Stay of suit under arbitration law denied where party's conduct showed readiness to proceed with litigation, not arbitration.

Section 34 of the Indian Arbitration Act, 1940 gives the court a judicial discretion to stay suit proceedings; it does not bar jurisdiction, and a stay may be refused where a non-arbitrating guarantor is involved and there is a risk of conflicting findings on liability. The refusal to stay was upheld. Readiness and willingness to arbitrate must continue until the matter is finally dealt with, and after refusal of stay, seeking time to file a written statement and directions for discovery and expedition amounts to taking a step in the proceedings. That conduct defeated the request for stay, and the preliminary objection was accepted.

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Issues: (i) Whether the suit should be stayed under Section 34 of the Indian Arbitration Act, 1940 despite the existence of an arbitration clause. (ii) Whether the appellant, by asking for time to file a written statement and directions for further conduct of the suit after refusal of stay, ceased to remain ready and willing to do all things necessary for arbitration or took a step in the proceedings.

Issue (i): Whether the suit should be stayed under Section 34 of the Indian Arbitration Act, 1940 despite the existence of an arbitration clause.

Analysis: Section 34 does not bar the court's jurisdiction; it confers a discretion to stay proceedings where the applicant satisfies the statutory conditions. The exercise of discretion must be judicial. On the facts, the court below had valid reasons to refuse a stay, including the presence of a claim against a non-arbitrating guarantor and the likelihood that the liability question would arise both in the suit and in arbitration, creating the risk of conflicting findings. The appellate court found no error in that exercise of discretion.

Conclusion: The refusal to stay the suit was upheld.

Issue (ii): Whether the appellant, by asking for time to file a written statement and directions for further conduct of the suit after refusal of stay, ceased to remain ready and willing to do all things necessary for arbitration or took a step in the proceedings.

Analysis: Readiness and willingness under Section 34 must continue until the matter is finally dealt with. A party who, after refusal of stay, seeks liberty to file a written statement and obtains directions for discovery, inspection, and expedition of the suit, manifests an intention to proceed with the suit rather than stand on the arbitration agreement. The court distinguished cases where filing was compelled by order and held that the appellant's conduct amounted to taking a step in the proceedings and negatived the continued readiness required by the section.

Conclusion: The preliminary objection was accepted and the appellant was held disentitled to a stay.

Final Conclusion: The appeal failed both on the merits of the discretionary refusal of stay and on the preliminary objection under Section 34, and the order refusing stay was confirmed.

Ratio Decidendi: A party seeking a stay under Section 34 of the Indian Arbitration Act, 1940 must continue to remain ready and willing to arbitrate, and conduct after refusal of stay that shows an intention to proceed with the suit constitutes a step in the proceedings and defeats the request for stay.

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