JUDGMENT
K. Govindarajan, J.
1.The defendant who failed in his attempt in getting an order of stay in I.A. No. 1111 of 1991 in O.S. No. 123 of 1991, on the file of the II Additional Sub Judge, Coimbatore, is the petitioner herein.
2. The respondent/plaintiff is a public sector undertaking dealing in cotton. The petitioner and respondent entered into a contract on 3-2-1988 for supply of cotton as specified in the contract. Since the petitioner did not lift 65 bales of cotton as per the contract dated 3-2-1988 the respondent issued a notice, and the petitioner received the notice but it did not lift the cotton bales. So, the respondent sold the same to the Tamil Nadu Textile Corporation at Rs. 8,875 per candy as per the sale contract dated 6-4-1988. Due to the same, the respondent incurred a loss of Rs. 1,57,319.27.
3. Similarly the petitioner and the respondent entered into an agreement on 4-11-1987 for lifting cotton. Even with respect to the said contract, the petitioner did not lift 150 bales of cotton. The respondent sent letters to the petitioner requesting them to lift the bales. But the petitioner did not lift the cotton and so the 100 bales of cotton were resold. The respondent issued a notice to the petitioner on 4-3-1989. The petitioner issued a reply on 10-10-1989. After several correspondence by the respondent, the respondent was constrained to resell 100 bales of cotton. Due to the same the respondent incurred loss of Rs. 3,45,651. To avoid limitation, the respondent filed a suit in O.S. No. 123 of 1991 on the file of the Sub Court, Coimbatore on 1-2-1991. After service of notice the case was posted to 7-3-1991. Again it was posted to 8-7-1991. When the case was posted to 8-8-1991, the petitioner/defendant entered appearance through its Counsel and requested time for filing written statement and the case was adjourned to 8-11-1991. Meanwhile, on 1-11-1991, the petitioner/defendant filed I.A. No. 1111 of 1991, under Section 34 of the Arbitration Act, 1940 to stay the suit and to refer the dispute that had arisen between the respondent/plaintiff and the petitioner/defendant to an Arbitrator as provided in Clause II(ii) of the contract. The application was contested by the respondent/plaintiff. The lower Court in its order dated 30-4-1992 rejected the application. Aggrieved against the same, the petitioner has filed the above revision.
4. The point for consideration on the facts of this case, is whether the petitioner is entitled to an order under Section 34 of the Indian Arbitration Act, staying the proceedings of the suit commenced by the respondent/plaintiff.
5. The scope and meaning of Section 34 of the Arbitration Act is quite clear. If a party to an arbitration agreement commences any legal proceedings against any other party to the said agreement with respect to the subject-matter thereof, then the other party is entitled to ask for such proceedings to be stayed so as to enable the arbitration agreement to be carried out. It is further to be clearly understood that mere existence of an Arbitration Clause in an agreement does not by itself operate as a bar to the suit in the Court and it does not by itself impose any obligation on the Court to stay the suit or to give any opportunity to the petitioner defendant to consider the question of enforcing the arbitration agreement. The right to file a suit in a Civil Court is conferred on a person having a grievance of a civil nature, under the general law. Where there is a right, there is a remedy. Under Section 9 of the Code of Civil Procedure this general right is conferred upon an aggrieved person except where the cognizance of the suit is barred either expressly or impliedly. The party seeking to curtail this general right of suit has to discharge the task of establishing his right to do so and it should be strictly complied with. The petitioner-defendant who wants to obtain an order of stay is required to present its application praying for stay before filing its written statement or taking any other steps in the suit proceedings.
6. Before going into the question whether the petitioner/defendant has taken any steps in the suit proceedings, and whether the petitioner has been ready and willing to go into the arbitration, it is necessary to deal with the scope and Section 34 of the Arbitration Act on the basis or various decisions.
7. In Anderson Wright Ltd. v. Moran and Company , the Apex Court has formulated some conditions to be fulfilled for getting an order of stay under Section 34 of the Arbitration Act, wherein it has been held as follows :
“Thus in order that a stay may be granted under this Section, it is necessary that the following conditions should be fulfilled.
(1) The proceeding must have been commenced by a party to an arbitration agreement against and other party to the agreement;
(2) The legal proceeding which is sought to be stayed must be in respect of a manner agreed to be referred :
(3) The applicant for stay must be a party to the legal proceeding and he must have taken no step in the proceeding after appearance. It is also necessary that he should satisfy the Court not only that he is but also was at the commencement of the proceedings ready and willing to do everything necessary for the proper conduct of the arbitration; and
(4) The Court must be satisfied that there is no sufficient reason why the matter should not be referred to an arbitration in accordance with the arbitration agreement.
