BIHAR WATER DEVELOPMENT CORPORATION (PRIVATE) LTD. Vs. BATLIBOI AND COMPANY (PRIVATE) LTD., AND ANOTHER

JUDGEMENT

(1.) Bihar Water Development Corporation Private Ltd., (defendant no. 2) in a money suit instituted by the plaintiff respondent bearing Money Suit No. 78 of 1976, has preferred this appeal against an order passed by the Additional Subordinate Judge refusing to stay the suit under Sec. 34of the Arbitration Act. Pursuant to two agreements dated 12.1.73 and 25.1.73 between the plaintiff respondent and defendant no. 1, the State of Bihar through the Secretary to the Government of Bihar, Department of Irrigation (Minor Irrigation the plaintiff supplied submersible pumps complete with all accessories. The agreements provided arbitration clause. The plaintiff instituted the suit in the year 1976 against the two defendants for the recovery of a sum of Rs. 3,03,603.96 as the balance price of the said supply along with interest calculated up to December 20, 1975. Defendant No. 2, who was not a party to arbitration agreement, was impleaded in the suit as it took over State owned tube wells with rights and liabilities of the Government of Bihar. The claim is stated to have been admitted on behalf of defendant no. 1, the State of Bihar, as alleged in paragraph 18 of the plaint. From the impugned order it appears that the State of Bihar entered appearance and moved two dozen petitions for filing written statement and at no stage filed any objection under Sec. 34of the Arbitration Act (hereinafter referred to as "the Act"), for staying the suit and referring the matter to arbitration in view of the arbitration clause in the agreement referred to above. On 6.1.78 the appellant (defendant no. 2), which came to be constituted on 22nd April, 1973, having taken over all rights and liabilities of the Government of Bihar so far as they related to tube wells, buildings, assets and works project, filed an application under Sec. 34of the Act as successor -in -interest of defendant no. 1 to enforce the arbitration clause and stay of the suit. The court below held that in the facts and circumstances of this case, the State of Bihar having not taken any objection to the continuance of the suit and, on the contrary, having taken large number of steps in aid of the progress of the suit, defendant no. 2 being only the successor -in -interest of defendant no. 1 cannot be permitted to enforce the arbitration clause and thus rejected the petition of defendant no. 2 under Sec. 34of the Act.

(2.) Mr. H.R. Das, Learned Counsel appearing on behalf of the appellant (defendant no. 2) contended that his client having preferred an application under Sec. 34of the Act on its very first appearance for stay of the suit and the plaintiff being interested in obtaining a decree, jointly and severally, against both the defendants, the court below has failed to exercise judicial discretion vested in it in not staying the suit. It is further contended that the petition under Sec. 34of the Act is not only maintainable at the instance only of a party to an arbitration agreement but also at the instance of any person claiming under a party in respect of any matter agreed to be, referred to arbitration and the Corporation being the successor -in -interest of the State of Bihar, therefore, is entitled to enforce the arbitration clause. Mr. Das in support of his stand relied upon a decision of this Court in Ram Naresh Kumar Singh v/s. The Food Corporation of India Ltd., repotted in : 1983 P.L.J.R. 521.

(3.) Mr. Ghose, senior counsel appearing on behalf of plaintiff respondent no. 1, on the other hand, submitted that the power to stay legal proceeding under Sec. 34of the Act is discretionary and, therefore, a party against whom legal proceedings have been commenced cannot claim stay of legal proceedings as a matter of right. The State Government which is a party to the arbitration agreement, being willing to proceed with the suit by the conduct manifested and having not resorted at any time to enforce the arbitration agreement, the trial court has not acted unreasonably in refusing to stay the suit at the instance of the successor -in interest of the State of Bihar. According to Learned Counsel, the decision in Ram Naresh Kumar Singh's case (supra) is of no help to the appellant. He in support of his stand relied upon the decisions of the Supreme Court in Printers (Mysore) Private Ltd., v/s. Pothan Joseph : (A.I.R. 1960 SC 1156) and State of UP., v/s. Janki Soran : (A.I.R. 1973 SC 2071).