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PETITIONER: UNION OF INDIA

       Vs.

RESPONDENT: SURJEET SINGH ATWAL

DATE OF JUDGMENT: 22/04/1969

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SIKRI, S.M. BACHAWAT, R.S.

CITATION:  1970 AIR  189            1970 SCR  (1) 351  1969 SCC  (2) 811  CITATOR INFO :  D          1972 SC1507  (23)  R          1981 SC2075  (22)

ACT: Indian Arbitration Act of 1940, ss. 31(4) and 34-Arbirration agreement   entered   at  Delhi-Suit  filed   in   Calcutta- Application  in  suit  under s.  34-Whether  an  application within meaning of s. 31(4)-Jurisdiction of Delhi Court.

HEADNOTE: An  agreement,  containing a clause for  settlement  of  the disputes  by  reference  to an Arbitrator  at  Calcutta  was executed at Delhi between the appellant-Union of India,  and the  respondent  for certain constructions  at  Dalbhumgarh. Ignoring  the  arbitration clause, the -respondent  filed  a suit  on  the  original  side of  the  Calcutta  High  Court claiming certain amount under the agreement.  The  appellant filed an application under s. 34 of the Arbitration Act  for the  stay of the suit.  The suit was stayed and  the  matter was  referred to the Arbitrator in Calcutta before whom  the appellant made a counter-claim.  The respondent objected  to the entertainment of the counter-claim.  The stay granted by the  Calcutta High Court was vacated.  Pending the suit  the appellant filed an application under s. 2O of the Act before the  Subordinate Judge, Delhi, for making the  reference  to the  Arbitrator.  The respondent opposed the application  on the  ground  that  the  Subordinate  Judge,  Delhi  had   no jurisdiction  to  entertain  the application  and  that  the appellant having filed an application under s. 34 of the Act in  the  Calcutta  High Court,  the  subsequent  application should be filed in the Calcutta High Court.  The Subordinate Judge Delhi, referred the disputes to the Arbitrator holding that  the Delhi Court had jurisdiction as the  contract  was concluded  and  signed at Delhi.  The  respondent  filed  an appeal  to  the  Punjab High Court,  which  the  High  Court allowed holding that the Delhi Court had no jurisdiction  to entertain the application.  In appeal, this Court, HELD  :  The Subordinate Judge, Delhi was right  in  holding that  the  application under s. 20 was maintainable  in  his court  and  for making a reference of the  disputes  to  the

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arbitrator mentioned in the agreement. Two  conditions must be fulfilled in order to give  a  court exclusive,  jurisdiction under s. 31(4) of the Act.  In  the first place an application under the Arbitration Act must be made  to  the Court competent to entertain it, and,  in  the second  place,  it  must be made "in  any  reference".   The application for stay of suit under s. 34 in the present case was  not  an  application in a reference  within  the  wider meaning given to that phrase by this Court in Kumbha Mawji’s case.   There are different sections in the Arbitration  Act whereby  an  application  is  to be  made  even  before  any -reference has been made.  Section 8 for instance,  provides for  an application to invoke the power of the  court,  when the  parties  fail  to  concur  in  the  appointment  of  an arbitrator to whom the reference can be made.  So also s. 20 provides   for  an  application  to  file  the   arbitration agreement  in  court  so that an order of  reference  to  an arbitrator  can  be made.  These  are  clearly  applications anterior  to  the reference but they lead  to  a  reference. Such  applications  are  undoubtedly  applications  "in  the matter of a reference" and may fall within the purview of s. 31(4)  of  the Act even though these applications  are  made before  any reference has taken place.  But  an  application under s. 34 is clearly not an application belonging to 352 the same category.  It has nothing to do with any reference. It  is  only  intended  to  make  an  arbitration  agreement effective  and prevent a party from going to court  contrary to  his own agreement that the dispute is to be  adjudicated by a private tribunal. [355F-356C] Kumbha Mawji v. Union of India, [1953] S.C.R. 878,  referred to. The  other  condition  imposed  by  s.  31(4)  is  that  the application  for stay must be made to a court  competent  to entertain it.  In s. 34 the expression "judicial  authority" is  used.   The  section provides for an  application  to  a judicial authority before whom a legal proceeding is pending for the stay of that proceeding.  An application for stay of legal  proceeding to a judicial authority before whom it  is pending  is  an application under the Arbitration Act  to  a judicial  authority  competent  to entertain  it.   But  the judicial authority need not necessarily be a court competent under  s.  2(c) to decide the question forming  the  subject matter  of  the  reference.   A  party  to  an   arbitration agreement may choose to file a suit in a court which has  no jurisdiction to go into the matter at all and merely because the  defendant in such a suit has to make an application  to that  court under s. 34 of the Act for the stay of the  suit it  cannot  be said that the court which  otherwise  has  no jurisdiction  in  the  matter becomes  a  court  within  the meaning of s. 2(c) of the Act. [356D] Chotey  Lal  Shamlal v. Cooch Bihar Oil Mills  Ltd.   I.L.R. [1954]  1  Cal. 418, Britannia Building & Iron Co.  Ltd.  v. Bobinda  Chandra  Bhattacharjee, LXIV  C.W.N.  325;  Basanti Cotton Mills Ltd. v. Dhingra Brothers, A.I.R. 1949 Cal. 684, approved.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 760 of 1966. Appeal  by special leave from the judgment and  order  dated January 11, 1965 of the Punjab High Court, Circuit Bench  at Delhi in F.A.0. No. 82-D of 1963. L.   M. Singhvi and B. D. Sharma, for the appellant.

