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Dunichand Sons and Co. Vs. Fort Gloster Industries Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAppeal No. 205 of 1961
Judge
Reported inAIR1962Cal541,66CWN821
ActsArbitration Act, 1940 - Section 34; ;Arbitration Act, 1899 - Section 19
AppellantDunichand Sons and Co.
RespondentFort Gloster Industries Ltd.
Appellant AdvocateA.C. Bhabra and ;R. Tirt, Advs.
Respondent AdvocateS.K. Ray Chowdhury and ;P.L. Khaitan, Advs.
DispositionAppeal allowed
Cases ReferredAnderson Wright v. Moran and Co.
Excerpt:
- .....the learned judge two points were taken (1) did the plaintiff take a step in the proceedings by entering appearance in the suit and filing a warrant of attorney as stated above, 2nd is it thereby precluded from making an application under section 34 of the arbitration act? (2) do the disputes between the parties involve the determination of difficult questions of law and facts which the arbitrators will be called upon to try and should the court consider that as a sufficient reason for allowing the suit to go ten? 2. the learned judge answered the first point in the negative. as regards the second point, he held that upon the materials on record he was not prepared to say that such a serious question of law would arise for determination by the arbitrators that the court should take it.....
Judgment:

Sinha, J.

1. This is an appeal against an order passed by G.K. Mitter, J. on the 21st September, 1961 whereby he made an order staying the suit instituted by Dunichand Sons and Company, against Fort Gloster Industries Ltd., under Section 34 of the Arbitration Act. The facts are as follows: By a contract dated 18th October, 1960, put through by brokers, the petitioner, Fort Gloster Industries Limited (hereinafter referred to as the 'appellant' (sic. respondent ?)) agreed to sell, and the respondent (sic. apellant) firm Dunichand. Sons and Company, (hereinafter referred to as the 'respondent' (sic. appellant)) agreed to buy, 50,000 yards hessian cloth 40' x 10 at the rate of Rs. 54.50 Np.per hundred yards, on terms and conditions contained in the Standard Contract of the Indian Jute and Hessian Exchange Limited, relating to transferable specific delivery of jute goods, including the usual arbitration clause, referring all disputes to the arbitration of the Bengal Chamber of Commerce and Industry, Calcutta. On the 21st February, 1961 the appellant gave shipping instruction to place the goods per S. S. 'City of Philadelphia'. On the '28th February, 1961 the respondent tendered a bill dated 22-2-1961 for Rs. 27,249.18 Np. together with the delivery order. On the 10th March, 1961 the respondent tendered the mate's receipt. Thereafter, the respondent demanded payment of the price of the goods. The appellant claimed that there were no goods on board the vessel above-mentioned, because the goods had in fact been seized by the Custom Authorities and there was no proper tender of the mate's receipt. As the appellant failed to pay for the goods alleged to be sold and delivered under the contract, the respondent referred the dispute to arbitration of the Bengal Chamber of Commerce and Industry and this was registered as Case No. 202 of 1961. On or about the 19th June 1961, Suit No. 975 of 1961 (Dunichand Sons and Company v. Fort Gloster Industries Limited) was instituted in this Court, asking for a decree for Rs. 10,750, alternatively for an enquiry into damages, for a declaration that the tender by the defendant (respondent) of the delivery order and the mate's receipt dated February 7, 1961 was wrongful and invalid, and for other reliefs. The Writ of Summons was served on the defendant (respondent) on 27th June, 1961. On the 17th July, 1961 the defendant (respondent) executed a warrant of attorney in favour of Messrs. Khaitan and Company. This warrant was filed before the Registrar on the 18th July, 1961 and on the same day appearance was entered in the suit on behalf of the defendant-respondent. On the 17th July, 1961 even before the warrant was filed, an application was taken out under Section 34 of the Arbitration Act, which application was made returnable on the 24th July, 1961. The notice of the application was served on the solicitors of the plaintiff (appellant) on the same day. The affidavit-in-opposition herein was affirmed on August 24, 1961 and the affidavit in reply on 31st August, 1961. Thereafter, the matter came up for hearing before Mitter, J. Before the learned Judge two points were taken (1) Did the plaintiff take a step in the proceedings by entering appearance in the suit and filing a warrant of attorney as stated above, 2nd is it thereby precluded from making an application under Section 34 of the Arbitration Act? (2) Do the disputes between the parties involve the determination of difficult questions of law and facts which the arbitrators will be called upon to try and should the Court consider that as a sufficient reason for allowing the suit to go ten?

