ORDER
Jaspal Singh, J.
1. The learned Additional District Judge dismissed the application moved under Section 34 of the Arbitration Act holding that the applicant had not been received to have been ready and willing to have the disputes determined through arbitrator. The appellant says that the learned Judge was wrong in holding so. Hence this appeal.
2. The facts need only a thumb-nail description. Admittedly there is an arbitration agreement between the parties. Admittedly, the disputes forming the subject-matter of the suit instituted by the respondents falls within the ambit and scope of the said agreement. Admitted also is the position that the appellant had moved the application under Section 34 of the Act without having taken any steps in the proceedings. However, despite all this the application did not find favor with the learned trial Judge.
3. Why?
4. Well, the answer is that after having gone through the record, he fell that though
before the institution of the suit itself the respondent-plaintiff had through letters in writing implored upon the appellant-defendant to agree to determination of the dispute through arbitration by invoking the arbitration agreement, the appellant-defendant did not respond positively and rather turned a deaf ear, so to say, to the demand and that consequently it could not be said that it was ready and willing to get the matter adjudicated through arbitration.
5. And what were those letters?
6. Let us have a look at them.
7. The first letter placed on the record is of April 29, 1989. It makes reference to an earlier letter of April 5, 1989 and speaks of the efforts made by the respondent-plaintiff to settle the matter amicably and proceeds to say:
“If the necessary action in the matter is not taken as requested, we shall be left with no other alternative but to approach the competent Court for the appointment of an arbitrator and the appointment as made by the Court will be binding on you”.
This was followed by a letter of July 4, 1989. It proceeded to say:
“As already explained, the matter of settlement of our account has been pending for the last several years and apparently you are not taking any interest in settling the matter amicably as suggested by us a number of times. The Courts have now opened after the summer vacation and our legal advisers are likely to move an application in Delhi High Court for the appointment of an arbitrator as provided in the agreement, latest by 15 of July, 1989. In case you are still interested in the settlement of the dispute amicably, you are requested to please remit to us on account the sum of Rs. 8000/– and also furnish complete details of the entries as pointed out vide our letter No. CPDHS : 88 : 620 dated 2nd December, 1988, so that we can check up whether the various amounts debited to our account by you are genuine and make adjustment of the same, if not already made, in our books.”
Then went the letter of July 25, 1989. I may quote the relevant portion from that letter too. It is as under:
“From the complete silence on the part of the Secretary, Haryana Breweries, it is evident that he is not at all interested in the settlement of our account which has been pending for the last about fifteen years amicably. We, therefore, once again request you to please make appointment of the arbitrator as per terms and conditions of the contract so that the point of dispute can be referred to him for adjudication.
1. Please note that in case necessary action is not take by you latest by 15th of August, 1989, we shall be left with no other alternative but to approach the Court of law for the appointment of the arbitrator as per the provisions of the Indian Arbitration Act.’ This may be treated as the final notice on the subject.”
As there was no response still, a legal notice ws sent through counsel. It is of May 16, 1990. To make the matter clear, I am reproducing below the relevant paragraph. It reads as follows:
In the aforesaid circumstances, I hereby call upon you to pay the aforesaid overdue sum of Rs. 70,062/– (Rupees seventy thousand and sixty two only) to my aforesaid client along with interest @ 18% per annum as stated above, within two weeks from the date of receipt of this notice. Alternatively, refer the matter to the Arbitration in terms of the Arbitration agreement existing between the parties within the aforesaid period. Failing which my client shall be left with no option but to approach the competent courts of law for appropriate remedial measures. In that event you shall be entirely responsible for its costs, risks and consequences.”
The suit was instituted in November 1991. Till then there had been no response to the request made for adjudication through arbitration.
8. Was the learned trial Judge unjustified in rejecting the application under Section 34 of the Act?
9. Since the answer lies within the wings of Section 34, let us have a look at it. It reads:
Section 34 Arbitration Act :–
34. Power to stay legal proceedings where there is an arbitration agreement — 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 conduct of the arbitration, such authority may make an order staying the proceedings.”
10. Surely, as even a cursory look at Section 34 would reveal, it confers a discretion on the Court to stay or not to stay the suit. Since the primary duty cast upon the court is to act upon the agreement, the discretion has to be exercised not only sparingly but cautiously also. Obviously it would be difficult and rather inexpedient too to lay down any inflexible formula which may govern the exercise of the said discretion but one thing is certain and it is that this discretion springs out only after the conditions stated in the section are fulfillled. There is no discretion before that.
11. And while we are on the conditions to be satisfied and as laid down in the provision, let us have a look at them too. They are:
1. The proceedings must have been commenced by a party to an arbitration agreement, against any other party to the agreement:
2. the legal proceeding which is sought to be stayed must be in respect of a matter agreed to be referred;
3. the applicant praying for stay must be a party to the legal proceeding and he must have taken no step in the proceeding after appearance;
4. the Court must be satisfied that there is no sufficient reason why the matter should not be referred to arbitrator; and that
5. 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 conduct of the arbitration.
12. It was common case of the parties that the first four conditions stood satisfied. What abut the fifth condition?
13. It was contended on behalf of the appellant that mere silence to act before the institution of the suit was of no consequence and in support reliance was placed on M/s. Sadhu Singh Ghuman v. Food Corporation of India, which in fact deals with the expression “step in the proceeding” and as such, is hardly relevant for our purposes.
