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Shroff Brothers Vs. Bisheswar Dayal Meatle - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAward Matter No. 250 of 1970 in suit No. 2241 of 1969
Judge
Reported inAIR1974Cal352
ActsArbitration Act, 1940 - Section 34
AppellantShroff Brothers
RespondentBisheswar Dayal Meatle
Cases ReferredW. Wood and Son Ltd. v. Bengal Corporation
Excerpt:
- ordersalil k. roy chowdhury, j. 1. this is an application for stay of the suit no. 2241 of 1969 (bisheswar daya) meatle v. shroff brothers) and all proceedings thereunder under section 34 of the arbitration act, 1940.2. the facts of the case briefly are: that the petitioner is a member of the calcutta stock exchange association limited and carried on business as stock-broker and/or as a dealer in stocks and shares. during january to march, 1965 and january to august, 1966, the respondent entered into a series of transactions with the petitioner for purchases and sales of stocks subject to the rules and bye-laws of the calcutta stock exchange association ltd. it is alleged in the plaint filed by the respondent that by the 31st of march, 1965 as a result of the said transactions between the.....
Judgment:
ORDER

Salil K. Roy Chowdhury, J.

1. This is an application for stay of the Suit No. 2241 of 1969 (Bisheswar Daya) Meatle v. Shroff Brothers) and all proceedings thereunder under Section 34 of the Arbitration Act, 1940.

2. The facts of the case briefly are: That the petitioner is a member of the Calcutta Stock Exchange Association Limited and carried on business as stock-broker and/or as a dealer in stocks and shares. During January to March, 1965 and January to August, 1966, the respondent entered into a series of transactions with the petitioner for purchases and sales of stocks subject to the rules and bye-laws of the Calcutta Stock Exchange Association Ltd. It is alleged in the plaint filed by the respondent that by the 31st of March, 1965 as a result of the said transactions between the parties a sum of Rs. 69,793/- became due and payable by the petitioner to the respondent. The respondent further alleged that the petitioner by a letter dated the 5th of April, 1965 signed by Sawalram Shroff one of the partners of the petitioner made an acknowledgment of its liability to the respondent and a part of payment of Rupees 40,000/- demand draft of same date. It is alleged by the respondent that after crediting the said sum of Rupees 40,000/- a balance sum of Rupees 29,793/- became due and payable to the respondent by the petitioner in respect of the said transactions. The said transactions terminated between the parties on the 31st of August. 1966. It is further alleged by the respondent in the plaint that on or about 31st of August, 1966 the petitioner made an acknowledgment in writing signed by the said Sawalram Shroff and made a part payment of Rs. 11,092.50 p. to one Messrs. Bhagwandas Gupta on the respondent's instructions for and on behalf of the respondent and admitted the existence of an account in relation to the said transactions between the parties and submitted a purported statement of account falsely alleging that nothing was due to the respondent by the petitioner. It is further alleged by the respondent that the said purported account contained fraudulent entry of alleged payment of Rs. 500/- in cash and omission of the said sum of Rs. 29,793/- due to the respondent by the petitioner in the said account. The respondent alleges in the plaint that he has not accepted the said account of the petitioner. Finally in the plaint the respondent after crediting the said amount of payment made by the petitioner on or about 31st of August, 1966 being the said sum of Rupees 11,092.50 claimed a sum of Rs. 30,293/- being the balance amount due in the said account relating to the said share transactions between the parties together with interest thereon at the rate of 12% per annum. The respondentfurther alleged that a notice in writing dated the 2nd of August, 1969 demanding the said sum with interest thereon at the rate of 12% per annum was duly given to the petitioner. As the petitioner failed to pay the said amount as demanded by the respondent, the Suit No. 2241 of 1969 (Bisheswar Dayal Meatle v. Shroff Brothers) was filed in this Court in August, 1969. The Writ of summons of the said suit No. 2241 of 1969 was admittedly served on the petitioner along with a copy of the plaint on the 19th of November, 1969. Therefore under Chapter VIII, Rule 5 of the Original Side Rules of this Court time to file written statement in this case was 28 days from the date of service of the Writ of summons that is upto 16th of December, 1969. In this case it is quite clear that the petitioner also did not enter appearance before the date fixed for its appearance in the said Writ of Summons on it under Chapter VIII, Rule 15 of the Original Side Rules. It further appears that the present application for stay of the suit under Section 34 of the Arbitration Act, 1940 was filed in this Court on the 6th of March, 1970 and an ad interim stay of the suit was obtained on the same date.

