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TMI Blog1987 (8) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... 82, the GEC submitted certain disputes between the GEC and Renusagar for arbitration to the International Chambers of Commerce. On June 11, 1982, Renusagar filed a suit in the Bombay High Court for a declaration that the claims purported to be referred to arbitration by GEC to ICC were beyond the scope and purview of the arbitration agreement contained in the contract and sought an injunction to restrain the GEC from taking any further steps pursuant to their request for arbitration addressed to ICC on March 2, 1982. In Renusagar s suit, GEC, on August 11, 1982 filed a petition under s. 3 of the Foreign Awards (Recognition and Enforcement) Act, 196 1 seeking a stay of the suit. On August 19, 1982 GEC also filed a suit in the Calcutta High Court against the United Commercial Bank to enforce a bank guarantee given by the bank at the instance of Renusagar. On November 25, 1982, Renusagar filed a suit No. 127 of 1982 in the Court of Civil Judge, Mirzapur praying for a declaration that the guarantee given by the United Commercial Bank for and on behalf of the plaintiff stood discharged and had become ineffective and unforceable and for a mandatory injunction against the GEC directing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or amend the application whenever necessary. What is important to be noticed here is that there was no prayer at this juncture for a stay of the suit. On January 19, 1983, GEC filed an application (10-C) requesting the Court to call upon Renusagar to furnish a complete record of the suit and annex ures. The Civil Judge passed an order: The case is called out. Shri J.P. Singh, present for the plaintiff, Shri R.S Dhawan, Advocate for the defendant. 10-C by the defendant to direct the plaintiff to give copies of complete record so that the defendant may plead preliminary objections. The copies of papers have been given. Now the defendant may file W.S. by March 4, 1983. Put up on March 7, 1983 for issues. Preliminary objections like 7-C and 8-C can be heard and disposed of after filing of written statement when the issues may be framed. On March 4, 1983 which was the date fixed by the Civil Judge for the filing of a written statement by GEC, GEC filed three applications before the Mirzapur Court: 11-C, 12-C and 13-C. 13-C was styled as objections by the defendant to the jurisdiction of the court to entertain this suit for declaration and injunction. The document began with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing barrred for limitation on the face of it, or it be returned to be plaintiff for presentation to a proper forum. Further, the suit is also liable to be dismissed because reliefs claimed by the plaintiff are untenable on their face. Again, alternatively the suit is liable to be stayed under s. 10 and/or s. 151 CPC in respect of first relief and under s. 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 in respect of the second relief claimed by the plaintiff in the plaint. 11-C was an application under Order VIII Rule 9 and s. 151 CPC seeking postponement of the striking of issues from March 7, 1983 to 4th or 5th of April, 1983. In the course of the application it was recited: That in keeping with the time schedule fixed by this Hon ble Court in effect, that a written statement be filed on March 4, 1983, the defendant is filing objections to the jurisdiction of the court to entertain this suit for declaration and injunction to file a subsequent pleading as written statement on merits in the event of the objections taken in the preliminary written statement dated 21st February, 1983 being rejected . The reference to the objections to the jurisdiction of the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara wise and on merits ........... The plaintiff objected to the presentation of the written statement on the ground that it was filed outside court hours. The plaintiff also filed an application for postponement of the date of settlement of 868 issues. On August 4, 1983, the defendant filed an application (19-C), requesting the court to settle the issues on August 18, 1983 itself without further postponement. Thereafter the case was adjourned from time to time. On October 19, 1983, the plaintiff filed an application (2c) requesting the court to set the defendant ex parte as not having filed any written statement and to decree the suit. On August 1, 1984, the Plaintiff, Renusagar filed an application, 25-A, for amendment of the Plaint. The amendment sought included a prayer for a decree in a sum of ₹ 62,72,272. After contest, the application for amendment was allowed on October 15, 1984 and GEC was given time to file an additional written statement. A few days earlier, the defendant had filed application (30-C) requesting the court to decide the issues regarding maintainability and jurisdiction and stating that the suit may proceed after decisions on these issues. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a fresh application setting out the relevant facts in the spirit of s. 3 of the Act. This application should be made within a fortnight from today. If such an application is made within the time specified by us, the learned Civil Judge will dispose of the same on merits and in accordance with the law. Till the learned Civil Judge disposes of this application he shall not proceed further with the hearing of the suit. No other order is necessary at this stage. With these obser vations the writ petition is dismissed sum marily. Consequent on the order of the High Court in the application under Art. 227, GEC filed another application (83-C) before the Mirzapur Court on April 15, 1985 expressly setting forth their objection under s. 3 of the Foreign Awards (Recognition Enforcement) Act and praying for a stay of the suit under that provision. Reference was also made to their earlier applications made on March 4, 1983. The contentions raised in 13-C were reiterated. This application (83C) was rejected by the learned Civil Judge, Mirzapur by an order dated July 9, 1985. The learned Civil Judge took the view that the objection raised on the basis of s. 3 of the Foreign Awards Act must, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case. The Foreign Awards (Recognition Enforcement) Act was enacted to enable effect to be given to the Convention on the Recognition Enforcement of Foreign Arbitral Awards done at New York, on the th day of June, 1958, to which India is a party and for purposes connected therewith . The Convention is set-forth in the Schedule to the Act and s. 4(i) of the Act provides that a foreign award shall, subject to the provisions of the Act, be enforceable in India as if it were an award made on a matter referred to arbitration in India. Except s. 3, we are not concerned with the remaining provisions of the Act. Section 3 is as follows: Stay of proceedings in respect of matters to be refer 871 red to arbitration:- Notwithstanding anything contained in the Arbitration Act, 1940, or in the Code of Civil Procedure, 1908, if any party to an agreement to which Article II of the Convention set forth in the Schedule applies, or any person claiming through or under him commences any legal proceedings in any Court against any other party to the agreement or any person claiming through or under him in respect of any matter agreed to be referred to arbitration in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not thereafter. The question is when may a written statement said to have been filed or when may any other step said to have been taken in the proceedings? On the question of the meaning of the expression step in the proceedings , on the question of the proper approach to the solution of the problem and on allied questions, we