P GANNU RAO Vs. PTHIAGARAJA RAO

JUDGEMENT

(1.) This application is made on behalf of the first defendant is C.S. No. 89 of 1947 under Section 34 of the Indian Arbitration Act of 1940 (which will hereafter be referred to as the Act in the course of this judgment) and for stay of proceedings in the suit in view of an agreement alleged to have been entered into between the parties that disputes between them should be referred to arbitration. The application is resisted on behalf of the plaintiff and the 2nd defendant. The main contention urged on behalf of the respondents is that it is too late now for the applicant to ask for stay of proceedings under Section 34 of the Act inasmuch as he has already taken "other steps in the proceedings" within the meaning of Section 34.

(2.) To appreciate these contentions it is necessary to state the facts very briefly. There was a partnership contract between the plaintiff and the defendants, the date of the deed of partnership being the 15 September, 1943. According to Clause (1) of that contract, in the event of any dispute between the partners regarding the partnership the same shall be settled by arbitration under the Indian Arbitration Act. The suit was filed by P. Thiagaraja Rao one of the parties to this contract against the other two partners for dissolution of partnership and for accounts, the date of the suit being 27 February, 1947. On the day following, the plaintiff filed an interlocutory application--Application No. 631 of 1947--in which he prayed for the following reliefs: an interim injunction pending disposal of the suit restraining the 1 defendant from drawing certain amounts, for the appointment of a commissioner to take an inventory of all documents, account books and vouchers in the premises mentioned in the application and to initial them, or in the alternative for attachment before judgment of the properties mentioned in Schedules A and B to the application, and for the appointment of a Receiver to take possession of all the assets of the firm. On this application, an ex parte order was made on the 28 February, 1947, directing notice to the respondents, granting interim injunction as prayed in Clause (a) of the notice of motion and appointing a commissioner for preparing an inventory and initialing the account books and documents. The notice in respect of the order for interim injunction was made returnable on the 3 of March, 1947. On that date, the 1st respondent to that application who is the applicant here appeared by Mr. V. Ramaswami Aiyar. What transpired on the date on which he so appeared before the Court is to be found in the following order made on the 3 of March: The first defendant appears by Mr. Ramaswami Aiyar and wants ten days time for filing counter affidavit. File counter affidavit and reply affidavit within ten days. With regard to prayer (a) Mr. Srinivasan for the plaintiff consents to the following modification of the order of interim injunction in respect of item 3 of schedule A of the summons. It is stated by Mr. Ramaswami Iyer that the 1 respondent has been permitted to overdraw from the Indian Bank on the security of the feed deposit of Rs. 72,000 mentioned as item 3 in schedule A. Mr. Srinivasan agreed that the fixed deposit may be used as security, for future overdrafts and that the order of interim injunction will not be enforced to the prejudice of the first respondent in respect of such overdrafts. Adjourned to the 14th March, 1947.

(3.) It is clear from this order that what happened on that date was that the present applicant through his learned Counsel asked for ten days time for filing a counter affidavit and for modification of the order of interim injunction issued in respect of the prayer incorporated in Clause (a) of the notice of motion. By consent of the plaintiff's advocate this request was granted and the order of interim injunction was modified in the manner in which the present applicant wanted it to be modified. There was not a word said on that date that the applicant contemplated filing a petition under Section 34 of the Act for stay of proceedings in the suit and for reference to arbitration of the disputes involved in it. On the adjourned date, the present applicant appeared again by Mr. Ramaswami Iyer and stated for the first time that he intended filing an application for referring the dispute to arbitration. It was represented on his behalf that in view of this decision arrived at by him he had not yet filed a counter affidavit. The order made on the 14 of March after recording these facts proceeds to say, He also states that all the account books and vouchers have come back to the respondent from the auditors and that the commissioner already appointed may see those books and documents and prepare a list and also initial them. The interim order of injunction as modified on the previous date of hearing was directed to continue and the application was ordered to be posted with the present application which Mr. Ramaswami Iyer said his client contemplated filing. According to the provisions of Section 34 of the Act, an application to stay proceedings and to refer the disputes to arbitration can be made only at any time before filing the written statement or taking any other steps in the proceedings.