RAMASWAMI - (1.) THIS appeal is brought, by special leave, from the judgment of the Punjab High Court, dated 22/02/1962 Civil Revision No. 331-D of 1958 whereby the High Court upheld and confirmed the judgment of the Appellate Court and set aside the judgment of the trial Court staying proceedings in the suit.
(2.) THE Uttar Pradesh Co-operative Federation Limited (hereinafter referred to as the 'Society') was registered under the Co-operative Societies Act No. II of 1912 at Lucknow and was carrying on the business of plying public carriers on Kanpur Delhi route. THE Society had been granted, for this purpose, permits by the Uttar Pradesh Government and Delhi Administration for seven vehicles. In March 1954, the Society entered into an agreement with the plaintiffs M/s. Sunder Brothers - through Bimal Kumar Jain and Dhan Kumar Jain by which they were appointed as Managing Agents for carrying on the business as public carriers. THE terms of the Managing Agency agreement were embodied in a letter, dated 2/03/1954 written by the Secretary of the Society. Clause 28 of the agreement reads as follows : "That in the event of there being any dispute regarding the terms and conditions of this agreement and your appointment hereunder as Managing Agents of the aforesaid business or any' matter arising from and relating thereto or the subject matter thereof, such dispute shall be decided by arbitration as provided under Co-operative Societies Act II of 1912 and you undertake and agree to be bound by the provisions for arbitration in the said Act". THE agreement was to last for a period of three years but on 5/07/1954 the Society terminated the agreement by its letter, dated 5/07/1954. THE plaintiffs, therefore, brought a suit on 18/08/1954 in the Court of the Subordinate Judge, First Class, Delhi, praying for a declaration that the termination of the Managing Agency agreement by the Society was illegal and the plaintiffs were entitled to continue the business of Managing Agents in accordance with the terms and conditions of the agreement. THE plaintiffs prayed for a mandatory injunction restraining the defendant Society from terminating the agreement. THE Society made an application under S. 34 of the Indian ARBITRATION AND CONCILIATION ACT, 1940 before the Subordinate Judge, Delhi, for an order for staying the suit. It was claimed by the Society that the suit was not maintainable because under S. 51 of the Co-operative Societies Act the dispute was to be adjudicated upon by the Registrar of Co-operative Societies. In the alternative it was alleged that by agreement between the parties the dispute was to be referred to arbitration in accordance with the Cooperative Societies Act and consequently proceedings should be stayed. THE trial Court stayed the proceedings but on the appeal of the plaintiffs the order of the trial Court was set aside and the application of the plaintiffs under S. 34 of the Indian Arbitration Act was dismissed. THE Society moved the Punjab High Court in revision but the revision application was dismissed and the order of the lower appellate Court was confirmed. It is necessary at this stage to set out the relevant provisions of the Indian Arbitration Act 'Act X of 1940). S. 34 of this Act states : "34. 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." Section 46 provides as follows : "46. The provisions of this Act, except sub-s. (1) of S. 6 and Sections 7, 12, 36 and 37, shall apply to every arbitration under any other enactment for the time being in force and as if the arbitration were pursuant to an arbitration agreement as if that other enactment were an arbitration agreement, except in so far as this Act is inconsistent with that other enactment or with any rules made thereunder." Section 47 reads as follows : "47. Subject to the provisions of S. 46 and save in so far as is otherwise provided by any law for the time being in force, the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder : Provided that an arbitration award otherwise obtained may with the consent of all the parties interested be taken into consideration as a compromise or adjustment of a suit by any Court before which the suit is pending." There was some controversy in the lower Courts as to whether the arbitration under Cl. 28 of the agreement was a statutory arbitration and whether S. 46 of the Indian Arbitration Act was applicable to the case. It was argued by Mr. Sinha on behalf of the appellant-Society that no statutory arbitration is created by Cl. 28 of the agreement but the parties had merely agreed to act in accordance with the provisions of the Co-operative Societies Act (Act II of 1912) and the Rules made thereunder. It was contended that the parties had merely incorporated the statutory provisions by reference in their agreement and S. 47 of the Indian Arbitration Act will, therefore, be applicable to the case. This legal position was not controverted by Mr. K. K. Jain appearing on behalf of the respondent. The only question in debate was whether the lower Courts rightly exercised their jurisdiction under S. 34 of the Indian Arbitration Act in not granting the stay of the proceedings of the suit.
(3.) IF the arbitration agreement is not to be treated as a statutory arbitration under S. 46 of the Arbitration Act but an arbitration agreement under Section 47 of the Act, then the procedure to be followed for the arbitration under that agreement will be that provided under the Co-operative Societies Act and the Rules framed thereunder. Under S. 47 of the Indian Arbitration Act the arbitration will be governed only by such rules of the Co-operative Societies Act and rules framed thereunder as are not inconsistent with the provisions of the Indian Arbitration Act. In this connection it is necessary to refer to Rules 115, 116 and 117 of the Co-operative Societies Rules framed under S. 43 of the Co-operative Societies Act. Rule 115 states as follows : Any dispute touching the business of a registered society (i) between members or past members of a society or persons claiming through a member or past member, (ii) or between a member or a past member or persons so claiming and the society or its committee or any officer of the society, (iii) between the society or its committee and any officer of the society. and (iv) between two or more registered societies, shall be decided either by the Registrar or by arbitration and shall for that purpose be referred in writing to the Registrar." Rule 116 provides : "The Registrar on receipt of a reference shall either decide the dispute himself, or refer it for decision to an arbitrator or to two joint arbitrators appointed by him or to three arbitrators, of whom one shall be nominated by each of the parties to the dispute and the third by the Registrar who shall also appoint one of the arbitrators to act as chairman." Rule 117 states : "In case it is decided to appoint three arbitrators (i) The Registrar shall issue a notice calling on each of the parties to nominate one person as its nominee within 15 days of the receipt of the notice. (ii) if a party consists of more than one person, such persons shall jointly make only one nomination (iii) if more than one person is nominated by a party the Registrar shall appoint either one of the nominees or some other person of his own choice as the nominee of that party. (iv) if a party fails to nominate an arbitrator within the appointed time or if its nomination is not valid the Registrar may himself make the nomination, (v) if one of the arbitrators fails to attend or refuses to work as an arbitrator, the remaining arbitrators may decide the dispute. IF two of the arbitrators fail to attend or refuse to work as arbitrators and the claim is not admitted the remaining arbitrator shall refer the case to the Registrar who may authorize him to give an award or appoint one or more arbitrators to proceed with the reference or he may decide the case himself" It has been observed by the High Court that it would be a difficult task for the arbitrator to investigate as to which of the rules made under the Co-operative Societies Act are consistent with and which of those rules are not consistent with the provisions of the Indian Arbitration Act and therefore it was a fit case in which discretion of the court under S. 34 of the Indian Arbitration Act should be exercised in not staying the proceedings of the suit. In our opinion, the reasoning of the High Court has much substance. There is also another reason why there should not be a stay of the proceedings under S. 34 of the Indian Arbitration Act. The suit was filed in 1954 and, though 12 years have elapsed nothing has been done in the suit and it will not be in the interest of speedy disposal of the suit between the parties if the proceedings in the suit are further stayed and the parties are referred to arbitration.;