Agrawal, C.J.
1. This case has been referred by a learned single Judge of this Court to a Division Bench doubting the correctness of the two single Judge decisions of this Court.
2. The matter arises out of an order refusing to grant injunction to the petitioner on his application filed in the court below Under Section 41(b) read with the Second Schedule of the Arbitration Act on the ground that the application for injunction was not maintainable as no arbitration proceeding happened to be pending.
3. The important question that arises for consideration in this application is as to what would be the correct meaning of the expression 'arbitration proceedings' occurring in the said section for exercising the powers for granting protective orders Under Section 41(b) of the Arbitration Act (for short 'the Act').
A building contract was entered into between the petitioner and opposite party No. 1 some time in the month of Aug. 1978 under which the petitioner was to complete the construction within a period of nine months commencing from 12-7-1978 at an estimated cost of Rs. 5,00,000/-. As usual, for some reasons or other, the details of which are not necessary for the present purpose, there was long delay in completing the structure. Ultimately, the contract was rescinded on 6-7-1981 and by a letter, opposite party No. 1 informed the Garrison Engineer, N.T.C., Chilka, under whom the petitioner had a separate agreement, for deducting Rs. 23,801.80 from the running bill of the petitioner towards his alleged liability to opposite party No. 1.
Thereupon, the petitioner immediately filed an application Under Section 41 for an injunction restraining opposite party No. 1 for enforcing the said letter for deduction of the above amount from the petitioner's bills and opposite party No. 2 from acting on the aforesaid letter. In the said application before the court it was stated by the petitioner that,
'In view of this position, the petitioner hasno other option but to demand for a statutoryarbitration as provided in the contractagreement relating to the disputes raised byhim only.'
No further statement in the matter of taking any action for invoking the arbitration clause in the contract, much less any arbitration proceeding having been initiated, was alleged. In the revision application also, no further averment to the above effect has been made.
5. Opposite parties in their objection, inter alia, took the stand that the application for injunction was not maintainable as there was no arbitration proceeding pending, as this objection has been upheld by the learned Subordinate Judge, hence the present application.
6. From the above facts it is seen that the petitioner filed the application for injunction only after the letter to opposite party No. 2 was written for withholding of Rs. 23,801.80 from the bills of the petitioner. But it was submitted by Mr. Palit, the learned counsel for the petitioner, that for invoking the jurisdiction of the court Under Section 41(b) of the Act, it was enough if a dispute involving an arbitration clause was raised by a party to the agreement for its adjudication. Even assuming for the sake of argument that the proposition enunciated by Mr. Palit is acceptable in law, no material has been brought on record to show that even that step, namely, any demand for referring the dispute to the arbitration, was taken by the petitioner before filing the application Under Section 41.
7. On a perusal of various authorities of different High Courts including our own High Court cited at the Bar, I find that different views have been taken regarding the meaning of the expression 'in relation to arbitration proceedings'. Whereas according to some of the decisions, 'arbitration proceedings' is referable to a proceeding initiated in the Court, in some others the proceeding may be only before the arbitrator.
In the second category of cases, yet another controversy arises as to what would constitute an 'arbitration proceedings' before the arbitrator, that is, whether a mere demand by one of the parties for a reference to an arbitrator was sufficient or thereafter it must follow by the appointment of the arbitrator and his entering upon the reference.
At this stage, it would be proper to set out the provisions of Section 41 of the Act:
'41. Subject to the provisions of this Act and rules made thereunder : --
(a) the provisions of the Code of Civil Procedure, 1908 shall apply to all proceedings before the Court and to all appeals under this Act; and
(b) the Court shall have, for the purpose of and it relation to, arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to, any proceedings before the Court'.
Provided that.....'.
Reading the scheme of Section 41, I think that the first view, that the arbitration proceedings must mean only such proceedings which are pending in the court, can be disposed of very conveniently as there is no merit in the same.
Clause (a) refers to the proceedings which are before the court in general terms.
Clause (b) on the other hand specifically refers to arbitration proceedings. If Clause (b) also were to apply only to the proceedings which are pending before the Court, it would have been redundant or unnecessary to provide for Clause (b) as the previous clause, i.e. Clause (a), would be quite sufficient to meet all contingencies.
