(1) This suit for Rs. 105 50 has been brought by the plaintiffs against the Union of India on 3-3-65 in this Court. The suit was fixed for 20th May 65, notice whereof had gone to the Defence Secretary, Government of India with a copy of the plaint on 31-3-65. On 20-5-65 the Advocate General appeared for the defendant and wanted time to file the written statement He was al­lowed to do so within one month and the case was to come up on 24-6-65 for filing the written statement. After this order was made Mr. SSL Padroo Advocate accompanied by S, Nagar Singh Branch Officer 970 Works Eng. Section, put in his appearance and stated that he had been engaged by the Union of India, defendant Mr. Padroo further stated that the papers of the case were with him. Mr Padroo also wanted time for filing written statement On 24-6-65 it was pointed out that the learned Ad. General, who subsequently appeared for the defendant, had filed an applica­tion for stay of the suit under S. 34 of the Arbi­tration Act This application, it may be stated, was filed by the Adv. General on 8-6-65. Objec­tions were taken from the plaintiff with respect to this application which they presented in the court on 6-7-65. The learned Ad. General then put in further objections with respect to these objections on 6-7-65.

(2) The question for consideration before me at this time is whether the suit should be stayed in terms of S. 34 of the Arbitration Act. I have heard elaborate arguments on this point from the learned counsel for the parties. It has to be stated that the parties examined witnesses in regard to the matter of stay. The plaintiff exa­mined the civil clerk of this court, Mr. Mohi-uJ-Din and Mr. SSL Padroo Advocate The defen­dant examined S. Nagar Singh Officer I/C 370 Works Engineering Section The evidence of the civil clerk Mr Mohi-ud-Din is that he despatched the notice in duplicate along with a copy of the plaint on 31-3-65 to the Defence Secretary Govern­ment of India Mr. Padroo's statement is with respect to his having appeared before the court and having sought an adjournment. According to Mr. Ndgar Singh he appeared on 20-5-66 in the court, but he had no knowledge about the nature of the case. On- 21-5-65 a letter from the Advo­cate General No. 93 demanded relevant papers from him which he handed over to the Ad. General on 22*5-65. If is not clear from the statement as to how the learned Ad. General knew about the case and its date ot hearing as 20th May 65, or how Mr. Padroo came in to represent the Union of India along with Nagar Singh. Anyhow this matter may not be of Very great consequence in view of the order that I propose to pass.

(3) To appreciate the argument of either side, firstly I shall enumerate what is factually necessary for a disposal of the application under 1 S. 34 The claim of the plaintiffs as already stated, is for Rs 105150 and odd. The claim consists of two parts : one on account of compensa­tion for the use and occupation of the house in­cluding the annexe and the garage and about 2 kanals under and appurtenant to the house at the rate of Rs. 50 per day from 1st March 62 to 20th Feb 65, i e.,, 1095 days which in all comes to Rs. 54750. Secondly compensation for use and occu­pation of 8 kanals and 8 marlas of garden and vege­table growing land valued at Rs. 168000 at 10% per annum of the value of the land from last March 1962 to 28th Feb. 1965 which comes to Rs. 50,403.

(4) According to the plaintiffs the house known as 'Guna' Crescent Villa at Batwara Srinagar was purchased by them somewhere in the year 1958. This house was under the occupation of the military personnel of the Union of India. (670 Engineering Works Section). The plaintiffs gave on lease this house along with two kanals of land to the President of India from 1-10-58 to 31-3-59. The lease deed was renewed from 1-4-59 to 31-3-60 by means of a lease deed dated 9-4-60. From 1-4-60 it was again renewed, upto the end of. March 63; Therefore the Union of India con-continued to be in its possession The plaintiffs did not receive any rent from 1st March 62 pertaining to this property. The lease deed had been executed with respect to the building, annexe, garage and 2 kanals of land and the lease continued upto the end of February 62 alone. After that there was no renewal of the lease and therefore any terms in the original lease deed which related to the settlement of dispute by arbitration would not apply to this case. The learned Ad. General, how­ever, argued that the Union of India would be deemed to be a tenant holding over and would be governed by the same terms as the original lease. In the original lease dated 9-4-60 cl. 9 provided that 'in the event of any dispute, difference, question or thing arising between the lessor and the lessee as regards the interpretation of any term or condition herein contained or as regards the rights obligations and duties of the parties under this agreement or any matter concerning or touching this agreement the same shall be re­ferred for decision to an arbitrator not below the rank of a Lt. Col. or civilian officer of equivalent status to be appointed by the Commander. HQ XV Camp area and the decision of such arbitrator shall be conclusive and binding on the parties here­to..." According to the Ad. General the tenancy would be construed on the same terms and con­ditions as contained in the lease deed of 9-4-60. Mr. Ishwar Singh calls that portion of the claim also one for tort. The Ad. General in this con­nexion referred me to two authorities, AIR 1926 Cal. 1239 and AIR 1925 Oudh 173 So far as this part of the argument of the Ad. General is con­cerned, I may agree with him. Even if the Union of India continued to remain in possession of the property after the end of February 1962, the plain­tiffs by accepting rent even after the term of the lease will be deemed to have acquiesced in the tenants' holding over. Mr. Ishwar Singh tried however to faintly argue that he had received the rent under protest after the period of the lease deed was ever, but when he was confronted with the receipts given by his client there was no pro­test entered on any of the receipts given by the plaintiffs or the payments received by them which would show that even after the termination of the lease deed the plaintiffs had been accepting rent without protest from the Union of India, thus giving the defendant Union of India the status of a tenant holding over. Therefore to that extent I think the Ad. General was right in in­voking the arbitration clause if otherwise he could do so.

