Chhangani, J. - (1.) THIS is a defendant's appeal under Section 39(1)(v) of the Indian Arbitration Act (Act No. X of 1940) (hereinafter referred to as the Act), against the order dated 9-3-1956 of the Senior Civil judge Chum, rejecting the application of the defendants under Section 34 of the Act.
(2.) THE plaintiff Fatehchand son of Champalal of Churu instituted a suit in the court of the Civil Judge, Chum on 1-3-1955 against defendant Joharimal and 10 others for recovery of Rs. 32,500/-: Rs. 27,780/11/6 as principal and Rs. 4,719/4/6 as interest. Chainrup and Sohanlal were impleaded as pro forma defendants Nos. 12 and 13. It is not necessary to set out the case of the plaintiff for the disposal of this appeal. THE suit was registered on 2-3-1955 and 26-3-1955 was fixed for the settlement of issues. On this date, Shri Vishambhar Dayal and Shri Manoharlal, Advocates presented their Vakalatnama on behalf of Joharimal., defendant No. 1 and appeared for him. THE other defendants could not be served and, therefore, the case was adjourned to 17-5-1955, THE plaintiff of course On this date applied for making some clerical amendments in the plaint which were opposed by the defendant Joharimal's counsel, but the objection was overruled and the amendments were permitted. On 17-5-1955, the Presiding Officer of the court was on leave and nothing substantial happened. THE case was adjourned to 20-7-1955. In the meanwhile, on 27-6-1955, Shri Vishambhar Dayal, counsel for the defendant put in an application in the court for orders directing the plaintiff to arrange for inspection by the defendant of the account-books on which the suit was based as also of the original agreement referred to in paragraphs 4 and 5 of the plaint. It was mentioned that the original agreement had not been produced alone: with the plaint. This application was heard in the presence of Shri Keshav Prasad Gupta, counsel for the plaintiff on the same day and it was ordered that the documents might be inspected on 5-7-1955. However, the inspection of the documents on 5-7-1955 could not be given by the plaintiff and therefore, on 77-1055 directions for arranging inspection on 20-7-1955 were issued by the court. On 20-7-1955 Shri Manoharalal siting that he would file Vakalatnama on behalf of the defendant No. 1 requested for an adjournment for filing written statement and Vakalatnama. It may be pointed out here that Vakalatnama on behalf of Joharimal having already been filed, thy inclusion of his name in connection with a promise to file Vakalatnama is evidently an error due to inadvertence. THE plaintiff produced account-books and further three more documents and the defendant was directed to inspect them. THE case was adjourned to 15-9-1955. In the meanwhile, an application was put in by Shri Vishambhar Dayal on behalf of Joharimal on 25-7-1955 in which it was stated that the inspection of account- books was being carried on and that the inspection revealed a number of irregularities is the maintenance of the books. It was, therefore, prayed that the account-books should be secured and kept in the custody of the court. Later on, however, on 12-8-1955, an application under Section 34 of the Act was presented requesting the court to stay the proceedings in view of an alleged agreement between the parties to get their dispute settled by arbitration. On 16-9-1955, the Presiding Officer of the court was again on leave and Shri Manoharlal again sought an adjournment to file Vakalatnama and written statement on behalf of defendants Nos. 2 to 11 and the case was fixed for 18-11-1955. On the last mentioned date, Shri Manoharlal presented Vakalatnama and again requested for time to file written statement. It was represented that some of the defendants have been residing in Pakistan and it, therefore, became necessary to request for an adjournment and the case was fixed for 27-1-1956 for filing written statement. It was also mentioned in the proceedings that the plaintiff should submit his reply to the defendants' application dated 12-8-1955 filed under Section 34 of the Act. On 27-1-1956 Shri Manoharlal, Advocate, again presented a written application requesting for time to file written statement. In this application, it was stated that Hansraj defendant who is acquainted with the matter arising out of the suit was at Kishanganj (Behar) and on account of Satyagarh there, he could not go to Churu. The other defendants were in Pakistan and they also could not go to Churu. In support of this, a telegram received from Shri Hansraj was also placed on record. On this application, the case was adjourned to 8-3-1956 for filing written statement and arguments on the application dated 12-8-1955. On 8-31956, the plaintiff put in a detailed reply mentioning the various steps taken by the defendant in the proceedings and opposed the application for stay, and the same was dismissed on 9-3-1956. Hence, this appeal by the defendants. It appears that the trial court treated this application as one on behalf of Joharimal alone, and the case with regard to the other defendants in this connection does not appear to have been considered. As nobody appeared on behalf of the plaintiff-respondent, we heard Shri Chandmal, advocate for the defendant-appellants only. In challenging the decision of the lower court, Shri Chandmal has raised the following contentions: 1. An application for time to file written statement or any other similar step should not be treated as a matter of law "a step in the proceeding" in terms of Section 34 of the Act. In order that the presentation of an application may be such a step, the application must be of such a nature as to lead the court to the conclusion that the party prefers to have his rights and liabilities determined by the court rather than by the domestic forum upon which the parties might have agreed. It must display an unequivocal intention to proceed with the suit and to abandon the right to have the matter disposed of by arbitration. As nobody was representing the plaintiff-respondent, Shri Chandmal placed a number of authorities irrespective of the consideration whether they supported his contention or not. On the view propounded by him, Shri Chandmal argued that the various applications presented on behalf of the defendant Joharimal having been made in ignorance of his rights under the arbitration clause, they could not be taken to have unequivocally expressed their intention to elect against the arbitration clause so as to bar the hearing of the application for stay of proceedings. 