Haryana Breweries Ltd vs Mahendra Kumar Gupta & Anr
2010 Latest Caselaw 5067 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     FAO 1/1995
                                    Reserved on : 01.11.2010
                                    Date of Decision :08.11.2010

      M/S HARYANA BREWERIES LTD.                ..... Appellant
                    Through   Mr. Sunil Goyal, Ms. Kavitha, Advs.

                  versus


      MAHENDRA KUMAR GUPTA & ANR                 .... Respondent

Through Mr. R.S. Kela, Adv.

CORAM:

HON'BLE MR. JUSTICE MOOL CHAND GARG

1. Whether the Reporters of local papers may be allowed to see the judgment? Yes

2. To be referred to Reporter or not? Yes

3. Whether the judgment should be reported in the Digest? Yes

: MOOL CHAND GARG,J

1. There is no dispute between the parties that there is an arbitration clause as part of the agreement which has given cause to the filing of an application under Section 34 of the Arbitration & Conciliation Act seeking stay of proceedings in the civil suit filed by the respondents against the appellant for recovery of sum of ` 1,47,625/-.

2. It is also a matter of record that on the first date of appearance after the service of summons the appellant simply requested for an adjournment for moving an application under Section 34 of the Act. However the application was defended by the respondent by taking a plea that the appellant was never interested in referring the dispute to arbitration inasmuch as he failed to give any reply to the 6 notices sent by the appellant calling upon him to pay the dues payable to the respondent by the appellant. He also states that even till the date he filed the application under Section 34 of the Arbitration Act, he was not willing to refer the disputes to arbitration and therefore the application filed by the appellant was not bona fide and was liable to

be dismissed.

3. It may be observed here that the appellant was served with summons of the suit for 11.10.1993 on which date the appellant did appear but took adjournment for filing an application under Section 34 of the Arbitration Act. Thereafter the matter was adjourned for 03.11.1993. The order passed is reproduced hereunder:

"11.10.93 Present counsel for defendant. Vakalatnama filed. He seeks date for filing of S.34 Application under Arbitration Act. Fixed for 3.11.93."

4. It is submitted by the appellant that application under Section 34 was filed by the appellant on 03.11.1993 i.e. on the next date.

5. The application was replied to by the respondents who have taken a preliminary objection that the application was not maintainable and is barred by limitation. It is their stand that :

The defendants were served of the notice of the suit for 11.10.1993 and appeared before this Hon'ble Court on 11.10.1993 and sought time from this Hon'ble Court for filing of the written statement, though the written statement was required to be filed on 11.10.1993 itself. At the request of the defendants, this Hon'ble Court was pleased to grant time to the defendants to file the written statement on 03.11.1993. Thus the defendants have already participated and taken part in the proceedings before this Hon'ble Court and the application under reply is, therefore, not maintainable.

6. It is also their stand that:

"Para-2 of the application is wrong and denied. It is wrong and denied that the suit is not maintainable. It is further wrong and denied that the suit is covered under any arbitration clause or that the suit is liable to be stayed as falsely alleged. Even otherwise the application under Section 34 of the Arbitration Act is not maintainable."

7. Before I proceed further I may simply observe that on the last date of hearing I asked for the parties for referring the matter to arbitration but none of the parties agreed probably on the ground that it may involve some costs. It may be observed here that the application was allowed by the Addl. District judge by passing the following order:

I have heard the argument of the learned counsel of the parties. It is laid down in the two authorities 1990 RLR 287 and 1990 RLR 493 that merely getting adjournments for ducments and for the inspection of the file and for the purpose of filing of the WS is not step in aid of the proceeding of the case. Even otherwise leaving this point aside, there are numerous authorities on the point laying down the law that the defendants should be ready and willing for Arbitration before filing of the suit. There conduct must show and prove this fact. In this authority reported as 34 91988) DLT -197 it is laid down that if dispute not raised before filing of the suit and no reply to legal notice of the plaintiff, it was held similarly that Section 34 of the Arbitration Act is not helpful for staying the proceedings. Latest authority is 48 (1992) DLT - 376. In this authority it is laid down that when letter of request and notice sent by the petitioner not responded by the defendant later on if the defendant files an application under Section 34 for staying the proceedings of the suit cannot be stayed as there will be want of readiness and willingness on the part of the defendant. In view of the abovesaid case authorities discussed, the application under Section 34 of Arbitration Act filed by the defendant is hereby dismissed with no orders as to costs. Now the defendant shall file WS on the next date 8.8.1994.

8. The learned counsel for the respondent submits that a legal notice was also served upon the appellant but in reply thereto they never referred to the arbitration Clause but simply denied the claim made by the respondents and according to them they also forfeited the security deposit. The respondent also relies upon a judgment delivered by Hon'ble Supreme Court in the case of Food Corporation of India Vs. M/s. Thakur Shipping Co. & Ors. AIR 1975 SC 469 where the necessary conditions for invoking Section 34 i.e. "Ready and willingness" have been discussed. In para 6 of the aforesaid judgment it has been observed:

"6. The High Court pointed out that in each of these two suits the first defendant applied for stay under Section 34 as shown as they received the summons of the suit statine in the application that they were really and willing to have the dispute settled by arbitration. The High Court held that the requirement of Section 34 is satisfied if the defendant expresses his willingness to go to arbitration at' the earliest opportunity after the suit is instituted. In our opinion the High Court was wrong in taking this view. Section 34 of the Arbitration Act reads :

Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should 'not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order-staying the proceedings.

