Shakti Fabrics vs Sri Ram Textiles
1990 Latest Caselaw 384 Del

JUDGMENT

M.L. Verma, J.

(1) This is a petition under Section 115 of the Code of Civil Procedure (hereinafter referred to as the CPC) against the order of the Commercial Sub-Judge, Delhi dated 28-10-89 allowing the application of the respondent herein under Section 34 of the Arbitration Act (hereinafter referred to as the Act).

(2) The petitioner herein had filed a suit under Order 37 Civil Procedure Code before the Commercial Sub-Judge, Delhi. A few important dates may be noticed herein. The summons of the suits was served on the respondent/defendant on 10-l1-1986. The respondent herein entered appearance on 17-11-1986. Summons for judgment was served on 11-11-87. On 16-11-87 an application under Section 34 of the Arbitration Act was filed. Thereafter the respondent herein also filed an application for leave to defend on 19-11-87.

(3) Mr. Malhotra, learned counsel for the petitioner, has raised three points in support of his revision petition. His first contention is that the respondent herein had participated in the proceedings by having filed an application for leave to defend and, therefore, the impugned order should not have been passed. The second contention is that the application under Section 34 is belated in so far as it has been filed beyond the period of ten days after the summons of the suit was served upon the respondent on 11-10-86. Lastly Mr. Malhotra urged that there was no valid arbitration agreement subsisting between the parties. He. however, fairly admitted that the observation of the learned trial court in paragraph 3 of the impugned order that the copies of the bills sent by the petitioner itself stated that these goods have been supplied according to the rules and regulations of the Hindustani Mercantile Association, Delhi, It is further admitted that the petitioners a member of that Association as also is the respondent herein and that one of the rules and regulations of the said Association is that any dispute between the members of the Association relating to their business dealings will be settled by reference to arbitration. In this view of matter Mr. Malhotra did not seriously press this contention. This is particularly in view of the decision of this Court reported in Krishanchander Rameshchander v. Sohanlal 1982 Rlr 82 and Krishanchander Rameshchander v. Sohanlal. 1983 Rlr (Note) 23 at page 22, wherein it has been held that there exists an arbitration agreement vide terms and conditions of sale mentioned in the bills which specifically incorporate the rules an,d regulations of the said Association as a condition of sale.

(4) In support of his first contention learned counsel for the petitioner has relied upon the judgment of the Bombay High Court reported in Jadavji Narsidas Shah and Co. v. Hirachand Chatarbhuj. . In this case, application for leave to defend had been filed- under Order 37 Rule 3 Civil Procedure Code (Act No. V/1908). It was held the filing of such an application amounted to taking steps in the proceedings since by such an application the defendant attempted to satisfy the Court that they were entitled to be heard and also sought dismissal of the summons for judgment. According to this judgment, filing of an affidavit for leave to defend expressed an unequivocal intention on the part of the defendants that the matter should be heard by the civil court and gave clear effect to that intention by asking the Court to give them leave to defend so that they should resist the plaintiff's claim.

(5) The contention of the Yearned counsel for the petitioner is that a perusal of Order 37 Rule 2 Sub rule (3) as well as Rule 3 Sob-rule (3) Civil Procedure Code (Act No. V. 1908 as amended in 1976) shows that the respondent herein had been taking steps in the proceedings and therefore the application under Section 34 of the Act was not maintainable. According to the learned counsel, entering appearance amounts to taking necessary steps in the proceedings for the purpose of Section 34 pf the Act and disentitles the person to seek stay of the suit for decision of the disputes by the domestic forum agreed to between the partics.

(6) In support of second contention, that the application under Section 34 of the Act was late as being beyond 10 days after the service of the summons of the suit was served on the respondent herein. Counsel for the petitioner relied upon the judgment of the Calcutta High Court reported in The Pench Valley Coat Co Ltd. v. The Indian Cable Co Ltd , He specifically drew my attention to paragraph 3 of this judgment. In this paragraph it has been observed that under Order 37 Rule 3 (before the amendment in 1976) of Civil Procedure Code the applicant was not entitled to defend the suit unless leave is obtained upon application made within 10 days from the service of summons. It was held in this judgment that the harmonious way of looking at the provisions of Order 37 Rule 3 Civil Procedure Code (before the amendment of 1976) and Section 34 to the Act was to hold that the application must be made as contemplated by Rule 3 of Order 37 of the Cpc, that is to say within 10 days of the service of summons. It is important to notice here that his judgment also was delivered on the basis of the provisions of Order 37 Rule 3 Civil Procedure Code, before its amendment in 1876.

