Satish Kumar v. B. S. Komal — 1993 DIGILAW 99 (HP)

Judgement ORDER :- By moving this application under Section 34 of the Arbitration Act, 1940 (hereinafter referred to as the Act), a prayer has been made by the defendants/applicants for stay of proceedings in Civil Suit No. 51 of 1988. It is alleged in the application that the subject matter of the Civil Suit filed by the plaintiff/non-applicant arises out of the partnership deed containing an arbitration clause, which envisage that all disputes and differences, if any, amongst the partners, shall be referred to an Arbitrator, who may be appointed by mutual consent of partners. The further allegations are that the applicants are ready and willing to go in for arbitration in respect of the disputes alleged by the plaintiff or with respect to any other disputes arising out of the partnership, in accordance with the arbitration agreement, and that the defendants have not taken any steps in the proceedings and have prayed for stay of proceedings in the suit. 2. The application is opposed by the plaintiff. The preliminary objection raised is that the applicants have taken part in the suit by taking time to file written statement which estoppes them from moving the application praying for stay of the suit. The other objection is that the arbitration clause in the agreement does not cover the dispute, which is the subject matter of suit. It is, however, not disputed by the plaintiff that the partnership deed was executed, which contains an arbitration clause. 3. On 19th Sept. 1988, the following three issues were framed and the parties were called upon to adduce their evidence on affidavits : 1. Whether the defendants have taken any steps in the proceedings and, therefore, the present application does not lie ? 2. Whether the arbitration clause does not cover the controversy which is the subject matter of the suit ? 3. Whether the suit is liable to be stayed under the provisions of Section 34 of the Arbitration Act ? 4. Each one of the applicants has filed his own affidavit in support of the averments made in the application, and in addition thereto reliance is also placed on the affidavit of Mr. Dharam Chand, Advocate dated 14th March, 1989. The only affidavit in rebuttal is of Satish Kumar, plaintiff/non-applicant. I have heard the learned counsel for the parties and gone through the record. Issue No. I : 5. Dharam Chand, Advocate dated 14th March, 1989. The only affidavit in rebuttal is of Satish Kumar, plaintiff/non-applicant. I have heard the learned counsel for the parties and gone through the record. Issue No. I : 5. It is contended by the learned counsel for the applicants that in view of the fact that execution of partnership deed is not in dispute and it is also not in dispute that it contains an arbitration clause, on the face of it, the entire subject matter of controversy, for which the plaintiff/non-applicant has filed the suit is based upon the right arising out of the terms of partnership, which disputes have to be resolved only through the process of arbitration and not by suit. There is no rebuttal to the specific averments made by the applicants that they were and are still ready and willing to have the entire matter referred for arbitration and there is no reason as to why the prayer made in the application be not allowed since no steps were taken by the applicants in the proceedings. After the applicants were served, power of attorney on their behalf was filed by Mr. Dharam Chand, Advocate, on the date fixed for appearance but no prayer was made by him seeking adjournment for filing written statement. On the very first available opportunity, the application was made. The mere act of putting appearance without making any prayer seeking time to file written statement does not amount to taking steps in the proceedings. The learned counsel has also referred to the orders passed on the file by the Deputy Registrar (Rules). 6. Ms. Pratima Malhotra appearing for the plaintiff/non-applicant has vehemently contended that the applicants were duly served with the summonses in the suit. Copies of plaint as also of miscellaneous application for interim relief were duly served upon them on 16th July, 1988. Appearance was put in on their behalf by Mr. Dharam Chand on 22nd July, 1988 by filing power of attorney and the case was adjourned for two weeks in order to enable the defendants to file written statement. This act itself amounts to taking steps in the proceedings. Appearance was put in on their behalf by Mr. Dharam Chand on 22nd July, 1988 by filing power of attorney and the case was adjourned for two weeks in order to enable the defendants to file written statement. This act itself amounts to taking steps in the proceedings. Had there been any intention on the part of the defendants/applicants to exercise their right under Section 34 of the Act, there is no reason as to why a request was not made on 22nd July, 1988 for moving an application for stay of suit. It was in the presence of Mr. Dharam Chand that the case was adjourned for filing written statement. Irrespective of the fact that prayer of the counsel is not recorded the very fact that the suit was adjourned for filing written statement, the same will amount to taking steps in the progress of the suit. In support of her submission, Ms. Pratima Malhotra has placed reliance upon a catena of judgments of various High Courts as also the Supreme Court. All judgments referred to at the Bar by the counsel for the parties need not be dealt with since the same are on same and similar field laying down almost same principle. 