(1) The plaintiffs M/s Tabular Containers Pvt. Ltd. have filed a suit for the recovery of Rs.4,57,539.00 against the defendant, the Union of India. This claim related to interest only. Summons were issued for 10th March 1980. These summons were served with a copy of the plaint on the standing counsel for Union of India, on 25th February, 1980. The papers were sent by the standing counsel to the Ministry of Law. On 6th March 1980 the Litigation Section of the Ministry of Law sent a 'brief transmission form' to Mr. P. P. Malhotra, Advocate. On 10-3-80 under instruction from Sh. Malhotra his Jr. appeared before the Deputy Registrar and sought time for filing the written statement. The Deputy Registrar granted time for the purpose. Subsequently the Ministry of defense instructed their counsel to make an application under Section 34 of the Arbitration Act as there was an arbitration clause in the contract.
(2) Accordingly the present application was made u/s 34 of the Arbitration Act. The counsel for the plaintiff contended that as the defendants have taken steps in the proceedings they are debarred from pursuing the application under section 34 and that the claim for interest is not a matter covered by the arbitration clause since the contract does not provide for payment of interest. Considering the facts of this case it was held that the request for time to file written statement by the counsel does not amount to a step in the proceedings within the contemplation of Section 34, of the Arbitration Act. Knowledge of the counsel as regards the exact nature of the suit is essential for determining the question whether a party has taken steps in the proceedings or not. After considering the fads of the case it was held that no knowledge of the nature of the suit can be imputed to the counsel or for that matter to his junior who appeared on behalf of the Government on 10th March, 1980. Held further :-
(3) That the arbitration clause is as wide as can be imagined. The claim of the interest is certainly a question or a dispute arising under the terms and condition of the contract. In any event, it is a dispute arising 'in connection with the contract'. It is in pursuance of the contract that the plaintiff supplied the stores and claim for interest has been made in connection with that contract.
(4) In the result I he application filed by the Union of India u/s 34 of the Arbitration Act was allowed and the suit filed by the plaintiff was stayed.