MANU/PH/0049/1974

Equivalent/Neutral Citation: AIR1974P&H232, (1973)75PLR920

IN THE HIGH COURT OF PUNJAB AND HARYANA

F.A.F.O. No. 136 of 1971
Decided On: 11.10.1973
Daman Anand and Ors. Vs. Hira Lal and Ors.
Hon'ble Judges/Coram:
R.N. Mittal, J.
Case Note:
Arbitration - Stay of Suit Proceedings - Quashing of - Section 34 of Arbitration
Act, 1940 - Whether suit was liable to be stayed under relevant Section of Act
- Held, in plaint, it had been stated that due to sad demise of Appellants had
been left unaided and firm had been dissolved by operation of law -
Respondents 1 to 5 were in possession of books of account, records, material
and other assets - Therefore, Appellants prayed that a decree for rendition of
accounts of partnerships named and styled as detailed in paragraph 3 of
plaint, be passed in favour of Appellants - Partnership agreements have not
been denied by Respondents - Respondents examined concerned witness who
deposed that he was marginal witness of partnership deed - Contents of
partnership deed were read out to partners who after admitting same as
correct signed it and he also did not mention dispute between parties - It was
necessary for Respondents to have mentioned disputes in application under
relevant Section of Act as the existence of dispute is a condition precedent for
referring the matter to the Arbitrator - Where dispute between parties was
not mentioned in application under relevant Section of Act, there being no
point of difference on which any reference could be made to arbitration before
filing of suit, proceedings in Court could not be stayed -
Respondent/Defendant No. 1 failed to state differences between parties in
application filed by him under relevant Section of Act, which he ought to have
done - In circumstances, proceedings could not be referred to Arbitrator - Trial
Court had erroneously held that dispute exists between parties under
agreement which for its resolution requires reference to arbitration -
Therefore, Court upset finding of trial Court - Court accept appeal and set
aside judgment of Senior Subordinate Judge and dismiss application under
relevant Section of Act - Appeal allowed
JUDGMENT
1. This appeal has been filed against the judgment of the Senior Subordinate Judge,
Kapurthala, dated March 1, 1971, by the plaintiffs.
2 . The facts giving rise to the present appeal are that a suit was instituted by the
plaintiffs for rendition of accounts of the partnership between the parties. The
defendants filed an application under Section 34 of the Arbitration Act, 1940,
hereinafter referred to as the Act, for staying the proceedings on the ground that
according to the deed of partnership, dated January 4, 1963, it had been agreed
between the parties that all disputes between the partners were to be referred to the

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Arbitrator. It was further stated that the defendants were willing at the time of the
institution of the suit and continued to be so to do all things necessary for proper
conduct of the arbitration proceedings. The application was contested by the plaintiffs.
Inter alia they pleaded that there was no such agreement, that the defendants had taken
steps in the proceedings and that the defendants had not disclosed in the application
the dispute sought to be referred to the arbitration. It was further stated that the
defendants were not ready and willing to refer the matter to the arbitration. The trial
Court framed the following issue:--
(1) Whether the suit is liable to be stayed under Section 34 of the Arbitration
Act?
The trial Court decided the issue in favour of the defendants and stayed the proceedings
in the suit. It directed the parties to get the dispute between them referred to arbitration
in accordance with the terms of partnership deed, dated January 4, 1963. The plaintiffs
having felt aggrieved from the judgment of the trial Court have come up in appeal to
this Court.
3. The first contention of the learned counsel for the appellants is that the defendants
had taken steps in the proceedings and therefore, the matter could not be referred to
the arbitration under Section 34 of the Act. In order to substantiate the contention the
learned counsel for the appellants has referred to the orders of the Court passed on
various dates.
4 . The suit was registered on April 29 1970. The service could not be effected on the
defendants except defendant No. 1 till July 25, 1970. On that date counsel for defendant
No. 1 appeared and the Court ordered that the service on the other defendants be
effected for August 29, 1970. On August 29, 1970, it was ordered that the other
defendants had not been served and fresh notice be issued for October 21, 1970. On
October 21, 1970, the defendants were served except Chaman Lal. The counsel,
however, appeared on behalf of all the defendants, and the case was adjourned to
November 16, 1970 for written statement. The order of the Court dated October 21,
1970 is as follows:--
"Present: Counsel for the parties.
Order
For written statement to come up on November 16, 1970."
On November 16, 1970, the parties requested the Court for adjourning the case for
compromise. The Court passed the following order on that date:--
"Present: Counsel for the parties.
Order
Counsel for the parties request for adjournment for effecting compromise. The
parties to attend on December 24, 1970."
On December 24, 1970, the Court passed the following order:-
"Present: Counsel for the parties.
Order

