Judgment

DUA, J.:- In this appeal by special leave the State of U. P. and the Divisional Forest Officer, Bijnor (defendants in the trial Court in the plaintiff-respondents suit) challenge the judgment and order of a learned Single Judge of the Allahabad High Court, allowing the plaintiff-respondents appeal and setting aside the order of the trial Court staying the suit under Section 34 of the Arbitration Act.

2. The plaintiffs had instituted a suit for the recovery of Rupees 69,556.27 by way of damages for breach of contract impleading the State of U. P. (through the Collector of Bijnor) as the first defendant and the Divisional Forest Officer, Bijnor as the second defendant. The summonses in the suit issued to the State of U. P. were served on the District Government Counsel. On September 22, 1966 the said 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. This prayer was granted. On October 1,1966 the District Government Counsel filed an application under Sec. 34 of the Arbitration Act pleading that there was an arbitration clause in the agreement between the 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 held that the dispute was subject to arbitration clause and since the State of U. P. had not taken any steps in the suit proceedings and had also not filed the written statement the suit was liable to be stayed. So holding the application of the State Government was allowed and the suit stayed.

3. On appeal by the plaintiff the High Court relying on two of its earlier decisions in United Provinces Govt. v. Sri Har Nath, AIR 1949 All 611 and Union of India v. Hans Raj Gupta and Co., AIR 1957 All 91, held that 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 Section 34 of the Arbitration Act. On this view the defendant was held disentitled to claim that the suit should be stayed. The appeal was accordingly allowed and the order of stay set aside.

4. In this Court Shri G. N. Dikshit learned counsel for the State of U. P. strongly contended that the District Government Counsel had no instructions to ask for adjournment for the purpose of filing the written statement and, therefore, his action in applying for adjournment for that purpose cannot bind the State of U. P., with the result that application for stay of proceedings in the suit under Section 34 of the Arbitration Act could not be held to be incompetent. It was also contended that the trial Court having granted stay in its discretion the High Court was in error in reversing that order and setting it aside on appeal. According to this submission the discretion had been exercised by the trial Court which could not be considered to be either unreasonable or contrary to any recognised principles and the High Court should, therefore, have upheld it.

5. The counsel relied in support of his submission on Punjab State v. Moji Ram, AIR 1957 Punj 223. In that case on the date fixed by the trial Court for appearance of the defendant, the Government pleader, with one Kartar Singh Sub-Divisional Officer, appeared and asked for time to file written statement as instructions with a copy of the plaint had not been received. Adjournment was granted and a date was fixed for filing the written statement. On the adjourned date the Government pleader filed an application for stay of the suit under Section 34 of the Arbitration Act. On these facts the High Court observed that the Government pleader had merely acted as a volunteer and asked for adjournment on the assumption that in due course he would receive instructions from the Government. The Government as a defendant, therefore, could not be said to have taken any step in the proceedings. The application for adjournment in these circumstances