- (1.) THIS is an appeal against the order of the learned Addl. District Judge No. 2, jaipur City dated October 11, 1975.
(2.) THE facts of the case, relevant for the disposal of this appeal, are that the plaintiff Devaki Nandan Bhatia entered into an agreement with the appellant for construction of a building. An agreement was executed between the parties which also contained a clause, i. e. Clause 16, for referring all the disputes arising under the agreement to arbitration. The plaintiff has brought this suit for the recovery of Rs. 58,699/-against the defendant appellant Bank on March 1, 1973. The defendant-appellant, on receipt of the summons of the suit, filed an application under Section 34 of the Indian Arbitration Act, 1940 on April 27, 1973 for staying the proceedings. The learned lower Court after considering the contentions of the respective parties rejected the application on October 11, 1975 holding that it is not a fit case which could be stayed, under Section 34 of the Indian Arbitration Act. The defendant-appellant feeling aggrieved against the decision of the learned Addl. District Judge has filed the present appeal on January 13, 1976. It was contended on behalf of the defendant-appellant that the learned Addl. District Judge has erred in law in not staying the suit under the provisions of section 34 of the Indian Arbitration Act. It was further contended that the defendant-appellant was always ready and willing to do all things necessary for the proper conduct of the arbitration upto the stage of filing the application under Section 34 of the Indian Arbitration Act. It was also contended that the default was always on the part of the plaintiff, and as such, the suit filed by him deserves to be stayed. It was further contended that the learned Addl. District judge has tried to make out a new case for the plaintiff. It was contended that in the plaint, the plaintiff did not make a mention of any extra work done by him beyond the scope and terms of the agreement, and as such, the learned addl. District Judge erred in law in refusing to stay the suit on that ground. It was further contended that under Section 34 of the Indian Arbitration Act step to refer the matter to the arbitration has to be initiated by the party concerned. In the present case, the plaintiff-respondent was the aggrieved party, and as such, steps ought to have been taken by him, and the facts on record clearly establish that the plaintiff-respondent did not take any steps to refer the matter to the arbitration. It was, therefore, contended that the order of the learned addl. District Judge has been vitiated, and under such circumstances, the appeal filed by the defendant-appellant should be allowed, and the suit filed by the plaintiff-respondent should be stayed. On behalf of the plaintiff-respondent, it was contended that an application under Section 34 of the Indian Arbitration Act should have been accompanied by an affidavit. In the instant case, the defendant-appellant did not file any affidavit, and as such, the application under Section 34 of the Indian Arbitration act deserved to be rejected on this ground alone. It was further contended that the application under Section 34 of the Indian Arbitration Act did not contain any facts justifying the stay of the suit. The defendant-appellant has only reproduced the wordings of Section 34 of the Indian Arbitration Act, and has not given any details justifying an inference that the defendant-appellant was always ready and willing to refer the dispute to arbitration upto the stage of filing the application under Section 34 of the Indian Arbitration Act. It was further contended that defendant-appellant only wanted to refer the issues to their architect, but did not take steps to refer the issue to the arbitrator as mentioned in Clause 16 of the agreement. It was also contended that the plaintiff-respondent wanted for an amicable settlement a pretty long time, and the claim was getting barred by time, the plaintiff-respondent was left with no other option, but to file the suit. It was also contended that the plaintiff-respondent had to file the suit in view of the categorical denial by the defendant-appellant by his letter of July 5, 1972. It was further contended by the plaintiff-respondent that there is a specific mention in the plaint for the extra work done by him besides the terms of the agreement. The respective contentions of the learned counsel for the parties have been considered and the record of the case carefully perused. It is true that the defendant appellant did not file any affidavit in support of the application under section 34 of the Indian Arbitration Act. The application under Section 34 of the indian Arbitration Act also does not contain the various facts which could establish the fact that the defendant-appellant was always ready and willing to refer the dispute to the arbitration, and was prepared to do all in his power for this purpose upto the stage of filing the application. The learned counsel for the defendant-appellant has relied on Charan Das v. Gur Saran Das, AIR 1945 All 146, in which it has been held as under: "the language of Section 34 contemplates that on an application being made for stay of the suit the Court should look at the plaint and see for itself whether the arbitration clause applied to the dispute and, if it did, whether the nature of the dispute was such that the ends of justice would be better met by the decision of the Court than by that of a private forum. The language of Section 34 clearly implies that the arbitration clause should be respected and it is only when a clear case has been made out by the plaintiff and if difficult questions of law are likely to arise, such as would inevitably entail a special case being prepared and reference to the Court made by an arbitrator that the Court should enter upon an enquiry and decision of the case. "
(3.) RELIANCE was also placed on Daulat Ram v. Punjab State, AIR 1958 Punj 19, wherein it was held as under: "silence of a party before the proceedings are started is not of any serious consequence. Not resorting to arbitration or taking up a plea in support of the same, on being threatened with a suit, would not disentitle the party to take a stand on the arbitration clause as a bar to the suit. The choice whether the party would like the matter to be referred or determined by the Court is to be made after the proceedings are instituted and not when the same are contemplated or threatened. It is only then that he is to make up his mind and act accordingly. " On behalf of the plaintiff-respondent reliance was placed on Governor-General v. Associated Live-Stock Farm India Ltd. , AIR 1948 Cal 230 wherein it was held as under:-- "the legal proceedings which are sought to be stayed must be in respect of matters which the parties have agreed to refer, that is to say, which come within the terms of the arbitration agreement If a party brings an action in respect of any matter not agreed to be referred the Court has no jurisdiction at all to stay the proceedings and the Court will refuse a stay. Further the Court will exercise its discretion and refuse to stay the action in cases where a substantial part of the disputes does not fall within the arbitration agreement and cannot be conveniently separated. It is, however, not sufficient to induce the Court not to stay the action to show that only a small part of the disputes is outside the arbitration clause. In order to arrive at a conclusion as to whether the action is in respect of matters agreed to be referred, the Court has to examine the arbitration clause and ascertain its ambit and scope. It takes two to make a dispute. If one party bases his claim outside the contracts but the other bases his defence on the contracts the resulting disputes certainly arise out of the contracts. " In The Printers (Mysore) Private Ltd. v. Pothan Joseph, AIR 1960 SC 1156, it was held as under: "the power to stay legal proceedings under Section 34 is discretionary, and so a party to an arbitration agreement against whom legal proceedings have been commenced cannot, by relying on the arbitration agreement, claim the stay of legal proceedings instituted in a court, as a matter of right. However, the discretion vested in the Court must be properly and judicially exercised. Ordinarily the court would direct the parties to go before the tribunal of their choice and stay the legal proceedings instituted before it by one of them. It would be difficult, and it is indeed inexpedient, to lay down any inflexible rules which should govern the exercise of the said discretion. " "it is ordinarily not open to the appellate court to substitute its own exercise of discretion for that of the trial Judge; but if it appears to the appellate court that in exercising its discretion the trial court has acted unreasonably or capriciously or has ignored relevant facts and has adopted an unjudicial approach then it would certainly be open to the appellate court--and in many cases it may be its duty--to interfere with the trial court's exercise of discretion. In cases falling under this class the exercise of discretion by the trial court is in law wrongful and improper and that would certainly justify and call for interference from the appellate court. " ;