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High Court Of Calcutta
A. K. SEN, SUDHIR RANJAN ROY
W.B.C.A.DEVELOPMENT CORPN. - Appellant
Versus
SASANKA SEKHAR - Respondent
F. M. A. 111 Of 1984
Decided On : 02/22/1985
ARBITRATION ACT - SECTION 34 - STAY OF PROCEEDINGS - DISPUTE WITHIN ARBITRATION CLAUSE - READINESS AND WILLINGNESS TO ARBITRATE - FRAUD ALLEGATIONS - JUDICIAL DISCRETION - CONTRACTUAL DISPUTE - PAYMENT CERTIFICATES.
Fact of the Case:
A dispute arose between the parties over the execution of a contract and consequent alleged non-payment of the final bill of the plaintiff and non-issuance of payment certificates in respect of some of the earlier paid bills. The plaintiff filed a suit for a declaration that he was entitled to get payment certificates from the defendants, for mandatory injunction directing the defendants to issue the said payment certificates, for a decree for Rs. 1,00,761,00 as per details given in the schedule to the plaint, for an enquiry under Order 20 Rule 12 of the Code of Civil Procedure, for costs and other reliefs. The defendants filed an application under section 34 of the Arbitration Act for stay of the suit and for referring the matter in accordance with the arbitration agreement to the sole Arbitrator.
Finding of the Court:
The Court held that the main dispute between the parties was within the terms of the arbitration clause and that the defendants were ready and willing to do all that was necessary for the proper conduct of the arbitration. The Court also held that the allegations of fraud made by the defendants against the plaintiff would not take the matter out of the arbitration clause and that the plaintiff had not raised any issue in his written objection to the stay petition filed by the defendant No. 1 that in view of the allegations of fraud made against him he would like to have the matter tried in a court of law.
Issues: 1. Whether the dispute between the parties was within the terms of the arbitration clause? 2. Whether the defendants were ready and willing to do all that was necessary for the proper conduct of the arbitration? 3. Whether the allegations of fraud made by the defendants against the plaintiff would take the matter out of the arbitration clause? 4. Whether the plaintiff had raised any issue in his written objection to the stay petition filed by the defendant No. 1 that in view of the allegations of fraud made against him he would like to have the matter tried in a court of law?
Ratio Decidendi: 1. The Court held that the main dispute between the parties was within the terms of the arbitration clause because the claim for payment certificates was only an insignificant part of the main dispute, namely, the claim in respect of the last and final bill of the plaintiff. 2. The Court held that the defendants were ready and willing to do all that was necessary for the proper conduct of the arbitration because they had made it clear that they were ready and willing to do everything necessary for the proper conduct of the arbitration, both prior to the institution of the suit and subsequent thereto. 3. The Court held that the allegations of fraud made by the defendants against the plaintiff would not take the matter out of the arbitration clause because fraud was not a question to be gone into by the arbitrator, the real point at issue being the completion of work according to agreement. 4. The Court held that the plaintiff had not raised any issue in his written objection to the stay petition filed by the defendant No. 1 that in view of the allegations of fraud made against him he would like to have the matter tried in a court of law.
Final Decision: The Court allowed the appeal and set aside the order of the trial court refusing to stay the proceedings of the suit. The Court directed that the matter be referred to arbitration in accordance with the arbitration agreement.
( 1 ) AN abortive application for stay under S. 34 of the Arbitration Act is the genesis of the instant appeal by the defendants.
( 2 ) THE defendant No. 1 the West Bengal Comprehensive Area Development Corporation, a statutory body (hereinafter referred to as the Corporation) invited tenders for construction of "field channel" at village Upar-Gugui and Mahultaur I and II in the district of Purulia against a tender notice dated February 29, 1981. The plaintiff, Sasanka Sekhar Banerjee (respondent), a contractor, submitted a tender with all formalities which was ultimately accepted by the defendant No. 1. A printed contract form was executed by and between the plaintiff and the defendant No. 1 on the 1st day of June, 1981.
( 3 ) CLAUSE 25 in the said printed agreement provides for settlement of all disputes arising out of the contract by referring the same to the sole arbitration of the Executive Vice-Chairman of the Corporation or to an Arbitrator to be appointed by him if he is unable or unwilling to act.
( 4 ) A dispute having arisen between the parties over execution of the contract and consequent alleged non-payment of the final bill of the plaintiff and non-issuance of payment certificates in respect of some of the earlier paid bills, there was exchange of letters between the parties and ultimately on August 3, 1982 the plaintiff issued a lawyer's notice upon the defendants demanding payment of his alleged dues and issuance of payment certificates. In the said notice, reference was made to the arbitration clause (clause 25) in the agreement and the defendants were allowed time for two months to refer the matter to the sole Arbitrator if they so desired, failing which legal action was proposed.
( 5 ) IN his reply dated August 9,1982 to the aforesaid notice the defendant No. 2, the Project Director, made it clear that no dispute having been raised by them or on their behalf there was no question of their inferring the matter to arbitration but in case the plaintiff referred his alleged dispute to the sole Arbitrator there would be no lack of co-operation on their part and he was duty bound to make available all the relevant records and evidence as may be required by the Arbitrator.
( 6 ) HOWEVER, without referring the matter to the sole Arbitrator in terms of clause 25 of the agreement the plaintiff straightway rushed to the Court of the learned Subordinate Judge and filed Title Suit No. 68 of 1982 against the defendants. In the said suit, the plaintiff prayed for a declaration that he was entitled to get payment certificates from the defendants for the payments made to him in connection with the work; for mandatory injunction directing the defendants to issue the said payment certificates; for a decree for Rs. 1,00,761,00 as per details given in the schedule to the plaint; for an enquiry under Order 20 Rule 12 of the Code of Civil Procedure, for costs and other reliefs.
( 7 ) ON receipt of the notice of the suit the defendants, before filing their written statement or taking any other steps filed an application under section 34 of the Arbitration Act for stay of the suit and for referring the matter in accordance with the arbitration agreement to the sole Arbitrator. In the said petition, pointed attention of the learned Subordinate Judge was drawn to the arbitration clause in the agreement viz. , clause 25 and the defendants also expressed their readiness and willingness to do all things necessary for the proper conduct of the arbitration.
( 8 ) THE plaintiff filed an objection to the said petition wherein it was alleged that section 34 of the Arbitration Act had no application to the facts of the case; that the reliefs sought for by the plaintiff in the suit were outside the scope of the agreement between the parties; that the plaintiff never violated any of the provisions of the agreement; that the defendants having failed to refer the matter to the sole Arbitrator in spite of an opportunit
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