumstances stated above.

2. The suit in this case was filed in the District Munsif Court, Coimbatore,by a building contractor against a cooperative building society and two of its principal office-bearers. The suit was for accounts. The defendants entered appearance in the suit, but did not file any written statement. They moved the court, instead, for an order staying the suit under Section 34 of the Arbitration Act. They invoked the arbitration clause in the suit contract. The learned District Munsif granted the application of the defendants and stayed the suit. That was on 18-3-1966. For a long time thereafter, however, nothing happened in the arbitration. The defendants did not take any initiative in the matter. In fact, contrary to what was said before the learned District Munsif in the application for stay, the Society was neither ready nor willing to refer the matter to arbitration and get on with it. On the contrary, they thwarted the attempts of the plaintiff, in that direction. For instance, the plaintiff, on his own initiative, moved the arbitrator to take up the arbitration. The arbitrator was the Deputy Registrar of Co-operative Societies, Coimbatore, Before the Deputy Registrar, the Society raised all kinds of technicalities. It was contended that the Deputy Registrar had no power to enter into the arbitration under Section 73 of the Tamil Nadu Co-operative Societies Act. The defendants also pleaded before the Deputy Registrar that the plaintiff's motion for arbitration was barred by limitation. These objections brought the arbitration under a stalemate. After adjourning the matter several times, the Deputy Registrar ultimately declined to take up the arbitration.

3. Meanwhile, seeing that nothing served in the arbitration, the learned District Munsif, set down the suit for hearing, but not before granting the defendants society time for filing their written statement. The defendants, however, excused themselves from filing their written statement, on the technical ground that the earlier order of the court granting stay of suit must first be formally set aside, on an application moved specifically for that purpose before the court. The learned District Munsif, however, declined to follow the procedure suggested by the defendants. And, in the absence of any written statement, filed, he proceeded with the trial of the suit and ultimately passed a preliminary decree for accounts as prayed for by the plaintiff. This preliminary decree was confirmed in appeal by the learned Subordinate Judge, Coimbatore.

4. In the present second appeal, the defendants question the correctness of the procedure adopted by the learned District Munsif in proceeding with the trial of the suit without formally setting aside the earlier order of stay passed under Section 34 of the Arbitration Act. Mr. Vanchinathan, appearing for the appellants, did not seriously contend that the trial court had no jurisdiction at all to get on with the trial of the suit when it became clear to it that the arbitration, for the purpose of which the suit had been earlier stayed, had become infructuous. All the same, I think it necessary to consider the legal position. For this has a bearing on the other contention raised by the learned counsel regarding procedure. Section 34 of the Arbitration Act expressly gives a discretion to the court to grant stay of trial of a suit on its file to enable the parties to go to arbitration. Where, the court exercises the discretion in favour of the defendant, the court passes an order staying the suit. But once that happens, there is no express provision in Section 34 or elsewhere in the Act enabling the court to cancel or set aside the order of stay at a subsequent point of time. Nonetheless, the position would seem to be one of construction of the scope of the court's jurisdiction. The power of the court under Section 34 to grant stay of suit must, in my opinion, necessarily include, by implication, the power to modify, vary, rescind or set aside the order of stay. It cannot be the intention, behind the section that a stay once granted cannot thereafter be set aside. The position of the court as a trier of the suit is such that an irrevocable order of stay would stultify its own jurisdiction. The court under Section 34, never completely puts it out of its power to direct the course which the suit should take at any given moment of time. The very conception of stay of suit in the context of the powers of the trial court excludes any idea of a permanent tying down by the court of its own hands. There is yet another consideration which has relevance to cases of this kind. The stay of suit under Section 34 is for a special purpose, to wit, to enable the parties to go to arbitration. Once the fulfilment of that purpose is found to have become impossible, the very basis for the continuance of the stay also disappears. In such situation, the trial court not only may proceed with the suit; it is its duty to do so.

5. The position in law would seem to have been the same under the law relating to arbitration before the Arbitration Act of 1940 was enacted. Cases had arisen before courts in India in regard to stay of suits under para. 18 of the second schedule to the Civil P. C. It has been held that if arbitration becomes impossible for any reason, the court ought to proceed to decide the suit itself. It has also been held that the stay order may be discharged if the parties are unable to obtain a satisfactory arbitrator or to bring the arbitration proceedings to a satisfactory and speedy conclusion--See Laxman v. Manjunatha, : AIR1921Bom458 ; Bava Chattagir v. Matanomal, 4 Ind Cas 359, ; Kishinchand v. Ramchand, AIR 1937 Sind 247 and Bhasimukhi v. Parbati Sunkar, AIR 1919 Cal 295. The power to discharge a stay order and to get on with the suit sometimes traced in some decisions to the inherent powers of the Court is saved by Section 151, Civil P. C. In England also the procedure is available whereby the parties to an arbitration agreement who had once obtained an order of stay of the suit between them from the court may move the same court for getting the stay vacated on finding that the arbitration has not borne fruit. See Kruger Town-wear Ltd. v. Northern Assurance Co. Ltd., 1953 1 WLR 1049. It therefore seems to be that the court does have jurisdiction to discharge an order of stay made by it earlier under Section 34 of the Arbitration Act.

