JASHU M PATEL Vs. SHIVDATTA R JOSHI

JUDGEMENT

(1.) THE matter pertains to a dispute arising out of dissolution of partnership agreement between the petitioners and respondents. Respondent is the original plaintiff in Suit No. 2041 of 1982. The petitioner herein has yet to file his written statement. In the suit, however interim proceedings had been taken out for appointment of Court Receiver being Notice of Motion No. 17 of 1983. The petitioner herein had filed his reply to the said motion. As may be noted, the suit was filed when the provisions of Indian Arbitration Act, 1940 were in force. During the pendency of the suit Arbitration and Conciliation Act, 1996 has came into force which repealed the Arbitration Act 1940.

(2.) THE petitioner has now invoked the provisions of section 8 of the Arbitration and Conciliation Act, 1996. It is contended on behalf of the petitioner that the party to the suit before filing his first statement on the substance of the dispute can invoke provisions of section 8 by calling on the judicial authority to refer parties to the arbitration. It is contended that petitioner herein has yet to file his first statement on the substance of the dispute and that being the case, it is open to the petitioner even if the petitioner had not invoked the provisions of section 34 of the Indian Arbitration Act, 1940 to invoke jurisdiction under section 8 of the Arbitration and Conciliation Act, 1996. On the other hand on behalf of the respondent, their learned Counsel contends, that expression "first statement on the substance of the dispute" does not necessarily refer to the written statement in the suit but can also apply or include even a reply to an application field even in interim proceedings. In the instant case, there is an arbitral clause. Petitioner herein, it is contended, extensively dealt with the contents of the plaint in reply to the motion for Receivership, and by so doing had already filed first statement on the substance of the disputes. That being the case, and as the petitioner herein, did not elect either for the stay of the suit or for getting the matter referred to arbitration, has waived the right and consequently application under section 8 has to be rejected.

(3.) UNDER the Indian Arbitration Act, 1940 power of the judicial authority was different and was governed by section 34 of the Indian Arbitration Act, 1940. Certain requirements had to be satisfied for a judicial authority to refer the parties to Arbitration under the Act of 1940. Firstly, a party to the legal proceedings could at any time before the filing of written statement or taking another step in the proceedings, apply to the judicial authority for state of the proceedings. Consequently the judicial authority had to be satisfied that there was no sufficient reason why matter should not be referred in accordance with arbitration agreement and that the applicant, was at the time when the proceedings were commenced and still, remains ready and willing to do all things necessary for the proper conduct of the arbitration. On being satisfied, such authority had to make an order staying the proceedings. It is clear from the language of section 34 that judicial authority or Court was not obliged or bound to refer the parties to arbitration. There was discretion in the Court. Even if the applicant satisfied, the requirements, namely of applying before filing of written statement or taking any steps in the proceedings and also expressing intent or desire to be ready and willing to comply with all necessary things for the proper conduct of the arbitration. The Court could refuse to stay the suit. The language of section 8 of the Act of 1996 is on the other mandatory. The judicial authority has no discretion, if an application is moved before filing the first statement of defence and if the subject matter of the suit is governed by the arbitral clause. Section 34 had come up for consideration before the Apex Court in several cases. However, reference need be made to the judgment. In (Food Corporation of India and another v. Yadav Engineer and Contractor) A. I. R. 1982 Supreme Court 1382. In that case, the expression "taking any other steps in the proceedings" had come up for consideration. The Apex Court was considering the expression "written statement" on the one hand and "taking any other steps in the proceedings" on the other. The following observations of the Apex Court need to be set out. The questions formulated for consideration are as set out in paragraph 7 of the judgment. One of the question formulated was as under: Would entering an appearance and contesting petition or notice of motion for interlocutory order constitute such step in the suit or proceedings as would disentitle the party to an order under section 34?" The subsidiary question formulated was as under: