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Case Number
Advocates
  • Roy Shivajee Nath
  • Narbadeshwar Pandey
  • Ashok Kumar Singh
Judges
  • Birendra Prasad Sinha
  • B.P Griyaghey, JJ.
Acts
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Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • Roy Shivajee Nath
  • Narbadeshwar Pandey
  • Ashok Kumar Singh
Judges
  • Birendra Prasad Sinha
  • B.P Griyaghey, JJ.
Acts
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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The plaintiff instituted Money Suit No. 86 of 1979 on 22-5-1979 against the Food Corporation of India Ltd. (FCI), its Regional Officer, Patna, and seven other officers for a decree of Rs. 2,63,204.34 p. with interest, arising out of a contract for execution of certain work. Defendants 1, 2, 6 and 7 appeared on 24-9-1979 and sought an adjournment to file the written statement, stating they needed departmental statements of fact. On 9-11-1979 those four defendants filed an application under Section 34 of the Arbitration Act seeking a stay of the suit, asserting the contract contained an arbitration clause (Clause 25) and that they were ready to participate in arbitration. On the same date (9-11-1979), defendants 3, 4, 5 and 8 also appeared and filed a similar application under Section 34; they had not earlier sought time to file a written statement. The plaintiff filed a rejoinder on 4-12-1979 arguing waiver by the defendants who had earlier sought time to file written statements. The learned Subordinate Judge I, Patna (order dated 17-3-1980) stayed the suit under Section 34. The plaintiff appealed that order.

Legal Issues Presented

  1. Whether the earlier application by defendants 1, 2, 6 and 7 for time to file a written statement (filed on 24-9-1979) constituted "taking a step in the proceedings" so as to bar those defendants from applying under Section 34, Arbitration Act, for a stay of the suit.
  2. Whether defendants 3, 4, 5 and 8 — having filed their Section 34 applications on their first appearance — were entitled to seek a stay under Section 34 before taking any step in the proceedings.
  3. Whether the defendants satisfied the requirement (as stated in Food Corporation of India v. Thakur Shipping Co.) that they were ready and willing both at the commencement of proceedings and at the time of applying for a stay to do everything necessary for the proper conduct of arbitration.
  4. Whether the learned Subordinate Judge properly exercised his discretion in staying proceedings under Section 34 without recording the particular satisfaction the appellant alleged was required.

Arguments of the Parties

Appellant's Arguments (Plaintiff)

  • Counsel for the appellant (Mr. Roy Shivajee Nath) argued that the application for time to file a written statement filed by defendants 1, 2, 6 and 7 on 24-9-1979 amounted to taking a definite step in the proceedings, thereby barring them from subsequently seeking a stay under Section 34.
  • The appellant relied on precedent (Abdul Quddoos v. Abdul Gani and Gaya Cotton and Jute Mills Ltd. v. Bihar State Electricity Board) to support the proposition that an application for adjournment to file a written statement can amount to a step in the proceedings.
  • The appellant further contended the trial judge had not recorded the required satisfaction regarding (a) lack of sufficient reason to refuse referral to arbitration and (b) the defendants' readiness and willingness at the commencement of proceedings to do everything necessary for proper conduct of arbitration, relying on Food Corporation of India v. Thakur Shipping Co.

Respondents' / Defendants' Position (as summarized in the opinion)

