Sreenivasalu Chettiar vs Parthasarathi Naidu

The defendant in O. S. No. 75 of 1978, District Munsif''s Court, Mayuram, who succeeded in obtaining stay of further proceedings in the suit

under S. 34 of the Arbitration Act, 1940 (hereinafter referred to as the Act) before the learned District Munsif of Mayuram and lost before the

learned Subordinate Judge, Mayuram, is the petitioner in this civil revision petition. Certain facts which would help to appreciate the rival

contentions of the parties are not in dispute. It is admitted that the petitioner and the respondent entered into a lease agreement dated 21-12-1964

under which if the respondent wants the petitioner to vacate the premises, sufficient time had to been mid a provision for the nomination of four

arbitrators to decide the market value of the superstructure was also made and the value so fixed should be paid by the respondent to the

petitioner. Originally, the respondent instituted O. S. No. 397 of 1975 on the file of the District Munsif''s Court, Mayuram, for the recovery of

possession and that suit was also decreed. However, on appeal, in A. S. No. 28 of 1977, Sub-Court, Mayuram, preferred by the petitioner, the

suit was dismissed. Thereafter, the respondent issued a notice on 25-1-1978 to the petitioner terminating the tenancy in favour of the petitioner and

demanding surrender of possession of the proper expressing his willingness to the value of the superstructure is as the compound wall in a sum of

Rs. 950/-. In response to this, the petitioner had on 8-2-1978 sent a reply setting out the terms of the agreement between the parties dated 1-12-

1964 and in particular inviting the attention of the respondent that resort would be had to the provisions of the Arbitration Act in the event of the

respondent filing the suit for recovery of possession. It was thereafter that the respondent instituted a suit in O. S. No. 75 of 1978 on 15-3-1978

praying for a decree against the petitioner to surrender possession of the suit property with the superstructure or to surrender possession without

the superstructure and for other incidental reliefs. It is not disputed that the petitioner was served with the summons in the suit and the suit was

posted for appearance on 16-6-1978. On that day, the petitioner entered appearance through counsel and a vakalat on his behalf was also filed. It

is admitted that the suit was adjourned to 17-7-1978 for filing of the written statement by the petitioner. However, on 12-7-1978 the petitioner

filed an application under S. 34 of the Arbitration Act to stay all further proceedings in the suit till the determination of the rights of the parties in

accordance of the provisions of the Act. That application was opposed by the respondent herein on the since the petitioner had entered

appearance through counsel and had requested time for written statement, that would amount to participation of the proceedings and a submission

to the Jurisdiction of the court and therefore, S. 34 of the Act cannot be invoked by the petitioner.

The learned District Munsif Mayuram, who heard this application on 1-11-1978, in the course of his order dated 13-11-1978 was of the view''

that the court automatically and in the usual course, adjourned the suit to 17-7-1978 for filing the written statement and no oral representation was

made by the learned counsel for the petitioner for filing the written statement and therefore, it cannot be said that the petitioner had participated or

had taken any step in the proceedings as contemplated under S. 34 of the On this conclusion, the learned District Munsif held that the petition was

maintainable and allowed the same. However, on appeal in C. M. A. No. 2 of 1979, Sub-Court. Mayuram the learned Subordinate judge held

that the circumstance that time hid been granted for filing the written statement indicates that it must have been only on the request of the petitioner

and that it is not known how the learned District Munsif was able to recollect and remember as to what happened on 1641-1978 application when

the hearing of the application was on 1-11-1978. Under those circumstances the learned Subordinate judge held that time had been granted by the

court for filing the written statement only on the representation of the learned counsel for the petitioner and therefore, the petitioner had participated

in the proceedings and submitted to the jurisdiction of the court and consequently, the-application under S. 34 of the Act is not maintainable. In this

view, the order passed by the learned District Munsif was set aside and the appeal was allowed.

In this civil revision petition, the only question that arises for consideration is whether the petitioner by reason of his participation in the

proceedings had forfeited right to maintain an application under S. 34 of the Act. Before proceeding to consider this aspect, it is necessary to

advert to S. 34 of the Act which runs as under:

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 any matter agreed to be referred, any 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 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, 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 language of the section being quite plain, there is little doubt about the gal position in relation to the scope and meaning of S. 34 of the Act.

