Food Corporation of India & ANR Vs.
Yadav Engineer & Contractor [1982] INSC 61 (6 August 1982)
DESAI, D.A.
DESAI, D.A.
SEN, A.P. (J) ISLAM, BAHARUL (J)
CITATION: 1982 AIR 1302 1983 SCR (1) 95 1982
SCC (2) 499 1982 SCALE (1)591
CITATOR INFO :
F 1989 SC 635 (9) F 1990 SC 893 (6)
ACT:
Arbitration Act 1940-Section 34-scope
of-"Taking any other steps in the proceedings" meaning of-notice of
motion taken out by plaintiff for interim injunction-Defendant appeared and
prayed for time to reply-Defendant's action whether "step taken in the
proceedings".
Practice : attention of single Judge drawn to
a binding decision of Division Bench of the same High Court-Decision not
adverted to-Decision contrary to that of Division Bench- Propriety of.
HEADNOTE:
Section 34 of the Arbitration Act 1940
provides that where one of the parties to an arbitration agreement commences
any legal proceedings against the other party in respect of any matter agreed to
be referred to arbitration, any party to such legal proceedings may at any time
before the filing of a written statement or taking any other steps in the
proceedings apply to the judicial authority before which the proceedings are
pending to stay the proceedings and the authority on being satisfied that the
opposite party is ready and willing to do all things necessary to the proper
conduct of the arbitration make an order staying the proceedings.
The contract entered into by the respondent
with the appellant Corporation for handling and transportation of the
Corporation's goods contained an arbitration clause authorising the Managing
Director of the Corporation to appoint an arbitrator in respect of any dispute
arising out of the contract between the parties.
Apprehending breach of contract, the
respondent filed a suit for a declaration that the contract was subsisting on
the date of the suit. The respondent prayed for an ad interim injunction
against the Corporation restraining it from committing breach of the contract.
On the notice being issued the District Manager of the Corporation appeared
before the Court and sought time to file reply to the application for interim
injunction. On the next day an application was filed on behalf of the
corporation that it was fully ready and willing to have the dispute resolved by
arbitration under the subsisting arbitration agreement and prayed that the suit
be stayed as provided in section 34 of the Arbitration Act 1940.
96 The respondent alleged that section 34 was
inapplicable in that when the District Manager sought time to file a reply to
the notice for interim injunction, it was a "step taken in the
proceedings" within the meaning of section 34.
Negativing the respondent's plea the Trial
Court held that the dispute was covered by the arbitration clause. It granted
stay of further proceedings in the suit and this view was upheld by the
District Judge in the respondent's appeal.
In the revision petition filed in the High
Court a single Judge although his attention was drawn to a binding precedent of
a Division Bench of the same High Court supporting the view that an application
for filing a reply to the notice of motion taken out by the plaintiff for
interim injunction was not a "step taken in the proceedings", without
adverting to that decision, held that an application of this nature was a
"step taken in the proceedings" and that this disentitled the
Corporation from invoking the arbitration agreement.
On the question whether, where there is a
subsisting valid arbitration agreement between the parties, entering an
appearance and contesting a petition or notice of motion for interlocutory
order constitutes a "step in the proceedings" as would disentitle the
party to an order under section 34 of the Arbitration Act.
Allowing the appeal,
HELD: Contesting the application for interim
injunction or for appointment of a receiver or for interim relief by itself,
without anything more, would not constitute a "step in the
proceedings" as would disentitle the party to an order under section 34 of
the Arbitration Act. [119 F]
1. (a) Section 34 envisages that before a
party to the arbitration agreement seeks stay of the suit filed by the opposite
party it must disclose its unequivocal intention to abide by the arbitration
agreement; but once the party takes steps which may indicate its intention to
waive the benefit of the arbitration agreement or abandons the right to claim
the benefit by conduct, such party would not be entitled to enforce the
agreement because there is a breach of the agreement by both parties disentitling
them to claim any benefit of the arbitration agreement. [105 D] Ramji Dayawala
& Sons (P) Ltd. v. Invest Import [1981] 1 S C.R. 899, followed.
(b) The general words "taking any other
steps in the proceedings" follow the specific expression "filing a
written statement" and both are used for achieving the same purpose.
Therefore the latter general expression must be construed ejusdem generis with
the specific expression just preceding to bring out the ambit of the latter.
The expression "written statement" is a term of specific connotation
ordinarily signifying a reply to the plaint filed by the plaintiff. [106 E] 97
(c) The expression "taking any other steps in the proceedings" does
not mean that every step taken in the proceedings would come in the way of
enforcement of the arbitration agreement; the step must be such as would
clearly and unambiguously manifest the intention to waive the benefit of
arbitration agreement and to acquiesce in the proceedings commenced against the
party and to get the dispute resolved by the court. Interlocutory proceedings
are incidental to the main proceedings and stand independent and aloof of the
main dispute. When these interiocutory proceedings are contested it cannot be
said that the party contesting them had displayed an unequivocal intention to
waive the benefit of the arbitration agreement or that it had submitted to the
jurisdiction of the court. [109 E-H] Uttar Pradesh v. Janki Saran Kailash
Chandra [1974] 1 S.C.R. 31, referred to.
Sansar Chand Deshraj v. State of Madhya
Pradesh AIR 1961 MP 322; Nuruddin Abdulhussein v. Abu Ahmed Abdul Jalli, AIR
1950 Bom. 127; Anandkumar Parmanand Kejriwala & Anr. v. Kamaladevi Hiralal
Kejriwal, AIR 1970 Bom. 231; Queens College Kanetra & Anr. v. The
Collector, Varanasi & Ors., AIR 1974 All. 134; Biswanath Rungta v. Oriental
Industrial Engineering Co. Pvt. Ltd. & Ors., AIR 1975 Cal. 222; State of
Gujarat & Ors.v. The Ghanshyam Salt Works AIR 1979 Guj.
215; Arjun Agarwalla v. Baidya Nath Roy &
Ors. AIR 1980 Cal.
354; and M/s. Bhonrilal Hiralal & Ors. v.
Prabhu Dayal & Anr., AIR 1980 Raj. 9, approved.
Subal Chandra Bhur v. Md. Ibrahim & Anr.,
AIR 1943 Cal.
484; Amritraj Kothari v. Golcha Financiers,
AIR 1966 Cal.
315; P. Gannu Rao v. P. Thiagaraja Rao &
Anr., AIR 1949 Madras 582 and Kunta Malla Reddy v. Soma Srinivas Reddy &
Ors., AIR 1978 A.P. 289, not approved.
In the instant case the District Manager of
the Corporation only appeared before the court in obedience to the notice on
the notice of motion taken out for ex parte ad interim injunction and prayed
for time to reply. The proceedings of the court did not disclose any step
having been taken by the Corporation in the proceedings as would disentitle the
Corporation to an order under section 34.
