http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 20  

PETITIONER: FOOD CORPORATION OF INDIA & ANR.

       Vs.

RESPONDENT: YADAV ENGINEER & CONTRACTOR

DATE OF JUDGMENT06/08/1982

BENCH: DESAI, D.A. BENCH: DESAI, D.A. SEN, A.P. (J) ISLAM, BAHARUL (J)

CITATION:  1982 AIR 1302            1983 SCR  (1)  95  1982 SCC  (2) 499        1982 SCALE  (1)591  CITATOR INFO :  F          1989 SC 635  (9)  F          1990 SC 893  (6)

ACT:      Arbitration Act  1940-Section 34-scope  of-"Taking  any other steps  in the proceedings" meaning of-notice of motion taken out  by  plaintiff  for  interim  injunction-Defendant appeared and  prayed for  time to  reply-Defendant’s  action whether "step taken in the proceedings".      Practice : attention of single Judge drawn to a binding decision of  Division Bench  of the same High Court-Decision not adverted to-Decision contrary to that of Division Bench- Propriety of.

HEADNOTE:      Section 34  of the  Arbitration Act  1940 provides that where  one  of  the  parties  to  an  arbitration  agreement commences any  legal proceedings  against the other party in respect of  any matter agreed to be referred to arbitration, any party  to such  legal proceedings may at any time before the filing  of 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 the authority on being satisfied that the opposite party is ready  and willing  to do  all things  necessary  to  the proper conduct  of the arbitration make an order staying the proceedings.      The contract  entered into  by the  respondent with the appellant Corporation for handling and transportation of the Corporation’s  goods   contained   an   arbitration   clause authorising the  Managing Director  of  the  Corporation  to appoint an  arbitrator in respect of any dispute arising out of the contract between the parties.      Apprehending breach of contract, the respondent filed a suit for  a declaration  that the contract was subsisting on the date  of the  suit. The  respondent  prayed  for  an  ad interim injunction  against the  Corporation restraining  it from committing  breach of the contract. On the notice being issued the  District Manager  of  the  Corporation  appeared before the  Court and  sought time  to  file  reply  to  the application for  interim injunction.  On  the  next  day  an

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 20  

application was  filed on  behalf of the corporation that it was fully  ready and willing to have the dispute resolved by arbitration under  the subsisting  arbitration agreement and prayed that  the suit be stayed as provided in section 34 of the Arbitration Act 1940. 96      The respondent alleged that section 34 was inapplicable in that  when the  District Manager  sought time  to file  a reply to  the notice  for interim injunction, it was a "step taken in the proceedings" within the meaning of section 34.      Negativing the  respondent’s plea  the Trial Court held that the  dispute was  covered by the arbitration clause. It granted stay  of further  proceedings in  the suit  and this view was  upheld by  the District  Judge in the respondent’s appeal.      In the  revision petition  filed in  the High  Court  a single Judge  although his  attention was drawn to a binding precedent of  a  Division  Bench  of  the  same  High  Court supporting the  view that  an application for filing a reply to the  notice of  motion taken  out by  the  plaintiff  for interim  injunction   was  not   a  "step   taken   in   the proceedings", without  adverting to that decision, held that an application  of this  nature was  a "step  taken  in  the proceedings" and  that this disentitled the Corporation from invoking the arbitration agreement.      On the  question whether,  where there  is a subsisting valid arbitration agreement between the parties, entering an appearance and contesting a petition or notice of motion for interlocutory order  constitutes a "step in the proceedings" as would  disentitle the  party to an order under section 34 of the Arbitration Act.      Allowing the appeal, ^      HELD: Contesting the application for interim injunction or for  appointment of  a receiver  or for interim relief by itself, without  anything more, would not constitute a "step in the  proceedings" as  would disentitle  the party  to  an order under section 34 of the Arbitration Act. [119 F]      1. (a)  Section 34 envisages that before a party to the arbitration agreement  seeks stay  of the  suit filed by the opposite party it must disclose its unequivocal intention to abide by the arbitration agreement; but once the party takes steps which  may indicate its intention to waive the benefit of the  arbitration agreement or abandons the right to claim the benefit  by conduct, such party would not be entitled to enforce the  agreement because  there is  a  breach  of  the agreement by  both parties  disentitling them  to claim  any benefit of the arbitration agreement. [105 D]      Ramji Dayawala  & Sons (P) Ltd. v. Invest Import [1981] 1 S C.R. 899, followed.      (b) The  general words  "taking any  other steps in the proceedings"  follow   the  specific  expression  "filing  a written statement"  and both are used for achieving the same purpose. Therefore  the latter  general expression  must  be construed ejusdem  generis with the specific expression just preceding  to  bring  out  the  ambit  of  the  latter.  The expression  "written   statement"  is  a  term  of  specific connotation ordinarily  signifying a  reply  to  the  plaint filed by the plaintiff. [106 E] 97      (c) The  expression "taking  any  other  steps  in  the proceedings" does  not mean  that every  step taken  in  the proceedings would  come in  the way  of enforcement  of  the arbitration agreement;  the  step  must  be  such  as  would clearly and  unambiguously manifest  the intention  to waive

