1. This is an application for stay under Section 34 of the Indian Arbitration Act. The application is resisted on two grounds — (i) the applicant has taken steps in the proceedings and (ii) that the contract containing the arbitration clause has been modified by subsequent agreements to such extent that the arbitration clauses have become ineffective and that the arbitration agreement does not cover the disputes raised in the suit. The suit is for the recovery of the sum of Rs. 2,43,804/13/4. The claim is under a contract for the distribution of a cinematograph film. The plaintiff is the Producer and the defendant No. 1 is the Distributor. The film proved to be very successful and had a long run in a large number of cinema houses. It is said that the box office receipt was very heavy. After giving credit for Rs. 10,000/- paid by the defendant No. 1 to the plaintiff there was due and owing to the plaintiff a large sum as claimed in the plaint. The defendant by his solicitor's letter dated November 24, 1958 contended that the amount due to the plaintiff would not be as much as claimed but would be only Rs. 1,01,048.18. The disputes between the parties not having been settled the plaintiff instituted the instant suit on May 4, 1959 and immediately thereafter took out a Notice of Motion on May 6, 1959 for judgment on admission under Or. 12, R. 6 of the CPC for the sum of Rs. 1,01,048.18. The notice was served on the defendant No. 1 on the same day.

2. On May 11, the Motion appeared as a New Motion in the List of Motions before the learned Interlocutory Judge when in the absence of the defendants the usual directions were given for filing affidavits. On May 13, 1959 Messrs T. Banerji and Co. acting for the defendant No. 1 wrote a letter to the plaintiff's solicitor in the following terms:

“Messrs S.C Roy Chowdhury and Co.

Dear Sirs,

Sukumar Kumar

Deluxe Film Distributors Ltd.

We have received instructions from Messrs The Deluxe Film Distributors Ltd. the defendant abovenamed to act for them in the above suit.

Please send us a copy of the plaint free of charge on our usual undertaking to accept service of the writ of summons without such copy plaint.

Please also send us a copy of the grounds of the pending application on the usual terms.

We understand that the time to file the affidavit in opposition expires tomorrow. As we did not receive our client's instructions before for the affidavit in opposition we shall mention the application tomorrow before His Lordship the Hon'ble Mr. Justice G.K Mitter at the first sitting of the Court and ask for a short extension of time for filing our client's affidavit in opposition.

We trust you will consent.

Our Managing Clerk was informed that a copy of the Notice of Motion was sent to our client's office. As the said Notice of Motion is mislaid, we shall thank you to kindly send us a copy of the Notice of Motion also.

Yours faithfully,

Sd./T. Banerji and Co.”

3. It is clear from the above letter that even though uptill now the defendants have not entered appearance and did not appear at the time when directions for affidavits were given on May 11, 1959, they kept themselves fully apprised of the proceedings in Court and know that “time to file affidavit-in-opposition expires tomorrow.” In terms of the request contained in the letter, the plaintiff's solicitor gave consent to the defendant asking for extension of time for filing affidavit-in-opposition. What happened thereafter is stated in paragraph 22 of the affidavit of the plaintiff in the Following words:

“On the following day that is 14th May, 1959 the petitioner's solicitors after obtaining verbal consent from my solicitors mentioned and applied to the Court when the Court ordered that the affidavit-in-opposition should be filed by the petitioner by 19th May, 1959, affidavit-in-reply should be filed by me by 23rd May, 1959 and the Motion should stand adjourned till 25th May, 1959. I crave reference to the relevant minutes of the Court at the hearing of this application. Having acted in the said suit in the manner aforesaid the petitioner definitely took steps in the proceedings in the said suit before he took out the Notice of the present application.”

4. That is how it is contended that the petitioner took steps in the proceedings and is thereby debarred from making this application under Section 34 of the Arbitration Act.

