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PETITIONER: SADHU SINGH GHUMAN

       Vs.

RESPONDENT: FOOD CORPORATION OF INDIA & ORS.

DATE OF JUDGMENT14/02/1990

BENCH: SHETTY, K.J. (J) BENCH: SHETTY, K.J. (J) SAHAI, R.M. (J)

CITATION:  1990 AIR  893            1990 SCR  (1) 353  1990 SCC  (2)  68        JT 1990 (1)   300  1990 SCALE  (1)236

ACT:     Arbitration  Act, 1940: Section 34  "A step in the  pro- ceeding "What is--Interpretation thereof.

HEADNOTE:     In  a  suit filed by the Respondent for  recovery  of  a certain amount from the appellants and others, on the  basis of  an  agreement  between the  parties,  appellant  entered appearance  and prayed for the production of original  docu- ments, since photostat copies were not clear, so that  writ- ten statement may be filed.     Thereafter  the appellant moved the Court under  Section 34 of the Arbitration Act, 1940 for stay of the suit on  the ground  that  there was an arbitration clause  in  the  suit agreement  covering  the matter in dispute. Though  the  Re- spondent  Corporation  admitted  the  existence  of  such  a clause, it opposed the prayer for stay of the proceedings on the plea that the appellant had taken steps in the  proceed- ings  of  the  suit, in that an adjournment  was  taken  for filing written statement. Staying the proceedings, the trial court  observed that there was no prayer for adjournment  of the case for filing the written statement.     On  appeal  by  the  Respondent-Corporation,  the  First Appellate  Court vacated the stay order passed by the  trial court.  The  Revision petition filed by  the  appellant  was dismissed by the High Court. This  appeal, by special leave, is against the High  Court’s order. Allowing the appeal, this Court,     HELD:  1.1  The expression "a step  in  the  proceeding" which  would disentitle the defendant from invoking  section 34 of the Arbitration Act is not every step taken by him  in the  suit. It should be a step to abandon the right to  have the suit stayed. It should be a step in aid of the  progress of the suit. The step must have been consciously taken  with a  view to submit to the jurisdiction of the Court  for  the purpose of adjudicating the controversy on merits. [356C-D] 354     1.2 Before the trial court, the defendants only sought a direction to the plaintiff to produce the original agreement and other documents so that they may file written statement.

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It  was not stated that they would file the  written  state- ment.  They  never  took any other step  submitting  to the jurisdiction of the court to decide the case on merits.  The right  to have the dispute settled by arbitration  has  been conferred by agreement of parties and that right should  not be  deprived of by technical pleas. The Court must  go  into the  circumstances  and intention of the party in  the  step taken.  The court must examine whether the party  has  aban- doned  his right under the agreement. In the light of  these principles  and looking to the substance of the  application dated  January 4, 1985, one cannot form an opinion that  the defendants  have  abandoned  their right to  have  the  suit stayed  and  took  a step in the suit to  file  the  written statement. [357B-D]     State  of U.P. v. Janki Saran Kailash Chandra, [1974]  1 SCR 31; Food Corporation of India v. Yadav Engineer,  [1983] 1  SCR 95 and General Electric Co. v. Renusagar  Power  Co., [1987] 4 SCC 137, relied on.

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1201  of 1990     From  the Judgment and Order dated 5.6.87 of the  Punjab and Haryana High Court in C.R. No. 556/87. Mukul Mudgal for the Appellant.     S.S.  Javali,  Y.P.  Rao and Raju Ramachandran  for  the Respondents. The Judgment of the Court was delivered by K. JAGANNATHA SHETTY, J. Special leave granted.     Food  Corporation of India filed a suit for recovery  of Rs.2  lacs against the appellant and respondents 2 to  7  on the basis of an agreement between the parties. After service of notice, the appellant entered appearance on December  10, 1984. On January 4, 1985, the appellant filed an application stating as follows: "That the photostat copy of the original agreement and other documents which have been produced by the plaintiff 355 in their evidence are not visible and clear, and it is  very difficult for the defendants to inspect and give the written statement. 3.  That it is very essential to get the original  documents produced in the court which are in possession of the  plain- tiff so that the defendants may file the written statement. 4. It is, therefore, respectfully prayed that the  plaintiff may kindly be ordered to produce the original agreement  and other documents which has been filed with the plaint."     On January 21, 1985, the appellant moved the Court under Section 34 of the Arbitration Act for stay of the proceeding of  the suit on the ground that there exists an  arbitration clause in the suit agreement covering the matter in dispute. The  Food Corporation of India contended that the  appellant had  taken  steps in the proceedings of the  suit  since  an adjournment  was taken for filing written statement. It  was however, admitted the existence of the arbitration agreement covering the matter in dispute in the suit. The Trial  Court accepted  the request of the appellant and stayed  the  suit inter-alia observing: ".....   This  application did not contain  any  prayer  for adjournment  of the case for filing the  written  statement. The prayer contained in this application was that the plain- tiff be directed to produce the original agreement and other documents so that the defendants may file the written state-