(7) Mr. Gopal Narain, learned counsel for the respondent has raised a preliminary objection with regard to the maintainability of the revision petition itself. He points out that an order on an application under Section 34 of the Act is an appealable order as is evident from the perusal of Section 39(1)(v) of the Arbitration Act. On merits learned Counsel for the respondent has contended that one must bear in mind that whereas prior to 1976 there was no intermediary step to be taken under Order 37 by the defendant ; subsequent to the amendment in 1976 under Order 37 Civil Procedure Code the defendant is first required to enter appearance. He contends that now there are two stages contemplated in Order 37 Civil Procedure Code, namely, entering appearance and filing an application for leave to defend. According to Mr. Gopal Narain entering of appearance does not tentamount to taking any steps in the proceedings for the purpose of Section 34 of the Act. He contends that even after defendant entered appearance the plaintiff may not move the court for summons turn judgment in which case the matter would rest there.

(8) Learned counsel for the respondent has relied upon two judgment of the Supreme Court reported in Food Corporation of India and another v. Yadav Engineer and another and Messrs Sadhu Singh Ghuman v Food Corporation of India and others 1990(1)JT 300 in support of his contention that; not every step in the proceedings under 0rder 37 or any Civil suit amounts to taking part in the proceedings for the purposes of Section 34 of the Act In Sadhu Singh's case (supra) an application bad been moved for the production of original agreement and other documents 80 that the defendant would file written statement. In that application it was not stated that the defendant would file the written statement, In that case the defendant never took any other step submitting to the jurisdiction of the Court to decide the case on merits. The Supreme Court held that the right to have the dispute settled by arbitration has been conferred by agreement of parties and that right should- not be deprived by technical pleas. It was observed that the Court must go into the circumstances and intention of the party in the step taken and examine whether the party has abandoned his right under the agreement.

(9) In the cage of Food Corporation of India and another v. Yadav Engineer and another (gupra)ithas been clearly laid down that unless the steps taken by the party, that seeks to enforce the arbitration agreement, is such as would display an unequivocal intention to proceed with the suit and acquiesce in the method of resolution of the dispute adopted by the opposite party ; namely, of filing of the suit, thereby indicating that it had abandoned its right under the arbitration agreement to get the dispute resolved by the arbitration ; any other steps would not disentitle the party from seeking the relief under Section 34. It was held that contesting the application for interim injunction or for appointment of a receiver or for interim relief, by itself, without anything more would not be a step in the proceedings for the purpose of Section 34 of the .Act. It was further held that if it were so ; such a view would work hardship and would be inequitable to the party who is willing to abide by the agreement and yet such a party would be forced to suffer the inequity of ex-parte orders.

(10) Learned counsel for the respondent contended that entering appearance does not amount to taking part in the proceedings or taking steps in the proceedings in terms of Section 34 of the Act. The fact of entering appearance must be understood in the context of the precaution that the defendant sought to take against the eventuality of a decree being passed, on his not entering appearance. This is the consequence of not entering appearance after service of summons of the suit under Order 37. Counsel for the respondent has relied upon two judgments on the- point that entering appearance does not amount to taking steps in the proceedings in terms of Section 34 The first authority is of the Bombay High Court in the case of Nuruddin Abdulhussen v Abu Ahmed Abdul jalli. , in this case it was held that every act does not amount to a step in the proceedings to debar the defendant from seeking a stay of the suit under Section 34. Entering of appearance was held not to be a step in the proceedings The other judgment is in the case of Dunichand Sons & Co v Fort Gloster Industries Ltd . In this case also it was laid down that unless it ia clear from the slop taken in the proceedings that there was an unequivocal intention on the part of the defendant in resisting the suit it could not be said that he has given up his right to have the dispute settled by a domestic forum under the Act.

(11) It is the contention of the learned counsel for the respondent that entering appearance does not amount to participating in the proceedings. Learned counsel for the respondent also pointed out that in view of Mr. Malhotra's fair admission with regard to the conditions stipulated in the bills of his client itself there was no need to make any submissions on the third plea of Mr.Malhotra which, in any case Mr.Malhotra did not press seriously. Mr. Gopal Narain has pointed out that admittedly before filing an application for leave to defend on 19-11-87 an application under Section 34 of the Arbitration Act had been filed on 16-11-87 which is obviously prior to the application for leave to defend His contention is that, therefore, the impugned order has been passed rightly and in any event there is no Jurisdictional error in the impugned order for this Court to interfere under Section 115 of the CPC.

(12) In the reply Mr.Malhotra does not seriously dispute that the order in question is appealable. He, however, contend that in spite of it being appealable the order can be revised and that in the event of the objection on behalf of the respondent with regard to the maintainability of the revision petition being upheld, this petition may be treated as an appeal against the impugned order.

(13) In support of his contention that the order is revisable in spite of its being appealable he has cited a Division Bench judgment of the Patna High Court in the case of Yugal Kishore Sinha v. Nagendra Prasad Yadav . To my mind this case is of no help to the petitioner for the reason that on an application under Section 34 of the Act on order of slay had been granted staying the proceedings. Against such an order an appeal had been filed, it was held in this case that the order of stay was not under Section 34 of the Act but under Section 151 Civil Procedure Code and in this view of the matter the appeal filed against the impugned order in the case was treated as a revision petition and disposed of as such.

