Holding

The Supreme Court held that the tenant was not entitled to leave to contest the eviction because his affidavit failed to disclose facts that would disentitle the landlord, and the lower courts correctly dismissed his application.

Summary

The landlord filed an eviction petition under Section 14(1)(e) of the Delhi Rent Control Act, claiming a bona‑fide personal requirement for the premises. The tenant applied under Section 25B(5) for leave to contest the eviction, but the Additional Rent Controller dismissed the application and ordered eviction, a decision affirmed by the Delhi High Court. The tenant appealed, arguing that his affidavit disclosed that the landlord‑tenant relationship did not exist and that the landlord lacked a genuine need for the flat. The Supreme Court held that the affidavit did not disclose facts sufficient to disentitle the landlord, that the denial of a landlord‑tenant relationship was not properly raised before the lower courts, and that the landlord’s claim of bona‑fide requirement was valid. Consequently, the appeal was dismissed.

Issues considered

Whether the tenant was entitled to leave to contest the eviction petition under Section 25B(5) of the Delhi Rent Control Act.
Whether the affidavit filed by the tenant disclosed facts that would disentitle the landlord from obtaining possession on the ground of bona‑fide requirement.
Whether the denial of a landlord‑tenant relationship constitutes a ground for granting leave to contest the eviction.

Legislation cited

Delhi Rent Control Act, 1958s. 14(1)(e), s. 14A, s. 25B(4), s. 25B(5)

Subjects

rent controlevictionbona fide requirementsummary trialSection 25Blandlord‑tenant relationship

Judgment

J.P. ANAND A
v.
D.G.BAFFNA

OCTOBER 30, 2001

[SYED SHAH MOHAMMED QUADRI AND S.N. PHUKAN, JJ.J B

Rent and eviction :

Delhi Rent Control Act, 1958:

Ss. 25-8(5) and 14( 1)(e )-Petition for eviction of tenant on ground of c
bona.fide requirement-Summary trial-Application of tenant uls 258(5) seek-
ing leave of court to contest eviction petition-Rent Controller dismissing
application of tenant and ordering his eviction-Revision petition of tenant
dismissed by High Court-Tenant contending that the grounds stated in affida-
vit accompanying his application, inter alia, denying relationship of "landlord D
and tenant" and bona fide requirement of landlord not considered by Rent
Controller and High Court-Held, tenant's claim that he had purchased the
premises under an oral agreement, paid part consideration and was occupying
premises as an owner was held by Rent Controller and High Court as un-
founded-Besides, plea as such not raised before the said courts-On the other
hand, a copy of agreement of tenancy available on record-As regards tenant
E
opposing landlord's ground ~f bona.fide requirement, Rent Controller.found
that wife and married daughters ~f landlord merely applied to Delhi Develop-
ment Authority.for allotment ~faccommodation which did not amount to having
alternative accommodation and the requirement of landlord was bona fide.
F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3201 of 1999.

From the Judgment and Order dated 5.2.99 of the Delhi High Court in
C.R. No. 61 of 1999.

Rajiv Dutta, Ms. Erakshi Kulshrestha and Rakesh K. Sharma for the G
1
~• appellant.

Ashok Kumar Chhabra and Ms. Madhu Moolchandani for the Respond-
ent.

The following Order of the Court was delivered : H
593
594 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.
A This appeal by special leave is from the judgment and order of the High
Court of Delhi in Civil Revision No. 61 of 1999 dated February 5, 1999. The
dispute in this appeal arises under Section 25B(5) of the Delhi Rent Control
Act, 1958 (for short, 'the Act').

The respondent filed eviction petition under Section 14(1)(e) of the Act
B
in the court of Rent Controller, Delhi, stating that the appellarit is the tenant
of Flat No. 21-D, SFS, Motia Khan, New Delhi (for short, 'the premises') and .,
he needed it for his bona fide personal occupation. On receiptof summons of
the eviction petition, the appellant filed an application under Section 25B(5)
of the Act seeking leave of the court to contest the eviction petition. . --
c
On considering the material placed before it, the learned Additional Rent
Controller dismissed }he application of the appellant and ordered eviction 9f
the appellant on August 19, 1998. The appellant unsuccessfully challenged that
order in the High Court of Delhi by filing the revision, referred to above, which
D was dismissed by the impugned order on February 5, 1999. Thus, the appellant
is in appeal in this Court.