The existence of a clause providing for an arbitration in the present case is riot in dispute. If that be so, then the position is that when a party to

such an arbitration agreement initiates legal proceedings against the other party to the agreement with respect to the subject matter thereof, then the

other is entitled to ask for a stay of such further proceedings in order to enable the terms of the arbitration agreement to be carried out. It must also

be noticed that a mere existence of an arbitration clause does not ipso facto operate as a bar to a suit in a court and there is no obligation cast on

the court to stay the suit or to give any opportunity to the defendant to consider the question of enforcing the arbitration agreement. The right to

resort to a suit by an aggrieved person is conferred by S. 9 of the CPC and curtailment of such a right has to be necessarily established by a party

seeking to do so. In the case of an arbitration agreement, the defendant, before he can successfully pray for, an order staying the suit, in addition to

fulfilling other conditions mentioned in S. 34 of the Act, must make an application before the court praying for stay before filing the written

statement or taking other step in the suit. The nature of the step which would disentitle a defendant from invoking the benefit of S. 34 of the Act

should be such as to indicate that the party acquiesced in the method of having the dispute decided by the court and a participation in and

contribution to its further progress or any act showing acquiescence in the jurisdiction of the court. In other words, there must be some expression

of a desire on the part of the defendant to take a step in the suit indicating that the defendant proposes to go on with the suit and abandons the

agreement to refer to arbitration. The question which may now be considered is whether the petitioner has taken any step in the proceeding as

contemplated by S. 34. Though the learned counsel for the petitioner would submit that the court suo motu granted fame for filing the written

statement and therefore, the petitioner cannot be disentitled from maintaining the application under S. 34 of the Act on the ground that he had taken

step in the proceedings, it is not possible to accept the same under the circumstances of there present case. Having taken the stand even in the

reply notice dated 8-2-1978 that he in the would invoke the provisions of the Arbitration Act in the event of a suit being filed by the respondent

herein, it is obvious that the petitioner was fully aware of the existence of the agreement to resolve the disputes by reference to arbitration and that

he could invoke S. 34 of the Act seeking a stay of the further proceedings in the suit. It is not in dispute that in the present case, the summons as

well as a copy of the plaint were served on the petitioner and if so, the petitioner certainly had full knowledge of the claim in the suit. Under Order

9, Rule 1of the Code of Civil Procedure, it is the duty of the defendant to be in attendance at the court either. in person or advocate on the day

fixed in the and unless the hearing is adjourned to a future day fixed by Court, the suit shall be heard in the present case, the fact remains that time

had been granted for filing of the written statement up to 17-7-1978. Such grant of time would indicate that it must have been only pursuant to a,

request made by the learned counsel for the petitioner, who had filed the vakalat on 16-6-1978. Otherwise, the court would have proceeded with

the hearing of the suit. It is thus evident-that the petitioner being fully aware that having regard to the provision for resolving the disputes by

reference to arbitration, yet chose to instruct his counsel to appear before the court and pray for time for filing the written statement which was also

granted by the court. This, in my view, is a clear manifestation of a desire on the part of the petitioner to take almost the first step in the suit

indicating that he intended to go on with the suit and not to resort to the arbitration provision. Under these circumstances, the lower appellate court

was perfectly justified in holding that the petitioner had participated in the proceedings and had also submitted to the jurisdiction the court, which

would disentitle him from invoking the procedure under S. 34 of the Act.

However, the learned counsel for the petitioner relies upon the decision of the Supreme Court in The State of Uttar Pradesh and Another Vs.

Janki Saran Kailash Chandra and Another, . In that case, the respondents had instituted a suit for the recovery of certain amounts by way of

damages for breach of contract impleading the appellants (defendants 1 and 2). After service of summons in the suit on 22-9-1966, the District

Government Counsel filed his appearance and also put in an application paying for a filing the written statement, which was granted. Thereafter, on

1-10-1966, the District Government Counsel, by means of an application, invoked S. 34 of the Arbitration Act and prayed that the suit should be

stayed. The trial court held that the dispute was subject to the arbitration clause and since no steps had been taken in the suit and the written

statement had also not been filed, the suit washable to be stayed. However, on appeal, the High Court held that the 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 S. 34 of

the Act and in this view, the defendant was held disentitled to claim that the suit should be stayed. On further appeal to the Supreme Court, it was

held that the District Government Counsel chose to ask for time to file the written statement and this act was purported to be done on behalf of the

