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The Food Corporation of India Vs. Srish Chandra Guha - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAward Case No. 255 of 1973
Judge
Reported inAIR1975Cal215
ActsArbitration Act, 1940 - Section 34
AppellantThe Food Corporation of India
RespondentSrish Chandra Guha
Advocates:Jayant Mitter, Adv.
DispositionApplication dismissed
Cases ReferredTaunton Coilings v. Cromie
Excerpt:
- .....for stay must plead and prove that he was ready and willing at the date of the commencement of the legal proceedings and in order to prove that, the applicant would be in a position to show that he evinced his intention to go to arbitration even before the date of the commencement of the legal proceedings.3. the next point urged by mr. mitter is that the discretion should be exercised in refusing to stay because the facts and circumstances of this case disclose that there is every possibility of there being conflict of decisions and plurality of proceedings if the suit is stayed and in order to avoid such situation the stay should be refused in the exercise of the court's discretion under section 34 of the arbitration act. 1940.4. as regards the first point, in my opinion, readiness and.....
Judgment:
ORDER

Ramendra Mohan Datta, J.

1. This is an application for stay of suit under Section 34 of the Arbitration Act X of 1940. It is quite apparent from the plaint that the subject-matter of the suit being Suit No. 75 of 1973 (Food Corporation of India v. Srish Chandra Guha) filed in this Court on February 24, 1973 is covered by the arbitration clause in the contract entered into by and between the parties herein.

2. Mr. Jayanta Mittcr, counsel for the Food Corporation of India, contends that in the facts and circumstances of this case, the discretion of the Court should be exercised in refusing to stay the suit because of the following grounds. It is contended that the averment relating to readiness and willingness on the part of the applicant made in paragraph 9 of the petition have been verified as submissions and this being a question of fact and the verification being in that form it should be held that the applicant for stay has failed to discharge the onus of proving the readiness and willingness and the application should be dismissed on this ground alone. On this point it is also argued that the applicant for stay must plead and prove that he was ready and willing at the date of the commencement of the legal proceedings and in order to prove that, the applicant would be in a position to show that he evinced his intention to go to arbitration even before the date of the commencement of the legal proceedings.

3. The next point urged by Mr. Mitter is that the discretion should be exercised in refusing to stay because the facts and circumstances of this case disclose that there is every possibility of there being conflict of decisions and plurality of proceedings if the suit is stayed and in order to avoid such situation the stay should be refused in the exercise of the Court's discretion under Section 34 of the Arbitration Act. 1940.

4. As regards the first point, in my opinion, readiness and willingness is a question of fact and the Court has to be satisfied about such conduct on the part of the applicant. Accordingly, the applicant for stay has to state all facts from which the Court would be in a position to come to the finding that the said applicant was, at the time when the proceedings were commenced and upto the date of the bearing or the order to be made in the application, ready and willing to do all things necessary to the proper conduct of the arbitration. It follows that whether the applicant was, at the material time, ready and willing or not would be a question of fact. The applicant is not expected toknow when the legal proceedings commenced. He usually comes to know of it after the writ of summons is served on him. It is at that stage only that he gets an opportunity to make the application for stay and usually the only evidence before the Court, as to the applicant's readiness and willigness at and from the date of the institution of the legal proceedings upto the date of the knowledge thereof by service of the writ of summons, is his affidavit evidence which is verified as true to his knowledge and the Court has to act on such affidavit evidence. Accordingly, such averment as to the readiness and willingness cannot be verified as submissions. This readi-ness and willingness is one of the most vital factors on the basis whereof the Court has to exercise its discretion under Section 34 of the Arbitration Act, 1940. Hence, if such averment would be verified as submission then the Court cannot rely thereon and cannot be in a position to exercise its discretion in favour of granting stay.

5. Reliance was placed on the case of Sitaram Gupta v. Bijoyesh Mukherjee, reported in (1959) 63 Cal WN 175 but in my opinion the said case has no application to the facts and circumstances of this case. That was a case relating to the amendment of verification in a matter under the Representation of the People Act, 1951. That being the position, I hold that there is no averment relating to readiness and willingness on the part of the applicant and as such the application should be dismissed on this point.

