Decided on August 06,1982



Desai, J. - (1.) A fond hope that a decision of this Court with the sanction of Art. 141 of the Constitution that the law laid down therein will be the law of the land would put an end to a raging controversy amongst various High Courts stands to some extent rudely shaken when the controversy with a slight variation has again been placed in the lap of this Court.
(2.) For highlighting and then resolving the controversy facts in dispute have a little or no relevance save and except mentioning certain events. Respondent Yadav Engineer and Contractor, a partnership firm filed a writ against Food Corporation of India, 1st defendant and Shyam Narain Nigam, District Manager of 1st defendant as 2nd defendant, for a declaration that the contract between the plaintiff and the 1st defendant for handling and transportation of the goods of the 1st Corporation was subsisting on the date of the suit and restraining the defendant from committing breach of the same by handing over that work to someone other than the plaintiff. The suit was instituted on June 1, 1981, in the Court of the III Civil Judge, Class I, Gwalior. In the suit a notice of motion was taken out purporting to be under O. XXXIX Rr. 1 and 2 read with Section 151, Civil P. C., for an interim injunction restraining the defendants from committing a breach of contract and from interfering with the work of handling and transport of goods of the 1st defendant Corporation by the plaintiff during the pendency of the suit. On the notice of motion being taken out the Court directed notice of the same to be served and the same was made returnable on the next day, June 2, 1981, On the returnable date the 2nd defendant District Manager of the 1st defendant-Corporation who had office in the city of Gwalior was served and he appeared through one Shri N. K. Modi, Advocate, filed the letter of authority (Vakalat) in favour of the learned Advocate on behalf of 2nd defendant and the learned advocate prayed for time for "reply and arguments to the plaintiff's application for temporary injunction". The Court acceded to the request and posted the matter on June 3, 1981. An endorsement appears in the record that the 1st defendant Food Corporation of India was not served though the endorsement reads 'absent'. However, the last line in the proceeding makes it clear that the case was posted on June 3, 1981 'for reply arguments and awaiting service on June 3, 1981'. When the matter came up on the next day, i.e. June 3, 1981, an application was moved on behalf of 1st defendant inviting the attention of the Court to the subsisting arbitration agreement between the plaintiff and the 1st defendant and which agreement authorised the Managing Director of the 1st defendant to appoint an arbitrator in respect of any dispute arising out of the contract between the plaintiff and the 1st defendant. It was also stated that the 1st defendant desires to have the dispute, if any, resolved by arbitration under the subsisting arbitration agreement and that the defendant is fully ready and willing (ichhuk) to go to arbitration. The application concluded with a prayer that under the circumstances the suit may be stayed as provided in Section 34 of the Arbitration Act, 1940 ('Act' for short).
(3.) The learned trial Judge was of the view that the dispute between the parties is covered by the arbitration agreement set out in Article 19 of the contract between the plaintiff and the 1st defendant. The learned Judge negatived the contention that an application made by the 2nd defendant for filing reply to the notice of motion taken out by the plaintiff for interim injunction is a step taken in the proceedings in view of the binding decision of a Division Bench of the Madhya Pradesh High Court in Sansar Chand Deshraj v. State of Madh. Pra., AIR 1961 Madh Pra 322. The learned Judge accordingly granted stay of further proceedings in the suit as prayed for on behalf of the 1st defendant. Plaintiff preferred an appeal in the Court of the District Judge, Gwalior. The learned III Additional District Judge, before whom the appeal came up for hearing, agreed with the view taken by the learned trial Judge and confirmed the order granting stay of further proceedings in the suit and dismissed the appeal. Undaunted even by this second rejection plaintiff approached the High Court in revision under Section 115 of the Civil P. C. The learned Judge, though his attention was drawn to the binding decision of the Division Bench of the same High Court, did not refer to it in the judgment and relied upon a decision of the Andhra Pradesh High Court in Bajaj International v. Indian Tobacco Suppliers, AIR 1978 Andh Pra 80, and held that an application for filing reply to a notice of motion for interim injunction is a step taken in the proceeding which would disentitle the party from invoking the arbitration agreement. In support of this conclusion the learned Judge also relied upon Abdul Quddoos v. Abdul Gani, AIR 1954 Nag 332, which decision clearly does not support any such proposition. The learned Judge further observed that even if the view that the application filed by the 2nd defendant praying for time to reply to the notice of motion for interim injunction may not be treated as a step in the proceeding, yet the 1st defendant would not be entitled, to a discretionary order under S. 34 of the Act on the ground that one of the conditions, necessary for invoking the jurisdiction of the Court under Sec. 34 is not satisfied inasmuch as nowhere in the application the 1st defendant has stated that the 1st defendant at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration. For this additional reason which was never urged on behalf of the plaintiff either in the trial Court or in the 1st appellate, Court and as would be presently pointed out which is contrary to the record the High Court interfered in revision, set aside the order of the trial Court granting stay and confirmed by the appellate Court and rejected the application for stay of proceedings in the suit. Hence this appeal by special leave. Section 34 of the Act reads as under: "34. Where any party to an arbitration agreement or any person claiming under him commences 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 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." The contours of the controversy are confined to one of the negative requirements of Section 34 to be fulfilled by a party seeking the discretionary relief of stay of proceedings to qualify for the same. It is not necessary to reproduce all the relevant conditions for attracting the application of S. 34. One of the conditions to be satisfied before an order under Sec. 34 can be obtained is that the party to the legal proceeding has at any time before filing a written statement or taking any other steps in the proceedings applied to the judicial authority for stay of proceedings. In other words, a party seeking stay of proceedings must move the Court with an application under S. 34 before filing the written statement to the suit or before taking any other steps in the proceedings. Admittedly, application in the present proceedings was filed before filing the written statement. The question. is whether the second pre-condition is satisfied in that the application under Sec. 34 was filed before taking any other steps in the proceedings. What does the expression 'before taking any other steps in the proceedings' signify Before ascertaining the scope and ambit of the, expression it would be worthwhile to briefly narrate the raison d'etre for prescribing this condition.;

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