Mr. Rajiv Dutta, learned senior counsel for the appellant, contends that . ..
in the affidavit accompanying the application seeking leave to defend the
eviction petition numerous groun~ are taken but both the learned Additional
E Rent Controller as well as the High Court did not· properly appreciate the
ground that the appellant denied the relationship of 'landlord and tenant',
between the parties, which if accepted would non-suit the respondent as such
leave.to defend ought to have been granted. Learned counsel for the respondent
submits .that the appellant's only claim before the court of the Rent Controller
F as well as the High Court was that he had purchased the premises and has been
in· its possession not as a tenant but as an owner thereof and that was found
against the appellant. He did not urge specifically before the Rent Controller
or before the High Court that the relationship of landlord and tenant did not
exist between them as such that ground was not dealt with specifically by the
courts.
G
'l I
The point for consideration is : whether on true interpretation of sub-
section (5) of Section 25B of the Act, the appellant has been illegally denied
leave to defend the eviction petition filed by the respondent.

H Chapter III A was inserted in the Act by Act 18 of 197 6(with effect from
J.P. ANAND v. D.G. BAFFNA 595
December l, 1975 which contains three sections. Section 25B, appears in that A.
chapter and provides for summary trial of certain applications. We are con-
cerned here with sub-sections (4) and (5) of the said provision, which read thus:

"25B. Special procedure for the disposal of applications for eviction
on the ground of bona fide requirement-
B
(4) The tenant on whom the summons is duly served (whether in
the ordinary way or by registered post) in the form specified in the
Third Schedule shall not contest the prayer for eviction from the
premises unless he files an affidavit stating the grounds on which he
seeks to contest the application for eviction and obtains leave from the C
Controller as hereinafter provided; and in default of his appearance in
pursuance of the summons or his obtaining such leave, the statement
made by the landlord in the application for eviction shall be deemed
.) to be admitted by the tenant and the applicant shall be entitled to an
order for eviction on the gounds aforesaid. D
(5) The Controller shall give to the tenant leave to contest the
ap}>lication if the affidavit filed by the tenant discloses such facts as
would disentitle the landlord from obtaining an order for recovery of
possession of the premises on the ground specified in clause (e) of the
proviso to sub-section (1) of Section 14, or under Section 14A." E
A plain reading of the above provisions, shows that sub-section (4)
precludes a tenant from contesting an eviction petition filed against him unless
he files an affidavit stating the grounds on which he seeks to contest the
application for eviction and obtains leave from the Controller. It further pro-
vides that in default of the tenant's appearance in pursuance of the summons F
or his obtaining leave to contest the eviction petition, the statement made by
the landlord in the application for eviction shall. be deemed to be admitted by
the tenant and the landlord shall be entitled to an order for eviction of the tenant
on the ground mentioned in the eviction petition. Sub-section (5) obliges the
Controller to grant leave to contest the eviction petition if the affidavit filed by G
' ,. the tenant discloses such facts as would disentitle the landlord from obtaining
an order for recovery of possession of the premises on the ground specified in
clause (e) of the proviso to sub-section (1) of Section 14 or under Section 14A.
The facts disclosed in the affidavit should not be vague or imprecise, they
should be clear and definite, and should prima.facie make out the ground stated H
596 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.
A in support of the application seeking leave to contest the eviction petition.

A perusal of clause (e) of sub-section (1) of Section 14 of the Act shows
that it empowers the Controller to order recovery of possession of premises
from the tenant by a landlord, if the premises let out for residential purposes
are required bonafuie by the landlord for occupation as a residence for himself
B or for any member of his family dependant on him, if he is the owner thereof,
or for any person for whose benefit the premises are held and that the landlord
or such person has no other reasonably suitable residential accommodation.
Admittedly the respondent's application seeking eviction of the appellant was
filed under clause (e) of sub-section (l) of Section 14 of the Act.
c
It would be appropriate to refer to the grounds stated in the affidavit
accompanying the application filed by the appellant under Section 25B(5) of
the Act. Grounds (l) and (m) are relevant for purposes of sub-section (5). They
relate to - ( l) denial of relationship of landlord and tenant, between the
D respondent and the appellant and (2) the respondent having alternative accom-
modation : it is alleged that the wife and married daughters of the respondent
applied to the Delhi Development Authority for allotment of accommodation
in their favour.

