1. This is an appeal against an order passed by Sen, J. refusing to stay a suit under the provisions of Section 34 of the Indian Arbitration Act, 1940 (hereinafter referred to as 'the said Act'). The suit concerned is suit No. 2306 of 1966 (P. N. Djakarta Lloyd v. Asiatic Shipping Co. Private Ltd.). In that suit, which was filed in this Court on or about 21st November, 1966, the brief allegations in the plaint are as follows: It is stated that the plaintiff was the owner of a vessel, namely, S.S. Capella and that by a charter party dated October 28, 1963 made between the plaintiff and the defendant No. 1, the Asiatic Shipping Co. Private Ltd., the appellant before us, it was agreed, inter alia, that the said vessel then in the Bay of Bengal would proceed to the port of Calcutta and the defendant No. 1 as the charterer would load goods and cargo therein and would proceed to Djakarta and Surabaya in Indonesia and deliver the cargo, on being paid 16,000 as freight. It is further alleged that the defendant No. 2, Associated Commercial Co. of India Private Ltd. In consideration of the plaintiff entering into the charter party, guaranteed the payment of 16,000 to the plaintiff. It is further alleged that the said vessel reached the port of Djakarta and duly delivered the cargo but the defendant No. 1 failed and neglected to pay the said 16,000 or any part thereof and the guarantor also has failed to make any payment. The charter party is admitted and it is also admitted that in the charter party there is an arbitration clause which runs as follows:
'Any dispute arising under this Charter Party is to be referred to arbitration in London, one Arbitrator to be employed by the Charterers and the other by the owners, and in case the Arbitrators shall not agree, then to the decision of an Umpire to be appointed by them. The Award of the Arbitrators or the Umpire to be final and binding on both parties. The Arbitrators including the Umpire to be commercial men.'
2. The appellant made an application in the Court below on the 2nd February, 1967 asking for stay of proceedings under Section 34 of the said Act. The learned Judge, by his order dated July 7, 1967 has refused to grant a stay. The ground upon which the stay was refused is as follows: The learned Judge has noticed that in the suit the claim is not only against the principal debtor but also against guarantor. Admittedly, there is no arbitration agreement with regard to the guarantor. Therefore, the suit will have to be decided as against defendant No. 2. The learned Judge has rightly observed that a decision upon the liability of a guarantor necessarily involves the determination of the question as to whether the principal debtor was liable, for if the principal debtor was not liable no liability could be attributed to the guarantor. Now, the principal debtor wants to go to arbitration in London. Apart from the fact that nothing whatsoever has happened in London but everything happened in India and the Far East, the Learned Judge has expressed an apprehension that the same issue as regards the liability of the principal debtor will have to be gone into, both in the suit and in the arbitration proceedings and there was every likelihood of conflicting findings. Therefore, by using his discretion he has held that he is not inclined to exercise his discretion in this case and on the facts of the instant case refused to stay the suit. The application was accordingly dismissed.
3. As soon as the judgment was delivered, the learned Counsel for the applicant made a prayer for filing a written statement. This appears from the judgment itself and is as follows:
'Mr. Chaudhuri submits that in view of the pendency of this application his client has not filed any written statement and he wants three weeks' time to file written statement. Mr. Chaudhuri's client will have three weeks' time to file the written statement'.
The learned Judge thereafter gave directions for expeditious hearing, for discovery and inspection and further directed that the suit should appear in the prospective list eight weeks from the date of the order. He further gave liberty to the parties to apply for an early hearing.
4. Mr. Banerjee, appearing on behalf of the respondent, took a preliminary point that the appellant has already taken 'a step in the proceeding' and consequently is not entitled to a stay. I shall deal with this point presently but will go into the merits of the case first, because we are against the appellant on merits. I do not think that it can be seriously disputed at this point of time that Section 34 is not an absolute bar on the Court in continuing the suit. In other words, an arbitration agreement is not an absolute bar to the jurisdiction of the Court to hear a suit. The position, however, has been succinctly stated in a Supreme Court decision, Printers (Mysore) Private Ltd. v. Pothan Joseph, : 3SCR713 . It has been pointed out that an arbitration agreement does not affect the jurisdiction of the Court, but where parties have entered into an agreement for arbitration, normally the Court would decide the rights of the parties according to their agreement. But the Court has always, a discretion to grant the stay or not and this discretion, of course, should be exercised judicially. In our opinion, in the facts and circumstances of this case, the discretion has been exercised judicially and we agree with the reasonings given by the learned Judge in not granting the stay. I have stated above the reasoning of the learned Judge and it is not necessary to repeat it. Mr. Chaudhuri, appearing on behalf of the appellant, has taken two other points before us. He argued that the defendant No. 2 was not a guarantor and there is no evidence to establish the guarantee. That being so, the facts taken into account by the learned Judge were nonexistent. The short answer to this is that in an application under Section 34, the Court cannot go into the merits of the case and decide the rights of the parties, particularly one who is admittedly net a party to the arbitration agreement. See Gaya Electric Supply Co. Ltd. v. State of Bihar, : 4SCR572 . It is also pertinent to observe that this point was never taken in the petition at all. It is impossible, to deal with it when it states an important point going to the root of the case, and was not taken in the petition so that the other side has not been able to answer the same. The next point taken is that the person signing the plaint was not the constituent attorney so far as the filing of the plaint is concerned because the power of attorney did not give him the power. Again this is a point that has not been taken in the petition and in any event, I cannot understand this point being raised in this application, because if the plaint is defective and suit is non-existent, the question of stay does not arise. In that case an appropriate application may be made. In our opinion, these contentions by the appellant are of no substance and cannot be allowed.