8. Under the scheme of the Act itself, in Chap. II, arbitration without intervention of court is also envisaged. Chapter II covers those references in which the parties may proceed if nothing goes wrong, upto the stage of the delivery of the award without the intervention of the court. This, however, does not mean that the court has no authority whatsoever to interfere or intervene at any earlier stage of the proceeding in appropriate cases, if it becomes necessary so to do. Rather, as a matter of fact, the court may exercise any of the powers during the progress of the arbitration proceeding even without its intervention. I, however, need not detain myself to indicate all those circumstances and encumber my judgment.
Under Chap. III falls only one section, namely, Section 20, which contemplates an arbitration with the intervention of a court where there is no suit pending.
Chapter IV contains the provisions for making the reference in pending suits.
9. It is thus obvious that the powers of the court under the Second Schedule to the Act can be exercised even in a case where the reference to arbitration has been made without the intervention of the court This provision was intended to empower the court to pass interim orders for the preservation or safety of the subject matter of the dispute during the pendency of the arbitration proceeding. In cases where an application is filed Under Section 20 of the Act or where reference to arbitration is made through the intervention of the court, the court has seisin of the case and can undoubtedly pass interim orders, but there is no reason to suppose that the court has no power Under Section 41(b) read with the Second Schedule to prevent the properties from being wasted while it is pending before the arbitrator. Such interpretation would lead to grave injustice and deprive the successful decree holder of the fruits of the decree which may ultimately be obtained by him. (See AIR 1964 Madh Pra 219; Daultaram Phoplchand v. Shriram).
It is apparent from a plain reading of Section 41 that it provides both for the case where the arbitration proceeding is pending before a court as well as for one where such proceedings are not pending before the court. Reference, to support this obvious inference may be made to the decisions reported in AIR 1962 Mad 436 (S.V. Seshmull v. S.N. Umaji & Co.) and AIR 1964 Madh Pra 219 (supra).
10. Now I would advert to the main question as to what would constitute 'arbitration proceedings' in the eye of law.
Although several decisions have been cited at the Bar arising out of various stages of a proceeding when the aggrieved party had sought the protection of the court Under Section 41(b) read with the Second Schedule of the Act, in most of the decisions, the question of maintainability of the application Under Section 41(b) was decided with reference to the facts of those particular cases without further discussing as to whether a stage earlier or later would have been appropriate for invoking the authority under the said provision of the Act. AIR 1963 Cat 594 (Ranjit Chandra Mitter v. Union of India) also arose out of a building agreement containing an arbitration clause where the contractor had served a notice on the Government through the Development-Commissioner to submit the dispute to an arbitrator as per the arbitration clause within 4 days or else a suit for damages was threatened. He thereafter filed an application Under Section 41 for an interim relief. On a question of propriety of the application and the relief sought for, it was held that in as much as there was no valid demand for arbitration by the contractor since the letter seeking it was addressed to a wrong authority and not to the Secretary, Ministry of Commerce and Industry, to whom only a copy of the notice was forwarded, it did not amount to calling upon that Secretary to nominate an arbitrator. On these facts it was found that since no arbitration proceeding was pending, the interlocutory application for interim injunction Under Section 41 did not lie.
From the above observation, I would like to safely infer that had the contractor made a valid demand for arbitration, the learned single Judge of the Calcutta High Court perhaps might have come to the conclusion in favour of the contractor that on the valid demand for arbitration an arbitration proceeding has had come into existence.
In the Madras case (AIR 1962 Mad 436) (supra) the situation was that some of the parties to the agreement had applied for nomination of an arbitrator to settle their respective disputes with the respondent and then they applied to the court for certain protective order Under Section 41 and the prayer was allowed. There is no clear enunciation or observation that the making of an application for nomination of an arbitrator meant in law that the arbitration proceeding had come into existence.
