Ramaswami, J. - (1.) This appeal is brought by certificate from the judgment of the Bombay High Court Nagpur Bench dated August 14, 1964 by which the appellants were convicted for contempt of Court of Civil Judge, Junior Division, Nagpur and sentenced to pay a fine of Rs. 200/- each. By the same judgment respondent No. 3, Sri Raj Nath Vig was also convicted for contempt and sentenced to pay a fine of Rs. 100/-.
(2.) It appears that a hire-purchase agreement was entered into between the appellants and respondent No. 1, on or about August 12, 1959. Under that agreement a motor truck was made available to respondent No. 1 for doing transport business. The hire-purchase agreement contained an arbitration clause for settlement of disputes arising between the parties. It appears that subsequently dispute did arise between the parties and a reference was made to an arbitrator to settle the disputes. Respondent No. 3 Sri Ram Nath Vig who is a practising lawyer in Delhi was the person named as arbitrator in the arbitration agreement itself and the dispute was submitted to him on or about June 25, 1962 at the instance of the appellants. Thereafter the arbitrator gave notice of the reference and invited statements of the parties. He fixed the hearing of the arbitration matter before him on July 17, 1962. The case of respondent No. 1 is that he did not receive notice of this date from the arbitrator and therefore he did not appear on the date fixed. The arbitrator adjourned the hearing of the reference to another date, namely, August 29, 1962. The contention of respondent No. 1 is that he was not given intimation of this date also but this point is controverted by the respondents. Respondents Nos. 1 and 2 filed a Civil Suit in the Court of Civil Judge, Senior Division, Nagpur on August 30, 1962. In this suit they claimed a declaration that the hire-purchase agreement was brought about by fraud and was not binding on them on various grounds. The suit was registered and the Court ordered summons to be issued to the two appellants. Meanwhile, the arbitrator postponed the hearing of the reference to September 15, 1962 and it is alleged that he issued fresh notices to the parties on September 1, 1962. The hearing was again adjourned to October 23, 1962 and it is said that respondent No. 3 made an award on October 24, 1962. It has been found by the High Court that on October 18, 1962 a notice was issued by respondent No. 1 to the appellants and the arbitrator with a copy of the plaint. This notice was received by the appellants on October 22, 1962. In spite of this notice, evidence was recorded by the arbitrator on October 23, 1962 and he made the award on the next day directing respondent No. 1 to pay Rs. 20,400/-. The allegation of the arbitrator is that he received the notice sent on October 18, 1962 on the next day of the award i.e., on October 25, 1962. It appears that in the civil suit filed by respondents 1 and 2 which was registered as Civil Suit No. 657 of 1962 on the file of the Civil Judge, Junior Division, the first date of hearing was fixed on October 15, 1962. On that date the appellants filed an application under Section 34 of the Arbitration Act for staying the proceedings before the Court. No progress was made in the suit which was adjourned to November 6, 1962 and again to November 28, 1962 at the instance of the appellants. Finally on November 28, 1962 the arbitrator informed respondent No. 1 that he had made the award. On these facts respondents 1 and 2 filed an application under Section 3 of the Contempt of Courts Act for action being taken against the two appellants, respondent No. 3 and one more person. According to respondents 1 and 2 the appellants and respondent No. 3 had committed contempt of Court in proceedings with the arbitration reference in spite of notice under Section 35 of the Arbitration Act being given and in spite of the knowledge of the suit which was filed by respondents 1 and 2. The application was contested by the appellants as well as the arbitrator. The case of the appellants was that the suit itself was not sustainable and they were unaware that participation in the arbitration proceedings after receipt of notice was precluded by law and that they honestly and bona fide believed that they were not expected to take any action after the receipt of the notice without direction from the arbitrator. It was for the arbitrator to take a decision in the matter and if the arbitrator decided to proceed with the arbitration, they only obeyed the orders of the arbitrator and therefore had not committed any contempt. The defence of respondent No. 3 was that in completing the arbitration and giving his award he was only performing his duty. He denied that it was necessary for him to await the result of the stay application alleged to have been made by respondent No. 1 in the Nagpur Court as he was of the view that the subject-matter in the Nagpur Court was not the whole subject-matter under arbitration. Respondent No. 3 denied that he had any bias or that he conducted the arbitration proceedings in order to defeat the object of the suit and to place an impediment in the conduct of the suit. The High Court rejected the contention of the appellants and of respondent No. 3 and held that the action of the appellants in participating in the arbitration proceedings and the conduct of respondent No. 3 constituted contempt of Court as the conduct of respondent No. 3 and of the appellants had a tendency to bring into contempt the proceedings before the Civil Court.
(3.) It is necessary at this stage to set out the relevant provisions of the Arbitration Act (X of 1940). Section 32, 33, 34 and 35 are to the following effect: "32. Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act." "33. Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits: Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence, also, and it may pass such orders for discovery and particulars as it may do in a suit." "34. Where any part 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." "35. (1) No reference nor award shall be rendered invalid by reason only of commencement of legal proceedings upon the subject-matter of the reference but when legal proceedings upon the whole of the subject-matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire all further proceedings, in a pending reference shall, unless a stay of proceedings is granted under S. 34, be invalid. (2) In this Section the expression 'parties to the reference' includes any persons claiming under any of the parties and litigating under the same title." ;