8. In Food Corporation of India v. Thakur Shipping Company Ltd. , it has been held as follows :
“If the first defendant were ready and willing to go to arbitration one would have expected them, as the Trial Court observed, to reply to the telegrams saying that they were not agreeable to any departure from the terms of Clause 42 and could insist on compliance with that Clause. But they did not reply to the telegrams or do anything for reference of the dispute to arbitration provided in Clause 42. Silence and inaction on their part may in these circumstances very well justify that inference that they were not ready or willing to go to arbitration. The finding of the High Court that the Trial Court had exercised its discretion, not judicially cannot therefore be supported. And in this case really no question arises as to exercise of discretion; granting stay under Section 34 is of course discretionary as the Section indicates but the occasion for the exercise of discretion does not arise unless all the conditions stated in the Section are fulfilled. In this case the Trial Court found as a fact that the first defendant was not ready and willing to go to arbitration when the suit was instituted and we have held that the finding is not perverse or arbitrary; one of the requirements of the Section not having been fulfilled, Section 34 could not be invoked in this case”.
9. In State v. Geeta Iron Works , the Apex Court has held that one weighty factor obviously is to find out whether the party who invokes the arbitration Clause has expressed his readiness to rely on it at the earliest stage.
10. In Rachappa G. Bijapur v. Gurusiddappa Nuraniappa , the Apex Court has held as follows :
“In our opinion that is a correct position in law as declared by this Court, and it is in consonance with the principles that have been followed under Section 4 of the English Arbitration Act, 1989. At page 106 of the said report this Court observed that the general words ‘taking any other steps in the proceedings’ just follow the specific expression ‘filing a written statement’ and both are used for achieving the same purpose. Hence, this Court was of the opinion that the latter expression must be construed ejusdem generis with the specific expression just preceding to bring out the ambit of the latter. The expression ‘written statement’ is a term of specific connotation ordinarily signifying a reply to the plaint filed by the plaintiff. The expression ‘taking any other steps in the proceedings’ does not mean that every step in the proceedings would come in the way of enforcement of the arbitration agreement. The step must be such as would clearly and unambiguously manifest the intention to waive the benefit of arbitration agreement”.
11. In Indian Oil Corporation Ltd. v. Nainsukdas Baldeodas (95 L.W. 187), a Bench of this Court deals with Section 34 of the Arbitration Act and interprets the words ‘any time on or before filing a written statement’ occurring in that Section as to mean that the petition for stay has to be filed before the time fixed for filing a written statement. The Bench has also observed that if a person has really entered appearance and asks time for filing written statement he would be deemed to nave taken a step in the proceeding and therefore no application to stay the suit would be filed.
12. In Yeswant v. Usha Kumar , it has been held that the failure of the appellant to come forward at least with such offer at the earliest stage to assist any arbitration proceedings will definitely disentitle him to obtain stay of the suit under Section 34 of the Arbitration Act.
13. In the Tamil Nadu Civil Supplies Corporation Ltd. v. Ulaganathan (1981 T.L.N.J. 206), it has been held as follows :
“In both the above appeals notices have been issued by the plaintiffs through their Advocate regarding the dispute as early as on 29-6-1977 and no steps seem to have been taken by the Tamil Nadu Civil Supplies Corporation to refer the matter to arbitration. The lower Court also referred to a decision reported in (1975) 2 S.C.J. 389, where the Supreme Court held that the continuous willingness, both before and after to refer to arbitration should be proved by the petitioner and that the other party can show that the petitioner was not willing. In this case the Tamil Nadu Civil Supplies Corporation after receiving communication from the Hulling Agent having remained silent for considerable time, they cannot later on after the suits being filed come forward with an application for stay of the suit.”
14. In State Trading Corporation v. M/s. Vaishal Shoe Company Ltd. (A.I.R. 1984 Pat. 291 = 1984 Arb. LR 153), the Patna High Court has held as follows :
“In the instant case the plaintiff-respondents (sic) for the appointment of an arbitrator, but had also sent a legal notice thereafter and the defendants did not, even choose to send a reply. In cannot, therefore, be said that it was merely inaction or silence on the part of the defendants. They failed to act when they were called upon to do so. This was a positive act on their part signifying their unwillingness to go to the arbitration.”
15. The learned counsel appearing for the petitioner has also relied on the decision in M/s. Sathu Singh Ghuman v. Food Corporation of India , wherein the Apex Court has held as follows :
“The right to have the dispute settled by arbitration has been conferred by agreement of parties and that right should not be deprived of by technical pleas. The Court must go into circumstances and intention of the party in the step taken. The Court must examine whether the party has abandoned his right under the agreement. In the light of these principles and looking to the substance of the application dated January 4, 1985, we cannot form an opinion that the defendants have abandoned the right to have the suit stayed, and took a step in the suit to file the written statement.”
Before the Apex Court, the earlier decisions were not brought to their notice. The earlier decisions of the Apex Court cited above have been rendered by three Judges of the Apex Court. But the abovesaid decision, i.e., M/s. Sadhu Singh Ghuman v. Food Corporation of India, (supra) was rendered by two Judges of the Apex Court. In such circumstances, as to what this Court has to do has been the subject matter of the decision of Union of India v. Subramaniam , wherein the Apex Court has held that the proper course for the High Court is to try and follow the opinion of the larger Benches of the Supreme Court in preference to those rendered by the smaller Benches of the Court. So, I am the view that the decision cannot be applied in preference to the earlier decisions of larger Bench of the Apex Court which has dealt with the position more elaborately and accurately. Moreover, in the decision stated supra, apart from the fact that the decision has been rendered by a smaller Bench, the earlier decisions of the Supreme Court have not been considered.