(5) The second part of the claim consists of compensation for the use and occupation of 8 ks. and 8 rns. of vegetable growing land which accor­ding to the plaintiffs were never let out to the defendant. According to the plaintiffs the de­fendant had taken forcible possession of the same. There was some correspondence with respect to this part of the land between the parties. The Ad. General, however, has not at all indicated in his applications and affidavits on behalf of the Union of Indian that this plot of land ever formed the subject matter of any contract between the parties or this plot of land was covered by any of the lease deeds or their equivalents between the parties. In the last rejoinder of the Ad. General, however, when this plea was expressly taken by the plaintiffs in their objections dated 3-7-65 (Para 4 and 5) the Advocate General has denied having been in possession of 8 ks. and 8 ms. of land, which clearly shows that so far as this part of the case is concerned there has been no contract between the parties and the suit is based on mere tort alone. To this extent the Union of India cannot and is not in a position to take and therefore cannot take recourse to S. 34 of the Act. To this extent therefore the suit of the plaintiffs is maintainable and cannot be stayed.

(6) Now I have to consider the legal posi­tion as emerges from the proceedings of this case and the combination of the two claims in the same suit. The argument of the learned counsel for the plaintiffs in the first place is that the learned Ad. General cannot take recourse to S 34 of the Act. In what circumstances can S. 34 be availed of has been thoroughly discussed in AIR 1955 S. C. 53 wherein their Lordships have stated : -

1) The proceedings must have been com­menced by a party to an arbitration agreement against any other party to the agreement.

2) The legal proceeding which is sought to be stayed must be in respect of a matter agreed to be referred

3) The applicant for stay must be a party to the legal proceeding and he must have taken no steps in the proceeding after appearance. It is also necessary that he should 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 ; and

4) The court must be satisfied that there is no sufficient reason why the matter should not be referred to an arbitration in accordance with the arbitration agree­ment.

(7) One of the conditions of S. 34 is that when the legal proceedings are commenced against any party that party may at any time before filing a written statement or taking any other steps in the proceedings apply for stay of the proceedings and then it is for the court, if it is satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitra­tion agreement, to stay the proceedings provided the party applying for stay is ready and willing to do all things necessary for the proper conduct of the arbitration. In this case the whole dispute is whether the conduct of the defendant would disentitle him to apply for stay of the proceedings as he had taken steps in the suit itself before making the application for stay. As already mentioned, the suit was fixed for 20-5-65. On that day two learned counsels, one after the other, the Advocate General first and later Mr. SSL Padroo appeared for the defendant and prayed for an ad­journment for filing the written statement. There are authorities for the proposition that even making oral requests for adjournment would be construed as taking steps in the proceedings, thereby dis­abling the defendant from being granted a stay of the proceedings. Some authorities have gone so far as to hold that even if the defendant was not aware of the arbitration clause in the agreement and sought time to do certain things in the suit, he would not be entitled to claim stay of the suit under S, 34

