1957 (4) TMI 73 - HC - Indian Laws

Punjab State's Appeal Granted for Stay of Suit in Favor of Arbitration

The Punjab State appealed against the dismissal of its application for a stay of the suit filed by Moji Ram for recovery. The court found the arbitration ... - Issues Involved:1. Application for stay of suit under Section 34 of the Indian Arbitration Act.2. Existence and applicability of an arbitration agreement.3. Whether the Government took a step in the proceedings.4. Readiness and willingness of the Government to arbitrate.5. Coverage of the entire dispute by the arbitration agreement.Issue-wise Detailed Analysis:1. Application for Stay of Suit under Section 34 of the Indian Arbitration Act:The Punjab State appealed against the order of the Senior Subordinate Judge, Hissar, which dismissed the Government's application for a stay of the suit filed by Moji Ram for the recovery of Rs. 7,750. The Government's application for stay was contested on the grounds that there was no arbitration agreement and that the suit should not be stayed. The trial court refused to stay the suit, stating that the entire suit was not covered by the arbitration agreement.2. Existence and Applicability of an Arbitration Agreement:The arbitration agreement in question stated, 'In matter of dispute the case shall be referred to the Superintending Engineer of the Circle, whose order shall be final.' The main dispute was whether the disputed items were covered by the work orders or not. The court noted that the arbitration agreement was very broad and even wider than the words 'under the contract.' It was concluded that the dispute could only be settled by construing the items given in the work orders, making it a dispute under the work orders and thus applicable to the arbitration agreement.3. Whether the Government Took a Step in the Proceedings:On 19th November 1954, the Government Pleader appeared and asked for time to file a written statement, stating he had not received instructions or a copy of the plaint. The court found no evidence that the plaintiff had filed a copy of the plaint to be served with the summons on the Government. The Government Pleader filed an affidavit stating he had no instructions from the Legal Remembrancer and Secretary to Government, Punjab, and was not conversant with the case facts. The court concluded that the Government did not take any step in the proceedings as the Government Pleader had no authority to represent the Government at that time and merely acted as a volunteer.4. Readiness and Willingness of the Government to Arbitrate:The plaintiff argued that the Government was not ready and willing to arbitrate because it did not reply to the plaintiff's notice given on 17-2-1953. The court held that the silence of the defendant before the suit was filed did not affect the applicability of Section 34 of the Arbitration Act. The readiness and willingness to arbitrate must be assessed upon receiving notice of the suit, and the Government must decide to enforce the arbitration agreement before filing the written statement or taking any step in the proceedings.5. Coverage of the Entire Dispute by the Arbitration Agreement:The court examined whether the entire subject matter of the suit was covered by the arbitration agreement. Expert witnesses disagreed on whether the disputed items were covered by the work orders. However, it was undisputed that all disputed items related to the main contract for construction. The court cited precedents to establish that if a dispute requires resorting to the terms of a contract, it arises out of the contract and is covered by the arbitration agreement. The court concluded that even if some work was not covered by the work orders, claims for such extra work would still be related to the contract and thus covered by the arbitration agreement.Conclusion:The court accepted the appeal and stayed the suit of the plaintiff, concluding that the nature of the dispute was such that the Superintending Engineer was in a better position to settle it than a court of law. There was no order as to costs.