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 20  

the benefit of arbitration agreement and to acquiesce in the proceedings commenced  against the  party  and  to  get  the dispute resolved by the court. Interlocutory proceedings are incidental to the main proceedings and stand independent and aloof  of   the  main   dispute.  When  these  interiocutory proceedings are  contested it  cannot be said that the party contesting them  had displayed  an unequivocal  intention to waive the  benefit of  the arbitration  agreement or that it had submitted to the jurisdiction of the court. [109 E-H]      Uttar Pradesh  v. Janki  Saran Kailash Chandra [1974] 1 S.C.R. 31, referred to.      Sansar Chand  Deshraj v.  State of  Madhya Pradesh  AIR 1961 MP 322; Nuruddin Abdulhussein v. Abu Ahmed Abdul Jalli, AIR 1950  Bom. 127; Anandkumar Parmanand Kejriwala & Anr. v. Kamaladevi Hiralal  Kejriwal,  AIR  1970  Bom.  231;  Queens College Kanetra  & Anr.  v. The  Collector, Varanasi & Ors., AIR 1974  All. 134;  Biswanath Rungta v. Oriental Industrial Engineering Co.  Pvt. Ltd.  & Ors., AIR 1975 Cal. 222; State of Gujarat  & Ors.v.  The Ghanshyam Salt Works AIR 1979 Guj. 215; Arjun Agarwalla v. Baidya Nath Roy & Ors. AIR 1980 Cal. 354; and  M/s. Bhonrilal  Hiralal &  Ors. v.  Prabhu Dayal & Anr., AIR 1980 Raj. 9, approved.      Subal Chandra Bhur v. Md. Ibrahim & Anr., AIR 1943 Cal. 484; Amritraj  Kothari v.  Golcha Financiers,  AIR 1966 Cal. 315; P.  Gannu Rao  v. P.  Thiagaraja Rao  & Anr.,  AIR 1949 Madras 582  and Kunta  Malla Reddy  v. Soma Srinivas Reddy & Ors., AIR 1978 A.P. 289, not approved.      In  the  instant  case  the  District  Manager  of  the Corporation only  appeared before  the court in obedience to the notice on the notice of motion taken out for ex parte ad interim  injunction  and  prayed  for  time  to  reply.  The proceedings of  the court  did not  disclose any step having been taken  by the  Corporation in  the proceedings as would disentitle the  Corporation to  an order  under section  34. Moreover, the  application for  stay filed  on behalf of the Corporation clearly  stated that the "defendant is ready and willing ’ichuck’  for this  purpose" which means that it was ready and  willing to  proceed  with  the  arbitration  when commenced. [119 H]      2. If  a single  Judge hearing  a matter is inclined to take a  view contrary  to the earlier decision of a Division Bench of the same High Court it would be judicial improriety to ignore  that decision  but after referring to the binding decision he  may direct that the papers be placed before the Chief Justice  of the High Court to enable him to constitute a larger  division bench  to examine  the question. Judicial comity demands  that a  binding decision  to which attention had been  drawn should  neither be  ignored nor over-looked. [112 G-H] 98      In the  instant case  although attention  of the single Judge was  drawn to the binding decision of a Division Bench of the  same High  Court he  did not  refer to it but relied upon the  decision of  another High  Court  which  took  the contrary view.

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3317 of 1981.      Appeal by  Special leave  from the  judgment and  order dated the  20th November.  1981 of  the Madhya  Pradesh High Court in Civil Revision No. 696 of 1981.      K.K. Venugopal and S.K. Gambhir for the Appellant.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 20  

    Soli J. Sorabjee, D.K. Katare and S.S. Khanduja for the Respondent.      The Judgment of the Court was delivered by      DESAI, J.  A fond  hope that  a decision  of this Court with the  sanction of  Article 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.      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  & Contractor, a partnership  firm filed a suit 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 defendant 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 some one 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  Order XXXIX, rules 1 and 2 read with s. 151 of the Code  of   Civil  Procedure,   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 Corpora- 99 tion 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 arbritrator 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 s. 34 of the Arbitration Act, 1940 (’Act’ for short).      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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 20  

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  Madhya Pradesh.(1)  The learned  judge accordingly granted stay 100 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  s.  115  of  the  Code  of  Civil Procedure. 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 Adhara  Pradesh High Court in Bajaj International v.  Indian Tobacco  Suppliers(1) 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  Qudoos  v.  Abdul  Gani,(2)  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  s. 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 101           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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 20  

         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 s.  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 s.  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  s. 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.      Ordinarily as  provided in  s. 9  of the  Code of Civil Procedure all  suits of a civil nature except suits of which cognizance is  either expressly or impliedly barred would be triable by the courts set up for the purpose. If the dispute is of a civil nature the forum is one or the other court set up for the purpose. The State courts have been 102 set up  for an easy access by persons who seek resolution of their disputes.  They must  be disputes  of civil nature and the cognizance of which is not either expressly or impliedly barred. Civil  courts set  up by  the State  having  defined jurisdiction will  be  the  forum  for  resolution  of  such disputes. Ordinarily,  therefore, whenever  a dispute  of  a civil nature arises the party claiming relief would approach the court  having jurisdiction  to resolve  the dispute. The party against  whom relief is sought will be informed of the cognizance of  the dispute  being taken  by the court and it must come  forth and  either concede  that  the  dispute  is genuine in  whole or in part or defend the action. Sometimes a dispute  as to  jurisdiction, territorial or pecuniary, is raised but  apart from such specific exclusions claimed by a party civil  courts are  set up with the object of resolving civil disputes.  A forum  thus may  readily be available and presumed to  be easily  accessible. This  is the  prescribed mode of  access to  justice. Arbitration  Act carves  out an exception to  the general rule that the forum for resolution of civil  disputes is the civil court having jurisdiction to deal with  the same  by providing  that  the  parties  to  a dispute by  agreement unto  themselves may choose a forum of their choice  for settlement  of disputes  between  them  in preference to  the State  Courts.  Undoubtedly,  for  making these agreements  enforceable sanction  of law is necessary. That is the object underlying the Act. Industrial revolution bringing    into    existence    international    commercial transactions led to a search for finding a forum outside the municipal law courts involving protracted and dilatory legal process  for  simple,  uninhibited  by  intricate  rules  of evidence and  legal grammar.  This explains resort to forums for arbitration  at international  level. No two contracting

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 20  

parties are  under any  legal obligation  to provide  for an arbitration  agreement.   If  the   parties  enter  into  an arbitration agreement implying that they would like that the disputes covered  by the  agreement will  be resolved  by  a forum of  their choice,  the approach  of the  court must be that parties  to the  contract are held to their bargain. If in breach  or derogation  of a solemn contract a party to an arbitration agreement  approaches the court and if the other side expeditiously approaches the court invoking the court’s jurisdiction  to  stay  the  proceedings  so  that  by  this negative process  the court  forces the  parties to abide by the bargain,  ordinarily the  court’s approach should be and has been to enforce agreements rather than to find loopholes therein. More  often it  is found  that solemn contracts are entered into  on the clearest understanding that any dispute arising out of the contract 103 and  covered   by  the   contract  shall   be  referred   to arbitration. It  may be  that one or the other party may not have  entered  into  the  contract  in  the  absence  of  an arbitration  agreement.  Therefore  when  in  breach  of  an arbitration agreement a party to the agreement rushes to the court, unless  a clear  case to the contrary is made out the approach of  the court  should be  to hold  parties to their bargain provided necessary conditions for invoking s. 34 are satisfied.      Arbitration Act  prescribes various methods by which an arbitration agreement  can be  enforced. Section  20 enables parties to an arbitration agreement to approach the Court in the circumstances therein mentioned for a direction that the agreement be  filed in the court and on such agreement being filed the  Court is  empowered to make an order of reference to the  arbitrator. Provisions  of Chapter  IV  provide  for arbitration in suits. Section 34 prescribes one other method of  enforcing   arbitration  agreement  if  a  party  to  an arbitration agreement  in breach  of it approaches the court and files  a suit  in respect  of a  dispute covered  by the arbitration agreement.      Section 34 prescribes a method by which the other party to the  arbitration agreement  by satisfying  the conditions prescribed in s. 34 can enforce the arbitration agreement by obtaining an  order of stay of the suit. It is crystal clear that once  the suit is stayed the party who in breach of the arbitration agreement  approaches the  court for relief will be forced  to go  to arbitration  and thus the court by this negative attitude  of declining  to proceed further with the proceedings brought  before it would enforce the arbitration agreement. In  order, therefore,  to satisfy  the court that the other  party to  the arbitration  agreement who would be defendant in  the suit  is ready and willing to abide by the arbitration agreement  and ready to take all steps necessary for the proper conduct of the arbitration, it must show that it  is  not  waiving  or  abandoning  its  right  under  the arbitration agreement  or submitting  to the jurisdiction of the court  thereby  accepting  the  forum  selected  by  the plaintiff for  resolution of  dispute and acquiescing in it. In order to steer clear of this charge the provision is made in s.  34 for  an application by the party who is brought to the court by the opposite party in breach of the arbitration agreement to  apply  for  stay  before  filing  the  written statement  or   before  taking   any  other   steps  in  the proceeding. This 104 explains the  purpose and  object underlying  the  provision contained in s. 34.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 20  

