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1982 Supreme(MP) 462
IN THE HIGH COURT OF MADHYA PRADESH (GWALIOR BENCH)
D.A. Desai, A.P. Sen and Baharul Islam, JJ.
Food Corporation of India and another
Vs.
Yadav Engineer and Contractor
Civil Appeal No. 3317 of 1981
Decided On: 06.08.1982
For Appellant/Petitioner/Plaintiff: K.K. Venugopal with S.K. Gambhir
For Respondents/Defendant: Soli J. Sorabjee, D.K. Katare and S.S. Khanduja
Headnote:(1) Arbitration Act, 1940-S. 34-conditions for obtaining stay order duty of the defendant-filing of written statement-is waiver of arbitration agreement-expression taking any other steps in the proceedings-meaning of-contesting interlocutory proceeding-is not such a step.
One of the conditions to be satisfied before an order under section 34 can be obtained is that the party to the legal proceeding has at any time before filing a written statement or taking any other steps in the proceedings applied to the judicial authority for stay of proceedings. In other words, a party seeking stay of proceedings must move the Court with an application under section 34 before filing the written statement to the suit or before taking any other steps in the proceedings. [Para 4]
When in breach of an arbitration agreement a party to the agreement rushes to the Court, unless a clear case to the contrary is made out, the approach of the court should be to hold parties to their bargain provided necessary conditions for invoking section 34 are satisfied. [Para 5]
In order to satisfy the Court that the other party to the arbitration agreement who would 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. [Para 7]
When the party files written statement to the suit it discloses its defence, enters into a contest and invites the Court to adjudicate upon the dispute. Once the Court is invited to adjudicate upon the dispute there is no question of then enforcing an arbitration agreement by forcing the parties to resort to the forum of their choice as set out in the arbitration agreement. [Para 9]
Each and every step taken in the proceedings cannot come in the way of the party seeking to enforce the arbitration agreement by obtaining stay of proceedings but the step taken by the party must be such step as would clearly and unmistakably indicate an intention on the part of such party to give up the benefit of arbitration agreement and to acquiesce in the proceedings commenced against the party and to get the dispute resolved by the Court. A step taken in the suit which would disentitle the party from obtaining stay of proceeding must be such step as would display an unequivocal intention to proceed with the suit and to abandon the benefit of the arbitration agreement or the right to get the dispute resolved by arbitration. [Para 10]
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. [Para 12]
Contesting the application for interim injunction or for appointment of a Receiver or for interim relief by itself without anything more would not constitute such step as would disentitle the party to an order under section 34 of the Act. [Para 31]
(2) Civi1 P.C. 1908-S, 115-Arbitration Act, 1940-S. 34-in the trial court no plea was taken that the defendant applicant asserted that he was ready and willing to necessary things-such plea cannot be allowed to be raised in revision. [Para 33]
(3) Precedent-judgment of Division Bench of the same High Court-is binding on Single Bench-ignoring such judgment is judicial impropriety. [Para 16]
D. A. Desai, J.
A fond hope that a decision of this Court with the sanction of Article 141 of the Constitution that the law laid down therein will be the law of the land would put an end to a raging controversy amongst various High Courts stands to some extent rudely shaken when the controversy with a slight variation has again been placed in the lap of this Court.
For highlighting and then resolving the controversy facts in dispute have a little or no relevance save and except mentioning certain events. Respondent Yadav Engineer and Contractor, a partnership firm filed a suit against Food Corporation of India, 1st defendant and Shyam Narain Nigam, District Manager of 1st defendant as 2nd defendant, for a declaration that the contract between the plaintiff and the 1st defendant for handling and transportation of the goods of the 1st Corporation was subsisting on the date of the suit and restraining the defendant from committing breach of the same by handing over that work to someone other than the plaintiff. The suit was instituted on June 1, 1981, in the Court of the III Civil Judge, Class I, Gwalior. In the suit a notice of motion was taken out purporting to be under Order XXXIX, Rules 1 and 2 read with section 151, Civil Procedure Code, for an interim injunction restraining the defendants from committing a breach of contract and from interfering with the work of handling and transport of goods of the 1st defendant Corporation by the plaintiff during the pendency of the suit. On the notice of motion being taken out the Court directed notice of the same to be served and the same was made returnable on the next day, June 2, 1981. On the returnable date the 2nd defendant, District Manager of the 1st defendant-Corporation who had office in the city of Gwalior was served and he appeared through one Shri N.K. Modi, Advocate, filed the letter of authority (Vakalat) in favour of the learned Advocate on behalf of 2nd defendant and the learned advocate prayed for time for "reply and arguments to the plaintiff's application for temporary injunction". The Court acceded to the request and posted the matter on June 3, 1981. An endorsement appears in the record that the 1st defendant Food Corporation of India was not served though the endorsement reads 'absent'. However, the last line in the proceeding makes it clear that the case was posted on June 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 1st 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 arbitrator 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 section 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 negatived the contention that an application made by the 2nd defendant for filing reply to the notice of motion taken out by the plaintiff for interim injunction is a step taken in the proceedings in view of the binding decision of a Division Bench of the Madhya Pradesh High Court in Sansar Chand Deshraj v. State of M.P. 1961 MPLJ 392 : AIR 1961 MP 322. The learned Judge accordingly granted stay of further proceedings in the suit as prayed for on behalf of the 1st defendant. Plaintiff preferred an appea
