RACHAPPA GURUADAPPA BIJAPURversusGURUSIDDAPPA NURANIAPPA & ORS.

                   RACHAPPA GURUADAPPA BIJAPUR
A.                                       v.
                 GURUSIDDAPPA NURANIAPPA & ORS.

                             NOVEMBER 16, 1988

B     [SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.]

           Arbitration Act, 1940: Section 34-'Taking any other steps in the
     proceedings'-Interpretation of-Step should clearly and unam-
     biguously manifest intention to waive benefit of arbitration agreement-
     Adjournments taken for filing written statement-Disentitles asking for
     stay of suit.                  ·
c
         The petitioner and the respondents in the S.L.P. were partners in
  a partnership firm. On 8th November, 1980, respondent No. l issued a
  notice calling for dissolution of the firm alleging mismanagement, loss
  and exclusion from the management, and later filed a civil suit for: (i)
O dissolution of the firm, and (ii) accounts. On 4th November, 1981,
  respondent No. 9 who was defendant No. 7 in the suit, filed an applir•-
                                                                                -
  tion-.under Section 34 of the Arbitration Act, 1940 for stay of the suit.

        The Trial Judge after referring to the order-sheet in the matter
  a11d noticing that the counsel for the petitioner had taken steps in the
E proceedings in the suit, by seeking and securing adjournments for filing
  the written statement, held that there was no jurisdiction to stay the suit
  under Section 34 of the Act.

           On appeal, the Division Bench of the High Court confirmed the
     order 0fthe Trial Judge, and held that the petitioner having taken steps
F    in the suit, had thereby disentitled himself from asking for the stay of
     the said soit.

           Dismissing the petitioner's Special Leave Petition,

           HELD: I. Arbitration is an alternative procedure for speedy
q, adjudication of disputes between the parties and should normally be
     encouraged as parties have bound themselves to have their disputes
     adjudieated by arbitration, so they should be held bound by the
     agreement. [887B]

        2. Section 34 of the Arbitration Act is the statutory provision
H wlJich deals with the powers to stay legal proceedings where there is an
                                       884
                     R.G. BIJAPUR v. GURUSIDDAPPA                       885

 arbitration agreement. One of the requirements is .that the application
                                                                               A
for stay must be filed before the filing of the written statement or 'taking
any other steps in the proceedings'. [887C; 888E]

      3. The expression 'taking any other steps in the proceedings' does
not mean that every step in the proceedings would come in the way of
enforcement of the arbitration agreement. The step must be such as             B
would clearly and unambiguously manifest the intention to waive the
benefit of arbitration agreement, and display an unequivocal intention
to proceed with the suit giving up the right to have the matter disposed
of by arbitration. [891E-F; Bl
                            '
      4. Each Court must find out from the context of each case what
has happened, and whether a step was taken in the suit which would             c
disentitle the party from obtaining stay of proceedings. [89IC]

      In the instant case, it is indisputable that the proceeding was
commenced by a party to an arbitration agreement against the other
party to the agreement and the legal proceedings which was sought to be        D
stayed was in respect of a matter agreed to be referred to arbitration.
From the order-sheet in the case as noted by the Trial Judge, it appears
that the counsel appearing for the petitioner had sought adjournment
'specifically for filing written statement'; and obtained time on more
than one occasion for such purpose. It was not only the time taken to
consider whether written statement shotild be filed as a defence to the        E
plaint, but it was time taken to have the matter decided by the suit. The
party evinced an intention to have the matter adjudicated by the Court
and not keen to have the matter adjudicated by arbitration. If that is so,
the party has disentitled itself to ask for the stay of the said suit. The
High Court was, therefore, right in affirming the order of the Trial
Judge. [891F-H; 892A]

     State of Uttar Pradesh & Anr. v. Jaliki Saran Kaiiasiz Chandra &
Anr., [1974] 1 SCR 31 and Food Corpli. of India & Anr. v. Yadav
Engineer and Contractor, [1983] i SCR 95; referred lo.

      Law of Arbitration by R.S. Bachawat (/st Edn.), pp. 498-499;             tJ
referred to.

      CIVIL APPELLATE JURISDICTION: Speciai Leave Petition
(Civil) No. 10264 of 1988

      From the Judgment and Order dated 26.5.1988 of the Kamaiaka              H
     886          SUPREME COURT REPORTS                [1988] Supp. 3 S.C.R

A    High Court in M.F.A. No. 52 of 1982.

           S.K. Kulkarni and Mrs. Kiran Suri for the Petitioner.

           Jagdish G. Yadwad and S. Srinivasan for the Respondents.