There can be no doubt that for entertaining a petition under Section 14
E of the Act existence of relationship of landlord and tenant between the parties
to the petition is a condition precedent. Though the respondent asserted exist-
ence of such a relationship, the appellant denied the same in ground (f). The
denial of relationship is on the basis of the appellant's claim that he had
purchased the premises under an oral agreement for sale and paid certain
F amounts towards part consideration, and therefore he is occupying the premises
as the owner and not as the tenant. Both the learned Additional Rent Controller
and the learned Single Judge of the High Court found that the case set up by
the appellant was unfounded. The learned counsel for the appellant disputed
that the alleged agreement of tenancy between the parties was filed in the Court
a· of the Additional Rent Controller. To verify this aspect, we called for the
original records. On perusal of the record it is noticed that along with the
rejoinder a zerox copy of the agreement of tenancy was filed in the Court of
the Additional Rent Controller. The main plea of denial of relationship of the
landlord and the tenant is indeed a plea of the appellant asserting title to the
H premises in himself and that was found against him. In the backdrop of the plea
J.P. ANAND v. D.G. BAFFNA 597
of the appellant and the finding of the Rent Controller and the High Court, A
it cannot be contended legitimately that the learned Additional Rent Controller
or the learned Single Judge of the High Court erred in not recording specific
finding that the relationship of landlord and tenant existed between the parties,
more so when the plea as such was not urged before the said courts.

The other ground that was urged to seek leave to contest the eviction
B
petition is with regard to the bona fide requirement of the respondent for the
reason that the wife and the married daughters of the respondent hold accom-
modation. The learned Additional Rent Contoller found that the wife and the
married daughters applied for allotment of accommodation to the Delhi Devel-
opment Authority and that did not amount to having alternative accommoda- c
tion and that the need of the respondent was bona .fide and that he had no
alternative accommodation. This finding of fact was not challenged in the. High
I Court.

We are informed that the appellant has filed a suit for specific perform-
D
ance of contract for sale of the premises and that is pending before the Court
of the District Judge, Delhi. We make it clear that the findings recorded by the
leaned Additional Rent Controller or High Court and any observation made by
this Court shall not prejudice the rights and obligations of the parties in the suit
which shall be decided by the learned District Judge, Delhi on its own merits
uninfluenced by those proceedings.
E

In the result we find no substance in this appeal; the appeal is dismissed
accordingly. There shall be no order as to costs.

R.P. Appeal dismissed.
A SMT. KALPANA KOTHARI
v.
SMT. SUDHA YADAV AND ORS.

OCTOBER 31, 2001

B [S. RAJENDRA BABU AND DORAISWAMY RAJU~J.]
. /

Arbitration Act, 1940/Arbitration and Conciliation Act, 1996-Section
3418-Suit for dissolution of p4rtnership firm and rendition of accounts by one
partner-Application under Section 34 of the 1940 Act.for stay of proceedings
C filed by other partne.rs before ~rial court-Application dismissed as not
pressed in view of the repeal of the 1940 Act-Subsequently application filed
before High Court under Section 8 o.f the 1996 Act also dismissed-On appeal,
held, repeal of the 1940 Act and estoppel cannot constitute any legal
impediment.for having recourse to the remedies under the 1996 Act-Evidence
D Act, 1872-Section 115.

Code of Civil Procedure, 1908-0rder 40, Rule /-,-Appointment of .... -
Receiver-Application filed by one o.f the partners .for appointment o.f Re-
ceiver-Dismissed by trial Court but allowed by Uigh Cou.rt-On appeal he_ld,
when an arbitration clause exists, having recour1e to civil court for appoint-
E
ment of Receiver without making evident any intention to have recourse to
arbitration in tenns o.f the agreement cannot arise.

