P L D 1970 Dacca 699 (PLP)

A. S. CHOWDHURY, J.‑This appeal is at the instance of the Defendant No. 1, Province of East Pakistan and directed against an order made by Mr. D. N. Chowdhury, Subordinate Judge, Noakhali, on the 3rd July 1968 in the Money Suit No. 1 of 1968 of that Court. The appellant is aggrieved by refusal of the learned Judge to stay further proceedings of the suit in question. The plaintiffs, Pak Modern Builders and others, instituted a suit against the appellant founded on a contract for work obtained from the appellant. The contract was for improving the surface of a part of a Road called Motabi Raipur Road. A dispute arose with regard to a payment of certain bills and plaintiffs ultimately instituted a suit for recovery of a sum of Rs. 1,35,511.20 paisa against Province of East Pakistan. After the institution of the suit, the defendant‑appellant applied for staying the proceeding under section 34 of the Arbitration Act hereinafter called "the Act". This application was submitted before taking any step in the said proceedings. The learned Judge after quoting section 34 observed as follows :‑ "On a plain reading of this section it is not disputed that defendants have not entered W. S. in the suit as yet and it is also seen that they have not taken any other steps. But before defendant can get an order of stay filed by the plaintiffs it must be shown that the petitioners were ready when the proceedings commenced before this Court and are still ready to refer the matter to the Arbitration." The learned Judge further observed that from certain circum stances he inferred that the defendants were not ready and willing to go for arbitration before the institution of the suit. The learned Advocate for the appellant, Mr. Siddique Ahmed Chowdhury, submits that since it is admitted by the learned Judge that the application under section 34 of the Act was filed before any other step was taken there was no reason whatsoever to refuse to stay the proceedings. He appears to think that if an application under section 34 is filed before taking any other step in the proceedings, an order staying the suit is to be automatically granted under section

34. It is true that if an application is submitted before any step in the proceeding is taken, the Court may in its discretion grant the prayer if there is no reason to refuse it. Mr. C. P. Korim, learned Advocate for the respondent, on the other hand, claims with equal vehemence that a Court is concerned with justice only, and when it is apparent that the arbitrator named in the relevant clause would not be competent to determine the matter with fairness and justice, it would be a sufficient reason for refusal to stay the proceedings. Mr. Chowdhury submits in reply that it was not urged before the learned sub ordinate Judge and as such it cannot be raised before this Court as well. He also expresses the apprehension that our going into this question might prejudice the suit. I do not know why Mr. Chowdury should be so apprehensive. It is known to all concerned that the pending suit is to be disposed of in accordance with law on the evidence that may be adduced by the parties without taking into consideration any observation that we may have to make in disposing of this application under section 34 of the Act. Mr. Karim, learned Advocate for the respondent, submits that clause 34 of the Contract provides that work will be executed under the direction and approval of the Superintending Engineer of the Circle. But, clause 35 of the Contract provides for reference to the said Superintending Engineer of the Circle for arbitration, in case of a dispute arising out of the contract. Mr. Chowdhury, learned Advocate for the appellants, submits that it is not open to Mr. Karim even to feel aggrieved now. It is urged that he knew that he would be required to work under the direction of the Superintending Engineer of the Circle and he agreed to his arbitration and after having done so, he cannot be now allowed to make a case for avoiding the agreement he solemnly make. In support of his contention Mr. Chowdhury places his reliance on the case of Governor General in‑Council v. Simla Banking and Industrial Co. Ltd, New Delhi and another (A I R 1947 Lah. 215). In that case the learned Judges do not appear to have considered that the arbitrator took some part in the transaction in a manner which placed him in such a position as to create a doubt in the mind of one of the parties about the fairness of his determination of the dispute. It is true in that case also the arbitration was between a Contractor and an Employer who was, in that case, the Governor‑General of India, and arbitrator, the Superintending Engineer, an employee of the Governor- General. But, the point made by Mr. Karim, on the materials placed before us to which I shall refer presently, was not raised in that Court. The cited case is, however, an authority for the proposition that if the defendant applies for staying the proceeding that would be sufficient for his claiming the stay of the proceeding provided there is no other sufficient reason for refusing it. In the case before us the learned Subordinate Judge clearly erred in thinking that the defendant was required to show that he was ready and willing to proceed