B          The Judgment of the Court was delivered by

           SABYASACHI MUKHARJI, J. This is a petition for leave to
     appeal against the judgment ancj order of the High Court of Karnataka
     dated 26th of May, 1988. By, the said judgment the High Court
     affirmed the order of the learm;tl Civil Judge_,Hubli. To appreciate the
     controversy, a few facts may be necessary.
c
             On or about 18th September, 1972 a partnership firm was con-
      stituted which included the .petitioner and the respondents Nos. 1 to 9
      to run a cinema theatre and Hubli in the State of Karnataka. The said
      firm was reconstituted in August, 1973 for a period of 25 years with
D   . one partner retiring from the first firm. In the said reconstituted firm
      the 1st respondent had 12 paise share. On 8th November, 1980 the 1st
      respondent had issued a notice calling for dissolution of the firm alleg-
      ing mismanagement, loss and exclusion from the management. In 1981
      the 1st respondent filed a suit in the Court of the ·civil Judge, HubliJor
      (i) dissolution of the firm and (ii) accounts. On 4th November, 1981,
E     the 9th respondent who is defendant No. 7 in the suit filed an applica-
      tion under Section 34 of the Arbitration Act, 1944 (hereinafter refer-
      red to as 'the Act') for stay of the said suit. The learned Trial Judge
      after referring to the facts and the relevant decisions referred to the
      order-sheet in this matter and observed that there is a clear record in
      the order-sheet that the counsel appearing for the applicant had
f     "sought adjournment specifically for filing written statement''. The
     order-sheet further recorded that the matter was posted to 4th
     November, 1981 "for arguments". The learned Trial Judge was of the
      view that the petitioner herein who is defendant No. 4 in the suit had
      sought and secured several adjournments to file a written statement.
      In that view of the matter, the learned Trial Judge was of the view that
O     the petitioner had taken steps in the proceedings in the suit by seeking
      and securing adjournment to file the written statement. In that view of
      the matter of declined to exercise his jurisdiction to stay the said suit
      under Section 34 of the Act. There was an appeal. The Division Bench
      of tlieHigh Court was of the view that in view of the facts mentioned in
      the order of the Trial Judge, it appeared that the petitioner herein had
H     taken steps in the suit and had thereby djse11~itle~ himself from as~ing
           R.G. BIJAPUR >. GURUSIDDAPPA [MUKHARJ!, J.]                887

for the stay of the said suit. The High Court, therefore, confirmed the
                                                                             A
order. of the learned Trial Judge. Aggrieved thereby, the petitio.ner
seeks leave to appeal under Article 136 of the Constitution from the
said decision.

      Arbitration is an alternative procedure for speedy adjudication
of disputes between the parties and should normally be encouraged            B
and parties have bound themselves to have their disputes adjudicated
by arbitration, so they should be held bound by the agreement bet-
ween the parties. Section 34 of the Act is the statutory provision which
deals with the powers to stay legal proceedings where there is an
arbitration agreement. Section 34 of the Act which is relevant for our
present purpose is as follows:
                                                                             c
            "34. Power to stay legal proceedings where there is an
            arbitration agreement.-Where any' part to· an arbitration
            agreement or any person claiming under him commences
            any legal proceedings against any other party to the agree-
            ment or any person claiming under him in respect of any          D
            matter agreed to bil>.referred, any party to such legal pro-
            ceedings may, at any time before filing a written statement
            or taking any other steps in the proceedings, apply to the
            judicial authority before which the proceedings are pend-
            ing to stay the proceedings; and if satisfied that there is no
            sufficient reason why the matter.should not be referred in       E
            accordance with the arbitration agreement and that the
            applicant was, at the time when the proceedings were com-
            menced, and still remains, ready and willing to do all things
            necessary to the proper conduct of the arbitration, such
            authority may make an order staying the proceedings."
                                                                             F
      An analysis of the aforesaid section makes it clear that in order
to have the proceedings in the suit stayed, there must be an .arbitration
agreement between the parties covering the disputes in question. The
section stipulates that in order that stay may be granted under the
section, it is necessary that the following conditions are fulfilled:

      (i) The proceedings must have commenced by a party to an
      arbitration agreement against any other party to the agreement;

      (ii) the legal proceeding, in this case the suit, which is sought to
      be stayed must be in respect of a matter agreed to be referred;
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     888         SUPREME COURT REPORTS               [1988] Supp. 3 S.C.R.

           (iii) the applicant for stay must be a party to the legal proceed-
           ing, the suit in this case.