  • Defendants 1, 2, 6 and 7 explained their 24-9-1979 appearance and adjournment request as necessary because they did not have departmental statements of fact and para-wise comments; therefore they could not then file a written statement.
  • Defendants 3, 4, 5 and 8 filed Section 34 applications on their first appearance (9-11-1979) and had not previously taken any step in the suit.
  • Counsel for the respondents (Mr. Pandey) submitted that all defendants were proper parties and had the right to contest the suit; Section 34 allows any party to apply before filing the written statement or taking any step in the proceeding.
  • The defendants' applications stated that they were ready to participate in and conduct the arbitration, i.e., they were ready and willing to do what was necessary for arbitration to proceed.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Abdul Quddoos v. Abdul Gani, AIR 1954 Nag 332 Held that an oral application for time to file a written statement can amount to taking a step in the proceedings; a step need not be by written petition. The appellant relied on it to argue that the 24-9-1979 oral/written request for time by certain defendants barred them from Section 34 relief. The court examined the facts and distinguished the present case on the basis that defendants had appeared for the first time and needed departmental statements, so that the adjournment request did not unequivocally show desire to proceed on merits.
Gaya Cotton and Jute Mills Ltd. v. Bihar State Electricity Board, 1968 BLJR 559 Application for adjournment to file written statement is prima facie a step in the proceedings; burden lies on defendants to show circumstances justifying a contrary conclusion. Multiple petitions might indicate intention to proceed on merits. Cited by appellant; the court noted difference in facts — unlike Gaya Cotton where several petitions were filed, in the present case defendants 1,2,6,7 had appeared for the first time and had not filed multiple petitions — thus Gaya Cotton weighed against treating the single adjournment request as a definitive step here.
Austin and Whiteley Ltd. v. S. Bowley and Son, (1913) 108 LT 921 Definition: a "step in the proceedings" is a step indicating intention that the action should proceed and no desire that the matter be referred to arbitration. The court adopted this formulation of the test: whether the act displays an unequivocal intention to proceed with the suit and abandon arbitration.
Subal Chandra v. Md. Ibrahim, AIR 1943 Cal 484 Twofold aspect: (a) the act must be an application or something in the nature of an application to court; and (b) such an act should indicate acquiescence in court adjudication rather than arbitration. The court referenced this two-part test when assessing whether the defendants' conduct constituted a step in the proceeding; it applied the test and concluded the 24-9-1979 adjournment request did not meet the threshold of indicating acquiescence to court adjudication.
Naruddin Abdulhusain v. Abu Ahmed, AIR 1950 Bom 127 Reiterated that the real test is whether the act displays an unequivocal intention to proceed with the suit and give up arbitration rights. Used by the court as part of the consolidated principle to determine whether the adjournment request amounted to a step in the proceedings. Court found no unequivocal intention to abandon arbitration here.
State of U.P v. Janki Saran, AIR 1973 SC 2071 "Taking other steps in the suit" connotes doing something to aid progress of the suit or submitting to the jurisdiction of the court for adjudication on merits. Quoted to clarify the meaning of taking steps in proceedings; court evaluated whether the defendants' acts fell within that description and concluded they did not (for defendants 1,2,6,7), while defendants 3,4,5,8 had not taken prior steps and thus were entitled to apply under Section 34.
Food Corporation of India v. Thakur Shipping Co., AIR 1975 SC 469 Holds that an applicant for stay under Section 34 must be ready and willing both at the commencement of proceedings and at the time of applying to do everything necessary for proper conduct of arbitration. The court applied this standard and concluded that the defendants had stated they were ready and willing; the court found that readiness and willingness existed both at commencement (the date they appeared) and when they applied under Section 34, and therefore the requirement was satisfied.

Court's Reasoning and Analysis

The court proceeded through the following analytical steps, grounded in the authorities it cited:

  1. Identified the dispositive legal test: whether an act amounts to a "step in the proceedings" depends on whether the act unequivocally indicates an intention to have the matter decided by the court on merits and to abandon arbitration (drawing on Austin & Whiteley, Subal Chandra, Naruddin, and State of U.P. authorities).
  2. Examined the conduct of defendants 1, 2, 6 and 7. These defendants appeared for the first time on 24-9-1979 and sought adjournment to obtain departmental statements necessary to prepare a written statement. The court found that because they could not prepare a written statement without those statements or comments from the department, the adjournment request did not necessarily indicate an intention to contest the suit on merits or to abandon arbitration. The court contrasted the present factual matrix with cases like Gaya Cotton where multiple petitions suggested an intention to proceed before the court.
  3. Considered defendants 3, 4, 5 and 8 separately. They filed their Section 34 applications on the very first date they appeared (9-11-1979) and had not previously taken any step in the proceedings. The court held they therefore fell squarely within the protective language of Section 34 (which permits any party to apply before filing a written statement or taking any other step).
  4. Addressed the appellant's contention based on Food Corporation of India v. Thakur Shipping Co. concerning the requirement of readiness and willingness to arbitrate. The court noted that the defendants' application explicitly stated they were ready to participate in arbitration and to get the dispute decided by the arbitrator. It found, on the facts, that readiness and willingness existed both at the date of their appearance (the commencement of legal proceedings) and at the date of filing the Section 34 application.
  5. Rejected the submission that the trial judge failed to record necessary satisfaction: the court considered the record and the material before the Subordinate Judge and concluded that the learned Subordinate Judge properly found merit in the defendants' prayer for stay under Section 34 after considering the facts and circumstances.
  6. On this combined analysis — that the adjournment request did not amount to an unequivocal step in the proceedings for defendants 1,2,6,7, and that defendants 3,4,5,8 had not taken prior steps and had demonstrated readiness and willingness — the court concluded the stay order under Section 34 was properly granted and the appeal lacked merit.