Moreover, the application for stay filed on
behalf of the Corporation clearly stated that the "defendant is ready and
willing 'ichuck' for this purpose" which means that it was ready and
willing to proceed with the arbitration when commenced. [119 H]
2. If a single Judge hearing a matter is
inclined to take a view contrary to the earlier decision of a Division Bench of
the same High Court it would be judicial improriety to ignore that decision but
after referring to the binding decision he may direct that the papers be placed
before the Chief Justice of the High Court to enable him to constitute a larger
division bench to examine the question. Judicial comity demands that a binding
decision to which attention had been drawn should neither be ignored nor
over-looked.
[112 G-H] 98 In the instant case although
attention of the single Judge was drawn to the binding decision of a Division
Bench of the same High Court he did not refer to it but relied upon the
decision of another High Court which took the contrary view.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 3317 of 1981.
Appeal by Special leave from the judgment and
order dated the 20th November. 1981 of the Madhya Pradesh High Court in Civil
Revision No. 696 of 1981.
K.K. Venugopal and S.K. Gambhir for the
Appellant.
Soli J. Sorabjee, D.K. Katare and S.S.
Khanduja for the Respondent.
The Judgment of the Court was delivered by
DESAI, J. A fond hope that a decision of this Court with the sanction of
Article 141 of the Constitution that the law laid down therein will be the law of
the land would put an end to a raging controversy amongst various High Courts
stands to some extent rudely shaken when the controversy with a slight
variation has again been placed in the lap of this Court.
For highlighting and then resolving the controversy
facts in dispute have a little or no relevance save and except mentioning
certain events. Respondent Yadav Engineer & Contractor, a partnership firm
filed a suit against Food Corporation of India, 1st defendant and Shyam Narain
Nigam, District Manager of 1st defendant as 2nd defendant, for a declaration
that the contract between the plaintiff and the 1st defendant for handling and
transportation of the goods of the 1st defendant Corporation was subsisting on
the date of the suit and restraining the defendant from committing breach of
the same by handing over that work to someone other than the plaintiff. The
suit was instituted on June 1, 1981, in the Court of the III Civil Judge, Class
I, Gwalior.
In the suit a notice of motion was taken out
purporting to be under Order XXXIX, rules 1 and 2 read with s. 151 of the Code
of Civil Procedure, for an interim injunction restraining the defendants from
committing a breach of contract and from interfering with the work of handling
and transport of goods of the 1st defendant Corpora- 99 tion by the plaintiff
during the pendency of the suit. On the notice of motion being taken out the
Court directed notice of the same to be served and the same was made returnable
on the next day, June 2, 1981. On the returnable date the 2nd defendant,
District Manager of the 1st defendant Corporation who had office in the City of
Gwalior was served and he appeared through one Shri N.K. Modi, Advocate, filed
the letter of authority (Vakalat) in favour of the learned advocate on behalf
of 2nd defendant and the learned advocate prayed for time for 'reply and
arguments to the plaintiff's application for temporary injunction'. The court
acceded to the request and posted the matter on June 3, 1981. An endorsement
appears in the record that the 1st defendant Food Corporation of India was not
served though the endorsement reads 'absent'. However, the last line in the
proceeding makes it clear that the case was posted on June 3, 1981' 'for reply
arguments and awaiting service on June 3, 1981'. When the matter came up on the
next day, i.e. June 3, 1981, an application was moved on behalf of 1st
defendant inviting the attention of the Court to the subsisting arbitration
agreement between the plaintiff and the 1st defendant and which agreement
authorised the Managing Director of the 1st defendant to appoint an arbritrator
in respect of any dispute arising out of the contract between the plaintiff and
the 1st defendant. It was also stated that the 1st defendant desires to have
the dispute, if any, resolved by arbitration under the subsisting arbitration
agreement and that the defendant is fully ready and willing (ichhuk) to go to
arbitration. The application concluded with a prayer that under the
circumstances the suit may be stayed as provided in s. 34 of the Arbitration
Act, 1940 ('Act' for short).
The learned trial Judge was of the view that
the dispute between the parties is covered by the arbitration agreement set out
in Article 19 of the contract between the plaintiff and the 1st defendant. The
learned Judge negatived the contention that an application made by the 2nd
defendant for filing reply to the notice of motion taken out by the plaintiff
for interim injunction is a step taken in the proceedings in view of the
binding decision of a Division Bench of the Madhya Pradesh High Court in Sansar
Chand Deshraj v. State of Madhya Pradesh.(1) The learned judge accordingly
granted stay 100 of further proceedings in the suit as prayed for on behalf of
the 1st defendant. Plaintiff preferred an appeal in the Court of the District
Judge, Gwalior. The learned III Additional District Judge, before whom the
appeal came up for hearing, agreed with the view taken by the learned trial
judge and confirmed the order granting stay of further proceedings in the suit
and dismissed the appeal. Undaunted even by this second rejection plaintiff
approached the High Court in revision under s. 115 of the Code of Civil
Procedure. The learned judge, though his attention was drawn to the binding
decision of the Division Bench of the same High Court, did not refer to it in
the judgment and relied upon a decision of the Adhara Pradesh High Court in
Bajaj International v. Indian Tobacco Suppliers(1) and held that an application
for filing reply to a notice of motion for interim injunction is a step taken
in the proceeding which would disentitle the party from invoking the
arbitration agreement. In support of this conclusion the learned judge also
relied upon Abdul Qudoos v. Abdul Gani,(2) which decision clearly does not support
any such proposition. The learned judge further observed that even if the view
that the application filed by the 2nd defendant praying for time to reply to
the notice of motion for interim injunction may not be treated as a step in the
proceeding, yet the 1st defendant would not be entitled to a discretionary
order under s. 34 of the Act on the ground that one of the conditions necessary
for invoking the jurisdiction of the court under s. 34 is not satisfied
inasmuch as nowhere in the application the 1st defendant has stated that the
1st defendant at the time when the proceedings were commenced and still remains
ready and willing to do all things necessary for the proper conduct of the
arbitration. For this additional reason which was never urged on behalf of the
plaintiff either in the trial court or in the 1st appellate court and as would
be presently pointed out which is contrary to the record the High Court
interfered in revision, set aside the order of the trial court granting stay
and confirmed by the appellate court and rejected the application for stay of
proceedings in the suit. Hence this appeal by special leave.