Appellants and respondents entered into a partnership business. Due
to misunderstanding between the parties, respondent filed a suit for disso-
F lotion of the partnership firm and rendition of accounts and also an
application for appointment of a Receiver and for injunction. Appellants
filed application under Section 34 of the Arbitration Act, 1940. Applica-
tion filed by the respondent was dismissed. However, application filed by
the appellant was allowed and proceedings in the suit was stayed. Re·
G spondent then filed an application for appointment of a Receiver before ~;·1
the High Court and the same was allowed. At the appellate stage, appel·
lants filed a written application for dismissal of application under Section
34 as not pressed in view of the repeal of the 1940 Act and coming into
force of the 1996 Act and got orders thereon. Thereafter, appellants filed
H an application under Section 8 of the 1996 Act for stay of proceedings
598 \
KALPANA KOTHARI v. SUDHA YADAV 599
before High Court and the Trial Court. However, the application was A
dismissed. Hence the present appeal.

Allowing the appeal, the Court

HELD : 1. The mgh Court did not properly appreciate the relevant
and respeetive scope, object and purpose as also the considerations neces- B
sary for dealing with and disposing of the respective applications envisaged
·-.. under Section 34 of the 1940 Act and Section 8 of the 1996 Act. Section 34 of
the Arbitration Act providing for filing an application to stay the legal
proceedings instituted by any party to an arbitration agreement against
any other party to such agreement, had nothing to do with actual reference c
to the arbitration of the disputes and that was left to be taken care of under
Sections 8 and 20 of the 1940 Act. In striking contrast to the said scheme
I underlying the provisions of the 1940 Act, in the new 1996 Act, there is no
provision corresponding to Section 34 of the old Act and Section 8 of the
1996 Act mandates that the Judicial Authority before wh~ch an action has D
been brought in respect of a matter, which is the subject-matter of an arbi·
tration agreement, shall refer the parties to arbitration if a party to such an
agreement applies not later than when submitting his first statement. The
provisions of the 1996 Act do not envisage the specific obtaining of any stay
as under the 1940 Act, for the reason that not only the direction to make
E
reference is mandatory but notwith-;tanding the pendency of the proceed·
ings before the Judicial Authority or the making of an application under
Section 8(1) of the 1996 Act, the arbitration proceedings before the Judicial
-t Authority or the making of an application under Section 8(1) of the 1996
Act, the arbitration proceedings are enabled, under Section 8(3) of the 1996 ·
Act, to be commenced or continued and an arbitral award also made un- F
hampered by such pendency. (605-B-H]

2. On the ground of estoppel and the conduct of the appellants in
getting their earlier application made under Section 34 of the 1940 Act
dismissed as not pressed that the applications under Section 8 of the 1996 ·G
'• 1 Act were not countenanced by the mgh Court. The fact that the earlier
application under the 1940 Act was got dismissed as not pressed in the
teeth of the repeal of the said Act cannot, constitute any legal impediment
for having recourse to and avail of the avenues thrown '>pen to parties
under the 1996 Act. Similarly, having regard to the distinct purposes, , H
600 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.
A scope and subject of the respective provisions of law in these two Acts, the
plea of estoppel can have no application to deprive the appellants of the
legitimate right to invoke an all comprehensive provision of mandatory
character like Section 8 of the 1996 Act to have the matter relating to the
disputes referred to arbitration. [606·B-C]
B 3. The High Court' did not take into account the overall necessity to
balance the interests of both parties while appointing the Receiver and
grant of injunction. The feasibility or otherwise of appointing Party
receive~ and allowing the partners to carry on the day-to-day activities of
the business subject to strict and effective control and accountability to the
c Court of the realizing of the business was not considered at all before going
out for the appointment of third party Receiver and prohibiting any sales,
completely. As long as the Arbitration Clause exists, having recourse to
Civil Court for adjudication of disputes envisaged to be resolved through \
arbit~l process or getting any orders of the nature from Civil Court for
D appointment of receiver or prohibitory orders without evincing any inten-
tion to have recourse to arbitration in terms of the agreement may not
arise. (606-D-H]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 7404-7406 of
2001.
E
from the Judgment and Order dated 18.1.2000 of the Rajasthan High
Court in-S.B.C.M.A. Nos. 251, 550, 635 of 1996.

