International Computers Indian ... vs Glowbus Office Equipment P. Ltd.
1998 Latest Caselaw 573 Del

ORDER

C.M. Nayar J.

1. The present appeal is directed against the Order dated 14th August, 1996 passed by the Additional District Judge. The learned Judge held that the application filed by the appellant under Section 34 of the Arbitration Act (hereinafter referred to as the 'Act') was not maintainable as the appellant had taken two adjournments specifically for filing written statement and this will amount to joining the proceedings. The suit was filed by the respondent for recovery of Rs.4,65,560/- in the Court of District Judge, Delhi and the following order was passed on 21st April, 1993:

"Present : Counsel for the plaintiff New suit received on assignment. Be checked and the registered. Let the defendant be served with summons on PF & RC & UPC to be filed within twenty four hours and also by pasting for 26.5.1993."

2. The Court passed subsequent Orders on 26th May, 1993, 6th August, 1993 and 5th October, 1993 respectively which read as follows:-

"26.5.1993.

Present : Proxy counsel for the party.

Lawyers are on strike. Memo of appearance filed. Now to come up for written statement on 6.8.1993."

6.8.1993

Present : Counsel for parties.

Written statement not filed. Case is adjourned for filing written statement subject to payment of costs of Rs.300/- for 5.10.1993."

5.10.1993

Present : Counsel for parties.

Written statement not filed. Application under Section 34 of Arbitration Act be filed subject to payment of costs of Rs.500/- for 17.11.1993. Previous costs paid."

3. The Trial Judge held that the counsel appearing for the appellant had sought adjournments "specifically for filing written statement" and obtained time for more than one occasion for such purpose, subsequent application of stay of suit would not be maintainable. Therefore, the appellant could not be permitted to raise the plea of stay as contemplated under Section 34 of the Act. The reading of the Order will clearly show that the provisions of law have been clearly misunderstood and misinterpreted and no cogent reasons have been assigned by the learned Judge to hold that the adjournments sought by the counsel for the appellant were only for the purpose of filing written statement which would amount to joining the proceedings. Reliance placed on the judgment of the Supreme Court as reported in Rachappa Guruadappa, Bijapur Vs. Gurusiddappa Nuraniappa and others , is clearly misconceived. In that case the Supreme Court stated the principles in such matters. Paragraph 4 which lays down the ingredients of the Section reads as under:-

"4. An analysis of the aforesaid section makes it clear that in order to have the proceedings in the suit stayed, there must be an arbitration agreement between the parties covering the disputes in question. The section stipulates that in order that stay may be granted under the section, it is necessary that the following conditions are fulfillled:

(i) The proceedings must have commenced by a party to an arbitration agreement against any other party to the agreement;

(ii) the legal proceeding, in this case the suit, which is sought to be stayed must be in respect of a matter agreed to be referred;

(iii) the applicant for stay must be a party to the legal proceeding, the suit in this case.

(iv) the applicant must have taken no steps in the proceeding after appearance;

(v) the applicant must satisfy that only the applicant was at the time when the proceedings were commenced, ready and willing to do everything necessary for the proper conduct of the arbitration;

and

(vi) the Court must also be satisfied that there was no sufficient reason why the matter should not be referred to arbitration."

4. Similarly in paragraph 9 it is stated as follows:-

"9. In the aforesaid view of the matter, without the aid of Explanation 2 added to the U.P.Act, we have to proceed to find out the conditions required to be fulfillled in order to be entitled to stay under S. 34 of the Act. As mentioned hereinbefore, it is imperative to find out whether "any other steps in the proceedings" have been taken before making an application for stay of the suit in this case. In our opinion, proceeding without being embroiled in the facts and the circumstances of the case with the controversy whether the said expression should be construed ejusdem generis, it is necessary to determine whether the party had evinced or indicated any intention to proceed unequivocally with the suit and not to proceed with the arbitration. This position was examined by this Court in Food Corpn. of India Vs. Yadav Engineer & Contractor, where this Court referred to the decision of State of U.P. Vs. Janki Saran Kailash Chandra (supra), and after setting out the provisions of S.34 of the Arbitration Act, this Court observed that apart from written statement "some other step" mentioned in the Section, 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."

5. The facts of the case are noted by the Supreme Court in paragraph 12 and the ultimate conclusions are given in paragraph 13. These paragraphs may also be referred to as follows:-

"12. From the Order sheet in this case and as noted by the learned trial Judge, it appears that the counsel appearing for the petitioner had sought adjournment "specifically for filing written statement" and obtained time for more than one occasion for such purpose. It was not only the time taken to consider whether written statement should be filed as a defense to the plaint to enter into an arena of controversy, but it was time taken to have the matter decided by the suit.