3. It is clear on the face of it thatafter the writ of summons was served, the petitioner did not do anything for getting the suit stayed by making the application prior to the expiry of the date of filing the written statement under the provisions of the Rules of this Court. It is only after about 2 months 20 days from the date of expiry of the filing of written statement fixed under the Rules, the petitioner made this application and obtained an interim stay on the 6th of March, 1970. It appears that on the 10th of March, 1970 by special leave this application was made returnable and on that date direction for filing an affidavit was given by Ghose, J. being affidavit-in-opposition on the 24th of March, 1970 and affidavit-in-reply on the 4th of April, 1970 and the matter was adjourned till 6th of April, 1970. Thereafter it appears that the petitioner was not at all diligent or vigilant to get the matter heard and took advantage of law's delay as it is helpful to the petitioner to delay the adjudication either by the Court or by arbitration and gained time as long as possible. Thereafter I find the matter was mentioned before me on the 31st of August, 1971 when I directed the matter to appear in the list next Monday. Subsequently the matter was adjourned from time to time and the petitioner was not interested to get the matter heard and gained time as long as possible in order to delay the adjudication of the alleged claim of the respondent. It is significant that the petitioner after getting the stay of the suit as far back on the 6th of March, 1970 has neither made a genuine, sincere and honest effort to get the matter heard, as had it been so I would have disposed of the matter but somehow or other the parties got the matter adjourned to suit the convenience oftheir lawyers. The petitioner in my view deliberately did not take any step after getting the stay to refer the matter to arbitration and it was not really sincere and honest and ready and willing to get the same adjudicated by the arbitrator. I posed that question to Mr. S.K. Kapoor who appeared for the petitioner and his answer being that it was the respondent's claim to be preferred before the arbitrator and the petitioner had no claim to be made I cannot understand the said plea. It appears to me that in a case like this court has to exercise its discretion either to grant stay or refuse stay, taking into consideration the entire facts and circumstances of the case and conduct of the petitioner upto the date of the hearing of this application. Nothing prevented the petitioner to refer the matter to arbitration denying the alleged claim of the respondent arising out of the share transactions which are the subject-matter of the suit. In my view, the petitioner by simply getting the stay even after gaining some time from the date of the expiry of the filing of the written statement under the Rules of this Court, sat over the matter and took advantage of the laws delay in all possible way, as if the petitioner or its lawyer has no duty to discharge towards the court which will be called upon to exercise discretion at the time of hearing of this application. However, I will come to this question subsequently and after the matter was mentioned before me by the respondent on the ground that stay has been obtained about more than three years back and the petitioner has prevented the hearing of the application on some ground or other and the adjudication of the respondent's claims is being delayed, ultimately I have been able to get the matter heard before me.

4. Mr. S.K. Kapoor appearing for the petitioner submitted that all the conditions under Section 34 of the Arbitration Act, 1940 have been satisfied as the subject-matter of the suit is covered by the arbitration clause contained under the rules and bye-laws of the Calcutta Stock Exchange Association Ltd. admittedly which governs the contract between the parties. Therefore, Mr. Kapoor submitted that there is no sufficient cause why the suit should not be stayed. Mr. Kapoor in reply to my question as to why the matter has not been heard for such a long time of about 4 years submitted that the petitioner has got nothing to do with the hearing of this application as no court took up the matter for disposal. I must say I cannot accept the said contention at least from the period it was mentioned before me it must have been adjourned with the consent of both the parties or one of the parties was not present in the court when the matter was called on in the list. It further appears that the matter was adjourned from time to time with the consent of the parties. Further to my question as to why the petitionerhas not referred the matter to arbitration after getting the suit stayed as far back on the 6th of March, 1970, Mr. Kapoor's answer was that the petitioner has no claim against the respondent as such there was nothing to refer to arbitration by the petitioner. In my view, such answer is not at all convincing but gives me the impression that the whole object of the petitioner is to gain time and delay the adjudication of the disputes between the parties either by arbitration or by suit. Mr. Kapoor submitted that in the plaint it is admitted by the respondent that the contract was subject to the Rules and bye-laws of the Calcutta Stock Exchange Association Ltd. which contained the arbitration clause and as such in the facts and circumstances of this case the suit must be stayed and the interim stay must be confirmed.