2. The learned Judge answered the first point in the negative. As regards the second point, he held that upon the materials on record he was not prepared to say that such a serious question of law would arise for determination by the arbitrators that the Court should take it out of their hands and try it itself. In appeal, the second point has not been pressed before us. The only point pressed before us is the first point, namely as to whether by entering appearance in the suit and filing a warrant of attorney, the applicant has taken a 'step in the proceedings' thereby precluding itself from making an application under Section 34 of the Arbitration Act.

3. The argument advanced by Mr. Bhabra on behalfof the appellant turns on the wordings of Section 34, and the change that has been brought about in that section by amendment of the original Section 19 of the Indian Arbitration Act, 1899, which was based on Section 4 of the English Arbitration Act of 1889. Under the English Act, an application for stay can be made 'at any time after appearance, and before delivering any pleadings or taking any other steps in the proceedings'. Under Section 19 of the Indian Arbitration Act, 1899 such an application could be made 'at any time after appearance and before filing a written statement or taking any other steps-in the proceedings'. The wordings have now been changed and under Section 34 of the Arbitration Act, 1940, such an application should be made 'at any time before filing a written statement or taking any other steps in the proceedings.' The short argument of Mr. Bhabra is that previous to the amendment, Section 19 of the Indian Arbitration Act itself laid down that the application was to be made after appearance. In this respect, the provision was similar to the English Act. Therefore, it followed that under the old provision, entering appearance was by itself not a 'step in the proceedings'. Now, the words 'after appearance' have been deliberately omitted. It is therefore argued that under Section 34 of the present Act, entering appearance is by itself a step in the proceedings. So far as the warrant is concerned, it is argued that the warrant executed on behalf of the solicitors authorised them to enter appearance in the suit and to defend the same. Therefore, this amounted to the expression of an intention to defend the suit. As to what amounts to a step in the proceedings, the leading case in England, is the judgment of Lindley, L. J. in Iyes and Barker v. Wilians, (1894) 2 Ch 478. This was what the learned Judge said :

'The authorities shew that a step in the proceedings means something in the nature of an application to the court, and not 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.'

4. This principle has, more or less, been followed in English cases and in cases under the Indian Arbitration Act, although it has been pointed out by Page, J. in a case presently to be mentioned, that the principle laid down cannot be wholly accurate, because the filing of a written statement is according to the terms of the section itself, a step in the proceedings and yet it cannot be said that it is an application to Court, or even in the nature of such an application. In my opinion, it is not of much use looking into cases decided before the amendment. It is obvious that under the old law, a 'step in the proceedings' could only be taken after appearance. It followed that appearance itself could not be a step in the proceedings. Although this is so, it is necessary to look into an authority under the old Act namely, the decision of Page, J. in Bhowani Das Ramgovind v. Panna Chand : AIR1925Cal801 . In that case, there was an agreement for reference to arbitration, and notwithstanding the agreement a suit was filed. According to the defendant, the summons was suppressed, with the result that the time to enter appearance was over by the time the defendant came to know of the filing of the suit. The defendant thereupon applied for a copy of the plaint and made an application for leave to enter appearance, as is necessary under the rules. Having done so, and having received a copy of the plaint, the defendant then made an application under Section 19 of the Arbitration Act for Stay of the suit, it was alleged that by making an application for leave to enter appearance, the defendant had taken a 'step in the proceedings' and was precluded from asking for a stay. Page J. referred to the case of Ives and Barker, 1894-2 Ch 478 (supra) and held that so far as the application for a copy of the plaint was concerned, it was merely to seek information about the nature of the plaintiff's claim. This was not a step in the proceedings. The learned Judge said as follows:

