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The National Small Industries Corporation Ltd. Vs. R. Siegward and Sohn and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberOriginal Suit Appeal No. 397 of 1967
Judge
Reported inILR1970Delhi632
ActsArbitration Act, 1940 - Sections 34
AppellantThe National Small Industries Corporation Ltd.
RespondentR. Siegward and Sohn and ors.
Advocates: J.P. Chopra,; P.S. Sharma,; A.C. Gulati and;
Excerpt:
arbitration act (1940) - section 34-application under, for stay of suit pre-requisites for -- steps in proceedings-when disentitle applicant from moving application - acquiescence in jurisdiction of court-effect of. ; where summons carrying with them a copy of the plaint were received by defendant no. 1 on 27-9-66, and appearance was put on his behalf on several hearings, when ultimately on 21-7-69 the case was adjourned to 11th august, 1969 after defendant no. 4 had filed his written statement, for filing of the written statement by defendant no. 1 and later on defendant made an application under section 34 of the indian arbitration act for stay of the suit: held, that there has been a clear acquiescence in the jurisdiction of the court on the part of defendant no. 1. the defendant no......orderv, rules 1 and 5 of the code of civil procedure)'(8) the summons is addressed to the defendant no. 1 and-starts by saying as under : 'whereasplaintiff has instituted a suit against you for recovery of rs. 1,72,070.00 vide plaint copy attached herewith, you are hereby summoned to appear in this court inperson or by pleader duly instructed, and able to answer all material questions relating to the suit, or who shall be accompanied by some other person able to answer all such questions, on the 1st day of november, 1966 at 10 o'clock in the forenoon to answer the claim, and you are directed to produce on that day all the documents upon which you intend to rely in support of your defense. take notice that in default of your appearance on the day before-mentioned the suit will be heard and.....
Judgment:
ORDER

V, Rules 1 and 5 of the Code of Civil Procedure)'

(8) The summons is addressed to the defendant No. 1 and-starts by saying as under :

'WHEREASplaintiff has instituted a suit against you for recovery of Rs. 1,72,070.00 vide plaint copy attached herewith, you are hereby summoned to appear in this Court inperson or by pleader duly instructed, and able to answer all material questions relating to the suit, or who shall be accompanied by some other person able to answer all such questions, on the 1st day of November, 1966 at 10 O'clock in the forenoon to answer the claim, and you are directed to produce on that day all the documents upon which you intend to rely in support of your defense. Take notice that in default of your appearance on the day before-mentioned the suit will be heard and determined in your absence.'

(9) As the entire language of the process issued has been purpose fully reproduced above, it becomes clear that :

(A)a copy of the plaint was attached with the summons. (b) the defendant was summoned to appear in the court in person or by a pleader duly instructed in order to answer all material questions. (c) he was to appear on the 1st day of November, 1966, at 10 O'clock in the forenoon to answer the claim. (d) the defendant was clearly directed on that day to produce all the documents on which he intended to rely in support of his defense. (e) the defendant was notified that in case of default of appearance the entire suit was liable to be heard and determined in his absence.

(10) The clear warning contained in clause (e) above would make any ordinary person understand that in default of his compliance with the process, the suit may even be decreed on the date for which the defendant had been called to court. The said summons bears an endorsement which is to the following effect :

'RECEIVEDone summons'

(11) The receipt is signed on the 27th September. It does nto state the year but obviously the year could nto be other than the year 1966 because the summons purports to be issued on the 2nd September, 1966. It is extremely note-worthy that the process issued on the 22nd September, 1966 to the defendant abroad through registered post was received so expeditiously as on 27th September, 1966. I must notice here that the receipt of the summons, as the endorsement shows, does nto mention the receipt of the plaint. Be that as it may, there never has been any grievance that the plaint was nto received with that summons. In any case, there is no allegation contained in the application made under section 34 that the plaint was nto received with the original summons. Adverting once again to the application under section 34, paragraph 3 states that till the 29th July, 1969, there was no change of the attorney acting on behalf of defendant No. 1 who earlier than that date were M/s. Anand Das Gupta and Sagar, Solicitors and Advocates duly instructed by defendant No. 1 to act for them. It is also alleged in para 3 of the application that the for mer transferred to the latter attorneys the file containing the relevant documents and then comes a detailed sentence which is to the following effect :

'INas much as the copy of the plaint was misplaced, on August 11, 1969, the Solicitors acting on behalf of defendant No. 1, i. e., Messrs. B. C. Das Gupta & Sagar requested Ms. Anand Dasgupta & Sagar to send them a copy of the plaint.'

