BRIJ GOPAL BINANI Vs. SREELAL BINANI

JUDGEMENT

(1.) THIS is an application under Section 34 of the Arbitration Act, 1940 for stay of Suit No. 229 of 1978. THIS is a suit by Sreelal Binani against 14 defendants. Of the 14 defendants, the defendants Nos. 1 to 10 are said to be the partners of Pioneer Match Factory and defendants Nos. 11 to 13 are alleged to be the benamdars and name lenders of the defendants Nos. 1 to 10 and defendant No. 14 is said to be a concern in which the defendants Nos. 11, 12 and 13 are the partners. In the plaint, it is alleged that Pioneer Match Factory has its head office at 11, Sovaram Basak Street Calcutta and its factory is situate at 16, Dum Dum Road, 24-Parganas. The said partnership was carried on under a Deed of Partnership dated 7th Dec. 1971. The said Deed of Partnership contained, inter alia, the following clauses;

(2.) IT is the case of the petitioner that the parties had carried on the business under the said Deed of Partnership. In or about Oct. 1972, the business of the said partnership firm was closed as it was neither practicable nor profitable to carry on the said business of manufacture and sale of matches. After the said closure of that business the machinery including the plant of the factory, according to the plaintiff, were kept in a godown within the said factory premises and a portion of the factory premises was let out, without any prior knowledge or consent of the plaintiff, to certain concerns mentioned in the plaint. Even after letting out the portion of the factory premises by the parties, a considerable portion of land in the said factory premises remained vacant, and according to the plaintiff, instead of letting out the remaining vacant portion of land at the market rate in the name of the said partnership firm, the defendants Nos. 1 to 10 took recourse to a fraudulent device, whereby a new partnership was constituted in the name of Joyshree Corporation in which defendants Nos. 11 to 13 were made partners and the partners of Joyshree Corporation, being Nos. 11 to 13, according to the plaintiff, were the name lenders of the defendants Nos. 1 to 10. Therefore, the plaintiff in this suit states that by its notice dated 11th Jan. 1978 the plaintiff has dissolved the firm and in the alternative has prayed for dissolution of the partnership and also further asked for a declaration that the said firm stood dissolved on or about 11th Jan., 1978 and alternatively a decree for dissolution of the said firm of Pioneer Match Factory and on just and equitable grounds to wind up the business of the firm. The plaintiff after coming to know of the purported tenancy as also the fact of earning profit by Joyshree Corporation by way of letting out the said factory premises has refused to ratify the same. The allegation of the plaintiff is that the defendants Nos. 1 to 10 of the said partnership firm, of which the plaintiff was the partner, are realising rent from Joyshree Corporation about Rs. 2,000 and odd and the said Joyshree Corporation is realising rents over Rupees 7,000 from different other tenants. Therefore, it is the case of the plaintiff that really the defendants Nos. 1 to 10 are realising for themselves the said amounts through Joyshree Corporation and the said Joyshree Corporation is the defendants' firm benamidar. IT is this suit that is sought to be stayed in this application under Section 34 of the Arbitration Act, 1940.

(3.) IT was, then, urged that the stay should not be granted because the defendants have taken steps in aid of the suit and secondly the defendants were not ready or willing to go to arbitration. In support of this in para 19 onwards of the affidavit-in-opposition Shrilal Binani has stated that when the application was made before Mr. Justice Deb for appointment of Receiver, the same was opposed on the 18th Jan., 1978 and on the 8th Feb., 1978 when his Lordship had indicated that he was going to pass an order appointing an independent person as a Receiver, the parties including the defendants agreed to the appointment of a party-Receiver. IT was, therefore, submitted that the defendants had taken steps in the suit disentitling them to ask for a stay. IT was further submitted that the defendants were not ready or willing to go to arbitration. Now, so far as taking steps in the suit is concerned, it appears that according to the plaintiff-respondent the defendants had opposed the application for appointment of Receiver on the 8th February, 1978 and had asked for adjournment of the same. Thereupon they had agreed to the appointment of a party-Receiver. This step as is apparent was taken subsequent to the making of an application for stay under Section 34 of the Arbitration Act. Section 34 authorises a person to ask for a stay "any time before filing written statement or taking any other steps in the proceedings." Steps taken which are contemplated must be before the making of an application under Section 34 of the Act. Section 34 does not contemplate of the steps in the proceeding after steps have been taken for stay. Therefore the conduct of the parties on 8th Feb., 1978, after the application had been made for stay of the suit, in my opinion, would be irrelevant for considering whether any steps had been taken in the proceeding so as to disentitle the applicant from obtaining a stay under Section 34 of the Act. Furthermore, in my opinion, by making the submission as to who should be the Receiver a party does not evince an intention to submit to the jurisdiction of the Court for adjudication of the disputes by the Court nor does the party indicate any intention not to insist on the arbitration. I think also step in aid, in my opinion, should be such an overt act which will indicate that the party intends to submit to the jurisdiction of the suit for adjudication of the disputes between the parties. Reliance in this connection may be placed on the observations in the case of Biswanath Rungta v. O. I. Engineering Co., .