Decided on March 12,1996

M/S Atlas Industrial Corporation Appellant
M/S Graphic Machineries Respondents


Manmohan Sarin, J. - (1.)By this order I would be disposing of the above application filed by the respondent under Sec. 34 of the Arbitration Act, 1940 for stay of the present suit.
(2.)The present suit for recovery was filed by the plaintiff for recovery of Rs. 6,17,000.00 together with interest on 25th of Jan., 1995. The defendant immediately on being served, submitted that he would be moving an application under Sec. 34 of the Arbitration Act for stay of the suit. The present application thus, came to be filed. The contention of applicant/defendant in brief is that:
(i) The plaintiff and defendant had entered into an agreement for Sole Selling Agency dated 15th Jan., 1992. The said agreement contains an arbitration agreement in Clause 11 which is as under: "In the event of any dispute arising on account of interpretation and/or performance of the terms and conditions of this agreement, the same shall be referred to arbitration in accordance with the provision of India.n Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder in force."

(ii) The applicant/defendant after the execution of the Sole Selling Agency Agreement had admittedly instituted a petition under Sec. 20 of the Arbitration Act bearing No. 217/1993 in the court of Shri R. C. Jain, Additional District Judge, Delhi seeking filing of the arbitration agreement and reference of the claims of disputes of the applicant/defendant to arbitration. The plaintiff was duly served in the said petition and filed its reply, wherein he admitted the arbitration agreement. The Additional District Judge Shri R. C. Jain vide order dated 21.3.1994 appointed late Shri R. K. Sain, as the sole Arbitrator to adjudicate upon the claims and disputes between the defendant and the plaintiff. These inter alia related to the defendant's claim for damages of Rs. 4 lacs, price of the Maruti Car Rs. 1 lakh, interest thereon Rs. 24,000.00. In addition Rs. 84,000.00was claimed balance sale price of machines. Adjustment in the claim amount for loan given by the plaintiff to the defendant to the tune of Rs. 1,65,000.00 was given and the defendant claimed in all Rs. 4,59,390.00. The applicant/defendant claims that the Arbitrator was served on 18.5.1994 and a sum of Rs. 2,000.00 was paid as the 50% fee. The plaintiff did not pay the Arbitrator's fee. In the event, unfortunately the Arbitrator expired in Dec. 1994. The defendant/applicant claims to have called upon the plaintiff vide a notice dated 13th Jan., 1995 to fill up the vacancy but the plaintiff did not respond and instead has filed the present suit.

(iii) The applicant had also filed petition under Sec. 8 of the Arbitration Act, which was pending in the court of Shri M. C. Garg, Additional District Judge and registered as Suit No. 1998 of 1995 for filling up of the vacancy arising from death of the appointed Arbitrator. The learned Additional District Judge on 28.2.1996, has allowed the petition and appointed Mr. S. S. Bindra, advocate as the sole Arbitrator subject to the decision of this court on the present application under Sec. 34 of the Arbitration Act, 1940.

(3.)The learned counsel for the plaintiff has opposed the application on the ground that the transaction of the loan given under the Sole Selling Agreement was a collateral one. It had been reached after the Sole Selling Agreement has been concluded and the terms settled. In other words, the submission of the learned counsel for the plaintiff is that the loan transaction is outside the ambit of the arbitration agreement and the payment of the loan installment cannot be a subject matter for arbitration. It has further been contended by the learned counsel for the plaintiff that the defendant was not ready and willing for arbitration and had in fact delayed the same by not filling in the vacancy after the death of the Arbitrator. The learned counsel for the plaintiff contended that the defendant had been delaying the filling of the vacancy with the ulterior purpose of allowing the plaintiff's claim to become barred by limitation.

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