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National Company Ltd. v. Biseswarilal And Co.
Factual and Procedural Background
This opinion concerns an application seeking an order that Title Suit No. 235 of 1961, pending in the City Civil Court, be stayed under section 34 of the Arbitration Act. The petitioner also sought an injunction restraining the respondent (and its agents and servants) from proceeding further in the City Civil Court suit, but counsel for the petitioner abandoned the application so far as it related to the injunction prayer. The singular issue identified in the application was whether an order can be made under section 34 of the Arbitration Act in respect of the suit pending in the City Civil Court.
The petitioner additionally asked, alternatively or consequentially, for transfer of the suit under section 24 of the Code of Civil Procedure or section 9 of the City Civil Court Act so that the High Court could, it was urged, exercise jurisdiction under section 34. The petition was heard, and after addressing the statutory language and relevant authorities the court concluded that the petitioner was not entitled to the relief sought and dismissed the petition with costs.
Legal Issues Presented
- Whether this Court can make an order under section 34 of the Arbitration Act to stay Title Suit No. 235 of 1961 pending in the City Civil Court.
- Whether the City Civil Court has jurisdiction under section 34 of the Arbitration Act (i.e., whether section 34 applies to proceedings in the City Civil Court).
- Whether notice under section 35 of the Arbitration Act, if delivered before the arbitrators, would render the arbitration ineffective or invalidate an award.
- Whether the High Court should transfer the suit (under section 24 CPC or section 9 of the City Civil Court Act) so that powers under section 34 could be exercised.
- Whether the High Court should exercise suo motu or supervisory jurisdiction to transfer or stay the suit in the absence of a properly constituted application.
Arguments of the Parties
Petitioner's Arguments
- The City Civil Court Act demonstrates that the City Civil Court has no jurisdiction in matters under the Arbitration Act; one object of that Act was to relieve congestion in the High Court, and therefore the High Court should exercise jurisdiction in arbitration matters not specifically conferred on the City Civil Court.
- Given that the suit was instituted in the City Civil Court, if a notice under section 35 were delivered to the arbitrators before arbitration proceeded, the arbitration would be prevented from being proceeded with; sections 34 and 35 are complementary, so if section 34 applies, section 35 will apply.
- The High Court should transfer the suit under section 24 of the Code of Civil Procedure or section 9 of the City Civil Court Act — either suo motu or on the facts of the case — because otherwise the petitioner would be without an effective remedy and arbitration proceedings might be frustrated.
- Relied on several precedents (including Supreme Court authorities) to support a harmonious construction of statutes and to consult objects and reasons where appropriate.
- Relied on a decision reported at A.I.R (1936) Mad. 55 to support the contention that the court may exercise suo motu powers without giving reasons.
Respondent's Arguments
- The question whether section 34 applies to the City Civil Court is not free from difficulty; counsel for the respondent did not ask the court to express a definitive view on that question.
- Relied on the facts and decision in Kamal Brothers v. Hansraj Kapur to show that the circumstances there (where arbitration proceedings had priority and an umpire was appointed) were peculiar and distinguishable; Kamal Brothers is not authority for the proposition that a suit in the City Civil Court can be stayed under section 34.
- Relied on Rambilas Nandlal v. Imperial Oil Mills Ltd. for the proposition that an award is not rendered invalid merely by a notice under section 35 unless the legal proceedings commenced are upon either the whole or part of the subject matter of the reference; arbitrators cannot decide upon the validity of their own jurisdiction.
- Contended that there was an injunction in force granted by the City Civil Court; unless that injunction is vacated the petitioner cannot proceed with arbitration, making the section 35 contention academic so long as the injunction remains.