Section 34 of the Act reads as under :
"34. Where any party to an arbitration
agreement or any person claiming under him commences 101 any legal proceedings
against any other party to the agreement or any person claiming under him in
respect of any matter agreed to be referred, any party to such legal
proceedings may, at any time before filing a written statement or taking any
other steps in the proceedings, apply to the judicial authority before which
the proceedings are pending to stay the proceedings; and if satisfied that
there is no sufficient reason why the matter should not be referred in
accordance with the arbitration agreement and that the applicant was, at the
time when the proceedings were commenced, and still remains, ready and willing
to do all things necessary to the proper conduct of the arbitration, such
authority may make an order staying the proceedings." The contours of the
controversy are confined to one of the negative requirements of s. 34 to be
fulfilled by a party seeking the discretionary relief of stay of proceedings to
qualify for the same. It is not necessary to reproduce all the relevant
conditions for attracting the application of s. 34. One of the conditions to be
satisfied before an order under s. 34 can be obtained is that the party to the
legal proceeding has at any time before filing a written statement or taking
any other steps in the proceedings applied to the judicial authority for stay
of proceedings. In other words, a party seeking stay of proceedings must move
the court with an application under s. 34 before filing the written statement
to the suit or before taking any other steps in the proceedings. Admittedly,
application in the present proceedings was filed before filing the written
statement.
The question is whether the second
pre-condition is satisfied in that the application under s. 34 was filed before
taking any other steps in the proceedings. What does the expression 'before
taking any other steps in the proceedings' signify? Before ascertaining the
scope and ambit of the expression it would be worthwhile to briefly narrate the
raison d'etre for prescribing this condition.
Ordinarily as provided in s. 9 of the Code of
Civil Procedure all suits of a civil nature except suits of which cognizance is
either expressly or impliedly barred would be triable by the courts set up for
the purpose. If the dispute is of a civil nature the forum is one or the other
court set up for the purpose. The State courts have been 102 set up for an easy
access by persons who seek resolution of their disputes. They must be disputes
of civil nature and the cognizance of which is not either expressly or
impliedly barred. Civil courts set up by the State having defined jurisdiction
will be the forum for resolution of such disputes. Ordinarily, therefore,
whenever a dispute of a civil nature arises the party claiming relief would
approach the court having jurisdiction to resolve the dispute. The party
against whom relief is sought will be informed of the cognizance of the dispute
being taken by the court and it must come forth and either concede that the
dispute is genuine in whole or in part or defend the action. Sometimes a
dispute as to jurisdiction, territorial or pecuniary, is raised but apart from
such specific exclusions claimed by a party civil courts are set up with the
object of resolving civil disputes. A forum thus may readily be available and
presumed to be easily accessible. This is the prescribed mode of access to
justice. Arbitration Act carves out an exception to the general rule that the
forum for resolution of civil disputes is the civil court having jurisdiction
to deal with the same by providing that the parties to a dispute by agreement
unto themselves may choose a forum of their choice for settlement of disputes
between them in preference to the State Courts. Undoubtedly, for making these
agreements enforceable sanction of law is necessary.
That is the object underlying the Act.
Industrial revolution bringing into existence international commercial
transactions led to a search for finding a forum outside the municipal law
courts involving protracted and dilatory legal process for simple, uninhibited
by intricate rules of evidence and legal grammar. This explains resort to
forums for arbitration at international level. No two contracting parties are
under any legal obligation to provide for an arbitration agreement. If the
parties enter into an arbitration agreement implying that they would like that
the disputes covered by the agreement will be resolved by a forum of their
choice, the approach of the court must be that parties to the contract are held
to their bargain. If in breach or derogation of a solemn contract a party to an
arbitration agreement approaches the court and if the other side expeditiously
approaches the court invoking the court's jurisdiction to stay the proceedings
so that by this negative process the court forces the parties to abide by the
bargain, ordinarily the court's approach should be and has been to enforce
agreements rather than to find loopholes therein. More often it is found that
solemn contracts are entered into on the clearest understanding that any
dispute arising out of the contract 103 and covered by the contract shall be
referred to arbitration. It may be that one or the other party may not have
entered into the contract in the absence of an arbitration agreement. Therefore
when in breach of an arbitration agreement a party to the agreement rushes to
the court, unless a clear case to the contrary is made out the approach of the
court should be to hold parties to their bargain provided necessary conditions
for invoking s. 34 are satisfied.
Arbitration Act prescribes various methods by
which an arbitration agreement can be enforced. Section 20 enables parties to
an arbitration agreement to approach the Court in the circumstances therein
mentioned for a direction that the agreement be filed in the court and on such
agreement being filed the Court is empowered to make an order of reference to
the arbitrator. Provisions of Chapter IV provide for arbitration in suits.
Section 34 prescribes one other method of enforcing arbitration agreement if a
party to an arbitration agreement in breach of it approaches the court and
files a suit in respect of a dispute covered by the arbitration agreement.
Section 34 prescribes a method by which the
other party to the arbitration agreement by satisfying the conditions
prescribed in s. 34 can enforce the arbitration agreement by obtaining an order
of stay of the suit. It is crystal clear that once the suit is stayed the party
who in breach of the arbitration agreement approaches the court for relief will
be forced to go to arbitration and thus the court by this negative attitude of
declining to proceed further with the proceedings brought before it would enforce
the arbitration agreement. In order, therefore, to satisfy the court that the
other party to the arbitration agreement who would be defendant in the suit is
ready and willing to abide by the arbitration agreement and ready to take all
steps necessary for the proper conduct of the arbitration, it must show that it
is not waiving or abandoning its right under the arbitration agreement or
submitting to the jurisdiction of the court thereby accepting the forum
selected by the plaintiff for resolution of dispute and acquiescing in it.
In order to steer clear of this charge the
provision is made in s. 34 for an application by the party who is brought to
the court by the opposite party in breach of the arbitration agreement to apply
for stay before filing the written statement or before taking any other steps
in the proceeding. This 104 explains the purpose and object underlying the
provision contained in s. 34.
The contention and the resultant issue in
dispute must now be neatly framed. The primary issue is: what action on the
part of the defendant who is sued in a court of law and who has a subsisting
valid arbitration agreement with the plaintiff, would constitute step in the
proceeding so as to disentitle him to stay of the suit which, if granted, would
enable him to enforce the arbitration agreement ? Would entering an appearance
and contesting petition or notice of motion for interlocutory order constitute
such step in the suit or proceedings as would disentitle the party to an order
under s. 34 ? The subsidiary point is, whether where in a suit filed in a
court, a prayer for an ex parte ad interim injunction is made either by an
application or by a notice of motion or an application is made for appointment
of a receiver and either ex parte ad interim injunction is granted or ex parte
receiver is appointed and the copies of the pleadings and the order are served
upon the defendant, if the defendant appears and requests the court either to
vacate the injunction or discharge the receiver or modify the orders without
filing a written statement or making an application for filing a written
statement to the plaint, could he be said to have taken a step in the
proceedings so as to disentitle him from obtaining stay of the suit ? Let the
precedents rest for the time being and let an attempt be made to ascertain the
underlying intendment in enacting the condition in s. 34 which prescribes a
mode of enforcing the arbitration agreement to the effect that if a party to an
arbitration agreement commences an action the other party to the agreement, if
it desires to enforce the agreement, may seek stay of the suit before either
filing written statement or taking other steps in the proceeding.
