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PETITIONER: STATE OF PUNJAB

       Vs.

RESPONDENT: M/s.  GEETA IRON & BRASS WORKS LTD.

DATE OF JUDGMENT14/10/1977

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. SINGH, JASWANT

CITATION:  1978 AIR 1608            1979 SCR  (1) 746  1978 SCC  (1)  68

ACT: Arbitration Act 1940 (Act IV of 1940),  Section 34-Power  to stay legal proceedings where there is an agreement-Scope  of S. 34. Constitution  of  India,  Article  136-Interference  against interlocutory orders refusing stay of proceedings u/s. 34 of the Arbitration Act. Civil Procedure Code (Act V of 1908). s. 80-Scope of.

HEADNOTE: The  respondent/plaintiff issued a notice u/s. 80 C.P.C.  to the  appellant/  defendant for referring certain  claims  to Arbitration as per the contract.  There being no response, a suit  was filed under the Arbitration Act and summons  taken out  to  the Chief Secretary.  In the ex  parte  proceedings taken, on the refusal of the summons issued, the  Government later  applied for staying of the proceeding u/s.  34.   The Subordinate  Judge  declined to stay  the  proceedings.   In appeal, the High Court refused to interfere against the said order.’ Dismissing the special leave petition, the Court, HELD : (1) A statutory notice of the proposed action u/s. 80 C.P.C.  is intended to alert the State to negotiate  a  just settlement  or  at  least  have the  courtesy  to  tell  the potential  outsider why the claim is being resisted.   As  a matter  of  law, mere silence on the part of  the  defendant when a notice u/s. 80, C. P. C. is sent to him may not more, disentitle  him to move u/s. 34 of the Arbitration  Act  and seek stay. [747 E, G] (2)  Where parties have, by contract, agreed to refer  their disputes  to  arbitration,  the  courts  should  as  far  as possible  proceed to give an opportunity for  resolution  of disputes   by   arbitration   rather than   by   judicial adjudication.   Even  so.  there is  a  residual  discretion vested in the court to stay or not to stay having regard  to the totality of circumstances.  One weighty factor obviously to  find out whether the party who invokes  the  arbitration clause  has  expressed his readiness to rely on  it  at  the earliest stage. In  the instant case there is no gross error justifying  the grant of leave since an opportunity for settling the dispute through arbitration was thrown away by sheer inaction by the

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appellant.[747- C-D] Observation :               Government   must  be  made   accountable   by               Parliamentary   social  audit   for   wasteful               litigative   expenditure  inflicted   on   the               community by inaction.  A litigative policy of               the State involves settlement of  Governmental               dispute   with   citizens  in   a   sense   of               conciliation  rather  than  a  fighting  mood.               Indeed,  it should be a directive on the  part               of  the  State to empower its law  officer  to               take  steps  to compose disputes  rather  than               continue  them in court.  Litigation in  which               Governments are involved adds to the case load               accumulation  in  courts for  which  there  is               public criticism. [747 F-H, 748 A] [The Court expressed its hope that a more responsive  spirit will  be brought to bear upon governmental litigation so  as to avoid waste of public money and promote expeditious  work in courts of cases which deserve to be attended to.]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION  :  Special  Leave   Petition (Civil), No. 1781 of 1977. 747 From  the Judgment and Order dated 30-3-1976 of the  Gujarat High Court in Appeal No. 9 of 1976. Hardev  Singh,  R.  S.  Sodhi  and  O.  P.  Sharma  for  the Petitioner.                            ORDER KRISHNA  IYER,  J. This special leave to  appeal  is  sought against  a  discretionary order passed  by  the  Subordinate Judge  declining  to  stay  a  suit  under  s.  34  of   the Arbitration  Act.  This order was challenged in  appeal  and the High Court, after an exhaustive consideration, felt that the exercise of discretion was not so improper as to deserve interference. Shri Hardev Singh is-right to the limited extent that  where parties  have by contract agreed to refer their disputes  to arbitration the courts should as far as possible proceed  to give   an   opportunity  for  resolution  of   disputes   by arbitration rather than by judicial adjudication.  Even  so, there  is a residual discretion vested in the court to  stay or   not   to  stay  having  regard  to  the   totality   of circumstances.   One weighty factor obvious is to  find  out whether  the  party who invokes the arbitration  closely  as expressed his readiness to rely on it at the earliest stage. We are not investigating the merits of the matter under Art. 136  but  are  satisfied  that  there  is  no  gross   error justifying grant of leave.  We make it clear however that as a  matter of law mere silence on the part of  the  defendant when  a  notice under s. 80 C.P.C. is sent to him  may  not, without  more, disentitle him to move under s. 34  and  seek stay.   In the present case, other circumstances  have  also been pressed into service by the Court. While dismissing the special leave petition for the  reasons mentioned  above,  we  would  like  to  emphasize  that  the deserved   defeat   of  the  State  in  the   courts   below demonstrates  the gross indifference of  the  administration towards litigative diligence.  In the present case a  notice under s. 80 C.P.C. was sent. No response.  A suit was filed and  summons taken out to the Chief  Secretary.   Shockingly enough, the summons was refused.  An ex parte proceeding was

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taken when the lethargic Government woke up. We   like  to  emphasize  that  Governments  must  be   made accountable  by  Parliamentary  social  audit  for  wasteful litigative   expenditure  inflicted  on  the  community   by inaction.   A statutory notice of the proposed action  under S.  80 C.P.C. is intended to alert the State to negotiate  a just  settlement or at least have the courtesy to  tell  the potential outsider why the claim is being resisted.  Now  S. 80  has become a ritual because the administration is  often unresponsive  and  hardly  lives  up  to  the   Parliament’s expectation  in  continuing s. 80 in the  Code  despite  the Central  Law Commission’s recommendations for its  deletion. An opportunity for settling the dispute through  arbitration was thrown away by sheer inaction.  A litigative policy  for the State involves settlement of Governmental disputes  with citizens  in  a  sense  of conciliation  rather  than  in  a fighting mood.  Indeed, it should be a directive on 11-951SCI/77 748 the  part  of the State to empower its law officer  to  take steps  to  compose  disputes rather than  continue  them  in court.   We  are  constrained  to  make  these  observations because  much  of the litigation in  which  Governments  are involved  adds to the case load accumulation in  courts  for which  there  is  public criticism.  We  hope  that  a  more responsive spirit will be brought to bear upon  governmental litigation so as to avoid waste of public money and  promote expeditious  work  in courts of cases which  deserve  to  be attended to.  Dismissed. S.R.                   Special leave petition dismissed. 749