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M.   C. Chagla, C. B. Agarwala, Rameshwar Nath, Mahinder Narain and P. L. Vohra, for the respondent. The Judgment of the Court was delivered by Ramaswami,  J. This appeal is brought by special leave  from the  judgment of the Punjab High Court dated March 20,  1965 in FAO no. 82-D of 1963. The  said  appeal was filed under s. 39 of  the  Arbitration Act,  1940 (hereinafter referred to as the Act) against  the order  of  the Subordinate Judge, First Class,  Delhi  dated January 29, 1963 passed on an application under s. 20 of the Act  by  the  Union  of India  for  filing  the  arbitration agreement in court and to make a reference of the dispute to the officer mentioned in the agreement. In the year 1942 tenders were invited by the Union of  India for  construction  of  certain  runways  and  roads  in   an aerodrome                             353 at Dalbhumgarh.  The tender of the respondent, Surjeet Singh Atwal, was accepted and the agreement was executed on August 19,  1944.   Clause  25 of the agreement  provided  for  the settlement  of the disputes by reference to the  arbitration of  the Superintending Engineer of thek Circle for the  time being, according to law.  The respondent alleged that he had completed  the work entrusted to him under the contract  and made  a claim of Rs. 50,000 on the basis of his  last  bill. On  the other hand the Union of India made a demand  against the contractor for a sum of Rs. 5,09,164 on the ground  that the  amount had been overpaid to the  respondent.   Ignoring the  arbitration  clause  respondent filed  a  suit  on  the original side of the Calcutta High Court for the recovery of Rs. 50,000, being suit no. 531 of 1951.  The Union of  India made  an application under s. 34 of the Act for the stay  of the  suit.  The suit was consequently stayed and the  matter was  referred  to  the  arbitration  of  the  Superintending Engineer,  Calcutta  Aviation  Circle,  C.P.W.D.   Calcutta. Before, the arbitrator the Union of India made its  counter- claim for a sum of Rs. 5,09,164.  The contractor objected to the  entertainment  of the counter-claim.  The stay  of  the suit which was granted by the Calcutta High Court was  later on  vacated.   Pending  the suit of the  respondent  in  the Calcutta High Court, the Union of India filed an application under  s.  20  of the Act in the Court  of  the  Subordinate Judge,  First  Class,  Delhi for getting  the  agreement  of reference filed in the Court and for making the reference of the  disputes between the parties to the arbitration of  the Superintending  Engineer,  Central Circle  No.  1,  C.P.W.D. Calcutta.  The respondent opposed the petition mainly on the ground  that  the court of Subordinate Judge,  First  Class, Delhi had no jurisdiction to entertain the application.   It was  contended that the appellant had filed  an  application under  s.  34 of the Act for stay of the suit filed  in  the Calcutta   High   Court,  and,  therefore   any   subsequent application  relating  to arbitration  under  the  agreement should be filed in the Calcutta High Court.  By its judgment dated  January 29, 1963 the Subordinate Judge, First  Class, Delhi  allowed the application of the appellant and  ordered that  the  disputes between the parties be referred  to  the Superintending Engineer, Calcutta Circle No. 1, C.P.W.D. The learned  Subordinate  Judge held that the  contract  of  the parties was concluded at Delhi and it was signed at Delhi on behalf of the respondent and, therefore, the Delhi court had jurisdiction to try the suit.  Aggrieved by the judgment  of the Subordinate Judge, First Class that respondent filed  an appeal under s. 39 of the in the Punjab High Court.  By  his judgment  dated January 11, 1965 D. K. Mahajan  J.,  allowed

