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M. Palaniappan Vs. A. Amsaveni Ammal and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtChennai High Court
Decided On
Reported in(1981)1MLJ167
AppellantM. Palaniappan
RespondentA. Amsaveni Ammal and ors.
Cases ReferredIn State of Punjab v. Geeta Iron and Brass Works Ltd.
Excerpt:
.....that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and 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, such authority may make an order staying the proceedings. the further requirement of the section is that the appellant under section 34 of the act should have made apparent his readiness and willingness at the time when the proceedings were commenced and later as well to do all things necessary for the proper conduct of the arbitration. the representation which was made on behalf of the appellant on 27th april, 1979, was not with a view to take any further step in the proceedings as..........and that would not in any manner disclose a refusal to abide by the provisions for settling the disputes by arbitration. on the other hand, the learned counsel for the respondents contends that even when the respondents had called upon the appellant to refer the dispute to arbitration, the appellant did not do so and indicated thereby that he was not ready and willing to do all things necessary for the proper conduct of the arbitration as envisaged in the agreement between the parties. in the present case, the existence of the agreement between the parties providing for composing their disputes by arbitration is not in dispute.5. section 34 of the act runs thus-where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any.....
Judgment:
ORDER

V. Ratnam, J.

1. The first defendant in O.S. No. 572 of 1979, Sub-Court, Coimbatore, is the appellant in this Civil Miscellaneous Appeal, which is directed against the order of the Court below dismissing an application filed by the appellant under Section 34 of the Indian Arbitration Act, 1940(hereinafter referred to as the Act) praying for a stay of the suit. The respondents herein instituted that suit for dissolution of the partnership firm M/s. Balasubramania Foundry in which the appellant, the respondents and others are partners and for other consequential reliefs. The partnership came into existence under the terms of the agreement dated 25th November, 1971. Inter alia, Clause 14 of the agreement provided that 'all disputes and questions in connection with the partnership or this deed, arising between the partners or between any one of them and their legal representatives and whether during or after the cessation of the partnership shall be referred to arbitration under the Indian Arbitration Act'. Alleging that the claim made in the plaint related to disputes contemplated by the aforesaid clause and therefore, referable to arbitration and that the suit had been filed by the respondents in violation of Clause (14) of the partnership agreement, the appellant invoked Section 34 of the Act for a stay of the suit.

2. That application was resisted by the respondents herein on the ground that even before the institution of the suit on 24th April, 1979. notices had been sent to the appellant and the appellant did not accept the request of the respondents for arbitration and consequently, the appellant had lost the right to compel the respondents to resort to arbitration for resolving their disputes. In addition, the respondents also put forth the objection that the appellant had taken part in the proceedings by opposing the application for the appointment of a Commissioner and therefore, lost his right to rely upon and invoke Section 34 of the Act. On these grounds, the respondents prayed for the dismissal of the application.

3. The learned Subordinate Judge, Coimbatore, who enquired into the application, after referring to the notices, held that the appellant declined to refer the matter to arbitration earlier and therefore, he cannot turn round and say that he is entitled to invoke Section 34 of the Act. It was also further held that the appellant had participated in the proceedings in I.A. No. 459 of 1979 on 27th April, 1979 and took time for counter and therefore, had taken a step in the proceedings and thus became disentitled to invoke the provisions of Section 34 of the Act. On these conclusions, the Court below dismissed the petition. It is the correctness of this order that is challenged in this Civil Miscellaneous Appeal.

4. Mr. V. P. Raman, learned counsed for the appellant, contends that the Court below was in error when it held that the appellant declined to resort to arbitration when called upon by the respondents to do so and had thereby lost the right to invoke the provisions of Section 34 of the Act. According to him, at best, it would only be a case of silence on the part of the appellant and that would not in any manner disclose a refusal to abide by the provisions for settling the disputes by arbitration. On the other hand, the learned Counsel for the respondents contends that even when the respondents had called upon the appellant to refer the dispute to arbitration, the appellant did not do so and indicated thereby that he was not ready and willing to do all things necessary for the proper conduct of the arbitration as envisaged in the agreement between the parties. In the present case, the existence of the agreement between the parties providing for composing their disputes by arbitration is not in dispute.