'But in order to conform to the provisions of Section 19 the defendant must apply to the Court 'after appearance and before filing a written statement or taking any other step in the proceedings'. Now, in my opinion, to move the Court for leave to enter an appearance is, for certain purposes, to take a step in the proceedings. For example, a party taking such a step would be deemed to have waived any irregularity in the service of the writ to which he applies for leave to appear. The question which I have to determine is whether such an application is a step in the proceedings within Section 19 of the Arbitration Act.......... Any act in the nature of an application to theCourt which indicates that a party is willing that the suit should proceed, in my opinion, would be a step in the proceedings within Section 19 of the Indian Arbitration Act. The intention of the party is to be gathered from the nature of application which is made, and if, having regard to the form of the application, the Court is of opinion that a step has been taken it will so hold, notwithstanding that the party may in truth and in fact have no such intention, or that the application is coupled with a protest that the Party desires that the matters in dispute should be referred to arbitration. Applying this test to the motion before the Court I am clearly of opinion that the defendant's application for leave to enter an appearance was not a step in the proceedings within Section 19 of the Arbitration Act. It is not a reasonable deduction from such conduct that the defendant intends to resist the suit on the merits. It is equally reasonable to infer therefrom that he intends thereafter to make a preliminary objection to the matter being made the subject of litigation at all. Nay more, the language used in the section leads me to the same conclusion, for it is therein expressly provided that the party making an application under the section for a stay of the proceedings must before so doing have entered an appearance. It is not reasonable to suppose that the legislature intended that a party should be held to have taken a step in the proceedings within Section 19 of the Arbitration Act merely because he has made an application which, if granted, will place him en train for fulfilling a condition precedent to an application for stay being duly made in accordance with the provisions of the section.'

5. It will be seen that the learned Judge pointed out that under the wordings of Section 19 of the Indian Arbitration Act itself, a 'step in the proceedings' has to be taken after appearance. It was, therefore, not reasonable to hold that entering appearance was by itself a step in the proceedings. He has however pointed out that a step taken in the suit like entering appearance is in a sense always a 'step in the proceedings' but the fast to be applied is as to whether the particular step taken showed an unequivocal intention of resisting the suit on the merits, and not by arbitration. The entering of appearanceby itself was held not to show such an intention. The next case to be cited is a Bombay case, which was decided after the amendment of 1940, introducing Section 34 in the Arbitration Act of 1940. This is a judgment of Tendolkar, J. Nuruddin Abdul Hussain v. Abu Ahmed : AIR1950Bom127 . The facts in that case were as follows: A suit was filed in the Bombay High Court and the defendant thereto put in an unconditional appearance, and then made an application for stay of the suit under Section 34, on the ground that there was a valid agreement for reference to arbitration. The question for decision was whether the filing of an unconditional appearance was a step in the proceedings. The learned Judge pointed out that such a question had not arisen for determination either in England or India so far, for the simple reason that both under Section 4 of the English Arbitration Act and under Section 19 of the Indian Arbitration Act of 1899, a step in the proceeding taken 'at any time after appearance' disqualified the defendant from applying for a stay. Therefore, under these provisions of law, it could not be argued that entering appearance was by itself a step in the proceedings, it was argued, as it has been argued before us by Mr. Bhabra, that as the words 'at any time after appearance' which still appear in the English Act and which appeared in the Indian Act of 1899, have deliberately been deleted, it must have been the intention of the Legislature that filing of an appearance, which, before the amendment, was not a step in the proceedings for the purposes of this section, should, after the amendment, be considered to be one. This argument was not accepted. The learned Judge referred to 1894-2 Ch. 478 (supra) and quoted the view of Lord Lindley, Next the learned Judge cited the case of Ford's Hotel Co. v. Bartlett, 1896 AC 1. In that case, the defendant took out a summons and obtained an order for further time for delivery of his defence. It was held that this was a step in the proceedings. Lord Shand said--'this appears to me to have been in fact an abandonment of the proposal to have the stay of the cause disposed of by arbitration.' According to Tendolkar J. these observations indicate the definition of a 'step in the proceedings'. Next the learned Judge cites the case of Austin and Whitely Ltd. v. S. Bowley and Sons (1913) 108 LT 921. In that case, in an action in a County Court, the defendant filled in a slip attached to a default summons giving notice of his intention to defend the suit, it was held by the King's Bench Division that this was merely equivalent to filing of an appearance in the High Court, and was not a step in the proceedings. Riddiey, J., observed as follows:--

'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.'