- Opposed transfer under section 24 CPC and section 9 City Civil Court Act: there was no proper application for supervisory jurisdiction and no special reason to exercise such jurisdiction; transfer sought for the purpose of stay (rather than trial) would be inappropriate and an indirect attempt to achieve what section 34 forbids.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Poppatlal Shah v. The State of Madras, (1) A.I.R 1953 S.C. 274 | Observation that all parts of a statute are to be read together. | The court acknowledged this as a well-settled principle supporting harmonious construction of statutes, but emphasised that clear statutory words must be accepted even if they point to a particular construction. |
| State of W.B v. Subodh Gopal Bose, (2) A.I.R 1954 S.C. 92 | Principle that the objects and reasons of a statute can be looked at in construing it. | Noted as a settled principle relied upon by the petitioner, but the court stressed that it could not override clear statutory language. |
| Rajkrishna Bose v. Binod Kanungo, (3) A.I.R 1954 S.C. 202 | Principle that statutes should be given a harmonious construction. | Accepted as a guiding principle but applied consistently with the literal language of section 34 where that language is clear. |
| Kamal Brothers v. Hansraj Kapur, (4) A.I.R 1959 Cal. 583 | Held that, on the facts, injunction against suit in the City Civil Court was justified where arbitration was prior in point of time and an umpire was proceeding; an injunction for limited period was granted. | The court distinguished Kamal Brothers as factually peculiar and not authority for the broader proposition that suits in the City Civil Court can be stayed under section 34. |
| Radhakissen Dhanuka v. Bombay Co. Ltd., (5) I.L.R. 56 Cal. 755 | Under the old Arbitration Act (section 19), the Small Causes Court had no jurisdiction to grant a stay; the High Court was the proper court to exercise the stay power in Presidency towns because of the old Act's wording. | The court noted this historical decision but observed that the language of the present section 34 differs from the old section 19, so the older conclusion is not automatically applicable. |
| Basanti Cotton Mills Ltd. v. M/S. Dhingra Brothers, (6) I.L.R. 1950 (I) Cal. 546 | Consideration of the language of the present section 34 and its proper application. | The court cited this decision as holding that the conclusion in Dhanuka's case could not apply to the present section 34, supporting the view that the present statutory language must be followed. |
| Rambilas Nandlal v. Imperial Oil Mills Ltd., (7) A.I.R 1960 Cal. 304 | Held that an award is not rendered invalid merely by a notice under section 35 unless the subsequent legal proceedings are upon the whole or part of the subject matter of the reference; arbitrators cannot decide on the validity of their own jurisdiction. | The court relied on this authority to reject the petitioner's submission that a section 35 notice automatically renders arbitration ineffective; the court held that section 35 is relevant only where the legal proceedings concern the subject matter of the reference. |
| Nrisingha Charan Nandy Choudhury v. Rajniti Prasad Singh, (8) Law Reports 63 I.A. 311 | Observation that the word "trial" does not include jurisdiction to take cognisance of the suit, but includes matters governing the hearing, including preliminary matters of competence of the court to entertain it. | The petitioner relied on this passage to argue for transfer under section 9 (for trial), but the court held that a transfer sought solely for stay (not trial) would be inappropriate and beyond the intended scope of section 9 or section 24 CPC. |
| A.I.R. (1936) Mad. 55 (case name not specified in the opinion) | Authority relied on by the petitioner to contend that the court need not give reasons when exercising suo motu jurisdiction. | The court noted the reliance but declined to exercise suo motu supervisory jurisdiction in the present matter and expressed unwillingness to exercise such power here even if done without giving reasons. |
Court's Reasoning and Analysis
The court's analysis proceeded from the textual language of section 34 of the Arbitration Act. The court emphasised that section 34 "lays down in unmistakable terms that the jurisdiction under section 34 is in the court before which the proceedings are pending." In other words, the power to stay proceedings under section 34 is vested in the court in which the legal proceedings were instituted. The court refused to read into section 34 any additional words or alterations that would permit the High Court to assume jurisdiction over a suit originally instituted in the City Civil Court merely because the High Court otherwise has jurisdiction in arbitration matters.
The petitioner urged a construction based on the objects and reasons of the City Civil Court Act and on principles of harmonious construction, relying on Supreme Court authorities. The court acknowledged those principles but observed that where the clear words of a statute point to a particular construction the court must accept that construction. It therefore declined to reinterpret section 34 so as to confer stay-powers on the High Court in respect of a suit pending before the City Civil Court.