7. In R. D. Bhardwaj v. State of Himachal Pradesh (ILR 1978 HP 545), the Law Officer attached to the learned Advocate General, by putting in appearance on behalf of the State of Himachal Pradesh had made a request to allow him one weeks time for filing written statement to the main suit as also reply to the miscellaneous application. The application for stay of the suit under Section 34 of the Act was made on 12th April, 1978. Learned single Judge held that : "............ It is incumbent upon the party who wants the suit to be stayed that he must clearify his position at the earliest possible opportunity so as to leave no manner of doubt that he wishes to have a resort to arbitration proceedings. And if he does not clarify that position and allows the suit to progress, he can be presumed to have given up his claim to have the matter decided by the arbitrator and to have thereby forfeited his right to claim a stay. And if he does not clarify that position and allows the suit to progress, he can be presumed to have given up his claim to have the matter decided by the arbitrator and to have thereby forfeited his right to claim a stay. Since Shri Paul appearing on behalf of the defendants had specifically prayed for an adjournment to enable him to file a written statement to the suit as also a reply to the application under Order 39, Rules 1 and 2, it amounted to a step in the proceedings. In such circumstances the Court has to refuse to stay the proceedings on the ground that the stage fixed by the law for making application has passed. It is now not open to the defendants to say that in spite of it their intention was to apply for stay at a future date. Once they opted to get time for filing the written statement, that tantamounted to a step in the proceedings of the suit and forfeited the right to apply for stay of the suit." 8. The Court in holding so that the application for stay should be moved at an earlier stage of proceedings, thereby leaving no manner of doubt that it had no intention to take part in the progress of the suit placed reliance upon the judgment of the Supreme Court in the State of Uttar Pradesh v. M/s. Janki Saran Kailash Chandra (AIR 1973 SC 2071). 9. Defendants/applicants were served in this case on 16th July, 1988. Power of attorney of Mr. Dharam Chand and Mr. D. C, Jishtu is dated 21st July, 1988, which was filed in the Registry on 22nd July, 1988. The following proceedings were recorded by the Deputy Registrar (Rules) : "22-7-1988 : Present : Mr. P. Mehdudia, Advocate vice counsel for the plaintiff. Mr. Dharam Chand, Advocate, for all the defendants. Shri Dharam Chand, Advocate has filed power of attorney on behalf of all the defendants today. Let the written statement be filed within the next two weeks." 10. The case thereafter was again listed only on 17th August, 1988 before the Deputy Registrar (Rules), when the following proceedings are recorded : "17-8-1988. Present : Mrs. Pratima Malhotra, Adv. for the plaintiff. Mr. Dharam Chand, Adv. for the defendants. The defendant has moved OMP No. 313 of 1988 under Section 34 of the Indian Arbitration Act. The case thereafter was again listed only on 17th August, 1988 before the Deputy Registrar (Rules), when the following proceedings are recorded : "17-8-1988. Present : Mrs. Pratima Malhotra, Adv. for the plaintiff. Mr. Dharam Chand, Adv. for the defendants. The defendant has moved OMP No. 313 of 1988 under Section 34 of the Indian Arbitration Act. Let reply to such OMP be filed by the plaintiffs within the next three weeks." 11. Quoting of the proceedings of the two dates makes it clear that on 22nd July, 1988, no prayer, in fact, was made by Mr. Dharam Chand, Advocate. It was the Deputy Registrar (Rules), who of his own recorded that "let the written statement be filed within the next two weeks". Instead of putting in the written statement, on 2nd August, 1988, an application under Section 34 of the Act was filed. The plaintiff in his affidavit has alleged that the defendants by taking time to file written statement on 22nd July, 1988, after receiving notices on 9th June, 1988 had taken steps in the proceedings. The affidavit of Mr. Dharam Chand makes the facts clear, in which he has in unequivocal terms stated that on 21st July, 1988, the applicants had handed over to him the copies of the plaint and of the miscellaneous application along with power of attorney. Since the case was fixed on 22nd July, 1988, he could not and actually did not go through the copy of plaint as also of the application. He also did not go through any other paper concerning the Civil Suit. Simply power of attorney, which was signed by the applicants was presented before the Deputy Registrar (Rules) and no prayer, as such, was made seeking adjournment ox for filing written statement. It was in a routine manner that the Deputy Registrar (Rules) passed the order to the effect that written statement be filed within the next two weeks. It was on 2nd August, 1988 that an application for stay of the proceedings in the Civil Suit was moved. 