P L D 1957 Dacca 171 (PLP)

AKBAR, J.‑

This is an appeal against an order of the Subordinate Judge, 2nd Court, Dacca, refusing to stay a suit on an application made under section 34 of the Arbitration Act, 1940. The facts briefly, are as follows: Abdur Rahman, who carries on business in jute in the name and style of M/s. A. Rahman & Co., insured certain stock of jute lying in his godown at Narayanganj with M/S Queensland In surance Co., Limited, hereinafter referred to as the defendant Company. On 21st June 1954, a fire broke out in the neigh bouring godown and it gradually spread to the godown of the plaintiff and damaged his jute. On the very next day, i.e., on 22nd June 1954, the plaintiff lodged a claim for Rs. 66,702 with the defendant Company. In February 1955, the assessor filed his report assessing the damage at Rs. 12,153‑

8. The plaintiff was, however, unable to accept the assessor's report and there was some correspondence between the parties. Thereafter, on 20th June 1955, the plaintiff filed a suit, being M. S. No. 16 of 1955 of the Court of 2nd Subordinate Judge. Dacca, claiming Rs. 66,702 as damages and Rs. 3,942 by way of interest. On 19th September 1955, the defendant Company filed an application under section 34 of the Arbitration Act to stay all proceedings in M. S. No. 16 of 1955. The learned Subordinate Judge rejected their application, and hence this appeal by the defendant Company. The fact that the subject‑matter of the suit comes within the ambit and purview of clause 18 of the insurance policy taken out by the plaintiff has not been disputed by either of the parties. It is also not alleged that the defendant Company by taking no steps in the proceeding has precluded itself from obtaining relief by stay of the suit. What was contended was that on the date of the commencement of the suit, the defendant Company was not ready and willing to go to arbi tration. It is, therefore, incumbent on the plaintiff to show that the defendant Company was not on the date of com mencement of the suit ready and willing to do all things necessary to the proper conduct of the arbitration. Mr. Nandi, the learned advocate for the defendant appellants, has contended that his client was so ready. On the other hand, Mr. Asrarul Hussain, the learned advocate for the plaintiff respondent, has contended that events subsequent to the loss of jute by fire show that the defendant Company was not at all ready and willing to go to arbitra tion. It is, therefore, necessary to .set out briefly the events subsequent to the fire in the jute godown. On the 30th April 1955, the plaintiff's lawyer wrote to the defendant Company that his client was unable to accept the assessor's report regarding the quantum of damage, and made a demand to resort to arbitration in terms of the arbitration clause in the policy. A suggestion was also made in that letter that the name of the arbitrator or arbitrators were to be submitted at a joint sitting. There was no response from the side of the defendant Company and so the plaintiff's lawyer again wrote on 23rd May 1955, as follows: "Unfortunately though you received the said letters duly, you did not even care to reply to the same. In view of the aforesaid general apathy on your side, my clients are suggesting the name of Mr. Abdul Ghani Khan, Barrister at‑Law of 40, Laxmi Bazar Dacca, to be arbitrator on my client's side. In case you do not agree to the name and/or not proceed in terms of the arbitration clause within a fortnight from date, my clients will have the option of either proceeding with the arbitration of Mr. Abdul Ghani Khan, Barrister‑at‑law of 40, Laxmi Bazar, Dacca, and hold you liable in terms of the award or file a suit for recovery of the full amount of Rs. 66,702 with interest at 121 % from the date of the fire without further reference to you, which please note." On the 10th June, 1955, the defendant Company replied as follows:‑ "Reference letter of the 23rd ultimo, copy endorsed to the General Accident received in this office on the 31st idem, it will be noted from copies of the under‑noted letters attached that prior to your first advice, dated 30th April 1955, on the issue, Messrs. Landale and Clark (Pakistan), Ltd., was authorised to examine the latest contention, dated 16th March 1955, viz., "threw certain amount of jute in the water. Those rotten jute can even now be seen in the river bed, as water has completely receded", in spite of the fact that earlier conflicting statements were suitably dealt with:‑

