# [1978] 1 S.C.R. 746

- **Citation:** [1978] 1 S.C.R. 746
- **Court:** Supreme Court of India
- **Decided:** 1977-10-14
- **Bench:** V. R. Krishna Iyer, Jaswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1978-1-s-c-r-746-7315
- **Pages:** 3

## Headnote

Arbitr11tion Act 1940 (Act IV of 1940), Section 34-Po·wer to stay legal
proceedings lvhere there is an agreement-Scope of S. 34 .
. Constitution of India, Article 136-Jnterference against interlocutory orders
refusing stay of proceedings uls. 34 of the Arbitration Act.
C
Civil Procedure Code (Act V of 1908). s. 80-Scope of.
The respondent/plaintiff issued a notice u/s. 80 C.P.C. to the appellant/
defendant for referring certain claoims to Arbitration a.;; per the contract. There
being no response. a suit was filed under the A1bitration Act and stimn1ons
taken out to the Chief Secretary. In the ex parte proceedings taken, on the refusal of the summons issued, the Government larcr applied for staying of the
proceeding u/s. 34.
The Subordinate Judge dec~!ri.ed to stay the
proceedings.
D
In appeal, the High Court refused to interfere ag2.in~1 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
n1atter of Jaw, mere silence on the part of the defendant \vhen a notice u/s. 80,
C. P. C. is sent to him may not, more, disentitle him to move u/s. 34 of the
E
Arbitration Act and seek stay. [747 E, G]
F
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 a_rbitration 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-Dl
Observation :
Government must be made accountable by Parliamentary social audit
for wasteful litigative expenditure inflicted on the community by inaction.
A Iitigative 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 invol-Ved 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
II
promote expeditious work in courts of cases which deserve to be attended to.J
•
.
•

## Text

A
B
746
STATE OF PUNJAB
1'.
M/s. GEETA IRON & BRASS WORKS LTD.
October 14, 1977
[V. R. KRISHNA IYER AND JASWANT SINGH, JJ.]
Arbitr11tion Act 1940 (Act IV of 1940), Section 34-Po·wer to stay legal
proceedings lvhere there is an agreement-Scope of S. 34 .
. Constitution of India, Article 136-Jnterference against interlocutory orders
refusing stay of proceedings uls. 34 of the Arbitration Act.
C
Civil Procedure Code (Act V of 1908). s. 80-Scope of.
The respondent/plaintiff issued a notice u/s. 80 C.P.C. to the appellant/
defendant for referring certain claoims to Arbitration a.;; per the contract. There
being no response. a suit was filed under the A1bitration Act and stimn1ons
taken out to the Chief Secretary. In the ex parte proceedings taken, on the refusal of the summons issued, the Government larcr applied for staying of the
proceeding u/s. 34.
The Subordinate Judge dec~!ri.ed to stay the
proceedings.
D
In appeal, the High Court refused to interfere ag2.in~1 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
n1atter of Jaw, mere silence on the part of the defendant \vhen a notice u/s. 80,
C. P. C. is sent to him may not, more, disentitle him to move u/s. 34 of the
E
Arbitration Act and seek stay. [747 E, G]
F
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 a_rbitration 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-Dl
Observation :
Government must be made accountable by Parliamentary social audit
for wasteful litigative expenditure inflicted on the community by inaction.
A Iitigative 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 invol-Ved 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
II
promote expeditious work in courts of cases which deserve to be attended to.J
•
.
•
CIVIL APPELLATE JURISDICTION : Special Leave Petition (Civil)
-
No. 1781 of 1977.
-
PUNJAB I'. GEETA IRON WORKS (Krishna Iyer, J.)
747
)
From the Judgment and Order dated 30-3-1976 of the Gujarat
A
•
•
High Court in Appeal No. 9 of 1976.
Hardev Singh, R. S. Sodhi and 0. 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 obviously is to find out whether the party who invokes the arbitration clause has expressed his readiness to rely on it at the earliest
stage.
We are not investigating the merits of the matter under Art.
136 but arc satisfied that there is no gros·s 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.
B
c
D
E
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
"dministration 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,
F
the summons was refused.
An ex parte proceeding was taken when
ihe lethargic Government woke up.
We like to emphasize that Governments must be made accountable
l'y Parliamentary social audit for wasteful litigative expenditure inflicted _on the community by in.action. A .statutory notice of the proposed
action under s. 80 C.P.C. 1s mtended 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
l l-951SCT/77
.
G
H
A
B
748
SUPREME COURT REPORTS
[1978] [ S.C.R.
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 a !tended to.
Di~misscd.
S.R.
Special leave petition dismissed.
-
•
•