Case: Food Corporation Of India Vs. M/S. Thakur Shipping Co. Ltd. &amp; Ors

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 observation of Das J. in Subal Chandra Bhurs case, AIR 1943 Cal 484 on which the High Court relied, is preceded by the followings sentence: "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". In Anderson Wright Ltd. v. Moran and Co., (l955) 1 SCR 862 = (AIR 1955 SC 53 ) this Court enumerating the conditions that should be fulfilled before a stay may be granted under Section 34 notes as one of the conditions that the-applicant 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 .It is thus quite clear on the authorities and from the terms of Section 34 that the readiness and willingness must exist not, only when an application for stay is made but also at the commencement of the legal proceedings. From the conduct of the first defendant in either of these two suits the trial Court found that they were not ready and willing to go to arbitration at the time when the suits were instituted. This is a finding of fact and we are afraid there was no valid ground in either case for interference with this finding.From the letters written on behalf of the Corporation to the agents of the first defendant in the suit giving rise to Civil Appeal 1519 of 1974 urging them to take steps for referring the dispute to arbitration and the evasive replies sent to these letters, the trial Court came to the conclusion that the first defendant was not ready and willing to go to arbitration at the time when the suit was instituted.We do not think this was an arbitrary or perverse conclusion as the High Court characterized it. In our opinion the High Court went wrong in disregarding relevant and significant material, namely, the correspondence that passed between the parties, as innocuous" and erred in disturbing the finding of fact for no valid reason.7. As regards the suit which gives rise to Civil Appeal 1518 of 1974, the trial Court repelled the contention that as the Corporations proposal to refer the dispute to the sole arbitration of the Director-General Shipping. Bombay was different from what clause 42 of the Charter-Party provided, the defendant was justified in not replying to the telegrams or doing anything for the proper conduct of the arbitration. The argument that the trial Court rejected found favour with the High Court. That the Corporations proposal was a deviation from clause 42 of the Charter-Party was hardly a valid excuse for the first defendant to remain silent and inactive. If the first defendant were ready and willing to go to arbitration, one would have expected them, as the trial Court observed, to reply to the telegrams saying that they were not agreeable to any departure from the terms of clause 42 and would insist on compliance with that clause. But they did not reply to the telegrams or do anything for reference of the dispute to arbitration as provided in clause 42.Silence and inaction on their part may in these circumstances very well justify the inference that they were not ready or willing to go to arbitration. The finding of the High Court that the trial Court had exercised its discretion not judicially cannot therefore be supported.And in this case really no question arises as to exercise of discretion. Granting stay under Section 34 is of course discretionary as the section indicates but the-occasion for the exercise of discretion does not arise unless all the conditions stated in the section are fulfilled. In this case the trial Court found as a fact that the first defendant was not ready and willing to go to arbitration when the suit was instituted and we have held that the finding is not perverse or arbitrary, one of the requirements of the section not having been fulfilled, Section 34 could not be invoked in this case.8. Mr. Desai for the respondent relied on certain observations of this Court in Michael Golodetz v. Serajuddin and Co., (l964) 1 SCR 19 = (AIR 1963 SC 1044 ) in support of the proposition that the court should not allow a party to an arbitration agreement to proceed with the suit in "breach of the solemn obligation to seek resort to the tribunal selected by him". It is however made clear in that decision that these observations are subject to the terms of Section 34, one of which is that the other party to the agreement must remain "ready and willing to do all things necessary for the proper conduct of the arbitration". The legal position is explained in that decision, as follows;"The Court ordinarily requires the parties to resort for resolving disputes arising under a contract to the tribune1 contemplated by them at the time of the contract. That is not because the Court regards itself bound to abdicate its jurisdiction in respect of disputes within its cognizance, it merely seeks to promote the sanctity of contracts, and for that purpose stays the suit, The jurisdiction of the Court to try the suit remains undisputed, but the discretion of the court is on grounds of equity interposed.......... it is for the court, having regard to all the circumstances, to arrive at a conclusion whether sufficient reasons are made out for refusing to grant stay. Whether the circumstances in a given case make out sufficient reasons for refusing to stay a suit is essentially a question of fact."

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It is thus quite clear on the authorities and from the terms of Section 34 that the readiness and willingness must exist not, only when an application for stay is made but also at the commencement of the legal proceedings. From the conduct of the first defendant in either of these two suits the trial Court found that they were not ready and willing to go to arbitration at the time when the suits were instituted. This is a finding of fact and we are afraid there was no valid ground in either case for interference with this finding.From the letters written on behalf of the Corporation to the agents of the first defendant in the suit giving rise to Civil Appeal 1519 of 1974 urging them to take steps for referring the dispute to arbitration and the evasive replies sent to these letters, the trial Court came to the conclusion that the first defendant was not ready and willing to go to arbitration at the time when the suit was instituted.We do not think this was an arbitrary or perverse conclusion as the High Court characterized it. In our opinion the High Court went wrong in disregarding relevant and significant material, namely, the correspondence that passed between the parties, as innocuous" and erred in disturbing the finding of fact for no valid reason.7. As regards the suit which gives rise to Civil Appeal 1518 of 1974, the trial Court repelled the contention that as the Corporations proposal to refer the dispute to the sole arbitration of the Director-General Shipping. Bombay was different from what clause 42 of the Charter-Party provided, the defendant was justified in not replying to the telegrams or doing anything for the proper conduct of the arbitration. The argument that the trial Court rejected found favour with the High Court. That the Corporations proposal was a deviation from clause 42 of the Charter-Party was hardly a valid excuse for the first defendant to remain silent and inactive. If the first defendant were ready and willing to go to arbitration, one would have expected them, as the trial Court observed, to reply to the telegrams saying that they were not agreeable to any departure from the terms of clause 42 and would insist on compliance with that clause. But they did not reply to the telegrams or do anything for reference of the dispute to arbitration as provided in clause 42.Silence and inaction on their part may in these circumstances very well justify the inference that they were not ready or willing to go to arbitration. The finding of the High Court that the trial Court had exercised its discretion not judicially cannot therefore be supported.And in this case really no question arises as to exercise of discretion. Granting stay under Section 34 is of course discretionary as the section indicates but the-occasion for the exercise of discretion does not arise unless all the conditions stated in the section are fulfilled. In this case the trial Court found as a fact that the first defendant was not ready and willing to go to arbitration when the suit was instituted and we have held that the finding is not perverse or arbitrary, one of the requirements of the section not having been fulfilled, Section 34 could not be invoked in this case.