Chawla T. Construct vs Punjab National Bank
1991 Latest Caselaw 712 Del

JUDGMENT

Y.K. Sabharwal, J.

(1) [ED. facts : Plaintiff, constructed a building of Deft. Bank and gave final bill of more than Rs.31 lakh. On 21.12.87, the Architect duly certified it for about Rs. 231/2lakh. On 3.5.90, pff. sent a notice demanding this amount and also asked for arbitration. Deft. did not reply this notice. Nor it invoked arbitration clause in the agreement between parties. Pff. then filed instant suit. Deft. applied for its stay u/S 34, Arbitration Act]. After detailing above, Judgment is :

(2) An order staying proceeding u/S 34 of the Act can only be made if requirements of the section are fulfillled. One of the requirement ment is that the deft. seeking stay of the suit has to satisfy the court that he was at the time when the proceedings were commenced and at the time when the application for stay is made and till its decision remained ready and willing to do all things necessary to the proper conduct of the arbitration. It is implicit in S. 34 that the deft. has to make a specific averment about its readiness and willingness to do all things necessary for the proper conduct of the arbitration proceedings at the time when the proceedings commenced till its conclusion. Reference may be made to National Research Dev. Corp. vs. Bhupal Mining 1973. DLT. 37 holding that the party applying u/S. 34 of the Act must specifically allege that he was, not only, at the commencement of the suit quite ready and willing to have the dispute resolved by arbitration, but that he was throughout ready and willing for such arbitration and do every thing necessary for the proper and successful conduct of the arbitration proceedings. In this application no such averment has been made. Learned counsel for the deft. concedes that such an averment in the application has not been made but submits that an averment about readiness and willingness has been made in the rejoinder filed by the deft. to the reply of the pff. In order to fulfill the requirement of S. 34, such an averment should be made in the application and not in the rejoinder. But assuming the averment in the rejoinder can cause (removal) of defect, it has to be noticed that even in the rejoinder the deft. has not pleaded that it was ready and willing to refer the matter to arbitration at the commencement of the proceeding. The averment in the rejoinder is that he "is ready and willing to refer the matter to arbitration." The readiness and willingness u/S 34 has to be alleged and established not only at the time when the application for stay is made but even at the time of the commencement of the legal proceedings. The application does not fulfill the requirements of S. 34 of the Act and thus the deft, is not entitled to an order staying the proceedings of the suit.

(3) Apart from the above I may notice another aspect of the case which also shows that the deft. was not ready and willing for arbitration. There is no dispute that after the certificate of the Architect dated 21.12.87 various letters were written by plff. to deft. demanding the amount certified by the Architect. The letters annexed with the plaint making the demand are dated 11.8.88, 31.8.88, 23.12.88,1.4.89. No reply was sent to any of these letters. The pff. has also placed on record notice dated 3.5.90 sent through its counsel to the deft. calling upon it to make the payment and also stating that in case the bank disputes the claim it may refer the matter to arbitration immediately. The receipt of the notice is not disputed by the deft. It is also not disputed that this notice was not replied. The suit was filed more than three months after notice had been served on the deft. According to learned counsel for pff. Mr. V.P.Singh, if the suit had not been filed it may have become time barred as the final bill had been raised by the pff. even as per the averment in the application on 26.8.87. Sh.Jagdeep Kishore had no explanation for the aforesaid conduct of the deft. in maintaining complete silence. Mr. Kishore, however, submits that mere inaction or silence on the part of the deft. is not a ground for refusing an order staying the proceedings of the suit. Learned counsel further submits that even refusal of the deft. to go to arbitration before filing of the suit is not a relevant consideration as Section 34 only requires the deft. to show that at the commencement of the suit deft. was willing to refer the matter to arbitration and still remains so willing when the application for stay is made and Section 34 does not require the deft. to show that deft. was ready for arbitration before filing of the suit. In support of the submission Mr. Kishore relies upon Food Corp. vs. Thakur Shipping Air 1980. GDD. 25 holding that even if the party had stated before the suit that it was unwilling to go to arbitration but later succeeds to prove that at the commencement of the suit the party was willing to refer the matter to arbitration the S. 34 gets complied with. In peculiar facts of some case a deft. may be able to establish his readiness and willingness to refer the matter to arbitration at the commencement of suit despite his refusal to refer the matter to arbitration before institution of the suit. It does not follow from the above proposition that refusal of deft. to refer the matter to arbitration before institution of the suit is not at all a relevant consideration. Reference may be made to Food Corp. vs. Thakur Shipping on which strong reliance was placed by Mr. V.P. Singh. The Supreme Court has held that where a party to an arbitration agreement choses to maintain silence in the face of repeated requests by either party to take steps for arbitration the case is not one of mere inaction, failure to act when a party is called upon to do so is a positive gesture signifying unwillingness or want of readiness to go to arbitration. The pff. had filed appeal in Supreme Court challenging the decision of the High Court which had set aside the order of the trial court pointing out that the deft. had applied for stay of the suit u/S 34 as soon as they received the summons of the suit stating in the application that they were ready and willing to have the disputes settled by arbitration, expressing willingness to go to arbitration at the earliest opportunity after institution of the suit. The Supreme Court reversed the decision of the High Court and restored the order of the trial court holding that from the conduct of the deft. it was clear that they were not ready and willing to go to arbitration at the time when the suit was instituted. It was also held that on the facts and circumstances of the case the silence and inaction on the part of the deft. may very well justify the inference that they were not ready and willing to go to arbitration. In the present case the position is almost similar. There was complete silence on the part of the deft. from 1987 till the filing of the suit. Even to the notice dated 3.5.90 no reply was sent. The suit may have become time-barred if the pff. had waited for few months more. It is not a case of mere inaction and silence. The inaction and silence, on the facts of this case clearly shows that the deft. was not ready and willing to go to arbitration. The requirement of S. 34 that the deft. has to show readiness and willingness at the commencement of the proceedings is not an empty formality. It would not be a correct statement of law that a mere assertion by deft. that he was willing to have the matter referred to arbitration at the commencement of the proceedings should always be accepted as correct by the court without regard to the conduct of the deft. and the facts and circumstance of the case. The conduct of the deft. would be a relevant consideration. Reference may also be made to National Small Ind, vs. Mis. Metal Products holding that failure of respondents to invoke the arbitration clause when called upon to do so but keeping quite and not giving any reply showed that the respondents were not ready and willing to refer the matter to arbitration when the suit was instituted. The D.B. held that the extreme proposition that silence and inaction before the institution of the suit is totally irrelevant cannot be accepted as laying down correct law because where a party to arbitration agreement chooses to maintain silence in face of the repeated requests by other party to take steps for arbitration the case is not one of mere inaction. Failing to act when a party is called upon to do so is a positive indication signifying unwillingness or want of readiness to go to arbitration. The deft. has failed to aver and establish that it was ready and willing to refer the matter to arbitration at the commencement of the proceedings in the suit. Application dismissed.