12. It was in a routine manner that the Deputy Registrar (Rules) passed the order to the effect that written statement be filed within the next two weeks. It was on 2nd August, 1988 that an application for stay of the proceedings in the Civil Suit was moved. 12. The Supreme Court in Food Corporation of India v. Yadav Engineer and Contractor (AIR 1982 SC 1302) held that 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. One of the necessary conditions to be satisfied was held to be for 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. 13. It is not in dispute that in the instant written statement has not been filed till date. The only act which is pressed into service as an act amounting to taking steps in the proceedings is the one of putting in appearance by Mr. Dharam Chand, Advocate, filing power of attorney by him and the adjournment of the case on 22nd July, 1988 for filing written statement. In Food Corporations case (AIR 1982 SC 1302) (supra), the apex Court held that 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 the proceedings. The steps taken by the party must be such steps 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. The Court further held : "......... 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." 14. In General Electric Co. v. Renusagar Power Co. 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." 14. In General Electric Co. v. Renusagar Power Co. (1987) 4 SCC 137, following the judgments in Janki Saran, (AIR 1973 SC 2071) and Food Corporations cases (AIR 1982 SC 1302) (supra), the Court held that : ".......... a step in the proceeding which would disentitle the defendant from invoking Section 34 of the Arbitration Act should be a step in aid of the progress of the suit or submission to the jurisdiction of the court for the purpose of adjudication of the merits of the controversy in the suit. The step must be such as to manifest the intention of the party unequivocally to abandon the right under the arbitration agreement and instead to opt to have the dispute resolved on merits in the suit. The step must be such as to indicate an election or affirmation in favour of the suit in the place of the arbitration. The election or affirmation may be by express choice or by necessary implication by acquiescence. The broad and general right of a person to seek redressal of his grievances in a court of law is subject to the right of the parties to have the disputes settled by a forum of mutual choice. Neither right is insubstantial and neither right can be allowed to be defeated by any manner of technicality. The right to have the dispute adjudicated by a civil court cannot be allowed to be defeated by vague or amorphous miscalled agreements to refer to arbitration. On the other hand, if the agreement to refer to arbitration is established, the right to have the dispute settled by arbitration cannot be allowed to be defeated on technical grounds." 15. The Court further held that a broad view has to be taken of the principles involved and narrow and technical interpretation which tends to defeat the object of the legislation must be avoided. 16. The Court further held that a broad view has to be taken of the principles involved and narrow and technical interpretation which tends to defeat the object of the legislation must be avoided. 16. Finally in Rachappa Gurudappa Bijapur v. Gurudiddappa Nurandappa (1989) 3 SCC 245 : (AIR 1989 SC 635), the apex Court held that it is imperative to find out, before an application under Section 34 of the Act is allowed that whether "any other steps in the proceedings" have been taken before making any application for stay of the suit. In para 9 of the report, it was observed that : "............. In our opinion, proceeding without being embroiled in the facts and the circumstances of the case with the controversy whether the said expression should be construed ejusdem generis, it is necessary to determine whether the party had evinced or indicated any intention to proceed unequivocally with the suit and not to proceed with the arbitration. This position was examined by this Court in Food Corpn. of India v. Yadav Engineer and Contractor, (1982) 2 SCC 499 : (AIR 1982 SC 1302), where this Court referred to the decision of Uttar Pradesh v. Janki Saran Kailash Chandra, and after setting out the provisions of Section 34 of the Arbitration Act, this Court observed that apart from written statement some other step mentioned in the Section must indisputably be such step as would manifestly display an unequivocal intention to proceed with the suit and to give up the right to have the matter disposed of by arbitration." (Emphasis supplied) 17. The Court further laid an emphasis that the Court must find out from the context of each case whether any intention is or is not manifest or displayed. The expression taking any other steps in the proceedings does not mean that every step in the proceeding would come in the way of enforcement of the arbitration agreement. The steps may not be, as would clearly and unambiguously manifest the intention to waive the benefit of the arbitration agreement. 