The main legal point established in the judgment is that the powers of the civil court are suspended by a reference and stay of proceedings under Section 34 of the Arbitration Act, and granting interim relief under Section 41(b) would only arise when the arbitration proceedings have commenced or are pending.

N.Y. Hanumanthappa, J. - The point that arises for consideration in this revision petition is that when once a reference is ordered under Section 34 of the Arbitration Act, 1940 (hereinafter referred to as "the Act"), before its commencement or pending proceedings before the arbitrator, powers under Section 41(b) of the Act be exercised by the civil court ?

2. In order to answer this question, it is proper to narrate a few facts and relevant provisions and interpretation of law on the scope of sections involved.

3. Petitioner herein is a society known as The Karnataka State Co-operative Marketing Federation Ltd. entered into an agreement with respondent-plaintiff viz., K. Muniswamy Raju entrusting the work of construction of Multi-storeyed Building-II in Cunningham Road, for a sum of Rs. 1,51,90,453/- under the terms of agreement based on competitive tender. There was a formal agreement entered into on 4.10.1984 signed by both the parties. After completing part construction work Muniswamy Raju-plaintiff received a sum of Rs. 85 lakhs and the remaining part of the work was deferred. For the said remaining work defendant invited tenders. Pursuant to the tender notification dated 29.1.1990 published in Deccan Herald dated 24.2.1990 for the purpose of construction of M.S. Office, Complex-II (Read Block), Bangalore. Along with others, Shri Muniswamy Raju also submitted his tender. At that stage, Muniswamy Raju filed a suit in O.S. No. 2874 of 1990 in the court of 21st Additional City Civil Court, Bangalore against the vendor not to entrust tender work to any other contractor pending disposal of the settlement. He also filed I.A. I under Order 39, Rules 1 and 2 C.P.C. Defendant put appearance. He opposed I.A. I and he also filed I.A. II under Section 34 of the Arbitration Act of 1940. Proceedings in O.S. No. 2874 of 1990 was stayed.

4. After hearing both sides on I.As. I and II and also taking into consideration the effect of Clauses 31 and 33 of the agreement which are extracted hereunder :

"Clause 31 :

All disputes between the parties to the contract (other than those for which the contract stipulates the decision of the Employer as final and binding) shall after written notice by either party to the contract to either of them and to the Managing Director of the Employer, Bangalore (hereinafter called as 'the appointing authority') be referred for adjudication to a sole Arbitrator to be appointed as hereinafter provided."

Clause 33.

Should any matter pertaining to this contract were to be referred to a court of law, the courts in Bangalore City only shall have jurisdiction."

The trial court held that the difference between the parties required to be decided by an arbitrator. Hence, made a reference under Article 31 of the agreement and also stayed proceedings by exercise powers conferred under Section 34 of the Act.

5. As far as I.A. I for injunction is concerned, trial court held that the same may be consideration on merits after taking into consideration the provisions of Sections of Section 41(b) of the Act with a further direction that the defendant to file objections if any to I.A. I. Operative portion of the order reads as follows :

"I direct that the suit matter be referred to the Arbitration under Article 31 of the agreement pending arbitration, the suit is hereby stayed under Section 34 of the Arbitration Act.

I.A. I will considered on its merits taking into consideration the provisions of Section 41(b) of the Arbitration Act.

The defendant is hereby directed to file objections, if any, to I.A. I accordingly."

6. Aggrieved by the second part of the order passed by the trial court, defendant has preferred this revision petition.

7. Shri K.C. Shivasubramaniam, learned counsel for the petitioner contends that when once a reference has been made and proceedings have been stayed, to grant interim relief alone exercising powers under Section 41(b) of the Act will not arise. According to him, when once suit is stayed, f