           (iv) the applicant must have taken no steps in the proceeding
           after appearance;

B          (v) the applicant must satisfy that only the applicant was at the
           time when the proceedings were commenced, ready and willing
           to do everything necessary for the proper conduct of the atbitra-
           tion; and

           (vi) the Court must also be satisfied that there was no sufficient
           reason why the mattenhould not be referred to 'arbitration.

           Several decisions of this Court and the decisions of the High
     Court have laid down the aforesaid position in law. See, in this connec-
     tion, the observations in the "Law of Arbitration" by R.S. Bachawat
     (1st Edn.) at pages 498-499;
0
           Indisputably, in this case·; the proceeding was commenced by a
     party to an arbitration agreement against the other party to the agree-
     meht and the legal proceeding which was sought to be stayed was in
     respect of a matter agteed to be referred to. It is also clear ihat the
     petitioner is a patty to the arbitration agreement. The only question
ll   that was agitated before the learned Trial Judge as well as before the
     High Court was, whether the petitioner had taken no steps after
     appearance. The section requires. that the application must be filed
     before the filing of the written statement or taking any other step in
     the proceeding.

p          In the case of State of Uttar Pradesh & Anr. v. Janki Saran
    ktiiiash Chandra & Ant., [i974] 1 SCR 3 lj the palintiff instituted a suit
    fof recovery of damages for breach of contract impleading the State of
    U.P. as the first defendant and the Divisional Forest Officers, BijfiOr
    as the second defendant. The summons in the said suit issued lo lhe
    Siate of U.P. were setved on the District Government Counsel. On
C1 2nd September, 1966 the said counsel filed an appearance slip in the
    court and also put in a formal application praying for one month's time
    for the purpose of filing written statement. That prayer was granted.
    Ort 1st October,. J966 the District Government Counsel filed art appli-
    cation under Section 34 of lhe Act pleading that there was an atbitra~
    tioii dause in tile agreement between the partles to the suit and the
l1i State of U .P. being wiilirig lo refer the tnatter to arbitration the suit
                                                l)




           R.G. BIJAIPUR v. GURUSIDDAPPA {MUKHA!ill, J.{               889

should be stayed. The trial court held that the dispute was subject to
                                                                              A
arbitration clause and since the State of U.P. had not taken any steps
in the suit proceedings and had also not filed the written statement the
suit was liable to be stayed. On appeal the High Court held that the
action of the District Government Counsel in applying for time to file
the written statement amounted to taking a step in the proceedings
within the meaning of section 34 of the Act. On this view, the                B
defendant was held disentitled to claim the stay of the suit. By special
leave, the defendant applied to this Court. This Court dismissed the
appeal and observed at page 37 of the report as follows:

            "The District Government Counsel in the present case was
            thus fully empowered to appear and act for and on behalf
            of the Government and also to make applications on its            c
            behalf. If the said counsel wanted time for the purpose of
            having fuller instructions, he could have asked for it specifi-
            cally, for he was not a layman ignorant about the legal posi-
            tion but a professional lawyer retained by the Government
            for the purpose of acting and pleading on behalf of the           D
            Government as a recognised agent. He, however, chose
            instead to ask for time specifically for filing written state-
            ment and this act he purported to do on behalf of the State
            Government which he was fully empowered to do. The
            State took benefit of his appearance and his successful
            prayer for adjournment of the case by one month for the           E
            purpose of filing the written statement. In those circum-
            stances, it is hardly open to the State Government to plead
            that the District Government Counsel was not authorised
            to seek adjournment on its behalf for this purpose. An
            oblique suggestion thrown on behalf of the appellant that
            the District Government Counsel had merely volunteered            F
            to appear without instructions, presumably taking the cue
            from the decision of the Punjab High Court in the case of
            Moji Ram, is merely to be stated to be rejected. A reco-
            gnised agent like the District Government Counsel can
            scarcely be considered to appear volutarily in a case on
            behalf of the Government in the sense of being un-                G'
            authorised by his client for the simple teasoh that he is
            authorised by virtue of statute to appear, act and make
            applications on behalf of the Government. Indeed in the
            present case the District Government Counsel also filed in
            court the usual appearance slip. If he wanted time for
            further consultatioins, he could and should have specifi.         H
    890         SUPREME COURT REPORTS               [1988) Supp. 3 S.C.R.

                cally made a prayer to that effect. It is, however, idle to
A               contend that he can be considered to have merely volun-
                teered without authority to appear and ask for time for
                filing the written statement. The argument of appearance
                by a recognised agent as a mere volunteer is extremely
                difficult to appreciate. The State, as already observed, took
B               the benefit of the adjournment. It will be somewhat irra"
                tional and perhaps incongruous to permit the State, after
                having taken the benefit of this adjournment, to plead that
                the application for adjournment was not made on instruc-
                tions and was unauthorised. To accede to the State
                Government the right to do so would clearly be unjust to
                the opposite party which could have rightfully objected to
c               the adjournment, ·had there been any indication that the
                prayer was not being made on instructions from the State
                Government. September 2, 1966 was fixed in the summons
                for filing written statement. Failure to do so would have
                entailed consequences prejudicial to the State Govern-
D               ment. Those consequences were avoided by making an
                application for extension of time for filing written state-
                ment which must have been understood by the opposite
                party, as also by the court, to be on instructions by the
                State Government."