(12) A copy of the letter addressed to M/s. Anand Dasgupta and Sagar is annexed herewith as annexure 'A'.

(13) A reference to the letter described as annexure A shows its date as 11th August, 1969. In the very first sentence there occurs a demand which it will be appropriate to notice and that is to the following effect:

'WEthank you for your letter No. A. D/346 of August 6, 1969 along with the file relating to the above matter, but note, however, that the copy of the plaint which was in the file is nto available in it.'

(14) It was after making that statement that the request was made for sending along the copy of the plaint. All this clearly establishes that the plaint had all the while been with defendant No. 1 and I have no hesitation, whatsoever, in holding that the plaint was received by defendant No. .1 on the 27th September, 1966.

(15) As is visible from the summons issued and as is the demand of rule 1 of Order V of the Civil Procedure Code ., it was defendant No. 1 who was to be immediately acquainted with the allegations made in the plaint and it was for him to prepare his defense for the 1st November, 1966. In that situation, I am inclined to hold that defendant No. 1 should have before 1st November, 1969, imagined out very properly as to whether any arbitration clause was available to him which could be set up as a defense to silence the proceedings in the suit. The situation, however, is very unfortunate and that is this that there was continuous appearance on behalf of defendant No. 1 on the following dates and even then no written statement was filed. It is apparent from the record presently available. Before I detail the dates of the available orders, I may say that defendant No. 1 may have appeared in 1966 or 1967 on some preceding dates but the available record shows that the first date on which appearance was put in on behalf of defendant No. 1 was 1st September, 1967. Then, these are the following dates on which appearance was put in on behalf of defendant No. 1:

3RDOctober, 1967; 21st November, 1967; 19th December, 1967; 27th February, 1968; 21st March, 1968; 3rd April, 1968; 15th July, 1968; 9th September. 1968; 10th October, 1968; 18th October, 1968; 4th February 1969; 6th March, 1969; 11th March, 1969; 17th March, 1969; 8th May, 1969; 21st July 1969 and 11th August, 1969.

(16) The application under section 34 of the Indian Arbitration Act is dated 21st August, 1969. It could be said in a hurry that with this picture available on the order sheet there is no justification for the application under section 34 but I am in no such hurry and propose to deal with utmost patience with the points raised during the course of arguments by both the sides. Even then I may mention straightway here that the written statement was filed on behalf of defendant No. 4 on the 21st July, 1969 when the following order was made in the presence of the counsel for defendant No. 1 :

'WRITTEN statements on behalf of defendants Nos. 1, 2, and 3 to be filed on or before 11th August, 1969, peremptory.'

(17) I cannto but hold that defendant No. 1 took time 21st July, 1969 to file the written statement on 11th August, 1969. l am bound to hold as above because no protest, whatsoever was made on behalf of defendant No. 1 that no written statement should be ordered to be filed on his behalf because there existed an arbitration agreement between him and the plaintiff which he will be seeking to invoke. I cannto appreciate why from the 1st September, 1967 to the 21st July, 1969, the defendant No. 1 abroad and the efficient attorneys functioning on his behalf in India slept willfully over the alleged arbitration agreement. In any case, there is no justification for holding otherwise than this that on the 21st July, 1969 clearly an opportunity was sought by defendant No. 1 to file the written statement on 11th August, 1969. If a reference in this behalf is made to annexure 'A' which is the letter dated August 11, 1969 and which is relied upon by defendant No. 1 for the purpose of the instant application under section 34 of the Arbitration Act, then, it becomes plainly clear that a request had been made before that letter was written for gaining time for filing written statement and the counsel for defendant No. I asked his former solicitors to send the copy of the plaint so that the counsel representing defendant No. 1 on 21st July, 1969 and onwards could be enabled to take further steps in the case. The letter also says that the Court had taken serious view of the delay and thereforee the request contained was to the effect that the copy of the plaint be made available at the earliest. No pardon, by any stretch of imagination, can be extended to the actions performed by the defendant No. 1 in completely ignoring the agreement to refer to arbitration which is none pleaded and which has all along existed. The consequence of the facts which are being noticed, however, is this that I am inclined to emphasize the finding recorded above that on the 21st July, 1969 there certainly was an oral request by the counsel appearing for defendant No. 1 for time to be given for filing written statement. That written statement was nto filed on that day but even then on that very day the letter copy of which has been filed as annexure 'A' with the application was admittedly sent by the present lawyers of defendant No. 1 to the former solicitors.

(18) The learned counsel appearing for defendant No. 1 stated that he has, in any case, a right to make the application and seek the relief which may be available to him.. A preliminary objection was raised by the learned counsel for the plaintiff that the application under section 34 of the Arbitration Act be thrown out on the ground that defendant No. 1 having been proceeded against ex part he had lost the right to join the proceedings with an application under section 34 in his hand so as to seek any relief whatsoever.

