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Judgment
AR. Lakshmanan, J.—Application Nos. 101 and 102 of 1994 have been filed by the plaintiff to direct the defendants to furnish security in a
sum of Rs. 31,91,977 and for a prohibitory order restraining the United Western Bank Ltd., Broadway Branch, from parting with the amount of
Rs. 5,00,000 together with interest in respect of the fixed deposit amount in the joint account of N. Murughasan and M/s. Raj Maritimes
respectively. In both these applications, notice was ordered by this Court.
The defendants have filed Application Nos. 2677 and 2678 of 1994 to refer the matter for arbitration as stipulated in the memorandum of
agreement dated 8.12.1992 and to grant stay of the suit and all proceedings in Application Nos. 101 and 102 of 1994.
First, I will take up Application Nos. 2677 and 2678 of 1994. The only point that arises for consideration in these application is, whether the
suit filed by the plaintiff/respondent is to be stayed and the matter to be referred for arbitration as stipulated in the memorandum of agreement
dated 8.12.1992.1 have heard Ms. Srividya for the applicants/defendants and Mr. Bijai Sundar for the respondent/plaintiff.
The plaintiff filed a suit against the defendants for recovery of a sum of Rs. 31,91,977 together with interest at 21% per annum and for costs.
According to the plaintiff, the defendants have committed breach of contract and have not fulfilled the terms and conditions of the contract of sale
of the vessel M. V.SUCCESS SEA. The suit is filed on the basis of the memorandum of agreement dated 8.12.1992. At the time of hearing my
attention was drawn to Clause of 15 of the agreement, which reads thus:
Arbitration: Should any dispute arise in connection with the interpretation of and fulfilment of this contract in the manner and time specified
herein, the same shall be decided by Arbitration in the City of Madras, India, and shall be referred to a Three Member Arbitration Committee, one
member appointed by each of the parties and the third member be nominated by M/s. King and Patridge, Catholic Centre, Armenian Street,
Madras, India, and the decisions of the said Arbitration Committee shall be binding on both the parties without recourse to further legal actions.
The above clause provides for referring the matter for arbitration of any dispute arising in connection with the interpretation of and fulfilment of
the contract in the manner and the time specified therein. As stated above, the plaintiff contends that the defendants have committed breach of
contract, that they arc liable to pay a sum of Rs. 31 lakhs and odd and that therefore, the suit has been laid for recovery of the said sum. Per
contra, the defendants contend that the question whether the defendants have committed a breach of contract is in dispute and hence the same has
to be referred to arbitration as provided in Clause 15 of the agreement.
In this context, reference to Section 34 of the Arbitration Act will be useful. It reads as under:
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.
The following are the admitted facts:
(a) The plaintiff and the defendants are parties to the agreement dated 8.12.1992.
(b) The agreement provides for referring the matter for arbitration of any dispute arising in connection with the interpretation of and fulfilment of the
contract.
(c) The plaintiff, without invoking the arbitration clause, has filed the present suit for recovery of a sum of Rs. 31 lakhs and odd.
(d) The plaintiff has commenced the legal proceedings against the defendants, who are parties to the agreement.
(e) The defendants have not filed any written statement or taken time for filing the written statement but have applied to this Court, before which
the suit is pending, to stay the suit proceedings.
In the above background, it is for this Court to see whether the defendants have shown sufficient reason as to why the matter should be referred
to arbitration in accordance with the arbitration agreement and to stay the proceedings. At the time of hearing, Ms. M. Srividya. learned Counsel
for the defendants, raised the points stated supra.
Per contra, Mr. K. Bijai Sundar, learned Counsel for the plaintiff/respondent contended that though disputes and difference have arisen between
the parties, in the plethora of correspondence exchanged between them, the defendants have not expressed their willingness and readiness to
participate in the arbitration proceedings. Since the defendants have not expressed their readiness and willingness to participate in the arbitration
proceedings even in the affidavit, such an application for stay moved by the defendants is not maintainable. It is also contended that the dispute
which has arisen between the parties does not fall within the ambit of Clause 15 of the agreement and hence, the dispute has to be decided only by
this Court. It is then contended that since the claim made by the plaintiff is only for damages suffered on account of the breach of contract by the
defendants, the said dispute is beyond the scope of the arbitration clause.
In these applications, the defendants have also filed a reply affidavit denying all the averments made in the counter-affidavit of the plaintiff and
also specifically making an averment that the defendants have been and are ready and willing to do all necessary things for the proper conduct of
the arbitration and therefore prayed that the matter may be referred for arbitration.