5. Mr. R.L. Sinha appearing with Mrs. Puspa Chowcharia for the respondent submitted that stay should not be granted and the interim stay should be vacated as the petitioner was not and still is not ready and willing to go to arbitration and do all things necessary for the same. Mr. Sinha pointed out and quite rightly that after the Writ of Summons with a copy of the plaint was served on the 19th of November, 1969 the petitioner waited for about three months after the expiry of the last date of filing of the written statement in this court and made this application for stay and obtained an interim stay and thereafter sat over it. Mr. Sinha rightly submitted that in the facts of this case it will cause serious prejudice and hardship to the respondent to refer the matter to arbitration at this stage when his claim has become barred by limitation as having arisen on 31st of August, 1966. He further submitted that that is also a consideration for the court to take in dealing with an application under Section 34 of the Arbitration Act, 1940. He further submitted that the conduct of the petitioner clearly indicates that it was not ready and willing to refer the matter to arbitration at any stage and its whole intention is to delay the hearing of the suit. Mr. Sinha referred to an unreported judgment delivered by me where under similar circumstances I have refused stay of the suit. Mr. Sinha submitted that in the petition the petitioner has merely quoted the Section 34 in paragraph 12 of the petition without any specific averment of any concrete facts showing its readiness and willingness to do all things necessary to the proper conduct of the arbitration at the date of the commencement of the proceeding and thereafter till this application was made. Mr. Sinha submitted that the balance of convenience is entirely in favour of the stay of the suit being refused otherwise it will cause great hardship and inconvenience to the respondent who is a resident of Delhi and it will be highly inconvenient for him to appear before the Arbitrator. He submitted that the application should be dismissed andthe stay should be vacated in the facts and circumstances of this case.

6. Considering the contentions of the parties very carefully I am of the view that this is a case where court should refuse the stay and vacate the interim order and direct the party to proceed with the suit by giving direction therein. Here from the facts which I have already stated before, admittedly there was a series of share transactions between the petitioner who is a stock and share broker and member of the Calcutta Stock Exchange Association Ltd. and the respondent who is a resident of Delhi and an account was running in respect of the said transactions between the parties, in which from time to time the amounts were settled or stated and now in the plaint it is alleged by the respondent that the petitioner by making fraudulent entries and omission has falsely alleged that there is nothing due and owing to the respondent by the petitioner in respect of the said transaction. Admittedly the said transactions look place during January to March, 1965 and January to August, 1966, an account is alleged to have been made out upto 31st of August, 1966 when it appears as the petitioner alleged that there is nothing due and payable by the petitioner to the respondent in respect of the said account, whereas the respondent alleged that a sum of Rupees 29,793/- was due and payable by the petitioners to the respondent together with interest thereon at the rate of 12% per annum, for which the respondent is alleged to have served a notice on the petitioner dated the 2nd of August, 1969. Whereas the petitioner in this petition alleges and admits that between 1964 and 1966 there were various transactions between the parties as alleged by the respondent and whether there is any sum due and payable by the petitioner to the respondent is a dispute arising out of the contract which contained an arbitration clause under bye-laws and regulations of the Calcutta Stock Exchange Association Ltd. which governed the contract between the parties. It is for the first time by this application made on the 6th of March, 1970 the petitioner is trying to invoke the arbitration clause in the contract and obtained the ad interim order of stay of this suit. In the petition there is no averment save and except parrot like repetition of the provisions of Section 34 of the Arbitration Act, 1940, in paragraphs 9, 11 and 12 of the petition. There is no explanation whatsoever a so what facts would show that the petitioner at the time when the suit commenced was ready and willing to do all things necessary to the proper conduct of the arbitration. Mere filing of this application for stay would not show that the petitioner was ready and willing within the meaning of the said section at the commencement of the suit (See Union of India v. Promode Kumar, (1971) 75 Cal WN 767).