(19) I have heard Mr. Gulati the learned counsel for defendant No. I but it is mostly on account of the view taken by me at the outset that I hold that such a bar did nto arise at all and the defendant No. 1 could prefer the present application. A mere reading of the statutory provisions contained in section 34 of the Arbitration Act is enough to support me in my observation that even a defendant against whom an order is recorded that the proceedings will be ex parte qus. him does nto loose the right to present the application under section 34 which action he will be performing nto under the provisions of Civil Procedure Code but in terms of the rights conferred statutorily through the Indian Arbitration Act wherein section 34 stands by itself. With that finding I disagree with the preliminary objection raised by the learned counsel for the plaintiff.

(20) That takes me to the other submission made by Mr. J. P. Chopra who has very ably placed the case on behalf of the plaintiff before me. While saying so I must also praise the efficient manner in which Mr. Gulati met the arguments of the learned counsel for the plaintiff. I have been impressed by both the counsel.

(21) The provisions comprised in section 34 of the Indian Arbitration Act need to be reproduced in their entirety, and the same are as under : Section 34

'WHEREany party to an arbitration agreement or any person claiming under him commands 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 proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should nto be referred to 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.'

(22) The argument made by the learned counsel for the plaintiff is to the effect that defendant No. 1 did not, on the date of filing the application under section 34, have the competence to file the same. One of the submissions was similar to the one which has been dealt with while disposing of the preliminary objections. The other submission, however, which has gained importance during the course of arguments and which calls for a clear determination is that any party to an arbitration agreement or any person claiming under him may file an application under section 34 only if no written statement has been filed and no other step has been taken by such party in the proceedings to the suit. This limitation is clearly there in the Section itself. The counsel for the plaintiff conceded that no written statement having been filed, that part of the statutory limitation is nto available for the purpose of his arguments. But then he takes the firm stand on the words 'taking any other steps in the proceedings'. He does nto leave the matter there. He also bases himself on the concluding phraseology of that section and submits that a party to be competently entitled to invoke section 34 must be such who must have been ready and willing, at the time of commencement of the proceedings and at all times till the application under section 34 is determined, to do all things necessary to the proper conduct of the arbitration. His clear contentions are as under :

(A)that defendant No. 1 could have filed this application only before taking any step whatsoever in the proceedings. It is submitted that the participation in the proceedings in the suit after receiving the copy of the plaint along with the summons issued in terms of O.V. rules 1 and 2 and 5 of the Civil Procedure Code to defendant No. 1 and then taking of the time for filing written statement on the 21st July, 1969, did constitute 'steps in the proceedings'. The submission is that defendant No. I afterhaving participated in the proceedings in the suit and after having taken time to file the written statement stands debarred from filing the application under section 34. (b) the other objection is that the defendant in his application under section 34 must have clearly alleged that at the time of the commencement of the proceedings and at all times thereafter the defendant was ready and willing to do all things in order to promote the initiation and the conclusion of the arbitration proceedings.

(23) I would deal Serialtum with the submissions made on behalf of the plaintiff.

(24) Apart from the provisions contained in O.V. Rr. 1, 2 and 5 of the Civil Procedure Code the counsel for the plaintiff referred to the provisions contained in rules 3 and 4 of Chapter Iv of the Delhi High Court Rules. There also it is provided that the defendant may take time to file the written statement. The reference was made in order to derive support for the submission which related to the provisions contained in the Civil Procedure Code The counsel then cited the judgment made by this High Court on the 14th March, 1968. There is a brief note pertaining to the said judgment which has been produced as item No. 72 in the Delhi High Court Notes of the year 1968. It occurs on page 105. The law laid down there is to the effect that it is well settled that the existence of an arbitration agreement is neither a bar to the institution of the suit nor it precludes the civil court from taking cognizance of the suit and trying the same. The only relief which the other party can claim is by resorting to section 34 but then the suit can only be stayed and nto killed.

(25) The citation has no relevance to the matter in controversy and the law laid down, of course, emphasizes the proposition which stands well established.

(26) Then the counsel for the plaintiff cited the case reported as : AIR1953All149 . He refers to paragraph 5 of the judgment. There the court was dealing with the words 'Any other step in the proceedings' as they occur in section 34 referred to above. The observation made was to the following effect:

'IF any step whatsoever is taken by such party in the proceedings in court his right to apply for stay of proceedings and to take advantage of the reference to arbitration clause is lost. The words used in the section are unqualified-'before filing a written statement or taking any other steps in the proceedings.' Accordingly once an application is made for time to file a written statement there is a step taken in the proceedings.'

