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Harbans Singh Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberSuit No. 3322 of 1953
Judge
Reported inAIR1961Cal659,65CWN913
ActsArbitration Act, 1940 - Sections 8, 20, 31, 31(4) and 34
AppellantHarbans Singh
RespondentUnion of India (Uoi)
Appellant AdvocateS. Sen and ;S.B. Mukherjee, Advs.
Respondent AdvocateB.N. Sen, Adv.
Cases ReferredChhotey Lal Sham Lal v. Cooch Behar Oil Mills Ltd.
Excerpt:
- .....tribunal. conflict is resolved by providing for stay of the suit under section 34. after the suit is stayed there cannot conceivably be any conflict. it is true that the suit is not altogether killed by the stay order, it is only kept in a state of suspended animation a'd can be brought to life, if for instance, the arbitration is superseded and/or fails. but so long as the stay order is operative there could not be any conflict. the conflict intended to be avoided by section 31, is the conflict between different courts in respect to arbitration proceedings pursuant to a reference. only one court will be entitled to control arbitration proceedings in any reference. that is why it is provided that the court in which the first application under the act is made in the reference will.....
Judgment:
ORDER

P.C. Mallick, J.

1. This is an application to supersede an arbitration agreement, to revoke the authority of the arbitrator and to vacate an order for stay of the suit instituted by the plaintiff in this court. The plaintiff is a contractor who did certain construction works at Sindri. In terms of the contract the petitioner furnished security deposit for the sum of Rs. 5,000/-. A suit was instituted by the contractor against the Union of India in the court to recover the security deposit. By an order dated September 8, 1954 the suit was stayed under Section 34 of the Indian Arbitration Act. Thereafter, the Government referred the disputes to the arbitration of Sri O. P. Mittal under the arbitration clause in the contract and the petitioner was informed of this reference sometime at the end of May 1955. It appears that the petitioner took considerable time and only filed his State-of-Facts on February 10, 1959. The Government filed its Counter-State-of-Facts on May 5, 1959. The date fixed by the arbitrator for hearing was August 12, 1959. It was pointed out in the said sitting by the petitioner's advocate Sri A. N. Mitter that the time to make the award had expired and the case could only be proceeded with when the extension of time had been obtained from a competent court. Sri A. N. Mitter promised that he would send the contractor's consent for extension of time to be obtained from the Calcutta High Court within a week after the receipt of which the Government will apply and obtain the necessary extension of time. It was pointed out however by Sri Gajaria, Standing Counsel, for the C. P. W. D. New Delhi, that the Dhanbad Court had granted an extension of time till December 1958. Though repeatedly called upon, Sri Mitter did not send his client's consent for extension of time as promised. On September 14, 1969 the Government made another ex parte application' for extension of time in the Dhanbad Court which was granted and the time to make the award was extended till January 3, 1961. The present notice was taken Out on December 17, 1960.

2. It is alleged in the petition that the time for making the award having expired, the arbitrator has become functus officio, that the ex parte order for extension of time obtained from the Dhanbad Court is bad on the ground that the Dhanbad Court had no jurisdiction and that the petitioner was guilty of interminable delay. On the basis of these averments the present application has been made. All allegations made against the Government have however been denied in the affidavit-in-opposition filed on behalf of the Government by Sri Bhatia, Executive Engineer, Dhanbad. It is alleged that the application for extension of time was made in the Dhanbad Court according to the usual practice, and that the construction works having been done at Dhanbad the Dhanbad Court had jurisdiction in the matter. It is further alleged that the reference made by the Government to Sri O. P. Mittal is an independent proceeding altogether having nothing to do with the stay order under Section 34. It is pleaded that if there is delay in the matter of the arbitration it is due to acts of omission and commission 6n the part of the contractor. In that view of the matter the contractor is not entitled to make any grievance that there is delay in the arbitration proceedings.

