LexSECURITY & FINANCE (P) LTD. & ANR. versus DATTARAYA RAGHAV AGGE & ORS.
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SECURITY & FINANCE (P) LTD. & ANR. V. DATTARAYA RAGHAV AGGE & ORS. November 8, 1968 [J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] Arbitration Act 10 of 1940, s. 35--Civil suit filed during pendency vf dispute before arbitrator-Notice of suit given under s. 35 to arbitrator and opposite party-Arbitrator nevertheless recording evidence of oppo- site party and giving award-Whether arbitrator and opposite party guilty of contempt of court and s. 3 Contempt of Courts Act (32 of 1952). A rure-purchase agreement was entered into between the appellants and respondent No. !. Under that agreement a motor transport truck was made available to respondent No. I for doing transport business. The agreement contained an arbitration clause for settlement of disputes. When disputes arose reference was made to an arbitrator. Respondent No. 3 a practising lawyer was named as the arbitrator. During the pen- dency of the arbitration proceedings respondents Nos. I and 2 filed a civil suit in which they claimed a declaration that the hire-purchase agreement was brought a'bout by fraud and was not binding on them on various grounds. The suit was registered and the court ordered summons to be issued to the two appellants. A notice was also issued by respondent No. I to the appellants and the arbitrator with a copy of the plaint. When the arbitrator made an award after recording the evidence of the appel- lants respondents Nos. I and 2 filed an application under s. 3 of the Contempt of Courts Act on the allegation that the appellants and respon- dent No. 3 had committed contempt of court in proceeding with the arbitration reference in spite of the notice under s. 35 of the Arbitration Act being given and in spite of the knowledge of the suit which was filed by respondents I and 2. The application was contested by the appellants as well as the arbitrator. The appellants contended that in obeying the orders of the a·rbitrator to produce evidence they did not commit any con- tempt. Respondent No. 3 denied that he conducted the arbitration pro- ceedings in order to defeat the object of the suit. The High Court found the appellants and respondent No. 3 guilty of contempt of court on the view that their conduct had- a tendency to bring into contempt the pro- ceedings before the Civil Court. Jn appeal to this Court by certificate, HELD : The High Court was in error in holding that in the circums- tances o'f the case the appellants and respondent No. 3 were guilty of contempt of court. A B c D E F Section 35 of the Arbitration Act does not expressly prohibit the artJitra- G tor from continuing the hearing of the reference. Its only effect is that "aU further proceedings in a pending reference shall, unless a stay of pro- ceedings is g'ranted under s. 34, be invalid''. For this consequence to follow, however, two important and distinct conditions must be satisfied namely, (1) that such legal proceedings must be upon the whole and not merely part of the subject-matter of the re'ference, and (2) that a notice of such legal proceeding must be given to the arbitrator. Even on the assumptiop that these conditions were satisfied the only effect is that the H further proceedings before the arbitrator after the receipt of the notice are. rendered invalid and there is no prohibition under s. 35 requiring the arb1trator not to carry on the atbitration proceedings after the receipt of the notice. [672 G-673 BJ ' - • SECURITY & FINANCE LTD. v. D. R. AGGll (Ramaswami, J.) 669 A It is well established that an authority holding an enquiry in good faith -· in exercise of the powers vested in it by a statute is not gwlty of con- tempt ot court, merely because a parallel enquiry is imminent or pending bewre a court. To constitute the offence of contempt of court there must be involved some 'act done or writing published calculated to bring a court or a judge of the court into contempt or to lower his authority' or 'something calculated to obstruct or interfere with the due course of justice or the lawful process of the court'. [673 CJ B Reg. v. Gray [1900] 2 Q.B. 36, Arthur Reginald Perera v. The King, [195 IJ A.C. 482, Tukaram Gaokar v. S. N. Shukla, [1968] 3 S.C.R. 422 .,, and Rizwan-ul-Hasan v. State of Uttar Pradesh, [1953] S.C.R. 581, 588, applied. ;;;I It followed therefore that even if the action of the appellants and res- pondent No. 1 in the present case was assumed to be
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