5. I now will deal with the preliminary point. This is rather an interesting point, because it does not seem that any of the decided authorities have dealt with the point, exactly as it has arisen before us. I do not think there can be any doubts as regards the proposition that if an application is made to file a written statement in the Court of first instance dealing with a stay application, that, under Section 34 itself creates a bar. For that purpose, it will be necessary to look at the provisions of Section 34 itself which I set out below:
'34. Where any party to an arbitration agreement or any person claiming under him commences any legal proceeding against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings'.
It will be observed there that an applicant for stay must at the time when the proceedings are commenced and 'still' remain 'ready and willing to do all things necessary for the proper conduct of the arbitration'. The word 'still' must mean that he must continue to remain ready and willing. As I have said, the point that a prayer for filing written statement in the Court below would have precluded an application for stay, is well decided in this Court and in other Courts. Reference may be made to the case of Sarat Kumar Roy v. Corporation of Calcutta, (1907) 11 Cal WN 306; Karnani Industrial Bank Ltd. v. Satya Niranjan : AIR1924Cal789 .
But the question here has arisen in a slightly different form, namely, as to what happens when the prayer for filing a written statement is made after the disposal of the application for stay in the Court below. What is argued is that after the case has been disposed of in the Court below, there is no harm if the applicant files a written statement or takes any step, because such things should not be done before the commencement of the proceedings but can be done afterwards. For this purpose, a decision of a single Judge of the Simla High Court has been cited, namely, Hanuman Chamber of Commerce Ltd. v. Parameshri Lal Co., AIR 1951 Simla 173. in that case, an application was made for stay under Section 34 of the said Act. The trial Court ordered that, without prejudice to the decision of the stay application, the defendant should file a written statement, as also their documents and 'lists of reliance'. Against this order, there was an application for review and it was contended that a written statement should not be directed to be filed, as it would affect the rights of the parties under Section 34. This was negatived. The learned Judge said that a written statement filed as directed by the Court would not prejudice the parties under Section 34. It was held that Section 34 does not prohibit the filing of the written statement pending the decision of an application for stay of proceedings under Section 34. If the learned Judge intended to say that after an application under Section 34 is filed, the parties can go on taking steps in the suit, then, with respect we differ. But the case may be distinguished on this ground that it was the Court which ordered the party to file the written statement and so it could not be said that the filing of the written statement was ad invitum and that it displayed the intention of the party not to proceed with the arbitration. When a stay is refused, it is customary to ask for the order to be stayed pending an appeal, suppose, the Court refuses an order of stay. Then, if a party is forced or compelled to file a written statement although it wished to proceed with the arbitration and in the absence of which the suit would be decreed ex parte, it can scarcely be said that it shows an intention of the party not to abide by the arbitration agreement. Each such case will depend on its own facts. Here, however, as soon as the order was made in the Court below, the learned Counsel for the appellant did not ask for a stay but deliberately made a prayer before the Court for liberty to file written statement and asked for and obtained directions for the further conduct of the suit. There was order for the discovery and inspection and for expedition of the suit. It must not be forgotten that under Section 34, not only there must be readiness and willingness to go to arbitration at the time when the proceedings were commenced, but such readiness and willingness must continue. Here, no stay has been obtained in the Court below and an appeal has been preferred. The entire matter, therefore, is open before us. We have the same rights as those of the Court below. If this appeal succeeds, then we shall have to make an order for stay, and we cannot ignore the wordings of Section 34 which requires that the parties applying must 'still remain ready and willing to go to arbitration'. By asking for directions in the suit itself, the applicant must be taken to have expressed a desire to go on with the suit. In our opinion, the preliminary point is a valid one and should be upheld.
6. The result is that this appeal fails and is dismissed with costs.
7. The operation of the order will remain stayed for six weeks from this date.
8. I agree.