(27) The following case has direct bearing on the facts and circumstances of this case. This is so because in the face of my finding recorded above that on the 21st July, 1969 a request was clearly made on behalf of defendant No. 1 to obtain time to file the written statement, it would nto remain difficult any longer to hold that the defendant had taken steps in the proceedings and thereforee divested himself of the right to move an application under section 34. The other case cited is : AIR1957All91 . The reference really is to paragraphs 3 and 4 of that judgment.. The court there also was dealing with the provisions of section 34 of the Arbitration Act and the very clause with which I am presently concerned was considered. The court observed in the course of its judgment that the words 'other steps in the proceedings are words of general character.' The said words are of wide import and would embrace within their amplitude a large variety of acts. Any application by a party indicating that he has participated in the proceedings of the case or has contributed to its further progress or any act by a party showing that he has acquiesced in the jurisdiction of the Court would constitute a step in the legal proceedings. The learned judges of the Division Bench went deep into the provisions of section 34 and noticed that the legislature intended that a party desiring to oust the jurisdiction of the ordinary courts, and seeking a resort to the domestic forum should do so at the earliest possible opportunity.

(28) In the present case the summons, carrying with them obviously, a copy of the plaint of this suit, were received by defendant No. 1 on 27th September, 1966. It hardly needs any comment to record that there has hardly been any 'earliest filing of the application. On the other hand, there has been a clear acquiescence in the jurisdiction of the court on the part of defendant No. 1. The defendant No. 1 surrendered to the jurisdiction of the court by putting in appearance although the filing of the written statement was withheld. I will. thereforee, hold that on 21st July, 1969, the defendant No. 1 clearly surrendered to the jurisdiction of this court and it was in the presence of the counsel for defendant No. 1 that the order was passed to the effect that the written statement on behalf of defendant No. 4 having been filed, the written statements on behalf of defendants Nos. 1, 2 and 3 be filed on or before 11th August, 1969, peremptory. It is meaningful that the written statement on behalf of defendant No. 4 had been filed on that day and it caused the occasion for passing the said order which allowed time up to 11-8-1969 to defendant No. 1 obviously on a request made for the purpose.

(29) It would be appropriate to notice before departing from the case to which I am making reference above that it was also held there that the application would constitute a step in the proceedings on the part of the person making the prayer for time to file a written statement even if the application is oral. Once the act constitutes a step in the proceedings, the court would thereafter refuse to stay the suit because it is deemed in law that the stage for making the application under section 34 of the Act has passed over.

(30) I am also asked to notice the law laid down in : AIR1948Cal59 . I do nto find that any observations on the matter presently in controversy are contained in that case. The counsel for the plaintiff then refers to 1969 Delhi High Court Notes, item No. 74 at page 63. That case, however, deals with the second of the submissions made on behalf of the plaintiff. The counsel for the plaintiff states that neither the application nor any affidavit supporting it makes averments that the defendant No. 1 was ready and willing to perform all acts to promote the arbitration proceedings, at the time of the commencement of these proceedings and that he remained ready thereafter to do so. He has also contended that in the present case there are other parties than defendant No. 1 and who obviously are nto parties to any agreement to refer to arbitration and, thereforee, discretionary relief envisaged in section 34 may nto be granted. I will deal with the latter part of this submission later on. The findings recorded by this court in the case referred to above, are, of course, to the effect that it may nto be appropriate to stay the suit partially so as to be stayed only against one of the defendants. That aspect will be examined in this case as well.

(31) The first part of the foregoing submission, is supported by the law laid down in : AIR1967Mad201 . Incolumn 2 at page 202 in paragraph 6, it is clearly held as under :

'Aparty who invokes S. 34 must specifically allege that he was, nto only, at the commencement of the suit quite ready and willing to have the dispute resolved by arbitration proceedings, but that he is throughout ready and willing for such arbitration and to do everything necessary for the proper and successful conduct of the arbitration proceedings. The readiness and willingness to do everything necessary for the proper conduct of the arbitration proceedings should cover the entire period both before the commencement of the suit and thereafter.'

