1969 (4) TMI 104 - SC - Companies Law

Whether the application made by the appellant under s. 34 of the Act before the Calcutta High Court was an application in a reference within the meaning of s. 31(4) of the same Act? Held that - The application for stay under s. 34 of the Act cannot be treated as an application in a reference under s. 31(4) of the Act. Therefore, the Subordinate Judge, First Class, Delhi was right in holding that the application under s. 20 of the Act was maintainable in his Court and for making a reference of the dispute to the arbitrator mentioned in the agreement. Accordingly we set aside the order of the Punjab High Court and restore the order of the Subordinate Judge, First Class, Delhi dated January 29, 1963 allowing the application filed by the appellant under s. 20 of the Arbitration Act, 1940. The appeal is allowed

Summary

Issues:
Jurisdiction of the court to entertain an application under the Arbitration Act.
Interpretation of the phrase "in any reference" under section 31(4) of the Arbitration Act.
Determining if an application for stay of suit under section 34 of the Act constitutes an application "in a reference."

Analysis:
The case involved an appeal brought by special leave from the judgment of the Punjab High Court regarding the jurisdiction of the court to entertain an application under the Arbitration Act. The dispute arose from a contract between the Union of India and a contractor, which contained an arbitration clause for settlement of disputes. The contractor filed a suit in the Calcutta High Court, and the Union of India applied for a stay under section 34 of the Act. The matter was referred to arbitration, and subsequently, the Union of India filed an application under section 20 of the Act in the Court of the Subordinate Judge, First Class, Delhi, for making a reference of the disputes to the arbitrator mentioned in the agreement.

The main issue revolved around the interpretation of the phrase "in any reference" under section 31(4) of the Arbitration Act. The Court analyzed previous judgments and held that an application for stay of suit under section 34 is not considered an application "in a reference." The Court emphasized that different sections of the Act require applications to be made even before a reference is initiated, such as section 8 and section 20. However, an application under section 34 is distinct as it aims to enforce the arbitration agreement and prevent parties from resorting to court contrary to the agreement.

Moreover, the Court clarified that for a Court to have exclusive jurisdiction under section 31(4) of the Act, the application must be made to a Court competent to entertain it. The Court highlighted that the term "judicial authority" used in section 34 does not necessarily refer to a court with jurisdiction to decide the subject matter of the reference. The Court cited decisions of the Calcutta High Court to support this interpretation.

Ultimately, the Supreme Court held that the application under section 20 of the Act was maintainable in the Court of the Subordinate Judge, First Class, Delhi, and set aside the order of the Punjab High Court. The appeal was allowed with costs, affirming the jurisdiction of the Delhi court to entertain the application and make a reference to the arbitrator specified in the agreement.