Madhya Pradesh High Court
Kishandas Parsram Ahuja And Anr. vs Bhagchand Dwarkadas Nagdev And Ors. on 30 April, 1991
Equivalent citations: AIR1991MP309, AIR 1991 MADHYA PRADESH 309, (1991) JAB LJ 498, (1991) 2 ARBILR 313, (1991) 3 CURCC 89
ORDER
1. The applicants and non-applicants constituted a partnership styled as "Kishanchand Bhagchand". The non-applicants filed a suit bearing No. C.S. No. 18-A of 1982 for accounts of partnership. Applicants were defendants in that suit. They filed an application under Section 34 of the Arbitration Act praying for stay of proceedings in suit in view of a term in the contract agreement providing for settlement of disputes through arbitration. That application, however, was not prosecuted and was withdrawn. Consequently, the suit proceeded and is pending adjudication.
2. The applicants then filed a separate application under Section 8(2) of the Arbitration Act for appointment of an arbitrator to settle the disputes arising out of the partnership agreement. That application was registered as C.S. No. 34-B of 1982. By the impugned order, dated 6-5-1987, the application has been rejected on the ground that the applicants withdrew their application under Section 34 of the Arbitration Act made in Civil Suit No. 18-A of 1982. The view taken by the District Judge is that the withdrawal of that application under Section 34 tantamounts to waiver of their right to get the matter resolved through arbitration. This revision is directed against the rejection of that application under Section 8(2) of the Arbitration Act.
3. Shri H. B. Agarwal, in support of the revision application, contended that withdrawal of application under Section 34 praying for stay of the suit is inconsequential and is no impediment to move the Court under Section 8(2) to get an arbitrator appointed and to get the matter adjudicated by the arbitrator. Ordinarily, a suit of civil nature has to be instituted in and dealt with by a Civil Court of competent jurisdiction. Any enactment or contract between the parties taking away this jurisdiction must be strictly construed. The Arbitration Act undoubtedly contains provisions permitting the parties to settle their disputes by person/persons of their choice and arbitrator/arbitrators may be appointed in accordance with the agreement between the parties either with or without the intervention of the Court. The award given by the arbitrator so appointed can be challenged on very limited grounds. Such agreement between the parties, however, does not oust the jurisdiction of a competent Civil Court to deal with the dispute and a suit to have the dispute resolved by Civil Court can be filed despite such agreement. Section 34 of the Arbitration Act, however, enables the other party to the arbitration agreement to object, without participating in proceedings in such a suit, and to insist that the matter should be decided by the arbitrator in accordance with the agreement. That Section 34 of the Arbitration Act reads thus:
"34. Power to stay legal proceedings where there is an arbitration agreement.-- Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to-stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings."
4. The terms of this section clearly permit a party to the arbitration agreement to oppose adjudication of the matter by a Court if the other party to the agreement approaches that Court. All the same, on receiving notice of the institution of such a suit, the defendant, viz., the other party to agreement, may not exercise the right and option available to it in terms of Section 34 and may allow the suit to continue and thus obtain decision from the Court on the disputed matter and may not insist upon decision by arbitrator. This only means that such a defendant is entitled to waive the right to have the matter adjudicated by arbitrator in accordance with the agreement. That is why Section 34 specifically mentions that the right to choose the forum of choice in terms of the agreement must be enforced before the filing of the written statement or taking any other steps in the proceedings (in suit). Once such a right is waived, it will not be permissible for such a defendant to invoke the terms of the agreement and insist upon the appointment of an arbitrator/arbitrators in terms of the agreement to resolve the dispute. Under the scheme of the arbitration agreement, a party agreeing to resolve the dispute through arbitrator may enforce that agreement either by making an application under Section 8 or under Section 20 of the Arbitration Act. According to Sections, the Court intervenes where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties and when on demand by one of the parties to agreement, the other party does not agree to the appointment of arbitrator for settling the dispute. Section 20 enables a party to the arbitration agreement not to proceed in accordance with Section 8 falling under Chapter II, but to make an application to the Court directing the opposite party to file the arbitration agreement and for a direction to refer the dispute to arbitrator appointed by the parties and if the parties cannot agree upon an arbitrator then for appointment of an arbitrator by Court and reference of the matter to such arbitrator. Both these sections contain provisions to enforce the arbitration agreement between the parties for resolving their disputes. It can, therefore, be safely inferred that once a party to the arbitration agreement waives his right to enforce that agreement and takes part in proceedings in suit relating to the matter in dispute between them, it cannot invoke the provisions of Section 8 or of Section 20 of the Arbitration Act and obtain a reference to the arbitrator through Court in terms of those provisions. When a defendant in the suit invokes the provisions of Section 34, all that he does is to pray for stay of the trial of the suit leaving the plaintiff to proceed to enforce the arbitration agreement in accordance with the provisions of the Arbitration Act. But, once the defendant waives such a right, it may not be open for him to otherwise approach and move a Court by separate proceedings either under Sections or Section 20 for reference to arbitrator.
5. In the present case, the applicants first moved the Court in the pending civil suit for stay of the suit under Section 34 of the Arbitration Act. For reasons best known to them they withdrew that application and thus consciously abandoned their right to obtain an order staying the suit. They thus allowed the suit to continue despite the agreement to get their disputes settled by arbitrator. The proceedings in that civil suit (C.S. No. 18-A/ 82 of the Court of IIIrd Additional Judge to the Court of District Judge, Raipur) show that after getting the application under Section 34 dismissed, the applicants, defendants in that suit, participated in further proceedings and vehemently contested that suit. It is, thus, clear that at one stage, the applicants in that suit (C.S. No. 18-A/82) appraised the opposite party, viz., the non-applicants herein, and plaintiffs in that suit, that the arbitration Clause is attracted and might be brought into play. The withdrawal of that application and further participation of the applicants in those proceedings in that suit do constitute waiver of this claim of stay of that suit which must proceed. (A Division Bench of Allahabad High Court has expressed such a view in Union of India v. Hans Raj Gupta and Company, AIR 1957 AH 91, and I respectfully agree with that view.) It is, therefore, clear that it wilt not be permissible for a party on one hand to contend by making an application under. Section 34 of the Arbitration Act in a pending suit to say that it would like to bring the arbitration Clause into play by moving the Court either under Section 8 or under Section 20 and at the same time not only to allow the suit to proceed but also to participate in the suit relating to the matter covered by the arbitration agreement. Once the suit is allowed to proceed and the party (defendant) participates any application either under Section 20 of the Arbitration Act by such a party must be held untenable.
6. The learned District Judge while passing the impugned order, has taken the correct view of the law. It has been found as a fact that the subject matter of the dispute in C.S. No. 18-A of 1982 and the dispute sought to be resolved by the appellant through the arbitrator by a direction under Section 8, i.e., by intervention of the Court, are not different. It has been found that by withdrawing the application under Section 34 filed in that civil suit and having participated in further proceedings in the suit, the applicants have waived their right to get the dispute resolved by arbitrator. In my opinion, the lower Court has taken the correct view and the impugned order calls for no interference.
7. The revision is, therefore, dismissed with costs. Counsel's fee Rs. 500/-.