1. Letter No. C. F.‑ARC/1280/1/1536, dated 16th March 1955, National Bank of Pakistan.

2. Our reply, dated 23rd March 1955. For reasons that it is not necessary to go into details at this stage, the assessor's reply is being held in abeyance and can only say that it will be completed on receipt of informa tion from a certain quarter. In the circumstances, you will agree that to proceed further the report is necessary, and your notice of 14 days that you will, in the absence of interested Underwriters, be appointing an arbitrator to proceed with arbitration would be irregular. vide condition No. 18 of the policy, relevant extract reproduced hereunder:‑ "In case either party shall refuse or fail to appoint an arbitrator within two calendar months, after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint a sole arbitrator." On the 14th June 1955, the plaintiff's lawyer replied to the above letter stating that the defendant was trying to avoid the plaintiff's claim on technical ground. He concluded the letter by saying:‑ "Instead of facing facts evenly and squarely, my clients feel that you are only going to obstruct and delay realisation of the just dues of the clients and as you have not given any slightest indication that you accept the arbitration proposal and as there is a question of special limitation against my clients in this case, they have regretfully decided to file a suit against you for realisation of their just dues." Mr. Nandi has contended that the defendant Company was always ready and willing to go to arbitration, and by their letter, dated 10th June, they intended to point out to the plaintiff that 14 days' notice was irregular, because clause 18 of the policy provided for appointment of arbitrator or arbitrators within two calendar months after receipt of notice requiring appointment of arbitrator. Mr. Asrarul Hussain has pointed out that the suit was to be filed within one year from the date of cause of action, and hence it was not possible to give two months' notice. We think it will be difficult to interpret the defendant's letter as meaning unwillingness to go to arbitration. Hence the question arises if the defendant Company had denounced the arbitration agreement by their conduct. The plaintiff's jute was damaged by fire on 21st June 1954. The assessor submitted his report in February 1955. On the 30th April, 1955, the plaintiff informed the defendant Company that he was unwilling to accept that report. There is no explanation why the plaintiff took more than two months to inform the defendant of his reaction to the report. The defendant Company did not choose to reply to the letter of 30th April 1955. Certainly, such carelessness on the part of a well‑known Company does not speak well of their method of business. This silence of the defendant Company, however, did not lead the plaintiff to think that the defendant Company was unwilling to go to arbitration as would appear from their letter, dated 23rd May 1955. On the 10th June 1955, the defendant while stating that they were awaiting the assessor's second report pointed out that the notice of 14 days was not in accordance with the arbitration clause in the policy. Mr. Asrarul Hussain has attempted to argue that the real object of the defendant Company was to frustrate the arbitration. Hence, relying on the case of Shivaldas Hotchand v. Japan Cotton Trading Company (A I R 1928 Sind 94), he has contended that we should not permit the defendant Company to take advantage of their own wrong. No doubt; the defendant Company was not very prompt in their reply, but we think it cannot be said that the plaintiff was very vigilant in the matter. We are, therefore, unable to interpret the letter of the defendant Company of 10th June to mean that the defendant Company was attempting to frustrate arbitration. In this connection, we may refer to the case of Anglo‑Persian Oil Company, Limited Madras v. P. S. Panchapakesa Aiyar (I L R 47 Mad. 164). In that case, the defendant, who had been threa tened for a long time with legal proceeding, did not draw the attention of the plaintiff to the arbitration clause or said that they were willing to refer the dispute to arbitration and objected to litigation. Hence the Judge refused their applica tion for stay of the suit. The defendant appealed against that order. Schwabe, C. J., while dealing with this question, observed:‑ "There is no authority in support of the proposition which has been adduced before us and I am satisfied that the reason is that there is no such authority and I can see no ground on principle for so holding. The law provides that if there is a submission for a reference to arbitration, and a party chooses to bring his suit, the other party can then decide whether or not he will remain before the Court, which he indicates by taking some step in the action, or whether he will avail himself of his contractual rights to have the dispute referred to arbitration. If he had misled the plaintiff in some way into bringing the suit, it might be a good ground for punishing him in costs and if the misleading had been definite enough to amount to a particular statement that he would not apply to have the matter referred to arbitration and would submit to the jurisdiction of the Court, it might be a good ground for punishing him in costs, and it might even amount to an estoppel, so as to prevent him from making an application thereafter." We respectfully agree with the above observations. In this case, at the most, it may be said that the dispute could not be referred to arbitration within a year from the date of fire, to some extent due to the delay on the part of the defend ant Company in replying to plaintiff's letter promptly. Hence, in view of clause 19 of the policy, the plaintiff' had no other alternative but to file a suit before the expiry of twelve months from the date of cause of action. This fact should be taken into consideration at the time of awarding costs, but this cannot be a good ground for refusing stay. We are, therefore, unable to accept the learned Sub ordinate Judge's view that in this case there is indication in the correspondence that the defendant was not ready and willing to have an arbitration at the time when the proceeding was commenced. Mr. Asrarul Hussain has lastly pointed out that due to dilatory tactics of the defendant Company, this dispute could not be referred to the arbitrator within a year from the date of loss or damage, and, therefore, in view of clause 19 of the policy, his client had no other alternative but to file this suit. He has argued that, in these circumstances, the learned Subordinate Judge exercised his discretion judicially in reject ing the application, and we should, therefore, not interfere with his order. In support of his contention that the discretion of the Court should not be treated lightly, he has relied on the cases of Shivaldas Hotchand v. Japan Cotton Trading Company and G. Freeman & Sons v. Chester Rural District Council (I K B (1911) 783). No doubt, under section 34 of the Arbitration Act, the Court has a discretion to reject such an application for stay of legal proceedings commenced in violation of an arbitration agreement. The Courts of Appeal in England recognised that the Court had such a discretion, but they also laid greater emphasis on the sanctity of contracts entered into with full knowledge of fats, and held parties firmly to their contracts except in extreme cases. We would be very reluctant to interfere unless we are convinced that there were adequate grounds for saying that this discretion had not been exercised judicially. The learned Judge, while refusing to stay the proceedings, observed: "I am satisfied from the facts and circumstances of the case that the defendants were not at the commencement of the proceedings and are still ready and willing to do all things necessary to the proper conduct of the arbitration." Beside this, he has given no reasons for refusing the application that was before him. We have found that there is no basis for such a finding. Hence it is clear that the dis cretion has not been exercised in accordance with law. Mr. Asrarul Hussain has attempted to argue that the arbi trator will take longer time to settle this dispute. We are unable to agree with him. It is well‑known that exigencies of trade and commerce required speedy settlement of disputes, and arbitration out of Court was found satisfactory and less expensive. Consequently, the Courts also began to encourage arbitration out of Court. To put it very mildly, we are very surprised to learn from the learned counsel that Court's pro cedure is more expeditious than that of arbitration. We could only wish that it was so. After giving the matter our best consideration, we are not prepared to say that the facts and circumstances of the case justify refusal of the application. The suit, as framed, is clearly in respect of a matter agreed to be referred to arbitration under clause 18 of the policy. No good reason had been suggested why the matter should not be referred to arbitration in terms of the agreement between the parties. We, therefore, allow this appeal, set aside the order of the learned Judge and make the order prayed for. The costs of the appeal will be costs in the arbitration. RAHMAN, J.‑

I agree. K. B. A. Appeal allowed.