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Asian Asphalt and anr. Vs. Shalimar Tar Products Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberC.R. No. 2691 of 1976
Judge
Reported inAIR1978Cal305
ActsArbitration Act, 1940 - Sections 34 and 39; ;Code of Civil Procedure (CPC) , 1908 - Section 115
AppellantAsian Asphalt and anr.
RespondentShalimar Tar Products Ltd. and ors.
Appellant AdvocateK.J. John, Adv.
Respondent AdvocateP.K. Sengupta and ;Amal Kr. Roy, Advs. (for No. 1) and ;P.N. Biswas, Adv. (for Nos. 2 and 3)
Cases ReferredNew Delhi v. Sarup Singh
Excerpt:
- .....a suit against both the principal debtor and the guarantor, the court was justified in refusing to stay a suit when there is an arbitration agreement only between the plaintiff and the principal debtor the guarantor not being a party to it. the court further considered that a decision on the liability of a guarantor necessarily involves the determination of the question as to whether the principal debtor was liable. if the principal debtor was not liable no liability could be attributed to the guarantor. as the same issue as regards the liability of the principal debtor will have to be gone into both in the suit and in the arbitration proceedings, there was every likelihood of conflicting finding and hence the suit could not be stayed. mr. sengupta strongly relied on the decision as one.....
Judgment:
ORDER

Sudhamay Basu, J.

1. This Rule relates to an order dated the 24th of June, 1976 passed by the Subordinate Judge, 8th court.Alipore in Title Appeal No. 1048 of 1975 setting aside the order No. 8 dated the 1st of Dec. 1975 passed by the Munsiff, 2nd court at Alipore in Title Suit No. 487 of 1975.

2. It appears that the Opposite Party No. 1, Shalimar Tar Products (1935 Limited) filed a Title Suit (No. 487 of 1975), inter alia, for injunction on the basis of a written agreement entered into by and between the petitioners and opposite party No. 1. Clause 16 of the agreement which contains an arbitration clause is as follows:

'All disputes and differences between the parties arising out of this agreement over the meaning, construction or import thereof or the right and liability of the party hereunder shall be referred to arbitration under the Arbitration Act.'

3. The petitioners were the contractors for certain work and were impleaded as defendants Nos. 1 and 2. The defendants Nos. 3 and 4 in that suit were the dismissed officers of Shalimar Tar Products (1935 Limited) who later on joined the petitioners as employees. The petitioners entered appearance but before taking any steps in the suit filed an application under Section 34 of the Arbitration Act for stay of the suit. The learned Munsiff after hearing the parties granted a stay as he found that the scope of the arbitration clause covered the subject-matter of the suit. The learned Subordinate Judge at Alipore, however, set aside that order mainly on the ground that the defendants Nos. 3 and 4 were not parties to the arbitration agreement and even if a stay was granted so far as defendants Nos. 1 and 2 were concerned the plaintiff may have to proceed against the defendants Nos. 3 and 4. The learned Judge thought that there was no reason why the plaintiff should be asked to wait as against defendants Nos. 3 and 4 unnecessarily till the suit remained stayed. He also thought that a suit could not be stayed piecemeal. The said order of the appeal court is challenged in this revisional application.

4. Mr. John, the learned advocate appearing in support of the rule, mainly contended that the defendants Nos. 3 and 4 were mere employees and the main cause of action for injunction was against defendants Nos. 1 and 2. In this connection he relied on a decision of this court reported in : AIR1962Cal177 (Satyendra Nath Mitra v. Union of India).

In that case a suit was filed against the Union of India and one Uma Shankar General Manager of Calcutta Telephones for breach of contract in wrongfully disconnecting the telephone service of the plaintiff who was a Solicitor of this court. The cause of action against the defendant Uma Shankar was one for damages. On an application being filed for stay of the suit under Section 34 of the Indian Arbitration Act Mullick, J. granted stay of the suit as against the Union of India but no stay was granted against the other defendant. Mr. John on the basis of the said decision submitted that in the present case also two of the defendants were employees of the other defendant just as the General Manager was an employee of the Union of India. If a stay can be granted against some of the parties the question of piecemeal stay does not at all handicap the court.

