1990 JTR(SC) 79
1990 AIR(SC) 893 ; 1990 16 AllLR 343 ; 1990 1 APLJ 74 ; 1990 1 ArbLR 140 ; 1990 2 BLJR 1268 ; 1990 CivCC 518 ; 1990 1 CurCC(SC) 570 ; 1990 1 CurLJ 599 ; 1990 1 GLH 512 ; 1990 1 JT 300 ; 1990 2 PLJR(SC) 20 ; 1990 RLR 283 ; 1990 1 Scale 236 ; 1990 2 SCC 68 ; 1990 1 SCR 353 ; 1990 1 UJ 627 ; 1990 KHC 753
SUPREME COURT OF INDIA
K. JAGANNATHA SHETTY AND R.M. SAHAI, JJ.
M/s. Sadhu Singh Ghuman, Appellant
Versus
Food Corporation of India and others, Respondents
Civil Appeal No. 1201 of 1990, D/- 14-2-1990.
Advocates appeared :
Mr. Mukul Mudgal Advocate, for Appellant; Mr. S. S.Javali, Sr. Advocate, Mr. Y. P. Rao and Mr. Raju Ramachandran, Advocates with him, for Respondents.
Act Referred :ARBITRATION ACT : S.34
(A) Section 34 of the Arbitration Act applies where a party seeks a stay of court proceedings on the ground that an arbitration agreement exists. In this case, the provision was invoked to stay a suit for recovery, and the court examined whether the applicants request for production of documents and adjournment amounted to an abandonment of the right to arbitrate, analyzing the intent and substance of the steps taken in light of earlier precedents.
(B) A step in the proceedings under Section 34 is one that manifests a clear intention to abandon the right to arbitrate and submit to the courts jurisdiction for adjudication on merits; mere procedural steps, such as seeking production of documents or adjournment to file a written statement, do not amount to such a step; the right to arbitration cannot be defeated on technical grounds unless there is an unequivocal election to proceed in court.
Facts of the case:
The Food Corporation of India filed a suit for recovery of Rs. 2 lacs based on an agreement. The appellant appeared and later filed an application seeking production of the original agreement and documents to enable filing written statement, and moved under Section 34 for a stay. The trial court stayed the suit, the additional district judge vacated the stay on the ground that the application was a step in the proceedings, and the High Court dismissed the revision.
Findings of Court:
The court found that the application seeking production of documents and an adjournment was not a step in aid of the progress of the suit or an unequivocal submission to the courts jurisdiction, and did not demonstrate an intention to abandon the arbitration agreement.
Issues:
Whether the application for production of original documents and adjournment to file written statement constitutes a step in the proceeding under Section 34 of the Arbitration Act, disentitling the party from invoking arbitration.
Ratio Decidendi:
A party does not abandon the right to arbitration merely by seeking production of documents or adjournment to file written statement; such steps must show a clear intention to submit to the courts jurisdiction for adjudication on merits, and in the absence of such intention, the right to arbitrate cannot be defeated on technical grounds.
Result:
The appeal is allowed, the order of the High Court is set aside, and the order of the trial Court restoring the stay is restored.
(A) Section 34 of the Arbitration Act applies where a party seeks a stay of court proceedings on the ground that an arbitration agreement exists. In this case, the provision was invoked to stay a suit for recovery, and the court examined whether the applicants request for production of documents and adjournment amounted to an abandonment of the right to arbitrate, analyzing the intent and substance of the steps taken in light of earlier precedents.
(B) A step in the proceedings under Section 34 is one that manifests a clear intention to abandon the right to arbitrate and submit to the courts jurisdiction for adjudication on merits; mere procedural steps, such as seeking production of documents or adjournment to file a written statement, do not amount to such a step; the right to arbitration cannot be defeated on technical grounds unless there is an unequivocal election to proceed in court.
Facts of the case:
The Food Corporation of India filed a suit for recovery of Rs. 2 lacs based on an agreement. The appellant appeared and later filed an application seeking production of the original agreement and documents to enable filing written statement, and moved under Section 34 for a stay. The trial court stayed the suit, the additional district judge vacated the stay on the ground that the application was a step in the proceedings, and the High Court dismissed the revision.
Findings of Court:
The court found that the application seeking production of documents and an adjournment was not a step in aid of the progress of the suit or an unequivocal submission to the courts jurisdiction, and did not demonstrate an intention to abandon the arbitration agreement.
Issues:
Whether the application for production of original documents and adjournment to file written statement constitutes a step in the proceeding under Section 34 of the Arbitration Act, disentitling the party from invoking arbitration.
Ratio Decidendi:
A party does not abandon the right to arbitration merely by seeking production of documents or adjournment to file written statement; such steps must show a clear intention to submit to the courts jurisdiction for adjudication on merits, and in the absence of such intention, the right to arbitrate cannot be defeated on technical grounds.
Result:
The appeal is allowed, the order of the High Court is set aside, and the order of the trial Court restoring the stay is restored.
Mukul Mudgal, RAJU RAMACHANDRAN, S.S.JAVALI, Y.P.RAO
Judgment
K. JAGANNATHA SHETTY, J.:- Special leave granted.
2. 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 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 plaintiff 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."
3. On January 21, 1985, the appellant moved the Court under S. 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 plaintiff be directed to produce the original agreement and other documents so that the defendants may file the written statement .... ..... 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 proceedings because it was not a prayer for adjournment of the case for filing written statement."
4. But the Additional District Judge, in the appeal preferred 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. Accordingly, he accepted the appeal and vacated the stay order and directed the trial Court to proceed with the suit in accordance with law.
5. 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.
6. Section 34 of the Arbitration Act has received the consideration of this Court in State of U.P. 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 defendant from invoking S. 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 the merits. In General Electric Co. case this Court after considering the previous decisions observed (at pp. 155-56) :
"....... thus a step the proceeding which would disentitle the defendant from invoking S. 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."
7. 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 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 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.
8. In the result the appeal is allowed in setting aside the order of the High Court and restoring the order of the trial Court.
9. In the circumstances of the case, we make no order as to costs.
Appeal allowed.
For Citation : AIR 1990 SC 893