with the arbitration even before the commencement of the suit. That is not the law. The principle involved has been clearly laid down in the following passage in the decision referred to above:‑ "The silence of the party applying for stay for his omission to remind the party, which has started the proceeding, of his duty not to start them under the agreement between the parties before the proceedings have been started do not, in my view, seem to be material. It is only when a suit or a proceeding has been commenced against a party that the latter can made up his mind as to whether he would apply for stay or not. If he decides to ask for stay he can do so at any time "before filing a written statement or taking any other steps in the proceedings" and not, thereafter. But during that period (i.e., after the suit or proceedings have been commenced and before a written statement has been filed) which is given to him by law his choice is unfettered and remains unaffected by his silence or omission such as referred to above." It is therefore not correct to think, as the learned Subordinate Judge does, that omission of the Province of East Pakistan to arrange for arbitration when notice under section 20 of the B Code of Civil Procedure was served was sufficient to preclude it from applying for staying the proceedings under section 34 of the Act. This view of the learned Judge cannot be sustained. Delivering judgment of a Division Bench of this Court in the case of Esack v. Raja Mia and others (20 D L R Dacca 1120), I observed: "In the facts and circumstances of this case we are clearly of opinion that the defendants never acquiesced in the suit and never took a "step in the proceeding" within the meaning of section 34 of the Arbitration Act and they are, therefore, entitled to an order of stay as prayed for by them and the learned Judge properly exercised his discretion in staying the suit." It was not necessary for me to say in that case that a defendant was entitled to an order of staying the suit unless there is no reason to refuse the prayer as this question was not raised. But the judgment read as a whole will make the position clear. This case also on which reliance has been placed by Mr. Chowdhury has no application to the facts of the present case. Mr. Chowdhury also relies on the case of Punjab State v. Moji Ram (A I R 1957 Pb. 223). In that case a learned single Judge of the Punjab High Court, Bishan Narain J, made an order staying the suit of the plaintiff on the ground that the defendant applied for staying the suit before taking any other step. Mr. Chowdhury fails to indicate any observation in that case discussing the point raised by Mr. Karim and therefore that case also is of no assistance to him. He also relies on the case of Anderson Wright Ltd., v. Moran & Co. (AIR 1955 S C 53). In that case the learned Judges of the Supreme Court of India laid down four conditions which were to be fulfilled before a prayer for staying the suit could be made. That does not mean that a Court was bound to grant the order even if there was some reason for refusing the same. This case has also no application to the facts of the case before us. We have already said that Mr. Karim has pointed out clauses 24 and

25. As we read these two clauses, we find that the Superintending Engineer who was in the control of the work in question would be the arbitrator in case of a dispute. This by itself would not be sufficient to claim that although an applica tion for staying the proceeding was made before taking any step in the proceeding, it should be refused as the Superintending Engineer was not considered to be a fit and proper person to act as arbitrator. On a plain reading of section 34, it appears, that a defendant may apply for staying the proceeding of a suit instituted against him before taking any other step in the proceeding and the Court may in its discretion grant the prayer or refuse to stay, if it is found that there is sufficient ground for such refusal. I now read section 34 of the Act "Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such a legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were com menced, 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." I would say that the Legislature, in the ends of justice requires the Court to be satisfied "that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement," before it makes an order staying the proceedings. Mr. Karim, therefore, emphasises that the Court is to be satisfied that there is no reason for refusal to stay the proceeding of the suit and be urges that as the Court proceeds to satisfy itself in this b; half, it will find that the Engineer concerned has been taking such part in the matter as would show that he would not be in a position to act fairly and justly. He further submits that the Engineer in this particular case was in the position of a witness, and as such he would give his decision in the light of his prior knowledge about the matter. Mr. Karim, therefore, streneously argues that if the Superintending Engineer acts as arbitrator his client will be greatly prejudiced and he points out in support of his contention two letters filed in the trial Court along with the plaint. The letter dated 29‑7‑64 is addressed to the Executive