UNION OF INDIA Vs. NATH BIHARI SHARMA

JUDGEMENT

(1.) THIS appeal is by the defendant to an action for recovery of certain amount of money by way of out of pocket expenses in connection with a certain contract entered into between the plaintiffs and the defendant and which contract was abruptly rescinded by the defendant. THIS appeal arises out of an order passed under Section 34 of the Arbitration Act refusing to stay further proceedings in the suit. The facts, in brief, for the purpose of understanding the case need be stated. On the 5th of November, 1948, a contract was entered into between the plaintiffs and the defendant, namely, the Union of India, for construction of several temporary huts at Ba'rauni junction under Mansi subdivision of the Engineering Department of the North Eastern Railway. The contract was entered into on behalf of the Union of India by the Chief Engineer of the said railway, and the work was to be completed by the 31st of January, 1949. When materials and men were gathered by the plaintiffs and some work had been started, the plaintiffs received a letter dated the 29th of December, 1948 on behalf of the defendant asking to stop the work altogether and also asking the plaintiffs to submit account of the loss of out of pocket expenses due to sudden stoppage of the work. On the 20th of January, 1949, the plaintiffs submitted their bill for Rs. 22,867 1/12/- as submitted by the learned Counsel for the appellant. On the 26th of November, 1943, the plaintiffs had requested the Resident Engineer, Mansi, for supply of bolts and nuts for completion of the work. On the 27th of January, 1949, the Resident Engineer informed the plaintiffs that the Chief Engineer had extended the period for completion of the work to the 28th of February, 1949. On the 1st of February, 1949, the Resident Engineer informed the plaintiffs that the bolts and nuts required by them were not at all necessary inasmuch as wooden pegs would be enough for the work in question. On the 7th of February. 1949, the plaintiffs did not accept the extension of time as given by the Chief Engineer. By a letter dated the 27th or 28th of February, 1949, the Chief Engineer rejected the plaintiffs' claim on the ground that the plaintiffs had made no arrangement for the work. On the 3rd of May, 1949, the plaintiffs requested the Assistant Engineer to take measurements of the work so far done so that their bill might be prepared accordingly, and measurements were, in fact, taken in plaintiffs' presence between the 4th and 6th of October, 1949 and bills were prepared. According to the defendant, all the bills were paid and the plaintiffs accepted the same, and the plaintiffs' security which had been given at the time of the contract, namely, Rs. 3,000/- was refunded to the plaintiffs with a token cut of Rs. 50/-. On the 29th of December, 1951, the plaintiffs served a notice under Section 80 of the Code of Civil Procedure on the General Manager of the defendant railway. On the 17th of April, 1952, the General Manager replied that the claim of the plaintiffs was barred, and it was not barred, the dispute should have been referred to arbitration, as provided for in the agreement. On the 3rd of May, 1952, the plaintiffs instituted the present suit for compensation for breach of the contract, and the suit was valued at Rs. 8,681/12/9, although, according to the plaintiffs, they were entitled to Rs. 22,000/- and odd. On the 19th of August, 1952, the defendant appeared in the suit, and filed a petition stating that the suit was not maintainable, and that the dispute should have been referred to arbitration of the Deputy Chief Engineer of the North Eastern Railway. It appears that upon that petition the Court passed orders to the effect that the matter would be heard as a preliminary point after the written statement had been filed. On the 8th of September, 1952, the written statement was filed.

(2.) THE matter as to whether the suit should have been stayed under Section 34 of the Arbitration Act was heard, and the Court held (1) that the matter in controversy in the suit was outside the scope of the agreement, and (2) that the defendant had not shown his willingness for referring the matter to arbitration. THErefore, according to the Court below, the civil suit could not be stayed.

(3.) SECTION 34 of the Arbitration Act refers to (1) party to the agreement or persons claiming under the party to the agreement, (2) matter agreed to be referred to arbitration, (3) application to the judicial authority before which the proceedings are pending to stay the proceeding at any time before filing the written statement or taking any other steps in the proceedings and (4) the discretion of that judicial authority to stay the proceedings. In the present case, the disputants were parties to the agreement and, on my finding, the dispute is with reference to the matter agreed between the parties to be referred to arbitration, and the matter of stay was before the Court below. The only question remains whether the third requisite has been complied with. The Court below on this aspect of the matter has recorded the following findings :