(32) The other case cited is 1960 Bom 292. Therein runs the same rhythm as in the case out of which the foregoing observation has been taken out. There also it has been stated in the paragraph 13 en page 294 that the affidavit dated 20th February, 1956 was deficient in its averments to meet the requirement of law. In paragraph 6 cf the affidavit which was under consideration of the Bombay High Court in that case, the applicant moving the application under section 34 had clearly averred that the defendants were ready and willing to do all things necessary to the proper conduct of the arbitration. The Bombay High Court, however, held that the averments did nto satisfy the statutory obligations created by section 34. The finding was to the following effect :

'THEstatement alone was nto a sufficient averment. They were further bound to state, but they have nto stated, that they were ready and willing to do all things necessary to the proper conduct of the arbitration even at the time when the proceedings were commenced, that is to say, on 1st December, 1955, when the suit was instituted.'

(33) I had observed on my own during the course of hearing of this case that the words 'when the proceedings were commenced' contained in section 34 could only be related to the date of the institution of the suit. The commencement of the proceedings in the instant case would be the commencement of the present suit which was instituted so far back as in the year 1966, The law laid down in : [1955]1SCR862 has then been referred to. In that case paragraph 7 of their lordships' judgment records the conditions which are to be fulfillled necessarily before stay is granted under section 34. Condition No. 3 as noticed there, is one of prime importance. I pro- pose to reproduce it as hereunder :

Condition No. 3 'The applicant for stay must be a party to the legal proceeding and he must have taken no step in the proceeding after appearance. It is also necessary that he should satisfy the court nto only that he is but also was at the commencement of the proceedings ready and willing to do every thing necessary for the proper conduct of the arbitration.'

(34) This observation supports me in my finding already recorded to the effect that defendant No. 1 had by his continuous participation in the proceedings and by asking for an opportunity to file written statement taken such steps in the course of the proceedings which disentitled him from presenting the application under section 34 of the Arbitration Act. The foregoing observation made by the Hon'ble Supreme Court of India leads me to the further finding that there is no averment in the instant application which may fulfill the requirements of condition No. 3 cited above. For this purpose a reference may be made to paragraph 8 of the application. There the present defendant No. 1 (applicant) has clearly stated only to the extent which will be visible from the following quotation of the said paragraph :

PARAGRAPH8 'The applicant (defendant No. 1) submits that it is ready and willing to join arbitration proceedings and submits furthermore that the disputes, if any, without prejudice to any other plea, specifically the pleas of jurisdiction, should be referred to arbitration as agreed between the plaintiff and the applicant (defendant No. 1)'

(35) I have reproduced above paragraph 8 of the application in its entirety. A mere reading of the said paragraph shows that there is no averment at all that defendant No. 1 was ready and willing within the terms of section 34 of the Act at the time of commencement of the suit to get the disputes settled through . arbitration. T am bound to follow the rule laid down by the Hon'ble the Supreme Court of India and I hereby hold that the ave'ments made in paragraph 8 of the application do nto meet the statutory obligations imposed by section 34 from of the Act and thereforee, displaced defendant No. 1 from the competence of urging the application under section 34.

(36) No case law has been cited to displace my observation made in the course of arguments to the effect that I am inclined to hold that there occurred at one time an agreement to refer to arbitration between the parties. That takes me to the communication which is in the form of an invitation letter issued by the present plaintiff to the defendants under the date 25th June, 1962. That communication on page 2 of itself contains in clearest terms a clause which is to the effect that in case any contract results from that invitation then any dispute or difference which may arise between the parties with regard to the construction, meaning and effect of any such contract will be referable and determinable through the process of arbitration. Defendant No. 1 sent a communication dated 6th July, 1962 which expressly referred to the foregoing letter dated 25th June, 1962. While certain terms were controverter the imposition of the arbitration clause was never questioned. In that situation the apparent conclusion would be that art agreement to refer to arbitration had come to prevail between the parties. The applicant may have been in a happier situation if on the very first appearance he had moved the present application under section 34 without taking any steps whatsoever. But even then the suit being nto only confined to a relief against defendant No. 1 alone the propriety of staying the same would have come in for determination. That aspect has now to be dealt with. Defendants Nos. 2 and 3 are as much the parties to the suit as defendant No. 1. It is a discretionary provision which is being invoked by the defendant No. 1 to silence the suit which may stand stayed till the fate of the arbitration proceedings is finally decided. The law that has been cited by the learned counsel for the defendant has in my estimation no relevance whatsoever to the point under discussion. The first case cited is A.1.R. 1921 Nag 177. That was a case where the courtdealing with a situation where the award had already been passed. I am nto dealing with any such situation here. There the award had been made on certain grounds and the court noticed that the accounts of both the firms were written in one and the same book, though at different places and it appeared that the accounts of one firm could nto be finally settled without examining the accounts of the other. I am, however, concerned with the stage where the present suit is sought to be stayed and I am nto dealing with a situation where out of arbitration proceedings an award may have already resulted. The case mentioned above has no relevance. Then reference is made to A.1.R. 1939 Lah 154. The learned counsel for defendant No. 1 took his stand on the observations starting from the bottom of column No. 2 on page 157. There the court first referred to 115 Ind Cas 680 and noticed that the parties had gone to arbitration knowing that certain third persons were also interested in the subject matter of the reference. It was observed that in those circumstances it was nto open to a party to challenge the validity of the award on the ground that third parties were interested. If the observations of the Lahore bench as on page 158 towards the concluding part of the judgment are taken into consideration, then in my estimation the case relied upon by defendant No. 1 goes against him. There the High Court while dealing with that case had observed as under :