(14) The next judgment relied upon by Mr Malhotra is of the learned Single Judge of the Allahabad High Court reported as L. Charan Das v. L. Gur Saran Das Kanpur . In this case it was held that there is nothing in Sections 39 or 41 of the Act to deprive the Court of the powers conferred under Section 115 Civil Procedure Code and, therefore, against an order under Section 34 a revision petition was entertained and disposed of. Under Section 115 Civil Procedure Code a revision petition would lie only against such orders "in which no appeal lies", therefore, even if there is no bar under 'Sections 39 or 41 of the Act for the exercise of powers under Section 115, but under the provisions of Section 115 Civil Procedure Code only non-appealable orders are subject to revisional jurisdiction With respect, I am unable to agree with the view taken by the learned Single Judge of the Allahabad High Court in the case of L. Charan Das (supra). I am, therefore, of the opinion that the order impugned in this revision petition is appealable and, therefore, in view of the express provisions in Section 115 Civil Procedure Code, revision petition is not maintainable.

(15) With regard to the other contention of Mr. Gopal Narain, Mr. Malhotra submitted that entering of appearance amounted to taking steps for the purposes of Section 34 of the Act. He reiterated his contention that the application under Section 34 was barred by time According to Mr. Malhotra it is of no consequence that the respondent may have taken the steps of entering appearance only by way of abundant caution to avoid evil consequences He was, however, unable to show me any ground of challenge based on the contention that by such an act or step the respondent has shown an unequivocal intention to submit to the jurisdiction of the civil court and had acquiesced !o the decision of the dispute by the civil court or grave a go-by to its. stand that the disputes between the parties should be adjudicated upon by a domestic forum agreed to between the parties.

(16) Pressing his point with regard to the application under Section 34 of the Act as being time barred Mr. Malhotra has cited another judgment of the Calcutta High Court in the case of Shroff Brothers v. Bisheswar Dayal Meatle . In this case it was noticed that under Chapter Viii, Rule 5 of the Original Side Rules of the Calcutta High Court time to file the written statement was 28 days from the date of service of the writ of Summons. It was therefore, held that an application under Section 34 of the Act should have been made within the period of 28 days This judgment also does not help the petitioner. In this case also the rules of the Calcutta High Court and the provisions of Section 34 were construed harmoniously, neither in this case nor in the case of Pench Valley Coal Co (supra) it has been held that there is a period of limitation prescribed for making an application under Section 34 of the Act In view of the amendment in Order 37 of Civil Procedure Code now there are two stages of action contemplated that is to say entering of appearance and applying for leave to defend whereas before the amendment in 1976 there was only one step to be taken and that was to seek leave to defend. Before amendment there was no provisions for the defendant to enter appearance on receipt of summons in the suit under, Order 37 Civil Procedure Code. No authority has been cited by Mr. Malhotra on the point that entering of appearance amounts to taking steps for purposes of Section 34 of the Act as against two authorities cited by Mr. Gopal Narain.

(17) There is no time limit prescribed for making an application under Section 34 of the Act. Therefore, it is not correct to contend that the application of the respondent herein made before the trial court was barred by limitation. The argument of Mr. Malhotra that such an application should have been made within 10 days of the service of summons is in conflict with the judgment in Shroff Brothers (supra) cited by Mr. Malhotra where the period for making the application was, in fact, held to be of 28 days In both the judgment of the Calcutta High Court cited by Mr. Malhotra it appears to me that tiling of application under Section 34 of the Act has been held to be co-terminus with the time limit prescribed under other provisions of law so as to construe different provisions harmoniously. Therefore, in the Pench Valley case (supra) it was held that an application under Section 34 of the Act should have been made within 10 .days of the service of summons whereas in Shroff Brothers (supra) this period was 28 days. It is also important to note here that Section 34 provides that an application for stay of proceedings should be made before filing of written statement or taking any steps in the proceedings. Therefore, if the time for filing of the written statement is 28 days then by virtue of that provisions an application under Section 34 should obviously be made within 28 days.

(18) I am, therefore, of the opinion that entering appearance under Order 37 Civil Procedure Code does not tentamount to taking steps .for the purposes of Section 34 of the Act. I also bold that the application under Section 34 of the Act filed by the respondent herein before the trial court was not barred by lime. Further the revision petition is not maintainable since it is againss, an appealable order. Even otherwise the revision petition has no merit and deserves to be dismissed. Since I have held that there is not merit in the case, no useful purpose would be served in treating the revision petition as appeal. Besides Mr. Gopal Narain .has objected to this position being taken on behalf of the petitioner since various other questions like the point of limitation will arise for consideration. The oral request for treating the revision petition as an appeal is rejected.

(19) The petitioner should not have given a goby to the arbitration agreement and should have gone in for arbitration proceedings instead of filing the suit before the trial court. Accordingly dismiss the revision petition with costs, qualified at Rs.1,000.00 .