WITH
F
'c.A. Nos. 7407-7409 of 2001.

R.F. Nariman, Bhaskar P. Gupta, N.R. Choudhury, Prashant Kumar,
Triveni Podekar, Ashok Sharma, N.S. Bisht, Somnath Mukherjee, N.S. Bisht,
J.P. Pandey, Dr. P.C. Jain, Chanchal Kumar Ganguli (N.P.) N.S. Vashisht,
G Arun K. Sinha, Rakesh Singh and Rao Ranjit, for the appearing parties.

The Judgment of the Court was delivered by

RAJU, J. Special leave granted.

H Having regard to the nature of the orders under challenge and the stage
KALPANA KOTHARI v. SUDHA YADAV [RAJU, J.] 601
of the proceedings, we consider it inappropriate to refer to or delve in great A
detail with the allegations and claims on either side, in this judgment. But, it
becomes necessary to deal with the background of the disputes between parties
on a bird's eye view.

One Shri Laxmi Narain Yadav (since dead) was running a hotel business
in tourist bungalow on Mirza Ismail Road at Jaipur, which belonged to him
B
exclusively and absolutely. It was said to have been constructed on agricultural
land without obtaining proper sanction and the proceedings were also said to
have been initiated against him, in accordance with law. On 13.2.80, Laxmi
Narain Yadav died leaving behind him a son Shri Vijay Krishna Yadav (a law
graduate) and his wife Smt. Ashok Kumari and in a family settlement arrived c
at thereafter, the entire land and building admeasuring 5354 sq. yds. (4478 sq.
meters) of the Tourist Hotel as such fell to the share of the son Shri Vijay
I Krishna Yadav. Thereafter, he made a notional division of the property into
three shares measuring 1184 sq. meters, 1587 sq. meters and 1707 sq. meters
in favour of himself, his wife Smt. Sudha Yadav and son Prashant Yadav. On D
31.1.87, a partnership by name Mis Sumeru Enterprises was entered into
between Shri Yadav, his wife, Mis Padmini Enterprises Private Ltd. and one
Smt. Kalpana Kothari, besides admitting the minor Prashant Yadav to the
benefits of partnership, with share in profits at 11 %, 12%, 32.5%, 32.5% and
12% with shares in losses at 14%, 15%, 35.5%, 35.5% and nil respectively
E
among them. The property of the Tourist Hotel was brought into as the stock
of the Firm and valuing the same at 61 % the respective shares was credited into
the Capital Account of the Firm as Rs.17 ,00,000, Rs.22,00,000 and Rs.22,00,000
respectively in the names of Shri Yadav, his wife Smt. Sudha Yadav and their
minor son Prashant Yadav. The rest of the capital was said to be required to
be arranged by the other partners Mis Padmini Enterprises Pvt. Ltd. and Smt. F
Kalpana Kothari. For purposes of the partnership business, the land was got
converted from agricultural use to commercial use on payment of the required
conversion charges by the Firm and a registered lease-deed was entered into
between the State represented by the Governor of Rajasthan and the Finn
Mis Sumeru Enterprises on 3.3.89. The building plans were said to have been G
got approved from the Jaipur Development Authority in July 1991 and there-
after on 5.10.91, all the partners of Mis Sumeru Enterprises seem to have
entered into an agreement with Mis Parasnath Builders Pvt. Ltd., as per the
terms of which, among other things, the builders were appointed as Agent and
Manager, not only to execute the constructions but also to enter into negotia- H
602 SUPREME COURT REPORTS (2001] SUPP. 4 S.C.R.
A tions for sale of the apartments (shops, offices; etc.) on such terms and con-
ditions and at such rate or prices as prevalent in the market with the intending
purchasers. All the partners also were said to have executed a Power of
Attorney dated 2.11.91 duly registered in favour of Mis Parasnath Builders Pvt.
Ltd.
B While matters stood thus, Shri Vijay Krishna Yadav also expired on
23.12.91 leaving behind a Will dated 16.12.91 as to the mode of succession
and an order of Letters of Administration dated 13.9.93 was said to have been
obtained from the District Judge, Jaipur City, on the basis of the Will dated
16.12.91. A sum of Rs.2.50 lakhs each was to be and has been given to each
C one of the daughters, Preeti Yadav and Mamta Yadav, and the shares in the
Partnership in question of late Shri Yadav had been divided equally between
his wife and son resulting in modification and due alteration and adjustment
of shares in the property of the Firm so far as Smt. Sudha Yadav and Prashant \
Yadav came to be made with Smt. Yadav holding 17.5% and Master Prashant
D Yadav holding 17.5% with share in loss of Smt. Yadav at 29%'both of hers
and of her late husband, put together. After obtaining Letters of Administra-
tion, Smt. Sudha Yadav was. said to have written two Letters dated 7.10.93 and
31.1.94 approving and confirming the accounts of the 'Firm. It was also
claimed for the appellants that withdrawals by crossed cheque payments came
E to be made from the Firm on account of late Shri Yadav at Rs.10,14,203
(including the payment of Rs.5 lakhs as per direction in the Will and Letters
of Administration), of Smt. Yadav at Rs.20,03,432 and of Master Prashant
Yadav at Rs.10,03,432 (in all Rs.40,21,067 from the funds of the Firm). After
all these, a sum of Rs.6,82,650.52 (Rs.3,41,325.26 each) was said to be lying
to the credit of Smt. Yadav and Master Prashant Yadav in the accounts of the
F
Firm. The further claim of the appellants seems. to be that ori effecting sales
of some of the apartments, the profits earned were also distributed among the
partners by proper credit entries of Rs.5,96,829.30 each in favour of Smt.
Yadav and Prashant Yadav and Rs.11,08,397 .28 each in favour of Smt. Kalpana
Kothari and Mis Padmini Enterprises Pvt. Ltd. It is also· claimed that till
G October 1995, a total number of 173 offices and shops came to be disposed
of and of which possession in respect of 154 were also said to have been
delivered to the buyers and several crores of rupees were ploughed into for
executing the construction works.