The court considered prior decisions. It distinguished Kamal Brothers v. Hansraj Kapur, noting that the facts there (where arbitration proceedings and an umpire had been appointed before the City Civil Court suit) were peculiar and not authority for the broader proposition sought by the petitioner. The court further examined the older decision in Dhanuka's case, which under the previous statutory wording had limited stay-power to the High Court in Presidency towns; but the court observed the present section 34's language differs and that Basanti Cotton Mills had held the Dhanuka conclusion could not apply to the present section 34.
Turning to sections 34 and 35 together, the court held they are complementary: if section 34 applies, section 35 follows; conversely, if section 34 does not apply, section 35 will not apply. The court relied on Rambilas Nandlal for the principle that a notice under section 35 does not by itself invalidate an arbitration award unless the subsequent legal proceedings relate to the whole or part of the subject matter referred to arbitration, and that arbitrators cannot decide on the validity of their own jurisdiction.
The court accepted the respondent's point that an injunction granted by the City Civil Court would, in practice, prevent the petitioner from proceeding with arbitration until that injunction were vacated, rendering the petitioner's contention about section 35 academic while the injunction stands. On the transfer issue, the court rejected the petitioner's submission that the suit should be transferred under section 24 CPC or section 9 of the City Civil Court Act so as to enable section 34 to be invoked: a transfer for the purpose of securing a stay (rather than for trial) would be an indirect attempt to achieve what the clear language of section 34 forbids and would be beyond the scope of the transfer provisions relied upon.
Finally, as to the exercise of supervisory or suo motu powers, the court declined to exercise such jurisdiction in the absence of a properly constituted application and any special reason compelling such action. The court expressed that the strength of supervisory power lies in restraint and that exercising it merely because the petitioner wants an order under section 34 would be an abuse of that power.
Holding and Implications
Holding: The petition is dismissed with costs.
Implications:
- The petitioner was denied the stay of Title Suit No. 235 of 1961 and any transfer sought for the purpose of obtaining such a stay. The court concluded that the petitioner is not entitled to the orders prayed for.
- The court declined to express a definitive view on whether section 34 of the Arbitration Act applies to the City Civil Court; that question was left open at the instance of counsel.
- The decision means, in this case, the petitioner remains subject to the injunction and proceedings in the City Civil Court unless and until that injunction is vacated or other appropriate remedies are pursued. The court indicated that a notice under section 35 does not automatically render the arbitration ineffective unless the subsequent legal proceedings concern the whole or part of the subject matter of the reference.
- No broad novel principle was declared: the court applied the clear language of section 34 and relied on existing authorities to distinguish or limit prior decisions; the ruling was a denial of relief specific to the petition before the court rather than a definitive pronouncement on the general applicability of section 34 to the City Civil Court.
Judge's initials as in the opinion: S.N.G
2. This is an application for an order that Title Suit No. 235 of 1961 in the City Civil Court be stayed under section 34 of the Arbitration Act. The other order prayed for is that the respondent, its agents and servants be restrained front proceeding further or taking any steps in the said title suit pending in the City Civil Court. Counsel for the petitioner abandoned the application in so far as it related to the prayer for injunction.
3. The only point in this application is whether there can be an order under section 34 of the Arbitration Act. The suit is pending in the City Civil Court. Counsel for the petitioner contended that the City Civil Court Act shows that the City Civil Court has no jurisdiction in Arbitration Acts and it will appear from the objects and reasons of City Civil Court Act that one of the reasons for that enactment is relief of congestion in the High Court, and therefore this court would exercise jurisdiction in matters which are not specifically conferred upon the City Civil Court by the City Civil Court Act. In other words the contention is that in so far as the Arbitration Act is concerned, since the High Court has jurisdiction in Arbitration matters this Court will exercise jurisdiction in suits which are pending in the City Civil Court. Counsel for the petitioner referred to some decisions of lithe Supreme Court, Poppatlal Shah v. The State of Madras (1) A.I.R 1953 S.C 274 on the observations appearing at p. 276 of the report that all parts of a statute are to be read together, State of W.B v. Subodh Gopal Bose, (2) A.I.R 1954 S.C 92 that the objects and reasons of a statute can be looked at and Rajkrishna Bose v. Binod Kanungo (3) A.I.R 1954 S.C 202 that the court should attempt a harmonious construction of the statute. These principles are well settled. On the other hand it is equally well settled that if the clear words of a statute point to a conclusion or construction, then that construction has to be accepted. In the present case the language of section 34 of the Arbitration Act lays down in unmistakable terms that the jurisdiction under section 34 is in the court before which the proceedings are pending.
