General
Electric Company Vs. Renusagar Power Company [1987] INSC 207 (11 August 1987)
REDDY,
O. CHINNAPPA (J) REDDY, O. CHINNAPPA (J) SHETTY, K.J. (J)
CITATION:
1987 SCR (3) 858 1987 SCC (4) 137 JT 1987 (3) 277 1987 SCALE (2)257
ACT:
The
Foreign Awards (Recognition and Enforcement) Act, 1961-S. 3--Stay of
Proceedings in a Court of law while arbitration proceedings are in
progress--The expression "before filing a written statement or taking any
other step in the proceedings" should be construed in the light of the
construction put upon that expression appearing in s. 34 of the Indian
Arbitration Act, 1940.
HEADNOTE:
Section
3 of the Foreign Awards (Recognition and Enforcement) Act, 1961, which is
analogous to s. 34 of the Indian Arbitration Act, 1940, provides that, if any
party to an agreement to which Art. 1I of the convention set forth in the
Schedule thereto applies, commences any legal proceedings in any court against
any other party to the agreement in respect of any matter agreed to be referred
to arbitration in such agreement, any party to such legal proceedings may, at
any time after appearance and before filing a writ- ten statement or taking any
other step in the proceedings, apply to the court to stay the proceedings and
the court, unless satisfied that the agreement is null and void, inoperative or
incapable of being performed or that there is not, in fact, any dispute between
the parties with regard to the matter agreed to be referred, shall make an
order staying the proceedings.
The
appellant (GEC), a multi-national company, which had entered into a contract
with the respondent (Renusagar), an Indian company, regarding sale of equipment
for a thermal plant, submitted certain disputes between them for arbitration to
the International Chamber of Commerce (ICC), where- upon, the respondent filed
a suit in the Bombay High Court for a declaration that the claims were not arbitral
in terms of the contract. On an application filed by the appellant, the High
Court stayed further proceedings in the suit in terms of s. 3 of the Foreign
Awards (Recognition and Enforcement) Act, 1961. Appeals filed by the respondent
against that order were dismissed by the Division Bench of the High Court and
this Court holding that the claims were arbitrable. Meanwhile, the appellant
had filed a suit against a bank in the Calcutta High Court for enforcement of a
bank 859 guarantee given by it at the instance of the respondent, following
which, the respondent had also filed a suit--the suit from which the present
appeal arose--in the Court of Civil Judge, Mirzapur praying for a declaration
that the guarantee given by the bank stood discharged and had become
ineffective and unenforceable.
A
number of applications were filed by the appellant during the proceedings of
the suit. In application 7-C, the appellant purported to put on record its
complaint that it had not received the annexure to the plaint. In application
8-C, it prayed for rejection of the plaint and the suit under s. 20 and O.VII,
r. 11 read with s. 151 C.P.C. In application 10-C, the appellant requested the
court to call upon the respondent to furnish a complete record of the suit and
annexure. On the date fixed for filing of written statement, the appellant
filed applications 1c, 12-C and 13-C: 11-C was an application under O.VIII r. 9
and s. 151 C.P.C. seeking postponement of the striking of issues, 12-C was an
application under O.VIII, r.9 to grant leave to the appellant to file a
subsequent pleading as written statement on merits if the court rejected the
objections taken in the 'preliminary written statement'; 13-C, which was,
referred to as the 'preliminary written statement' in 11-C and 12-C, was an
application styled as "Objections by the defendant to the jurisdiction of
the Court to entertain this suit for declaration and injunction" setting
forth seven reasons in support of the objections raised, the seventh ground
asserting that the suit was liable to be stayed inter alia under s. 3 of the
Foreign Awards (Recognition and Enforcement) Act, 1961 and/or s. 34 of the
Indian Arbitration Act, 1940.
In
application 30-C, the appellant requested the court to decide the issues
regarding maintainability of the suit and the jurisdiction of the court before
proceeding with the suit. In application 65-C, the appellant reiterated that
the two issues referred to in 30-C should be heard first and decided before the
case was proceeded upon on merits. The Civil Judge rejected application 65-C
commenting that such a request was being repeatedly made. The appellant
challenged that order by a petition under Art. 227 which was dismissed by the
High Court in limine with the direction that the appellant should make a fresh
application setting out the relevant facts in the spirit of s. 3 of the Foreign
Awards (Recognition and Enforcement) Act and the Civil Judge should dispose of
the same in accordance with law. Accordingly, the appellant filed application
83-C 'praying for stay of the suit in terms of s. 3 of the said Act which was
rejected by the Civil Judge who held that the objection raised on the basis of
that provision must, in the circumstances of the case, be considered to have
been abandoned and the appellant considered to have elected to proceed with the
suit. The revision application 860 filed against that order was dismissed by
the High Court which held that the plaint as initially presented had been
completely answered by the appellant in application 13-C which was clearly in
the nature of a written statement in the case.
Allowing
the appeal and staying the suit,
HELD:
Application 13-C contained a prayer for the stay of the suit under s. 3 of the
Foreign Awards (Recognition and Enforcement) Act, 1961 and it was made before
the writ- ten statement was filed and before any step in the proceeding was
taken. Looking to the substance of the matter and ignoring technicalities, we
are firmly of the view that the defendant sought a stay of the suit before
filing a written statement or taking any other step in the suit and that he
never abandoned his right to have the suit stayed. [883A-C] (i) While s. 34 of
the Indian Arbitration Act vests in the Court the discretion to stay or not to
stay the proceedings, s. 3 of the Foreign Awards (Recognition and Enforcement)
Act vests no such discretion in the Court. Under the latter Act it is mandatory
that the proceedings should be stayed if the conditions prescribed are
fulfilled. But, whether it is a defendant who invokes the discretion of the
Court under s. 34 of the Indian Arbitration Act or whether it is a defendant who
seeks to enforce the right under s. 3 of the Foreign Awards (Recognition and
Enforcement) Act, it is necessary that he should not have disentitled himself,
from doing so either by filing a written statement or by taking any other step
in the proceedings. His application to the Court, be it under s. 34 of the
Indian Arbitration Act or s. 3 of the Foreign Awards (Recognition and
Enforcement) Act may be filed "before filing a written statement or taking
any other step in the proceedings." It is competent then only and not
thereafter. [871G-H; 872A-C] (ii) A step in the proceeding which would
disentitle the defendant from invoking s. 34 of the Arbitration Act should be a
step in aid of the progress of the suit or submission to the jurisdiction of
the court for the purpose of adjudication of the merits of the controversy in
the suit. The step must be such as to manifest the intention of the party
unequivocally to abandon the right under the arbitration agreement and instead
to opt to have the dispute resolved on merits in the suit. The step must be
such as to indicate an election or affirmation in favour of the suit in the
place of the arbitration. The election or affirmation may be by express choice
or by necessary implication by acquiescence.