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the appeal and set aside the order of the Subordinate Judge, First Class and dismissed the application of the  ’appellant on  the ground that the Delhi court had no  jurisdiction  to entertain an application under s. 20 of the Act. 354 The question involved in this appeal is whether the applica- tion made by the appellant under s. 34 of the Act before the Calcutta High Court was an application in a reference within the  meaning of s. 31(4) of the same Act.  Section  2(c)  of the Act ,defines "Court" thus :               "Court’    means   a   Civil   Court    having               jurisdiction  to decide the questions  forming               the  subject-matter  of the reference  if  the               same  had been the subject-matter of  a  suit,               but  does  not,  except  for  the  purpose  of               arbitration  proceedings  under  section   21,               include a Small Causes Court;" Section  1.4  provides that the award may be  filed  in  the court.  Section 3 1 ( 1 ) enacts that an award may be  filed in any Court having jurisdiction in the matter to which  the reference   relates.   Section  31(2)  provides   that   all questions regarding the validity, effect or existence of  an award or an arbitration agreement between the parties to the agreement  shall be decided by the Court in which the  award has been filed and by no other Court.  Section 31(3)  states that  all applications regarding the conduct of  arbitration proceedings  shall be made to the Court where the award  has been  filed and to no other Court.  Section 31 (4) reads  as follows               "Notwithstanding anything contained  elsewhere               in  this Act or in any other law for the  time               being  in  force, where in any  reference  any               application under this Act has been made in  a               Court  competent to entertain it,  that  Court               alone   shall  have  jurisdiction   over   the               arbitration  proceedings  and  all  subsequent               applications arising out of that reference and               the  arbitration proceedings shall be made  in               that Court and in no other Court.               " Section 34 states :               "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 con-                                    355               duct  of the arbitration, such  authority  may               make an order staying the proceedings." Two  conditions must be fulfilled in order to give  a  Court exclusive  jurisdiction under s. 31(4) of the Act.   In  the first place an application under the Arbitration Act must be made to the Court competent to entertain it.  In the  second