E         It may be noted that thereafter in U.P. there was amendment
    which added an explanation which provided that a mere application
    for time to file a written statement or a mere contest to an interlo-
    cutory application for injuction, would not amount to taking any steps
    in the proceedings.

F         In the aforesaid view of the matter, without the aid of Explana-
    tion 2 added to the U.P. Act, we have to proceed to find out the
    conditions required to be fulfilled in order to be entitled to stay under
    section 34 of the Act. As mentioned hereinbefore, it is imperative to
    find out whether "any other steps in the proceedings" have been taken
    before making an application for stay of the suit in this case. In our
G   opinion, proceedin.,g without being embroiled in the facts and the
    circumstances of the case with the controversy whether the said exprns-
    sion should be construed ejusdem generis, it is necessary to determine
    whether the party had evinced or indicated any intention to proceed
    unequivocally with the suit and not to proceed with the arbitration.
    This position was examined by this Court in Food Corpn. of India &
H   Anr. v. Yadav Engineer & Contractor, I 1983) I SCR 95, where this
            R.G. BIJAPUR v. GURUSI]?DAPPA (MUKHARJI, J,]               891


Court referred to the decision of Uttar Pradesh v. Janki Saran Kai/ash
                                                                              A
Chandra, .(supra), andafter setting out the provisions of section 34 of
the Arbitration Act, this Court observed that apart from written state·
ment "some other step" mentioned in the Section, must indisputably
be such step as would manifestly display an unequivocal intention to
proceed with the suit and to give up the right to have the matter
disposed of by arbitration.                                     ·             B

      Each court must find out from the context of each case whether
this has happened or not. The Court further observed therein that "a
step taken in the suit which would disentitle the party from obtaining
stay of proceeding must be such step as would display an unequivocal
intention to proceed with the suit and to abandon the benefit of the
arbitration agreement or the right to get the dispute resolved by
                                                                              c
arbitration".

      In our opinion, that is a correct position in law as declared by this
Court, and it is in consonance with the principles that have been fol·
lowed under section 4 of the English Arbitration Act, 1889. At page           l>
 106 of the said report this Court observed that the "general words"
taking any other steps in the proceedigs' just follow the specific expres-
sion 'filing a written statement' and both are used for achieving the
same purpose". Hence, this Court was of the opinion that the latter
expression must be construed ejusdem generis with the specific expres-
sion just preceding to bring out the ambit of the latter. The expression      E
'written statement' is a term of specific connotation ordinarily signify-
ing a reply to the plaint filed by the plaintiff. The expression 'taking
any other steps in the proceeding' does not mean that everycStep in the
proceedings would come in the way of enforcement of the arbitration
agreement. The step must be such as would clearly and unambiguously
manifest the intention to waive the benefit of arbitration agreement.         F

       From the Order-sheet in this case and as noted by the learned
Trial Judge, it appears that the counsel appearing ror the petitioner
has sought adjournment "specifically for filing written statement" and
obtained time for more than one occasions for such purpose. It was not
only the time taken to consider whether written statement should be           G
filed as a defence to the plaint to enter into an arena of controversy,
but it was time taken to have the matter decided by the suit.

      The party evinced an intention to have the matter adjudicated by
the Court. If that is the position, then in our opinion, in view of the
principle enunciated hereinbefore, the party has disentitled itself to        H
    892         SUPREME COURT REPORTS                [1988] Supp. 3 S.C.R.

A ask for stay of the said suit. The High Court was, therefore, right in
  affirming the order of the learned Trial Judge. Apart from the same,
  from the conduct of the petitioner and the narration of the events
  mentioned hereilibefore, it does not appear that the petitioner was
  ever keen to have the matter adjudicated by arbitration. If that is the
B position then the petitioner cannot have any grievance.

         In that view of the matter this application under Article 136 of
    the Constitution must fail and is accordingly dismissed.

          On the prayer of the counsel for the.petitioner, we direct that the
    petitioner would have eight weeks' time from today for filing the writ-
e   ten Statement tO the plaint. I              _



    N.V..K ..                                            Petition dismissed.