State of Punjab Vs. M/S. Geeta Iron
& Brass Works Ltd. [1977] INSC 200 (14 October 1977)
KRISHNAIYER, V.R.
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 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.]
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 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.
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