LexUTTAR PRADESH CO-OPERATIVE FEDERATION LTD. versus M/S SUNDER BROTHERS OF DELHI
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• 215 A UTTAR PRADESH CO-OPERATIVE FEDERATION LTD. B c D E F G v MIS SUNDER BROTHERS OF DELHI April 20, 1966 (K. SUBBA RAO AND V. RAMASWAM!, JJ.] Indian Arbitration Act, s. 34-Arbitration agreement-Parties how far bound to have dispute decided by agreed arbitrator-One of the parties filing suit-Court's discretion to stay such suit-Ap- pellate Court's power to interfere with trial court's discretion under s. 34. The appellant society carried on business as public carriers on the Kanpur-Delhi route. By an agreement in 1954 they appointed the respondents as their Managing Agents for a period of 3 years. But much before the expiry of that period they terminated the agree- ment. Disputes arising between the parties were under the agree- ment, to be decided by arbitration as provided in the Co-operative Societies Act II of 1912. According to the relevant provisions of the said Act disputes were to be decided by the Registrar of Co-opera- tive Societies or by an arbitrator or arbitrators appointed by him. The respondents however filed a suit against the Society asking for a declaration that the termination of the agreement by the society was illegal and for a mandatory injunction restraining the society from term.inati.ng the agreement. The Society thereupon filed an application under s. 34 of the Indian Arbitration Act praying for a stay of the aforesaid suit on the ground that the respondents had agreed to arbitration as provided in the Co-operative Societies Act. The trial Court stayed the suit but the appellate Court set aside the trial Court's order and dismissed the application under s. 34. The High Court upheld the appellate Court's order whereupon, by spe- cial leave, the society appealed to this Court. HELD: (i) The High Court rightly refused to stay the suit. It rightly observed that it would be a difficult task for the arbitrator to investigate as to which of the rules made under the Co-operative . Societies Act are consistent with and which of those rules are not consistent with the provisions of the Indian Arbitration Act. The suit, moreover, was filed as far back as 1954 and its stay would not be in the interests of it~ speedy disposal. [219 G-220 BJ (ii) It is, of course. the normal duty of the court to hold the parties to the contract and to make them nresent their disputes to the forum of their choice, but the strict or:mciple of sanctity of con- tract is subject to the discretion of the Court under s. 34 of the Indi'an Arbitration Act. A party may be released from the bargain if he can show that the selected arbitrator is likely to show bias or there is sufficient reason to suspect' that he will act unfairly or that he has been guilty of unreasonable conduct. [222 DJ In the present case the respondent had alleged that the Regis- trar Co-operative Societies had approved the termination of the con- tract of Managing Agency with the plaintifT and the Registrar was H the Chairman of the Defendant-Society. In the circumstances the High Court m_ust be hrld to hc:tve properly exercised it~ discretion under s. 34 of the Indian Arbitration Act in not granting a s!Ay of the proceedings in the suit. [222 EJ. L/S5SCI-16 216 BcPREME COURT REPORTS [1966] SUl'P, 8,C,R. Bristol Corporation v. Jolin Aird & Co. [19131 A.C. 241, referred A to. (iii) Ii it appears to the appellate Court that in exercising its discretion the trial court has acted unreasonably or capriciously or has ignored relevant facts then it would certainly be open to the Appellate Court to intt>rfcre with the trial court's exercise o[ dis- cretion, [222 HJ B Charles Osenton & Co. v. Johnston, [1942) A.C. 130, referred to. CiVJL APPELLATE JURISDICTIOS: Civil Appeal No. 426 of 1964. Appeal by special leave from the judgment and order dated February 22. 1962 of the Punjab High Court (Circuit Bench) at Delhi in Civil Revision No. 311-D of 1958. S. P. Sinha and lnder Sen Sawhncy, for the appellant. K. K. Jain and Bishambar Lal, for the respondent. The Judgment of the Court was delivered by Rallllllwami, J. This appeal is brought, by special leave, from c the judgment of the Punjab High Court dated February 22, 1962 in Civil Revision No. 33i·D of 1958 whereby the High D Court upheld and confim1ed the judgment of the Appellate Court and set aside the judgment of the trial court staying proceedings in the suit. The Uttar Pradesh Co-operative Federation Limited (herein- after
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