Holding and Implications

Final Disposition: The appeal is DISMISSED. The appellate court found no merit in the appellant's challenge to the order dated 17-3-1980 of the Subordinate Judge staying the suit under Section 34 of the Arbitration Act. The dismissal was ordered without costs.

Direct Consequences: The trial court's order staying the money suit under Section 34 stands. Defendants who applied under Section 34 (including those who had earlier sought time to file a written statement) were found entitled to that relief based on the court's determination that their conduct did not amount to taking a step that waived arbitration and that they were ready and willing to participate in arbitration.

Broader Implications: The opinion applies and reiterates established principles about what constitutes a "step in the proceedings" for purposes of Section 34 — focusing on whether conduct unequivocally indicates submission to the court rather than arbitration, and the separate requirement of readiness and willingness to arbitrate at commencement and at the time of application. The court did not purport to establish a new legal principle beyond applying these precedents to the facts of the case.

Appeal dismissed.
Show full summary ...

    Ram Naresh Kumar Singh v. Food Corporation Of India Ltd., Patna And Others

    1. This is an appeal by the plaintiff against an order D/- 17-3-1980, passed by Subordinate Judge I, Patna in Money Suit No. 86 of 1979, staying the proceedings under Sec. 34, Arbitration Act.

    2. The plaintiff filed the money suit for a decree for a sum of Rs. 2,63,204.34 p. against the defendants with interest pendente lite and future, the plaintiff had taken a contract to execute certain work under the defendants the Food Corporation of India Ltd. and others. The claim arose out of this contract. This suit was filed on 22-5-1979, impleading the Food Corporation of India Ltd., Regional Officer, Patna and 7 others who appear to be Officers of the Food Corporation of India. The defendants 1, 2, 6 and 7 appeared on 24-9-1979 and filed a petition stating, inter alia that 24-9-1979 was the date fixed for filing the written statement, but they had to obtain the statements of fact from the department and therefore, it was not possible to file the written statement on that date. A prayer was made to adjourn the case for one month for filing the written statement in the case. On 9-11-1979, defendants 1, 2, 6 and 7, who had filed the petition for time mentioned above, filed another petition under Section 34, Arbitration Act, stating, inter alia, that there was an agreement between the plaintiff and the Food Corporation of India wherein there was an arbitration clause according to which all the disputes arising out of the agreement shall be referred to the sole arbitration of the person appointed by the Managing Director of the Food Corporation of India Ltd. It was further stated that claims were fully covered under Clause 25 of the condition of contract and the petitioners were/are ready to participate in the arbitration and get the dispute decided by the arbitrator. Accordingly, it was prayed that the suit should be stayed under Section 34, Arbitration, Act. On the same date, defendants 3, 4, 5 and 8 also appeared and filed a similar application for staying the suit under Section 34 of the Act. It may be relevant here to state that defendants 3, 4, 5 and 8 had not yet filed any application for time to allow them to file a written statement. On 4-12-1979, a rejoinder was filed on behalf of the plaintiff to the petitions filed by the defendants. In that view of the matter, it was asserted that those defendants had waived their right to file any application under Section 34 of the Act inasmuch as they had taken a definite step in the proceeding within the meaning of Section 34 of the Act. The matter was heard by the learned Subordinate Judge and after considering facts and circumstances of this case, he found that mere filing of the petition on one date could not be taken as an abandonment of the claim by the defendants of going to the arbitration or filing of any application under S. 34 of the Act The court also found that the other defendants, namely, defendants 3, 4, 5 and 8 had not filed any application for time for filing the written statement and had on the very first day filed the application for staying the suit. Upon such a finding, the learned Subordinate Judge stayed the further proceeding of the suit under S. 34 of the Act.

