UNION OF INDIA Vs. HAKIM CHAND & CO

JUDGEMENT

(1.) THIS is the defendants civil first appeal against an order dated 9 -3 -1976 of the Sub Judge (CJM) Jammu dismissing the application under Section 34 of the Arbitration Act and refusing to stay the proceedings.

(2.) A suit for declaration and injunction brought by M/S Hakim Chand and Co. against Union of India is pending in the court of Sub Judge (CJM)) Jammu. The reliefs claimed in the suit are that the contracts between the parties are not valid and enforceable at law as these were executed not in accordance with law and constitution. These contracts also suffer from the doctrine of frustration. As the contracts are not valid, therefore, all the supplies of milk made by the plaintiff could only be determined in terms of Section 79 of the Contract Act and are liable to be paid on reasonable and fair price. The defendant appeared and submitted an application under section 34 of the Arbitration Act, He contended that by virtue of Clause 20 of the agreement, the suit could not be tried by the civil court and the disputes were referable to the aforesaid clause and needed to be adjudicated upon by 1he arbitrator designate in the said clause. The defendant prayed for the stay of the suit. By supplementary affidavit the defendant affirmed that he was ready and willing to get the matter settled and decided by the arbitrator. The application was resisted by the plaintiff on two fold grounds, namely, that the question relating to the constitutional invalidity of contracts could not be gone into by the arbitrator. This matter could only be heard and decided by the civil court. Secondly that the defendant was earlier given the option to refer the dispute to the arbitrator. As he did not agree, there was, therefore, no indication of the fact that he (the defendant) was ready and willing to do all things necessary to the proper conduct of the arbitration even before or at the time when the proceedings commenced. The trial Judge after hearing the counsel for the parties declined to accede to the request of the defendant to stay the proceedings in terms of Section 34 of the Arbitration Act. He observed that because of the alleged invalidity of the contracts in regard to which the plaintiff sought arbitration the court could not refer the matter to the arbitrator as (the arbitrator) could not pronounce upon this question. That by the conduct of the defendant it was manifest that he was not willing to do anything that would show his readiness and willingness to seek arbitration of the disputes between the parties. The third ground on which the order of rejection proceeded was that the suit involved difficult and complicated questions of law and in view of that -the court was not satisfied that such questions should be referred to the arbitrator. Aggrieved by this order, the defendant has come up in appeal before this court.

(3.) IN order to attract the provisions of section 34 of the Arbitration Act, and claim the stay of the proceedings before the civil court, a party seeking arbitration must satisfy the court that he was at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration. The legal proceeding which is sought to be stayed must be in respect of a matter or a dispute which the parties had agreed in the agreement to be referred to the arbitrator. The applicant must not have taken any steps towards further proceedings of the suit. And lastly, the court must also be satisfied that there are no sufficient reasons which would justify the court to stay the proceedings.