The
broad and general right of a person to seek redressal of his grievance in a 861
court of law is subject to the right of the parties to have the disputes
settled by a forum of mutual choice. Neither right is in-substantial and
neither right can be allowed to be defeated by any manner of technicality. The
right to have the dispute adjudicated by a Civil Court cannot be allowed to be
defeated by vague or amorphous miscalled agreements to refer to 'arbitration'.
On the other hand, if the agreement to refer to arbitration is established, the
right to have the dispute settled by arbitration cannot be allowed to be
defeated on technical grounds. [879A-D] (iii) (a) In the present case, in
application 7-C, GEC purported to put on record their complaint that they had
not received the annexure to the plaint. By no stretch of imagination could it
possibly be said that 7-C indicated either an abandonment of arbitration or an
affirmation of the suit. 8-C was an application requesting the court to reject
the plaint and the suit for the reasons set forth in the application. One of
the grounds urged was that the Mirzapur Court had no territorial jurisdiction.
Another ground was that the plaint was insufficiently stamped. Yet another
ground was that the plaint disclosed no cause of action. Every one of the
objections was in the nature of a preliminary objection to the trial of the
suit on the merits of the dispute between the parties. Every one of the
objections was what may be called a threshold objection pleaded as a bar to any
further hearing of the suit. None of the objections invited an adjudication on
the merits of the controversy. [879E-G] (b) The expression 'merits of the
controversy in the suit' does not occur either under s. 34 of the Arbitration
Act or s. 3 of the Foreign Awards (Recognition and Enforcement) Act. The words
occur in the decision of this court in State of Uttar Pradesh v. Janki Saran
Kailash Chandra where the court said, "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 words
"adjudication of the merits of the controversy in the suit" were not
used to take in every adjudication which brought to an end the proceeding
before the court in whatever manner but were meant to cover only' such
adjudication as touched upon the real dispute between the parties which gave
rise to the action. Objections to adjudication of the disputes between the
parties, on whatever ground, are in truth not aids to the progress of the suit
but hurdles to such progress. Adjudication of such objections cannot be termed
as adjudication of the merits of the controversy in the suit. An invitation to
the court to reject a plaint or 862 dismiss a suit on a ground not touching the
merits of the controversy between the parties, but on a ground such as
insufficiency of the court fee paid, maintainability of suit, territorial
jurisdiction, etc., is really to enable the proceeding before the arbitrator to
go on and far from an election to abandon arbitration and continue the suit.
Every
threshold bar to a suit set up by a defendant is a step to allow the
arbitration to go on. It is a step in aid of arbitration and not in aid of the
progress of the suit.
In
that view, 8-C can hardly be called an invitation to the court to adjudicate
upon the merits of the controversy, when in fact it is designed to prevent the
court from touching upon the merits of the controversy. [880B-G] (c)
Applications 11-C, 12-C and 13-C have to be read together and reading them
together it is clear that the defendant raised objections to the trial of the
suit on merits, which were loosely described as 'objections to the jurisdiction
of the Court and objections to the maintain- ability of the suit' and which
were requested to be disposed of first, with a further request that if the
objections were rejected the defendant may then be allowed to file a proper
written statement on merits and issues struck thereafter.
The
invitation to the court was not to proceed with the suit but to refrain from
proceeding with the suit until the preliminary objections were first decided.
The preliminary objections were set out by the defendant in 8-C and 13-C and
they were not of such a nature as to make adjudication on merits of any part of
the real dispute between the parties necessary for deciding the preliminary
objections. While elaborating the preliminary objections, particularly in order
to explain the contention that the plaint did not disclose a cause of action,
the defendant did choose to controvert several factual averments made in the
plaint. We do not think that the circumstance that the defendant chose to deny
in his application inviting decision on his preliminary objections the
allegations of material facts made by the plaintiff in the plaint changes the
character of the applications into a written statement any more than a reply to
a notice of motion seeking an ad interim injunction acquires the character of a
written statement merely because factual allegations made in the plaint are
also dealt with in the reply. A defendant may consider it necessary to deny the
averments of fact in the plaint with a view to explain the preliminary
objections raised by him or he may deny the averments of fact by way of
abundant caution so as not to be understood as having admitted (by not denying)
the plaint averments. [881E-H; 882A-C] State of Uttar Pradesh v. Janki Saran
Kailash Chandra, [1974] 1 S.C.R. 31, referred to. 863 Food Corporation of India
v. Yadav Engineer, [1983] 1 S.C.R. 95, relied on.
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 2319 of 1986.
From
the Judgment and Order dated 7.3. 1986 of the Allahabad High Court in Revision
Petition No. 454 of 1985.
Shanti
Bhushan, S. Dastur, J.J. Bhatt, A. Dayal and K.J. John for the Appellant.
L.M.
Singhvi, Depanker Gupta, P.L.' Dubey, N.R. Khaitan, A.M. Singhvi, U.K. Khaitan,
Ajay Jain, Praveen Kumar and C. Mukhopadhya for the Respondent.