    The contention  and the resultant issue in dispute must now be  neatly framed.  The primary issue is: what action on the part  of the defendant who is sued in a court of law and who has  a subsisting  valid arbitration  agreement with the plaintiff, would  constitute step in the proceeding so as to disentitle him  to stay of the suit which, if granted, would enable him  to enforce  the arbitration  agreement  ?  Would entering an  appearance and contesting petition or notice of motion for  interlocutory order  constitute such step in the suit or  proceedings as  would disentitle  the party  to  an order under  s. 34  ? The subsidiary point is, whether where in a  suit filed  in a  court, a  prayer for  an ex parte ad interim injunction  is made either by an application or by a notice of  motion or  an application is made for appointment of a  receiver and  either ex parte ad interim injunction is granted or  ex parte receiver is appointed and the copies of the pleadings  and the  order are served upon the defendant, if the  defendant appears  and requests  the court either to vacate the  injunction or  discharge the  receiver or modify the orders  without filing  a written statement or making an application for  filing a  written statement  to the plaint, could he  be said to have taken a step in the proceedings so as to disentitle him from obtaining stay of the suit ?      Let the  precedents rest  for the time being and let an attempt be  made to  ascertain the  underlying intendment in enacting the  condition in  s. 34 which prescribes a mode of enforcing the  arbitration agreement to the effect that if a party to  an arbitration  agreement commences  an action the other party  to the  agreement, if it desires to enforce the agreement, may  seek stay  of the  suit before either filing written statement  or taking  other steps in the proceeding. Ordinarily  the   court  would   respect  the   sanctity  of contracts. A valid arbitration agreement between the parties obliges both  the parties  to the agreement to act according to the terms of the agreement. A valid arbitration agreement envisages resolution  of dispute by a forum of the choice of the parties  and displaces  the state  courts. Ordinarily, a party to  a valid  arbitration  agreement  is  not  entitled unilaterally to  commit a  breach of the agreement or ignore the agreement.  Now, if  a party to an arbitration agreement has a  dispute to be resolved arising out of the contract in which the  arbitration agreement is Incorporated and instead of invoking the 105 arbitration agreement by inviting the parties to appoint the arbitrator it rushes to the court in breach of the agreement and files a suit, the other party is undoubtedly entitled to enforce the  agreement. True,  the other  party  is  equally entitled to  waive the benefit of the arbitration agreement. If the  other party  desires to  waive the  benefit  of  the agreement it  can appear  in the  suit and contact the suit. Such conduct  would demonstrably  show that both the parties have  waived   the  benefit  flowing  from  the  arbitration agreement of  getting the dispute between them resolved by a forum of  their choice.  But if the first party in breach of the agreement  files a suit the other party to the agreement must  have   an  option   and  opportunity  to  enforce  the arbitration agreement.  Section 34  prescribes  a  mode  and method of  enforcing the arbitration agreement. When a party to the agreement has filed a suit in breach of the agreement and the  other party  to the  agreement is  dragged  to  the court, by  staying the  suit at  the instance  of the  other party so  dragged to  the court the first party consequently would be  forced to  honour the  arbitration agreement.  But before the  other party  to  the  arbitration  agreement  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 20  

entitled to enforce the arbitration agreement by stay of the suit it  must disclose its unequivocal intention to abide by the agreement  and, therefore, s. 34 obliges such a party to ask for  stay of  the proceedings  before such a party takes any steps  which may unequivocally indicate the intention to waive the  benefit of the arbitration agreement. 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 or 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. Section 34 provides that a party dragged to  the court as defendant by another party who is a party to  the arbitration agreement must ask for stay of the proceedings before  filling the  written statement or before taking any  other step  in the  proceedings. That party must simultaneously show  its readiness and willingness to do all things necessary  to the  proper conduct of the arbitration. The legislature  by making it mandatory on the party seeking benefit of  the arbitration  agreement to  apply for stay of the proceedings  before  filing  the  written  statement  or before  taking   any  other   steps   in   the   proceedings unmistakably  pointed   out  that   filing  of  the  written statement discloses such conduct on 106 the part  of the party as would unquestionably show that the party  has   abandoned  its  rights  under  the  arbitration agreement and  has disclosed  an  unequivocal  intention  to accept the  forum of the court for resolution of the dispute by waiving  its right to get the dispute resolved by a forum contemplated by  the arbitration  agreement. When  the party files  written  statement  to  the  suit  it  discloses  its defence, enters  into a  contest and  invites the  court  to adjudicate upon  the dispute.  Once the  court is invited to adjudicate upon  the dispute  there is  no question  of then enforcing an arbitration agreement by forcing the parties to resort to  the forum  of their  choice as  set  out  in  the arbitration agreement.  This flows  from  the  well  settled principle that  the court would normally hold the parties to the bargain  (see Ramaji  Dayawala & Sons (P) Ltd. v. Invest Import).(1)      Apart from  filing written  statement, what  other step did the  legislature  contemplate  as  being  taken  in  the proceedings which  would disentitle  the party  to the  suit from obtaining  stay of the proceedings which would have the effect of  enforcing the  arbitration  agreement  ?  General words ’taking  any other  steps  in  the  proceedings’  just follow the  specific expression ’filing a written statement’ and both are used for achieving the same purpose. Therefore, the latter  general expression  must  be  construed  ejusdem generis with the specific expression just preceding to bring out the  ambit of  the latter Expression ’written statement’ is a  term of  specific connotation  ordinarily signifying a reply to  the plaint  filed by the plaintiff. Therefore, the expression ’written statement’ in s. 34 signifies a specific thing, namely,  filing an  answer on  merits to  the  plaint filed by  the plaintiff.  This specific  word is followed by general words  ’taking any  other steps in the proceedings’. The principle  of ejusdem  generls must  help in finding out the import  of the  general  words  because  it  is  a  well established  rule  in  the  construction  of  statutes  that general  terms  following  particular  ones  apply  to  such

