ARJUN AGARWALLA Vs. BAIDYA NATH ROY

JUDGEMENT

(1.) THE parties to this application entered into a partnership agreement dated 5-1-1976 to carry on business under the name and style of Godhur Colliery Co. THE said deed contained an arbitration clause as follows:--

(2.) ACCORDING to the petitioner, the partnership stood dissolved on expiry of the period of partnership on 31-12-1970 or from 17-10-1971 when the business undertaking was taken over by the Government under the provisions of Coking Coal Mines (Emergency) Provisions Ordinance 1971 which ultimately culminated in nationalisation of the said business under the provisions of Coking Coal Mines (Nationalisation) Act 1972. This allegation of dissolution is denied by the respondents Nos. 1 and 3 who are contesting this application. It is further alleged in the petition that a settlement was arrived at by and between the parties and a joint petition was filed before the Commissioner of Payment whereby the respondent admitted that a sum of Rs. 1,15,000 would be payable to the petitioner out of the compensation money and pursuant to the order of the Commissioner of Payment the partners have received payments. These allegations are denied by the respondents. The petitioner stated that on 4-8-1979, the petitioner was surprised to receive a letter from one Solil Kumar Mukheriee whereby the petitioner was intimated that in Suit No. 555 of 1979 (Baidya Nath Roy v. Arjun Agarwalla and Ors) this Court had passed an order restraining the petitioner from receiving any money in respect of compensation. Thereafter he instructed M/s. Meheria and Co. to enquire into the matter and on 13-8-1979 the matter was mentioned on behalf of the petitioner and the Court directed service of a copy of the plaint on the petitioner and gave directions for filing affidavits in the pending application. The matter was again mentioned on behalf of the petitioner on 31-8-1979 for adjournment of the date of hearing of the application. Instead of filing the affidavit-in-opposition, the petitioner took out this application under Section 34 of the Arbitration Act for stay of the Suit No. 555 of 1979 filed by the respondent No. 1 on 30-7-1979 for dissolution of the partnership and accounts. The petitioner alleged that he did not take any step in the proceeding and was ready and willing to do everything necessary for proper conduct of the Arbitration. The respondents Nos. 1 and 3 filed their respective affidavits-in-opposition alleging that the petitioner orally prayed for vacating the interim order of injunction on 13-8-1979. The court refused to grant the said prayer and gave directions for service of a copy of the plaint on the petitioner and for filing affidavits. The petitioner again prayed for extension of time to file affidavit on 31-8-1979 and obtained another adjournment of hearing of the application on 6-6-1979 (or 6-9-1979 ?). Thereafter on 7-9-1979 the present application under Section 34 of the Arbitration Act was taken out. The conduct of the petitioner will show that he had taken steps in the proceeding prior to the taking out of this application. It was further alleged that the subject matter of the suit was not covered by the arbitration agreement and the agreement became unworkable. Hence stay should be refused.

(3.) IF steps are taken in the proceedings which are not in aid of the progress of the suit or without having any intention to have the adjudication on merit by the court, then those acts would not amount to step in the proceeding. He submitted that the law on this point had to be settled by the Supreme Court in view of the divergence of decisions by different High Courts in India. He further submitted that prior to 1973, in some of the High Courts including our Court, it was held that filing of affidavits or obtaining time for filing affidavits in an application for Receiver or injunction would amount to taking step in the proceeding. This caused serious hardship to the defendant if he wanted to enforce the arbitration agreement He was unable to try to vacate interim orders for Receiver or injunction or to contest the same. In such cases, even if the defendant could obtain an order for stay ultimately, he would have to face serious prejudice and inconvenience during the intervening period. To eradicate these inconveniences and for the ends of, justice, it was necessary to settle the law on this point. He submitted that in (Shri Ram Shah v. Mastan Singh) the Division Bench of that High Court, has elaborated this principle in the light of the decision and has pointed out two distinct classes of proceedings viz, "incidental" and "supplemental" and has opined that contesting a supplemental proceeding or taking any step in the same will not amount to taking step in the proceeding. This will be clear from paragraph 6 of this decision :--