Arbitration Act, 1940 : Sections 31 and 34
by Balmokand Vohra,
Cite as : (1971) 1 SCC (Jour) 70
The Supreme Court in the case of Kumbha Mawji v. Union of India,1 took a comprehensive view of Section 31 of the Indian Arbitration Act and held that the expression "in any reference" used in Section 31(4) should be construed as "in the course of any reference". It was pointed out that the necessity for clothing a single court with effective and exclusive jurisdiction, and to bring about, by the combined operation of sub-sections (2), (3) and (4) of Section 31, the avoidance of conflict and scramble is equally essential whether the question arises during the pendency of the arbitration or after the arbitration is completed or before the arbitration is commenced.
In the recent case of Union of India v. Surjit Singh Atwal2, however the Supreme Court put a restricted and narrow construction to Section 31 by holding that an application for stay of suit under Section 34 cannot be treated as an application in a reference under Section 31(4) of the Arbitration Act. It was pointed out that such an application has nothing to do with any reference. It is only intended to make an arbitration agreement effective and prevent a party from going to court contrary to his agreement. It does not lead to a reference. It was also pointed out that the second condition imposed by Section 31(4) is that the application must be made to a court competent to entertain it. But in Section 34 the expression "judicial authority" is used; and the judicial authority need not necessarily be a court as defined in Section 2(c) of the Arbitration Act. A party to an Arbitration agreement may choose to file a suit in a court which has no jurisdiction to go into the matter at all and merely because the defendant in such a suit has to make an application to that court under Section 34 for the stay of the suit, it cannot be said that the court which otherwise has no jurisdiction in the matter becomes a court within the meaning of Section 2(c) of the Arbitration Act.
In the context of the above two decisions of the Supreme Court some humble comments on the scope of Sections 31 and 34 of the Arbitration Act are given below:
The main object of Section 31 of the Arbitration Act is to invest a single court with the exclusive jurisdiction to decide all questions relating to the matter of arbitration ; this object is achieved by the combined operation of all its sub-sections. The words "application in a reference" used in sub-section (4) should therefore, be related back to sub-sections (2) and (3) and all applications regarding the conduct of arbitration proceedings or arising out of such proceedings or in which the court has to decide questions regarding the validity, effect, or existence of an award or an arbitration agreement between the parties to the agreement, should be treated as "application in a reference".
The very foundation for the jurisdiction of the court under Section 34 is the existence of an arbitration agreement. The applicant asserts that there is such an agreement, while the plaintiff either disputes the existence of such an agreement or pleads that it is invalid. Section 33 gives an independent right to a person who wishes to challenge the existence or validity of an arbitration agreement to anticipate the other side and to initiate proceedings to have these questions determined beforehand. Thus applications under Sections 33 and 34 both are fundamentally in the matter of arbitration proceedings and fall within the purview of Section 31(4) of the Arbitration Act, though the former is intended to make an arbitration agreement ineffective and the latter effective and neither leads to a reference.
Section 35 of the Arbitration Act provides that when legal proceedings upon whole of the subject-matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the Arbitrators or umpire, all further proceedings in a pending reference shall, unless a stay of proceedings is granted under Section 34, be invalid. In these circumstances, therefore, an application for stay would be a necessary step to be taken by the applicant under law "in the course of reference". There seems no justification for holding that such an application cannot be treated as an application in a reference under Section 31(4) of the Arbitration Act.
It is possible that a party to an arbitration agreement may inadvertently or otherwise, file a suit in a court which is not competent under Section 2(c) of the Arbitration Act to decide the subject-matter of reference. Such an application cannot come within the purview of Section 31(4) of that Act. But in most of the cases parties file their suits in competent courts under legal advice. Applications for stay of such suits cannot be excluded from the purview of Section 31(4) merely because in Section 34 the expression "judicial authority" and not "court" is used. The jurisdiction of the court is determined under Section 31(4), read with Sections 2(c) and 14 of the Arbitration Act and is not influenced by the expression "judicial authority" used in Section 34.
- 1953 SCR 878.
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- 1969(2) SCC 211.
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