Rajasthan High Court - Jaipur
D.C.M. Ltd. vs Rajasthan State Electricity Board on 21 May, 1991
Equivalent citations: AIR1992RAJ138, 1991(2)WLN386
JUDGMENT S.N. Bhargava, J.
1. These four appeals involve similar question of law and therefore, are being disposed of by this common judgment.
2. Adverting to the facts of S. B. Civil Misc. Appeal No. 477/1989. Plaintiff-appellant is a Public Limited Company registered under the Companies Act, 1882 and has got factories at Kota and utilising electricity for running its factories. The plaintiff entered into separate agreements with the defendant-respondent. The defendant issued a notification dt. 6-3-1982 by which the tariff for the supply of electricity was amended with effect from 1-3-1982. The defendant sent a bill to the plaintiff, at the revised rates, starting from 1-3-1982. Plaintiff-appellant made payment of the said bill under protest and made several representations and written several letters to the defendant, asserting that the new tariff could be held to be applicable only from 6-3-1982 and not retrospectively from 1-3-1982 and that the plaintiff was not liable to pay electricity charges at the enhanced tariff for the period 1-3-1982 to 5-3-1982, therefore, the said amount should be refunded. The defendant-respondent neither replied the communications nor refunded the amount. Hence, a registered notice was sent to the defendant, through counsel, requesting to refund the said amount. It was specifically mentioned in the notice that though the subject of refund is not at all covered under any agreement between the Board and the plaintiff, but still, the plaintiff has no objection if the matter could be solved by arbitration, provided a reply is received within seven days, failing which a suit shall be filed by the plaintiff against the Board, in the court. But the Board in spite of several verbal requests and the legal notice through counsel did not refund the amount nor even replied to the notice, therefore, the plaintiff had no other alternative but to file a civil suit on 25-4-1985 for recovery of the said amount. The respondent defendant submitted an application under Section 34 of the Arbitration Act, 1940, alleging that the matter is covered by Clause 30 of the agreement, which envisages arbitration between the parties and requested that the proceedings in the suit should be stayed and the matter may be referred to arbitration. The said application was opposed by the plaintiff on the ground that the matter was not covered by the arbitration clause and the present dispute was not a contract and covered by Clause 30 of the agreement. Moreover, the defendant was not ready and willing to settle the matter by arbitration and did not respond to several letters nor did it reply even the legal notice sent by the plaintiff through its counsel, before filing the suit. Therefore, this application should be dismissed.
3. Trial court, after hearing both the parties, allowed the application of the defendant vide its order dated 24-7-1989 and stayed further proceedings in the suit. It is against this order that the Civil Misc. Appeal No. 477/1989 has been filed. Arguments have been heard. Record of the case has been perused.
4. Learned counsel for the appellant has very vehemently submitted that the trial court did not even care to go through the so-called arbitration agreement because Clause 16(b) and (c) of the agreement relied by the trial court did not refer to any arbitration whatsoever. Moreover, the matter in the present dispute is not covered by Clause 30 of the agreement and even if the matter is held to be covered by Clause 30, then Clause 30 is not a simple arbitration clause and the application should not have been allowed. He has also submitted that the matter in dispute is only a pure legal question which cannot be effectively decided by arbitration. Lastly, he has submitted that since the defendant was not ready and willing to go for arbitration, application under Section 34 of the Arbitration Act ought to have been dismissed. He has placed reliance on Middle East Trading Co. v. New National Mills Limited, ATR 1960 Bom 292 and N.C. Padmanabhan v. S. Srinivasan, AIR 1967 Madras 201. Relying on these two authorities, Calcutta High Court in Shroff Bros. v. Bisheswar Dayal, AIR 1974 Calcutta 352 has held that the applicant who files an application under Section 34 must satisfy the court that he was always ready and willing to get the matter decided by arbitration. The readiness should not be matter of implication but should be unambiguous and specific averments thereof should be made in the petition and an affidavit in support thereof. Mere repetition of the words of section is not sufficient.
5. Learned counsel for the appellant has also placed reliance on Hindustan Copper Limited v. Assam Bearing Agencies, AIR 1980 Delhi 238 wherein it has been held that mere referring to arbitration clause is not enough. The applicant must satisfy that the matter in dispute is covered by the arbitration clause. It has further been observed that one of the ingredients of Section 34 is that the defendant must show that it was ever ready and willing for arbitration. Silence on the part of the defendant-applicant after the receipt of legal notice also shows its unwillingness.