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 Compromise not effected. For written statement to come up on January 1,
1971"
5 . From the perusal of the aforesaid orders, it is clear that the counsel for the
defendants never requested for an adjournment for filing the written statement. It was
the Court who adjourned the case for filing the written statement. From the orders,
dated October 21, 1970 and December 24, 1970, it cannot be assumed that the case
was adjourned for filing the written statement on the request of the counsel for the
defendants.
6 . Mr. Bhagirath Dass has very vehemently urged that from the aforesaid orders no
other inference can be drawn except that the case was adjourned for written statement
on the request of the counsel for the defendants and that it was a step in aid of the
proceedings. I regret my inability to subscribe to the views of the learned counsel for
the appellants. In case an adjournment had been granted on the request of the counsel
for the defendants, it would have been stated so in the order. If an adjournment is
granted by the Court for written statement without any request by the counsel for the
defendants, it cannot be said that the defendants cannot file an application under
Section 34 of the Act on the adjourned date. It is only when some step has been taken
by the defendants in any legal proceedings from which it appears that they have
participated in the proceedings or contributed to their progress that it can be inferred
that they had given up their right to filed an application under Section 34 of the Act.
7 . The learned counsel for the appellants has further urged that both the parties
requested for an adjournment on November 16, 1970 for effecting a compromise. He
also contends that seeking an adjournment for compromise is a step in aid of the
proceedings. I do not agree with this contention of the learned counsel for the
appellants. It has been observed in Daulat Ram Rala Ram v. State of Punjab
MANU/PH/0008/1958 that the true test for determining whether an act is a step in the
proceedings is not so much the question as to whether, it is an application but whether
the act displays an unequivocal intention to proceed with the suit and to give up the
right to have the matter disposed of by arbitration. I am respectfully in agreement with
the aforesaid observations of the learned Judge of this Court. Merely requesting for an
adjournment to effect compromise does not show that the defendants gave up their
right to have the matter disposed of by the arbitration. It has not been disputed that an
arbitration clause existed in the partnership deed. The step which is contemplated by
Section 34 of the Act is some effective step towards the progress of the suit. A request
for adjournment for compromise cannot be held to be a step in the progress of the suit
or submission to the jurisdiction of the Court. It has been observed in the State of Uttar
Pradesh v. Janki Saran Kailash Chandra MANU/SC/0004/1973 : AIR 1973 SC 2071, that
taking steps in the suit proceedings connotes the idea of doing something in aid of the
progress of the suit or submitting to the jurisdiction of the Court for the purpose of
adjudication of the merits of the controversy in the suit. If the aforesaid ratio of Hon'ble
the Supreme Court is applied to the present case, it will be seen that the said request
does not debar the defendants from filing an application under Section 34 of the Act.
The learned counsel for the appellants has placed reliance on Amarjit Singh v. Smt.
Saroj Malik MANU/PH/0175/1972. In that case, a request was made by the counsel for
the defendants that the case be adjourned for filing a written statement in the suit. The
learned Judge observed that it was a step in aid of the execution. It was also observed
therein that it was not possible to give an exact definition of what is meant by "a step in
the proceedings in the suit" in Section 34 of the Act. It was further observed that it
would depend upon the circumstances of each case. In my view, the appellants cannot
derive any benefit from that case. For the reasons recorded above, I do not find force in