The observation of Das J. in Subal Chandra Bhur's case on which the High Court relied, is preceded by the following sentence : "Further, the readiness and willingness required by Section 34 of the Act has to exist at the commencement of the legal proceedings and has to continue up to the date of the application for stay". In Anderson Wright Ltd. v. Moran and Company : [1955]1SCR862 , this Court enumerating the conditions that should be fulfilled before a stay may be granted under Section 34 notes as one of the conditions that the applicant for stay "should satisfy the court not only that he is but also was at the commencement of the proceedings ready and willing to do everything necessary for the proper conduct of the arbitration". It is thus quite clear on the authorities and from the terms of Section 34 that the readiness and willingness must exist not only when an application for stay is made but also at the commencement of the legal proceedings."

9. Relying upon the aforesaid judgment the respondent submits that the ready willingness of the party wishes to invoke arbitration Clause must exist not only when an application for stay is made out but also at the commencement of legal proceedings. It is submitted that it is apparent that when the appellants were denying the claims made by the appellant during legal notice and never came out with their willingness to rely upon the arbitration clause and on the first day when they have appeared in the Court have also not filed application for stay, it must be presumed that they were not ready and willing to submit themselves for the arbitration. The second

judgment cited on behalf of the appellant is the judgment delivered by the Hon'ble Supreme Court in the case of Rachappa Gurudappa Bijapur Vs. Gurudiddappa Nurandappa & Ors. (1989) 3 SCC 245. In the aforesaid judgment seeking adjournment for filing of the written statement was also taken as taking steps showing intention with the suit and therefore abandoning the benefit of adjudication of disputes for arbitration.

10. This judgment however may not be applicable to the facts of this case as it is apparent that the adjournment sought on the very first day of hearing was not for filing of the written statement but for filing an application under Section 34 of the Arbitration Act. Because even otherwise it relates to a foreign award. This also belies the stand taken by the respondent in his reply.

11. On the other hand, appellants have relied upon another judgment delivered by Hon'ble Supreme Court in the case of M/s Sadhu Singh Ghuman Vs. Food Corporation of India & Ors. AIR 1990 SC 893 wherein the expression "a step in the proceeding" have been examined and in para 6 it has been held:

"6 . Section 34 of the Arbitration Act has received the consideration of this Court in State of Uttar Pradesh v. Janki Saran Kailash Chandra, : [1974]1SCR31 , (ii) Food Corporation of India v. Yadav Engineer, [1983] 1 SCR 95 and more recently in General Electric Co. v. Renusagar Power Co. MANU/SC/0007/1987 : [1987]3SCR858 . It may be noted that the expression "a step in the proceeding" which would disentitle the defendant from invoking Section 34 of the Arbitration Act is not every step taken by him in the suit. It should be a step to abandon the right to have the suit stayed. It should be a step in aid of the progress of the suit. The step must have been consciously taken with a view to submit to the jurisdiction of the Court for the purpose of adjudicating the controversy on the merits. In General Electric Co. 's case this Court after considering the previous decisions observed (at 155-56):

...thus a step in the proceeding which would disentitle the defendant from invoking Section 34 of the Arbitration Act should be a step in aid of the progress of the suit or submission to the jurisdiction of the court for the purpose of adjudication of the merits of the controversy in the suit. The step must be such as to manifest the intention of the party unequivocally to abandon the right under the arbitration agreement and instead to opt to have the dispute resolved on merits in the suit. The step must be

such as to indicate an election or affirmation in favour of the suit in the place of the arbitration. The election or affirmation may be by express choice or by necessary implication by acquiescence. The broad and general right of a person to seek redressal of his grievances in a court of law is subject to the right of the parties to have the disputes settled by a forum of mutual choice. Neither right is insubstantial nor the right can be allowed to be defeated by any manner of technicality. The right to have the dispute adjudicated by a civil court cannot be allowed to be defeated by vague or amorphous mis-called agreements to refer to 'arbitration'. On the other hand, if the agreement to refer to arbitration is established, the right to have the dispute settled by arbitration cannot be allowed to be defeated on technical grounds."

12. Applying the principles laid down in the later judgment of the Hon'ble Supreme Court to the facts and issue before us it is apparent that the adjournment sought for by the appellant on 11.10.1993 was not for seeking time to file written statement but was an adjournment sought for moving an application under Section 34 of the Arbitration Act. Such adjournment in the facts of the case could not be taken as a step in the proceedings otherwise then an intention to move an application under Section 34 of the Arbitration Act.

13. In these circumstances, the order passed by the Addl. District Judge dismissing the application under Section 34 of the Arbitration Act cannot be upheld and is liable to be set aside. Accordingly the appeal is allowed with no orders as to costs. Pending applications are also disposed of.

MOOL CHAND GARG, J NOVEMBER 08, 2010 'ga'