14. Though not referred to or relied upon, I am conscious of same of the judgments which say that initial omission by defendant in appointment of arbitration is not to be taken in account (See Food Corporation of India, Ahmedabad v. M/s. G.T. Corporation, ) and that even where the party stated before the institution of the suit that he was unwilling to go to arbitration it would be of no consequence (See Hood Corporation of India v. Thakur Shipping Company Bombay, AIR 1980 Goa 25. However, the examination of the facts of those cases would reveal to the discerning eye that the observations so made were on account of the peculiar facts in those cases.
15. The readiness and willingness of the maker of application under Section 34 is a sine qua non for the applicability of that section and the use of the words “was” and “still remains” show unmistakably that such readiness and willingness must exist on the date when the proceedings were commenced in court and must continue to exist till the
application is made and I say so on the authority of the Supreme Court in Anderson Wright Ltd. v. Moran & Co., (1955) SCR 862 wherein the Court observed :
“Further, the readiness and willingness required by Section 34 of the Act has to exist at the commencement of the legal proceedings and has to continue up to the date of the application for stay.”
The position in law being as noticed above, is it a case of mere in action”?
16. Before I proceed to answer this question, I think I shall be failing in my duty in not referring to yet another judgment of the Supreme Court which unfortunately escaped the notice of both the sides. It is reported as State of Punjab v. Geeta Iron & Brass Works Ltd., . It was observed therein:
“We make it clear however, that as a matter of law mere silence on the part of the defendant when a notice under Section 80 C.P.C. is sent to him may not, without more, disentitle him to move under Section 34 and seek stay”.
Undoubtedly the effect of these observations is that mere failure to respond to a notice sent under Section 80 of the Code of Civil Procedure will not disentitle the defendant to apply for stay of the suit under Section 34 of the Act but then surely the judgment also shows that silence of the defendant may well be considered as a circumstance disentitling the defendant from asking for favorable exercise of discretion. In any case the report does not reproduce the contents of the notice under Section 80 CPC and one may well assume that keeping in view the requirements of S. 80, there probably was no demand for resort to arbitration. Where, however, there is specific demand for resort to arbitration and yet the other party remains unmoved and or fails or refuses to respond, this may be taken to signifying unwillingness or want of readiness to resort to arbitration. In support I seek to draw force from Food Corporation of India v. Thakur Shipping Co., . In the said case, as in the case before me the plaintiff repeatedly wrote to the defendant to take steps to refer the matter to arbitration
but there was no reply or there was evasive reply. The plaintiff filed the suit when the claim was about to expire (In the case before me the defendant claims that the suit is already barred by time). The Court held :
“Where a party to an arbitration agreement chooses to maintain silence in the face of repeated requests by the other party to take steps for arbitration, the case is not one of “mere in action”. Failing to act when a party is called upon to do so is a positive gesture signifying unwillingness or want of readiness to go to arbitration.”
17. The position thus boils down to this. Where arbitration has not been specifically asked for as in the case of State of Punjab v. M/s. Geeta Iron & Brass Works Ltd., , mere silence on the part of the defendant to a notice “without more” may not, in itself disentitle him to move under Section 34 of the Act though such a silence may well be considered as a circumstance against him. However, where arbitration has been specifically asked for and not responded to, as in Food Corporation of India v. M/s. Thakur Shipping Co., , it would not be a case of mere inaction. This, in short, is what, to my mind distinguishes the said two cases of the Supreme Court from each other.
18. As in the case before me there were repeated requests for resort to arbitration and as those requests were not responded to, the learned Additional District Judge was right in refusing to stay the proceedings.
19. A few words more need to be said.
20. The copy of the application under Section 34 of the Act attached with the appeal shows that in para 5 the following was alleged:
“5. That the said agreement is valid and binding between the parties. The defendant was ready and willing to submit to the jurisdiction of Arbitration. Thus the present proceedings are liable to be stayed as per the provisions of the Arbitration Act, 1940”.
The requirement under Section 34 of the Act,
however, is that “the applicant was, at the lime when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration”. Surely, what is pleaded by the respondent-defendant in his application under Section 34 and as reproduced by me above, falls much short of what is required to be pleaded. Rather, what is pleaded does not meet the requirements of the provision at all. There is no pleading that there was readiness and willingness “at the time when the proceedings were commenced”. There is also no pleading that the defendant “still remains ready and willing”. The defendant has also no where claimed that the readiness and willingness was “to do all things necessary to the proper conduct of the arbitration”. What is pleaded is readiness and willingness “to submit to the jurisdiction of Arbitration”. To my mind this leads the defendant nowhere. It need hardly be emphasised that if the defendant wants the court to exercise its discretion in his favor he must make necessary averments in the application. The defendant has failed to stand up to this standard also.
21. Here is a case in which the learned Additional District Judge has neither ignored relevant facts nor has he adopted an approach which may be called erroneous. Discretion lay with him. His exercise of it can neither be debunked as capricious nor can it be condemned as unreasonable. I, therefore, see no reason to interfere, and consequently confirm the order of dismissing the application moved under Section 34 of the Arbitration Act.
22. However, this still is not the end of the matter. The learned Additional District Judge has also gone into the question as to whether the suit is barred by limitation or not. I think this question was foreign to the consideration of application under Section 34. Anyhow, during arguments, it was submitted on behalf of both the sides that the finding on the question of limitation be set aside and the question be left open for decision at an appropriate stage. I order accordingly. The appeal is accepted to that extent only.
23. There will be no order as to costs.
24. Order accordingly.