'INthe present case, the reference was made on the assumption that all the interested persons had joined. It has however now transpired that there was no valid reference to arbitration on behalf of Haji Ismail Beg.'

(37) The facts and circumstances of the instant case can only be appreciated within their own limit and I have to emphasise again that I am at astage where I am simply to adjudicate upon an application under section 34 to determine whether J have to stay this suit or I am to allow it to proceed. I do nto thereforee derive any help from the Lahore judgment which deals with a stage after the award.

(38) The other case cited by the counsel for the defendant No, 1 is 1949 Allahabad page 71. That case is to the effect that unless a prima facia case of fraud is made out the stay should nto be refused. The words are to the effect :

'If the plaintiff objects to the case being referred to a domestic tribunal in accordance with an arbitration agreement between the parties he must make out a substantial and bona fide case of fraud.'

(39) That as a proposition of law may help the defendant if the application is merited as between the parties to an agreement to refer to arbitration. I cannto imagine how that would apply in case of a stranger to the agreement. Defendants Nos. 2 and 3 admittedly were never the parties to any agreement to refer to arbitration. Although I have already recorded my finding that defendant No. 1 had taken steps in the proceedings so as to disentitle him from moving this application under section 34, I will be failing in my duty if J do nto notice another case cited by the learned counsel for defendant No. 1. That case is A.I.R. 1948 Bom 55. There Justice Bhagvati dealt with the provisions of section 34. Be that as it may, the learned counsel for defendant No. 1 has, with his exceptional ability, laid stress upon the two citations taken out from the observation made by Lord Justice Lindley and produced in that judgment and I propose to reproduce those observations in this judgment because it would be appropriate that the submissions made by the learned counsel for defendant No. 1 are clearly dealt with. The first observation made by Lord Justice Lindley on which reliance is placed is to the following effect :

'THEauthorities show that a step in the proceedings means something in the nature of an application to the court, and nto mere talk between solicitors or solicitors' clerks, nor the writing of letters but the taking of some step such as taking out a summons or something of that kind, which is, in the technical sense, a step in the proceedings.'

(40) The learned counsel for defendant No. 1, Mr. A.C. Gulati emphasized that in order to detain the hands of the applicant under section 34 his step must be a substantial step. His clear submission was that although defendant No. 1 had put in appearance at various stages but the same should nto be considered as any substantial step. I am inclined to look at the observation quoted above from his angle that it clearly lays down that if there is a step in the technical sense then that would certainly disentitle the applicant under section 34 of the Indian Arbitration Act from seeking its aid. In this case the discussion made above shows as to how defendant No. 1 was called upon to meet the claim of the plaintiff on 1st November, 1966 itself or to run the risk of the suit being finally disposed of. I have also held that on 21st July, 1969 there was clearly an appearance on behalf of defendant No. 1 when in the presence of the counsel the written statement was filed by defendant No. 4. That occasioned the quarry from defendants Nos. 1, 2 and 3 as to why they had nto filed their written statements. The order was then passed to the effect that written statements on behalf of defendants Nos. 1,2 and 3 be filed on or before 11th August, 1969, peremptory. No protest having been made on that day and an adjournment having been obtained for the purpose of filing the written statement, I am inclined to hold that opportunity was sought to file the written statement and that act on the part of defendant No.1 did constitute a technical step in the proceedings within the meaning of the citation relied upon.

(41) The second observation made by Lord Justice Lindley to which reference was made is as under :

'ITseems to me that the mere filing of affidavits in defense to a motion for a receiver is nto in the nature of an application to the court, and consequently nto a step in the proceedings within the meaning of the section. By such a step is meant a substantive step taken by a party. It may be that a very limited application to the court such as taking out a summons for extension of time would be enough.'