were referred by the learned counsel for GEC and Renusagar to decisions of the *English Courts, decisions of the **Canadian Courts and ***passages from textbooks. We do not propose to refer to them in our judgment--not because we do not find them instructive; indeed we read them carefully and found them helpful, but because we think that reference to such persuasive authority is justified only if there is no guidance from binding authority. The time has perhaps arrived to discourage uninhibited reference to and extravagant use of foreign precedents, though indeed we welcome such precedents when they explore virgin territory and expand the horizons of legal thought. The setting of a foreign judgment is the foreign country s past and present history, its economic relations, its social relations, its trade and commerce, its traditions, its values, its need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court and we are unable to find any cogent ground for interfering under Art. 136 of the Constitution. The Court then proceeded to discuss the scope and meaning of s. 34 of the Arbitration Act and went on to observe: 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 proceedings. In the present case the written statement was indisputably not filed before the application for stay was presented. The question is wheth er 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 874 proceedings connotes the idea of doing some thing 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. Thereafter, the Court also noticed that the State had taken benefit of the appearance of the District Standing Counsel and his successful prayer for adjournment of the case by on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 filing the written statement or before taking any other step in the proceedings. That party must simultaneously show its readiness and willing ness 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out that no case is made out for granting interim relief. 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 re ceiver 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. There fore, the expression tak 877 ing 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. Interloc utory proceedings are incidental to the main proceedings. They have a life till the dispos al of the main proceeding. As the suit or the proceedings is likely to take some time before the dispute in the suit is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pports the view 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 necessarily 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. The Court finally concluded the discussion as follows: 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 arbitra tion agreement is such as would display in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the grounds urged was that the Mirzapur Court had no territorial jurisdiction. Another ground was that the plaint was insufficiently stamped. Yet another ground was that the plaint disclosed no cause of action. Every one of the objections was in the nature of a preliminary objection to the trial of the suit on the merits of the dispute between the parties. Every one of the objections was what may be called a threshold objection pleaded as a bar to any further hearing of the suit. None of the objections invited an adjudication on the merits of the controversy. It was said that the return of a plaint under Order VII r. 10 and the rejection of a plaint under Order VII r. 11 put an end to the controversy so far as the court where the proceedings had been instituted and that the rejection of a plaint under Order VII r. 11 was a decree within the definition of that expression in Order II r. 2 of the Civil Procedure Code. It was argued that the rejection of a plaint for non-disclosure of a cause of action was also an 880 adjudication of the merits of the controversy in the suit and reliance was placed on decisions under the Representation of People Act. We do not think that we can a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to adjudicate upon the merits of the controversy, when in fact it is designed to prevent the court from touching upon the merits of the controversy. The next set of events relied upon by the plaintiff to deny the defendant s right to obtain stay in the filing by GEC of the applications 1c, 12-C and 13-C in the Mirzapur Court on March 4, 1983.4 th March and 7th March were the dates which had been fixed by the Court for filing the written statement and for the striking of the issues. The defendant, on March 4, instead of filing the written statement, filed 11-C, 12-C and 13-C. 13-C, as already mentioned, was styled objections by the defendant to the jurisdiction of the Court to entertain a suit for declaration and injunction . It began with the statement, the Hon ble Court has no jurisdiction to entertain the suit for the following reasons and ended with the prayer: for the above reasons it is prayed that the plaint may be either rejected for failure to disclose a cause of action or as being barred by limitation on the face of it, or it be returned to the plaintiff for presentation to a proper forum. Further the suit is also liable to be dismissed because reliefs claimed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deny the averments of the fact in the plaint with a view to explain the preliminary objections raised by him or he may deny the averments of fact by way of abundant caution so as not to be understood as having admitted (by not denying) the plaint averments. In such a situation, the question to be considered is did the defendant intend it to be a written statement or was the document capable of being construed as setting out unreservedly the case which the defendant wished to put forward? Was it meant to answer the plaint? We do not think either 8-C or 13-C is capable of being so construed. Neither the title of the documents nor the prayer in the documents would justify their being dubbed as written statements. We have referred to their contents and we do not think it possible to view 8-C or 13-C as meant to answer the plaint. They were objections and not answer to the Plaint. We are unable to hold that either of them can be treated as a written statement. It is of interest to note here that the plaintiff himself filed an application 21-C requesting the court to set the defendant ex parte on the ground that he did not file any written statement. Obviously the plaintiff never cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther hand, we have also the circumstance that the defendant filed 13-C one of the prayers of which was a stay of the suit under s. 3 of the Act. The argument was that the defendant did not press his application and did not seek the orders of the court on 13-C. This would not be a correct picture of the events since we find that even on January 19, 1983, the court made an order that preliminary objections like 7-C and 8-C could be heard and disposed of after filing of written statement when the issues may be framed. We also find that at every stage the defendant kept referring to his preliminary objections and never for a moment abandoned them. 30-C was another application filed by him requesting the court to decide the preliminary objections regarding jurisdiction and maintainability of the suit. On this the order was that it was not competent for the court to reopen the order dated January 19, 1983. It was therefore, not the defendant s fault that the preliminary objections were not decided. Later again the defendant filed 34-C requesting the court to frame preliminary issues and try them on the question of the jurisdiction of the court and the maintainability of the suit. This ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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