3. Mr. B. N. Sen the learned counsel appearing for the Union of India took the point that this Court has no jurisdiction to entertain the application inasmuch as two previous applications for extension of time to make the award in these arbitration proceedings were made in the Dhanbad Court. Under Section 31(4) of the Indian Arbitration Act the Dhanbad Court has now exclusive jurisdiction to entertain any application in respect to the reference. Mr. Samaren Sen the learned counsel appearing for the petitioner countered this argument by contending that this Court has exclusive jurisdiction in the matter having regard to the fact that previous to the applications made in the Dhanbad Court, an application for stay under Section 34 of the Indian Arbitration Act was made in this court. It is contended by Mr. Samaren Sen that in consequence the order passed by the Dhanbad Court is a nullity. If the application made under Section 34 can be said to be an application 'in the reference' then Mr. Samaren Sen's contention must be upheld. This Court in that event would have exclusive jurisdiction to deal with the reference and the orders of the Dhanbad Court must be held to be nullities. The point raised by Mr. Samaren Sen is an interesting one. A decision of the Supreme Court has been cited and relied on by Mr. Samaren Sen in support of his argument that the court in which an application for stay is made under Section 34 will have exclusive jurisdiction in all subsequent proceedings. The case cited is the case of Kumbha Mawji v. Dominion of India reported in : [1953]4SCR878 . In this case the Umpire made over to eidier of the parties an award in the original. One of the parties made an application to the Gauhati Court for an order under Section 14(2) of the Indian Arbitration Act calling upon the arbitrator to file the award. Subsequently the other party sent the award given to him to the Registrar of the Calcutta High Court through his solicitor duly stamped for being filed in the Calcutta High Court. In the proceeding before the Calcutta High Court the question arose whether the Calcutta High Court or the Gauhati Court had jurisdiction. It was contended that the phrase 'in any reference' in Section 31(4) of the Act means during the pendency of the arbitration reference but in die cited case the reference has terminated with the award, so that the application made in the Gauhati Court for causing the award to be filed even though made first did not give exclusive jurisdiction to the Gauhati Court. The Supreme Court negatived this contention holding that the phrase 'in any reference' means 'in the matter of a reference' and it is comprehensive enough to cover an application made after the arbitration is completed by the making of an award. Hence the Gauhati Court had exclusive jurisdiction to deal with the award and not the Calcutta High Court. This decision is not a direct authority on the point under consideration. The Court was not called upon in this case to decide whether the Court in which an application was made before any reference will have exclusive jurisdiction to deal with the reference if and when such reference is made in the future. There are observations, however, in the judgment which tend to show that the application in the reference contemplated in Section 31(4) is an application during the pendency of the arbitration or after the arbitration is completed and even before the arbitration is commenced. The passage relied on by Mr. Samaren Sen is set out at page 317 of the report and reads as follows:

'Thus it will be seen on a comprehensive view of Section 31 that while the first sub-section determines the jurisdiction of the Court in which an award can be filed, Sub-sections (2), (3) and (4) are intended to make that jurisdiction effective in three different ways, (1) by vesting in one Court the authority to deal with all questions regarding the validity, effect or existence of an award or an arbitration agreement, (2) by casting on the persons concerned the obligation to file all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings in one Court, and (3) by vesting exclusive jurisdiction in the Court in which the first application relating, to the matter is filed. The context, therefore, of Sub-section (4) would seem to indicate that the sub-section was not meant to be confined to applications made during the pendency of an arbitration. The necessity for clothing a single Court with effective and exclusive jurisdiction, and to bring about by the combined operation of these three provisions the avoidance of conflict and scramble is equally essential whether the question arises during the pendency of the aribitration or after the arbitration is completed or before the arbitration is commenced.''