Engineer, Chittagong Road Division, relating to bill of Mr. Nurual Huda defendant No. 2 in which the Superintending Engineer asked for a detailed report on the claims made by Mr. Nurul Huda from the Executive Engineer. The Second letter is dated 20‑3‑67 which is addressed to the Superintending Engineer by the Executive Engineer in which he complained that "the contractors have not yet put their dated signature in M. B. or bills as a token of acceptance of measure ments in spite of repeated reminders issued from this office from time to time as a result of which the long outstanding pending bills cannot be finalised." A copy was forwarded to the said contractor in the following terms "I, Mr. Nurul Huda, Contractor, Huda Building, Feni. 2 Messrs Pak Modern Builders for information and necessary action. He is requested for the last chance to attend this office on 15‑9‑67 at 10‑00 a. m. to put his dated signature in connecting M. Bs. and bills as a token of acceptance of measurements against which no further claim in any shape will be entertained after the aforesaid date by the undersigned." Mr. Chowdhury, however, objects to our looking in to these two letters on the ground that these have not been formally proved. Mr. Karim on the other hand submits that the Court, in satisfying itself as to whether or not there is sufficient reason for granting the stay as prayed for was called upon to consider the materials which were placed before him for hearing an application under section 34 of the Act. It must be so, for, Mr. Chowdhury himself urges that it is in the nature of an interlocutary matter and it is to be taken by the defendant before taking any step in the pro ceeding with, in its term; indicates that this application is to be considered at a very early stage when the Court has to be, prima facie, satisfied as required under section 34 of the Act as indicated above. Therefore, this objection of Mr. Chowdhury is overruled. These two letters in original were filed before the trial Court and it appears from these two letters that the Superintend ing Engineer was aware of the objection relating to the measure ments and refusal of the plaintiff to sign the measurement book. Another letter in original has been filed in this Court in the rule issued at the instance of the appellant asking the defendant opposite‑party to show cause why the suit should not be stayed pending the disposal of this appeal. The rule and the appeal were directed to be heard together by an order made on the 28‑11‑68 at the time of issuing the rule. In that rule, a copy of a letter has been made Annexure "C" to the counter‑affidavit filed therein. The letter is addressed to (1). Mr. Nurul Huda, Contractor, (2) Messrs Pak Modern Builders, the defendants. It reads as follows:‑ "It has been reported to this office by the Executive Engineer, Noakhali Road Division that they are not attending his office to accept the measurement entered in the M. B. and their bills in spite of repeated letters issued to them by the Executive Engineer. They are however given further time for 10(ten) days with effect from the date of receipt of this letter to attend office of the Executive Engineer, Noakhali Road Division to accept the measurement entered in M. B. and their bills with their dated signature for settlement of their outstanding claims early. If they fail to do so, their claim will be settled ex parte. No further appeal will be entertained by the office in this respect. (Sd.) Illegible Superintending Engineer, R. & H, Chittagong Road Circle, Ctg." Mr. Chowdhury again objects to our reading this letter which was not filed in the trial Court and he claims that this matter should go back to the trial Court for rehearing if these materials were to be considered. We would have ordinarily acceded to such a request but it is clear to us that it would unnecessarily delay the matter, and, again we have to indicate the law which is to be applied on the materials so far placed. This letter shows that the Superintending Engineer was asking the defendants to put their signatures on the measurements and on their failure they were told "their claim will be settled ex parte". He took the decision without giving the defendants any hearing. A person who takes such a step cannot be expected to hold a fair arbitration. Mr. Chowdhury, submits that this letter has also not been formally proved. We have earlier indicated our views in this behalf while considering two other letters. If it is found that no such letter was ever written, the defendant will be fully liable for such consequence as may be provided by law. But w;, are of opinion that in the ends of justice in this interlocutory proceedings we cannot shut our eyes against this letter which has been filed in this Court in a connected proceeding along with a duly affirmed affidavit. The question raised in this case, came for a discussion in the case of Ives and Barker v. Willans ((1894) 2 Ch. D 478). In that case it was held that if an Engineer of a company was selected as an arbitrator by a contractor of that company, the arbitration could not be refused on the ground that Engineer was an employee of the company. This principle was laid down on the ground that the contractor accepted the Engineer as an arbitrator knowing full well that he was the person who would be directing the execution of the work and that he was an employee of the company. In fact the dispute would be between him and the contractor if such a dispute arises at all. This observation will appear to support the contention of Mr. Chowdhury. But each case is an authority for facts of that case. In view' of the letters referred to above, it appears to us that the Engineer in the case before us, has placed himself in the position of a witness and he is likely to be guided by his own P pre‑conceived notion as will appear from three letters particularly the letter dated 4‑12‑

