ABDUL LATIFF Vs. DOST MOHAMMAD AND CO LTD

JUDGEMENT

(1.) This is a plaintiffs appeal. The appellant filed a suit for the taking of accounts of a dissolved partnership. The defendant made an application under Section 34, Arbitration Act, alleging that in the partnership agreement there was a clause by which all disputes and differences whatsoever in connexion with or arising out of the partnership between the parties thereto shall be referred to the sole arbitration of Haji Dost Mohammad and that, therefore, the present suit should be stayed. The plaintiff objected to the stay of the suit on the ground, inter alia that the arbitrator mentioned in the arbitration agreement, namely, Haji Dost Mohammad, being himself a share-holder in the defendant company Dost Mohammad and Co. Ltd. (which was arrayed as defendant 1 in the suit) there was sufficient reason why the Court should decide the case itself and not stay it. The learned Judge of the Court below considered that the parties had themselves agreed to the aribtration of Haji Dost Mohammad and that, therefore, they were bound by the agreement. In the result, he allowed the application under Section 34, Arbitration Act, and stayed the suit. Against that order, the plaintiff has come up in appeal to this Court.

(2.) The partnership agreement between the parties recites that the disputes and differences arising in connection with the partnership shall be referred to the sole aribtration of Haji Dost Mohammad. Now, Haji Dost Mohammad was admittedly a share-holder in the concern Do3t Mohammad & Co. Ltd. , which was arrayed as defendant 1 in the suit. His son, Mohammad Rafique, is the managing director of the said concern. His other son, Mohammad Shafique represents it in the present suit. He remained a share-holder up to 31 December 1946, on which date he seems to have transferred his shares to his son. The suit was filed on 15th November 1946. Thus Dost Mohammad was a share-holder of the defendant company on the date of the suit and even for some time after it. Allegations of fraud and criminal misappropriation were made against the plaintiff by defendant 1 in respect of the accounts. The plaintiff does not want that the dispute should be decided by Haji Dost Mohammad. It is clear from the admitted facts on the record that the arbitrator is a person who is vitally interested in the result of the suit. As he was a share-holder in the defendant company which had made serious allegations against the plaintiff, it is possible that he may be a witness also of the facts that may have to be gone into in the suit. In a case of this nature, it is well settled that the Court is not bound to stay the proceedings pending before it and to allow the case to be decided by the arbitration of such a person.

(3.) Section 34, Arbitration Act, runs thus: Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at anytime before filing a written statement or taking any other steps in the proceedings apply to the judicial authority before which the proceedings; are pending to stay the proceedings; and if satisfied; that there is no sufficient reason why the matter should not be referred in accordance with the 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 to the proper conduct of the arbitration, such authority may make an order staying the proceedings. The section clearly contemplates that the suit is to be stayed only when the Court is satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement.