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Issues: (i) Whether a defendant to a suit covered by an arbitration agreement takes a "step in the proceedings" so as to lose the right to seek stay under section 34 of the Arbitration Act, 1940 by appearing and contesting an interlocutory application for temporary injunction or other interim relief before filing the written statement. (ii) Whether the defendant satisfied the condition in section 34 of the Arbitration Act, 1940 of being ready and willing at the commencement of the proceedings and at the time of applying for stay to do all things necessary for the proper conduct of the arbitration.
Issue (i): Whether a defendant to a suit covered by an arbitration agreement takes a "step in the proceedings" so as to lose the right to seek stay under section 34 of the Arbitration Act, 1940 by appearing and contesting an interlocutory application for temporary injunction or other interim relief before filing the written statement.
Analysis: The expression "before taking any other steps in the proceedings" was construed narrowly and in the context of section 34's object of enforcing the arbitration bargain. The general words were held to take colour from the specific words "filing a written statement" and to cover only steps in the main proceeding that clearly and unequivocally show an intention to submit to the court's jurisdiction and abandon the contractual forum. Contesting interlocutory applications for interim relief, such as injunctions or receiverships, was treated as incidental to the main dispute and not as conduct necessarily showing waiver or acquiescence. A party faced with ex parte interim orders cannot be forced to forfeit arbitration rights merely for seeking to protect itself against interim relief.
Conclusion: Appearance and contest of an interlocutory injunction application, without more, does not amount to taking a step in the proceedings and does not defeat an application for stay under section 34.
Issue (ii): Whether the defendant satisfied the condition in section 34 of the Arbitration Act, 1940 of being ready and willing at the commencement of the proceedings and at the time of applying for stay to do all things necessary for the proper conduct of the arbitration.
Analysis: The stay application expressly stated readiness and willingness to arbitrate, and the contrary finding recorded by the High Court was held to be unsupported by the record. The readiness-and-willingness requirement was therefore satisfied on the facts.
Conclusion: The condition of readiness and willingness was fulfilled.
Final Conclusion: The order refusing stay could not be sustained, and the stay of the suit granted by the trial court and affirmed in appeal stood restored.
Ratio Decidendi: For section 34 of the Arbitration Act, 1940, only such conduct as clearly and unequivocally manifests an intention to abandon the arbitration agreement and submit to adjudication by the court amounts to "taking any other steps in the proceedings"; contesting interlocutory relief does not, by itself, have that effect.
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