Ordinarily the court would respect the
sanctity of contracts. A valid arbitration agreement between the parties
obliges both the parties to the agreement to act according to the terms of the
agreement. A valid arbitration agreement envisages resolution of dispute by a
forum of the choice of the parties and displaces the state courts. Ordinarily,
a party to a valid arbitration agreement is not entitled unilaterally to commit
a breach of the agreement or ignore the agreement. Now, if a party to an
arbitration agreement has a dispute to be resolved arising out of the contract
in which the arbitration agreement is Incorporated and instead of invoking the
105 arbitration agreement by inviting the parties to appoint the arbitrator it
rushes to the court in breach of the agreement and files a suit, the other
party is undoubtedly entitled to enforce the agreement. True, the other party
is equally entitled to waive the benefit of the arbitration agreement.
If the other party desires to waive the
benefit of the agreement it can appear in the suit and contact the suit.
Such conduct would demonstrably show that
both the parties have waived the benefit flowing from the arbitration agreement
of getting the dispute between them resolved by a forum of their choice. But if
the first party in breach of the agreement files a suit the other party to the
agreement must have an option and opportunity to enforce the arbitration
agreement. Section 34 prescribes a mode and method of enforcing the arbitration
agreement. When a party to the agreement has filed a suit in breach of the
agreement and the other party to the agreement is dragged to the court, by
staying the suit at the instance of the other party so dragged to the court the
first party consequently would be forced to honour the arbitration agreement.
But before the other party to the arbitration agreement is entitled to enforce
the arbitration agreement by stay of the suit it must disclose its unequivocal
intention to abide by the agreement and, therefore, s. 34 obliges such a party
to ask for stay of the proceedings before such a party takes any steps which
may unequivocally indicate the intention to waive the benefit of the
arbitration agreement. Abandonment of a right to seek resolution of dispute as
provided in the arbitration agreement must be clearly manifested by the step
taken by such party. Once such unequivocal intention is declared or abandonment
of the right to claim the benefit of the agreement becomes manifest from the
conduct, such party would then not be entitled to enforce the arbitration
agreement because there is thus a breach of the agreement by both the parties
disentitling both to claim any benefit of the arbitration agreement. Section 34
provides that a party dragged to the court as defendant by another party who is
a party to the arbitration agreement must ask for stay of the proceedings
before filling the written statement or before taking any other step in the
proceedings. That party must simultaneously show its readiness and willingness
to do all things necessary to the proper conduct of the arbitration.
The legislature by making it mandatory on the
party seeking benefit of the arbitration agreement to apply for stay of the
proceedings before filing the written statement or before taking any other
steps in the proceedings unmistakably pointed out that filing of the written
statement discloses such conduct on 106 the part of the party as would
unquestionably show that the party has abandoned its rights under the
arbitration agreement and has disclosed an unequivocal intention to accept the
forum of the court for resolution of the dispute by waiving its right to get
the dispute resolved by a forum contemplated by the arbitration agreement. When
the party files written statement to the suit it discloses its defence, enters
into a contest and invites the court to adjudicate upon the dispute. Once the
court is invited to adjudicate upon the dispute there is no question of then
enforcing an arbitration agreement by forcing the parties to resort to the
forum of their choice as set out in the arbitration agreement. This flows from
the well settled principle that the court would normally hold the parties to
the bargain (see Ramaji Dayawala & Sons (P) Ltd. v. Invest Import).(1)
Apart from filing written statement, what other step did the legislature
contemplate as being taken in the proceedings which would disentitle the party
to the suit from obtaining stay of the proceedings which would have the effect
of enforcing the arbitration agreement ? General words 'taking any other steps
in the proceedings' just follow the specific expression 'filing a written
statement' and both are used for achieving the same purpose. Therefore, the
latter general expression must be construed ejusdem generis with the specific
expression just preceding to bring out the ambit of the latter Expression
'written statement' is a term of specific connotation ordinarily signifying a
reply to the plaint filed by the plaintiff. Therefore, the expression 'written
statement' in s. 34 signifies a specific thing, namely, filing an answer on
merits to the plaint filed by the plaintiff. This specific word is followed by
general words 'taking any other steps in the proceedings'.
The principle of ejusdem generls must help in
finding out the import of the general words because it is a well established
rule in the construction of statutes that general terms following particular
ones apply to such persons or things as are ejusdem generis with these
comprehended in the language of the legislature. In Ashbury Railway Carriage
& Iran Co. v. Riche,(2) the question of construction of the object of a
Company: 'to carry on business of mechanical engineers and general
contractors', came in for consideration and 107 it was said that the generality
of the expression 'general contractors' was limited to the previous words
'mechanical engineers' on the principle of ejusdem generis. Filing of the
written statement would disentitle the party from seeking enforcement of
arbitration agreement by obtaining stay of proceedings because it is such an
act on behalf of the party entitled to enforce the arbitration agreement which
would disclose unequivocal intention of the party to give up the benefit of the
arbitration agreement and accept the method in preference to the one set out in
the arbitration agreement to the one adopted by the other party by filing the
suit and get the dispute adjudicated upon by the machinery of the court. If
this is the underlying intendment in providing that application for stay of the
proceedings must be filed before the filing of the written statement, the same
conclusion must follow when instead of filing the written statement the party
has taken some other step in the proceedings. That some other step must
indisputably be such step as would manifestly display an unequivocal intention
to proceed with the suit and to give up the right to have the matter disposed
of by arbitration.
Each and every step taken in the proceedings
cannot come in the way of the party seeking to enforce the arbitration
agreement by obtaining stay of proceedings but the step taken by the party must
be such step as would clearly and unmistakebly indicate an intention on the
part of such party to give up the benefit of arbitration agreement and to
acquiesce in the proceedings commenced against the party and to get the dispute
resolved by the court. A step taken in the suit which would disentitle the
party from obtaining stay of proceeding must be such step as would display an
unequivocal intention to proceed with the suit and to abandon the benefit of
the arbitration agreement or the right to get the dispute resolved by
arbitration.