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 20  

persons  or   things  as  are  ejusdem  generis  with  these comprehended in  the language of the legislature. In Ashbury Railway Carriage  & Iran  Co. v.  Riche,(2) the  question of construction of  the object  of  a  Company:  ’to  carry  on business of  mechanical engineers  and general contractors’, came in for consideration and 107 it was  said that  the generality of the expression ’general contractors’ was  limited to  the previous words ’mechanical engineers’ on  the principle  of ejusdem  generis. Filing of the  written  statement  would  disentitle  the  party  from seeking enforcement  of arbitration  agreement by  obtaining stay of  proceedings because  it is such an act on behalf of the party  entitled to  enforce  the  arbitration  agreement which would  disclose unequivocal  intention of the party to give up  the benefit of the arbitration agreement and accept the  method  in  preference  to  the  one  set  out  in  the arbitration agreement  to the one adopted by the other party by filing  the suit  and get the dispute adjudicated upon by the machinery  of the  court.  If  this  is  the  underlying intendment in  providing that  application for  stay of  the proceedings must  be filed  before the filing of the written statement, the  same conclusion  must follow when instead of filing the  written statement the party has taken some other step  in   the  proceedings.   That  some  other  step  must indisputably be  such step  as would  manifestly display  an unequivocal intention  to proceed  with the suit and to give up the  right to have the matter disposed of by arbitration. Each and  every step taken in the proceedings cannot come in the way  of the  party seeking  to enforce  the  arbitration agreement by  obtaining stay  of proceedings  but  the  step taken by  the party  must be  such step as would clearly and unmistakebly indicate an intention on the part of such party to give  up the  benefit of  arbitration  agreement  and  to acquiesce in the proceedings commenced against the party and to get  the dispute  resolved by  the court. A step taken in the suit  which would  disentitle the  party from  obtaining stay of  proceeding must  be such  step as  would display an unequivocal intention  to  proceed  with  the  suit  and  to abandon the  benefit of  the arbitration  agreement  or  the right to get the dispute resolved by arbitration.      If the  step in  the proceedings  contemplated by s. 34 must be  such  step  as  would  clearly,  unambiguously  and unequivocally disclose the intention of the party taking the step to  give up the benefit of the arbitration agreement or its right of getting the dispute resolved by arbitration and to acquiesce in the methodology of resoluution of dispute by court, would  an  appearence  in  the  suit  for  contesting interlocutory   applications   such   as   application   for appointment of  receiver or  ex parte ad interim injunction, mandatory or  prohibitory, and contesting the same be a step which would  disclose an  unequivocal intention  to  proceed with the suit and to give up the benefit 108 of the  arbitration agreement  ? That  is the controversy in the appeal before us.      Arbitration agreement generally provides for resolution of disputes  either present  or future  by a  forum  of  the choice of  the parties.  Ordinarily,  arbitration  agreement finds  its  place  in  contracts.  Apprehending  that  while preforming contract  some disputes  may arise, care is taken to incorporate  an arbitration  agreement  in  the  contract itself  prescribing   the  forum   for  resolution  of  such disputes. To  illustrate, partnership  contracts incorporate arbitration agreement for resolution of disputes arising out

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 20  

of the  contract of  partnership. Building  contracts  these days  incorporate   arbitration  agreements.   International commercial   transactions   also   incorporate   arbitration agreements. The purpose underlying entering into arbitration agreement is  to provide  for resolution of disputes arising from the contract between the parties. Now, if a party to an arbitration agreement files a suit seeking relief in respect of disputes arising from the contract the other party to the agreement can  either waive  the benefit  of the arbitration agreement  and   acquiesce  in   the  suit  or  enforce  the arbitration agreement.  Such conduct  has specifically to be in relation  to disputes  covered by  arbitration agreement. But if  a party to an arbitration agreement files a suit and simultaneously moves an interlocutory application such as an application for appointment of receiver, usually to be found in  suits  for  dissolution  of  partnership  and  rendering accounts, or  for  an  interim  injunction  to  ward  off  a threatened or  continuing breach  of  contract,  irreparable harm would be suffered by the other party to the arbitration agreement if it cannot contest the interlocutory application on  the  pain  of  abandoning  the  benefit  of  arbitration agreement.   A   concrete   illustration   would   be   both illuminating and  convincing. In  a suit  for dissolution of partnership and  accounts an  application for appointment of receiver as  also  an  application  for  interim  injunction restraining the  defendant from  using the partnership goods or assets  for continuing  the business are filed. The court passes ex parte interim order and issues notice calling upon the defendant  to show cause why the same should not be made absolute. In  a running  business appointment  of a receiver would thoroughly  dislocate the  business and  an injunction would bring  to standstill  the flourishing business. If the defendant  appears   and  contests   the   application   for appointment  of   receiver  as   also  the  application  for injunction, could he be said to display an unequivocal 109 intention  to   give  up  the  benefit  of  the  arbitration agreement and to acquiesce in the suit ? The dispute between the parties  is whether  the partnership should be dissolved as per  the  contract  of  partnership.  Interim  injunction application or  application for appointment of receiver have nothing to  do directly  or substantially  with the terms of the partnership.  The main  or substantial  dispute will  be covered  by   the  plaint  filed  in  the  suit.  Incidental proceedings for  appointment  of  receiver  or  for  interim injunction are  for the protection either of the property or the interests  of the parties. Now, when ex parte orders are obtained on  ex parte  averments the  other party  cannot be precluded from  coming and pointing out that no case is made out for  granting interim reiief. It would be too cumbersome to expect  the party first to apply for stay and then invite the court  under  s.  41  (2)  of  the  Act  to  vacate  the injunction  or   to  discharge   the  receiver.  Giving  the expression ’taking  any other steps in the proceedings’ such wide connotation as making an application for any purpose in the suit such as vacating stay, discharge of the receiver or even modifying  the interim  orders would  work hardship and would be  inequitous to the party who is willing to abide by the arbitration  agreement and  yet be  forced to suffer the inequity of  ex  parte  orders.  Therefore,  the  expression ’taking any  other steps in the proceedings’ must be given a narrow meaning  in that  the step  must be taken in the main proceeding of  the suit  and it  must be  such step as would clearly and  unambiguously manifest  the intention  to waive the benefit of the arbitration agreement and to acquiesce in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 20  