67. Even in the case of Ives and Barker v. Willans it was observed:‑ " ..they could complain of the illegitimate consequence, and if it were true that these engineers were in collusion with the contractor so as to act unfairly, or so as to lead the Court to suppose that they would act unfairly, there would be some ground for saying that this arbitration clause ought not to be enforced." In view of the letters referred to above we are of opinion that "it would be reasonable for the Court to suppose that they would act unfairly." The case of Ives and Barker just referred to was decided in 1894. The question came up for consideration of the House of Lords in the case of Baristol Corporation v. John Aird & CO . (1913 A C 241) I should say here that the English cases are applicable to our cases for, section 34 of our Act is analogous to section 4 of the Arbitration Act, 1889 (English Act). I now read a passage from the speech of Lord Atkinson the House of Lords in the case reported in 1913 A C 241 referred to above. In that case Lord Atkinson said:‑ "I have listened with great attention to the able arguments which have been addressed to the House, and I am utterly to get rid of the notion that upon two of the most matters, namely, this filing and the excavation monoliths, Mr. Squire will necessarily be at once in the position of a judge and a witness. I think he must necessarily be in that position. I cannot imagine any position more unpleasant any position more undesirable. If he be really a witness, then he must, in effect, be examined before himself, and cross‑examined before himself, and he must decide upon his own veracity or reliability. I think there could be no stronger reason to induce the Court not to exercise their discretion to stay the action than that any gentleman who has taken upon himself the duties of arbitrator should be put in such an entirely anomalous position." His Lordship laid down the principle in clear terms. We are, therefore, of opinion that in the instant case we can say that the Superintending Engineer placed himself in an entirely anomalous, position in which he cannot act fairly and justly as an arbitrator. Lord Shaw of Dunfermline also summed up the position in the following terms : - "Prima facie, a judge ought to be entirely apart from the subject‑matter upon which he adjudicates; prima facie, in a contract of the kind I have sketched he is the very opposite of what he ought to be. But, my Lords, the law is now settled in the sense I have mentioned, and I turn with satisfaction to the action of the Legislature which, I think, affords an opening for relief. By section 4 of the Arbitration Act, 1889, where proceedings on a contract containing an arbitration clause are taken, the Court, if satisfied that there is no sufficient reason why the matter should not be referred, may make an order staying the proceedings." Lord Moulto observed in that case: - "It must be remembered that these arbitration clauses must be taken to have been inserted with due regard to the existing law of the land, and the law of the land as applicable to them is, as I have said, that it does not prevent the parties coming to the Court, but only gives to the Court the power to refuse its assistance in proper cases." We would say that this is not a proper case for refusing the assistance of the Court. We have seen in these letters that Arbitrator requires the defendants to sign the measurement book, This act shows that arbitrator has already irrevocably committed himself to some particular view in the matter. He, therefore, cannot, in our opinion, act as an arbitrator. This principle was laid down by Lord Parker of Waddington in the case of Baristol Corporation referred to above. His Lordship certainly not be enough to allege that the arbitrator independent person, if the parties with knowledge so have nevertheless agreed to accept him as But it may be a different matter altogether if by of his own the arbitrator has already irrevocably committed himself to some particular view." We are clearly of opinion that there is sufficient reason in this case for refusing to stay the proceedings. We, therefore, uphold the order of the learned Subordinate Judge although on different grounds. For the reasons stated above, the appeal is dismissed and the learned Judge is directed to dispose of the suit as expeditiously as possible. In the facts and circumstances of the case the parties are left to bear their own costs. The appeal having been disposed of, the connected C. R. No. 1720 (fm) of 1968 which has become infructuous is also discharged without any order as to costs. HABIBUR RAHMAN, J.‑I agree. Appeal dismissed.