4. As to whether the City Civil Court has or has no jurisdiction under section 34 of the Arbitration Act, counsel for the respondent contended that the question was not free from difficulty and I do not express any views on the question. In Kamal Brothers v. Hansraj Kapur, (4) A.I.R 1959 Cal. 583 an application was made for an injunction restraining the respondent from proceeding with a suit pending in the City Civil Court. In Kamal Brothers' case the suit was instituted in the City Civil Court and an application was made in this court for stay of the suit. The respondent there had earlier filed a suit in the High Court which was stayed under section 34. Pursuant to the order the disputes were referred to arbitration and a counsel of this court was appointed as an Umpire. During the pendency of the proceedings before the Umpire the respondent instituted the suit in the City Civil Court. In the facts and circumstances of this case it was held that the arbitration agreement had not been superseded and on the contrary by an order of this court the Umpire was proceeding with the reference and the arbitration proceedings were prior in point of time and the suit in the City Civil Court was instituted to take out the question of the tenancy right being adjudicated by the Umpire. Under those circumstances it was held that a case for injunction for a limited period had been made out. There it was ordered that in the interest of justice the proper order in that was to issue an injunction from proceeding with the suit in the City Civil Court for a period of four months. The peculiar circumstances and facts of that case ate entirely inappropriate to the present case. Furthermore, as counsel for the respondent in my view rightly contended, Kamal Brothers case is not an authority for the proposition that the suit in the City Civil Court can be stayed under section 34. In the case of Radhakissen Dhanuka v. Bombay C. Ltd., (5) I.L.R 56 Cal. 755 Lort Williams, J. held that the small Causes Court has no jurisdiction to grant a stay of suit under the provisions of section 19 of the then Arbitration Act Under the old Act the language of section 19 corresponding to the present section 34 was different. Under section 19 of the old Arbitration Act where a party to a submission commenced legal proceedings, any party to such proceedings could apply to the court to stay the proceedings. The court in the old Act was to mean in the Presidency Towns the High Court. Therefore under the old Act the High Court was the proper court for exercising power of stay under the Arbitration though the suit was instituted in the Small Causes Court, Calcutta. The language of section 34 is entirely different and to my mind it is indisputable that the court where the proceeding is instituted is the only court to exercise power under section 34. If section 34 does not apply to the City Civil Court I can not interpret section 34 in the manner suggested, for that would be engrafting on the statute words entirely opposed to the words used in the statute. The question came up for consideration in another decision of this court. Basanti Cotton Mills Ltd.…Plaintiff v. M/S. Dhingra Brothers…Defendant Opposite Party., (6) I.L.R 1950 (I) Cal 546. It was held there that on the language of the present section 34 the conclusion which had been reached in Dhanuka's case (5) could not apply.
5. It is therefore manifest that so far as the High Court is concerned, unless the suit is pending in this Court provisions of section 34 will not apply. I have already indicated that the question as to whether section 34 of the Arbitration Act applies in the City Civil Court is left open at the instance of counsel.