The
Judgment of the Court was delivered by CHINNAPPA REDDY, J. The appellant,
General Electric Company, a multi-national, entered into a contract with the
respondent, Renusagar Power Company Limited, an Indian Company, agreeing to
sell equipment for a Thermal Electric generating plant to be erected at
Renukoot on the terms and conditions set forth in the contract. For the
purposes of this case, it is unnecessary to set out the terms of the contract
and the details of what was envisaged to be done by the parties. It is also
unnecessary to set out the various events that took place subsequently. It is
sufficient to state that on March 2, 1982, the GEC submitted certain disputes
between the GEC and Renusagar for arbitration to the International Chambers of
Commerce. On June 11, 1982, Renusagar filed a suit in the Bombay High Court
.for a declaration that the claims purported to be referred to arbitration by
GEC to ICC were beyond the scope and purview of the arbitration agreement
contained in the contract and sought an injunction to restrain the GEC from
taking any further steps pursuant to their request for arbitration addressed to
ICC on March 2, 1982. In Renusagar's suit, GEC, on August 11, 1982 filed a
petition under s. 3 of the Foreign Awards (Recognition and Enforcement) Act,
196 1 seeking a stay of the suit. On August 19, 1982 GEC also filed a suit in
the Calcutta High Court against the United Commercial Bank to enforce a bank
guarantee given by the bank at the instance of Renusagar. On November 25, 1982,
Renusagar filed a suit No. 127 of 1982 in the Court of Civil Judge, Mirzapur
praying for a declaration that the guarantee given by the United Commercial
Bank for and on behalf of the plaintiff stood 864 discharged and had become
ineffective and unforceable and for a mandatory injunction against the GEC
directing and ordering them to settle the plaintiff's claim regarding 75 MVA
Transformers and to satisfy validly the settlement arrived at of the
plaintiff's claim as mentioned in para 12 of the plaint.
It
is useful to refer at this juncture to some of the happenings in the
proceedings in the Bombay High Court. On April 20, 1983, a learned single Judge
of the Bombay High Court dismissed the notice of motion taken out by Renusagar
for stay of the arbitration proceedings and allowed the application of GEC for
stay of further proceedings in the Bombay High Court. Appeal filed by Renusagar
to the Division Bench of the High Court was dismissed on October 21, 1983.
Further
appeals filed by Renusagar to the Supreme Court were also dismissed on August
16, 1984. The Supreme Court held that the claims of GEC were arbitral and that
the decision of the court was conclusive on that issue and would not arise
before the court of arbitration of ICC.
On
January 17, 1983, GEC filed an application (7-C) purporting to put on record
their complaint that annexure to the plaint had not been received by them. On
the same day, the Civil Judge made an order: "Copy of the plaint has been
given to the defendant (GEC) so that the defendant may file a written statement."
On the same day, the defendant GEC also filed another application (8-C)
purporting to be 'under s. 20 and Order VII r. 11 read with s. 151 of the Code
of Civil Procedure' praying that the court may be pleased to reject the plaint
and the suit. In this application, it was stated that the suit was in abuse of
the process of the court and an attempt to harass the defendants.
The
court was requested to dismiss the plaintiff's suit on that ground as also on
other grounds which were thereafter mentioned. It was stated that the defendant
did not reside and no cause of action arose within the local limits of the
jurisdiction of the court. There was a violation of the stipulation laid down
in s. 20 of the Code of Civil Procedure resulting in an abuse of the process of
the court. It should entail a dismissal of the suit. The suit had been fraudulently
instituted on insufficient court-fee and for that reason also the suit deserved
to be dismissed. The defendant then proceeded to state that they reserved the
right to take further objections as preliminary objections to the
maintainability of the suit and craved leave to add to or alter or amend the
application whenever necessary.
What
is important to be noticed here is that there was no prayer at this juncture
for a stay of the suit. On January 19, 1983, GEC filed an application (10-C)
requesting the Court to call upon Renusagar to furnish a complete record of the
suit and annexure. The Civil Judge passed an order:' "The case is called
out. Shri J.P. Singh, present for the plaintiff, Shri R.S' Dhawan, Advocate for
the defendant. 10-C by the defendant to direct the plaintiff to give copies of
complete record so that the defendant may plead preliminary objections. The
copies of papers have been given. Now the defendant may file W.S. by March 4,
1983. Put up on March 7, 1983 for issues. Preliminary objections like 7-C and
8-C can be heard and disposed of after filing of written statement when the
issues may be framed." On March 4, 1983 which was the date fixed by the Civil
Judge for the filing of a written statement by GEC, GEC filed three
applications before the Mirzapur Court: 11-C, 12-C and 13-C. 13-C was styled as
"objections by the defendant to the jurisdiction of the court to entertain
this suit for declaration and injunction." The document began with the
statement: "The Hon'ble court has no jurisdiction to entertain this suit
because of the following reasons." Seven reasons were set forth. The first
and the fourth grounds related to the territorial jurisdiction of the court.
The second ground stated that the plaint did not disclose any cause of action
and, therefore, was liable to be rejected under Order VII CPC. The third ground
stated that from the statements in the plaint, the suit was barred by
limitation. The plaint was, therefore, liable to be rejected under Order VII r.
11 D. The fifth ground was to the effect that the reliefs claimed were
untenable on their face and the suit was liable to be straightaway dismissed on
that account. The sixth ground was that the suit was liable to be stayed under
s. 10 or s. 15 1 of the CPC. The seventh ground was: "Similarly the suit
is liable to be stayed as regards the second relief claimed by the plaintiff
under s. 3 of the Arbitration (Protocol and Convention) Act, 1937 and Foreign
Awards (Recognition & Enforcement) Act, 1961 and/or s. 34 of the Indian
Arbitration Act, 1940 or under all of them". Thereafter the document
proceeded to amplify the seven grounds by detailed reference to the allegations
in the plaint and by further traversing those allegations. In regard to the
seventh ground that the suit was liable to be stayed under s. 3 of the Foreign
Awards (Recognition and Enforcement) Act, 1961, it was stated:
"The
present claim arises out of the only contract between the parties entered into
in 1964. Disputes arising out of or related to this contract have to be
settled, after being unable to resolve such disputes by, sincere negotiation by
arbitration under the rules of the International Chamber of Commerce Court of
Arbitration because of the provisions of Art.
