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High Court Of Calcutta
Sankar Prasad Mitra, Sudhamay Basu
STEEL PLANT PRIVATE LTD - Appellant
Versus
SWASTIKA ALLOY STEEL LTD - Respondent
A. F. O. O. 463 Of 1976
Decided On : 04/13/1978
ARBITRATION - STAY OF SUIT - DISCRETION OF COURT - FACTORS TO BE CONSIDERED - DELAY IN APPLYING FOR STAY - READINESS AND WILLINGNESS TO ARBITRATE - BALANCE OF CONVENIENCE - POSSIBILITY OF CLAIM BEING BARRED BY LIMITATION.
Fact of the Case:
The appellant, a steel plant, entered into a contract with the respondent, a company, for the purchase of an electric arc furnace. Disputes arose between the parties, and the respondent filed a suit in the Calcutta High Court for breach of contract. The appellant applied for a stay of the suit under Section 34 of the Indian Arbitration Act, 1940, on the ground that the contract contained an arbitration clause.
Finding of the Court:
The Calcutta High Court dismissed the appellant's application for a stay, holding that the appellant was not ready and willing to arbitrate, that the balance of convenience favored the suit proceeding, and that there was a possibility of the claim being barred by limitation if it was referred to arbitration.
Issues: 1. Whether the appellant was ready and willing to arbitrate? 2. Whether the balance of convenience favored the suit proceeding? 3. Whether there was a possibility of the claim being barred by limitation if it was referred to arbitration?
Ratio Decidendi: 1. The court held that the appellant was not ready and willing to arbitrate because it had delayed in applying for a stay of the suit, had not taken any steps to refer the matter to arbitration, and had not shown a genuine desire to settle the dispute through arbitration. 2. The court held that the balance of convenience favored the suit proceeding because the appellant had an advance of Rs. 4 lakhs from the respondent, and the delay in the arbitration proceedings would prejudice the respondent's rights. 3. The court held that there was a possibility of the claim being barred by limitation if it was referred to arbitration because the application for a stay was made after the time for filing the written statement had expired.
Final Decision: The Calcutta High Court dismissed the appellant's appeal against the order of the trial court refusing to grant a stay of the suit.
( 1 ) THIS appeal is against an order dated the 26th of November 1976 passed by Salil K. Roy Chowdhury, J. by which he refused to grant stay on an application made under Section 34 of the Indian Arbitration Act.
( 2 ) THE relevant facts are as follows : on the 30th of Aug. 1972 the respondent No. 2, Jain and Associates, placed an order with the appellant, Steel Plant Private Limited for purchase of an electric Arc Furnace at Rs. 11,25,890/- with transformers and other accessories on terms and conditions specified in the order. The order was accompanied by an initial advance of Rs. 80,000/- with a request to send the formal contract in quadruplicate in confirmation of acceptance of the order and starting the work. By a letter dated the 8th of Sept. 1972 the appellant petitioners granted the receipt for a sum of Rs. 80,000/- and recorded that the order had been registered for delivery within thirty months. Formal acceptance was made on the 20th Sept. 1972. On the 7th of Oct. 1972 four copies of acceptance of the order dated the 20th of Sept. 1972 were forwarded by the appellant for signature of respondent No. 2. In or about March, 1973 the respondent No. 2 requested the appellant to transfer the contract for sale and purchase of the Arc Furnaces in the name of respondent No. 1, Swastika Alloy Steel Limited. After some correspondence the respondent No. 2 authorised transfer of the amount advanced in the name of respondent. No. 1 and thereafter the appellant in their books transferred the contract in the name of respondent No. 1. On the 31st of March, 1973 respondent No. 2 paid a further sum of Rs. 1,20,000/- by cheque at Calcutta to the appellant. In Dec. 1973 the respondent No. 1 as required by the appellant, duly signed and forwarded to the former one of the four copies of the acceptance of the order dated the 20th of Sept. 1972 which had been sent to respondent No. 2, In the said letter of 20th Sept. 1972 various terms of contracts were incorporated including the arbitration clause. It may be noted that one Jogindra Kumar Jain, a partner of the firm M/s. Jain Associates, was also a Managing Director of the company Swastika Alloy Steel Limited. The respondent No. 1 by signing acceptance of the order agreed to abide by all the terms and conditions contained in the letter dated the 20th of Sept. 1972. The condition contained in arbitration clause is as follows:"if at any time any question, dispute or difference whatsoever shall arise between the purchaser and the seller upon any relation to or in connection with the contract, either of the party may give to the other notice in writing of the existing such question, dispute or difference and the same shall be referred to arbitration in Bombay in accordance with the Indian Arbitration Act. "it appears that on the 8th of Aug. 1973 the respondent No. 1 paid a further sum of Rs. 2,00,000/- by way of advance. Thereafter disputes arose between the parties as the appellants demanded an increase in the agreed price on account of rise of price by a further sum of Rs. 1,02,000/- which the respondents did not agree to pay. On the 3rd of March, 1975 the respondent No. 1 accepted repudiation of the contract and demanded refund of Rs. 4,00,000/ -. On the 14th of March, the respondents filed a suit (being No. 34 of 1975) in this High Court against the appellant for committing breach of the contract and claiming, inter alia, decree for damages and for delivery up and cancellation of the order dated the 20th of Sept. 1972 and a refund of Rs. 4,00,000/ -. The writ of summons was served on the appellant at Calcutta on 20th of April 1975. The time to file the written statement was to expire on the 11th of June, 1975
( 3 ) EXPLAINING the delay the appellant stated that the appellants contacted their Solicitors at Bombay who after perusing all the papers advised the appellants in the early part of June, 1975 that the suit being filed in breach of the arbitration agreement the applic
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