If the step in the proceedings contemplated
by s. 34 must be such step as would clearly, unambiguously and unequivocally
disclose the intention of the party taking the step to give up the benefit of
the arbitration agreement or its right of getting the dispute resolved by
arbitration and to acquiesce in the methodology of resoluution of dispute by
court, would an appearence in the suit for contesting interlocutory
applications such as application for appointment of receiver or ex parte ad interim
injunction, mandatory or prohibitory, and contesting the same be a step which
would disclose an unequivocal intention to proceed with the suit and to give up
the benefit 108 of the arbitration agreement ? That is the controversy in the
appeal before us.
Arbitration agreement generally provides for
resolution of disputes either present or future by a forum of the choice of the
parties. Ordinarily, arbitration agreement finds its place in contracts.
Apprehending that while preforming contract some disputes may arise, care is
taken to incorporate an arbitration agreement in the contract itself
prescribing the forum for resolution of such disputes. To illustrate,
partnership contracts incorporate arbitration agreement for resolution of
disputes arising out of the contract of partnership. Building contracts these
days incorporate arbitration agreements. International commercial transactions
also incorporate arbitration agreements. The purpose underlying entering into
arbitration agreement is to provide for resolution of disputes arising from the
contract between the parties. Now, if a party to an arbitration agreement files
a suit seeking relief in respect of disputes arising from the contract the
other party to the agreement can either waive the benefit of the arbitration
agreement and acquiesce in the suit or enforce the arbitration agreement. Such
conduct has specifically to be in relation to disputes covered by arbitration
agreement.
But if a party to an arbitration agreement
files a suit and simultaneously moves an interlocutory application such as an
application for appointment of receiver, usually to be found in suits for
dissolution of partnership and rendering accounts, or for an interim injunction
to ward off a threatened or continuing breach of contract, irreparable harm
would be suffered by the other party to the arbitration agreement if it cannot
contest the interlocutory application on the pain of abandoning the benefit of
arbitration agreement. A concrete illustration would be both illuminating and
convincing. In a suit for dissolution of partnership and accounts an
application for appointment of receiver as also an application for interim
injunction restraining the defendant from using the partnership goods or assets
for continuing the business are filed. The court passes ex parte interim order
and issues notice calling upon the defendant to show cause why the same should
not be made absolute. In a running business appointment of a receiver would
thoroughly dislocate the business and an injunction would bring to standstill
the flourishing business. If the defendant appears and contests the application
for appointment of receiver as also the application for injunction, could he be
said to display an unequivocal 109 intention to give up the benefit of the
arbitration agreement and to acquiesce in the suit ? The dispute between the
parties is whether the partnership should be dissolved as per the contract of
partnership. Interim injunction application or application for appointment of
receiver have nothing to do directly or substantially with the terms of the
partnership. The main or substantial dispute will be covered by the plaint
filed in the suit. Incidental proceedings for appointment of receiver or for
interim injunction are for the protection either of the property or the
interests of the parties. Now, when ex parte orders are obtained on ex parte
averments the other party cannot be precluded from coming and pointing out that
no case is made out for granting interim reiief. It would be too cumbersome to
expect the party first to apply for stay and then invite the court under s. 41
(2) of the Act to vacate the injunction or to discharge the receiver. Giving
the expression 'taking any other steps in the proceedings' such wide
connotation as making an application for any purpose in the suit such as
vacating stay, discharge of the receiver or even modifying the interim orders
would work hardship and would be inequitous to the party who is willing to
abide by the arbitration agreement and yet be forced to suffer the inequity of
ex parte orders. Therefore, the expression 'taking any other steps in the
proceedings' must be given a narrow meaning in that the step must be taken in
the main proceeding of the suit and it must be such step as would clearly and
unambiguously manifest the intention to waive the benefit of the arbitration
agreement and to acquiesce in the proceedings. Interlocutory proceedings are
incidental to the main proceedings. They have a life till the disposal of the
main proceeding. As the suit or the proceeding is likely to take some time
before the dispute in the suit is finally adjudicated, more often interim
orders have to be made for the protection of the rights of the parties. Such
interlocutory proceedings stand independent and aloof of the main dispute
between the parties involved in the suit. They are steps taken for facilitating
the just and fair disposal of the main dispute. When these interlocutory
proceedings are contested it cannot be said that the party contesting such
proceedings has displayed an unequivocal intention to waive the benefit of the
arbitration agreement or that it has submitted to the jurisdiction of the
court. When ex parte orders are made at the back of the party the other party
is forced to come to the court to vindicate its right.
Such compulsion cannot disclose an
unambiguous intention to give up the benefit of the arbitration 110 agreement.
Therefore, taking any other steps in the proceedings must be confined to taking
steps in the proceedings for resolution of the substantial dispute in the suit.
Appearing and contesting the interlocutory applications by seeking either
vacation thereof or modification thereof cannot be said to be displaying an
unambiguous intention to acquiesce in the suit and to waive the benefit of the
arbitration agreement. Any other view would both be harsh and inequitous and
contrary to the underlying intendment of the Act. The first party which
approaches the court and seeks an ex parte interim order has obviously come to
the court in breach of the arbitration agreement. By obtaining an ex parte
order if it forces the other party to the agreement to suffer the order, or by
merely contesting be imputed the intention of waiving the benefit of
arbitration agreement, it would enjoy an undeserved advantages. Such could not
be the underlying purpose of s. 34. Therefore, in our opinion, to effectuate
the purpose underlying s. 34 the narrow construction of the expression 'taking
any other steps in the proceedings' as herein-above set out appears to advance
the object and purpose underlying s. 34 and the purpose for which the Act was
enacted.
Having examined the contention on the
language of the statute, the setting in which it is placed, the underlying
intendment and the purpose it seeks to serve, let us turn to precedents. There
is a clear cut cleavage and divergence of opinion amongst various High Courts.
Allahabad, Bombay and later decisions of Calcutta High Court, Gujarat, Madhya
Pradesh and Rajasthan High Courts have taken the view that appearing and
contesting interlocutory application is not a step taken in the proceedings so
as to disentitle the party from taking benefit of the arbitration agreement by
seeking stay of the suit. On the other hand, earlier decisions of Calcutta High
Court, Delhi and Madras High Courts have taken a contrary view.
In Bombay there has been a reference to a
practice commended to us by Mr. Sorabji, learned counsel for the respondent
that to avoid the pitfall of s. 34 even while contesting an interlocutory
application the party seeking to enforce the arbitration agreement must enter
appearance under protest. This practice not only does not commend to us, but
way back in Nuruddin 111 Abdulhussein v. Abu Ahmed Abdul Jalli,(1), Tendolkar,
J. has rejected it as one of the doubtful legal import and utility.
One must construe the section on its own
language keeping in view the purpose and object of the enactment. One cannot
add to the requirement by introducing a practice brought into vogue by
Solicitors in Bombay, when no such practice exists elsewhere in the country.