the proceedings. Interlocutory proceedings are incidental to the main  proceedings. They have a life till the disposal of the main proceeding. As the suit or the proceeding is likely to take  some time before the dispute in the suit is finally adjudicated, more  often interim  orders have to be made for the  protection   of  the   rights  of   the  parties.  Such interlocutory proceedings stand independent and aloof of the main dispute  between the parties involved in the suit. They are steps  taken for facilitating the just and fair disposal of the  main dispute.  When these  interlocutory proceedings are contested  it cannot  be said  that the party contesting such proceedings  has displayed  an unequivocal intention to waive the  benefit of  the arbitration  agreement or that it has submitted  to the  jurisdiction of  the court.  When  ex parte orders  are made  at the  back of  the party the other party is forced to come to the court to vindicate its right. Such compulsion  cannot disclose an unambiguous intention to give up the benefit of the arbitration 110 agreement.  Therefore,   taking  any   other  steps  in  the proceedings  must   be  confined  to  taking  steps  in  the proceedings for resolution of the substantial dispute in the suit.   Appearing    and   contesting    the   interlocutory applications  by   seeking  either   vacation   thereof   or modification thereof  cannot be  said to  be  displaying  an unambiguous intention  to acquiesce in the suit and to waive the benefit  of the  arbitration agreement.  Any other  view would both  be harsh  and inequitous  and  contrary  to  the underlying intendment  of the  Act. The  first  party  which approaches the court and seeks an ex parte interim order has obviously come  to the  court in  breach of  the arbitration agreement. By  obtaining an  ex parte order if it forces the other party  to the  agreement to  suffer the  order, or  by merely contesting  be imputed  the intention  of waiving the benefit  of   arbitration  agreement,   it  would  enjoy  an undeserved advantages.  Such could  not  be  the  underlying purpose of  s. 34.  Therefore, in our opinion, to effectuate the purpose  underlying s. 34 the narrow construction of the expression ’taking  any other  steps in  the proceedings’ as herein-above set  out appears  to  advance  the  object  and purpose underlying  s. 34  and the purpose for which the Act was enacted.      Having examined  the contention  on the language of the statute, the  setting in  which it is placed, the underlying intendment and the purpose it seeks to serve, let us turn to precedents. There  is a clear cut cleavage and divergence of opinion amongst  various High  Courts. Allahabad, Bombay and later decisions  of Calcutta  High  Court,  Gujarat,  Madhya Pradesh and  Rajasthan High  Courts have taken the view that appearing and  contesting interlocutory application is not a step taken  in the proceedings so as to disentitle the party from taking  benefit of the arbitration agreement by seeking stay of  the suit.  On the  other hand, earlier decisions of Calcutta High Court, Delhi and Madras High Courts have taken a contrary view.      In Bombay  there has  been a  reference to  a  practice commended to  us by  Mr. Sorabji,  learned counsel  for  the respondent that  to avoid  the pitfall  of s.  34 even while contesting an interlocutory application the party seeking to enforce the  arbitration  agreement  must  enter  appearance under protest.  This practice  not only  does not commend to us, but way back in Nuruddin 111 Abdulhussein v. Abu Ahmed Abdul Jalli,(1), Tendolkar, J. has rejected it as one of the doubtful legal import and utility.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 20  

One must construe the section on its own language keeping in view the purpose and object of the enactment. One cannot add to the  requirement by  introducing a  practice brought into vogue by  Solicitors in Bombay, when no such practice exists elsewhere in  the country.  Section 34  is even  invoked  in rural  backward   areas.  The   highly  skilful  solicitor’s draftmanship cannot  provide as  escape route  to an  unwary litigent. We  are, therefore,  not disposed  to  accept  the suggestion that  in order  to avoid  any  pitfall  of  being denied  the  benefit  of  arbitration  agreement  the  party seeking to  enforce the  agreement must  enter an appearance under protest because we affirm what Tendolkar, J. has said. It reads as under:           "It appears  to me  therefore that the addition of           the words  ’under protest’  to an appearance filed           in court in cases not covered by O. 30, R.S. Civil           P.C., is meaningless when neither the jurisdiction           of the  Court nor  the validity  of  the  writ  or           service is  challenged. It is not challenged where           a defendant  files  an  appearance  under  protest           under the  prevailing practice  because he desires           to apply  for  stay  under  the  Arbitration  Act.           Therefore, whatever  may be  the  reason  for  the           practice which  has grown up, it seems to me clear           that there  is no  obligation on  the defendant to           follow  this   practice  of  doubtful  import  and           utility  and   he  is   at  liberty   to  file  an           unconditional appearance."      Before we  turn to  the only  decision of this Court in State of  Uttar Pradesh  v. Janki  Saran Kailash Chandra,(2) which at  one stage was expected to resolve the controversy, we may  briefly refer  to the  decisions of the various High Courts to which our attention was drawn.      We would  first refer  to the  decisions which take the view that  appearing to  contest  interlocutory  application either for  vacating the  interim orders  or modification of the same does not constitute a      (1) AIR 1950 Bom. 127.      (2) [1974] 1 S.C.R. 31. 112 step in  the proceedings which would disentitle the party to an order  of stay  under s.  34. In  Nuruddin  Abdulhussein, (supra) learned  single judge  of the Bombay High Court held that the  true test for determining whether an act is a step in the proceedings is not so much the question as to whether it is  an application-although,  of course,  that would be a satisfactory test in many cases-but whether the act displays an unequivocal  intention to  proceed with  the suit  and to give up  the  right  to  have  the  matter  disposed  of  by arbitration. In  reaching this  conclusion the  Court relied upon Ford’s  Hotel Co.  v.  Bartlett,(1)  where  Lord  Shand observed as under;           "...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". The  contention   that   when   the   defendant   filed   an unconditional appearance, presumably having reference to the practice  that   had  grown  up  in  Bombay  High  Court  of appearance under protest. it was a step in the proceeding as contemplated by s. 34 was negatived and stay was granted. In Sansar Chand Deshraj, (supra) a Division Bench of the Madhya Pradesh  High   Court  approved  the  decision  in  Nuruddin Abdulhussein, and  held that  mere filing  of a  reply to an application for  interim relief  by way  of appointment of a receiver or for issue of an injunction does not constitute a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 20  