5. Mr. Sengupta, the learned advocate, appearing against the rule, however, relied on a decision of Asiatic Shipping Company v. P. & D. Lloyd reported in : AIR1969Cal374 for the proposition that the arbitration agreement does not affect the jurisdiction of the court. The court has always discretion to grant stay or not. It was held in the said case that where on failure of the principal debtor to pay consideration of the contract the plaintiff creditor filed a suit against both the principal debtor and the guarantor, the court was justified in refusing to stay a suit when there is an arbitration agreement only between the plaintiff and the principal debtor the guarantor not being a party to it. The court further considered that a decision on the liability of a guarantor necessarily involves the determination of the question as to whether the principal debtor was liable. If the principal debtor was not liable no liability could be attributed to the guarantor. As the same issue as regards the liability of the principal debtor will have to be gone into both in the suit and in the arbitration proceedings, there was every likelihood of conflicting finding and hence the suit could not be stayed. Mr. Sengupta strongly relied on the decision as one of the considerations for the same was absence of the guarantor being a party to the arbitration agreement. He submitted that similarly in this case the two employees defendants were not parties to the agreement and the possibility of a conflicting decision in the suit and thearbitration proceedings could not be excluded.

6. It is true that the decision of Mullick, J. recognised partial stay of a suit. The Division Bench decision in the other case reported in : AIR1969Cal374 , however, noted the fact that one of the parties in the suit was not party to the arbitration agreement and the same weighed with the court. While the former helps the petitioners the latter goes against them.

7. It is, however, well settled by authorities both Indian and English that the power conferred upon the court to grant stay under Section 34 of the Arbitration Act is entirely a matter of discretion of the court. It is difficult and inexpedient to lay down any inflexible rules which govern the exercise of the said discretion. To lay down a formula to solve the problem by its automatic application will hardly be possible. It is also well settled that when discretion is exercised by a court it will not be interferred with readily. The fact that the appellate court would have taken a different view if the decision had rested with it would not justify interference with the trial courts exercise of discretion. (See Charles Osenthon and Company v. Johnston, 1942 AC 130; Printers (M. Y. S.) Private Limited v. P. Joseph, : [1960]3SCR713 .

8. As to the application of this principle it may be urged that since the lower court granted a stay in its discretion the appellate court should not have disturbed the same. At the same time Mr. Sengupta's argument (is) that the appellate court, in any event, had undoubted jurisdiction to set aside the lower court's decision and if the same was not decided illegally but merely wrongly this court in its revisional jurisdiction should not interfere. In the case of Hindusthan Aeronautics v. Ajit Prasad reported in : (1972)ILLJ170SC the Supreme Court observed 'it is not a conclusion of the High Court that the first appellate court had no jurisdiction to make the order that it made. The order of the first appellate court may be right or wrong; may be in accordance with law or may not be in accordance with law but one thing is clear that it had jurisdiction to make that order. It is not the case that the first appellate court exercised its jurisdiction either illegally or with material irregularity. That being so, the High Court could not have invoked its jurisdiction under Section 115 C.P.C. Itfollowed other decisions, such as, P. Dhoni v. M. H. Jadhav, : [1966]1SCR102 and D. L. F. Housing and Construction Co. (P.) Limited, New Delhi v. Sarup Singh, : [1970]2SCR368 .

9. Mr. John, however, contended that since Mullick. J. had held that it was possible to grant a piecemeal stay the appellate court's order in setting aside the grant of stay was not only wrong but was illegal. After some anxious consideration I find it difficult to accept the contention of Mr. John on this point. As we have already noted while some aspects of the decisions of Mullick, J. help him there are other aspects of the decision of the Division Bench which go against him. In this state of things the decision of the appellate court on the peculiar conspectus of the facts and circumstances of the case cannot be said to be illegal or tainted with material irregularity. I am prepared to concede that perhaps if I sat on the lower appellate court I might have taken a decision different from it and might not have substituted my decision for that of the lower court. To do so in matters of discretion may not be proper but in spite of the impropriety of the decision the learned appellate court had the undoubted jurisdiction to decide the matter--rightly or wrongly. A wrong decision would not justify this court to interfere. The decisions of the Supreme Court, I have quoted above, do not support such a view. In the result I am constrained to reject the petition.

10. The Rule is, therefore, discharged. There will be no order as to costs.

11. The interim stay stands vacated.

12. Let the operation of this order remain stayed for a period of four weeks from date.


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