2001 Supreme(SC) 1519

2001(8) Supreme 402
SUPREME COURT OF INDIA
(From Rajasthan High Court)
S. Rajendra Babu & Doraiswamy Raju, JJ.
Smt. Kalpana Kothari -Appellant
versus
Smt. Sudha Yadav & Ors. -Respondents
Civil Appeal Nos. 7404-7406 of 2001
(Arising out of SLP (C) Nos. 9189-9191 of 2000)
With
Civil Appeal Nos. 7407-7409 of 2001
(Arising out of SLP (C) Nos. 12182-12184 of 2000)
Decided on 31-10-2001
Counsel for the Parties :
For the Appearing Parties : R.F. Nariman, Sr. Advocate, Bhaskar P. Gupta, N.R. Choudhury, Prashant Kumar, Triveni Podekar, Ashok Sharma, N.S. Bisht, Somnath Mukherjee, N.S. Bisht, J.P. Pandey, Dr. P.C. Jain, Chanchal Kumar Ganguli, Advocate (N.P.), N.S. Vashisht, Arun K. Sinha, Rakesh Singh and Rao Ranjit, Advocates.

IMPORTANT POINT
The fact that earlier application u/s. 34 of Arbitration Act, 1940 was got dismissed as not pressed in the teeth of the repeal of the said Act cannot constitute any legal impediment for having recourse to and avail of the avenues thrown open to parties u/s. 8 of the Arbitration and Conciliation Act, 1986. Similarly, plea of estoppel have no application in above situation.

Headnote:Arbitration Act, 1940-Section 34-Arbitration and Conciliation Act, 1986-Section 8-Evidence Act, 1872-Section 115-C.P.C. 1908-Order 40 Rule 1, Order 39 Rules 1 and 2-Partnership Act, 1932-Section 44(g)-First respondent filed suit for dissolution of partnership and for accounts and also filed applications for appointment of receiver and for injunction-The defendants (appellant) initially filed applications in suit u/s. 34 Arbitration Act, 1940-Applications of respondent rejected by trial Court but that of defendant allowed-Further suit proceeding came to be stayed-At appellate stage Application u/s. 34 was withdrawn being not pressed as new act had been passed-Appellants (defendants) again moved High Court for stay u/s. 8 of Arbitration and Conciliation Act, 1986-Application rejected on grounds that no such application could be filed once the application earlier filed under 1940 Act was got dismissed as not pressed and also on the ground of estoppel based on the very fact-Appeals against to Supreme Court-Whether orders under challenge can be approved? (No)-Appeals allowed-Case remanded to trial Court-Decide afresh in accordance with law.

       Held : On a careful consideration for the same and the reasons assigned by the learned Judge in the High Court, we find it difficult to affix our approval to the order under challenge. (Para 7)

       We are of the view that the High Court did not properly appreciate the relevant and respective scope, object and purpose as also the considerations necessary for dealing with and disposing of the respective applications envisaged under Section 34 of the 1940 Act and Section 8 of the 1996 Act. Section 34 of the 1940 Act provided for filing an application to stay legal proceedings instituted by any party to an arbitration agreement against any other party to such agreement, in derogation of the arbitration clause and attempts for settlement of disputes otherwise than in accordance with the arbitration clause by substantiating the existence of an arbitration clause and the judicial authority concerned may stay such proceedings on being satisfied that there is no sufficient reason as to why the matter should not be referred to for decision in accordance with the arbitration agreement, and that the applicant seeking for stay was at the time when the proceedings were commenced and still remained ready and willing to do all things necessary to the proper conduct of the arbitration. This provision under the 1940 Act had nothing to do with actual reference to the arbitration of the disputes and that was left to be taken care of under Section 8 and 20 of the 1940 Act. In striking contrast to the said scheme underlying the provisions of the 1940 Act, in the new 1996 Act, there is no provision corresponding to Section 34 of the old Act and Section 8 of the 1996 Act mandates that the Judicial Authority before which an action has been brought in respect of a matter, which is the subject-matter of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement. The provisions of the 1996 Act do not envisage the specific obtaining of any stay as under the 1940 Act, for the reason that not only the direction to make reference is mandatory but not withstanding the pendency of the proceedings before the Judicial Authority or the making of an application under Section 8(1) of the 1996 Act, the arbitration proceedings are enabled, under Section 8(3) of the 1996 Act to be commenced or continued and an arbitral award also made unhampered by such pendency. We have to test the order under appeal on this basis. On the ground of estoppel and the conduct of the appellants in getting their earlier application made under Section 34 of the 1940 Act dismissed as not pressed that the applications under Section 8 of the 1996 Act were not countenanced by the High Court. The fact that the earlier application under the 1940 Act was got dismissed as not pressed in the teeth of the repeal of the said Act cannot, in our view, constitute any legal impediment for having recourse to and avail of the avenues thrown open to parties under the 1996 Act. Similarly, having regard to the distinct purposes, scope and object of the respective provisions of law in these two Acts, the plea of estoppel can have no application to deprive the appellants of the legitimate right to invoke an all comprehensive provision of mandatory character like Section 8 of the 1996 Act to have the matter relating to the disputes referred to arbitration, in terms of the arbitration agreement. So far as the need for or desirability of appointing the Receiver and granting of injunction, as prayed for, is concerned, the High Court does not seem to have taken into account the overall necessity to balance the interests of both parties. Since only the land has been said to have been brought into the partnership assets by the Plaintiff s husband with no other contribution of any further funds, that the land was got legally converted into one fit for commercial purposes of the Firm and the constructions were stated to have been put up only with the funds of the other partners or the builders, as the case may be, and the serious difficulties and loss to which the Firm and partners may be put into by freezing the day-to-day business activities of the Firm and the adverse impact on the credibility and reputation of the Firm, as a whole, do not seem to have engaged the attention of the High Court in passing the orders under challenge. The feasibility or otherwise of appointing Party Receiver and allowing them to carry on the day-to-day activities of the business subject to strict and effective control and accountability to the Court of the realizing of the business does not seem to have been considered at all before going out for the appointment of a third party Receiver and prohibiting any sales, completely. As long as the Arbitration clause exists, having recourse to Civil Court for adjudication of disputes envisaged to be resolved through arbitral process or getting any orders of the nature from Civil Court for appointment of Receiver or prohibitory orders without evincing any intention to have recourse to arbitration in terms of the agreement, may not arise. For all the reasons stated supra, we set aside the orders of the High Court as also that of the trial Court and remit the proceedings to the Trial Court which shall consider the matter afresh in the light of the claims and rights of the respective parties under the Arbitration and Conciliation Act, 1996 and pass such orders as it deem fit in accordance with law. Both parties are at liberty to move all or any applications for the purpose before the Trial Court. Though, we set aside the order of the High Court to facilitate the trial Court to deal with the matter afresh, the status quo as brought about by the orders of the High Court shall continue till the trial Court chooses to make its own orders or directions in this regard, uninfluenced by the earlier orders of its own or that of the High Court. The appeals are allowed on the above terms with no order as to costs. (Paras 8 to 12)