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the contention of the learned counsel for the appellants and reject the same.
8 . The next contention of the learned counsel for the appellants is that in the
application under Section 34 of the Act, the dispute between the parties had not been
mentioned and it was necessary under the law to have stated such a dispute in the
application. In the circumstances, he submits that the application was liable to be
dismissed on this ground. On the other hand, the learned counsel for the respondents
states that the filing of the suit itself shows that a dispute exists inter se the parties and
it does not make any difference whether it is stated in the application or not. He,
therefore, urges that there is no sufficient ground for interfering with the order of the
Court by which the trial Court in its discretion stayed the proceedings under Section 34
of the Act.
9. I have heard the contentions of the learned counsel of the parties. In the application
under Section 34 of the Act, filed by defendant No. 1, it is stated that the plaintiffs have
filed a suit for accounts on the basis of deed of partnership dated January 4, 1963,
according to which it was agreed between the parties that if there was any dispute inter
se the members of the partnership qua the partnership, the would be decided by
Arbitrator and not through civil Courts. The applicant was willing at the time of the suit
and subsequently was also ready and willing to do all things necessary to the proper
conduct of the arbitration. He therefore, prayed that the proceedings be stayed. The
application has been filed only be defendant No. 1. In reply to the application, inter alia
it was pleaded that the defendants having failed to disclose in the application the
dispute sought to be referred to the arbitration which was necessary under the law to
have been stated in the application, the application was liable to be dismissed on that
ground alone. Thereafter, no application was filed to amend the application under
Section 34 of the Act and incorporate therein the disputes existing between the parties.
In the plaint, it has been stated that due to the sad demise of Shri Tek Chand plaintiffs
had been left unaided and the firm had been dissolved by operation of law. Defendants
1 to 5 were in possession of the books of account, records, material and other assets.
Therefore, the plaintiffs prayed that a decree for rendition of accounts of the
partnerships named and styled as detailed in paragraph 3 of the plaint, be passed in
favour of the plaintiffs. The partnership agreements have not been denied by the
defendants. The defendants examined D.W. 1 Rattan Chand who deposed that he was
the marginal witness of the partnership deed dated January 4, 1963. The contents of the
partnership deed were read out to the partners who after admitting the same as correct
signed it. He also did not mention the dispute between the parties. It was necessary for
the defendants to have mentioned the disputes in the application under Section 34 of
the Act as the existence of dispute is a condition precedent for referring the matter to
the Arbitrator. It has been held in Ladha Singh Bedi v, Jyoti Prosad Singha
MANU/WB/0036/1939 : AIR 1940 Cal 105, that an arbitration presupposes a dispute or
difference between the parties and if there is no dispute or difference there is no
occasion for an arbitration and a pending suit between the parties ought not to be
stayed in such a case. If there is no indication that there was any dispute or difference
before suit or in other words where the plaintiff is not aware before the institution of
the suit, that there is a difference between him and the defendant or of nature of the
difference, he cannot be said to have gone back upon his agreement to refer to
arbitration or was attempting to go back upon it, by rushing to Court. It was further
held by the learned Division Bench that the Court under those circumstances would be
justified in the exercise of its discretion in refusing to stay the suit. The aforesaid
observations of the Division Bench were followed by Kapur J. (as he then was) in
Chiranjiv Lal v. The Tropical Insurance Co. Ltd. MANU/PH/0017/1952 in which it was
observed that where there was no point of difference before the filing of the suit, there

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was nothing to refer to arbitration. In a later Division Bench case Bharat Construction
Co. Ltd. v. Union of India MANU/WB/0205/1954 : AIR 1954 Cal 606, similar view was
again expressed by the Calcutta High Court. It was observed by the learned Bench that
an application under Section 34 should make out that a dispute, as understood in the
law of arbitration, had arisen before the institution of the suit or before the filing of the
application, that such dispute was the subject-matter of the suit and that the dispute
was within the arbitration clause of the contract. Again a similar matter came up before
the Circuit Bench of this Court at Delhi in Dwarka Nath Kapur v. Rameshwar Nath 1966
68 Pun LR 91(Delhi Section). Grover, J. (As he then was) observed that where the
dispute between the parties was not mentioned in the application under Section 34 of
the Act, there being no point of difference on which any reference could be made to
arbitration before the filing of the suit, the proceedings in Court could not be stayed.
The ratio in the aforementioned cases applies to the present case. Defendant No. 1
failed to state the differences between the parties in the application filed by him under
Section 34 of the Act, which he ought to have done. In the circumstances, the
proceedings could not be referred to the Arbitrator. The trial Court has erroneously held
that the dispute exists between the parties under the agreement which for its resolution
requires reference to the arbitration. In my view, the approach of the learned trial Court
was erroneous. I, therefore, upset the finding of the trial Court.
10. For the reasons recorded above, I accept the appeal, set aside the judgment of the
Senior Subordinate Judge and dismiss the application under Section 34 of the Act. In
the circumstances of the case, I make no order as to costs.
11. Appeal allowed.
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