# Durrani Oriental Carpets and another v. Obeetee Ltd. Company

- **Citation:** (2000) 3 ILRA 106
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 1999-03-17
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/durrani-oriental-carpets-and-another-v-obeetee-ltd-company-39053
- **Pages:** 4

## Text

INDIAN LAW REPORTS ALLAHABAD SERIES [2000
106
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By the Court

1. This appeal is directed against the
order of the Civil Judge (Senior Division),
Mirzapur dated 17.3.1999 rejecting the
application of the appellants for stay of the
suit under Section 34 of Arbitration Act,
1940.

2. Briefly stated the facts are that
respondent is a registered company. It
carries on its business of manufacture and
export of hand knotted woolen carpets
under the name and style of Obeetee Ltd.
The defendant-appellant no. 1 is a
partnership firm and appellant no.2 is one
of the partners. They entered into an
agreement on 10.8.1988. Under the said
agreement it was provided that the
respondent shall sell to the appellants all
the raw materials for the manufacture of its
floor coverings on the price mutually
agreed between the parties from time to
time.
The
floor
coverings,
after
manufacture, shall be utilised by the
appellants for the execution of the orders
given by the respondent. There were other
clauses in the agreement. Clause no.13 was
an arbitration clause which reads as
under:-

"13. In the event of any dispute(s)
between the parties hereto in relation to the
terms of this agreement, or in relation to
the floor coverings covered by this
agreement,
or
in
relation
to
the
interpretation of any of these terms, the
said dispute(s) shall be referred for the
arbitration and, for that, each party shall be
entitled to appoint one Arbitrator under the
Arbitration Act, 1940 and the decision of
the Arbitrators shall be final and binding
on the parties hereto. (emphasis supplied).
3All] Durrani Oriental Carpets and another V. Obeetee Ltd. Company
107

3. The parties however, changed
some of the terms of the agreement in
March 1990. The respondent claimed
certain
amount
as
due
against
the
appellants and a legal notice was issued to
the appellants on 29.7.1994 demanding the
amount. The appellants sent a reply dated
30.9.1994
denying
its
liability.
The
respondent again sent a notice dated
19.10.1994 indicating that the amount be
paid and the matter be settled.

4. As the appellants neither paid the
amount nor settled the matter, the plaintiffrespondent filed suit on 14th July 1995 for
recovery of a sum of Rs.5,69,600.32. The
appellants, in the said suit, filed an
application under Section 34 of the
Arbitration Act, 1940 for stay of the
proceedings in the suit on the ground that
there was an application clause between
the parties providing that in case of dispute
between the parties, the matter shall be
referred to the arbitrator and in view of the
said arbitration agreement the matter has to
be decided by an arbitrator and the
proceedings in the suit be stayed. The
appellants also filed written statement in
the suit on 17.1.1997. The respondent filed
objection to the application filed by the
appellant for stay of the proceedings of the
suit. The Court below rejected the
application on 17.3.1999 on the finding
that the parties have entered into another
agreement in the year 1990 and therefore
the original contract did not survive
particularly in regard to the arbitration
clause. This order has been challenged
before this Court.

5. The learned counsel for the
appellants contended that the transactions
between the parties were going on as per
agreement on the works order issued for
each transaction but as there was some
difficulty, some of the terms of the
agreement were changed. The arbitration
clause in the agreement still survived. The
arbitration clause referred to above was in
relation to the terms of the agreement
dated 10th August 1988. Admittedly, the
parties entered into another agreement, the
result of which was change in the terms of
agreement.
The
defendant-appellants
themselves filed a Photostat copy of the
said agreement (Paper No.21C) and the
terms
of
the
said
agreement
were
incorporated in the letter dated 27.03.1994
(Paper No. 16C-9). In view of the change
in the nature of terms of agreement and
change of the pattern of transaction
between
the
parties,
the
previous
agreement dated 10th August 1988 to refer
the matter to the arbitrator cannot be
enforced.

6. In this case the appellants are
otherwise not entitled to any discretion
from the Court for stay of the proceedings
of the suit. The plaintiff-respondent had
given legal notice dated 29.7.1994 to settle
the matter and pay the amount. The
appellant sent the reply dated 30.9.1994
and did not ask for settlement of the
dispute by arbitration. The plaintiff again
gave a notice on 19.10.1994 and when the
defendant-appellants did not respond, it
had to file suit for recovery of the amount
after
paying
heavy
court
fee.
The
respondent in paragraphs 14 and 17 of the
plaint asserted these facts. In paragraph 17
of the plaint it has been categorically
stated that the defendant refused to make
settlement and to negotiate the outstanding
balance against them even after the legal
notice of demand and reminders were
served upon them. The appellants have
filed written statement and they have not
specifically denied the fact that they had
received the notice and in the reply to the
INDIAN LAW REPORTS ALLAHABAD SERIES [2000
108
notice they never expressed their intention
for
settlement
of
dispute
through
arbitration.