H Misunderstanding seems to have surfaced among partjes resulting in the
KALPANA KOTHARI v. SUDHA YADAV [RAJU, J.] 603
issue o( a notice dated l.2.95 by Smt. Yadav making serious allegations of A
malpractices and irregularities against others in the Firm followed by a suit for
dissolution of the Partnership Firm through Court under Section 44 (g) of the
Partnership Act, and for rendition of accounts, filed on 17.10.1995. In the
.·'• meantime, through one Shri Yadvendra Singh (the real brother of Smt. Yadav)
the minor Prashant Yadav also seems to have filed a suit on 30.3.1995, which B
came to be withdrawn subsequently and followed by a fresh suit in September
1995, staking a claim for the entire property left behind by late Shri Laxmi
Narian Yadav, as his own. It is stated that in this suit Smt. Yadav has been
made a party defendant as she had made Prashant Yadav as party defendant
also in her suit.
c
Smt. Yadav, in her suit, has filed an application for the appointment of
a Receiver as also an application for injunction. Mis Parasnath Builders Pvt.
Ltd. as well as Smt. Kalpana Kothari filed applications under Section 34 of the
Arbitration Act, 1940, in the Trial Court, relying upon the arbitration clauses
contained in the Partnership Deed dated 31.1.87 and the agreement dated D
5.10.1991 entered into by the Firm with the Builders. The applications filed
for appointment of Receiver and also the one for injunction also were opposed
by these defendants in the suit. On a consideration of the materials on record
and also the respective contentions of parties, by an order dated 6.2.96, the
applications for injunction as also for the appointment of Receiver were re-
E
jected by the Trial Court. Similarly, the suit was also stayed by allowing the
applications filed under Section 34 of the Arbitration Act, 1940. Aggrieved,
) Smt. Sudha Yadav has filed before the High Court S.B. Civil Misc. Appeal
No.251 of 1996 against the order dismissing the application for appointment
of a Receiver made under Order 40 Rule l, CPC, S.B. Civil Misc. Appeal
Nos.550 of 1996 and 635 of 1996 (defect) against the orders passed on the F
respective applications filed under Section 34 of the Arbitration Act, 1940. On
27 .8.99, the defendants, who filed applications before the Trial Court under
Section 34 of the Arbitration Act, 1940, moved applications in writing before
the High Court stating that they do not press their applications under Section
,. > " Act, 1940, in view of the repeal of the 1940 Act and for
34 of the Arbitration G
their dismissal as not pressed and consequently, the same was allowed on
7.10.99. The minor Prashant Yadav was also said to have attained majority
on 21.9.97. But, subsequently in about ~o months time the very same
defendants (respondents 1 & 2 before High Court) filed an application on
26.10.99 under Section 8 (1) of the Arbitration and Conciliation Act, 1996, H
604 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.
A with a prayer that the proceedings before the Trial Court be stayed without
prejudice to the rights under Section 8(3) of 1996 Ac~, till the commencement/
continuation of the arbitration proceedtngs and making of the Arbitrators
award. A learned Single Judge of the Rajasthan High Court at Jaipur by the
order dated 18.1.2000, under challenge in these appeals, set aside the orders
I
B of the Trial Court dated 6.2.96, and held as follows:

