Ronojit Kumar Mitra, J. - (1.) The petitioner who was the respondent before the Arbitrator has made this application under Section-34 of the Arbitration Act. 1940 and sought to stay the suit. The suit being Anand Bearing Co. Put. Ltd. v. Rashtriya Ispat Nigam Ltd. had been instituted in this Court by the respondent, on July 14, 1997. The respondent was the claimant before the Arbitrator, and had instituted the suit on the basis of an alleged admission of the claim by the petitioner in its 'counter statement of facts'. On the basis of the alleged admission of the claim, the respondent had made an application before the Arbitrator for an award in favour of the respondent, and having waited for two months the respondent had instituted this suit
(2.) The facts of the case in short were, that pursuant to a contract between the parties, the respondent was to supply two Russian bearings in accordance with the terms and conditions contained in the 'tender' and also in the 'general conditions of contract' Article 23 of the 'general conditions of contract' contained an arbitration agreement. The respondent had supplied and the petitioner had received and accepted the bearings. Admittedly in terms of the contract, the petitioner had paid 75% of the purchase price. By its letter dated November 6, 1995 the respondent referred to arbitration, certain disputes regard ing its alleged claim for the payment of the balance 25% for the supply of the two bearings. The Chairman-cum-Managing Director of the petitioner in accordance with the terms of the contract appointed an Arbitrator. The parties filed their 'statement of claim' and 'counter-statement', respectively, and between September 1996 to July 1997 several meetings had been held before the Arbitrator. The petitioner also had referred to arbitration diverse alleged claims against the respondent in respect to disputes in some 34 separate contracts, all of which had been entered between the parties, though not related to the contract which was presently being considered by this Court. Admittedly both the purchase-orders as also the disputes in the two sets of arbitration proceedings between the parties pending as on date had nothing in common. The Arbitrator appointed in respect to both the references was however, the same person.
(3.) It was submitted by counsel for the petitioner that in its' counter-statement', the petitioner had admitted that there was no dispute that the payment by the petitioner to the respondent of the balance 25% of the value of the two bearings, remained due and outstanding He contended on behalf of the petitioner that in the several other transactions between the parties, which were the subject matters of separate contracts as referred earlier, the respondent had supplied to the petitioner spurious bearings The respondent had refused to replace the spurious bearings, or accept the petitioner's alternative proposal The petitioner, it was submitted in those circumstances' in exercise of its rights under Article 17 of the 'general conditions of contract' had, as it was entitled to, withheld the balance price amounting to a sum of Rs. 17,75,000.00, being 25% of the total price, for the supply of the two bearings According to him, Article 17 of the contract clearly provided that the petitioner had the right to deduct any amount from what was payable by it to the respondent in respect to a contract, and appropriate that deducted amount towards the dues which may be payable by the respondent to the petitioner in respect to another quite separate contract. In support of the exercise of such right, counsel for the petitioner cited and relied on the decisions reported in AIR (1984) SC 29 and AIR (1988) A.P. 53 He argued that the respondent was fully aware of the arbitration agreement, and the Article which reversed to the petitioner the right to withhold, and that the reference to arbitration made by the respondent had been made frivolously and without any basis whatsoever He placed Section 34 of the Arbitration Act, 1940 and submitted that an application under this section could be made at any time before the filing of the 'written statetnent' He contended that the view expressed in the decision reported in AIR (1974) Cal 352 had been over-ruled by the decision reported in AIR (1978) Cal. 386 and that there was no force in the proposition of law which had been urged on behalf of the respondent, that an application under Section 34 of the Act must be made before the expiry of the date for filing of the 'written-statement' In support of his submissions he cited and relied on the decisions reported in AIR (1978) Cal 386 (supra); AIR (1984) SC 29 (supra) and AIR (1988) A.P 53 (supra).;