(42) In my estimation the last sentence contained in the foregoing observation is a killer because there Lord Justice Lindley says that a very limited application to the court would be enough to constitute such a step that will cause disentitlement for making the application under section 34 of the Act. The earlier part of this citation on which stand was taken does nto lend any assistance to the learned counsel. The reason is that mere filing of affidavit in defense to a motion need nto be before the court and his lordship may have been confronted with a situation where the said affidavits were filed in the Registry of that court. Certainly, if a document is filed in the Registry and it does nto come before the court then it cannto be said to be a step before the court in the course of the proceedings but then in the instant case I would hold that there has been a clear participation in the proceedings promoting the same from date to date. Defendant No. 1 in the instant case has been party to the order dated 21st July, 1969 when time was granted for the filing of the written statement and as such he cannto derive any help from these observations made by Lindley, L. J. There were some other cases also cited on behalf of defendant No. 1. One of those cases is 1957, Punjab, page 223. The single bench judgment of that court is pleaded in order to bring out that a particular application to the court may or may nto be in the circumstances of a given case, a step in the proceedings. That proposition in no way promotes the arguments to any richer status. It is precisely said there to the following effect:

'WHETHERa particular application to court amounts to a step in proceedings, it depends upon the circumstances in each case and no absolute test can be laid down to determine it.'

(43) I only express my wonder as to how such a broad observation leads to any firm argument to support the contention which is being raised. Another part of the judgment goes against defendant No. I and that is to the following effect :

'SILENCEof the defendant before the suit is filed does nto affect the applicability of section 34 of the Arbitration Act, nor does it indicate that defendant is nto ready and willing to get the dispute decided by arbitration. It is only on receiving notice of the suit that the defendant has to make up his mind if he should enforce the arbitration agreement but he is to do so before filing the written statement or before taking any step in the proceedings in suit.'

(44) The proposition propounded is thereforee to the effect that silence before the suit does nto matter. No one can say that it does matter. Of course, the applicant has to seek protection of the agreement to refer to arbitration only when he becomes aware of the suit. It is only then that he has to make up his mind as to whether he should surrender to the jurisdiction of the civil court or he should invoke the agreement to refer to arbitration. Obviously his discretion is there. Once he seeks to invoke the 'agreement' he must make a clear submission in the application that at the commencement of the proceedings and during the course of the proceedings and at all times he was ready and willing to do everything to promote the determination of the dispute through the proceedings before the arbitrator. A reference then made is to : AIR1962Cal177 . It is paragraph 4 of the judgment which has been referred to. There is an observation which is to the effect that all that is necessary is that after the suit is instituted, the party invoking section 34 must be ready and willing to go to arbitration in order that he may apply for stay of the suit. I held that as from the 1st September, 1967, the defendant No. 1 was never ready and willing to go to arbitration. There is no justification why defendant No. 1 did nto invoke the right to refer to arbitration even on the said date while it is clear that service of defendant No. I was effected on 27th September, 1966 and on record appearance of defendant No. 1 is available, on 1st September, 1967.

(45) There is another case reported in this very volume which is on page 541 to which also a reference was made by the learned counsel for the defendant. There he referred to paragraph 5 of the judgment as on page 543. That judgment was also interpreting the words 'step in the proceedings'. The learned judges of the Calcutta High Court in the Division Bench referred to the observations of Riddley, J. and reproduced them in their judgment. I also do the same. The observations of justice Riddley were to the following effect :

'IN my opinion what is intended by a step in the proceedings is some step which indicates an intention on the part of a party to the proceedings that he desires that the action should proceed and has no desire that the matter should be referred to arbitration.'

(46) Having reproduced the said observation and having recorded the finding as above, I need nto record any further comments that defendant No. 1 has been indicating then vibrant desire to proceed with the suit by putting in appearance after appearance and promoting the suit from date to date and even then asking for time to file the written statement.

(47) Another case to which reference is made by the counsel for defendant No. 1 is : AIR1950Bom127 . The law laid down there again in my view, gees against defendant No. 1. In para 7 of that judgment Justice Tendolkar noticed the observations made by Justice Das in a Calcutta case reported as : AIR1943Cal484 . The observations of Justice Das which have been noticed by the Bombay High Court in the foregoing judgment are to the following effect :

'ITseems to me that these authorities establish that in order to constitute a step in the proceedings the act in question must be (a) an application made to the court .......or something in the nature of an application to the court,.... .and (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.'

