1982 (8) TMI 214 - SC - Companies Law

Court clarifies: filing time extension not a legal step. Interlocutory motions /= abandonment of arbitration.

The Supreme Court held that filing an application for time to reply to a notice of motion for interim injunction does not constitute a step in the ... Whether application for stay of suit be rejected? Held that:- On June 3, 1981, an application for stay of suit was made on behalf of the 1st defendant under s. 34. Ex facie, the proceedings did not disclose any step having been taken by the 1st defendant in the proceedings as would disentitle it to an order under s. 34. 2nd defendant was impleaded in his official capacity. Assuming the application of the 2nd defendant for filing reply to the interim injunction application also binds the 1st defendant though it was not served with the summons yet an application seeking time to file reply to an interim injunction application cannot be said to be a step in the proceedings as would display an unequivocal intention to proceed with the suit or would disclose that the defendants had acquiesced into the resolution of dispute by the court or had abandoned the rights under the arbitration agreement. The application for stay was read over to us and a copy was submitted for our perusal. In para 2 of the application it is clearly stated that ’the defendant is ready and willing (ichhuk) for this purpose. It appears that the original application was in Hindi. The important word used in the application is ichhuk which, it was agreed, would mean ready and willing. It is followed by the expression ’for this purpose’ which would imply that the Ist defendant was always ready and willing to proceed with the arbitration when commenced and is shown to be ready and willing at the time of applying for stay. Therefore, the Ist defendant had complied with the requirement of his readiness and willingness to go to arbitration. Therefore, the learned judge was clearly in error in interfering with the order of the trial court confirmed by the Ist appellate court on this ground also. Appeal allowed - the learned judge of the High Court was clearly in error in interfering with the order made by the trial court and confirmed in appeal granting stay of the suit. Issues Involved:1. Whether the application for filing a reply to a notice of motion for interim injunction constitutes a step in the proceedings under Section 34 of the Arbitration Act, 1940.2. Whether the first defendant complied with the requirement of being ready and willing to arbitrate at the time of the application for stay of proceedings.Issue-wise Detailed Analysis:1. Application for Filing Reply to Notice of Motion for Interim Injunction as a Step in Proceedings:The primary issue was whether the act of the second defendant filing an application for time to reply to the notice of motion for interim injunction constituted a step in the proceedings under Section 34 of the Arbitration Act, 1940. The court examined the language and purpose of Section 34, which stipulates that a party seeking to enforce an arbitration agreement must apply for a stay of proceedings before filing a written statement or taking any other steps in the proceedings.The court emphasized that the purpose of Section 34 is to ensure that a party does not abandon its right to arbitration by taking actions that indicate an intention to proceed with the suit. The court concluded that contesting interlocutory applications, such as those for interim injunctions or receivers, does not constitute a step in the proceedings that would disentitle a party from seeking a stay under Section 34. The reasoning was that such interlocutory proceedings are incidental and do not indicate an unequivocal intention to abandon the arbitration agreement.The court reviewed various precedents, noting a divergence of opinions among High Courts. It ultimately sided with the view that appearing and contesting interlocutory applications does not constitute a step in the proceedings. The court cited the decision in *Janki Saran Kailashchandra*, which supported the interpretation that a step in the proceedings must indicate an intention to proceed with the suit and abandon the arbitration agreement.2. Compliance with the Requirement of Readiness and Willingness to Arbitrate:The second issue was whether the first defendant had complied with the requirement of being ready and willing to arbitrate at the time of the application for stay of proceedings. The High Court had found that the first defendant's application did not explicitly state its readiness and willingness to arbitrate, which is a mandatory condition under Section 34.The Supreme Court examined the application and found that it did contain an averment indicating the first defendant's readiness and willingness to arbitrate. The original application, written in Hindi, used the word 'ichhuk,' which translates to 'ready and willing.' The court held that this satisfied the requirement under Section 34.The court also noted that the issue of readiness and willingness was not raised by the plaintiff in the trial court or the first appellate court, and thus, it was inappropriate for the High Court to consider it in a revision petition under Section 115 of the Code of Civil Procedure.Conclusion:The Supreme Court concluded that the learned judge of the High Court erred in interfering with the trial court's order, which had been confirmed by the first appellate court. The judgment of the High Court was set aside, and the order granting stay of the suit was restored. The appeal was allowed with no order as to costs.