Author Details: Aditi Goel, 4th Year student at Symbiosis Law School, NOIDA.
Citation: 1996 SCC OnLine Kar 426
Bench: Kumar Rajaratnam
Original Copy: N/A
Issues in question:
- Whether Section 34 of the Arbitration Act can be applied here?
Background of the case:
- Petitioner (MP Electricity Board) challenged the order passed by Additional Civil Judge in a Miscellaneous Appeal arising out of the orders on file of the Principal Munsif, Hubli.
- A contract was entered into, which was on a turn-key basis for completion of a project that was to be handed over to the respondent.
- Petitioner stated that the respondent defaulted with respect to certain terms of the contract. The petitioner became obliged to rescind the contract.
- As per the contract, the respondent was directed to deposit the amount given by bank guarantee.
- Respondent went to the Madhya Pradesh Arbitration Tribunal and obtained an injunction against the petitioner from invoking the bank guarantee and was passed in favour of the respondent.
- Petitioner filed two applications under Order 1, Rule 10 of CPC and the other one under Section 34 of the Arbitration Act.
- Application under Section 34 was rejected on the ground that the petitioner voluntarily entered appearance and filed objections to the interlocutory application which had, by its conduct, waived its right of Section 34 of the Act.
- Section 34 of the Act indicates that a party of a contract may apply to the judicial authority before filing a written statement or taking any other steps in the proceedings.
- Bench relied on Food Corporation of India v. Yadav Engineer & Contractors. The Supreme Court’s statement was very controversial as it stated that there was barely any scope for the courts to have declined to stay the suits filed by the second defendant.
- The court in the case of M/s Sadhu Singh Ghuman v. Food Corporation of India laid that ‘a step in the proceeding’ should be a step which must be taken consciously with the view to submit to the court for adjudicating the controversy on merits.
- The expression used in Section 34 says ‘proceedings’, meaning that the nature of this provision is to proceed with a suit as the expression ‘proceedings’ covers the interlocutory applications which are filed in the suit.
- In the case of Rachappa Guradappa v. Gurusiddappa Nuraniappa & Ors., the court held that Section 34 requires an application for the stay of legal proceedings. These steps need to be taken before the filing of a written statement or any other steps in the proceedings. It is essential to find out if ‘any steps in the proceeding’ have been taken or not.
- After considering the facts of the present case and the decisions of the courts mentioned above, the court led the following analysis and conclusion:
- Consent of the petitioner for setting aside ex-parte interim injunction does not disentitle the petitioner from seeking protection under Section 34.
- The court set aside the orders of October 1987.
- Civil Revision Petitioners were allowed.
- The judgement of this case is like a battle between the judgements of various courts. This small judgement has stated several precedents, some which the present court used to its benefit and some which were later quashed by higher or same level courts.
- It is clear that Section 34 of the Arbitration Act has created a ruckus in these cases. Invoking of Section 34 needs to be done after steps have been taken. It is also important to know that Section 34 is not just a suit, it is a proceeding. It needs work to be done on it and not just simply filed. This section might seem important, but at least it is clear that this has and might create a lot more confusion if not laid properly.
- Interpretation of the statutes must be done according to the purpose they serve. On one hand, criminal law must be strictly interpreted, whereas any other laws, when it comes to the rights of a human, can be interpreted liberally based on the circumstances.
- Overall, courts need to understand and interpret in a way that would benefit the people in the essence of natural justice and not disobey the very statute written for the benefit.