As laid down by the Supreme Court, the object of giving exclusive jurisdiction is to avoid conflict and scramble between different courts. Mr. Sen submitted that the order for stay under Section 34 is also an application contemplated by Section 31(4) andit does not matter that the actual reference issubsequent to the order for stay. There is aclear indication in the observation of the SupremeCourt quoted above that the application mentionedin Section 31(4) need not be an application onlyduring the pendency of the arbitration proceedingbut may very well be an application after the reference has concluded by an award and even beforeany reference has been made. This argumentrequires careful consideration. A direct decision onthe point however is a decision of the Punjab HighCourt in the case of Swastika Scientific EngineeringCo. v. Union of India reported in AIR 1853 Punj129. It was held by Kapur J. in this case thatthe court in which an application was made forstay would have exclusive jurisdiction. The reasongiven is that after making a stay order, the Courtretains its control over the suit and has the powerto vary and discharge the order for stay under thegeneral jurisdiction of the Court, as stated byRussel in his book (1949 Edition) at page 94.Reliance is also placed OH the decision of HorwillJ. of the Madras High Court in the case of Md.Mohiuddin Nachiar v. Md. Naina Maracair reportedin AIR 1938 Mad 205 in which the learned Judgeobserved that it is the duty of the Court whichpassed an order for stay that parties do not delaythe disposal of the arbitration proceedings and tosee that as far as possible they prosecute theproceedings. The Court should retain control forthat purpose over the arbitration proceedings andthe stay order to be passed in the suit should notbe a stay sine die. The Madras case was a caseof arbitration in a suit and there could not beany question of any other Court having jurisdictionto control the arbitration proceedings. In the opinion of Kapur, J. it was intolerable that two Courtswill be dealing with the same matter and it seemedto him not to be the intention of the Legislature.I do not, however, with respect, agree with thelearned Judge that the two matters are the same.In my judgment, neither the observation of Kusselnoted above nor the Madras decision can be relied onin support of the decision arrived at by the learnedJudge in the Punjab case.

4. It is important to keep in mind that while both Section 31 and Section 34 of the Act were enacted to avoid conflict and scramble, the nature of conflict and scramble intended to be avoided are different in the two sections. Section 34 was intended to avoid conflict between the public tribunal and the private tribunal intended to be set up by the arbitration agreement. The section provides that in case where parties have agreed to adjudication of disputes by a private tribunal, the dispute cannot be adjudged by a public tribunal. Conflict is resolved by providing for stay of the suit under Section 34. After the suit is stayed there cannot conceivably be any conflict. It is true that the suit is not altogether killed by the stay order, it is only kept in a state of suspended animation a'd can be brought to life, if for instance, the arbitration is superseded and/or fails. But so long as the stay order is operative there could not be any conflict. The conflict intended to be avoided by Section 31, is the conflict between different Courts in respect to arbitration proceedings pursuant to a reference. Only one Court will be entitled to control arbitration proceedings in any reference. That is why it is provided that the Court in which the first application under the Act is made in the reference will have exclusive control over the subject-matter, namely, the arbitration proceedings. Two conditions must be fulfilled to give the Court exclusive jurisdiction under Section 31(4) of the Act. First, an application must be made in the Court under the Arbitration Act and second that the application must be made 'in any reference'. Application under Section 34 is no doubt an application under the Arbitration Act. But is such an application an application 'in the reference? That is the question to be answered. The Supreme Court has held that the phrase 'in any reference' means 'in any matter of a reference' and that the phrase covers an application not merely during the pendency of the reference but also before the reference has taken place. There are different sections in the Arbitration Act whereby an application is to be made even before any reference has been made. Section 8 for instance provides for an application to invoke, the power of the Court, when the parties fail to concur in the appointment of an arbitrator to whom the reference can be made. So also Section 20 provides for an application to file the arbitration agreement in Court so that an order of reference to an arbitrator can be made. These are clearly applications anterior to the reference but they lead to a reference. Such applications are undoubtedly applications 'in the matter of a reference'. These applications, in my judgment, are well within Section 31(4) of the Act, even though these applications are made before any reference has taken place. These are the applications which My Lords of the Supreme Court had in view when making the observation above quoted. An application under Section 34 is clearly not an application belonging to the same category. It has nothing to do with any reference. It is only intended to make the arbitration agreement effective and prevent a party from going to Court contrary to his own agreement that the dispute is to be adjudicated by a private tribunal. No order for reference can be made in an application under Section 34 of the Arbitration Act, nor does the order for stay lead to a reference. After stay other steps must be taken under the Act so that there may be reference. Such other step is entirely different and has nothing to do with the application for stay tinder Section 34 which is intended to stay the suit simplicitor.