5. Section 34 of the Act runs thus-

Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and 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, such authority may make an order staying the proceedings.

This section confers the right to seek a stay of the suit on a party to the arbitration agreement when the other party commences legal proceedings against him and the appropriate time for invoking that provision would be before the riling of a written statement or the taking of any other steps in the proceedings. The further requirement of the section is that the appellant under Section 34 of the Act should have made apparent his readiness and willingness at the time when the proceedings were commenced and later as well to do all things necessary for the proper conduct of the arbitration. The objection that has been raised in the present case is that having regard to the stand that has been taken by the appellant to the notices sent by the respondents, the appellant had expressed his unwillingness and want of readiness to go to arbitration and consequently, he cannot invoke Section 34 of the Act. In Exhibit A-4 dated 25th July, 1977, the appellant had stated that if necessary, an arbitrator can be appointed for the purpose as envisaged in the partnership deed. This certainly does not express or signify any unwillingness or want of readiness on the part of the appellant to go to arbitration. Exhibit B-4, dated 30th September, 1977 called upon the appellant to refer the matter under dispute for arbitration and also to nominate a person as an arbitrator. Under Exhibit B-5, dated 10th October, 1977, the appellant stated that there is no dispute at all which can form the subject-matter of a valid reference to arbitration and therefore, there was no occasion as such for referring any matter to arbitration. Again, by Exhibit B-6, dated 23rd February, 1978, the respondents called upon the appellant to agree to arbitration within three days from the date of that notice and the appellant did not send any reply whatever. From this, it is sought to be inferred that the appellant was not willing and ready to go on with the arbitration which would disentitle him from invoking Section 34 of the Act. It must he remembered that all this correspondence had passed prior to 25th April, 1979, when the suit was instituted. A reading of Section 34 would indicate that the willingness or readiness of a party to resort to arbitration must be manifested from the time of the commencement of the legal proceedings and throughout the course thereof and the provisions do not require that even at the stage of the exchange of notice between the parties prior to the commencement of the proceedings, the other party must express his willingness and readiness for arbitration. In any event, in the present case, the notices relied upon do not disclose any unwillingness as such on the part of the appellants to resort to and proceed with the arbitration. Even as late as 25th July, 1977, in Exhibit A-4, the appellant had stated that an arbitrator can be appointed for the purpose envisaged in the partnership deed. In Exhibit B-5 dated 10th October, 1977, sent by the appellant, he had stated that there is no dispute which has to be resolved by resorting to arbitration and consequently this cannot be characterised as unwillingness on the part of the appellant to resort to the arbitration procedure provided for in the agreement. The next occasion when the respondents called upon the appellant to abide by the procedure for arbitration was when Exhibit B-6 was issued on 23rd March, 1978. It is not the case of the respondents that to this notice, the appellant expressed his unwillingness and thereby declined to accept the procedure for resolving disputes by resort to arbitration. The attitude of the appellant in regard to Exhibit B-6 was one of silence even as found by the Court below. It is rather difficult to accept that silence on the part of the appellant is equivalent to an expression to unwillingness or want of readiness on his part to go to arbitration. Indeed, such silence should be normally taken to be consent on the part of the appellant for the course suggested by the respondents. In the absence of any other material to indicate that the appellant was disinclined to go through the arbitration procedure, the mere silence on the part of the appellant cannot be taken to be an indication of his unwillingness to resort to arbitration. In State of Punjab v. Geeta Iron and Brass Works Ltd. : [1978]1SCR746 . the Supreme Court points out that a mere silence on the part of the defendant when a notice under Section 80, Civil Procedure Code, is sent to the Government may not, without more', disentitle it to move under Section 34 and seek stay. In the light of the above decision, it is not possible to hold that by mere silence the appellant had lost his remedy to invoke Section 34 of the Act. Indeed, it is clear that after the commencement of the proceedings, the appellant did not express his unwillingness or want of readiness nor did he decline to refer the matter to arbitration. It is therefore not possible to uphold the conclusion of the Court below that the appellant cannot be permitted to turn round and invoke Section 34 of the Act.