7. Section 34 of the Arbitration Act
provides that an applicant seeking for stay
of proceedings of the suit must specify that
he was at the time when the proceedings
commenced and still remains ready and
willing to do all things necessary to the
proper conduct of arbitration, the Court
may
make
an
order
staying
the
proceedings
of
the
suit.
In
N.C.
Padmanabhan and others v. S. Srinivasan,
AIR 1967 Madras 201, the Court did not
stay the proceedings of the suit on the
ground that when the plaintiffs sent notice,
the defendant in his reply did not indicate
his intention to refer the matter to
arbitration. The words at the time when the
proceedings commenced' under Section 34
must cover the entire period both before
commencement of the suit and thereafter.
It was observed:-

"I have no hesitation in holding that the
averment extracted above does not satisfy
the requirements of S.34. A party who
invokes S.34 must specifically allege that
he was, not only, at the commencement of
the suit quite ready and willing to have the
dispute
resolved
by
arbitration
proceedings, but that he is throughout
ready and willing for such arbitration and
do everything necessary for the proper and
successful conduct of the arbitration
proceedings.
The
readiness
and
willingness to do everything necessary for
the proper conduct of the arbitration
proceedings should cover the entire period
both before the commencement of the suit
and thereafter. The readiness of the
defendant should not be a matter of
implication but there should be a clear,
unambiguous and specific averment to that
effect in an affidavit filed by the applicant
for the stay of the suit."

8. In Shalimar Paints Ltd. v.
Omprokash Singhania, AIR 1967 Calcutta
372,
referring
to
the
various
correspondence between the parties prior
to filing of the suit, the Court rejected the
prayer to stay the proceedings of the suit
with the following observation:-

"It does not appear from the facts and
circumstances of the case that the applicant
was
ready
and
willing
at
the
commencement of the proceedings to do
everything
necessary
for
the
proper
conduct of the arbitration. It is to be noted
that no suggestion was ever made by the
petitioner in any of the correspondence
carried on between the parties that the
disputes should be referred to arbitration
for adjudication in accordance with the
provisions contained in the arbitration
clause. The plaintiff had made various
demands and had sent letters of demands
even through its solicitors."

9. Sometimes, it may not itself be a
ground to reject the application but it has
to be examined on facts each of the cases.
It is the discretion of the Court to stay
proceedings of the suit under Section 34 of
the Arbitration Act. The appellate court
would be slow to interfere with the
exercise of discretion of the Court below
unless it is shown to be arbitrary or based
on certain unjustified grounds. In U.P. Cooperative Federation Ltd. v. Sunder Bros.,
Delhi, AIR 1967 SC 249, it was held that
where the discretion vested in the Court
under Section 34 has been exercised by the
lower Court, the appellate Court would
normally be not justified in interfering
with the exercise of the discretion under
appeal solely on the ground that it had
3All] Sunder Devi and others V. Rent Control & Eviction Officer, Kanpur Nagar & another 109
considered the matter at the trial stage and
it may have come to a contrary conclusion.

10. For the reasons stated above we
do not find any merit in the appeal and it is
accordingly dismissed.
Appeal Dismissed.

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By the Court

1. Heard learned counsel for the
petitioner and learned counsel appearing
for the contesting respondents.

2. By means of this petition filed
under Article 226 of the Constitution of
India, petitioner prays for issuance of a
writ, order or direction in the nature of
certiorari
quashing
the
order
dated
31.10.1998 passed by respondent no.1,
declaring the building in question as
vacant.

3. The dispute relates to building No.
86/382, Deo Nagar, Kanpur of which one
Sri Jagdamba Prasad Awasthi was the
original landlord. The said building was in
the tenancy of Mr. Suraj Prasad alias
Chhedi. The petitioner was permitted to
reside in the building I question in 1955 by
Sri Suraj Prasad alias Chhedi, the chief
tenant. On receipt of the application for
allotment of the said building, proceedings
under Section 16 read with Section 12 of
the U.P. Urban Buildings (Regulation of
Letting, rent and Eviction) Act, 1972 for
short, 'the Act' were initiated. On the
directions issued by the Rent Control and
Eviction officer, the building in question