18. Applying the aforementioned principles, intention in the instant case has to be gathered by reading the order recorded on 22nd July, 1988. It no where records that any prayer or request was made on behalf of the defendants/applicants to adjourn the proceedings or to allow them time to file written statement. 18. Applying the aforementioned principles, intention in the instant case has to be gathered by reading the order recorded on 22nd July, 1988. It no where records that any prayer or request was made on behalf of the defendants/applicants to adjourn the proceedings or to allow them time to file written statement. Time appears to have been given by the Deputy Registrar (Rules) of his own, and as is clear from the affidavit of Mr. Dharam Chand that in a routine manner when it was recorded that let the written statement be filed within the next two weeks. This observation of the Deputy Registrar (Rules) cannot by any stretch of imagination be construed as an adjournment of the case on the defendants request. There is a direct evidence in the instant case in the affidavit of Mr. Dharam Chand, which has remained unrebutted, that when appearance was put on 22nd July, 1988 neither he was aware of the exact nature of the proceedings, nor he had gone through the plaint etc. There is no material on record which might indicate that the defendants had given up their right to have the matters disposed through the process of arbitration. In Rachappa Gurudappas case (AIR 1989 SC 635) (supra), what has been observed is that the steps taken must be such as would clearly and unambiguously manifest an intention to waive the benefit of arbitration agreement. Appearance put in by a counsel being unaware of the nature of the proceedings or the detail of the claim, without even praying to adjourn the case for filing the written statement cannot in the facts and circumstances be held as expressing an intention to waive the benefit of arbitration agreement, nor can such putting in appearance, without anything more be held to taking the steps in the proceedings. Waiver, in fact, is an intentional relinquishment or abandonment of a known right or such conduct as warrants an inference of the relinquishment of such right. In other words, it implies to give up or forego something to which a person is entitled. In case of a waiver, there should be some clear and decisive act or a conduct beyond mere silence. Mr. Dharam Chand while putting in appearance, as the order of 22nd July, 1988 would show, remained silent as to the conduct of further proceedings. In case of a waiver, there should be some clear and decisive act or a conduct beyond mere silence. Mr. Dharam Chand while putting in appearance, as the order of 22nd July, 1988 would show, remained silent as to the conduct of further proceedings. Neither he prayed nor acted in such a manner which might be said to be an act of further progress of the suit. Silence on his part cannot amount to waiving of the right to pray for stay of the suit in view of the arbitration clause in the deed of partnership. Resultantly, I see no force in the submissions made by the learned counsel for the plaintiff-non-applicant and Issue No. 1 is held in negative. Issue No. 2 : 19. The other objection raised by the learned counsel for the plaintiff/non-applicant is that the disputes raised in the suit are not covered by the arbitration agreement has also no force. The arbitration clause is couched in a very wide language and embracing therein all possible disputes arising out of the partnership. The entire plaint on the face of it as also the relief claimed therein is based upon the rights alleged to be flowing on the terms and conditions of the partnership. There is thus no manner of doubt that the disputes arising are fully covered by Clause 15 of the Partnership agreement, which have to be resolved through the process of arbitration. Issue No. 2 is also held in negative. Issue No. 3 : 20. Having gone through the averments made in the application as also the arbitration clause and the controversy raised in the suit, and in view of the fact that the applicants have made necessary avernments that they are still ready and willing to have the matter resolved through the process of arbitration. I see no other reason as to why the matters, which have cropped up be not resolved, in accordance with Clause 15 of the partnership deed through the process of arbitration. Consequently, it is held that the suit is liable to be stayed under Section 34 of the Act and issue No. 3 is decided in affirmative. 21. In view of the aforementioned discussion, the application is allowed and further proceedings in the suit are ordered to be stayed. No costs. Civil Suit No. 51 of 1988. 21. Consequently, it is held that the suit is liable to be stayed under Section 34 of the Act and issue No. 3 is decided in affirmative. 21. In view of the aforementioned discussion, the application is allowed and further proceedings in the suit are ordered to be stayed. No costs. Civil Suit No. 51 of 1988. 21. In view of the fact that OMP No. 313 of 1988 has been allowed and proceedings in the suit have been ordered to be stayed, the record of the Civil Suit shall be consigned to the Record Room. Application allowed.