6. Much reliance was placed on Union of India v. Thekedar Bhoj Raj (1960) ILR 10 Rajasthan 1244 wherein a Division Bench of this Court has also held that the defendant-applicant must satisfy to the court that the matter in dispute is covered by arbitration clause. He must further satisfy that he was ready and willing to go for arbitration.
7. He has also placed reliance on Food Corporation of India v. Thakur Shipping Co., AIR 1975 SC 469 wherein their Lordships of the Supreme Court has held that the defendant-applicant must show that he was ready and willing for arbitrtion. Silence and inaction or evasive reply to the letter of plaintiff shows that the defendant was not ready and willing for the arbitration.
8. He has also placed reliance on Nagpur Golden Transport Co. v. Vimal Textiles, 1988 (1) RLR 756 wherein it has been held that the defendant should have mentioned in the reply of notice that the matter has to be decided by arbitrator and that he was ready and willing for the arbitration.
9. Learned counsel for the appellant has also relied on Man Industrial Corporation v. R.S.E.B., 1985 (2) WLN 189 wherein it has been observed that Clause 30 of the agreement is not a simple arbitration clause. Arbitration has to be preceded by reference to the Chief Engineer of the Electricity Board and no time limit is prescribed for the Chief Engineer to give his decision in the matter. Availability of the remedy of arbitration is thus dependent on the sweet will of the Chief Engineer of the Electricity Board. It has also been further observed that the nature of the dispute being purely a legal one, it can more conveniently be decided by the court rather than by arbitration and this judgment in Man Industrial Corporation's case (supra) has been noted with approval by the Supreme Court in Bihar State Electricity Board v. Dhanwat Rice and Oil Mills, 1989 (1) SCC 452: (AIR 1989 SC 1030).
10. On the other hand, learned counsel for the respondent has submitted that merely because letters or communiction addressed by the plaintiff had not been acknowledged or replied or no reply to the notice had been given, it does not mean and no inference can be drawn, that the defendant was not willing and ready for arbitration and the application should not be dismissed on this Court. In this connection, he has placed reliance on AIR 1944 Allahabad 253, AIR 1958 Punjab 19 Daulat Ram v. State of Punjab wherein it has been observed that silence of a party before the proceedings are started is not of any serious consequence in resorting to arbitration or taking up a plea in support of the same, on being threatened with a suit, would not disentitle the party to take a stand on the arbitration clause as a bar to the suit. The choice whether the party would like the matter to be referred or determined by the court is to be made after the proceedings are instituted and not when the same are contemplated or threatened.
11. He has further placed reliance on Atin Bose v. Heavy Engineering Corportion, AIR 1983 Calcutta 376 wherein it has been held that failure to reply to the notice received prior to suit could not be regarded as a sign of unwillingness.
12. My attention has also been drawn to State of Punjab v. Geeta Iron and Brass Works Limited, AIR 1978 SC 1608, Padma Ram v. Bhanwari Devi, AIR 1979 Rajasthan 84 wherein Justice S.N. Modi (as he then was) after referring to Thekedar Bhojraj's case (supra), observed that the conduct of the defendant in not replying the notice issued by the plaintiff does not amount to waiver and does not give rise to the inference of unwillingness on the part of the defendant to resort to arbitration proceedings. Mere silence on the part of the defendant before the suit cannot deprive him of his statutory right granted under Section 34. It has further been observed, after referring to Middle East Trading Co. and N.C. Padmanabhan (supra) that a party who invokes Section 34 must specifically allege that he was ready and willing for arbitration. Readiness of the defendant should not be a matter of implication but there should be a clear, unambiguous and specific averment to that effect in the application for stay and should be supported by an affidavit. In the absence of such an averment, the requirements of Section 34 are not fulfilled and the application deserves to be dismissed.
13. He has further submitted that even points of law can be referred to arbitration and in this connection, has placed reliance on Tarapore & Co. v. Cochin Shipyard Ltd., AIR 1984 SC 1072. Reliance has also been placed on Gaya Electric Supply Co. Ltd. v. State of Bihar, AIR 1953 SC 182 wherein their Lordships have observed that the only point which the court exercising jurisdiction under Section 34 can decide is whether the claim brought in the suit comes within the submission to arbitration. He has also drawn my attention to Printers (Mysore) Pvt. Ltd. v. Pottahn Joseph, AIR 1960 SC 1156 wherein their Lordships have observed that the appellate court should not interfere with the discretion exercised by the trial court but if it appears to the appellate court that in exercising its discretion the trial court has acted unreasonably or capriciously or has ignored the relevant facts and had adopted an unjudicial approach, then, it would certainly be open to the appellate court and in many cases it may be its duty to interfere with the exercise of discretion by the trial court. This authority has been relied by the Calcutta High Court in Steel Plant Private Limited v. Swastika Alloy Steel Limited, AIR 1978 Calcutta 386.