Section 34 is even invoked in rural backward areas. The highly skilful
solicitor's draftmanship cannot provide as escape route to an unwary litigent.
We are, therefore, not disposed to accept the suggestion that in order to avoid
any pitfall of being denied the benefit of arbitration agreement the party
seeking to enforce the agreement must enter an appearance under protest because
we affirm what Tendolkar, J. has said.
It reads as under:
"It appears to me therefore that the
addition of the words 'under protest' to an appearance filed in court in cases
not covered by O. 30, R.S. Civil P.C., is meaningless when neither the
jurisdiction of the Court nor the validity of the writ or service is
challenged. It is not challenged where a defendant files an appearance under
protest under the prevailing practice because he desires to apply for stay
under the Arbitration Act.
Therefore, whatever may be the reason for the
practice which has grown up, it seems to me clear that there is no obligation
on the defendant to follow this practice of doubtful import and utility and he
is at liberty to file an unconditional appearance." Before we turn to the
only decision of this Court in State of Uttar Pradesh v. Janki Saran Kailash
Chandra,(2) which at one stage was expected to resolve the controversy, we may
briefly refer to the decisions of the various High Courts to which our
attention was drawn.
We would first refer to the decisions which
take the view that appearing to contest interlocutory application either for
vacating the interim orders or modification of the same does not constitute a
(1) AIR 1950 Bom. 127.
(2) [1974] 1 S.C.R. 31.
112 step in the proceedings which would
disentitle the party to an order of stay under s. 34. In Nuruddin Abdulhussein,
(supra) learned single judge of the Bombay High Court held that the true test
for determining whether an act is a step in the proceedings is not so much the
question as to whether it is an application-although, of course, that would be
a satisfactory test in many cases-but whether the act displays an unequivocal
intention to proceed with the suit and to give up the right to have the matter
disposed of by arbitration. In reaching this conclusion the Court relied upon
Ford's Hotel Co. v. Bartlett,(1) where Lord Shand observed as under;
"...this appears to me to have been in
effect an abandonment of the proposal to have the subject of the cause disposed
of by arbitration".
The contention that when the defendant filed
an unconditional appearance, presumably having reference to the practice that
had grown up in Bombay High Court of appearance under protest. it was a step in
the proceeding as contemplated by s. 34 was negatived and stay was granted. In
Sansar Chand Deshraj, (supra) a Division Bench of the Madhya Pradesh High Court
approved the decision in Nuruddin Abdulhussein, and held that mere filing of a
reply to an application for interim relief by way of appointment of a receiver
or for issue of an injunction does not constitute a step in the proceeding
which would indicate that there is in effect abandonment of the proposal to
have the subject of cause disposed of by arbitration. It may be pointed out
here that the Division Bench decision of the Madhya Pradesh High Court which
was in terms binding on the learned Judge of the High Court, and it was
specifically submitted to us that even though the attention of the learned
judge was invited he neither referred to it nor distinguished it. Times without
number this Court has observed that considerations of judicial propriety and
decorum require that if a learned single Judge hearing a matter is inclined to
take the view contrary to the earlier decision of a Division Bench of the same
High Court, it would be judicial impropriety to ignore that decision but after
referring to the binding decision he may direct that the papers be placed
before the Chief Justice of the High Court to enable him to constitute a larger
Bench to examine the question. Judicial Comity (1) [1896] A.C. 1.
113 demands that a binding decision to which
attention has been drawn should neither be ignored nor overlooked (see
Mahadeolal Kanodia v. The Administrator General of West Bengal,(1) Shri Bhagwan
& Anr v. Ram Chand & Anr., (2) and State of Gujarat v. Ramprakash P.
Puri & Ors). (3).
In Anandkumar Parmanand Kejriwala & Anr.
v. Kamaladevi Hiralal Kejriwal,(4) a Division Bench of the Bombay High Court
approved the decision of the learned single judge in Nuruddin Abdulhussein and
observed that the test of making an application being styled as the step in the
proceedings is neither a sole test nor a conclusive test and what is such a
step in the proceedings has been settled by the decision of Tendolkar, J. The
defendant having filed appearance under protest and reserved the right to move
the Court for referring the dispute to arbitration, contested the notice of
motion taken out for appointment of receiver and injunction in both of which ex
parte order was made would not constitute a step in the proceedings as would
disentitle the defendant to an order under s.34.
In Queens College Kanetra & Anr. v. The
Collector, Varanasi & Ors.,(5) the defendant first applied for stay of
proceedings under s. 34 and after the court granted stay of proceedings
requested the court that the ex parte ad interim injunction be vacated. Two
objections were taken on behalf of the plaintiffs to this request of the
defendant. One being that when the suit is stayed the court has no jurisdiction
to deal with any part of the suit and secondly that if the application for ad
interim injunction had been contested before obtaining stay of the suit it
would have been a step in the suit and the defendant would not have been
entitled to an order for stay of the suit and, therefore, his action
constituted a step in the proceeding.
The Court negatived both the contentions and
observed that there could be no doubt that the act of the defedant to get an ex
parte order of injunction vacated does not indicate an unequivocal intention to
proceed with the suit and to give up the right to (1) [1960] 3 SCR 578.
(2) [1965] 3 S.C.R. 218 at p. 228.
(3) [1970] 2 S.C.R. 875.
(4) AIR 1970 Bom. 231.
(5) AIR 1974 All. 134.
114 have the matter disposed of by
arbitration. In reaching this conclusion the Court approved the decision of the
Madhya Pradesh High Court in Sansarchand and the decision of the Punjab High
Court in M/s. Charandas & Sons v. M/s. Harbhajan Singh Hardit Singh.(1) In
Sri Ram Shah v. Mastan Singh & Ors.,(2) a Division Bench of Allahabad High
Court approved the decision in Queens College Kanetra.
In Biswanath Rungta v. Oriential Industrial
Engineering Co. Pvt. Ltd. & Ors.,(3) a learned single Judge of the Calcutta
High Court after referring to the decision of this court in Janki Saran
Kailashchandra held that when the defendant sought to circumvent the ex parte
injunction obtained by the plaintiff he could not be said to have taken such a
step in the proceeding as would disentitle him to a relief under s. 34.
In Stata of Gujarat & Ors. v. The
Ghanshyam Salt Works.(4) a learned single Judge of the Gujarat High Court
accepted the Allahabad, Punjab and Madhya Pradesh decisions as laying down the
correct law and dissented from the view raken in the earlier Calcutta and
Madras cases. The learned judge was of the view that appearing and contesting
an interim injunction application would not constitute such a step as would
disentitle the defendant to an order under s.
