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1995 DIGILAW 436 (GUJ)

BABULAL PRABHUDAS MODI v. NARAYANBHAI PRABHUDAS MODI

1995-09-29

S.D.SHAH

body1995
S. D. SHAH, J. ( 1 ) THE petitioner-plaintiff is aggrieved by the judgment and order of 3rd Jt. Dist. Judge, Mehsana in Civil Misc. Appeal No. 43 of 1994, dated 20-1-1995 whereby he allowed the appeal and quashed the order below Exh. 68, dated 4-1-1994 passed in Reg. C. S. No. 301 of 1988. It appears that in the suit instituted by the petitioner-plaintiff for dissolution of partnership being run in the name and style of M/s. Prabhudas Joitaram, the respondent-defendants on the very day filed application-Exh. 10 under Sec. 34 of the Arbitration Act to stay the suit on the ground that the partnership deed contained a clause requiring reference of disputes between the partners to arbitrator. On such application the learned trial judge passed order fixing same for hearing on 20-7-1988. It appears that thereafter either through oversight of the trial Court or because of lapse on the part of the respondent-defendants no further orders were sought on Exh. 10 and the said application was kept pending without hearing or without any order. It also appears that the applications for interim orders were also heard in between by the trial Court and decided. Thereafter respondent-defendants have even filed their common written statement to the plaint and the applications for temporary injunction at Exh. 17 denying the averments made by the petitioner-plaintiff in their plaint. The Court even proceeded to frame issues at Exh. 61 based on the pleadings of the parties. Till that stage the respondant-defendants and/or their Advocates did not rise from slumber and did not point out to the Court that it should not proceed with the suit in view of application at Exh. 10 already tendered by them. In fact, relief of stay of the suit prayed for by Exh. 10 application appears to have been abandoned. The learned Advocate for the respondent-defendants thereafter filed another application Exh. 68 under Sec. 34 stating that the suit was required to be stayed and that a preliminary issue to that effect is required to be raised. The trial Court after hearing the parties and making reference to the persuasive precedents of various High Courts came to conclusion that the respondent-defendants have already taken steps in the proceedings by filing their written statement and have never pursued their application for stay of the suit at Exh. 10 under Sec. 34 of the Arbitration Act. The trial Court after hearing the parties and making reference to the persuasive precedents of various High Courts came to conclusion that the respondent-defendants have already taken steps in the proceedings by filing their written statement and have never pursued their application for stay of the suit at Exh. 10 under Sec. 34 of the Arbitration Act. The trial Court, therefore, dismissed the application on 4-1-1994. Being aggrieved thereby the respondentdefendants preferred the aforesaid Misc. Civil Appeal which came to be allowed by the 3rd Jt. Dist. Judge on the reasoning that the respondent-defendants were vigilant enough to immediately make application at Exh. 10 for stay of suit under Sec. 34 of the Arbitration Act, and when once such an application was given it was the obligation of the Court to decide the same. ( 2 ) MR. P. K. Jani, learned Advocate appearing for petitioner-plaintiff submitted that the order of the lower appellate Court is patently against the provision of sec. 34 as well as against the ratio of the decision of the Apex Court in the case of State of U. P. v. Janki Saran Kailash Chandra, reported in AIR 1973 SC 2071 as well as the decision of the Apex Court in the case of Rachappa Guruadappa v. Gurusiddappa Naraniappa, reported in 1989 (1) GLH 443. He submitted that in the present case the respondent-defendant having given the application-Exh. 10 under Sec. 34 of the Arbitration Act, 1940 did not pursue the application at all. He, on the contrary, filed written statement and thereafter took various steps in the proceedings. He also permitted the trial Court to frame issues based on the pleadings of the parties. Though, therefore, it can be said that he was initially ready and willing to refer the dispute to the Arbitrator, he has by his subsequent conduct waived and/ or abandoned the right of selecting the alternative forum, and he has submitted to the jurisdiction of the Civil Court. On the other hand, Mr. V. C. Desai, learned counsel appearing for the respondent-defendants submitted that once an application for stay of the proceedings is given under Sec. 34 of the Arbitration Act pursuant to arbitration agreement without taking any steps in the proceedings the requirements of Sec. 34 are satisfied and the Court is required to stay the suit at any stage of the proceedings. ( 3 ) IN order to appreciate the aforesaid rival submissions, it would be necessary, at this stage, to reproduce Sec. 34 of the Act which is relevant for the present purpose and which is as under :"34. Power to stay legal proceedings where there is an arbitration agreement :- 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 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 