14. I have given my thoughtful consideration to the whole matter and have also perused the record of the case as also taken into consideration the submissions made at the bar. I have also gone through the citations relied upon by the learned counsel for the parties.
15. I have carefully gone through the application under Section 34 of the Arbitration Act submitted by the defendant in the trial court. It is true, in that application, the defendant has stated that it had been and is still ready and willing to get the matter decided by arbitration and that it is prepared to fulfil its all obligations in that connection. In reply to the said application, the plaintiff has also asserted that the defendant was never interested nor ready and willing to get the matter decided by arbitration because the defendant never replied to the various letters, details whereof have been mentioned in para 6 of the plaint, and not even the legal notice given to the defendant by the plaintiff through its counsel......... In the notice given before filing the suit it had been stated as under:--
"That the above referred subject is not at all covered under any agreement between the Board and my clients and there is no arbitration agreement for resolving the same but any-how, if there is any such agreement in the knowledge of the Board, my clients would like to take arbitration proceedings, provided it is informed in writing to do so within 7 days of the receipt of this letter failing whereof, suit for the recovery of the amount shall be filed. Please intimate my clients accordingly".
In spite of the aforesaid unequivocal assertion by the plaintiff, the defendant remained silent and did not reply to the said notice nor informed the plaintiff about its (defendant's) willingness to get the matter decided by arbitration which plaintiff had itself offered. In view of this, the logical inference would be that the defendant was not ready and willing nor interested in getting the matter decided by arbitration. Mere repetition of the language of the Section in the application under Section 34 is not sufficient. Even after the detailed reply of the application under Section 34, the defendant did not submit any rejoinder nor counter explaining its conduct as to why it had not replied to several communications sent by the plaintiff, including the legal notice, wherein it had expressly been stated that the plaintiff was interested in getting the matter decided by arbitration, even though the matter may not be covered by the arbitration clause. It is not a case of mere inaction or non-replying to the notice because the plaintiff had itself offered and that offer was not accepted by the defendant nor even acknowledged by the defendant, therefore, the trial court should have drawn an inference that the defendant was not ready and willing to get the matter settled by arbitration and hence, the requirement of Section 34 have not been fulfilled and the application under Section 34 ought to have been dismissed. In taking this view, I get full support by the decision of this Court in Thekedar Bhojraj (supra) (Division Bench) and other authorities of Calcutta and Delhi High Courts relied by learned counsel for the appellant. Observations of this Court in a later case in Padma Ram (supra), which is a judgment by a single Judge, are not applicable to the facts of the present case because here in the legal notice given by the plaintiff, before filing the suit, a clear assertion had been made and an offer for getting the matter decided by arbitration made by the plaintiff was not accepted by the defendant, therefore, that case is clearly distinguishable. Power to stay legal proceedings under Section 34 is discretionary. A party to arbitration agreement, against whom, legal proceedings have been commenced, cannot be relying on the arbitration agreement, claim stay of the legal proceedings instituted in a court, as a matter of right. The discretion vested in the court must be properly and judicially exercised. It is also true that the appellate court should not lightly interfere with the discretion of the trial court, nevertheless, there is no bar as such and the appellate court if it finds that the trial court has not exercised its discretion judicially or has ignored relevant facts, it can interfere with the discretion exercised by the trial court. In the present case, the trial court has even referred to the clause of the agreement which did not refer to arbitration at all and has totally ignored and has not taken into consideration the assertion made by the plaintiff in its reply to the application under Section 34 of the Arbitrtion Act and also the assertion made by the plaintiff in the legal notice sent through counsel, prior to the filing of the suit. Moreover, the point in issue is purely a legal point as to whether the amended tariff can be applied retrospectively and therefore, it would be proper if this legal aspect is decided by a court of law rather than by an Arbitrator. Observations made in Man Structurals Ltd. case (supra) that Clause 30 of the agreement is not a simple arbitration clause as arbitration has to be preceded by a reference to the Chief Engineer of the Electricity Board and no time limit is prescribed for the Chief Engineer to give his decision in the matter, availability of the remedy of arbitration is thus dependent on the sweet will of the Chief Engineer of the Electricity Board, cannot be ignored. Keeping them in view, I am of the view that this appeal should be allowed.
16. In the result, these appeals are allowed, the order of the trial court is set aside and the application under Section 34 of the Arbitration Act, filed by the defendant is dismissed. The parties are left to bear their own costs. Record of the court below should be returned.