    3. Mr. Roy Shivajee Nath, learned counsel appearing on behalf of the appellant has submitted that the application filed on behalf of defendants 1, 2, 6 and 7 on 24-9-1979 clearly amounted to taking a definite step in the proceeding and that bars their right to file any application under S. 34 of the Act. He relied upon a decision in the case of Abdul Quddoos v. Abdul Gani, (AIR 1954 Nag 332) in which it was held that making an oral application for time to file a written statement was undoubtedly taking a step in the proceeding and that it was not necessary that the step in the proceeding must be taken by a written application. In that case the suit had been filed for dissolution of partnership and an application for appointment of a receiver was filed. On the date fixed for hearing of that application the defendants and their counsel appeared and filed their reply. The case seems to have been transferred to another court where also the defendants were further heard on the receivership matter. The suit was then fixed for settlement of issues and the defendants were directed to file written statement. They did not file written statement as directed and their counsel made an oral prayer for adjournment to file the written statement which was allowed. Therefter the defendants filed an application under S. 34 for staying the suit till the disposal of the application for revision in the High Court against the order passed in the receivership matter. The suit was ultimately stayed by the trial court under S. 34 of the Act. In appeal the point was taken that the defendants had taken steps in the proceeding and, therefore, the suit could not be stayed under S. 34. It was held that notwithstanding an oral prayer made on behalf of the defendants for time to file written statement they had undoubtedly taken a step in the proceeding by asking for time for filing the written statement.

    4. What really fell for consideration in that case was whether an oral application for time to file a written statement could be taken to mean a desire to proceed with the suit. It was held that in the facts and circumstances of that case the oral prayer made was a step in the proceeding and it was not necessary that the step must be taken by a written petition. The defendants had the copy of the plaint with them and if they did not want to defend the suit on merit, they would not have asked for time to file written statement. Learned counsel also relied upon a Bench decision of this Court in the case of Gaya Cotton and Jute Mills Ltd. v. Bihar State Electricity Board (1968 BLJR 559). On the facts and in the circumstances of this case also it was held that an application for adjournment of a case to enable the defendants to file a written statement was prima facie a step in the proceeding within the meaning of S. 34 and the burden lies on the defendants to establish the circumstances which would justify the court to hold that the effect should not be given to the prima facie meaning of the application. In this case six petitions had been filed on behalf of the defence after the service of summons, for time to file written statement. The last one was dated 9-1-1962. It was observed that those petitions which had been filed before 19 Dec. 1961 did not amount to a step taken by the defendents in the proceeding. The real test was whether the petition for time indicated an intention to have proceeding decided on merits by court or an intention to abandon the right to have the matter disposed of by arbitration. In one of the applications it had been mentioned that the Managing Director of the Company had gone out, therefore, no action including the filing of the written statement could be taken in his absence. Same thing was stated in another application as also in the third application. In the application of 19-12-1961 it was stated that was the date fixed for filing the written statement but in absence of the Managing Director and without consulting him it was not possible to file a written statement and, therefore, time should be granted for filing the written statement. It was held that by saying so a desire on the part of the defendants had been expressed to contest the suit on merits. It appears that six petitions as stated above had been filed in that case on behalf of the defendants and that weighed with the Court in holding that the defendants had taken a definite step in the proceeding.

    5. The real test for determining whether an act is a step in the proceeding is not so much the question as to whether it is an application filed by the defendants, but whether the act displays an unequivocal intention to proceed with the suit and to give up the right to have the matter disposed of by the arbitration. Ridley, J. in Austin and Whiteley Ltd. v. S. Bowley and Son (1913) 108 LT 921 (F) observed:—

    “In my opinion what is intended by a step in the proceedings is some step which indicates an intention on the part of a party to the proceedings that he desires that the action should proceed and has no desire that the matter should be referred to arbitration”

    In the case of Subal Chandra v. Md. Ibrahim, (AIR 1943 Cal 484) it was observed that—

    “After reviewing the English authorities 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…………or something in the nature of an application to the Court……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”.

    Relying upon these decisions Tendolkar, J. in Naruddin Abdulhusain v. Abu Ahmed, (AIR 1950 Bom 127) held that the real test was whether an act displays an unequivocal intention to proceed with the suit and to give the right to have the matter disposed of by arbitration. The Supreme Court in State of U.P v. Janki Saran, (AIR 1973 SC 2071) observed that “taking other steps in the suit proceedings connotes the idea of doing something in aid of the progress of the suit or submitting to the jurisdiction of the Court for the purpose of adjudication of the merits of the controversy in the suit”.