agreements and that applicant was, at the time when the proceedings were commenced, and 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". ( 4 ) IN the case of State of U. P. v. Janki Saran Kailash Chandra (supra) the Apex Court had to consider the scope of Sec. 34 of the Act, and more particularly, the scope and amplitude of the phrase "at any time before filing written statement or taking any other steps in the proceedings" and observed that apart from the 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 give up the right to have the matter disputed of by arbitration". Each Court must find out from the context of each case whether this has happened or not. The Court further observed therein that "a step taken in the suit which would disentitle the party from obtaining stay of proceedings 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". The Court further observed therein that "a step taken in the suit which would disentitle the party from obtaining stay of proceedings 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". ( 5 ) IN the subsequent decision in the case of Rachappa Guruadappa (supra) the Supreme Court analysed the said section in greater detail and pointed out the following conditions which must be satisfied before the suit is stayed under Sec. 34 of the Act : (I) The proceedings must have commenced by a party to arbitration agreement against any other party to the agreement; (II) the legal proceeding, in this case, the suit which is sought to be stayed must be in respect of a matter agreed to be referred; (III) the applicant for stay must be a party to the legal proceeding, the suit in this case; (IV) the applicant must have taken no steps in the proceeding after appearance; (V) the applicant was at the time when the proceedings were commenced, ready and willing to do everything necessary for the proper conduct of the arbitration; and (VI) the Court must also be satified that there was no sufficient reason why the matter should not be referred to arbitration. ( 6 ) APPLYING the aforesaid principles to the present case, it is satisfied that the proceedings were commenced by the plaintiff who was a party to the arbitration agreement against defendant who was also a party to the agreement. The suit was also in respect of the matter agreed to be referred. When application at Exh. 10 was filed the respondent-defendant had not taken any step in the proceeding. However, thereafter, the defendant has taken the steps of filing written statement, of giving number of applications for adjournments, of tendering documents on which the defendant was relying and lastly agreed to framing of issues by the trial Court based on the pleadings of the parties. In the present case, from the specific steps taken by the respondent-defendant has displayed an unequivocal intention to proceed with the suit and to submit to the jurisdiction of the Civil Court and to abandon the benefit of arbitration agreement by waiving the right to get the dispute resolved by arbitration. In the present case, from the specific steps taken by the respondent-defendant has displayed an unequivocal intention to proceed with the suit and to submit to the jurisdiction of the Civil Court and to abandon the benefit of arbitration agreement by waiving the right to get the dispute resolved by arbitration. In the present case, respondent-defendants have not only filed the written statement/written reply both to the plaint as well as to the application for temporary injunction, but they have subsequently produced number of documents and have also obtained adjournments on number of occasions thereafter. Even after the application for interim relief was decided, adjournments were sought and the issues were framed by the trial Court based on the pleadings of the parties to which act of the Court also they have not objected. It is after framing of issues only that another application was given calling upon the trial Court to frame preliminary issue about its jurisdiction. The steps taken by the respondent-defendants are, therefore, such as would clearly and unambiguously mainfest the intention to waive the benefit of arbitration agreement. In my opinion, therefore, the 3rd Jt. Dist. Judge, Mehsana was not right in holding that since the application at Exh. 10 was tendered by the defendants on 20th July, 1988, i. e. , at the very first stage, the respondent-defendants were ready and willing to refer the dispute to arbitration and that it cannot be said that they have taken any steps in the suit which would disentitle them to reference of the dispute to special forum. The view taken by the trial Court in this regard is pre-eminently just and proper and consistent with the decision of the Apex Court and therefore, the judgment and order of the 3rd Jt. Dist. Judge, Mehsana dated 20-1-1995 is quashed and set aside and the judgment and order passed by the trial court dated 4-1-1994 below Exh. 68 in Reg. C. S. No. 301 of 1988 is restored. ( 7 ) IN the result, C. R. A. succeeds and judgment and order in Civil Misc. Appeal No. 43 of 1994 passed by the learned 3rd Jt. Dist. Judge, Mehsana is quashed and set aside. Rule is made absolute accordingly. No costs. .