(8) Our law of Arbitration is modelled on the English law. S 34 of our Act is substantially similar to what is contained in the English law. Under the English law, the applicant must have taken no steps in the proceedings after appearance. A step is taken in proceedings by a party notwith­standing his ignorance at the time of the existence of the arbitration clause. A party who makes any application whatsoever to the court, even though it be merely an application for time, takes a step in the proceedings. Thus the filing of an affidavit in opposition to a summons for summary judgment, delivery of a defence, application to the court for leave to interrogate, or for stay pending the giving of security for costs or for extension of time for delivery of defence are 'steps' in the proceedings. Even attendance on an ordinary summons for direc­tions issued by the plaintiff and permitting an order to be made thereon without objection amounts to taking a steps in the action. (Vide Halsbury's Laws of England. Simonds' edn- Vol. 2 page 25). A number of authorities have been referred to in respect of the above law which need not be recapi­tulated here, but the extreme authority which says that a step will be deemed to be taken by a party notwithstanding his ignorance at the time of the existence of an arbitration clause is Parkar Gjines and Co. v. Turpin (1918) I KB 358. This authority at page 361 however lays down : -

'The words in their natural meaning indi­cate that if a party takes a step in the proceedings he cannot after that stay the action and proceed to arbitration. I should have been disposed to look leniently upon the respondent's application for particulars, if that had been the only step alleged, because the parti­culars were not very ample. But an application for discovery is a very dif­ferent matter."

(9) In that case the defendant was unaware that the contract contained an arbitration clause. The defendant asked for discovery and an order for mutual discovery was made. It was held that in view of the particular conduct of the defendant he could not claim a stay.

(10) In another English case (1940) 1 All 151 the defendants filed an affidavit claiming a defence to action. It was held that the defen­dants were precluded from relying on the arbitra­tion clause as they had taken a step in the action when they opposed the summons for leave to sign final judgment before the master.

(11) Amongst the Indian authorities the following may be mentioned. In AIR 1954 Nagpur 332 where an oral request was made for filing a written statement it was held to be step taken disentitling the defendant from getting a stay.

(12) In AIR 1960 Cal. 206 there was an ap­plication for judgment on admissions. Time was sought for filling an affidavit to counter-act that. It was held that it was a step taken.

(13) In AIR 1357 Cal. 91 more than one adjournment was taken for filing the written state­ment. The stay was refused.

(14) In AIR 1943 Cal. 484 time was taken for examination of accounts and for opposing receivership application. It was held that the defendant was not entitled to a stay.

(15) Amongst the authorities which hold that a formal request without going into the merits of the case would not amount to a step taken may be mentioned the following.

(16) In AIR 1962 Cal. 177 filing of a war-rant of attorney was held to be not a step taken.

(17) In AIR 1960 MP 322 time taken to oppose the application for grant of a temporary injunction was considered to be no step taken.

(18) Similarly in AIR 1948 Bom. 55 signing a joint application for adjournment of a case was held to be no step taken.

(19) It can be argued in this case that a copy of the plaint and summons was sent to the defen­dants, i. e., the Defence Secretary Government of India. The copy of plaint was sent on 31---65. The date fixed was 20-5-65. Nearly two months time was given to the defendant to file his written statement. It seems that the Defence Minister moved in the matter and in pursuance thereof not one counsel but two appeared on the day fixed, i.e. 20-5-65. It can safely be argued that the defen­dant was given sufficient time to know what the case against the defendant was. The concerned authorities were in possession of the entire re­cord. They should have examined it and found the arbitration clause in the lease deed and pressed for stay on 20th May. Technically it not necessary that the counsel should have been apprised of the whole legal position. If the de­fendant knew about the existence of the arbitra­tion clause that was sufficient In that view of the matter an adjournment sought by two learned counsel for the defendant in filing the written statement should be deemed to be a step taken in the proceedings.

(20) The other side can very safely argue that it is only when the whole record, the plaint and the relevant documents are examined by the defendant or his counsel that he can be deemed to either elect or waive the right of applying for the stay of the proceedings. It can be argued that the suit is not against any individual ; it is against the Union of India which has a hierarchy of offi­cers. The plaint was sent to the Defence Secre­tary who may have passed it on to various officers. The records of the case might be lying in some office. It appears that the records were with the 0 I/C 970 Engineering Works Section Srinagar because S. Nagar Singh supplied the relevant files to the Advocate General on 22nd May 65 when 5 the latter requisitioned them on 21-5-65. It can be argued for the defendant that it is only after 22nd May when the Ad. General was in possession of the record that he could examine the record and take steps to move an application for stay. Therefore any request made before that date for an adjournment for filing the written statement by the defendant's counsel would only be a formal and a mechanical request.