XVIII
of the said contract. The defendant is ready and willing to have the present
dispute raised by the 866 plaintiff in this plaint to be settled by arbitration
without prejudice to the defence of want of cause of action, the bar of
limitation and all other defenses. This Hon. Court is therefore "bound to
stay the present suit under s. 3 of the Foreign Awards (Recognition and
Enforcement) Act, 1961." The final prayer made in the application (13- C)
was:
"For
the above reasons it is prayed that the plaint be either rejected for failure
to disclose the cause of action or as being barrred for limitation on the face
of it, or it be returned to be plaintiff for presentation to a proper forum.
Further, the suit is also liable to be dismissed because reliefs claimed by the
plaintiff are untenable on their face. Again, alternatively the suit is liable
to be stayed under s. 10 and/or s. 151 CPC in respect of first relief and under
s. 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 in respect
of the second relief claimed by the plaintiff in the plaint." 11-C was an
application under Order VIII Rule 9 and s.
151
CPC seeking postponement of the striking of issues from March 7, 1983 to 4th or
5th of April, 1983. In the course of the application it was recited: "That
in keeping with the time schedule fixed by this Hon'ble Court in effect, that a
written statement be filed on March 4, 1983, the defendant is filing objections
to the jurisdiction of the court to entertain this suit for declaration and
injunction to file a subsequent pleading as written statement on merits in the
event of the objections taken in the preliminary written statement dated 21st February,
1983 being rejected". The reference to the objections to the jurisdiction
of the court and the preliminary written statement dated 21st February, 1983
was obviously to 13-C which was verified at Singapore on February 21, 1983.
12-C
was an application to grant leave to the defendant to file a subsequent
pleading as written statement on merits if the court rejected the objections
taken in the preliminary written statement. This application was filed under
Order VIII Rule 9.
On
March 7, 1983, the court adjourned the case to April 5, 1983 and from time to
time thereafter. On May 31, 1983, GEC filed their written statement raising
their pleas in defence to Renusagar's suit. However, in the first paragraph it
was stated:
867
"The defendant has filed in this Hon'ble Court an application under s. 20
and Order VIII Rule 9 read with s. 15 1 CPC for rejection of the plaint with
special costs to the defendant on January 15, 1983. The defendant has also
placed on record on January 17, 3983 that a copy of the plaint was supplied
without annexure and documents and without the injunction application said to
have been filed. The defendant has filed its preliminary written statement
contesting the jurisdiction of this Hon'ble Court to try and entertain the suit
as no cause of action has arisen to the plaintiff to sue this defendant on
March 4, 1983. An appropriate application under Order VIII Rule 9 read with s.
151 CPC was also filed for leave to file subsequent pleadings as written
statement on merits in the event of the preliminary written statement and the
pleas being rejected was also filed on the same date." In the second
paragraph, it was added, "This defendant craves leave of this Hon'ble
Court to incorporate the preliminary objections taken hither to fore by this
defendant in its applications and pleadings and preliminary written statement
as if the same are set out herein extenso. " Later in paragraph 6 and 7 of
the written statement, it was stated as follows:
"6.
The plaintiff states and submits that the preliminary objections are sufficient
to dispose of the entire claim in suit on issues of law alone which go to the
root of the Jurisdiction aspect of the suit and its apparent non-
maintainability and these sought to be decided as preliminary questions of law."
"7. Without prejudice of the preliminary objections referred to
hereinabove and deemed to be incorporated herein as stated this defendant shall
now deal with the plaint para- wise and on merits ........... " The
plaintiff objected to the presentation of the writ- ten statement on the ground
that it was filed outside court hours. The plaintiff also filed an application
for postponement of the date of settlement of 868 issues. On August 4, 1983,
the defendant filed an application (19-C), requesting the court to settle the
issues on August 18, 1983 itself without further postponement. There- after the
case was adjourned from time to time. On October 19, 1983, the plaintiff filed
an application (2c) requesting the court to set the defendant ex parte as not
having filed any written statement and to decree the suit. On August 1, 1984,
the Plaintiff, Renusagar filed an application, 25-A, for amendment of the
Plaint. The amendment sought included a prayer for a decree in a sum of
Rs.62,72,272. After contest, the application for amendment was allowed on
October 15, 1984 and GEC was given time to file an additional written
statement. A few days earlier, the defendant had filed application (30-C)
requesting the court to decide the issues regarding maintainability and
jurisdiction and stating that the suit may proceed after decisions on these
issues. On this application, the court made an order on October 15, 1984 to the
effect that a similar request had earlier been rejected by the Court on January
19, 1983 and it was not therefore, open to the Court to reopen the matter.
On
November 31, 1984, GEC filed an application (34-D) seeking time to file a
written statement "if so advised" and postponement of settlement of
issues. Time was granted. On January 5, 1985, GEC filed an application (65-C)
stating that they had consistently pleaded that the issues relating to the
jurisdiction of the court and maintainability of the suit should be heard first
and reiterating that request prayed that two issues may be struck and decided
before the case was proceeded upon on merits. The two issues suggested were:
"(1)
whether the Hon'ble Court had jurisdiction to try and entertain the suit and
(2) Whether the present suit is maintainable against the defendant applicant
who neither resides nor carries on business in India." On February 2,
1985, the Mirzapur Court rejected the application, commenting that such a
request was being repeatedly made. Against the order of the Mirzapur Court
rejecting the application 65-C, GEC filed a petition under Art. 227 before the
Allahabad High Court for quashing the proceedings in the suit. In ground eight
of the petition, it was stated that GEC had already raised the plea that the
suit was liable to be stayed under s. 3 of the Foreign Awards (Recognition
& Enforcement) Act, 1961. It was also stated in ground no. twelve that the
question of arbitrarbility of the disputes had already been decided by the
Supreme Court. On April 4, 1985, the Allahabad High Court 869 dismissed the
petition in limine observing as follows:- "We have considered the matter
carefully and we are of the view that so far as the court below has not been
called upon to apply its mind to the provisions contained in s. 3 of the Act.