7. It is also clear, at least no averment appears anywhere in the petition that there was any reply to the notice demand dated the 2nd of August, 1969 of the respondent or the petitioner has taken any -step invoking the arbitration clause in the contract prior to the making of this application or there is any averment showing any act on the pan of the petitioner about its readiness and willingness to refer the matter to arbitration. That is also a relevant fact for the court to consider at the time of making an order under Section 34 of the Arbitration Act, 1940 and exercise its discretion (See Middle East Trading Co. v. New National Mills Ltd., AIR 1960 Bom 292).

8. The applicant must satisfy the court that its readiness and willingness to do everything necessary for proper conduct of arbitration proceedings covers the entire period both before commencement of the suit and thereafter. The readiness should not be matter of implication but should be unambiguous and specific averment thereof should be made in the petition and affidavit filed in the application for stay of the suit under Sec-lion 34 of the Arbitration Act, 1940. (See N.C. Padmanabhan v. S. Srinivasan, : AIR1967Mad201 ). In this the petitioner has merely repeated the wording of the section without any specific averment of any fact showing its readiness and willingness before and at the time of commencement of this suit. Therefore, in my view, it must be held that the petitioner cannot be said to be ready and willing within the meaning of Section 34 of the Arbitration Act, 1940.

9. The other fatal defect which appears to me in the face of the petition is that the petitioner after being served with the Writ of Summons together with a copy of of the plaint on the 19th of November, 1969 has not made this application within the time fixed for filing the written statement, that is, 28 days from the date of service of the writ of summons on the petitioner which expired on the 17th of December, 1969. In order to enable the Court to grant stay the petitioner must make the application within the said period, that is, before the expiry of the time for filing the written statement. It is now welt settled that if the applicant makes an application for extension of time to file written statement that becomes a step in the proceeding and that also goes against the readiness and willingness of the petitioner at the time of making the application for stay or at the time of the hearing. It is true that the section provides that application for stay under Section 34 can be made 'at any time before filing of written statement' that in my view fixes the time upto the last date fixed for filing of the written statement under the provisions of the rules of the Original Side which I have mentioned before. Otherwise, the petitioner would simply wait till the date of expiry and without making any application for extension of time to file the written statement formally, get extension if it is permitted to make an application under Section 34 of the Arbitration Act 1940, beyond that, as if the time has not expired or it has been by necessary-implication extended by court. That, in my view, would be extending the meaning of the words 'at any time before filing of written statement' in Section 34 of the Arbitration Act, 1940. In my view what is required under the section is that the application for stay must be made promptly and before the last date fixed for filing of the written statement under the provisions of the Civil P. C. or the rules of this court. It would not be a correct application of the said Section 34 of the Arbitration Act, if an application is entertained after the expiry of the time for filing of the written statement, because on principle there is no difference between a formal application for extension of time to file the written statement or allowing the time for filing the written statement to expire and then make an application for stay under Section 34 of the Arbitration Act, 1940. A defendant who has been served with a Writ of summons along with the plaint must file his written statement within the time fixed under the Civil P. C. or Rules of this court for filing its written statement. Beyond the time so fixed he must make an application to the court for getting the extension of time to file written statement which the court may allow or not, in the facts and circumstances of each case. So, in my view, making the application for stay beyond the time fixed for filing the written statement by the Writ of summons served on the defendant implies an application for extension of time to file the written statement which has already expired. That is an absurd position and the petitioner must be said to be debarred from getting any order for stay under Section 34 of the Arbitration Act, 1940 if it makes the application after the expiry of the time for filing the written statement.

