Full Judgment Text
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PETITIONER:
STATE OF PUNJAB
Vs.
RESPONDENT:
M/s. GEETA IRON & BRASS WORKS LTD.
DATE OF JUDGMENT14/10/1977
BENCH:
KRISHNAIYER, V.R.
BENCH:
KRISHNAIYER, V.R.
SINGH, JASWANT
CITATION:
1978 AIR 1608 1979 SCR (1) 746
1978 SCC (1) 68
ACT:
Arbitration Act 1940 (Act IV of 1940), Section 34-Power to
stay legal proceedings where there is an agreement-Scope of
S. 34.
Constitution of India, Article 136-Interference against
interlocutory orders refusing stay of proceedings u/s. 34 of
the Arbitration Act.
Civil Procedure Code (Act V of 1908). s. 80-Scope of.
HEADNOTE:
The respondent/plaintiff issued a notice u/s. 80 C.P.C. to
the appellant/ defendant for referring certain claims to
Arbitration as per the contract. There being no response, a
suit was filed under the Arbitration Act and summons taken
out to the Chief Secretary. In the ex parte proceedings
taken, on the refusal of the summons issued, the Government
later applied for staying of the proceeding u/s. 34. The
Subordinate Judge declined to stay the proceedings. In
appeal, the High Court refused to interfere against the said
order.’
Dismissing the special leave petition, the Court,
HELD : (1) A statutory notice of the proposed action u/s. 80
C.P.C. is intended to alert the State to negotiate a just
settlement or at least have the courtesy to tell the
potential outsider why the claim is being resisted. As a
matter of law, mere silence on the part of the defendant
when a notice u/s. 80, C. P. C. is sent to him may not more,
disentitle him to move u/s. 34 of the Arbitration Act and
seek stay. [747 E, G]
(2) Where parties have, by contract, agreed to refer their
disputes to arbitration, the courts should as far as
possible proceed to give an opportunity for resolution of
disputes by arbitration rather than by judicial
adjudication. Even so. there is a residual discretion
vested in the court to stay or not to stay having regard to
the totality of circumstances. One weighty factor obviously
to find out whether the party who invokes the arbitration
clause has expressed his readiness to rely on it at the
earliest stage.
In the instant case there is no gross error justifying the
grant of leave since an opportunity for settling the dispute
through arbitration was thrown away by sheer inaction by the
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appellant.[747- C-D]
Observation :
Government must be made accountable by
Parliamentary social audit for wasteful
litigative expenditure inflicted on the
community by inaction. A litigative policy of
the State involves settlement of Governmental
dispute with citizens in a sense of
conciliation rather than a fighting mood.
Indeed, it should be a directive on the part
of the State to empower its law officer to
take steps to compose disputes rather than
continue them in court. Litigation in which
Governments are involved adds to the case load
accumulation in courts for which there is
public criticism. [747 F-H, 748 A]
[The Court expressed its hope that a more responsive spirit
will be brought to bear upon governmental litigation so as
to avoid waste of public money and promote expeditious work
in courts of cases which deserve to be attended to.]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Special Leave Petition
(Civil), No. 1781 of 1977.
747
From the Judgment and Order dated 30-3-1976 of the Gujarat
High Court in Appeal No. 9 of 1976.
Hardev Singh, R. S. Sodhi and O. P. Sharma for the
Petitioner.
ORDER
KRISHNA IYER, J. This special leave to appeal is sought
against a discretionary order passed by the Subordinate
Judge declining to stay a suit under s. 34 of the
Arbitration Act. This order was challenged in appeal and
the High Court, after an exhaustive consideration, felt that
the exercise of discretion was not so improper as to deserve
interference.
Shri Hardev Singh is-right to the limited extent that where
parties have by contract agreed to refer their disputes to
arbitration the courts should as far as possible proceed to
give an opportunity for resolution of disputes by
arbitration rather than by judicial adjudication. Even so,
there is a residual discretion vested in the court to stay
or not to stay having regard to the totality of
circumstances. One weighty factor obvious is to find out
whether the party who invokes the arbitration closely as
expressed his readiness to rely on it at the earliest stage.
We are not investigating the merits of the matter under Art.
136 but are satisfied that there is no gross error
justifying grant of leave. We make it clear however that as
a matter of law mere silence on the part of the defendant
when a notice under s. 80 C.P.C. is sent to him may not,
without more, disentitle him to move under s. 34 and seek
stay. In the present case, other circumstances have also
been pressed into service by the Court.
While dismissing the special leave petition for the reasons
mentioned above, we would like to emphasize that the
deserved defeat of the State in the courts below
demonstrates the gross indifference of the administration
towards litigative diligence. In the present case a notice
under s. 80 C.P.C. was sent. No response. A suit was filed
and summons taken out to the Chief Secretary. Shockingly
enough, the summons was refused. An ex parte proceeding was
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taken when the lethargic Government woke up.
We like to emphasize that Governments must be made
accountable by Parliamentary social audit for wasteful
litigative expenditure inflicted on the community by
inaction. A statutory notice of the proposed action under
S. 80 C.P.C. is intended to alert the State to negotiate a
just settlement or at least have the courtesy to tell the
potential outsider why the claim is being resisted. Now S.
80 has become a ritual because the administration is often
unresponsive and hardly lives up to the Parliament’s
expectation in continuing s. 80 in the Code despite the
Central Law Commission’s recommendations for its deletion.
An opportunity for settling the dispute through arbitration
was thrown away by sheer inaction. A litigative policy for
the State involves settlement of Governmental disputes with
citizens in a sense of conciliation rather than in a
fighting mood. Indeed, it should be a directive on
11-951SCI/77
748
the part of the State to empower its law officer to take
steps to compose disputes rather than continue them in
court. We are constrained to make these observations
because much of the litigation in which Governments are
involved adds to the case load accumulation in courts for
which there is public criticism. We hope that a more
responsive spirit will be brought to bear upon governmental
litigation so as to avoid waste of public money and promote
expeditious work in courts of cases which deserve to be
attended to. Dismissed.
S.R. Special leave petition dismissed.
749