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Andhra Pradesh High Court
Judges : A.R.LAKSHAMANAN
Kunta Malla Reddy - Appellant
Versus
Soma Srinivas Reddy - Respondent
Decided On : 06-07-77
ARBITRATION - STAY OF PROCEEDINGS - SECTION 34 OF THE ARBITRATION ACT, 1940 - INTERPRETATION - CONDITIONS FOR GRANT OF STAY - DISCRETION OF THE COURT - EXERCISE OF DISCRETION - PRINCIPLES GOVERNING - FILING OF COUNTER AFFIDAVIT IN INTERLOCUTORY APPLICATIONS - CONSTITUTES TAKING STEPS IN THE PROCEEDINGS - DISENTITLES THE APPLICANT FROM INVOKING SECTION 34 OF THE ACT.
Fact of the Case:
The appellant, the 1st defendant in a suit for accounts of a dissolved partnership firm, filed an application under Section 34 of the Arbitration Act, 1940, seeking a stay of the suit till the matter was referred to arbitrators as contemplated under Clause 11 of the partnership agreement. The court below dismissed the application. The appellant filed an appeal against the said decision.
Finding of the Court:
The court held that the appellant, by filing counter affidavits in the interlocutory applications filed by the plaintiff-1st respondent seeking interim injunction and the appointment of a Receiver, had taken steps in the proceedings and was therefore disentitled from invoking Section 34 of the Act. The court also held that the subject-matter of the suit was not one referable to Clause 11 of the partnership deed and that the court below had exercised its discretion properly in refusing to grant a stay.
Issues: 1. Whether the appellant had taken steps in the proceedings by filing counter affidavits in the interlocutory applications, thereby disentitling him from invoking Section 34 of the Act? 2. Whether the subject-matter of the suit was referable to Clause 11 of the partnership deed? 3. Whether the court below had exercised its discretion properly in refusing to grant a stay?
Ratio Decidendi: 1. The court held that the appellant, by filing counter affidavits in the interlocutory applications, had taken steps in the proceedings and was therefore disentitled from invoking Section 34 of the Act. The court relied on the Supreme Court decision in State of U. P. v. Janki Saran, where it was held that taking other steps in the suit proceedings connotes the idea of doing something in aid of the progress of the suit or submitting to jurisdiction of the court for the purpose of adjudication of the merits of the controversy in the suit. 2. The court held that the subject-matter of the suit was not referable to Clause 11 of the partnership deed. The court interpreted Clause 11 and came to the conclusion that the subject-matter of the suit was not one of the matters agreed to be referred to arbitration under the said clause. 3. The court held that the court below had exercised its discretion properly in refusing to grant a stay. The court relied on the Supreme Court decision in U. P. Co-operative Federation V. Sunder Bros. Delhi, where it was held that the discretion conferred on the court under Section 34 of the Act should be exercised judicially and not capriciously or unreasonably.
Final Decision: The appeal was dismissed.
( 1 ) REVISION by the 1st defendant under S. 115 of the Civil P. C. is directed against an order dated 12/03/1976 in I. A. 1012/75 in O. S. 387/75 on the file of the 2nd Addl. Judge, City Civil Court. Hyderabad dismissing the application filed by the petitioner under S. 34 of the Arbitration Act. 1940 (referred to hereinafter merely as the Act ).
( 2 ) AT the very outset a doubt was entertained whether it is an appeal or a revision that has to be filed against the impugned order rejecting the application filed under S. 34 of Act.
( 3 ) SECTION 34 of the Act deals with the power to stay legal proceedings where there is an arbitration agreement. Section 39 of the Act provides that an appeal shall lie from the various orders enumerated therein passed under that Act. Under Cl. (5) of sub-sec (1) of the said S. 39 of the Act an appeal lies from the order granting stay or refusing to stay the legal proceedings where there is an arbitration agreement.
( 4 ) THE order impugned is one passed in an application filed by the petitioner under S. 34 of the Act. An appeal under S. 39 of the Act lies against such order refusing to stay under S. 34 of the Act the legal proceedings where there is an arbitration agreement. Therefore it is not a revision under S. 115, C. P. C. that is entertainable against the impugned order but it is an appeal under S. 39 of the Act and therefore an appeal is maintainable against the impugned order. That propositional position is not disputed by the learned counsel appearing on the other side. We shall therefore treat this revision petition as an appeal under S. 39 of the Act and proceed.
( 5 ) THE respondent No. 1 the plaintiff in this case filed the suit O. S. 387/75 for accounts of the dissolved partnership firm viz. , The Janata Rice Mill. The partnership deed dated Jan. 9, 1964 contains a C. (11) pertaining to arbitrations which reads thus :"in case of any dispute arising out of the interpretation of any clause or clauses in these presents, the same shall be referred to an arbitrator or arbitrators as chosen by the aggrieved partners and the Arbitration Act in force in the State of Andhra Pradesh with all the relevant amendments from time to time shall be applicable to the deed of partnership. "
( 6 ) ALONG with the plaint, the 1st respondent-plaintiff filed I. A. 670/75 seeking a temporary injunction restraining the petitioner and other defendants from carrying on the rice milling business in the premises of the said Janata Rice Mill. An ex parte interim injunction was issued on 11/08/1975 and the matter was posted to Sept. 15, 1975 for the arguments of the defendants. This petitioner and defendant 2 filed I. A. 675/75 on Aug. , 13, 1975 seeking the vacation of the ex parte interim injunction granted on 11/08/1975. The petitioner filed a counter affidavit in support of that application for vacating the interim injunction. The Court below after hearing both sides passed an order on 26/08/1975 dismissing I. A. 670/75 and the interim injunction was vacated.
( 7 ) THE 1st respondent filed another application I. A. 745/75 on Sept. 4, 1975 under O. 40, R. 1, C. P. C. seeking the appointment of a Receiver in order to complete the winding up proceedings of the dissolved partnership firm. That application also was opposed by the petitioner who filed a counter affidavit opposing the same. That application I. A. 745/75 also was dismissed by the court below on 18-10-1975.
( 8 ) THE petitioner filed I. A. 1012/75 under S. 34 of the Act requesting the court below to stay the suit till the matter was referred to arbitrators as contemplated under Cl. 11 of the partnership agreement. The court below dismissed that application on 12/03/1976. The present appeal under S. 39 of the Act is filed by the 1st defendant against that decision of the court below.
( 9 ) SRI Waghrey the learned counsel appearing for the appellant submitted that the appellant as the 1st defendant did not file any written statement no
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