The learned Judge finally states as follows:--

'In my opinion the true test for determining whetheran act is a step in the proceedings is not so much the!question as to whether it is an application,-- although, ofcourse, that would be a satisfactory test in many cases--but whether the act displays an unequivocal intention toproceed with the suit and to give up the right to have thematter disposed of by arbitration.'

According to the learned Judge, the mere filing of suchas appearance does not disclose any such intention. Withrespect, we are in agreement with this view.

6. Finally, reference may be made to a Supreme Court decision Anderson Wright v. Moran and Co., (S) : [1955]1SCR862 . In that case, Mukherjea J. laid down four tests which must be satisfied before a stay may be granted under Section 34 of the said Act. These tests or conditions are as follows: (1) The proceeding must have been commenced by a party to an arbitration agreement against any other party to the agreement; (2) The legal proceeding which is sought to be stayed must be in respect of a matter agreed to be referred; (3) The applicant for stay must be a party to the legal proceeding and he must have taken no step in the proceedings after appearance.It is also necessary that he should satisfy the Court not only that he is, but also was at the commencement of the proceedings, ready and willing to do everything necessary for the proper conduct of the arbitration and (4) the Court must be satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the arbitration agreement.

7. Superficially, and at first sight, it may seem that the condition No. 3 as propounded is incorrect, because under Section 34 of the Arbitration Act, no appearance is necessary to make an application for stay. In other words, after the amendment, simply in order to make an application for stay, it is not necessary to enter appearance in the suit. An application can be made to the Court entitled,'In the matter of the arbitration proceedings.' In my opinion, that is not what was meant by the learned Judge. What he meant was that a step in the proceedings must be a step that one takes in a suit, after appearance, but that, entering appearance by itself is not a step in the proceedings. That I think must be so, if one looks at Section 34 itself. If it was intended to lay down the proposition that entering appearance by itself would be a step in the proceedings, then there was no sense in laying down the extreme limit of time to be the filing of the written statement, before which the step in the proceedings is to be taken. No written statement can be filed without entering appearance, and as soon as appearance is entered, it will then be said that the defendant has taken a step in the proceedings already. Then, why mention at all about the filing of a written statement? In other words, why speak about the taking of a step in the proceedings up to the filing of the written statement or at any time beforefiling written statement, when the entering of appearance has already amounted to a step in the proceedings and the right to apply for stay has already been barred? Therefore, the only change in the law, after the amendment, is that an application for a stay can be made without entering appearance in the suit, but otherwise there is no change in the law. The observations made by Mukherjea 1, in the case of Anderson Wright etc. (S) : [1955]1SCR862 (supra) clearly shows that the entering of appearance is not by itself a step in the proceedings. Coming now to the question of the warrant filed, we find that even before it was filed the defendant had already taken out a notice asking for a stay. The warrant is in the usual form and the mere fact that it authorises the attorney to defend the suit, does not mean that the defendant had made up its mind to defend the suit rather than to go to arbitration. Indeed, the fact that even before the warrant was filed the notice for stay was taken out, completely demolishes any such argument.

8. The result is that we are of the opinion that the learned Judge rightly decided that the entering of appearance by itself did not amount to a step in the proceedings, and, therefore, a stay should be granted. I have already stated that the other question raised in the court below has not been pressed before us. The appeal is accordingly dismissed with costs.

9. Certified for two Counsel. Interim order is vacated,but not to be given effect to for a fortnight.


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