Shri R.S. Dhawan who appears along- with Shri V.N. Deshpande has stated at the
bar that amongst other contentions advanced before the learned Civil Judge, he
had pointedly pressed that in view of the aforesaid provisions further
proceedings in the suit should be stayed. We have no doubt that such an
argument must have advanced by him. Nonetheless, the learned Civil Judge had
not given any decision on this point. We, therefore, consider it appropriate
that the petitioner should make a fresh application setting out the relevant
facts in the spirit of s. 3 of the Act. This application should be made within
a fortnight from today. If such an application is made within the time
specified by us, the learned Civil Judge will dispose of the same on merits and
in accordance with the law. Till the learned Civil Judge disposes of this
application he shall not proceed further with the hearing of the suit. No other
order is necessary at this stage. With these observations the writ petition is
dismissed summarily." Consequent on the order of the High Court in the
application under Art. 227, GEC filed another application (83-C) before the
Mirzapur Court on April 15, 1985 expressly set- ting forth their objection
under s. 3 of the Foreign Awards (Recognition & Enforcement) Act and
praying for a stay of the suit under that provision. Reference was also made to
their earlier applications made on March 4, 1983. The contentions raised in
13-C were reiterated. This application (83C) was rejected by the learned Civil
Judge, Mirzapur by an order dated July 9, 1985. The learned Civil Judge took
the view that the objection raised on the basis of s. 3 of the Foreign Awards
Act must, in the circumstances of the case, be considered to have been
abandoned and the defendant considered to have elected to proceed with the
suit. The revision application referred by GEC to the High Court of Allahabad
against the order dated July 9, 1985 was dismissed by the High Court on March
7, 1986.
The
High Court referred to the contents of 13-C in great detail and concluded,
"The plaint as initially presented appears to have been completely
answered by the General Electric Company in its application 13-C which it may
be remembered was also verified as a pleading, because in the written statement
16-Ka which was undoubtedly filed on May 31, 1983, no further facts are
referred to ............ 13-C is clearly in nature a written statement in the
case, raising such pleas which constitute the defence of the General Electric
Company to the case set-up in plaint as it stood then". The High Court
also observed that it was apparent to them that the emphasis in 13-C was on the
other objections and not on the objections under sec. 3 of the Foreign Awards
Act. The High Court also rejected the further contentions advanced on behalf of
the General Electric Company that a fresh right to make an application under
sec. 3 of the Foreign Awards (Recognition & Enforcement) Act accrued on the
plaint being amended by Renusagar. Stay of the Suit was, therefore, refused.
General Electric Company has preferred the present appeal against the judgment
of the High Court of Allahabad under Art. 136 of the Constitution.
Shri
Shanti Bhushan, on behalf of the appellant General Electric Company and Dr.
L.M. Singhvi, on behalf of Renusagar addressed elaborate arguments covering
indeed a wide range of facts and law. They also cited before us a host of cases
Indian, English and Canadian. We do not propose to examine the several side
issues and non-issues which have argued before us. We propose to confine
ourselves to the basic questions which were argued before us namely, (a)
whether either 8-C or 13-C could be considered to be a step in the suit so as
to disentitle the defendant from seeking a stay of the suit under sec. 3 of the
Foreign Awards (Recognition & Enforcement) Act, (b) whether 13-C was in the
nature of a written statement, the filing of which precluded the defendant from
seeking a stay and (c) whether the defendant could be said to have abandoned
the right to seek a stay in the circumstances of the case.
The
Foreign Awards (Recognition & Enforcement) Act was enacted 'to enable
effect to be given to the Convention on the Recognition & Enforcement of
Foreign Arbitral Awards done at New York, on the that day of June, 1958, to
which India is a party and for purposes connected therewith'. The Convention is
set-forth in the Schedule to the Act and s.
4(i)
of the Act provides that a foreign award shall, subject to the provisions of
the Act, be enforceable in India as if it were an award made on a matter
referred to arbitration in India. Except s. 3, we are not concerned with the
remaining provisions of the Act. Section 3 is as follows:
"Stay
of proceedings in respect of matters to be refer- 871 red to
arbitration:-Notwithstanding anything contained in the Arbitration Act, 1940,
or in the Code of Civil Procedure, 1908, if any party to an agreement to which
Article II of the Convention set forth in the Schedule applies, or any person
claiming through or under him commences any legal proceedings in any Court
against any other party to the agreement or any person claiming through or
under him in respect of any matter agreed to be referred to arbitration in such
agreement, any party to such legal proceedings may, at any time after
appearance and before filing a written statement or taking any other step in
the proceedings, apply to the Court to stay the proceedings and the Court,
unless satisfied that the agreement is null and void, inoperative or incapable
of being performed or that there is not, in fact, any dispute between the
parties with regard to the matter agreed to be referred, shall make an order
staying the proceedings." Section 3 of the Foreign Awards (Recogni- tion
& Enforcement) Act is analogous to s. 34 of the Indian Arbitration Act
which is as follows:- "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." It may be
straightaway noticed that while s. 34 of the Indian Arbitration Act vests in
the Court the discretion to stay or not to stay the proceedings, s. 3 of the
Foreign Awards (Recognition & Enforcement) Act vests no such discretion in
the Court. Under the Foreign Awards (Recognition & Enforcement) Act it is
mandatory that the proceedings could be stayed if the conditions prescribed are
fulfilled. But, whether it is a defendant who invokes the discretion of the
Court 872 under s. 34 of the Indian Arbitration Act or whether it is a
defendant who seeks to enforce the right under s. 3 of the Foreign Awards (Recognition
& Enforcement) Act, it is necessary that he should not have disentitled
himself, from doing so either by filing a written statement or by taking any
other step in the proceedings. His application to the Court, be it under s. 34
of the Indian Arbitration Act. or s. 3 of the Foreign Awards (Recognition &
Enforcement) Act may be filed "before filing a written statement or taking
any other step in the proceedings." It is competent then only and not
thereafter. The question is when may a written statement said to have been
filed or when may any other step said to have been taken in the proceedings? On
the question of the meaning of the expression 'step in the proceedings', on the
question of the proper approach to the solution of the problem and on allied questions,
we were referred by the learned counsel for GEC and Renusagar to decisions of
the *English Courts, decisions of the **Canadian Courts and ***passages from
textbooks. We do not propose to refer to them in our judgment--not because we
do not find them instructive; indeed we read them carefully and found them
helpful, but because we think that reference to such persuasive authority is
justified only if there is no guidance from binding authority. The time has
perhaps ar- rived to discourage uninhibited reference to and extravagant use of
foreign precedents, though indeed we welcome such precedents when they explore
virgin territory and expand the horizons of legal thought. The setting of a
foreign judgment is the foreign country's past and present history, its
economic relations, its social relations, its trade and commerce, its
traditions, its values, its needs, the stages of the development of its people,
its legal * 1. Ford's Hotel Company Ltd. v. Bartlett (1896(I) AC 1)
2.