I am unable to accept the contention raised by the learned Counsel for the plaintiff. It is the specific contention of the plaintiff that the
defendants have committed breach of contract, which, in my opinion, is a dispute arising in connection with the interpretation of and fulfilment of the
contract in the manner and time specified under the agreement. The defendant shave also specified the pre-conditions provided u/s 34 of the
Arbitration Act, as observed by me in paragraphs supra. In reply to the contention raised by the plaintiff that the defendants have not expressed
their readiness and willingness to adjudicate the matter by the process of arbitration, the defendants have now filed a reply affidavit expressing their
readiness and willingness to do all things for the proper conduct of the arbitration.
A Division Bench of the this Court in the decision reported in K.V. Nagaraja Iyer v. The Union of India ILR (1974) Mad. 337, has observed
as follows:
All that Section 34 of the Arbitration Act (X of 1940) requires is that the applicant must satisfy the court (among other things) that he was, at the
time when the proceedings were commenced, and still remains, ready and willing to do all things necessary for the proper conduct of the
arbitration. Section 34 of the Act docs not prescribe that the making of any kind of formal averment to that effect is a precondition to the grant of
stay under the Section 34. The true position is that whether an averment is made or not, the party asking for stay 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. Insistence upon proof of readiness and willingness at the relevant times ought not to be confused with an obligation to make any
averment in the petition in any particular form. Under certain circumstances, the absence of an averment in the petition may justify an adverse
inference against the petitioner''s profession of readiness and willingness. But, what is important is the satisfaction of the court, and not a ritual of
mere averments. Averment or no averment, if the court is satisfied that the administration was in fact ready and willing, at the relevant times, to do
everything necessary for the proper conduct of the arbitration, and that the other conditions laid down in the section have also been fulfilled, there is
no bar to the grant of stay by court.
In the instant case, the defendants have satisfied this Court, among other things, that they are when the proceedings were commenced and still
remains, ready and willing to do all things necessary for the proper conduct of the arbitration. As pointed out by the Division Bench in the decision
cited supra, Section 34 of the Arbitration Act does not prescribe that the making of any kind of formal averment to that effect is a pre-condition for
the grant of stay u/s 34 of the Arbitration Act. Hence, the contention raised by the plaintiff in this regard has no legs to stand and is liable to be
rejected. What is important, as pointed out by the Division Bench of the Madras High Court, is the satisfaction of the court and not a ritual of mere
averments. In this case, I am fully satisfied that the defendants have expressed their readiness and willingness to do all things necessary for the
proper conduct of the arbitration.
In the decision reported in Srivenkateswara Constructions and Others Vs. The Union of India, , a Division Bench of Andhra Pradesh High
Court has held as follows:
The section docs not at all require any such specific averment. What is required is that the Court should be satisfied that the applicant was ready
and willing to proceed to arbitration at the commencement of the proceedings as also at the time of the application.
Mr. K. Bijai Sunder, learned Counsel for the plaintiff, in support of his contention cited the decisions reported in Pearl Hosiery Mills, Ludhiana
Vs. Union of India and Another, and State of U.P. v. Harsh Singh Kanyal A.I.R 1986 All. 769 and submits that the defendants must aver their
readiness and willingness to have the dispute determined through arbitrator. These two decisions were rendered by two learned single Judges of
the Delhi and Allahabad High Courts, which, in my view, do not state the correct legal position. This apart, a Division Bench of this Court in the
decision reported in K.V. Nagaraja Iyer v. The Union of India ILR (1974) Mad. 337, held that Section 34 of the Arbitration Act requires that the
applicant must satisfy the court that he was at the time when the proceedings were commenced and still remains ready and willing for the proper
conduct of the arbitration and that the said section docs not prescribe the making of any kind of formal averment to that effect. Likewise, a Division
Bench of the Andhra Pradesh High Court in Srivenkateswara Constructions and Others Vs. The Union of India, , has also held that Section 34 of
the Arbitration Act docs not at all require any such specific averment and that the court should be satisfied that the applicant was ready and willing
to proceed to arbitration at the commencement of the proceedings as also at the time of the application.
In the instant case, the proceedings were commenced by the plaintiff, who is a party to the arbitration agreement, against the defendants. The
legal proceedings in this case, the suit, which is sought to be stayed, is undoubtedly in respect of a matter agreed to be referred to arbitration. The
applicant for stay viz., the defendant, is a party to the legal proceedings viz., suit in this case. The applicants/defendants have not taken any steps in
the proceedings after appearance. The applicants/defendants have also satisfied this Court that they are ready and willing to do everything
necessary for the proper conduct of the arbitration. This Court is also satisfied that there was sufficient reason for referring the matter to arbitration.
For the reasons stated above, Application Nos. 2677 and 2678 of 1994 are ordered as prayed for, and I order stay of the suit C.S.No.10 of
1994 and also direct the parties to refer the dispute for arbitration as stipulated in the memorandum of agreement dated.8.12.1992. The parties
shall refer the matter for arbitration-within eight weeks from to-day. In view of the order granting stay of the suit, there is no need to keep
Application Nos. 101 and 102 of 1994. Hence, both these applications are dismissed.