6. Mr. Vanchinathan concentrated his argument not as much on the jurisdictional aspect, but on the procedural one. He said that the procedure followed by the District Munsif in this case was not proper. It has already been noticed that no application was before the District Munsif in and by which he was invited to set aside the earlier order of stay. This, according to learned counsel, was a caution that the court should have left the stay untouched. He pointed out that when Section 34 contemplated an application to be moved by the defendants for stay of suit, it was meet and proper that the same procedure should be adopted by the trial court for later setting aside the stay and resuming the hearing of the suit. I do not. however, accept this argument as sound. It is well settled that what the court is called upon to do under Section 34 of the Arbitration Act is to exercise a discretion, one way or the other, when an application is made before it for stay of the suit for ensuring the arbitration to be taken up. The court is by no means under a duty to slay suit even in cases where all the requirements of the section are fulfilled. This being so, to contend that the court could terminate the stay and resume the hearing of the suit only on being so moved by means of a formal application is not only to read a procedural technicality which is not found in the statute, but to mistake the nature and purpose of the whole machinery of stay under the section. When once it is found that the court's power to take up the hearing of the suit is always there, as I have shown above, on a construction of the section, there is no scope at all for putting the court under a strait-jacket of procedure, especially where there is no express provision prescribing that procedure. The prime need of our court system at the present moment is to reduce, as far as possible, the technicalities and refinements of procedure. This may not be possible of achievement in matters where the Code or other relevant law lays down the procedure, in black and white. But where the Codes are silent, there is, in my view, every reason for the courts to eschew procedural technicalities and get on with the job on hand. I, therefore, feel that the learned District Munsif acted quite sensibly in cutting the cackle of procedure and straightway proceeding with the trial of the suit. The defendants cannot complain of this course, considering that they were given ample opportunity of filing their written statement. This opportunity was deliberately refused to be availed of by the defendants. They cannot now seek to unsettle everything that subsequently happened at the trial merely on the flimsy thread of technicality pleaded by them, which, as I have shown above, wilts under examination.

7. In Kisinchand v. Ramchand, AIR 1937 Sind 247, it was held that where a court had stayed a suit under para. 18 of Schedule 2 of the Civil P. C., ordinarily speaking, the court should first remove the stay before it revives the suit and then decide the suit on its merits. The learned Judges, however, added that if the court does not write a separate order vacating the original order of stay, but proceeds to hear the suit, the order of stay must be deemed to have been vacated by implication. The same court on an earlier occasion in Bawa Chattagir v. Natanomal, 4 Ind Cas 359, put the matter in proper perspective in the following passage-

'The Act (Arbitration Act, 1899) contemplates a business-like procedure on the part of those desiring to refer, and the whole object of the Legislature will be frustrated if it is to be utilised as a means of prolonging litigation indefinitely ... ... ... I construe the order staying proceedings for such reasonable time as would enable the defendants to get an arbitration carried through ... ... ... Defendants have already had an excessive time and I consider that they have shown, themselves to be not ready and willing to do all things necessary for the conduct of the arbitration. Having regard to the obstinate attitude adopted by the Bawa towards arbitration, I believe that the difficulty of obtaining a satisfactory arbitrator, and of bringing the arbitration proceedings to a satisfactory and speedy conclusion would be almost impossible.'

The position, in my view, is the same under the present Arbitration Act of 1940. The court which granted the stay has every power to discharge the same either on the ground that the arbitration has become infructuous or on the ground that the parties are not intent upon getting their disputes properly decided in arbitration.

8. Mr. Vanchinathan, in conclusion, pleaded that another chance might be given to the parties to pursue the arbitration proceedings. I do not think that this request, coming as it does from the defendants, deserves consideration. It is on record that the Society had opposed the plaintiff tooth and nail when the plaintiff moved the Deputy Registrar of Co-operative Societies to get on with the arbitration and raised all sorts of objections to his entertaining the arbitration. This resulted in a stalemate because, the Deputy Registrar declined to act although he was the arbitrator named in the arbitration agreement and there was no provision for a substitute. In any case, there has been an unconscionable delay -- a matter of nearly 11 years -- since the time when the District Munsif granted the order of stay. Since then, not only had the learned District Munsif passed the preliminary decree which has been confirmed by the learned Subordidate Judge and has come up on this appeal, but I learn from the Bar that a final decree has also been passed in the suit. In the circumstances, I must give a quietus to the whole matter, which I do by dismissing the second appeal. But I do so in the circumstances, without costs.


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