Ochs v. Ochs Brothers ( 1909 (II) Ch. Dvn. 121)
3.
Parker, Gaines & Co. v. Turpin ( 1918 (I) KB 358)
4.
Henry v. Geopresco International Ltd. ( 1975 (2) All Eng. LR 702)
5.
Tracomin SA v. Sudan Oil Seeds ( 1983 (I) All Eng. LR 404)
6.
In re. The Tuyuti (1984 (2) All Eng. LR 545) **1. Raymond v. Adrema Ltd. (37
DLR (2d) 9)
2.
Fathers of Confederation Bldgs. Trust v. Pigott Construction Company Limited 44
DLR (3d) 265) * * * 1. Russell on Arbitration (20th Edition) 2. Commercial
Arbitration by Mustil & Boyd.
873
ideology, its constitutional direction and strategies and its statutes and
precedents. Foreign precedents are to be read and remembered in their setting,
out never to be elevated to the level of binding precedents and, therefore, to
be avoided from frequent and needless question.
Section
34 of the Indian Arbitration Act has received the consideration of the Supreme
Court in State of U.P .v. Janki Saran Kailash Chander, [1974 (I) SCR 31] and
Food Corporation of India v. Yadav Engineer, [1983 (I) SCR 95].
In
State of Uttar Pradesh v. Janki Saran Kailash Chandra (supra), the facts were
that the summons in a suit instituted against the State of Uttar Pradesh were
served on the District Government Counsel. On September 2, 1966, the District
Government Counsel entered his appearance in the suit and also filed a formal
application praying for a month's time for filing a written statement. Time was
granted as prayed for. On October 1, 1966, the District Government Counsel
filed an application under s. 34 of the Arbitration Act pleading that there was
an arbitration clause in the agreement between the parties, that the State was
willing to have the matter referred to arbitration and that the suit should
therefore, be stayed. The Trial Court stayed the suit. But, on appeal, the High
Court took the view that the application for time for filing the written
statement was a step in the proceedings within the meaning of that expression
in s. 34 of the Arbitration Act and the defendant was therefore, disentitled to
claim that the suit should be stayed. The Supreme Court affirmed the decisions
of the High Court observing, "In our view there is no serious infirmity in
the impugned judgment of the High Court and we are unable to find any cogent
ground for interfering under Art. 136 of the Constitution." The Court then
proceeded to discuss the scope and meaning of s. 34 of the Arbitration Act and went
on to observe:
"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 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 874 proceedings connotes the idea of doing some- thing 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."
Thereafter, the Court also noticed that the State had taken benefit of the
appearance of the District Standing Counsel and his successful prayer for
adjournment of the case by one month for the purpose of filing the written
statement. Dealing with the question whether the High Court had interfered with
the discretion of the Trial Court, it was observed, "If the appellants'
application was for adjournment for the purpose of filing a written statement,
then there is no question of any exercise of the discretion by the Trial Court.
Discretion
with regard to stay under s. 34 of the Arbitration Act is to be exercised only
when an application under that Section is otherwise competent. Incidentally it
is worth noting that even the order of the trial Court is not included by the
appellant in the paper book and we do not know the reasoning of that Court for
granting stay. But on the view that we have taken that omission is of little
consequence." The Court then added, "Keeping in view the long delay
after the institution of the suit and the fact that the suit is for a very
heavy amount by way of damages for breach of contract, it will, in our opinion,
be more satisfactory on the whole to have the suit tried in a competent court
of law in the normal course rather than by a lay arbitrator who is not bound
either by the law of evidence or by the law of procedure." In Food
Corporation of India ,.Yadav Engineer (supra) the question arose whether the
appearance of the defendant and his prayer for time to reply to the notice of
motion taken out by the plaintiff for an interim injunction could be said to
amount to a step in the proceeding so as to disentitle the defendant from
seeking a stay of the proceeding under sec. 34 of the Arbitration Act. First
interpreting sec. 34 without the aid of authority, Desai, J. speaking for the
court, observed that if a party to an arbitration agreement sought to enforce
the agreement by seeking a stay of the suit, he was obliged to disclose his
unequivocal intention to abide by the agreement by asking for stay 875 before
taking any step which may unequivocally indicate otherwise, that is, a step
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 fight 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 filing 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 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 defense, 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, [ 1981] (I) SCR 399."
Posing next the question what other steps the legislature contemplated as
disentitling a party from obtaining stay of the proceedings, the 876 learned
Judges applied the principle of ejusdem generis and held:
"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 en- force the
arbitration agreement by obtaining stay of proceedings but the step taken by
the party must be such step as would clearly and unmistakably 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." The learned judges then proceeded to consider
the question whether an appearance in the suit to contest an interlocutory
application, such as, an application for appointment of receiver or ex parte ad
interim injunction, disclosed an unequivocal intention to proceed with the suit
and give up in the benefit of the arbitration agreement. The question was
answered as follows:
"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 relief. 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. There- fore, 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 proceedings
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 par- ties. 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 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 iniquitous 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 advantage. 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 hereinabove set out appears to ad- vance
the 878 object and purpose underlying s. 34 and the purpose for which the Act
was enacted." The court then referred to various decisions on the question.
Thereafter the case of State of U. P. v. Jankisaran Kailashchandra, (supra) was
discussed in detail. After quoting from the judgment of Justice Dua, the court
ob- served:
"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
necessarily 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." The Court finally concluded the discussion as
follows:
"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 in 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.