step in the proceeding which would indicate that there is in effect abandonment  of the  proposal to  have the subject of cause disposed of by arbitration. It may be pointed out here that the  Division Bench decision of the Madhya Pradesh High Court which was in terms binding on the learned Judge of the High Court,  and it  was specifically  submitted to  us that even though  the attention  of the learned judge was invited he neither  referred  to  it  nor  distinguished  it.  Times without number  this Court  has observed that considerations of judicial  propriety and decorum require that if a learned single Judge  hearing a  matter is inclined to take the view contrary to  the earlier decision of a Division Bench of the same High  Court, it would be judicial impropriety to ignore that decision but after referring to the binding decision he may direct  that the  papers  be  placed  before  the  Chief Justice of  the High  Court to  enable him  to constitute  a larger Bench to examine the question. Judicial Comity      (1) [1896] A.C. 1. 113 demands that  a binding decision to which attention has been drawn  should   neither  be   ignored  nor  overlooked  (see Mahadeolal Kanodia  v. The  Administrator  General  of  West Bengal,(1) Shri  Bhagwan &  Anr v. Ram Chand & Anr., (2) and State of Gujarat v. Ramprakash P. Puri & Ors). (3).      In Anandkumar  Parmanand Kejriwala & Anr. v. Kamaladevi Hiralal Kejriwal,(4)  a Division  Bench of  the Bombay  High Court approved  the decision  of the learned single judge in Nuruddin Abdulhussein  and observed  that the test of making an application  being styled  as the step in the proceedings is neither  a sole  test nor  a conclusive  test and what is such a  step in  the proceedings  has been  settled  by  the decision  of   Tendolkar,  J.  The  defendant  having  filed appearance under  protest and reserved the right to move the Court for  referring the  dispute to  arbitration, contested the notice  of motion  taken out for appointment of receiver and injunction  in both  of which  ex parte  order was  made would not  constitute a  step in  the proceedings  as  would disentitle the defendant to an order under s.34.      In Queens  College Kanetra  & Anr.  v.  The  Collector, Varanasi &  Ors.,(5) the defendant first applied for stay of proceedings under  s. 34 and after the court granted stay of proceedings requested the court that the ex parte ad interim injunction be  vacated. Two  objections were taken on behalf of the  plaintiffs to  this request  of the  defendant.  One being that  when  the  suit  is  stayed  the  court  has  no jurisdiction to  deal with any part of the suit and secondly that if  the application  for ad interim injunction had been contested before  obtaining stay  of the  suit it would have been a  step in  the suit  and the  defendant would not have been entitled  to  an  order  for  stay  of  the  suit  and, therefore, his  action constituted a step in the proceeding. The Court  negatived both  the contentions and observed that there could  be no doubt that the act of the defedant to get an ex parte order of injunction vacated does not indicate an unequivocal intention  to proceed  with the suit and to give up the right to      (1) [1960] 3 SCR 578.      (2) [1965] 3 S.C.R. 218 at p. 228.      (3) [1970] 2 S.C.R. 875.      (4) AIR 1970 Bom. 231.      (5) AIR 1974 All. 134. 114 have the matter disposed of by arbitration. In reaching this conclusion the  Court approved  the decision  of the  Madhya Pradesh High  Court in  Sansarchand and  the decision of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 20  

Punjab High Court in M/s. Charandas & Sons v. M/s. Harbhajan Singh Hardit Singh.(1)      In Sri  Ram Shah  v. Mastan Singh & Ors.,(2) a Division Bench of  Allahabad High  Court  approved  the  decision  in Queens College Kanetra.      In Biswanath Rungta v. Oriential Industrial Engineering Co. Pvt.  Ltd. &  Ors.,(3) a  learned single  Judge  of  the Calcutta High  Court after referring to the decision of this court in  Janki Saran  Kailashchandra  held  that  when  the defendant sought  to  circumvent  the  ex  parte  injunction obtained by the plaintiff he could not be said to have taken such a  step in  the proceeding as would disentitle him to a relief under s. 34.      In Stata  of Gujarat  &  Ors.  v.  The  Ghanshyam  Salt Works.(4) a  learned single  Judge of the Gujarat High Court accepted the  Allahabad, Punjab and Madhya Pradesh decisions as laying  down the  correct law and dissented from the view raken in  the earlier Calcutta and Madras cases. The learned judge was  of the  view that  appearing  and  contesting  an interim injunction  application would  not constitute such a step as  would disentitle the defendant to an order under s. 34. While  reaching this  conclusion he  observed  that  the question as  to interim  relief is decided only on the basis of the  prima facie  case and nothing is decided finally. In such  a   case,  therefore,  to  prevent  a  defendant  from contesting the interim application on the pain of losing his right to  get the  dispute decided  by arbitration may, in a given case, work injustice, and a functional approach in the matter of  interpretation of  the relevant  words is  called for.      In Arjun  Agarwalla v.  Baidya Nath  Roy &  Ors.,(5)  a learned single  Judge of  Calcutta High Court did not follow the earlier  Calcutta decisions  in view  of the decision of this Court in Janki      (1) AIR 1952 Punj. 109.      (2) AIR 1970 All. 288.      (3) AIR 1975 Cal. 222.      (4) AIR 1979 Guj. 215.      (5) A.I.R. 1980 Cal. 354. 115 Saran’s case  and agreed  with  the  decision  in  Biswanaih Rungta’s case.      In M/s.  Bhonrilal Hiralal  & Ors.  v. Prabhu  Dayal  & Anr.,(1) a  learned single Judge of the Rajasthan High Court after a  review of large number of decisions agreed with the Allahabad, Bombay  and Madhya  Pradesh  and  later  Calcutta decisions  and   held   that   appearing   to   contest   an interlocutory application  is not  a step in the proceedings as would disentitle the defendant to an order under s. 34.      We would  now refer  to the set of decisions which take the contrary  view. In  Subal Chandra  Bhur v. Md. Ibrahim & Anr.(2) S.R.  Das, J.,  after referring  to Ives & Barker v. Willans,(3) and  two earlier  decisions of the Calcutta High Court concluded  that in  order to  constitute a step in the proceedings the  act in question must be: (a) an application made to  the Court  either on summons; or (b) such an act as would indicate  that the  party is acquiescing in the method adopted by  the other side of having the disputes decided by the Court.  The second  test is  beyond question  invariably followed because  if the  party entitled  to the  benefit of arbitration agreement  by  taking  such  step  in  the  suit indicates that  it is acquiescing into the method adopted by the other  side for resolution of dispute, such party cannot at a  later stage  seek to enforce the arbitration agreement by praying  for stay  of the  suit. But with respect, merely