(a) The balance ~f convenience is in favour of appointment of a
Receiver for preserving as well as managing the property to save it
from any anticipated loss till the decision of the suit;

c (b) that having got the application earlier filed before the trial court
under Section 34 of the Arbitration Act, 1940 which was in force at
the time of filing of the suit dismissed as withdrawn, it is not permis-
sible to invoke the powers under Section 8 of the Arbitration and
Conciliation Act, 1996 to obtain the relief of stay of further proceed-
ings;
D
(c) that by their conduct as above they are estopped from filing a fresh
application.

Heard Sarva Shri R.F. Nariman and Bhaskar P. Gupta, Senior Advocates,
E for the appellants and Dr. P.C. Jain, Advocate, for the respondent-plaintiff. The
learned counsel appearing on either side vehemently tried to project the claims
of the respective parties both on grounds pertaining to legal issues and relevant
facts. On a careful consideration for the same and the reasons assigned by the
learned Judge in the High Court, we find it difficult to affix our approval to
the order under challenge.
F
The first respondent herein has filed the civil suit for dissolution of the
partnership and for accounts and also filed applications for the appointment of
Receiver and for injunction. The defendants have initially filed applications
in the suit before the Trial Court invoking the provisions contained in Section

'-
G 34 of the Arbitration Act, 1940 and not only the applications filed by the first
respondent before the Trial Court were rejected but the applications under
Section 34 of the Arbitration Act by the appellants came to be allowed and
further proceedings in the suit filed by the first respondent came to be stayed.
No doubt, at the appellate stage, after filing a written application for dismissal
of the applications filed by the appellants under Section 34 of the. Arbitration
H
KALPANA KOTHARI v. SUDHA YADAV [RAJU, J.] 605
Act, 1940, as not pressed in view of the repeal of the 1940 Act and coming A
into force of the 1996 Act and getting orders thereon, the appellants herein have
once again moved the High Court under Section 8 of the Act, with a request
for stay of proceedings before the High Court as well as the Trial Court, but
the application came to be rejected by the learned Judge in the High Court that
no such application could be filed, once the application earlier filed under 1940 B
Act was got dismissed as not pressed and also on the ground of estoppel, based
on the very fact. We are of the view that the High Court did not properly
appreciate the relevant and respective scope, object and purpose as also the
considerations necessary for dealing with and disposing of the respective
applications envisaged under Section 34 of the 1940 Act and Section 8 of the C
1996 Act. Section 34 of the 1940 Act provided for filing an application to stay
legal proceedings instituted by any party to an arbitration agreement against
any other party to such agreement, in derogation of the arbitration clause and
attempts for settlement of disputes otherwise than in accordance with the
arbitration clause by substantiating the existence of an arbitration clause and
D
the judicial authority concerned may stay such proceedings on being satisfied
that there is no sufficient reason as to why the matter should not be referred
to for decision in accordance with the arbitration agreement, and that the
applicant seeking for stay was at the time when the proceedings were com-
menced and still remained ready and willing to do all things necessary to the
proper conduct of the arbitration. This provision under the 1940 Act had E
nothing to do with actual reference to the arbitration of the disputes and that
was left to be taken care of under Sections 8 and 20 of the 1940 Act. In striking
contrast to the said scheme underlying the provisions of the 1940 Act, in the
new 1996 Act, there is no provision corresponding to Section 34 of the old Act
and Section 8 of the 1996 Act mandates that the Judicial Authority before F
which an action has been brought in respect of a matter, which is the subject-
matter of an arbitration agreement, shall refer the parties to arbitration if a party
to such an agreement applies not later than when submitting his first statement.
The provisions of the 1996 Act do not envisage the specific obtaining of any
stay as under the 1940 Act, for the reason that not only the direction to make G
- J reference is mandatory but notwithstanding the pendency of the proceedings
before the Judicial Authority or the making of an application under Section
8(1) of the 1996 Act, the arbitration proceedings are enabled, under Section
8(3) of the 1996 Act to be commenced or continued and an arbitral award also
made unhampered by such pendency. We have to test the order under appeal H
606 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.
A on this basis.

