A party seeking a stay of proceedings under Section 34 of the Arbitration Act, 1940, must apply at the earliest opportunity, before taking any steps in the proceedings. Applications for adjournment, indicating an intention to participate in the proceedings and defend the suit, constitute steps in the proceedings and bar a party from subsequently seeking a stay.

( 1 ) THIS is an appeal under Section 39 of the Arbitration Act. It arises out of an application filed by the defendant-appellant under Section 34, Arbitration Act, for the stay of a suit. The suit in question was filed by M/s Hans Raj Gupta and Co. , on 1-2-1950 against two defendants. The first defendant was the Union of India, the appellant in the present appeal, and the second defendant was one Sri Mahesh Chandra Gupta. Defendant No. 2 did not put in appearance, and the suit proceeded ex parte against him. In the suit, the plaintiff claimed a decree for Rs. 2,28,397/14/5 against defendant No. 1 on the ground that there was a contract entered into between defendant No. 1 and defendant No. 2 by virtue of which defendant No. 2 undertook to supply fire-wood to defendant No. 1. The plaintiff claimed to be the, assignee of the interest of defendant No. 2, and hence entitled to the amount claimed. It may be mentioned that in the plaint itself there was a definite and clear reference to the terms of the contract entered into between defendant No. 1 and defendant No. 2. The allegations in paras 7 and 8 of the plaint would further indicate that there was also a reference in the plaint to the fact that there was an arbitration clause in this contract. The plaint also indicated that previous to this suit there had arisen a dispute between the parties about the amount payable under the contract, that the said dispute was referred to the arbitrator constituted under the arbitration clause, and that, under the award given by the arbitrator, the amount claimed in the present suit was adjudicated as due to the plaintiff. The present suit was filed to recover the same amount.

( 2 ) IN this suit, 4-4-1950, was fixed for filing a written statement by the defendant. On that date, an application was filed on behalf of defendant No. 1, the Union of India, in which it was said that as the papers had to go from one quarter to another, and it generally look time, so it was prayed that at least two months time may be given to the defendant. The time asked for was allowed. After the expiry of two months, on 5-6-1950 a second application was again filed by defendant No. 1 saying:

"it is submitted that the matter as alleged by the plaintiff relates to a period of the years. Due to the change of the staff owing to the partition of the country the papers are not easily available and are being collected. It is, therefore, requested that at least one months time may kindly be allowed for doing the needful. "

This application was also allowed. After the expiry of that time, however, the defendant No. 1, instead of filing a written statement, filed an application for stay under Section 34, Arbitration act. This application for stay was rejected by the learned Civil Judge of Dehradun by his order dated 23-8-1950. Aggrieved with the said order the defendant No. 1 has filed this appeal. 2a. We have heard the learned counsel for the appellant, and after giving our consideration to the matter, we are of opinion that there is no substance in this appeal. The sole question that has been de bated before us is whether the two application for adjustment given by defendant No. 1 on 44-1950 and 5-6-1930 constitute a step in the proceedings of the case under Section 34 of the arbitration Act (Act X of 1940 ). Section 34 of the said Act provides as follows:"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