- (1.)RESPONDENT/plaintiff sued the appellant/defendant for recovery of an amount of Rs. 10,000/-. The summary procedure under Section 37, Code of Civil Procedure, was adopted for the trial of that suit. On 4-8-1978, the trial Court directed summons to be issued to the defendant in Form IV in Appendix B, Code of Civil Procedure. On 24-10-1978, the trial court held that the appellant was duly summoned and did not appear and, therefore, he was proceeded ex parte. On 15-11-1978, an ex parte decree was passed. It appears that thereafter the appellant applied fur setting aside the ex parte decree. That application was allowed and the ex parte decree was set aside. This was in Miscellaneous Civil Case No. 11 of 1979. On the ex parte decree being set aside, the civil suit was again taken on its original number and on 28-7-1979, the counsel for the appellant filed registered address. The Court again directed notice in Form IV, Appendix-B, Code of Civil Procedure, to be served upon the appellant. On 28-9-1979, the respondent's counsel wanted time to file affidavit. Meanwhile the respondent came to this Court questioning the propriety of the trial Court's order setting aside the ex parte decree. That attempt failed. Then on 7-8-1981 process fee was directed to be paid for service of summons in Form IV-A in Appendix-B, Code of Civil Procedure, in terms of sub-rule (4) of Rule 3 of Order 37. Then on 13-3-1981, the appellant filed an application under Section 34 of the Arbitration Act for stay of the suit contending that the parties had agreed to settle their disputes including the claim in suit through arbitration. The application was opposed and by the impugned order has been rejected. The learned lower Court is of opinion that the appellant had taken steps in the proceedings in suit in filing the registered address and in claiming indulgence by getting ex parte decree set aside. For this the lower Court is of opinion that the appellant is not entitled to invoke the provisions of Section 34, Arbitration Act.
(2.)A party claiming stay of the suit in terms of Section 34 of the Arbitration Act has to take that step "at any time before filing a written statement or taking any other steps in the proceedings" and should also be ready and willing to do all things necessary to the proper conduct of the arbitration at the time when the proceedings were commenced and continues to be so ready and willing also at the time when he makes an application under Section 34. Taking part in the proceedings or filing the written statement by the party would indicate an intention on its part to waive the benefit of the arbitration agreement. The other steps taken in the proceedings should, therefore, be such as may tantamount to abandonment of those known rights by that party to the arbitration agreement. As pointed out in Food Corporation of India v. Yadav Engineer, AIR 1982 SC 1302, abandonment of a right to seek resolution of dispute as provided in the arbitration agreement must be clearly manifested by the step taken by such party. Once such unequivocal intention is declared of abandonment of the right to claim the benefit of the agreement becomes manifest from the conduct, such party would then not be entitled to enforce the arbitration agreement because there is thus a breach of the agreement by both the parties disentitling both to claim any benefit of the arbitration agreement. The waiver of the right is thus of the essence. The party filing the suit or initiating other legal proceedings apparently commits that breach when instead of resorting to the arbitration agreement, it proceeds to get the matter adjudicated by a suit or other proceedings. Likewise, the other party may also do so either by filing the written statement or by taking other steps in the proceedings. What steps may amount to waiver of the right will depend upon the facts and circumstances of each case. In State of Uttar Pradesh v. Janki Saran Kailash Chandra, AIR 1973 SC 2071, application by District Government Pleader for adjournment for filing written statement was held to be a step in the proceedings. It was held that by seeking time to file written statement something was done towards the progress of the suit and it must be deemed that the party had submitted to the jurisdiction of the Court for the purpose of adjudication of the merits of the controversy in the suit.
In the case in hand, the suit was filed specifically under Order 37, Code of Civil Procedure. The various Rules and sub-rules of Order 37 prescribe a complete Code for trial and adjudication of such suits. According to sub-rule (3) of Rule 2, the defendant upon whom summons of the suit is served in Form IV in Appendix-B, has to enter appearance. If he does not so enter appearance, the allegations in the plaint shall be deemed to be admitted and a decree shall follow for an amount not exceeding the sum mentioned in the summons together with interest at the rate specified, if any, up to the date of the decree and also costs. In order, therefore, to avoid an ex parte decree, the defendant receiving such summons in Form IV must cause appearance. Such appearance by the defendant would, therefore, only prevent the Court from proceeding to pass an immediate decree which may otherwise follow in default of such appearance. Such an appearance by him only permits him to defend the suit and nothing more. By causing such appearance he becomes entitled to defend the suit. But such appearance is not indicative of any intention on his part to waive his right under the arbitration agreement. A reading of Rule 3 of Order 37, in my opinion makes the position clear. According to sub-rule (4) of Rule 3, after the defendant has entered appearance and filed an address for service of notice on him, the plaintiff shall serve on him a summons for judgement in Form 4A in Appendix B. This will be supported by an affidavit verifying the cause of action and the amount claimed and stating that in his belief there is no defence to the suit. It is then that, the defendant's participation comes up. He may at any time within ten days from the service of summons for judgement, by affidavit or otherwise disclosing such facts as may be deemed sufficient to entitle him to defend, apply on such summons for leave to defend such suit. Such leave to defend may be granted to him unconditionally or upon such terms as may appear to the Court or Judge to be just. (Sub-rule (5) of Rule 3 of Order 37). The scheme of Order 37 thus shows that the defendant has first within ten days of service upon him of a summons under Rule 2 to enter an appearance only to prevent a judgement and decree which may follow in default of that appearance. It is only when summons for judgement in Form 4A is served upon him that he has to apply for leave to defend. That is the first step which such a defendant in a suit under Order 37, Code of Civil Procedure, has to take in the suit. If he does so, he shall be certainly deemed to be taking part in the proceedings. In my opinion, however, merely entering appearance in consequence upon a summons under sub-rule (2) in Form 4, in Appendix B, does not tantamount to taking any steps in the proceedings. This entering appearance is not at all indicative of abandonment of the right to defend and does not express any intention of waiving any such right. From the facts as narrated above, it is clear that the appellant/defendant before taking any step in terms of sub-rule (S) of Rule 3 of Order 37, had only caused appearance in answer to summons under rule 2 and then only applied under Section 34 of the Act for stay of the suit. I am, therefore, of the opinion that the appellant had availed of his right to apply under Section 34 of the Act before taking any other step in the suit. The lower Court has gone wrong in holding that by entering appearance in response to summons under Rule 2 of Order 37, the appellant had taken steps towards the conduct of the suit.

(3.)LEARNED counsel for the respondent is not right in his contention that the appellant should not be permitted to avail of the arbitration agreement because he had applied for setting aside the ex parte decree and this step by him tantamounts to 'taking other steps in the suit.' The application for setting aside the ex parte decree, in my opinion, is not 'taking any other steps in the proceedings'/suit. The suit terminated on the passing of the ex parte decree consequent upon the Court's finding that the appellant/defendant committed default in appearance. Separate proceedings under Order 9 were, therefore, required to be taken for revival of the suit. These proceedings were, therefore, not in the suit but were meant for its continuance. The suit came to its original number only when the ex parte decree was set aside. Till then the defendant/appellant, according to the lower Court, had not even caused his appearance in the suit. It is only after the decree was set aside that the appellant entered appearance in the suit. I am, therefore, of opinion that in applying for setting aside the ex parte decree the appellant/defendant cannot be said to have participated in the progress of the suit.