A more clear enunciation can be found in a Bench decision of the Andhra Pradesh High Court in the case of Vijayawa Transport y. Andhra Pradesh State Civil Supplies Corporation Ltd., AIR 1983 Andh Pra 172. The situation in that case was that the appellant disputed the right of the respondent-Corporation to withhold certain payments, and invoking the arbitration clause filed an application Under Section 20 of the Act and then filed a separate application Under Section 41(b) read with the Second Schedule. The said application was rejected by the lower court, but the High Court granted the prayer taking the view that Section 41 is widely worded and empowers the court to exercise the powers of passing interim orders not only for the purpose of an arbitration proceeding but also in relation to arbitration proceedings. An arbitration proceeding may not be the same thing as an arbitration and it covers a much wider area than an arbitration in the strict sense. But again I do not find any clearcut enunciation in this decision also as to what step was necessary for a party to take to constitute it as 'relating to an arbitration proceeding'. To make my point more clear as to whether a demand for appointing an arbitrator was sufficient to constitute the stage of the commencement of an arbitration proceeding, I have taken care and I do not subscribe to the view taken in some decisions that the arbitration proceeding must be pending. I am prepared to take the view that commencement of the proceeding in the matter of arbitration would be sufficient for the purpose of invoking the power of the court Under Section 41(b) of the Act.
In the case of Nagarchand Goenka v. Surendra Nath Sarkar, AIR 1946 Pat 70 which has been referred to in a large number of decisions of different High Courts the question was entirely different, that is, whether the power Under Section 41(b) could be exercised by a court when an application Under Section 20(1) had been made even though no notices had been served on the parties and the proceedings had not become arbitration proceedings. This decision, therefore, is not of much assistance for the present case. To the same effect is the decision in AIR 1983 Ker 169 (Gokuldas v. Union of India).
There are two decisions of the Kerala High Court, viz., AIR 1978 Ker 223 (Baby Paul v.-Hindustan Paper Corpn. Ltd. and AIR 1979 Ker 212 (P. K. Thresia v. State of Kerala, both by the same learned Judge and are on the point to help resolve the issue in hand. These two decisions have been referred to with approval in the two decisions if this Court which I shall deal with and with which the learned referring Judge has disagreed. It is in these two decisions of the Kerala High Court that the learned Judge has clearly laid down that 'arbitration begins and arbitration proceedings commence only on the arbitrator getting authority to act'. 'The arbitrator's authority to act arises by actual submission of a dispute or disputes to the authority for a particular arbitrator by the party/parties to an arbitration agreement to enter upon the reference in respect of a particular dispute or disputes. The learned Judge of the Kerala High Court with reference to the Patna decision in Nagarchand Goenka (supra) observed that when an application Under Section 20 of the Act is made before the court, the court at once derives all the powers vested in the Civil Procedure Code by virtue of the general provision as per Section 41(a) of the Act and there was no necessity to search for any further power under Clause (b). I find full justification for the above observations and accordingly agree with the learned Judge.
11. Learned counsel for the petitioner placed strong reliance on AIR 1975 Cal 165 (Maheshwari & Co. Pvt. Ltd. v. Corporation of Calcutta) where it has been laid down that the court has power to make an order for interim protection even in a case where there is no application Under Section 20 or where proceedings under Chapter III have hot been taken and submitted with vehemence that on this authority alone he must succeed and that the court below has committed an apparent error of jurisdiction in rejecting the petitioner's application for injunction.
In my view, the reliance placed by the, learned counsel on this decision is entirely mis-placed, as it has been rightly contended on behalf of the opposite parties, that although it was not necessary that an arbitration proceeding should be pending in the court, no arbitration proceeding had come into existence at all in the case before us.
12. The two decisions of this court that now remain for examination are (1974) 2 Cut WR 1081 (Dayaram Gupta v. Hindustan Steel Ltd.) and (1983) 56 Cut LT 133 : (AIR 1984 NOC 167) (Sri Madhab Sunder Gajapati Narayan Deb v. Jayashree Chemicals) also relied upon by the learned counsel for the petitioner.
The ratio of both the cases, in short, is that for exercising the power Under Section 41(b) it is not necessary that the matter must be pending before the court. This proposition is well established and does not call for any discussion. But in Dayaram's case it has been further observed that unless it was established that a valid arbitration proceeding is pending before an arbitrator..... the court cannot grant the interim relief asked for. The fact of the case is that there was no agreement between the parties to refer to arbitration the dispute relating to the existence of a new contract for modification of the lease. It was in this circumstance that the learned Judge held that the arbitration proceeding pending before the arbitrator was itself without jurisdiction, and consequently, the Civil Court could not exercise the power Under Section 41. It is in this context that there is an emphasis regarding a valid arbitration proceeding pending before the arbitrator. This decision has been followed in the other case where the opposite party had filed an application before the Salt Commissioner requesting him to arbitrate on disputes between the parties and it was acknowledged by the arbitrator. It was thereafter that the opposite party filed an application in the Civil Court for an interim injunction and a direction for appointment of receiver was passed. The learned Judge following the earlier decision affirmed the order of the trial court on the ground that the facts disclosed that an arbitration proceeding was pending before the Salt Commissioner.