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 20  

making some  applications in  the suit without examining the purpose, object  and implication  of making  the application would not  always constitute  such step  as would disentitle the party  making such application from seeking relief under s. 34  on  the  short  ground  that  by  merely  making  the application it has either abandoned its right to enforce the arbitration agreement  by praying  for stay  of suit  or has acquiesced into  the mode  adopted by the opposite party for resolution of  dispute. Every  application by a party in the suit has  to be examined keeping in view the purpose and the object in  making the  application and what does the conduct of  the   party  making   the  application  disclose.  After formulating the aforementioned test the      (1) AIR 1980 Raj. 9.      (2) AIR 1943 Cal. 484.      (3) [1894] 2 Ch. 478. 116 learned judge  proceeded to  apply the  test  to  the  facts before him  with which  we are  not concerned. This decision was followed  by the  same High Court in Amritraj Kothari v. Golcha  Financiers,(1)  and  it  was  observed  that  it  is difficult to  make a  distinction between  filing a  written statement  in   suit  and   filing  an   opposition  to   an interlocutory application  in that  suit-both  of  them  are ’taking step  in the  suit’.  The  decision  in  Sansarchand Deshraj was  dissented from.  It may, however be pointed out that in  the later  decisions in  Biswanath Rungta and Arjun Agarwalla, the  same  High  Court  after  referring  to  the aforementioned two  decisions took  the  contrary  view  for which reliance  was placed  on the decision of this Court in Janki Saran’s case. The test formulated by the Calcutta High Court in  the recent  decisions is that the step which would disentitle the  defendant from  taking the  benefit of s. 34 must be  such step  unequivocally showing that the party had acquiesced in  the mode of resolution of the dispute adopted by the  other side or had abandoned its right to enforce the arbitration agreement.  It was  further observed  that if an injunction is  obtained or  a receiver  is  appointed  or  a prayer to  that effect  is made,  any step  taken to get the order vacated  or circumscribe the injunction without in any way touching  upon the  main dispute in the plaint would not be such  a step as would disentitle the party from obtaining stay of the proceedings. To that extent the earlier Calcutta view is  whittled down  and the later decisions have adopted the trend of decisions in other High Courts.      The earliest  decision of  the Madras  High Court is P. Gannu Rao v. P. Thiagaraja Rao & Anr.(2) Examining the ambit of the  expression ’taking  step in the proceedings’, it was held that  if something is done by the party concerned which is in  the nature  of an  application to  the court  it will necessarily come  under  the  category  of  a  step  in  the proceedings. After formulating this test the Court held that when  ex  parte  interim  injunction  was  served  upon  the defendant  and   the  defendant   appears  and   prays   for modification of  the injunction it constitutes a step in the proceedings which  would disentitle  him from obtaining stay of the  suit. In  reaching this conclusion the Court amongst others placed  reliance on  the decision of Das, J. in Subal Chandra Bhur’s case. The Madras High Court      (1) A.I.R. 1966 Cal. 315.      (2) A.I.R. 1949 Mad. 582. 117 has consistently  followed this  view in M/s. Bortes S.A. v. Astouic Compania  Naviors S.V.,(1)  & S. Ramalingam Chettiar v. S. Sarveswaran & Ors.(2)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 20  

    The Delhi High Court in M/s. Dadri Cement Co. & Anr. v. M/s. Bird  & Co.  Pvt. Ltd.,(3)  after referring  to a large number of  decisions but  particularly the  Madras cases and early Calcutta  cases ultimately  based the  decision on the facts of  the case.  The Court distinguished the decision of the Madhya  Pradesh High Court in Sansarchand Deshraj’s case observing that  that is  the decision  based on the facts of that case.  The Delhi High Court has not addressed itself to the controversy under discussion.      In Kunta  Malla Reddy v. Soma SrInivas Reddy & Ors.,(4) It was  held that  the expression ’steps in the proceedings’ in s.  34 also comprehends step in interlocutory proceedings also. In reaching this conclusion reliance was placed on the decisions of the Madras High Court.      A  review   of  these   precedents  would  unmistakably indicate that  the trend  of the  authorities points  in the direction of not treating every application made in the suit as a  step in  the proceeding nor entering appearance with a view to  contesting the  petition for interim relief such as injunction or  appointment of receiver as being steps in the proceedings. Therefore,  with respect,  the decisions taking the contrary view do not commend to us.      It is  at this stage that we must refer to the decision in Janki  Sarcn’s case  in some  detail. In  that case Janki Saran Kailashchandra  filed a suit against State of U.P. and Divisional Forest  Officer, Bijnor  for recovery  of damages alleging breach  of contract. The summons in the suit issued to the  State of  U.P. was served on the District Government Counsel. On  September  2,  1966,  the  District  Government Counsel filed  an appearance  slip in the Court and also put in a formal application praying for one month’s time for the purpose of  filing written statement. On October 1, 1966 the District Government Counsel filed an application under s. 34 of the  Act pleading that there was an arbitration clause in the contract 118 between parties  to the  suit and  the State  of U.P.  being willing to  refer the  matter to arbitration the suit should be stayed.  The trial  court granted  the motion for stay of suit. On  appeal the  High Court held that the action of the District Government Counsel in applying for time to file the written  statement   amounted  to   taking  a  step  in  the proceedings within  the meaning  of s 34 of the Act, and set aside the  order of the trial court and rejected the request for stay of proceedings. State of U.P. approached this Court against the  order of  the High  Court. Rejecting the appeal this Court observed as under:           "To enable  a defendant to obtain an order staying      the suit,  apart from  other conditions mentioned in s.      34 of  the Arbitration  Act, he  is required to present      his application  praying for  stay  before  filing  his      written statement  or taking any other step in the suit      proceedings. In  the present case the written statement      was indisputably  not filed  before the application for      stay was  presented. The  question is whether any other      step was  taken in the proceeding as contemplated by s.      34, and  it is  this point  with which  we are directly      concerned in  the present  case. Taking  other steps in      the  suit   proceedings  connotes  the  idea  of  doing      something in  aid  of  the  progress  of  the  suit  or      submitting to  the jurisdiction  of the  Court for  the      purpose  of   adjudication  of   the  merits   of   the      controversy in the suit"’ The view  herein taken  not only does not run counter to the view we  have taken  but in  fact clearly  supports the view