6. The next contention of of Mr. V. P. Raman is that when the matter stood posted to 27th April, 1979, a representation was made to the Court that the suit itself is not maintainable as there is a clause in the agreement for referring the dispute to arbitration and that the appellant will also file an application under Section 34 of the Act for stay and this would not amount to taking a step in the proceedings. The learned Counsel for the respondents, however, contends than even a request as made by the appellant amounts to taking a step in the proceedings. It is necessary to notice the circumstances under which a representation was made on behalf of the appellant and the purpose for which time was asked for in I.A. No. 459 of 1979, filed by the respondents herein which stood posted to 27th April, 1979. Along with the suit, the respondents had filed I.A. No. 459 of 1979 against the appellant wherein they had prayed for the appointment of a Commissioner to look into the accounts, and also to file an inventory. The appellant was served with notice of that application on 27th April, 1979, viz., the very same date to which it was posted and that day happened to be the last working day before the commencement of the summer vacation for the Court. In paragraph 6 of the affidavit in support of the application filed by the appellant under Section 34 of the Act, the appellant has stated that he entered appearance through his counsel and represented to the Court that the suit itself is not maintainable under the provisions of the Act : and that an application under Section 34 of the Act for staying the proceedings will be filed. It is also the further stand of the appellant in paragraph 6 that the application could not be filed into Court even on that day, but that it : could be put into Court only on the reopening day and the Court took note of these representations and posted I.A. No. 459 of 1979 to the reopening day after the summer recess viz., 11th June, 1979. The appellant had also categorically stated in paragraph 7 that he had not filed his written statement nor had he taken any steps in the suit beyond entering appearance and making the representation referred to earlier. In the counter that has been filed by the respondents, in paragraph 10, the respondents would not deny the representation that had been made on behalf of the appellant on 27th April, 1979, but would nevertheless maintain that a step had been taken in the proceedings, which would disentitle the appellant from prosecuting an application under Section 34 of the Act. It is not in dispute that I.A. No. 555 of 1979 under Section 34 of the Act had been filed by the appellant on the reopening date, viz., 11th June, 1979. Before the appellant can be held to be disentitled to invoke the benefits of Section 34 of the Act, the nature of the step taken by him should be such as to indicate that he has acquiesced in the method of having the dispute decided by the Court and a participation in and contribution to its further progress or has done any act showing acquiescence in the jurisdiction of the Court. In other words, there must be some expression of a desire on the part of the appellant to take a step in the suit indicating that the appellant proposes to go on with the suit and abandon the agreement to refer to arbitration. In the present case, there is a clear manifestation of a desire on the part of the appellant to take almost the first step to keep alive the arbitration agreement and not to go on with the suit as is evident from the representation made on his behalf and referred to already and which has not been in any manner controverted by the respondents. The representation which was made on behalf of the appellant on 27th April, 1979, was not with a view to take any further step in the proceedings as contemplated under Section 34 of the Act, but only with a view to impress upon the Court that in view of the provision contained in the agreement for resolving disputes by resorting to arbitration, the suit as well as the application for the appointment of a Commissioner will not lie. Bringing to the notice of the Court the existence of a clause for arbitration and taking time for the purpose of filing an application under Section 34 of the Act cannot in my view, be construed to be steps taken in aid of the progress of the suit and with a view to submit to the jurisdiction of the Court. In cases where parties have bound themselves by agreement to refer the disputes to arbitration, the Courts should, as far as possible, afford every opportunity for resolving the disputes by arbitration and the Court's exercise of the discretion to stay or not to stay a suit must be based on a consideration of the totality of the circumstances. In the present case, the appellant has not in any manner rendered himself unable to invoke the provisions of Section 34 of the Act. For the aforesaid reasons, the dismissal of the application filed by the appellant by the Court below is set aside and the Civil Miscellaneous Appeal is allowed with costs.


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