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ment  .....       In the present case, the prayer of the defendants that the plaintiff be directed to file the original agreement and other  documents  in the court before they  could  file  the written  statement cannot be said to be a step in  the  pro- ceedings because it was not a prayer for adjournment of  the case for filing written statement."     But  the Additional District Judge, in the  appeal  pre- ferred  by  the Food Corporation of India has  reversed  the order of the trial court. He was of the view that a  written request  made by the defendants by their  application  dated January  4, 1985 for an adjournment to enable them  to  file the written statement was a step in the proceedings and  the trial  court was not justified in staying the suit.  Accord- ingly, he accepted the 356 appeal  and  vacated the stay order and directed  the  trial court to proceed with the suit in accordance with law.     The  High Court of Punjab and Haryana has dismissed  the revision petition of the appellant. The High Court has  also observed  that the defendants having moved  the  application dated  January 4, 1985 for production of original  documents and  seeking  an adjournment of the suit to enable  them  to file  written  statement would certainly be construed  as  a step taken in the proceedings.     Section  34  of  the Arbitration Act  has  received  the consideration  of  this Court in State of Uttar  Pradesh  v. Janki  Saran  Kailash Chandra, [1974] 1 SCR  31,  (ii)  Food Corporation of India v. Yadav Engineer, [1983]  1 SCR 95 and more  recently  in General Electric Co. v.  Renusagar  Power Co.,  [1987] 4 SCC 137. It may be noted that the  expression "a  step in the proceeding" which would disentitle  the  de- fendant  from invoking section 34 of the Arbitration Act  is not every step taken by him in the suit. It should be a step to abandon the right to have the suit stayed. It should be a step in aid of the progress of the suit. The step must  have been  consciously taken with a view to submit to the  juris- diction  of  the Court for the purpose of  adjudicating  the controversy  on the merits. In General Electric Co. ’s  case this Court after considering the previous decisions observed (at 155-56):          ....   thus  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 inten- tion  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  impli- cation  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 insub- stantial nor the right can be allowed to be defeated by  any manner of technicality. The right to have the dispute  adju- dicated by a civil court cannot be allowed to be defeated by vague 357 or  amorphouse mis-called agreements to refer  to  ’arbitra- tion’.  On  the  other hand, if the agreement  to  refer  to arbitration  is established, the right to have  the  dispute

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settled  by arbitration cannot be allowed to be defeated  on technical grounds."     In the application filed by the defendants in this case, they only sought a direction to the plaintiff to produce the original agreement and other documents so that they may file written  statement. It was not stated that they  would  file the  written statement. They never took any other step  sub- mitting to the jurisdiction of the court to decide the  case on merits. The right to have the dispute settled by arbitra- tion  has  been conferred by agreement of parties  and  that right  should  not be deprived of by  technical  pleas.  The Court  must go into the circumstances and intention  of  the party in the step taken. The Court must examine whether  the party  has abandoned his right under the agreement.  In  the light  of these principles and looking to the  substance  of the  application  dated January 4, 1985, we cannot  form  an opinion  that the defendants have abandoned their  right  to have the suit stayed and took a step in the suit to file the written statement.     In the result the appeal is allowed in setting aside the order of the High Court and restoring the order of the  High Court.     In the circumstances of the case, we make no order as to costs.  G.N.                                           Appeal allowed. 358