13. The party evinced an intention to have the matter adjudicated by the Court. If that is the position, then in our opinion, in view of the principle enunciated hereinbefore, the party has disentitled itself to ask for stay of the said suit. The High Court was, therefore, right in affirming the order of the learned trial Judge. Apart from the same, from the conduct of the petitioner and the narration of the events mentioned hereinbefore, it does not appear that the petitioner was ever keen to have the matter adjudicated by arbitration. If that is the position then the petitioner cannot have any grievance."

6. In the present case the order sheet will indicate that there is no positive assertion on the part of the counsel for seeking time to file written statement as it is stated in the Order dated 26th May, 1993 that the Judge on his own has given time and listed the matter for written statement. Similarly in the Order of 6th August, 1993 the matter was again adjourned for filing of written statement subject to payment of costs. Subsequent order to the same effect was also passed on 5th October, 1993. The reading of the Orders would not emphatically establish that the counsel appearing for the appellant had sought adjournments specifically for filing written statement. The question also arises as to what would amount to an election in favour of the suit in place of arbitration and what steps are required to reiterate that there is abandonment of the right to have the suit stayed under Section 34 of the Act. The Supreme Court in the judgment as reported in M/s Sadhu Singh Ghuman Vs. Food Corporation of India and others has dealt with this question and the law as stated in paragraphs 6 and 7 which may be referred to as below:-

"6. Section 34 of the Arbitration Act has received the consideration of this Court in State of U.P. Vs. Janki Saran Kailash Chandra, , (ii) Food Corporation of India Vs. Yadav Engineer, and more recently in General Electric Co. Vs. Renusagar Power Co., (1987) 4 S 137. It may be noted that the expression "a step in the proceeding" which would disentitle the defendant from invoking S.34 of the Arbitration Act is not every step taken by him in the suit. It should be a step to abandon the right to have the suit stayed. It should be a step in aid of the progress of the suit. The step must have been consciously taken with a view to submit to the jurisdiction of the Court for the purpose of adjudicating the controversy on the merits. In General Electric Co. case this Court after considering the previous decisions observed (at pp.155-56):

"....thus a step in the proceeding which would disentitle the defendant from invoking S.34 of the Arbitration Act should be a step in aid of the progress of the suit or submission to the jurisdiction of the Court for the purpose of adjudication of the merits of the controversy in the suit. The step must be such as to manifest the intention of the party unequivocally to abandon the right under the arbitration agreement and instead to opt to have the dispute resolved on merits in the suit. The step must be such as to indicate an election or affirmation in favour of the suit in the place of the arbitration. The election or affirmation may be by express choice or by necessary implication by acquiescence. The broad and general right of a person to seek redressal of his grievances in a Court of law is subject to the right of the parties to have the disputes settled by a forum of mutual choice. Neither right is insubstantial and neither right can be allowed to be defeated by any manner of technicality. The right to have the dispute adjudicated by a Civil Court cannot be allowed to be defeated by vague or amorphous miscalled agreements to refer to `arbitration'. On the other hand, if the agreement to refer to arbitration is established, the right to have the dispute settled by arbitration cannot be allowed to be defeated on technical grounds."

"7. In the application filed by the defendants in this case, they only sought a direction to the plaintiff to produce the original agreement and other documents so that they may file written statement. It was not stated that they would file the written statement. They never took any other step submitting to the jurisdiction of the Court to decide the case on merits. The right to have the dispute settled by arbitration has been conferred by agreement of parties and that right should not be deprived of by technical pleas. The Court must go into the circumstances and intention of the party in the step taken. The Court must examine whether the party has abandoned his right under the agreement. In the light of these principles and looking to the substance of the application dated January 4, 1985, we cannot form an opinion that the defendants have abandoned their right to have the suit stayed and took a step in the suit to file the written statement."

7. In the case reported as State of Himachal Pradesh Vs. Lalchand Shahi the learned Judicial Commissioner held that no person can be deemed to take step in a proceeding who is not aware of what the proceedings are. The mere prayer for adjournment of the case made by a counsel which is also not established in the present case will not amount to taking of a step in the proceedings to exclude the application under Section 34 of the Act. The request for adjournment can only be interpreted as taking of steps in the proceedings, when it is established that the party has acted and shown willingness that the suit must proceed. In view of the settled position of law the Trial Judge erred in holding that the application under the provisions of Section 34 of the Indian Arbitration Act, 1940 was not maintainable as the appellant had sought time for filing written statement. The reading of the Orders will establish that the appellant has not conceded its right to file such an application nor it can be positively stated that the appellant had elected or affirmed in favour of the suit in place of arbitration. The appeal as a consequence is allowed. The Order dated 14th August, 1996 is set aside. The application filed by the appellant under Section 34 of the Act shall now be heard and disposed of on merits. In view of the time that has elapsed from the date of filing of the suit, it will be appropriate if the matter is heard and disposed of at an early date. The parties are directed to appear before the learned Additional District Judge for further proceedings on 14th August, 1998. The record shall also be transmitted through Special Messenger.

8. There will be no order as to costs.