5. In answer to the said paragraph 22 of the affidavit-in-opposition one Dipchand Kankaria a director of the defendant company stated as follows in his affidavit-in-reply:

“6. With regard to the allegations contained in paragraph 22 of the said affidavit I reiterate the statements in the petition and deny all allegations contrary thereto. It is not understood as to what is meant by the words ‘our client's consent’. A limited Warrant of Attorney was given by us to our solicitors for the purpose of acting for us in this suit for opposing the pending application and for obtaining copies of the plaint and petition. I crave leave to refer to the said Warrant of Attorney at the time of the hearing. No Warrant of Attorney was given for the purpose of defending this suit. The letter of our solicitors also makes it quite clear that no Warrant of Attorney to defend this suit was given to them. I deny that any steps were taken by us in this suit. All the steps taken were limited to the pending application and to prevent an ex parte order being passed in the said pending application.”

6. It is to be noted that no case is made that the defendants and/or their solicitors had no knowledge of the nature of the suit or application either on May 13, or on May 14, when oral application was made by this defendant's solicitor for extension of time to file affidavit against the judgment and decree being passed on admission.

7. Mr. Chatterjee, learned counsel for the petitioner, submitted that the letter of their solicitor stated that the copy of the Notice of Motion was mislaid. It does not however amount to an averment that the defendant was in ignorance of the nature of the suit or the application on that date. In any event, the letter does not take the defendants beyond May 13, when the letter was written. Thereafter the application for extension of time was made on the following day. It cannot therefore be inferred that because the Notice of Morion was mislaid on May 13, when the letter was written by T. Banerji, the defendant was in ignorance of the nature of the suit or of the application on May 14, the following day when the defendant's attorney made an application for extension of time to file affidavit. It should not be forgotten that prior to the suit there has been correspondence between the parties and/or their respective solicitors.

8. On the present materials I am unable to hold that the defendant No. 1 was in ignorance of the nature of the suit or the nature of the application pending against it on May 14. On the other hand I hold on the present materials that the defendant No. 1 and/or the attorney was fully aware that in a suit instituted by the plaintiff to recover a large sum of money on the basis of the distribution agreement subsisting between the parties the plaintiff had made an application for judgment for a sum of a little over Rs. 1 lakh on the basis of an admission contained in the letter of the defendants' solicitor to the plaintiff's quoted above. In such an application the defendant's attorney had asked for extension of time to file his affidavit. Does it amount to “taking step in the proceedings” within the meaning of Section 34 of the Indian Arbitration Act?

9. What is meant by “taking step in the proceedings” has been the subject matter of innumerable judicial decisions. In the case of Bhowanidas v. Panachand reported in ILR 52 Cal 453 : (AIR 1925 Cal 801), Page J. held that

“the expression taking any other step in the proceedings means doing anything in aid of the progress of the suit or submitting to the jurisdiction of the Court.”

10. In the case of Ives and Barker v. Willans reported in, (1894) 2 Ch. 478, it was held that a notice in writing requiring a statement of claim to be delivered after appearance in a suit is not “taking a step in the proceedings”. Lindley L.J makes the following observations at page 484:

“Before a man can make up his mind as to which of the alternatives he will take, he ought to know what the alternatives are, and ought to be in a position to exercise some kind of judgment in the matter, and if we were to hold that the defendant ought to have applied before, we should be saying that he should make his application in ignorance of material facts.

The authorities show that a step in the proceedings means something in the nature of an application to the Court, and not mere talk between solicitors or solicitors' clerks, nor the writing of letters, but the taking of some step, such as taking out a summons or something of that kind, which is, in the technical sense, a step in the proceedings.”

11. Mr. Chatterjee strongly relied on this authority. But in the instant case the defendant was not in ignorance of the material facts and the attorney made an oral application to the Court for extension of time. I apprehend that if the test laid down by Lindley L.J, is applied to the instant case, the application must fail.

