BISWANATH RUNGTA Vs. ORIENTAL INDUSTRIAL ENGINEERING CO PVT LTD

JUDGEMENT

(1.) THIS is an application under Section 34 of the Arbitration Act, 1940, for stay of a suit. A suit has been instituted by Oriental Industrial Engineering Co. (P) Ltd. and Ghanshyamdas Rungta and Rajen-dra Prasad Rungta, two of its directors against another director Biswanath Rungta. In the suit Allahabad Bank has also been made a party. The suit mainly is on the ground that in the course of business of the plaintiff-company, namely, Oriental Industrial Engineering Co. (P) Ltd. a sum of Rupees 11,13,000/- became due and payable to the company by the Uranium Corporation of India Ltd., a Government Company and with this amount of money the said defendant to the suit Biswanath Rungta had opened an account in the Allahabad Bank and is operating the said account acting upon certain lleged Board resolutions which are challeng-(sic) as being forged or not genuine and without authority. In essence what is being said is that the act and conduct of the defendant Biswanath Rungta were unauthorised and incorrect on behalf of the company and he should be restrained from operating or withdrawing any money deposited in the said account with the Allahabad Bank- It is stated in paragraph 3 (k) of the petition that the defendant No. 2, namely, Allahabad Bank has informed the company that unless it was restrained by an order of injunction the said defendant Allahabad Bank would allow operation of the said account by the defendant No. 1, as, indeed, it was bound to do. In the aforesaid view of the matter the suit was instituted asking for an appropriate order of injunction and declaration. The suit is by the company and two of its directors as mentioned hereinbefore. THIS is an application by the defendant for stay of the suit. It is stated that there is an arbitration clause contained in the Articles of Association in the following terms :--

(2.) IT is then contended that the defendant had taken steps in the proceeding and as such was disentitled to ask for stay under Section 34, IT is stated that after filing of the suit before the application was served upon the defendant the plaintiff made an application for an injunction restraining the defendant No. 1 from operating the bank account with the Allahabad Bank and obtained an ad interim order of injunction. Thereafter the matter appeared as a new motion and on the 31st May, 1974, after the order of injunction had been made absolute restraining the defendant No. 1, counsel mentioned on behalf of the present petitioner asking for an order that the Allahabad Bank be, however, restrained from allowing the plaintiff from operating the bank account and that was done on the 31st May, 1974, at the instance of the defendant-petitioner to this application. IT is further stated that the defendant-petitioner did not file affidavit-in-opposition to the application for injunction made in this Court. Upon these facts it is stated that the defendant had evinced an inclination to proceed with the suit by taking steps in the proceeding and as such was disentitled to ask for a stay under Section 34 of the Arbitration Act, 1940. My attention was drawn to several decisions to all of which I need not refer in details. The principle seems to be that if a party who has evinced an inclination by such overt act that he wishes to proceed with action then he was not entitled later on to ask for the stay of the suit. In what concrete situation it could be said that that a party has unequivocally expressed the inclination or desire to proceed with the suit by taking step in the proceeding naturally depends upon the facts and circumstances of each particular case and the courts have taken such decision depending on the facts of each case. Reliance was placed on the decision of the Calcutta High Court in the case of Subal Chandra Bhur v. Md. Ibrahim, AIR 1943 Cal 4S4 in which S. R. Das, J. as the learned Judge then was, observed at page 487 as follows :--

(3.) I make an order in terms of prayes (a) but in the interests of justice the status quo as on to-day will continue for a period of three months so that the parties may take appropriate direction either in the arbitration proceeding or in the suit for protection of legitimate rights. Cost cost in the arbitration proceedings.