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TMI Blog1982 (8) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... l. 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. Appeal allowed - 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 stay of the suit. - C.A. 3317 OF 1981 - - - Dated:- 6-8-1982 - D.A. DESAI, BAHARUL ISLAM AND A. P. SEN, JJ. For the Appellant : K.K. Venugopal and S.K. Gambhir For the Respondent : Soli J. Sorabjee, D.K. Katare and S.S. Khanduja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1 st 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 plaintiff and the 1st defendant. The learned Judge negative the contention that an application made by the 2nd defendant for filing reply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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 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 discretiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 explains the purpose and object underlying the provision contained in s. 34. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king 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 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 , cam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations 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 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 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 agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Abdulhussein v. Abu Ahmed Abdul Jalli,( AIR 1950 Bom. 127), Tendolkar, J. has rejected it as one of the doubtful legal import and utility. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicate 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 approved the decision of the Madhya Pradesh High Court in Sansarchand and the decision of the Punjab High Court in M/s. Charandas Sons v. M/s. Harbhajan Singh Hardit Singh.( AIR 1952 Punj. 109) In Sri Ram Shah v. Mastan Singh Ors.,( AIR 1970 All. 288) 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.,( AIR 1975 Cal. 222) 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.( AIR 1979 Guj. 215) 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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,( A.I.R. 1966 Cal. 315) 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, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esce 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. 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, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dant 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 2 nd 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 ..... 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