6. Counsel for the petitioner contended that since the suit was instituted in the City Civil Court if a notice under section 35 of the Arbitration Act were delivered before the Arbitrators, the arbitration would not be proceeded with. Sections 34 and 35 are complementary. If section 34 applies section 35 will apply. Conversely, if section 34 does not apply section 35 will not apply. Furthermore, counsel for the respondent in my view rightly contended on the authority of the decision in Rambilas Nandlal v. Imperial Oil Mills Ltd., (7) A.I.R 1960 Cal. 304 in support of the proposition that an award is not rendered invalid merely by a notice under section 35 unless the legal proceedings commenced be upon either the whole or part of the subject matter of the reference. Validity or invalidity of the contract, it was held there, was not and could not be referred to arbitration, for the arbitrators had no power and authority to decide upon the question of their own jurisdiction.
7. Therefore if the legal proceedings commenced in a court touch the validity or invalidity of the contract, the subject matter of the legal proceedings could not be one which could ordinarily be stayed under section 34 of the Arbitration Act and section 35 of the Arbitration Act which presupposes a legal proceeding which is capable of being stayed by the court under section 34 equally contemplates that if the legal proceedings do not refer to the subject matter of the reference a notice under section 35 can not obviously render arbitration proceedings ineffective or nugatory. Furthermore, counsel for the respondent contended that there was an injunction granted by the City Civil Court and unless the petitioner could vacate the order of injunction the petitioner could not proceed with the arbitration. Therefore the contention of the respondent that a notice under section 35 would render the arbitration ineffective becomes academic unless and until the order for injunction be removed. I am not impressed by the contention of counsel for the petitioner that the arbitration proceedings may be rendered ineffective because counsel for the respondent in my view rightly contended that notice under section 35 will not render the arbitration proceedings invalid because of the nature or the suit and secondly as long as the order for injunction lasts a notice under section 35 is irrelevant.
8. Counsel for the petitioner next contended that under section 24 of the Code of Civil Procedure or under section 9 of the City Civil Court Act I should transfer the suit. The contentions were that either I should do it suo motu or I should do it in the facts and circumstances of the case. I do not see any reason as to why the court suo motu would have to transfer the suit. It is urged that the petitioner will be without any remedy. I cannot accept that contention. The petitioner has various remedies. It is contended that it will be just. I am unable to accept that contention. It will be equally just as counsel for the respondent contended not to transfer the suit and it might cause injustice to the parties. Furthermore, the language of section 9 of the City Civil Court Act is that a suit is transferred for the purpose of trial. Counsel for the petitioner relied on the decision in Nrisingha Charan Nandy Choudhury v. Rajniti Prasad Singh, (8) Law Reports 63 I.A 311 on the observations at p. 324 of the report that the word “trial” does not include jurisdiction to take cognisance of the suit, but includes all the essential matters governing the hearing of a cause including the preliminary matter of the competence of the court to entertain it. If a transfer is sought for trial of the suit here there is no reason for that course of action and no one asks for it. If on the other hand a transfer is contended for the purpose of bringing the suit ???ere and then applying powers under section 34 of the Arbitration Act such an order will be an indirect attempt to achieve what is directly forbidden by the language of section 34, furthermore this will be a transfer not for trial but for stay of suit and in my opinion that is not the scope and intent of section 9 of the City Civil Court Act or section 24 of the Code.
9. Counsel for the respondent also contended that section 24 of the Code of Civil Procedure was not applicable inasmuch as the supervisory jurisdiction of the court was neither attracted nor was there any application in that behalf. Furthermore, counsel for the respondent in my view rightly contended that in the absence of a properly constituted application I should not exercise supervisory jurisdiction. No special reason has been assigned as to why I should exercise supervisory jurisdiction excepting the reason that the petitioner wants an order under section 34. Counsel for the petitioner also relied on the decision reported in (9) A.I.R (1936) Mad. 55 in support of his contention that the court need not give any reasons for suo motu exercise of jurisdiction. I am not inclined to exercise such power in the present case even if I am called to do so without giving any reasons. Furthermore, such an exercise of power will be in my view abusing the power which this court possesses, for in my view the strength of the power lies in the restraint of its use. I am, therefore, of opinion that the petitioner is not entitled to any order as asked for. This petition is dismissed with costs.
S.N.G
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