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 20  

because the pertinent observation is that taking step in the proceeding which  would disentitle  a party to obtain a stay of the  suit must  be doing something in aid of the progress of the  suit or  submitting to the jurisdiction of the court for the  purpose  of  adjudication  of  the  merits  of  the controversy in  the suit.  In other  words,  the  step  must aecessarily manifest  the intention  of the party to abandon or waive  its right to go to arbitration or acquiesce in the dispute being  decided by  court. In fact, the view taken in this  case  should  have  quelled  the  controversy  but  it continued to figure in one form or the other and that is why we have dealt with the matter in detail. 119      In this  context it  is advantageous  to refer  to  the provision contained in s. 4 of Arbitration Act, 1950, of the United Kingdom.  It provides that in order to be eligible to obtain stay  of proceedings the defendant must have taken no steps in  the proceedings  after appearance.  Analysing what constitutes step in the proceedings, inter alia, it has been held  that   the  filing  of  affidavits  in  answer  to  an application by  the plaintiff  for appointment  of  receiver does not  amount to  taking a  step in  the proceeding  (see Zalinoff v.  Hammond(1) referred  to in  Halsbury’s Laws  of England, 4th  End, Vol.  2, para  563 note  12). Russell  on Arbitration, 19th  Edn., page  183, under the heading "steps held not  to be  in  the  proceedings",  notes  that  filing affidavits in  reply to plaintiff’s affidavits in support of a motion  for a  receiver in  a partnership  action is not a step in  the proceedings.  There are  5-6  other  situations noticed by  the author  which, when  individually  analysed, would  show   that  the   steps  taken   with  reference  to interlocutory proceedings  are ordinarily  not held as steps in the proceedings.      Having thus  critically examined  both on principle and precedent the  meaning to be given to the expression ’taking steps in  the proceedings,’  we are clearly of the view that unless the  step alleged  to have  been taken  by the  party seeking to  enforce arbitration  agreement is  such as would display an  unequivocal intention  to proceed  with the suit and acquiesce in the method of resolution of dispute adopted by the  other party,  namely, filing of the suit and thereby indicate  that   it  has   abandoned  its  right  under  the arbitration  agreement   to  get  the  dispute  resolved  by arbitration, any  other step  would not disentitle the party from  seeking   relief  under  s.  34.  It  may  be  clearly emphasised  that  contesting  the  application  for  interim injunction or  for appointment  of a receiver or for interim relief by  itself without anything more would not constitute such step as would disentitle the party to an order under s. 34 of the Act.      Reverting to the facts of this case it is crystal clear that the  defendants had  taken no  steps in the proceedings which would  disentitle them  to a  relief under s. 34. Suit was filed  on June  1, 1981, impleading two defendants, Food Corporation of  India 1st  defendant and Shyam Narain Nigam, 2nd  defendant,  being  the  District  Manager  of  the  1st defendant Corporation.  Alongwith the  plaint  a  notice  of motion was taken out for ex parte ad interim 120 injunction. The  Court issued notice on the notice of motion and made  it returnable  on the next day, i.e. June 2, 1981. When the  matter was placed on Board of the Court on June 2, 1981, the  proceedings show  that the  District Manager, 2nd Defendant was served and appeared through Advocate Shri N.K. Modi. Defendant  1 was shown absent with an endorsement ’the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 20  

summons showing  service not received back’. Then comes what transpired on  that day  as disclosed  in the proceedings of the day. The same may be extracted:           "Shri  Modi   filed  Vakalatnama   on  behalf   of           defendant No.  2 and prayed for time for reply and           arguments  to   the  plaintiff’s  application  for           temporary injunction.  Plaintiff’s counsel  has no           objection. Therefore, request is accepted.           For reply  arguments and  awaiting service  on 3rd           June 1981." On June 3, 1981, an application for stay of suit was made on behalf of  the 1st  defendant under  s. 34.  Ex  facie,  the proceedings did  not disclose  any step having been taken by the 1st  defendant in the proceedings as would disentitle it to an  order under s. 34. 2nd defendant was impleaded in his official capacity.  Assuming  the  application  of  the  2nd defendant  for   filing  reply  to  the  interim  injunction application also  binds the  1st defendant though it was not served with  the summons  yet an application seeking time to file reply  to an  interim injunction  application cannot be said to  be a  step in  the proceedings  as would display an unequivocal intention  to proceed  with the  suit  or  would disclose  that   the  defendants  had  acquiesced  into  the resolution of  dispute by  the court  or had  abandoned  the rights under the arbitration agreement.      The learned  judge also  negatived the  prayed for stay for the  additional reason  that the  1st defendant  had not complied with  another condition for relief under s. 34. The learned judge  found that  in the  application for  stay the applicant  had   not  stated  that  at  the  time  when  the proceedings were  commenced it  was ready  and willing to do all  things   necessary  to   the  proper   conduct  of  the arbitration and  still remains  ready and  willing to do the same.  The   learned  judge  held  after  referring  to  the averments in  the application  for stay  that  there  is  no averment to 121 that effect.  Plaintiff contesting  the application  had not raised this  contention before the trial court and the first appellate court  and that  becomes  evident  from  what  the learned judge  has stated  in the  judgment  that  both  the courts have  not taken  into account this aspect of the case at all.  Obviously the  learned  judge  ought  not  to  have permitted the  contention while  hearing a revision petition under s.  115 of the Code of Civil Procedure. But apart from this, the  finding of  the  learned  judge  is  contrary  to record. The  application for  stay was read over to us and a copy was  submitted for  our  perusal.  In  para  2  of  the application it  is clearly  stated that  ’the  defendant  is ready and willing (ichhuk) for this purpose. It appears that the original  application was  in Hindi.  The important word used in  the application  is ichhuk  which, it  was  agreed, would  mean  ready  and  willing.  It  is  followed  by  the expression ’for this purpose’ which would imply that the Ist defendant was  always ready  and willing to proceed with the arbitration when  commenced and  is shown  to be  ready  and willing at the time of applying for stay. Therefore, the Ist defendant had complied with the requirement of his readiness and willingness to go to arbitration. Therefore, the learned judge was  clearly in error in interfering with the order of the trial court confirmed by the Ist appellate court on this ground also.      Accordingly we  hold that the learned judge of the High Court was  clearly in  error in  interfering with  the order made by  the trial  court and  confirmed in  appeal granting

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 20  

stay of  the  suit.  The  judgment  of  the  High  Court  is accordingly set  aside and  the one  made by the trial court and confirmed  in appeal  is restored  with no  order as  to costs. P.B.R.                                       Appeal allowed. 122