34. While reaching this conclusion he
observed that the question as to interim relief is decided only on the basis of
the prima facie case and nothing is decided finally. In such a case, therefore,
to prevent a defendant from contesting the interim application on the pain of
losing his right to get the dispute decided by arbitration may, in a given
case, work injustice, and a functional approach in the matter of interpretation
of the relevant words is called for.
In Arjun Agarwalla v. Baidya Nath Roy &
Ors.,(5) a learned single Judge of Calcutta High Court did not follow the
earlier Calcutta decisions in view of the decision of this Court in Janki (1)
AIR 1952 Punj. 109.
(2) AIR 1970 All. 288.
(3) AIR 1975 Cal. 222.
(4) AIR 1979 Guj. 215.
(5) A.I.R. 1980 Cal. 354.
115 Saran's case and agreed with the decision
in Biswanaih Rungta's case.
In M/s. Bhonrilal Hiralal & Ors. v.
Prabhu Dayal & Anr.,(1) a learned single Judge of the Rajasthan High Court
after a review of large number of decisions agreed with the Allahabad, Bombay
and Madhya Pradesh and later Calcutta decisions and held that appearing to
contest an interlocutory application is not a step in the proceedings as would
disentitle the defendant to an order under s. 34.
We would now refer to the set of decisions
which take the contrary view. In Subal Chandra Bhur v. Md. Ibrahim &
Anr.(2) S.R. Das, J., after referring to Ives & Barker v.
Willans,(3) and two earlier decisions of the
Calcutta High Court concluded that in order to constitute a step in the
proceedings the act in question must be: (a) an application made to the Court
either on summons; or (b) such an act as would indicate that the party is
acquiescing in the method adopted by the other side of having the disputes
decided by the Court. The second test is beyond question invariably followed
because if the party entitled to the benefit of arbitration agreement by taking
such step in the suit indicates that it is acquiescing into the method adopted
by the other side for resolution of dispute, such party cannot at a later stage
seek to enforce the arbitration agreement by praying for stay of the suit. But
with respect, merely making some applications in the suit without examining the
purpose, object and implication of making the application would not always
constitute such step as would disentitle the party making such application from
seeking relief under s. 34 on the short ground that by merely making the
application it has either abandoned its right to enforce the arbitration
agreement by praying for stay of suit or has acquiesced into the mode adopted
by the opposite party for resolution of dispute. Every application by a party
in the suit has to be examined keeping in view the purpose and the object in
making the application and what does the conduct of the party making the
application disclose. After formulating the aforementioned test the (1) AIR
1980 Raj. 9.
(2) AIR 1943 Cal. 484.
(3) [1894] 2 Ch. 478.
116 learned judge proceeded to apply the test
to the facts before him with which we are not concerned. This decision was
followed by the same High Court in Amritraj Kothari v.
Golcha Financiers,(1) and it was observed
that it is difficult to make a distinction between filing a written statement
in suit and filing an opposition to an interlocutory application in that suit-both
of them are 'taking step in the suit'. The decision in Sansarchand Deshraj was
dissented from. It may, however be pointed out that in the later decisions in
Biswanath Rungta and Arjun Agarwalla, the same High Court after referring to
the aforementioned two decisions took the contrary view for which reliance was
placed on the decision of this Court in Janki Saran's case. The test formulated
by the Calcutta High Court in the recent decisions is that the step which would
disentitle the defendant from taking the benefit of s. 34 must be such step
unequivocally showing that the party had acquiesced in the mode of resolution
of the dispute adopted by the other side or had abandoned its right to enforce
the arbitration agreement. It was further observed that if an injunction is
obtained or a receiver is appointed or a prayer to that effect is made, any
step taken to get the order vacated or circumscribe the injunction without in
any way touching upon the main dispute in the plaint would not be such a step as
would disentitle the party from obtaining stay of the proceedings. To that
extent the earlier Calcutta view is whittled down and the later decisions have
adopted the trend of decisions in other High Courts.
The earliest decision of the Madras High Court
is P. Gannu Rao v. P. Thiagaraja Rao & Anr.(2) Examining the ambit of the
expression 'taking step in the proceedings', it was held that if something is
done by the party concerned which is in the nature of an application to the
court it will necessarily come under the category of a step in the proceedings.
After formulating this test the Court held that when ex parte interim
injunction was served upon the defendant and the defendant appears and prays
for modification of the injunction it constitutes a step in the proceedings
which would disentitle him from obtaining stay of the suit. In reaching this
conclusion the Court amongst others placed reliance on the decision of Das, J.
in Subal Chandra Bhur's case. The Madras High Court (1) A.I.R. 1966 Cal. 315.
(2) A.I.R. 1949 Mad. 582.
117 has consistently followed this view in
M/s. Bortes S.A. v. Astouic Compania Naviors S.V.,(1) & S. Ramalingam
Chettiar v. S. Sarveswaran & Ors.(2) The Delhi High Court in M/s. Dadri
Cement Co. & Anr. v. M/s. Bird & Co. Pvt. Ltd.,(3) after referring to a
large number of decisions but particularly the Madras cases and early Calcutta
cases ultimately based the decision on the facts of the case. The Court
distinguished the decision of the Madhya Pradesh High Court in Sansarchand
Deshraj's case observing that that is the decision based on the facts of that
case. The Delhi High Court has not addressed itself to the controversy under
discussion.
In Kunta Malla Reddy v. Soma SrInivas Reddy
& Ors.,(4) It was held that the expression 'steps in the proceedings' in s.
34 also comprehends step in interlocutory proceedings also. In reaching this
conclusion reliance was placed on the decisions of the Madras High Court.
A review of these precedents would
unmistakably indicate that the trend of the authorities points in the direction
of not treating every application made in the suit as a step in the proceeding
nor entering appearance with a view to contesting the petition for interim
relief such as injunction or appointment of receiver as being steps in the
proceedings. Therefore, with respect, the decisions taking the contrary view do
not commend to us.