6. The contention of Mr. Mitter however, that such readiness and willingness must be proved to have existed even prior to the date of the commencement of the legal proceedings, in my opinion, has no substance. No such intention can be gathered from the language used in the said section. It is contended that in order to ascertain that the applicant was ready and willing at the date of the commencement of the legal proceeding of which he had no knowledge, he must show his state of mind from before the commencement of the legal proceeding. In other words, he must be in a position to show that when the plaintiff threatened to take legal action against him he replied saying that he was ready and willing to go to arbitration. He must prove that he insisted on going to arbitration instead of going to suit and that in the event of his remaining silent at that stage, the Court would hold that the applicant was not ready and willing at the commencement of the legal proceeding to go to arbitration. To my mind, the language used in Section 34 does not envisage any such readiness or willingness on the part of the applicant. As observed above, for the purpose of proving that he was ready and willing to go to arbitration at the date of the commencement of the legal proceeding in the absence of any contrary intention appearing in any of the documents or in the pleadings the Court can rely on the affidavit evidence if the Court issatisfied about the same and can use its discretion in granting or refusing stay. In support of the point taken by him Mr. Mitter relied on the case of Shalimar Paints Ltd. v. Omprokash Singhania, reported in : AIR1967Cal372 where Sen, J. analysed the correspondence exchanged between the parties prior to the commencement of the legal proceedings and took into consideration the fact that no reply to the demand letter had been given by the applicant for stay and on that basis held that the applicant did not evince his willingness and preparedness to go to arbitration.

7. In my opinion, the observation in that judgment has been very much shaken by reason of a later decision by the same learned Judge where the learned Judge held a contrary view by making the following observation :

'Mere inaction prior to the commencement of the legal proceedings may not be construed to amount to any lack of such readiness and willingness.'

That observation was made in a later un-reported judgment D/- 20-4-1968 passed in the Award Case No. 166 of 1967 (Cal), (Re : Arbitration Union of India v. Kailash Nath Ray). I respectfully agree with the above observation and hold that silence on the part of the applicant prior to the commencement of the legal proceeding cannot go to prove that the applicant was not ready and willing to go to arbitration. The other case cited by Mr. Mitter on this point is a single bench judgment of Madras High Court in the case of N. C. Padmanabhan v. S. Srinivasan, reported in : AIR1967Mad201 . With respect I differ from the view taken by the learned Judge on this point and I am inclined, as indicated above, to follow the above unreport-ed judgment of this Court. The Punjab High Court holds the same view as taken by me in the case of Punjab State v. Moji Ram, reported in . The Bombay High Court also holds to the same effect in the case of Middle East Trading Co. Bombay v. New National Mills Ltd. Ahmedabad, reported in AIR 1960 Bom 292 at p. 294.

8. That being the position, I hold that the application should be dismissed on the ground that there is no sufficient averment in the petition wherefrom the Court can be satisfied that the applicant was ready and willing to go to arbitration at the date of the commencement of the legal proceeding. I further hold that even if the applicant for stay remains silent prior to the commencement of the legal proceeding by not replying to the letter of demand threatening to institute legal proceedings the said conduct on the part of the applicant would not be a material consideration for the Court to hold that the applicant for stay was not ready and willing at the date of the commencement of the legal proceeding. Of course the question as to what would be the effect on the questionof readiness and willingness if the applicant would express his definite intention not to go to arbitration in the correspondence prior to the commencement of the legal proceeding has not been considered by me in this application and I do not propose to express my opinion thereon.

9. The next point which is argued before me is that stay should not be granted because of the pendency of the other legal proceedings in this Court in connection with the subject-matter of the dispute and in which legal proceeding the question of title relating to the foodgrains in suit are directly involved. The relevant facts in connection therewith are necessary to be set out for the purpose of deciding this point.

10. Srish Chandra Guha the petitioner herein, carries on business under the name and style of 'Guha Rice Co.' By an agreement with the President of India represented by the Regional Director (Food), Calcutta Guha undertook the work relating to reconditioning of damaged foodgrains sweepings including remilling and cleaning of rice, other grains and mixed grains, etc. on various terms and conditions contained in the said contract. Under the terms of the said contract the defendant was to handle such sweepings of grains, damaged and mixed grains etc. as might accumulate at the Government of India Godomn at Calcutta or at Calcutta Port on Government of India account. Guha was to be responsible for the safe custody of the sweepings of such foodgrains and was to pack the same after milling, polishing and/or reconditioning in bags to be provided by the Government and to weigh them upto a prescribed weight. Upon receipt of advice from Guha the Government would arrange to take delivery from Guha's custody or would authorise Guha to give delivery according to his instruction direct to the recipient.