State Government which he was fully empowered to do and after having taken the benefit of a successful prayer for an adjournment of the case by

one month for the purpose of the filing of the written statement, it is hardly open to the State Government to plead at the District Government

Counsel was not authorised to seek adjournment on his behalf. In this view, the Supreme Court ultimately upheld the order of the High Court. It

must be remembered that in that case also the written statement was indisputably not filed before the application for stay was presented. The

question whether any step was, taken in the proceedings as contemplated by S. 34 was considered and it was held that, praying, for time for filing

the written statement would amount to the taking of a step 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 between the parties to the suit. In my view, this decision, far from assisting the petitioner in

any manner, clearly supports the stand taken by the respondent. The learned counsel for the petitioner also relied upon the decision in Messrs

Prem Nath Pran Nath v. Amba Parshad, AIR1941Lah64. In that case, a suit, was brought against the defendant in the Small Causes Court at

Amritsar and no copy of the plaint was attached to the summons. On the date, fixed in the summons the defendant appeared in court and brought

the defect to the notice of the court and thereupon, he was supplied with the copy of the plaint. Thereafter, the case was adjourned in order to give

him some time to prepare a written statement. On the next adjourned date, the defendant applied for stay of proceedings under S. 19 of the

Arbitration Act, 1899.The application was rejected by the Small Causes Court on the ground that the grant of the adjournment meant, that the

defender had taken a step in the, proceedings. The correctness of this order was challenged before the High Court and the High Court held that

since the defendant had not been supplied with the copy of the plaint, the proceedings cannot be said to have commenced and if under those

circumstances, an application for time for filing the written statement was made, that cannot be regarded as a step taken in the proceedings by the

defendant. The facts of that case are totally different from the facts of the present case. In the present case, it is not the stand taken by petitioner

that he was not aware of the claim made in the suit or that a copy of the plaint was not enclosed along with the summons in the suit. It is also further

significant to note that the petitioner even in his reply notice made it clear that he was fully conscious of his right to invoke S. 34 of the Arbitration

Act in the event of a suit being instituted against it; in spite of it, he proceeded to engage a counsel who prayed for time for filing the written

statement. These circumstances, in my view, would make the decision relied upon by the learned counsel for the petitioner inapplicable to the

present case. On the other hand, the learned counsel for the respondent strongly relies upon the decision in M.P. Lokiah and Others Vs. V.M.

Jayaram Naidu, . In that case, the question that arose was whether an application for return of documents would constitute a step in the

proceedings as contemplated by S. 34 of the Arbitration Act. In discussing the scope as to what would constitute taking a step in the proceedings,

this Court observed at page 157 as under :

The words ''other steps in the proceedings would embrace within their amplitude a large variety of acts. An application by a party indicating that

he has participated in the proceedings of the case or has contributed to its further progress or any act by a party showing that he has acquiesced in

the jurisdiction of the civil Court would constitute a step in the legal proceedings. An application by the defendant for the appointment of a

Commissioner or Receiver for taking an inventory ox for possession of property would obviously be a step in the proceedings; in of such a case,

he seeks the assistance of the Court for the avowed purpose of establishing his case and defeating the suit. An application for time (underlining

mine) or for extension of time to file the written statement or for postponement of the hearing of the suit would also be an obvious step in the

proceedings; and the defendant''s intention to proceed with the suit rather than his insistence upon the arbitration clause can be readily inferred. In

all these cases it can be legitimately inferred that he intended to abandon his claim to refer the matter to arbitration and proceed with the trial.

In view of the above principles, the contention of the learned counsel for the petitioner is untenable. It must therefore held that when the petitioner

entered appearance through his counsel, who on instruction sought time for the purpose of filing a written statement, when the petitioner was fully

conscious of his right to invoke the provisions of S. 34 of the Act which he had asserted earlier even in his reply notice, the petitioner did take a

step in aid of the progress of the suit and submit to the jurisdiction of the court and therefore, he is precluded from invoking S. 34 of the Act.

Under these circumstances, the order of the lower appellate court is perfectly correct and does not merit any interference in revision. The civil

revision petition fails and is dismissed with costs.

Revision dismissed.