16. In view of the above the decision cited by the learned Counsel appearing for the petitioner in M/s. K.R.S.A. Karuppan Chettiar and Company v. Hindustan Petroleum Corporation Ltd. (1994 TLNJ 69), following the decision reported in Ms. Sathu Singh Ghuman v. Food Corporation of India, (supra), also cannot be relied on. Even in the said decision the learned Judge has not referred to the earlier decisions of the Apex Court on the issue.
17. The respondent issued Ex. B-19, dated 29-4-1989 demanding the amount claimed by them, failing which the company will proceed with the suit. But the petitioner did not send any reply nor invoked the arbitration Clause. Only thereafter to avoid limitation, the respondent was constrained to file the suit by paying heavy Court fee on 1-12-1991 and even after service of summons, and also on the date of entering appearance, the petitioner did not even suggest that it is going to invoke the arbitration Clause. The suit was adjourned for filing written statement. Only thereafter the petitioner come forward with the above petition for stay. At least from the date of notice, there is a delay of 2 1/2 years on the part of the petitioner in filing the petition under Section 34 of the Arbitration Act and the reason has not been explained by it before the Court at the time of institution of proceedings. Besides that, it was not ready and willing to do everything necessary for the proper conduct of the Arbitration and the conduct of the petitioner which I have already discussed would definitely disentitle them to obtain a stay of the suit proceedings under Section 34 of the Arbitration Act.
18. In Printers (Mrs.) Private Ltd. v. P. Joseph , the Apex Court while dealing with the powers of the lower Court while granting stay, has held as follows :
“Section 34 of the Act confers power on the Court to stay legal proceedings where there is an arbitration agreement subject to the conditions specified in the Section. The conditions thus specified are satisfied in the present case. But the Section clearly contemplates that even though there is an arbitration agreement and the requisite conditions specified by it are satisfied, the Court may nevertheless refuse to grant if it is satisfied that there are sufficient reasons why the matter should not be referred in accordance with the arbitration agreement. In other words, the power to stay legal proceedings is discretionary and so a party to an arbitration agreement against whom legal proceedings have been commenced cannot by relying on the arbitration agreement claim the stay of legal proceedings instituted in a Court as a matter of right. It is, however, clear that the discretion vested in the Court must be properly and judicially exercised. Ordinarily where a dispute between the parties has by agreement between them to be referred to the decision of a domestic tribunal the Court would direct the parties to go before the tribunal of their choice and stay the legal proceedings instituted before it by one of them. As in other matters of judicial discretion, so in the case of the discretion conferred on the Court by Section 34, it would be difficult, and it is indeed inexpedient, to lay down any inflexible rules which should govern the exercise of the said discretion. No test can indeed be laid down the automatic application of which will help the solution of the problem of the exercise of judicial discretion. As was observed by Bowen, L.J., in Gardner v. Jay, (1885) 29 Ch.D. 50 at 58, that discretion, like other judicial discretion, must be exercised according to common sense and according to justice.
In exercising its discretion under Section 34 the Court should not refuse to stay the legal proceedings merely because one of the parties to the arbitration agreement is unwilling to go before an arbitrator and in effect wants to resile from the said agreement, nor can stay be refused merely on the said ground that the relations between the parties to the dispute have been embittered or that the proceedings before the arbitrator may cause unnecessary delay as a result of the said relations. It may not always be reasonable or proper to refuse to stay legal proceedings merely because some questions of law would arise in resolving the dispute between the parties. On the other hand, if fraud or dishonesty is alleged against a party, it may be open to the party whose character is impeached, to claim that it should be given an opportunity to vindicate its character in an open trial before the Court rather than before the domestic tribunal, and in proper case, the Court may consider that fact as relevant for deciding whether stay should be granted or not. If there has been a longer delay in making an application for stay and the said delay may reasonably be attributed to the fact that the parties may have abandoned the arbitration agreement the Court may consider the delay as a relevant fact in deciding whether stay should be granted or not. Similarly, if complicated questions of law, or constitutional issues arise in the decisions of the dispute and the Court is satisfied that it would be inexpedient to leave the decision of such complex issues to the arbitrator it may, in a proper case, refuse to grant stay on that ground. Indeed, in such cases the arbitrator can and may state a special case for the opinion of the Court under Section 13(b) of the Act. Thus, the question as to whether legal proceedings should be stayed under Section 34 must always be decided by the Court in a judicial manner having regard to the relevant facts and circumstances of each case.”
19. In the light of the abovesaid principles enunciated by various decisions, I find no arbitrariness or perversity in the order of the lower Court which has decided the issue in a judicious manner. Accordingly, the revision is dismissed. No costs. Consequently, C.M.P. No. 14683 of 1992 is also dismissed.
20. Petition dismissed.