2. In the alternative, he contended that the other defendants adopted the application of Joharimal under Section 34 and that at that time, when the application was filed, the other defendants had not taken any step whatsoever. It was, therefore, submitted that the application was a good application so far as other defendants were concerned and the trial court seriously erred in rejecting the application in these circumstances. At the outset, we may notice the decision of this Court in Chitra Prakash Film Exchange Ltd. v. Motilal, ILR (1953) Kai 1021. It was observed in that case that practically all the High Courts are unanimous that an application by the defendant for adjournment for the purpose of filing a written statement itself amounts to taking step in the proceedings. Roop Kishore v. United Provinces Government, AIR 1945 All 24, was cited with approval, which contained the observation that in some cases, such an application may not be a step in the proceedings. The learned Judges also referred to the case of Premnath v. Amba Prasad, AIR 19411 Lah 64, where an application for adjournment was not treated as a step in the proceedings On the ground that the defendant had not received a copy of the plaint along with the summons and pointed as one instance contemplated in Roop Kishore's case, AIR 1945 All 24. Shri Chandmal does not dispute the correctness of this decision. He, however, contends that the precise question raised by him regarding the necessity of determining the step in proceedings by a reference to the tests indicated above was not specifically discussed and determined in this case. He points out that the Court having held that some applications for adjournment for filing written statements may not amount to requisite steps in terms of Section 34 of the Act, the decision does not debar the consideration and adjudication of his contention-based upon the test indicated above.
(3.) THE point is of importance and in view of the expanding commercial activities and the increasing practice in the commercial world of entering into agreements for reference of disputes to arbitration and of incorporating arbitration clauses in general agreements, we examined a number of English and Indian cases including those cited by Shri Chandmal to find out a workable, if not a theoretically, perfect and scientific definition of the expression, "step in. proceedings" occurring in Section 34 of the Act and for finding out the ratio for determining it. It may be mentioned at this stage that Section 4 of the English Arbitration Act of 1889 corresponds with Section 34 of the Act and, therefore, cases under the English law can be usefully considered in interpreting Section 34 of the Act. The leading English case is Ives and Barker v. Willans, 1894-2 Ch 478. The facts of this case were that the plaintiffs issued a writ against the defendant; the defendant entered an appearance to the praecipe, and by a formal document, he required a statement of claim. That was contemporaneous with the entry of the appearance. Then, he wrote a letter to the plaintiffs' solicitors, saying that he should desire a statement of claim. It was argued in that case that requiring a statement of claim amounted to taking a step in the proceedings. Repelling this argument, the learned Law Lord. Lord Lindley observed as follows: "That he knew what the contract was I do not doubt but he did not know from the writ what the particular breaches were in respect of which the plaintiffs were suing him, and, until he did not know that, at all events, how was he to form an opinion as to whether it would be desirable to apply for an order or not? He had not the materials before him in the matter and, it appears to me, therefore, that we should be doing an, injustice to a defendant if we said that he must apply under the section for an order to refer before he knows what the plaintiff is suing him for. Quite apart from the case not being within the words, therefore, it is not within the spirit or the sense of the Act." The learned Law Lord then defined the step in the proceedings in the following terms : "The authorities show that a step in the proceedings means something in the nature of an application to the court, and not mere the 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 sensev a step in the proceedings." The decision in the case is indeed unchallengeable and has never been challenged. But the general observations made in the case are, however, capable of varying interpretations and contained the seed for subsequent controversies. In fact, on their basis, submissions were made to interpret Section 4 as Incorporating the principle of election. In a later case. Ford's Hotel Co. Ltd. v. Barlett, 1896 AC 1, Lord Holsbury L. C., held in very general terms that taking out a summons for time to deliver defence amounts to a step in the proceedings. The other Law Lords agreed with him. Lord Shand while agreeing with the decision of Lord Halsbury, made further observations to the following effect: "The proceeding of presenting such a summons and supporting it before the matter was unquestionably judicial and implied a statement to the effect that the appellants were to defend their action. Having regard to the provisions of the Arbitration statute, this appears to me to have been in effect an abandonment of the proposal to have the subject of the cause disposed of by arbitration." ;