12. In the case of Zalinoff v. Hammond, reported in (1898) 2 Ch 92, Stirling, J., held that filing an affidavit in answer to a Motion for a receiver is not “taking a step in the proceedings” which will preclude the defendant from obtaining a stay. In the case of Joylal and Co. v. Gopiram Bhotica, decided by the Appeal Court consisting of Mookerjee and Fletcher, JJ. and reported in 24 Cal WN 612; (AIR 1920 Cal 685), what happened is this: After the disputes had been referred to arbitration at the instance of one of the parties, the other party instituted a suit asking for a declaration that there was no contract and for injunction to restrain the defendant from proceeding with the arbitration. In that suit an injunction was granted restraining the arbitration proceedings. Against this order for injunction an appeal was taken which was ultimately allowed and the injunction was dissolved. Thereafter an application for stay was made in the suit under S. 19 of the old Act. Mookerjee, J., in his judgment held that filing an appeal against an order granting injunction does not amount to taking a step in the proceedings with the following observation:

“Section 19 contemplates the institution of a suit, notwithstanding an agreement to refer to arbitration, and authorises the defendant in such suit to apply for stay, before he has filed his written statement or taken any other step in the suit. It is difficult to appreciate how this can stand in the way of the defendant, in the circumstances of the present case. If a contrary view were taken, the result would follow that the defendant would be deprived of his right to appeal against the adverse order made in the proceedings instituted by the respondent himself.”

13. The facts in that case were very peculiar. The arbitration proceedings had been stayed by an injunction and unless this injunction is dissolved or vacated, there was no other way of adjusting the disputes between the parties except by suit. Both the arbitration and the suit cannot be stayed at the same time. The defendant therefore must first get rid of the injunction before he can apply for stay of the suit. The plaintiff having failed to have the injunction dissolved in the trial court, had to appeal and after getting rid of the injunction in the Appeal Court an application for stay of the suit was made. In the background of these facts the observation of Sir Ashutosh Mookerjee quoted above was made. In my judgment Sir Ashutosh does not in this case discuss or lay down what is meant by taking step in the proceedings. The decision is not very helpful in this matter. In the case of Karnani Industrial Bank v. Satya Niranjan Shaw, reported in 28 Cal WN 771 : (AIR 1924 Cal 789), the Appeal Court consisting of Sanderson C.J and Richardson, J., held that even a verbal prayer by the defendant's counsel to file written statement in reply to a question put by the Court is taking a step in the proceedings. In the case of Subal Chandra v. Mahomed Ibrahim, reported in AIR 1943 Cal 484, S.R Das, J., (as he then was) after considering the case law recorded his view in the following terms at page 487:

“It seems to me that these authorities establish that in order to constitute a step in the proceedings the act in question must be: (a) an application made to the Court either on summons as in Forde's Hotel Co. v. Bartlett, (1896) AC 1 or Sarat Kumar Roy v. Corporation of Calcutta, ILR 34 Cal 443 or orally as in 28 Cal WN 771 : (AIR 1924 Cal 789) or something in the nature of an application to the Court, e.g, attending on summons for directions as in (1902) 1 KB 480, County Theatres and Hotel Ltd. v. Knowles; (1903) 2 Ch 222; Richardson v. Le Maitre; (1909) 2 Ch 121, Ochs v. Ochs Brothers and (b) such an act as would indicate that the party is acquiescing in the method adopted by the other side of having the disputes decided by the Court. Applying now the test deducible from the authorities referred to above to the facts of the present case, I am satisfied that when the petitioner by his counsel applied to Court for obtaining time to file his affidavit in opposition and for leave to have inspection of the books and records he acquiesced in the method adopted by the plaintiff for having the disputes decided by the Court & not by arbitration and that he was quite content that the disputes should be fought in Court. This conduct, to my mind, clearly implies a statement to the effect that the defendant would proceed to defend the action and would not insist on the right to have the disputes disposed of by arbitration.”