It is at this stage that we must refer to the
decision in Janki Sarcn's case in some detail. In that case Janki Saran
Kailashchandra filed a suit against State of U.P. and Divisional Forest
Officer, Bijnor for recovery of damages alleging breach of contract. The
summons in the suit issued to the State of U.P. was served on the District
Government Counsel. On September 2, 1966, the District Government Counsel filed
an appearance slip in the Court and also put in a formal application praying
for one month's time for the purpose of filing written statement. On October 1,
1966 the District Government Counsel filed an application under s. 34 of the
Act pleading that there was an arbitration clause in the contract 118 between
parties to the suit and the State of U.P. being willing to refer the matter to
arbitration the suit should be stayed. The trial court granted the motion for
stay of suit. On appeal the High Court held that the action of the District
Government Counsel in applying for time to file the written statement amounted
to taking a step in the proceedings within the meaning of s 34 of the Act, and
set aside the order of the trial court and rejected the request for stay of
proceedings. State of U.P. approached this Court against the order of the High
Court. Rejecting the appeal this Court observed as under:
"To enable a defendant to obtain an
order staying the suit, apart from other conditions mentioned in s. 34 of the Arbitration
Act, he is required to present his application praying for stay before filing
his written statement or taking any other step in the suit proceedings. In the
present case the written statement was indisputably not filed before the
application for stay was presented. The question is whether any other step was
taken in the proceeding as contemplated by s. 34, and it is this point with
which we are directly concerned in the present case. Taking other steps in the
suit proceedings connotes the idea of doing something in aid of the progress of
the suit or submitting to the jurisdiction of the Court for the purpose of
adjudication of the merits of the controversy in the suit"' The view
herein taken not only does not run counter to the view we have taken but in
fact clearly supports the view because the pertinent observation is that taking
step in the proceeding which would disentitle a party to obtain a stay of the
suit must be doing something in aid of the progress of the suit or submitting
to the jurisdiction of the court for the purpose of adjudication of the merits
of the controversy in the suit. In other words, the step must aecessarily
manifest the intention of the party to abandon or waive its right to go to
arbitration or acquiesce in the dispute being decided by court. In fact, the
view taken in this case should have quelled the controversy but it continued to
figure in one form or the other and that is why we have dealt with the matter
in detail.
119 In this context it is advantageous to
refer to the provision contained in s. 4 of Arbitration Act, 1950, of the
United Kingdom. It provides that in order to be eligible to obtain stay of
proceedings the defendant must have taken no steps in the proceedings after
appearance. Analysing what constitutes step in the proceedings, inter alia, it
has been held that the filing of affidavits in answer to an application by the
plaintiff for appointment of receiver does not amount to taking a step in the
proceeding (see Zalinoff v. Hammond(1) referred to in Halsbury's Laws of
England, 4th End, Vol. 2, para 563 note 12). Russell on Arbitration, 19th Edn.,
page 183, under the heading "steps held not to be in the proceedings",
notes that filing affidavits in reply to plaintiff's affidavits in support of a
motion for a receiver in a partnership action is not a step in the proceedings.
There are 5-6 other situations noticed by the author which, when individually analysed,
would show that the steps taken with reference to interlocutory proceedings are
ordinarily not held as steps in the proceedings.
Having thus critically examined both on
principle and precedent the meaning to be given to the expression 'taking steps
in the proceedings,' we are clearly of the view that unless the step alleged to
have been taken by the party seeking to enforce arbitration agreement is such
as would display an unequivocal intention to proceed with the suit and
acquiesce in the method of resolution of dispute adopted by the other party,
namely, filing of the suit and thereby indicate that it has abandoned its right
under the arbitration agreement to get the dispute resolved by arbitration, any
other step would not disentitle the party from seeking relief under s. 34. It
may be clearly emphasised that contesting the application for interim
injunction or for appointment of a receiver or for interim relief by itself
without anything more would not constitute such step as would disentitle the party
to an order under s. 34 of the Act.
Reverting to the facts of this case it is
crystal clear that the defendants had taken no steps in the proceedings which
would disentitle them to a relief under s. 34. Suit was filed on June 1, 1981,
impleading two defendants, Food Corporation of India 1st defendant and Shyam
Narain Nigam, 2nd defendant, being the District Manager of the 1st defendant
Corporation. Alongwith the plaint a notice of motion was taken out for ex parte
ad interim 120 injunction. The Court issued notice on the notice of motion and
made it returnable on the next day, i.e. June 2, 1981.
When the matter was placed on Board of the
Court on June 2, 1981, the proceedings show that the District Manager, 2nd
Defendant was served and appeared through Advocate Shri N.K. Modi. Defendant 1
was shown absent with an endorsement 'the summons showing service not received
back'. Then comes what transpired on that day as disclosed in the proceedings
of the day. The same may be extracted:
"Shri Modi filed Vakalatnama on behalf
of defendant No. 2 and prayed for time for reply and arguments to the
plaintiff's application for temporary injunction. Plaintiff's counsel has no
objection. Therefore, request is accepted.
For reply arguments and awaiting service on
3rd June 1981." On June 3, 1981, an application for stay of suit was made
on behalf of the 1st defendant under s. 34. Ex facie, the proceedings did not
disclose any step having been taken by the 1st defendant in the proceedings as
would disentitle it to an order under s. 34. 2nd defendant was impleaded in his
official capacity. Assuming the application of the 2nd defendant for filing
reply to the interim injunction application also binds the 1st defendant though
it was not served with the summons yet an application seeking time to file
reply to an interim injunction application cannot be said to be a step in the
proceedings as would display an unequivocal intention to proceed with the suit
or would disclose that the defendants had acquiesced into the resolution of
dispute by the court or had abandoned the rights under the arbitration
agreement.
The learned judge also negatived the prayed
for stay for the additional reason that the 1st defendant had not complied with
another condition for relief under s. 34. The learned judge found that in the
application for stay the applicant had not stated that at the time when the
proceedings were commenced it was ready and willing to do all things necessary
to the proper conduct of the arbitration and still remains ready and willing to
do the same. The learned judge held after referring to the averments in the
application for stay that there is no averment to 121 that effect. Plaintiff
contesting the application had not raised this contention before the trial
court and the first appellate court and that becomes evident from what the
learned judge has stated in the judgment that both the courts have not taken
into account this aspect of the case at all. Obviously the learned judge ought
not to have permitted the contention while hearing a revision petition under s.
115 of the Code of Civil Procedure. But apart from this, the finding of the
learned judge is contrary to record. The application for stay was read over to
us and a copy was submitted for our perusal. In para 2 of the application it is
clearly stated that 'the defendant is ready and willing (ichhuk) for this
purpose. It appears that the original application was in Hindi. The important
word used in the application is ichhuk which, it was agreed, would mean ready
and willing. It is followed by the expression 'for this purpose' which would
imply that the 1st defendant was always ready and willing to proceed with the
arbitration when commenced and is shown to be ready and willing at the time of
applying for stay. Therefore, the 1st defendant had complied with the
requirement of his readiness and willingness to go to arbitration. Therefore,
the learned judge was clearly in error in interfering with the order of the
trial court confirmed by the 1st appellate court on this ground also.
Accordingly we hold that the learned judge of
the High Court was clearly in error in interfering with the order made by the
trial court and confirmed in appeal granting stay of the suit. The judgment of
the High Court is accordingly set aside and the one made by the trial court and
confirmed in appeal is restored with no order as to costs.
P.B.R. Appeal allowed.
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