11. The Food Corporation of India alleges that Guha wrongfully hypothecated various quantities of grains with the Central Bank of India and obtained advances and/or loans in his overdraft account. The Central Bank filed suit in this Court and sought to realise its dues by appointment of Receiver over the said foodgrains and proceeded to obtain a sale with respect thereto.

12. The said Food Corporation of India made an application pro interesse suo, inter alia, for direction on the Joint Receivers appointed in the said Bank's suit being Suit No. 248 of 1970 - : AIR1972Cal345 , (Central Bank of India v. Srish Chandra Guha) for direction on the Joint Receivers to deliver the said goods and other articles to the Bank. On July 31, 1970 an order was made without prejudice to the rights and contentions of the parties, directing the Joint Receivers, inter alia, to realise and deliver to the Food Corporation of India the foodgrains mentioned in Ex. B and Ex. C to the petition thereto after making proper inventories as and when delivery would begiven. By the said order the Food Corporation of India was directed to sell the said foodgrains at the prescribed rates at which the Food Corporation sold similar Foodgrains and Was directed to maintain a separate account for the said sale proceeds and to hold the same subject to further orders of this Court. Pursuant to the said order the Food Corporation of India sold the said goods at a price of Rs. 1,24,918.72 paise and has been holding the said sum in a separate account until further orders of this Court. The said pro interesse suo application of the Food Corporation of India was directed to be tried on evidence and the same is pending in this Court.

13. The plaintiff Food Corporation of India has filed this suit only against Srish Chandra Guha as the sole proprietor of Guha Rice Co., inter alia, claiming to recover the said sale proceeds being the said sum of Rs. 1,24,918.72 Paise as also damages on account of the difference between the value of the goods entrusted with the defendant and the value received by such sale amounting to a sum of Rs. 38,852.97 P. and has asked for a declaration to that effect and a decree for the said several sums.

14. It is now contended by Mr. Mitter that in view of those pending proceedings namely, the suit filed by the Central Bank of India and the pro interesse suo application made by the Food Corporation of India in the said Central Bank of India's suit in respect whereof a trial on evidence has been ordered and pending before this Court, this suit should be allowed to be proceeded with along with other said pending proceedings so that all matters connected with the same subject-matter might be decided and there might not be any multiplicity of proceedings and conflict of decisions. It is contended that under such circumstances the Court is to exercise its discretion against any order for stay of suit under Section 34 of the Arbitration Act, 1940. It is argued by Mr. Mitter that if the said suit is stayed then there will be duplication of proceedings, there is possibility of two sets of evidence being taken--one before this Court and another before the Arbitrators. There is every possibility of there being conflicting decisions. On the contrary, if the suit is allowed to be proceeded with then all these matters might be taken up one after another and be disposed of conveniently with least possible delay. Accordingly, the balance of convenience is in favour of the suit being proceeded with in this Court instead of the suit being stayed. Mr. Mitter refers to a passage in Halsbury's Laws of England. 4th Edition Vol. 2, page 292, Article 566 which runs as follows :--

'Generally the balance of convenience is taken into account and stay has been refused in order to avoid plurality of proceedings.'

In the case of Halifax Overseas Freighters Ltd. v. Rasno Export, reported in (1958) Vol. 2 Lloyd's Rep. 146, McNair, I. in a stay ofproceedings matter not only took into consideration the possibility of conflicting decisions but also the fact that time and expense would be saved if the whole of the disputes would be disposed of in one set of proceedings which would take place in Court and on that basis dismissed the application for stay. In the case of Taunton Coilings v. Cromie, reported in (1964) 2 All ER 332 the Court of Appeal in England also took the view that it was undesirable that two different Tribunals who might reach two inconsistent findings should try two proceedings and held that there were special reasons for the exercise of the discretion refusing stay of execution. The Court of Appeal presided over by Lord Denning M. R., approved of the decision of McNair, J., in the above case on this point.

15. I accordingly hold that there is sufficient reason why discretion should be exercised in refusing to stay this suit. In my opinion, the applicant for stay has failed on both the main points urged on his behalf and, accordingly, this application is bound to be dismissed. The application is dismissed with costs.


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