(21) But even this argument need not detain me, for it is clear that the Union of India had sufficient time to get the record examined by any body and direct the learned counsel accordingly. Therefore in my opinion the defendant has lost his right for applying for a stay of the proceedings.

(22) Then we come to the other aspect of the question. In this suit even if it is conceded for the sake of argument that the defendant did not lose any time in making the request for stay of the proceedings, he can at best claim stay so far as part I of the claim for Rs. 54750 alone is concerned. The second part of the claim is for the illegal possession of 8 kamls and 8 marlas of vegetable land and garden. With respect to this part as already observed, the defendant can have nothing to plead for stay. This is a claim which has nothing to do with the contract and is a simple claim tor tort, although the plaintiffs have made both the claims for torts.

(23) The position then is that almost half of the claim is exclusively triable by this court. The plaintiffs have joined1 both the claims together and it is now to be seen whether the part pertain­ing to Rs 54750 should be stayed even if it be held that the defendant has not lost that right.

(24) S. 34 of the Arbitration Act is not mandatory. It is discretionary. It gives the dis­cretion to the court to stay or not to stay. Ordi­narily when a clear case is made out for stay, the discretion should be used in favour of the defen­dant. But a discretion is after all an option given to the court. The court may or may not exercise it. In this case apart from my finding that the defendant has lost his right of claiming a stay, I hold that the discretion should not be exercised in favour of the defendant for staying the part of the claim for Rs. 54750. My reasons for that will Be given hereinafter.

In AIR 1956 Nagpur 61 it has been held :-

"The legal proceeding which is sought to be stayed must be in respect of matter which the parties have agreed to refer and which comes within the ambit of the arbitration agreement. Where, however, a suit is commenced as to a matter which lies outside the submission, the court is bound to refuse a stay . ...

It has further held : -

The matter of stay is entirely within the discretion of the court and if that discretion has been exercised in accor­dance with the well established princi­ples governing such cases there is no reason for the High Court to examine too nicely the reasons given by the court below in support of its order refusing to stay the suit."

(25) In AIR 1954 Cal. 281 where serious allegations were made against a party and his re­putation and character was at stake it was held that the court will allow him an opportunity to have his character vindicated at a public trial and not send him to a private Tribunal with all the disadvantages incidental thereto and it was held that the discretion should not be exercised.

(26) In AIR 1950 Cal. 568 it was held that where the suit was based on torts which had a remote connection with the construct, no stay should be granted.

(27) In England also it has been held that the "fact that the arbitration agreement includes but a small part of the matters which are the subject matter of the legal proceedings may be a suffi­cient reason for refusing a stay, since the order to stay must of course be confined to those matters only which are within the scope of the agreement and therefore the effect of an order to stay would be that a part of the dispute between the parties would be litigated in court and a part would be referred to arbitration. (Vide Ivies v. Willims (1894) 2 CH. 478 CA)

(28) In the Radio Publicity Universal v Campagnie (1936) 2 All ER 721 it was held that the claim for damages for conspiracy was not a matter to which the arbitration provisions of the agreement extended and which should be excluded from stay.

(29) This being the state of law, my ad­ditional reasons for not staying the suit are as fol­lows :-

(1) The parties will be put to unnecessary inconvenience and hardship and expense by fighting two cases in the different forums : one before the arbitrator and .the second before this court. Both claims, even if split, are cognizable by this court.

(2) No useful purpose will be served by sending only a part of the claim to the arbitrator and continuing with the rest of the claim.

(3) The plaintiff claims damages for use and occupation of both sets of property. Two questions arise for determination First, whether the plaintiff is entitled to any compensation for use and occupation. Secondly, what should be the rate of that compensation. It is fair to the parties and to all concerned that both claims should be inquired into by the same authority. If part of it is tried by a civil court and part of it by the arbitrator, they may come to diagonally opposite conclusions. That would rather be defeating the ends of justice.

(4) Both properties are contiguous and rate of compensation for each and the period of occupation of each property has to be decided on almost the same evidence. The same evidence has therefore to be repeated before both the forms.

(5) There are certain allegations made by the defendant which can be a defence common to both the claims. In the interests of justice it is necessary that these defences should be sifted, inquired into and adjudicated upon by the same forum.

(30) These are the salient points which in­cline me to refuse the stay. The discretion being vested in me I do exercise it in favour of the plaintiffs and against the defendant.

(31) For the foregoing reasons the applica­tion of the defendant for stay of the proceedings under S. 34 of the Arbitration Act is hereby dis­missed. The defendant will file his written state­ment within 2 months from today.