(48) In my view the observations of Justice Das both in clauses (a) and (b) above fortify my findings which I have recorded above. In clause (a) the learned judge went to the extent of saying that the said step may be an application made to the court or even something in the nature of an application to the court I may emphasize that the gaining of an opportunity to file written statement on the 11th August by the counsel for defendant No. 1 who appeared on 21st July, 1969, certainly was something in the nature of an application for that purpose. As to clause (b) above a step in the proceedings may be any act which would indicate that the party concerned acquiesced in method adopted by the other side of having the disputes decided by the court. In this case such acquiescing is visible from the date of serviceof the summons to the date of making an application under section 34. That by itself debars defendant No. 1 from making the application under section 34 of the Indian Arbitration Act. After noticing the foregoing observations made by Justice Das in the Calcutta case Justice Tendolkar observed to the following effects:

'IN my opinion the true test for determining whether an act is a step in the proceedings is nto 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.'

(49) I have clearly observed in the foregoing part of this judgment that since defendant No. 1 received the copy of the plaint and since it became obvious to defendant No. 1 that he had been called upon to answer the claim on 1st November, 1966, it must have been known to him that he could resort to his right to the arbitration proceedings and if he did not, then the only conclusion is that defendant No. 1 displayed his unequivocal intention to participate in the suit. That was the true picture till this application dated 21-8-69 was made.

(50) The learned counsel for defendant No. 1 also cited A.I.R. 1961 M P 327. That High Court observed that the filing of a reply to an application of the plaintiff for securing a temporary injunction and arguing the said application itself does nto amount to taking of steps in the proceedings by the defendant within the meaning of section 34 . The Court was of the view that when an interim relief is being sought and repelled then the step is nto such a step which may be in reply to the claim in suit. I am of the view that it is nto at all necessary to express any disapproval or approval of the said view in the instant case. I must however, say that I do nto see eye to eye with that observation. That observation, however, calls for emphasizing that the judgment cited does nto at all notice the situation such as the one involved in the present suit. The povisions of Order V of the Civil Procedure code and Rules 3, and 4 contained in Chapter Vi of the Delhi High Court Rules were never considered by that Court. That Court was never confronted with the situation where the defendant stood apprised of the plaintiff's suit and had been called through the process duly issued to answer the claim and appear by himself or through a pleader accompanied by any person duly instructed to answer all material questions relating to the claim in suit. In this case, apart from any other thing, there has been a clear intention on the part of defendant No. I to promote the proceedings of the suit from day to day and that acquiescence is very material to displace his entitlement to a relief under section 34 of the Arbitration Act.

(51) Mr. Gulati who is present in court during the course of this judgment has just now drawn my attention to paragraph 9 of the above noted judgment reported in : AIR1961MP322 . There the court was dealing with another aspect of section 34. According to Mr. Gulati the observations made there answer to the benefit of defendant No. 1. The High Court there observed as under :-

'THEdefendants in their reply dated 8-9-1959 have clearly drawn the attention of the Court to the subsistence of the arbitration agreement and further have pointed that that was the correct remedy for the plaintiff to follow. It is implicit in the objection raised that they were prepared to have the dispute decided by arbitration.'

(52) The argument preferred is to the effect that the last sentence in paragraph 9 of the said judgment may be taken into consideration for recording the finding that the averments contained paragraph 8 of the instant application are sufficient affirmation of defendant No. 1 readiness to refer the matter to arbitration. I cannto accept that argument because a mere reading of paragraph 8 of the application under section 34 is sufficient to repel the same. There is no statement there that the applicant was ready and willing at the commencement of the proceedings to do everything for the initiation and promotion of the arbitration proceedings. I have already mentioned the view taken by the Hon'ble the Supreme Court of India and I am of the opinion that there should be a clear statement in an application under section 34 that the applicant was ready and willing to go into arbitration at the commencement of the proceedings and has always remained so. The commencement of the proceedings would in this case be the date of the institution of the suit.

(53) After considering all the authorities cited on both the sides I find that the applicant fails in emplying with both the tests. Firstly, he has been participating in the proceedings in the suit and that participation amounts to his acquiescence which can only be interpreted as his having surrendered to the jurisdiction of the court. Secondly, there is no requisite averments in the application under section 34 to the effect that the applicant was ready and willing at the commencement of these proceedings and always has remained so to go into arbitration proceedings.

(54) Before parting with this judgment, I am inclined to and I do exercise my inherant power to set aside the order which says that the proceedings are as in default of filing of the written statement by deft. 1. Defendant No. 1 must have fair chance to defend this suit. I am disallowing the application under section 34 of the Indian Arbitration Act also for the reason that defendants Nos. 2 and 3 were never parties to any agreement to refer to arbitration. Under these peculiar circumstances I see no reason why defendant No. 1 be debarred from contesting the suit. I, thereforee, allow defendant No. 1 to file the written statement and as the party is abroad, the defendant No. 1 will have the time to do so till the 21st December, 1969. The case has been ably argued by Mr. Gulati. The application under section 34 is dismissed but there will be no order as to costs.


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