10. In order to be entitled to stay under Section 34 of the Arbitration Act, 1940 the requirements are :

'(1) The proceeding must have been commenced by a party to an arbitration agreement against any other party to the agreement;

(2) The legal proceeding which is sought to be stayed must be in respect of a matter agreed to be referred;

(3) The applicant for stay must be a party to the legal proceeding and he must have taken no step in the proceeding 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 every thing necessary for the proper conduct of the arbitration; and

(4) 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. (Anderson Wright Ltd. v. Moran and Co., : [1955]1SCR862 ).

11. In this case the conditions (1) and (2) are satisfied. But, in my view, the conditions (3) and (4) are not satisfied. Firstly, on the ground that the petitioner has not mad this application before the expiry of the date for filing of the written statement and the petitioner has not given any explanation whatsoever for delay of about 2 months 20 days for making this application. Secondly, there is no specific averment of any facts showing the petitioner's readiness and willingness at the commencement of the suit in the background of facts that the respondent served a notice of demand on the petitioner before filing of the suit which remain unreplied by the petitioner and lastly, the petitioner after obtaining the ad-interim stay has not taken any step whatsoever save and except getting the matter adjourned, for disposal of this application expeditiously or refer the matter to arbitration or take steps in relation thereto for about 4 years. Those factors in the background of the petitioner's conduct of not replying to the notice of demand of the respondent and not making the application before the expiry of the date for filing of the written statement fixed under the rules of this court, is a relevant fact showing that the petitioner is not ready and willing to do every thing necessary to the proper conduct of the arbitration at the time of hearing of this application.

12. In my view, the fourth condition is also not satisfied in this case as having regard to the inordinate delay in getting this matter heard, for whatever reasons it may be, and in the background of the petitioner's conduct as hereinbefore stated, the question of possibility of the respondent's claim being barred, if it is now referred to arbitration is in relevant question for the court to take into consideration in exercising its discretion under Section 34 of the Arbitration Act, 1940. It is true that ordinarily such a question may not be relevant but in the facts and circumstances of this case in my view it becomes a relevant factor for court to consider in exercising its discretion for stay of the suit under Section 34 of the Arbitration Act, 1940 (See Observation of Sankar Prasad Mitra, J. (as His Lordship then was) in Union of India v. P.K. Agarwala. (1971) 75 Cal WN 767 at p. 783, paras. 53 & 54 and Shalimar Paints Ltd. v. Omprakash Singhania, : AIR1967Cal372 . Lastly there is an allegation of the respondent in the plaint that the petitioner is falsely alleging that there is nothing due and owing by the petitioner to the respondent by making false entries and omission in the account. It is true that the petitioner is not asking for the same to be tried in court but that is not always required. It is for the court to consider whether such an allegation in the facts and circumstances of the case should be tried by the court and not by the arbitrator. Here having regard to the facts that the respondent is a resident of Delhi and in the facts andcircumstances of this case the balance of convenience is entirely in favour of the suit being not stayed but to be tried in open court instead of it being heard before the arbitrator. It is now well settled that the petitioner in an application under Section 34 of the Arbitration Act, 1940 must be ready and willing to do all things necessary to the proper conduct of the arbitration not only at the commencement of the proceeding but upto the dale of the hearing of the application including the appeal therefrom. Here, in my view, the petitioner in not making any specific averment of facts showing its readiness and willingness at the commencement of the suit or in not filing the application within the period fixed for filing of the written statement and also not doing anything after obtaining an interim stay, instead of referring the disputes of arbitration, kept the application pending for a period nearly for 4 years and all the said facts taken together clearly demonstrate that the petitioner was not ready and willing at the commencement of the proceeding and is not ready and willing to do all things necessary to the proper conduct of the arbitration at the date of hearing of this application. Reference may be made to the Division Bench decision of this Court in Asiatic Shipping Co. (Pvt.) Ltd. v. P.N. Djakarta Lloyd, : AIR1969Cal374 where in a case the stay of the suit was refused by the trial Court, pending appeal from the said order of dismissal the petitioner filed written statement and took steps for the conduct of the suit which was held to be a conduct on the part of the petitioner which cannot be said that the petitioner continues to remain ready and willing. In my view, the same principle will also apply in the facts of this case as the petitioner having obtained an interim stay of the suit and did not get it heard for a period of about 4 years and did not take any step for referring the disputes to arbitration is also a factor for the court to take into consideration (reference may be made to W. Wood and Son Ltd. v. Bengal Corporation, : AIR1959Cal8 ).