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place,  the application must be made "in any reference."  It was   contended  on  behalf  of  the  respondent   that   an application  for stay of suit under s. 34 of the Act was  an application  made "in a reference" within the meaning of  s. 31(4) of the Act.  In support of this proposition  reference was  made to the decision of this Court in Kumbha  Mawji  v. Union  of India() in which it was held that the  phrase  "in any  reference"  in s. 31 (4) of the Act  was  comprehensive enough  to  cover  an  application  first  made  after   the arbitration is completed and a final award made and the sub- section  is  not confined to applications  made  during  the pendency of the arbitration proceeding.  It was pointed  out that sub-s. (1) of s. 31 determines the jurisdiction of  the court  in which an award can be filed and that sub-ss.  (2), (3) and (4)of s. 31 were intended to make that  jurisdiction effective  in  three different ways (I ) by vesting  in  one court the authority to deal with all questions regarding the validity, effect or existence of an award or an  arbitration agreement,  (2)  by  casting on the  persons  concerned  the obligation to file all applications regarding the conduct of arbitration  proceedings  or otherwise arising out  of  such proceedings  in  one  court, and (3)  by  vesting  exclusive jurisdiction  in  the court in which the  first  application relating  to the matter was filed.  The context,  therefore, of  sub-s. (4) would seem to indicate that  the  sub-section was not meant to be confined to applications made during the pendency  of an arbitration.  The necessity for  clothing  a single court with effective and exclusive jurisdiction,  and to  bring  about by the combined operation  of  these  three provisions the avoidance of conflict and scramble is equally essential whether the question arises during the pendency of the  arbitration  or after the arbitration is  completed  or before  the  arbitration is commenced.  It  was,  therefore, held  that  the expression "in any reference"  in  s.  31(4) should be construed as "in the course of a reference".  Even so, we are of opinion that the application for stay of  suit under  s. 34 in the present case is not an application in  a reference  within the wider meaning given to that phrase  by this  Court in Kumbha Mawji’s case().  There  are  different sections in the Arbitration Act whereby an application is to be made even before any reference has been made.  Section  8 for  instance,  provides for an application  to  invoke  the power of the Court, when the parties (1)  [1953] S.C.R. 878. 356 fail  to concur in the appointment of an arbitrator to  whom the  reference can be made.  So also S. 20 provides  for  an application  to file the arbitration agreement in  Court  so that  an  order of reference to an arbitrator can  be  made. These are clearly applications anterior to the reference but they lead to a reference.  Such applications are undoubtedly applications.   "in the matter of a reference" and may  fall within the purview of s. 31(4) of the Act even though  these applications are made before any reference has  taken-place. But an application under s’ 34 is clearly not an application belonging  to the same category.  It has nothing to do  with any  reference.  It is only intended to make an  arbitration agreement effective and prevent a party from going to  Court contrary  to  his own agreement that the dispute  is  to  be adjudicated by a private tribunal. We do not, therefore, consider that an application for  stay of  suit under s. 34 is an application in a  reference  even within the wider meaning given to that phrase by this  Court in Kumbha Mawji’s case(1).  The second condition imposed  by s. 31(4) is that the application for stay must be made to  a

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Court competent to entertain it.  It should be noticed  that in  s. 34 the expression "judicial authority" is used.   The section provides for an application to a judicial  authority before  whom a legal proceeding is pending for the  stay  of that   proceeding.   An  application  for  stay   of   legal proceeding to a judicial authority before whom it is pending is  an application under the Arbitration Act to  a  judicial authority  competent  to  entertain it.   But  the  judicial authority need not necessarily be a court competent under s. 2  (c) to decide the question forming the subject matter  of the  reference.   A party to an  arbitration  agreement  may choose  to file a suit in a court which has no  jurisdiction to  go  into  the  matter at  all  and  merely  because  the defendant in such a suit has to make an application to  that Court  under  s. 34 of the Act for the stay of the  suit  it cannot  be  said  that  the Court  which  otherwise  has  no jurisdiction  in  the  matter becomes  a  Court  within  the meaning  of  s.  2 (c) of the Act.  The view  that  we  have expressed is borne out by the decisions of the Calcutta High Court in Choteylal Shamlal v. Cooch Behar Oil Mills Ltd.(2); Britannia  Building  &  Iron Co.  Ltd.  v.  Gobinda  Chandra Bhattacharjee  (3) and Basanti Cotton Mills Ltd. v.  Dhingra Brothers(4). For these reasons we consider that the application for  stay under  s. 34 of the Act cannot be treated as an  application in  a reference under s. 31(4) of the Act.   Therefore,  the Subordinate  Judge, First Class, Delhi was right in  holding that the application (1)  [1953] S.C.R. 878. (3)  LXV C.W.N. 325. (2)  I.L.R. [1954] 1 Ca]. 418. (4)  A.I.R. 1949 Cal. 684.                             357 under s. 20 of the Act was maintainable in his Court and for making  a  reference  of  the  dispute  to  the   arbitrator mentioned  in the agreement.  Accordingly we set  aside  the order of the Punjab High Court and restore the order of  the Subordinate Judge, First Class, Delhi dated January 29, 1963 allowing the application filed by the appellant under s.  20 of  the Arbitration Act, 1940.  The appeal is  allowed  with costs. Y.P.                                                  Appeal allowed. .3 Sup.  CI/67-9. 358