    6. The question, therefore, for consideration is whether the application filed by the defendants 1, 2, 6 and 7 under S. 34 of the Act really amounted to their taking any step in the suit with the intention to pursue the matter on merits and abandon their right to go to the arbitration. The defendant 1 is a public Corporation and the other defendants are its office-bearers. In their application dated 24-9-1979 they stated that in order to file the written statement it was necessary to have the statements of fact and para-wise comments with regard to the allegations made in the plaint. It was further stated that they had appeared for the first time on that date and since those statements were not available it was not possible to file a written statement. It is obvious that the defendants could not file any written statement without collecting the statements of fact and comments from the department concerned. It is not a case where the defendants had filed several applications as in the case of Gaya Cotton and Jute Mills Ltd. (1068) BLJR 559) (supra), They had appeared for the first time and they had to make up their mind after ascertaining full facts whether or not to contest the suit. No doubt a prayer was made to adjourn the case for filing the written statement, but in the facts and circumstances of this case, that by itself cannot be construed as taking any step in the suit with a view to contest the suit on merits and abandon their right to have the matter disposed of by the arbitration.

    7. Be that as it may the objection of the plaintiff in this regard has to be overruled for another reason as well. Defendants 3, 4, 5 and 8 had not made any application for time like defendants 1, 2, 6 and 7. When they appeared on 9-11-1979, on that very date they filed an application under S. 34. Arbitration Act, requesting the court to stay the suit. They had not taken any step in the suit whatsoever prior to the filing of the application under S. 34 on 9-11-1979. Learned counsel for the appellant submitted that the defendants 3, 4, 5 and 8 were/are formal parties only in the suit. Originally, reliefs had been claimed against all the defendants jointly, but it appears that on 13-3-1980 a petition was filed on behalf of the plaintiff for amendment in the prayer portion of the plaint confining his relief only as against defendant 1. That amendment seems to have been allowed on 17-3-1980. But that would not change the position. This application for amendment dated 13-3-1980 was filed only after the two applications had been filed on behalf of the two sets of defendants on 9-11-1979 for staying the proceeding under S. 34. It appears that having realised this position the plaintiff filed the application for amendment. Mr. Pandey who appears for the respondents has submitted that all the defendants in their various capacities are necessary parties to the suit. The question is not whether defendants 3, 4, 5 and 8 are necessary parties in the suit. They have been made defendants in the suit by the plaintiff and they have a right to contest the suit. Section 34, Arbitration Act, provides that any party to such a legal proceeding may at any time before filing of the written statement or taking any other step in the proceeding, apply to the court for staying the proceedings. Defendants 3, 4, 5 and 8 are parties to the suit and they had a right as any other defendants in the suit to make an application under S. 34 of the Act. That being so, it cannot be said that the order passed by the learned Subordinate Judge staying the suit on this account is bad and illegal.

    8. Learned counsel for the appellant then submitted that the learned Subordinate Judge has not recorded any finding with regard to his satisfaction that there was no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the defendants were at the time when the proceedings were commenced and now, ready and willing to do all things necessary to the proper conduct of the arbitration. In this connection, learned counsel referred to a decision of the Supreme Court in Food Corporation of India v. Thakur Shipping Co. (AIR 1975 SC 469). It was held that “an applicant for stay of legal proceedings under this section must satisfy the Court not only that he is but also was at the commencement of the proceedings ready and willing to do everything necessary for the proper conduct of the arbitration. Thus the readiness and willingness must exist not only when an application for stay is made but also at the commencement of the legal proceedings”. The defendants in their application had categorically stated that the petitioners were/are ready to participate in the arbitration and to get the dispute settled by the arbitrator. Learned counsel contended that since the defendants 1, 2, 6 and 7 had made an application for time on 24-9-1979, that is to say when they appeared for the first time in the suit, it must be held that they were not ready and willing on that date to do everything necessary for the proper conduct of the arbitration. This argument must also be rejected on the same ground on which the first submission has been rejected by us. At any rate, this argument is not available on that ground against the defendants 3, 4, 5 and 8. The learned Subordinate Judge has found that there was merit in the prayer of the defendants for staying the proceedings under S. 34. After considering the facts and circumstances of this case, we are also of the opinion that the defendants were willing and ready to do everything necessary for the proper conduct of the arbitration. Their readiness and willingness to do so existed on the date they appeared in the suit, that is to say, commencement of the legal proceeding as also on the date when they filed the application under S. 34 of the Act. This submission of the learned counsel is also rejected.

    9. Haying considered all the facts and circumstances of this case and the material on record we are of the opinion that there is no merit in this appeal which must be dismissed. The appeal accordingly fails and is dismissed, but without costs.

    Appeal dismissed.

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    Comments

    Ram Naresh Kumar Singh v. Food Corporation Of India Ltd., Patna And Others
    (Mar 17, 1983)