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HIGH COURT OF ANDHRA PRADESH
SUBBA RAO,JAGANMOHAN REDDY, JJ.
Andhra Co-operative Spinning Mills Ltd., Guntakal
Versus
C. Sriniyasan
A. A. O. Nos. 115 and 116 of 1956against orders of Sub. J. Anantapur
Decided On : 16-09-1957
ARBITRATION - STAY OF SUIT - DISPUTE COVERED BY ARBITRATION CLAUSE - CONSTRUCTION OF CONTRACT - QUESTION OF LAW - DISCRETION OF COURT.
Fact of the Case:
The appellant, a mill owner, entered into an agreement with the respondent, a contractor, for the construction of a mill premises. The agreement contained an arbitration clause providing for the reference of disputes to arbitration. The respondent claimed extra payment for sand and stone used in the construction, alleging that the appellant had authorised the use of materials from a different place involving a longer lead. The appellant denied the authorisation and filed a suit for a declaration that the respondent was not entitled to the extra payment and for an injunction restraining him from proceeding with the arbitration. The respondent applied for a stay of the suit under Section 34 of the Arbitration Act.
Finding of the Court:
The Court held that the dispute was covered by the arbitration clause and that the appellant was not entitled to an injunction restraining the respondent from proceeding with the arbitration. The Court found that the respondent's claim was based on the terms of the agreement and that the conditions precedent to the making of the claim had been fulfilled. The Court also found that the allegations of fraud and the legal points involved in the dispute were not sufficient reasons for refusing a stay of the suit.
Issues: 1. Whether the dispute was covered by the arbitration clause? 2. Whether the appellant was entitled to an injunction restraining the respondent from proceeding with the arbitration?
Ratio Decidendi: 1. The arbitration clause in the agreement provided for the reference of disputes arising under the contract to arbitration. The respondent's claim was based on the terms of the agreement and the conditions precedent to the making of the claim had been fulfilled. Therefore, the dispute was covered by the arbitration clause. 2. The allegations of fraud and the legal points involved in the dispute were not sufficient reasons for refusing a stay of the suit. The parties had agreed to refer disputes to arbitration and the Court should give effect to their agreement.
Final Decision: The Court dismissed the appellant's appeals and upheld the lower court's order staying the suit.
JAGANMOHAN REDDY, J. : -
These are two Civil Miscellaneous Appeals against the orders of the Subordinate Judge, Anantapur, in I. As. 347 and 381 of 1955, allowing the latter and dismissing the former with costs. The appellant had filed a suit in the Court of the Subordinate Judge, Anantapur, against the respondent, who is a contractor, for a declaration that he is not entitled to Rs. 19,339-10-9 on account of work done on a building contract and for an injunction restraining him from proceeding with the arbitration which was pending before Dewan Bahadur A. Nageswar Iyer. It is necessary to state a few facts for a better appreciation of the contentions urged in these appeals.
2. The appellant called for tenders for building a mill premises and the respondent, contractor, tendered for it. His tender was accepted. An agreement was subsequently entered into on 18-4-1952 between the parties and the contractor thereafter agreed also to construct other buildings as such as canteen, power house etc. on the same conditions as are mentioned in the agreement dated 18-4-1952. It is alleged that in pursuance of the agreement the respondent carried out the works and was submitting from time to time various bills to the Consulting Engineer of the appellant and on 12-3-54 he submitted a bill for work done aggregating to Rs. 7,14,268-11-0 inclusive of sales-tax and after giving credit to the amounts already received by him, he claimed a sum of Rs. 37,677-13-6.
In the letter accompanying the bill, the respondent asked for valuation and payment for certain extra items which, according to the bill received on 14-4-1954, were valued at Rs. 2,53,437/-. The Consulting Engineer immediately replied that there was no authorisation for this extra lead and that the claim was suddenly sprung on him. It was accordingly rejected on the ground that the alleged expenditure was not authorised and the claim for extra was not in accordance with the terms of the agreement dated 18-4-1952.
After the claim was rejected, the respondent caused a notice to be issued by his advocate on 18-2-1955 calling on the appellant to have the disputes settled by reference to arbitration. He subsequently nominated Dewan Bahadur Nageswar Iyer, retired consulting Engineer, Government of India, as an arbitrator and called on the appellant to nominate another arbitrator within fifteen days, in default of which the appellant was informed that the arbitrator appointed by the contractor would function as the sole arbitrator as per the terms of the agreement dated 18-4-1952.
The appellant by his telegarm dated 22-4-1955 intimated that the arbitration was illegal. Thereafter O. S. 43/1955 was filed on 24-9-1955 as aforesaid. In that suit I. A. 347/55 under O. 39 Rr. 1 and 2 C. P. C. was filed for restraining the arbitrator from going on with the arbitration till the disposal of the suit. Interim injunction was granted on 24-9-1955. Respondent put in a counter and also rued I. A. 381/55 for a stay of the proceedings in the suit under S. 34 of the Arbitration Act. As we have already stated the Subordinate Judge allowed this application and dismissed the application filed by the appellant after vacating the stay.
3. In these appeals learned advocate for the appellant contends that the dispute is not one governed by the agreement and therefore Cl. 40 of the agreement (Ex. A-4) does not apply. According to him the claim for the extra lead put forward by the respondent not being founded on the agreement, Ex. A-4, but being based on a distinct oral agreement, the arbitration clause cannot be invoked; that the works not being completed by the respondent, the reference to the arbitration was premature, unless the written consent of the employer or the Consulting Engineer or the Contractor was given for such reference; that in any case the Court in exercise of its discretion should have dismissed the petition for stay of proceedings in the suit and should have granted his application as the matt
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