13. In my view taking the entire facts together and considering the facts and circumstances of this case which I have discussed before, the interim stay of the suit must be vacated and the application must be dismissed. It is well settled that the discretion of the court has to be exercised having regard to the peculiar facts in each case and it cannot be categorised into definite sets of facts or circumstances. It must be judged in the light of each particular case taken as a whole. Ordinarily the agreement between the parties must be held to be binding, but in order to avail of the same a party must come within the four corners of the statute, that is the provisions under Section 34 of the Arbitration Act, 1940, and the requirements have been laid down in the said Supreme Court decision in Anderson Wright td. v. Moran and Co., : [1955]1SCR862 which I have setout before. Making an application for stay without any specific averment of facts as I have already stated before about its readiness and willingness, not explaining its delay in making this application and also not making the application within the time fixed for filing the written statement and for other reasons which I have discussed before, the petitioner is not entitled to any order in this application.

14. As I have already held that in the facts of this case the petitioner cannot be said to be ready and willing at the commencement of the proceeding or at the date of hearing of this application, one of the grounds being the petitioner's not making the application within the period fixed for filing of the written statement. In fact, this application has been made on the 6th of March, 1970. The date for filing the written statement expired on or about the 16th of December, 1969. So, it is clear that had it been a case for filing the written statement the petitioner had to make an application for extension of time to file the written statement. Therefore, by making this application beyond the time fixed for filing written statement he cannot get indirectly what he is not entitled to directly, that is, without making an application for extension of time to file written statement, which would amount to a step in the proceeding getting the time extended. Therefore, it is clear that the petitioner was not ready and willing to do all things necessary for referring the subject-matter of the suit to arbitration. Here, I may point out that the English Section 4 of Arbitration Act, 1950 and our Section 34 are practically the same, save and except that in the English Act time for making the application is 'at any time after appearance, and before delivering any pleadings' whereas in the Indian Act it is 'at any time before filing a written statement'. But in my view the scope and effect of both the acts are similar. The purpose of arbitration is expedition and cheapness, so that a party to an arbitration agreement can always prevent the other party from continuing with any legal proceeding subject-matter of which arc covered by the arbitration agreement and get a stay of the said proceeding, provided the party making the application for stay statisfies the conditions under the said section and even then the Court has a discretion either to grant the stay or refuse it taking into consideration all the relevant facts of each particular case. One of the facts is that if there is a delay in making the application, in that event the Court would refuse to exercise its discretion in favour of the stay. As I have already held that in this case by making the application long after the expiry of the date fixed for the filing of written statement by the writ of summons under the Rules of this Court the petitioner is not entitled to maintain this application and in any event the Court will not exercise its discretion in favour of the stay for the said delay. Itwill be useful here to quote a passage fromRussel on Arbitration, 18th Edition page 154which is as follows:

'Without actually taking a step in the proceeding a party wanting to stay should apply promptly, if he does not, that is a ground on which the discretion can be exercised against him.'

15. The said principles apply in full force in the facts of this case as the petitioner has failed to apply promptly within the time fixed for filing the written statement under the writ of summons served on it on the 19th of November, 1969. Therefore, I have no hesitation in dismissing the application and vacating the stay of the suit obtained by the petitioner.

16. In the result, the interim stay of the suit by the order dated the 6th of March, 1970 is vacated. The petitioner to fife its written statement within four weeks from date. Cross order for discovery within a week thereafter. Inspection forthwith thereafter. Suit to appear at the top of the appropriate prospective list six weeks hence. Liberty to the parties to apply for fixing an early date of hearing of the suit. Petitioner to pay the costs of this application.


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