14. Mr. Chatterjee submitted that the cited case is distinguishable in that over and above asking for an extension of time to file an affidavit, the defendant asked leave to obtain inspection of the books. In this Mr. Chatterjee is right. Mr. Chatterjee further submitted that if the learned Judge purports to lay down the law that mere asking for time to file an affidavit in an interlocutory application would amount to taking step in the proceedings that would be an overstatement and is not borne out by the authorities. The judgment properly read however does not lay down any such proposition. I respectfully agree with the view expressed by the learned Judge in the paragraph quoted above.

15. Mr. Chatterjee contends that the authorities indicate that filing an affidavit to resist an interlocutory application for appointment of Receiver or injunction does not amount to taking step in the proceeding. Why should it not be held on a parity of reasoning that filing affidavit to resist an application for judgment on admission does not amount to taking step in the proceedings? Application under O. 12, R. 6 for judgment on admission is as much, an interlocutory proceeding as a proceeding for appointment of Receiver or injunction in a suit. Why then a distinction should be made between them for the purpose of Section 34 of the Indian Arbitration Act? Mr. Chatterjee frankly confessed that he has not been able to find any authority one way or the other and therefore he made his submission on principle that for the purpose of Section 34 of the Indian Arbitration Act, all interlocutory applications must be treated on the same footing. No distinction can be made between an application for appointment of Receiver or injunction and an application for judgment on admission. Logically it must be held that if opposition to an application for Receiver or injunction does not amount to taking step in the proceedings, opposition to an application for judgment on admission does not amount to taking such step either. It seems to me however that there is a difference between the two classes of application. Resistance to an application for Receiver or injunction may not indicate an intention on the part of the defendant that he is willing to submit to the jurisdiction of the Court and giving up his right to have the dispute adjusted by arbitration. The defendant may have to take steps in these interlocutory proceedings to prevent an imminent hazard. But taking step to prevent a judgment on admission is resistance to the decree itself claimed in the suit and amounts to a clear indication of intention that the controversy between the parties be decided by the Court. The application for judgment on admission may abridge the usual elaborate procedure prescribed by the Code for obtaining a decree. But apart from this procedure there is hardly any difference. While in the usual way when the plaintiff proceeds with the suit in the normal course a defendant is held to submit to the jurisdiction of the Court by filing written statement, in the case where the plaintiff is allowed by the law of procedure to abridge it and is entitled to get a decree by making an application for judgment on admission the defendant must also be held to indicate his intention to submit to the jurisdiction of the Court by filing an affidavit in opposition to the application for judgment on admission. In my judgment, filing written statement in the suit and filing affidavit in opposition to an application for judgment on admission under O. 12, R. 6 or filing an affidavit in opposition to an application for summary judgment under Chapter XIIIA of the Rules stand on the same footing. They indicate the defendant's intention to submit to the jurisdiction of the Court for adjudication of the claim in the suit itself, implying thereby that he gave up his right to have the dispute adjusted by arbitration. If as I hold filing written statement and filing an affidavit in opposition to this class of applications viz., under O. 12, R. 6 or under Chapter XIIIA of the Rules indicated above stand on the same footing, application for extension of time to file written statement or application for extension of time to file such affidavits must also be treated on the same footing. The Appeal Court in the case reported in 28 Cal WN 771. (AIR 1924 Cal 789), has laid down that oral application for extension of time to file written statement amounts to taking step in the proceedings it must he held on the same ground that oral application for extension of him in an application for judgment on admission also amounts to taking step in the proceedings so as to disentitle the defendant from making an application for stay under Section 34 of the Indian Arbitration Act.

16. For reasons stated above I uphold the first ground taken by Mr. Ray. It is not necessary to express my opinion on the other ground taken by Mr. Ray. In the result the application fails and is dismissed. On the defendant No. 1's depositing with the plaintiffs solicitor the sum of Rs. 1,01,048.18 within a week from this date to be held by the plaintiff's attorney free of all hen and subject to the further order of this Court, I grant a stay of this order for a month. In default, there will be no stay except for the week allowed to make the deposit.

JC/V.B.B

17. Application dismissed.