On the ground of estoppel and the conduct of the appellants in getting
their earlier application made under Section 34 of the 1940 Act dismissed as
not pressed that the applications under Section 8 of the 1996 Act were not
countenanced by the High Court. The fact that the earlier application under (
B the 1940 Act was got dismissed as not pressed in the teeth of the repeal of the
said Act cannot, in our view, constitute any legal impediment for having
recourse to and avail of the avenues thrown open to parties under the 1996 Act.
Similarly, having regard to the distinct purposes, scope and object of the
respective provisions of law in these two Acts, the plea of estoppel can have
c no application to deprive the appellants of the~gitimate right to invoke an all
comprehensive provision of mandatory character like Section 8 of the 1996 Act
to have the matter relating to the disputes referred to arbitration, in terms of
the arbitration agreement.

So far as the need for or desirability of appointing the Receiver and
D
granting of injunction, as prayed for, is concerned, the High Court does not
seem to have taken into account the overall necessity to balance the interests
of both parties. Since only the land has been said to have been brought into
the partnership assets by the Plaintiffs husband with no other contribution of
any further funds, that the land was got legally converted into one fit for
E commercial purposes of the Firm and the constructions were stated to have
been put up only with the funds of the other partners or the builders, as the case
may be, and the serious difficulties and loss to which the Firm and partners may
be put into by freezing the day-io-day business activities of the Firm and the
adverse impact on the credibility and reputation of the Firm, as a whole, do not
F seem to have engaged the attention of the High Court in passing the orders
under challenge. The feasibility or otherwise of appointing Party Receiver and
allowing them to carry on the day-to-day activities of the business subject to
. strict and effective control and accountability to the Court of the realizing of
the business does not seem to have been considered at all before going out for
G the appointment of a third party Receiver and prohibiting any sales, com-
pletely. As long as the Arbitration clause exists, having recourse to Civil Court '- -
for adjudication of disputes envisaged to be resolved through arbitral process
or getting any orders of the nature from Civil Court for appointment of Re-
ceiver or prohibitory orders without evincing any intention to have recourse to
H arbitration in terms of the agreement, may not arise.
KALPANA KOTHARI v. SUDHA YADAV [RAJU, J.] 607
For all the reasons stated supra, we set aside the orders of the High Court A
as also that of the Trial Court and remit the proceedings to the Trial Court
which shall consider the matter afresh in the light of the claims and rights Jf
the respective parties under the Arbitration and Conciliation Act, 1996 and pass
such orders as it deent fit in accordance with law. Both parties are at liberty
to move all or any applications for the purpose before the Trial Court. Though, B
we set aside the order of the High Court to facilitate the Trial Court to deal with
the matter afresh, the status quo as brought about by the orders of the High
Court shall continue till the Trial Court chooses to make its own orders or
directions in this regard, uninfluenced by the earlier orders of its own or that
of the High Court.
c
The appeals are allowed on the above terms with no order as to costs.

N.J. Appeals allowed.

>