TMI Blog1985 (2) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 referring the matter to arbitration but in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no obligation to seek arbitration. However, the defendants having expressed their readiness and willingness to participate in the arbitration proceedings, the hearing of the suit should be stayed and the matter should be referred to arbitration. 10. The learned Subordinate Judge, Purulia, by his order dated 17-8-83 rejected the application filed by the defendants under Section 34 of the Arbitration Act, on the following grounds : -- (1) That the reliefs sought for in the suit or at any event, the substantive reliefs were outside the purview of the arbitration clause. (2) That in the lawyer's notice dated August 3, 1982 the plaintiff gave the defendants an opportunity to refer the dispute to arbitration within two months, but the defendants did not avail themselves of the said opportunity indicating thereby that the defendants had no dispute to raise before the Arbitrator. (3) That there was no existing dispute between the parties which the defendants were ready and willing to refer to arbitration at the time the suit was filed. (4) That the defendants having made serious allegations against the plaintiff touching his reputation and character no di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the commencement of the proceeding ready and willing to do everything necessary for the proper conduct of the arbitration. He further contended that the appellants having made a charge of fraud against the respondent in the matter of execution of the contract the respondent could very well resist the transfer of the decision from the trial Court to the Arbitrator and demand a public trial. Lastly, it was Mr. Dutt's submission that the trial Court having refused to stay the legal proceeding instituted by the respondent in exercise of its judicial discretion, this Court will be reluctant to substitute its discretion for that of the trial Court and reverse the impugned order. 13. We may now proceed to consider the merits of the rival contentions of the parties. 14. One of the relevant points at issue here is whether the reliefs claimed by the respondent in the suit are covered by the arbitration clause in the agreement. The learned trial Court has answered the point in the negative. Since a dispute not covered by the arbitration clause cannot be referred to arbitration, it may be useful to consider what, is the real dispute in the suit and whether the said dispute is cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itration clause, it is not a sufficient reason for refusing to stay proceedings where the main subject of the action is within the arbitration clause. 19. There being no dispute about the soundness of the above proposition, the question that really arises for our consideration is whether the claim relating to the payment certificates forms the main subject of the action or a small and insignificant part thereof. 20. Having carefully considered the rival contentions of the parties on the point and after having gone through the plaint in Title Suit No. 68 of 1982 we are of the view that the claim relating to the payment certificates is only an insignificant part of the main subject of the action, viz., the claim in respect of the last and final bill of the respondent. Paragraph 13 of the plaint will show that the payment certificates for 1980-81 and 1981-82 were asked for with the sole object of getting the Income Tax and Sales tax clearance certificates for obtaining other works, but the defendants did not oblige the plaintiff. Indisputably, there cropped up a dispute between the parties regarding the proper execution of the contractual work by the plaintiff, the defendants ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court is not precluded to infer readiness and willingness from the other material facts and circumstances of the case. 22. In the instant case, the plaintiff served a Lawyer's notice upon the defendants dated August 3, 1982. The penultimate paragraph of the said notice is as follows : -- Further as per Clause 25 of the tender, if you want to refer the matter to the sole arbitrator for arbitration you may do so within two months from the receipt of this notice with intimation to my client, failing which it will be deemed that you are not agreeable to arbitration and in a such case my client will have no other alternative but to take appropriate legal steps in the Court of law for realisation of his dues. 23. This notice was replied to by the defendant No. 2 on 7/9-8-82. The last paragraph of the reply is relevant for our purpose and the material portion thereof is as follows: -- In any event, if your client so desires he may raise the dispute and refer the matter to the sole arbitration of the Executive Vice-Chairman of the C.A.D.C. which does not require me to be agreeable as wrongly stated by you. This is the responsibility of your client and cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o do so; such inaction on the part of the defendants signify unwillingness or want of readiness to go to arbitration . 30. While making these observations, several facts in our view, were overlooked by the learned trial Court. He failed to notice from the correspondence filed that a pre-suit dispute existed between the parties over the proper execution of the work by the plaintiff, the defendants having taken the positive stand that the field channel that the plaintiff had excavated was short by 1221 Rft, in reply to the plaintiffs claim that he having completed the execution of the work, should be paid his final bill. 31. It need not be emphasized that a dispute implies assertion of a right by one party and repudiation thereof by another. Here also the plaintiff claimed that he had executed the work completely whereas the defendants asserted that it was not so completed. There being a valid arbitration clause binding on both the parties, the plaintiff could not ignore the same and start a legal proceeding over disputes covered by the arbitration clause. Under the arbitration clause, the party raising the disputes could make the reference, so that the plaintiff himself could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mr. Dutt, appearing on behalf of the respondent, also submitted that in the instant case the allegations of fraud, misappropriation etc. by the defendant No. 2 against the plaintiff respondent are serious in nature involving the professional reputation of his client and that being so, the Court should be reluctant to send the dispute to arbitration. In this connection Mr. Dutt referred to various English and Indian decisions including a decision of the Supreme Court reported in [1962]3SCR702 . 35. In Abdul Kadir v. Madhav Prabhakar reported in [1962]3SCR702 , the Supreme Court observed in paragraph 17 of the judgment that there is no dispute that where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open Court, that should be a sufficient cause for the Court not to order an arbitration agreement to be filed and not to make the reference . 36. Reference was also made to Turner v. Fenton reported in (1982) 1 All ER 8 (Ch.D.) where it has been held that where a professional man's reputation would be at stake in an arbitration then, even though actual dishonesty might not be alleged ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42. Thus, at all stages before the institution of the legal proceeding, the plaintiff never insisted that the matter should be tried in open Court. For the first time, he referred to the allegations of fraud made against him by the defendant No. 2 in paragraph 17 of the plaint. 43. However, mere allegation of fraud unconnected with the real point at issue will, in our view, not operate as a bar to the stay of the legal proceeding. According to us, the most vital question for consideration in such matters would be whether in deciding the real dispute between the parties it would be necessary for the arbitrator to enter into the allegation of fraud involving the reputation of a professional man. If it is necessary for the arbitrator to enter into such question for determining the real point at issue between the parties, the Court will be reluctant to allow the matter to go to arbitration and at public trial would be more appropriate. 44. Similar observation has been made in Russell on the Law of Arbitration (Twentieth Edition) p. 187 that the Court will consider whether the charges of fraud are raised in such a way that the arbitrator, if the matter goes to arbitration, will h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discretion vested in the Court under Section 34 has been exercised by the trial Court, the appeal Court should be slow to interfere with the exercise of the said discretion. In dealing with the matter raised before it at the appellate stage the appeal Court would normally not to be justified in interfering with the exercise of the discretion under the appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial Court reasonably and in a judicial manner, the fact that the appeal court would have taken a different view may not justify interference with the trial court's exercise of discretion . 49. Significantly, this decision was also cited by Mr. Saktinath Mukherjee, appearing on behalf of the appellants. 50. In our view, the trial Court in the instant case had failed to exercise its judicial discretion in accordance with law when it ignored many relevant facts. He failed to consider that the main dispute between the parties was within the terms of the arbitration clause; he also overlooked or failed to appreciate certain correspondences between the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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