5. Again an application for stay must be made in the Court in which the suit is filed. The Court in which the suit is filed may not be the Court having jurisdiction in the matter to which the reference relates. For instance, even though no part of the cause of action in the instant case arose within the jurisdiction of the Delhi Court, the plaintiff could have been misled to file the suit at Delhi. The Delhi Court in such event would be competent to entertain the application under Section 34. Indeed it is the only Court to entertain such an application. The Delhi Court however is not the Court in which any application can be made in respect to the reference. Thus while the Delhi Court under Section 34 is competent to entertain the application under Section 34 of the Indian Arbitration Act, it is not competent to entertain any application in the matter of the reference. After this judgment was ready for delivery Mr. B. N. Sen has drawn my attention to a decision of Bachawat, J. in the case of Chhotey Lal Sham Lal v. Cooch Behar Oil Mills Ltd., reported in ILR (1954) 1 Cal. 418 in which the learned Judge held that an application under section 34 is not an application under the Act in a reference in a Court competent to entertain it as contemplated by Section 31(4) of the Act. I respectfully agree with the above decision and the reasoning given therefor.

6. The preliminary point taken by Mr. B. N. Sen must therefore prevail. It must be held that in so far as it is an application under the Arbitration Act simpliciter in relation to the reference pending before Sri. O. P. Mittal, it must be dismissed. I would however record my view that the only ground for supersession made is the inordinate delay in the arbitration proceedings. Responsibility for this delay falls fairly and squarely on the petitioner and he is not entitled to ask for supersession on the ground of inordinate delay caused by his own omissions and commissions.

7. Mr. Samarea Sen however submits that even if it is held that this Court has no jurisdiction under Section 31 of the Arbitration Act to make any order in the matter of reference this Court has jurisdiction to alter and modify the stay order passed in the suit pending in this Court. Mr. Sen is right in making this submission and this Court has full jurisdiction to vacate its own stay order passed in the suit pending in this Court. The Court passed the stay order in order that the dispute may be adjusted privately by arbitration in terms of the arbitration agreement. As a result of the stay order the suit is not dead but it is in a state of suspended animation. If the arbitration is superseded and/or otherwise proves to be infructuous the suit may well proceed after the stay order is vacated. In the instant case the submission has not been superseded nor the stay order revoked. But Mr. Sen argues that the time to file the award has expired. In other words, the arbitration has proved to be infructuous. The stay order therefore should be vacated and the suit proceeded with. It is true that the time to make the award has expired. By the last extension the time to make the award was extended till January 3, 1961. The present notice was taken out on December 19, 1960 and an interim stay of the arbitration proceeding was obtained on the same date from this Court, The arbitration could not be proceeded with and award could not be made by reason of this stay order obtained by the petitioner himself. The petitioner never wanted arbitration. He took every tactic to get out of it. In my judgment the mere fact that the time to make the award has expired does not prove that the arbitration has become infructuous. The Court can extend time and in the facts of this case the Court may very well grant further time to the arbitrator to make the award. No ground, therefore, has been made for vacating the stay. The application, therefore, fails and is dismissed with costs.

8. The petitioner has asked for a stay of this order on the ground that he intends to appeal against the order. I grant a, stay for three weeks.


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