13. In the order of reference, the learned single Judge has taken an exception to the view expressed in the above mentioned cases on the ground that it would result in creation of a vacuum and a good deal of mischief may be done in between if it is construed that the court is debarred from entertaining an application for interim relief before the proceeding is commenced.
14. The vacuum theory has been demolished in Ranjit Chandra Mitter's case, AIR 1963 Cal 594 itself to which the learned Judge himself has made a reference. In the said case it was observed that no hardship can be caused because of the so-called time-lag as even in cases where a party proceeds under Chap. II of the Act, there may be a time-lag between the dispute and the arbitration proceeding, but the parties may well proceed Under Section 20 of Chapter III, and such an application can be filed forthwith. Once an application is filed Under Section 20, there is a proceeding, a pending suit -- and an application for interim relief can be made in that proceeding. I, therefore, see no reason to justify the expression of 'fear' by the learned Judge. There cannot be any fool-proof scheme. Even in any preventive proceeding like one Under Section 144 or 145 etc. of the Cr. P.C., there may be some mischief done before the prohibitory order is enforced because there is bound to be some time-lag.
But at the same time I find myself unable to uphold the two decisions of this Court in their entirety as I cannot subscribe to the view taken in them that for exercising the power Under Section 41(b) of the Act the 'arbitration proceeding must be pending before the arbitrator', as in my judgment the power to grant interim reliefs and protective orders in terms of the Second Schedule is 'conferred upon the court for the purpose of or in relation to arbitration proceedings'. It is not limited to the stage when the proceeding would become pending before the arbitrator as the proceeding commences the moment the party/parties submits to his authority and he might not have entered upon the reference to make it a pending arbitration proceedings.
S.R. Das, J. (as he then was) in (1948) 52 Cal WN 45 (Chhedilal v. Brit-Over Limited) placed in a similar situation observed thus : ~
'I do not see why the word 'pending' should be added to the section.'. 15. The decisions of this Court, viz., (1974) 2 Cut WR 1081 (Dayaram Gupta v. Hindusthan Steel Ltd.) and (1983) 56 Cut LT 133: (AIR 1984 NOC 167) (Sri Madhab Sunder Gajapati Narayan Deb v. Jayashree Chemicals) are therefore not correct to the above extent, i.e. when they hold that the arbitration proceeding must be pending before the arbitrator so as to apply the provisions of Section 41(b) of the Act. They must be overruled to that extent.
16. To conclude and summarise my discussions, I would hold that the power Under Section 41(b) read with the Second Schedule of the Arbitration Act can be exercised by a civil court in appropriate cases for the purpose of and in relation to arbitration proceedings. The arbitrator's authority to act arises after submission of the dispute(s) either mutually or by one of the parties to an arbitration agreement, requesting the arbitrator (either named in the agreement itself or subsequently appointed) to decide their dispute(s) or by the court making an order of reference to the arbitrator either Under Section 20, or as provided in Chap. IV of the Arbitration Act.
17. Now having understood the correct legal position, let us apply the same to the facts of the present case. From the facts disclosed by the petitioner in his application in the trial court as well as in the revision application, there is no averment that he took any step in regard to referring the disputes or differences between the parties to an arbitrator. In that view of the matter, it has got to be held that the stage for seeking any relief Under Section 41(b) of the Act had not arisen in this case as no arbitration proceeding had commenced. Although therefore the court below was not correct in his opinion regarding the legal position, since the application of the petitioner was still non-maintainable for the view I have taken, it was rightly rejected. In the ultimate analysis therefore the same result follows and this revision petition is devoid of merit. It is accordingly dismissed with costs.
Mohapatra, J.
18. I Agree.