'
' 879 Thus we see that it is the view of this court that a step in the
proceeding which would disentitle the defendant from invoking sec. 34 of the
Arbitration Act should be a step in aid of the progress of the suit or
submission to the jurisdiction of the court for the purpose of adjudication of
the merits of the controversy in the suit. The step must be such as to manifest
the intention of the party unequivocally to abandon the right under the
arbitration agreement and in- stead to opt to have the dispute resolved on
merits in the suit. The step must be such as to indicate an election or
affirmation in favour of the suit in the place of the arbitration. The election
or affirmation may be by express choice or by necessary implication by
acquiescence. The broad and general right of a person to seek redressed of his
grievances in a court of law is subject to the right of the parties to have the
disputes settled by a forum of mutual choice. Neither right is insubstantial
and neither right can be allowed to be defeated by any manner of technicality.
The right to have the dispute adjudicated by a civil court cannot be allowed to
be defeated by vague or amorphous miscalled agreements to refer to
'arbitration'. On the other hand, if the agreement to refer to arbitration is
established, the right to have the dispute settled by arbitration cannot be
allowed to be defeated on technical grounds.
What
do we have in the present case? We mentioned at the outset that GEC filed two
applications on January 17, 1983, 7-C and 8-C. In 7-C, GEC purported to put on
record their complaint that they had not received the annexure to the plaint.
By no stretch of imagination could it possibly be paid that 7-C indicated
either an abandonment of arbitration or an affirmation of the suit. 8-C was an
application requesting the court to reject the plaint and the suit for the
reasons set forth in the application. One of the grounds urged was that the
Mirzapur Court had no territorial jurisdiction. Another ground was that the
plaint was insufficiently stamped. Yet another ground was that the plaint
disclosed no cause of action. Every one of the objections was in the nature of
a preliminary objection to the trial of the suit on the merits of the dispute
between the parties.
Every
one of the objections was what may be called a thresh- old objection pleaded as
a bar to any further hearing of the suit. None of the objections invited an
adjudication on the merits of the controversy. It was said that the return of a
plaint under Order VII r. 10 and the rejection of a plaint under Order VII r.
11 put an end to the controversy so far as the court where the proceedings had
been instituted and that the rejection of a plaint under Order VII r. 11 was a
decree within the definition of that expression in Order II r. 2 of the Civil
Procedure Code. It was argued that the rejection of a plaint for non-disclosure
of a cause of action was also an 880 adjudication of the merits of the
controversy in the suit and reliance was placed on decisions under the
Representation of People Act. We do not think that we can accept the argument
nor are we able to derive any assistance from the cases cited. In the first
place, the expression 'merits of the controversy in the suit' does not occur
either under sec. 34 of the Arbitration Act or sec. 3 of the Foreign Awards
(Recognition and Enforcement) Act. The words occur in the decision of this
court in State of U.P .v. Janki Saran Kailash Chandra (supra) where the court
said, "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." As often enough pointed out by us, words and
expressions used in a judgment are not to be construed in the same manner as
statutes or as words and expressions defined in statutes. We do not have any
doubt that when the words "adjudication of the merits of the controversy
in the suit" were used by this court in State of U.P .v. Janki Saran Kailash
Chandra (supra), the words were not used to take in every adjudication which
brought to an end the proceeding before the court in whatever manner but were meant
to cover only such adjudication touched upon the real dispute between the
parties which gave rise to the action. Objections to adjudication of the
disputes between the parties, on whatever ground, are in truth not aids to the
progress of the suit but hurdles to such progress. Adjudication of such
objections cannot be termed as adjudication of the merits of the controversy in
the suit. As we said earlier, a broad view has to be taken of the principles
involved and narrow and technical interpretation which tends to defeat the
object of the legislation must be avoided. We are of the view that an
invitation to the court to reject a plaint or dismiss a suit on a ground not
touching the merits of the controversy between the parties, but a ground such
as insufficiency of the court fee paid, maintainability of suit, territorial
jurisdiction etc. is really to enable the proceeding before the arbitrator to
go on and far from an election to abandon arbitration and continue the suit.
Every threshold bar to a suit set up by a defendant is a step to allow the
arbitration to go on.
It
is a step in aid of arbitration and not in aid of the progress of the suit. In
that view, we think that 8-C can hardly be called an invitation to the court to
adjudicate upon the merits of the controversy, when in fact it is designed to
prevent the court from touching upon the merits of the controversy.
The
next set of events relied upon by the plaintiff to deny the defendant's right
to obtain stay in the filing by GEC of the applications 1c, 12-C and 13-C in
the Mirzapur Court on March 4, 1983.4th 881 March and 7th March were the dates
which had been fixed by the Court for filing the written statement and for the
striking of the issues. The defendant, on March 4, instead of filing the
written statement, filed 11-C, 12-C and 13-C.
13-C,
as already mentioned, was styled "objections by the defendant to the
jurisdiction of the Court to entertain a suit for declaration and
injunction". It began with the statement, "the Hon'ble Court has no
jurisdiction to entertain the suit for the following reasons" and ended
with the prayer:
"for
the above reasons it is prayed that the plaint may be either rejected for
failure to disclose a cause of action or as being barred by limitation on the
face of it, or it be returned to the plaintiff for presentation to a proper
forum. Further the suit is also liable to be dismissed because reliefs claimed
by the plaintiff are untenable on their face, Again, alternatively the suit is
liable to be stayed under s. 10 and/ or s. 151 CPC in respect of first relief
and s. 3 of the Foreign Awards (Recognition & Enforcement) Act 196 1 in
respect of second relief claimed by the plaintiff in the suit." 11-C was
an application seeking postponement of the striking of the issues from March 7
to a later date in the event of the preliminary objections being rejected. 12-C
was an application to grant leave to file a subsequent pleading as written
statement in the event of the preliminary objections being rejected. Obviously
ll-C, 12-C and 13-C have to be read together and reading them together, it
appears to us to be clear that the defendant raised objections to the trial of
the suit on merits, which were loosely described as 'objections to the
jurisdiction of the Court and objections to the maintainability of the suit'
and which were requested to be disposed of first, with a further request that
if the objections-were rejected the defendant may then be allowed to file a
proper written statement on merits and issues struck thereafter. The invitation
to the Court was not to proceed with the suit but to refrain from proceeding
with the suit until the preliminary objections were first decided. The
preliminary objections were set out by the defendant in 8-C and 13-C and we
have set them out earlier while narrating the facts. We notice that the
preliminary objections raised were not of such a nature as to make adjudication
on merits of any part of the real dispute between the parties necessary for
deciding the preliminary objections.
While
elaborating the preliminary objections, particularly in order to explain the
contention that the plaint did not disclose a cause of action, the defendant
did choose to controvert several factual averments made in the plaint. We do
not think that the 882 circumstances that the defendant chose to deny in his
application inviting decision on his preliminary objections, the allegations of
material facts made by the plaintiff in the plaint changes the character of the
applications into a written statement any more than a reply to a notice of
motion seeking an ad interim injunction acquires the character of a written statement
merely because factual allegations made in the plaint are also dealt with in
the reply. A defendant may consider it necessary to deny the averments of the
fact in the plaint with a view to explain the preliminary objections raised by
him or he may deny the averments of fact by way of abundant caution so as not
to be under- stood as having admitted (by not denying) the plaint averments.
In
such a situation, the question to be considered is did the defendant intend it
to be a written statement or was the document capable of being construed as
setting out unreservedly the case which the defendant wished to put forward?
Was it meant to answer the plaint? We do not think either 8-C or 13-C is
capable of being so construed. Neither the title of the documents nor the
prayer in the documents would justify their being dubbed as written statements.
We have referred to their contents and we do not think it possible to view 8-C
or 13-C as meant to answer the plaint.
They
were objections and not answer to the Plaint. We are unable to hold that either
of them can be treated as a written statement. It is of interest to note here
that the plaintiff himself filed an application 21-C requesting the court to
set the defendant ex parte on the ground that he did not file any written
statement. Obviously the plaintiff never considered 13-C to be a written
statement. We are also unable to hold that either of them can be said to be a
step in the proceeding. We have already explained why 8-C cannot be treated as
a step in the proceeding. The same reasons apply to 13-C also. 13-C invited the
court to consider the preliminary an objection amongst which was a prayer to
stay the suit under s. 3 of the Foreign Awards (Recognition & Enforcement)
Act. An invitation to the court to decide the preliminary objections was in
fact a request to the court not to proceed with the trial of the suit on
merits. We are unable to hold that 13-C was an invitation to the court to
adjudicate upon the merits of the controversy, when in fact as we said in the
case of 8-C, it was designed to prevent the court from touching upon the merits
of the controversy.
It
was argued that the defendant himself sought permission for filing additional
pleadings if preliminary objections were rejected and, therefore, the defendant
himself thought that 13-C was a pleading, namely, a written statement. Our
attention was also invited to the written statement filed on May 31, 1983 in
which the preliminary objections filed earlier were referred to as preliminary
883 written Statement. We do not think we will be justified in harping upon a
word here or a word there. As we said earlier, we propose to look at the
substance of the matter and ignore the chaff. Looking to the sub Stance of the
matter, we find that before May 31, 1983, that is, the date on which the
written statement was filed, the defendant did not take any step in the suit.
The applications filed by him were not in aid of the progress of the suit, but
to request the court to refrain from proceeding with the suit. 13-C contained a
prayer for the stay of the suit under s. 3 of the Foreign Awards (Recognition
& Enforcement) Act and we hold that, in terms of that provision, it was
made before the written statement was filed and before any step in the
proceeding was taken.
An
argument which was pressed before us was that the conduct of the defendant was
such that he must be considered to have abandoned his right to have the suit
stayed under s. 3 of the Foreign Awards (Recognition & Enforcement) Act. We
do not think there is any substance in the submission. On the one hand, we have
the outstanding circumstances that the defendant was proceedings with the
arbitration. On the other hand, we have also the circumstance that the
defendant filed 13-C one of the prayers of which was a stay of the suit under
s. 3 of the Act. The argument was that the defendant did not press his
application and did not seek the orders of the court on 13-C. This would not be
a correct picture of the events since we find that even on January 19, 1983,
the court made an order that preliminary objections like 7-C and 8-C could be
heard and disposed of after filing of written statement when the issues may be
framed. We also find that at every stage the defendant kept referring to his
preliminary objections and never for a moment abandoned them. 30-C was another
application filed by him requesting the court to decide the preliminary
objections regarding jurisdiction and maintainability of the suit. On this the
order was that it was not competent for the court to reopen the order dated
January 19, 1983. It was therefore, not the defendant's fault that the
preliminary objections were not decided.
Later
again the defendant filed 34-C requesting the court to frame preliminary issues
and try them on the question of the jurisdiction of the court and the
maintainability of the suit. This application was also rejected by the court
with the comment that the request was being repeatedly made. It was against
this order that the defendant went to the High Court with the application 65-C.
The High Court directed the defendant to file an application for the trial
court specially requesting that court to apply its mind to the provisions of s.
3 of the Foreign Awards (Recognition & Enforcement) Act and pointedly
pressing the contention relating to that the provisions. Pursuant to this
direction, the defendant filed 83-C 884 before the trial court and it is on the
orders made on this application that the present appeal has come before us. The
submission of the learned counsel for the plaintiff was that the appeal before
us arose directly from the order made on the application 83-C not on the
application 13-C. According to the learned counsel, 13-C must be considered to
have been given up and since 83-C was filed long after the filing of the
written statement, it was incompetent. We are unable to agree. 13-C was never
abandoned by the defendant. On the other hand 83-C also expressly refers to
13-C. 83-C is a reiteration and revival of 13-C with emphasis on the objection
relating to s. 3 of the Foreign Awards (Recognition & Enforcement) Act.
Looking
to the substance of the matter and ignoring technicalities, we are firmly of
the view that the defendant sought a stay of the suit before filing a written
statement or taking any other step in the suit and that he never abandoned his
right to have the suit stayed. The appeals, therefore allowed with costs and
the suit No. 127 of 1982 in the court of Mirzapur stayed under s. 3 of the
Foreign Awards (Recognition & Enforcement) Act. In the view that we have
taken we do not think it necessary to consider the further question raised by
the learned counsel for the appellant that the amendment of the plaint
introducing a substantially new cause of action gave the defendant a fresh
right under s. 3 of the Foreign Awards Act.
H.L.C.
Appeal allowed.
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