Supreme Court of India
SADHU SINGH GHUMANversusFOOD CORPORATION OF INDIA & ORS.
- Citation
- 1990 INSC 37
- Decided
- 14 February 1990
- Disposal
- Appeal(s) allowed
- Bench
- K JAGANNATHA SHETTY
Holding
A "step in the proceeding" under Section 34 must be a conscious act abandoning the right to arbitration and advancing the suit on its merits; a mere request for documents does not satisfy this requirement.
Summary
Food Corporation of India sued Sadhu Singh and others for recovery of Rs.2 lakh based on a contract that contained an arbitration clause. The defendants appeared, sought production of the original agreement to enable filing of a written statement, and then invoked Section 34 of the Arbitration Act, 1940 for a stay of the suit. The trial court stayed the suit, holding that the defendants had not taken a step that abandoned their right to arbitration. The appellate and high courts reversed the stay, deeming the request for document production and adjournment as a "step in the proceeding" that barred the stay. The Supreme Court held that a step must be a conscious act abandoning the arbitration right and furthering the suit on its merits; merely seeking documents does not qualify. Consequently, the Supreme Court allowed the appeal, set aside the high court order and restored the trial court's stay. No costs were awarded.
Issues considered
- What constitutes a "step in the proceeding" under Section 34 of the Arbitration Act, 1940 that disqualifies a party from invoking a stay of suit?
- Whether the defendants' request for production of documents and adjournment amounted to such a step?
Legislation cited
Subjects
ArbitrationSection 34step in proceedingstay of suitarbitration clausecivil procedure
Judgment
SADHU SINGH GRUMAN A
v•
.-.i, FOOD CORPORATION OF INDIA & ORS.
FEBRUARY 14, 1990
[K. JAGANNATHA SHETIY AND R.M. SAHA!, JJ.] I:!
) Arbitration Act, 1940: Section 34-"A step in the proceeding"-
What is-Interpretation thereof.
In a suit filed by tbe Respondent for recovery of a certain amount
from the appellants and others, on the basis of an agreement between
the parties, appellant entered appearance and prayed for the produc-
c
tion of original documents, since photostat copies were not clear, so
that written statement may be filed.
Thereafter the appellant moved the Court under Section 34 of the
Arbitration Act, 1940 for stay of the suit on the ground that there was D
an arbitration clause in the suit agreement covering the matter in dis-
pute. Though the Respondent Cm,·poration admitted the existence of
such a clause, it opposed the prayer for stay of the proceedings on the
plea that the appellant had taken steps in the proceedings of the suit, in
J,l, that an adjournment was taken for filing written statement. Staying the
proceedings, the trial court observed that there was no prayer for E
adjournment of the case for filing the written statement.
On appeal by the Respondent-Corporation, the First Appellate
Court vacated the stay order passed by the trial court. The Revision
petition filed by the appellant was dismissed by the High Court.
F
This appeal, by special leave, is against the High Court's order.
""
Allowing the appeal, this Court,
HELD: 1.1 The expression "a step in the proceeding" which
would disentitle the defendant from invoking section 34 of the Arbitra- G
tion Act is not every step taken by him In the suit. It should be a step to
abandon the right to have the suit stayed. It should be a step in aid of
I( the progress of the suit. The step must have been consciously taken with
a view to submit to the jurisdiction of the Court for the purpose of
adjudicating the controversy on merits. [356C-D]
~
353
354 SUPREME COURT REPORTS (1990] l S.C.R.
1.2 Before the trial court, the defendants only sought a direction
A
to the plaintiff to produce the original agreement and other documents
so that they may file written statement. It was not stated that they
wonld file the written statement. They never took any other step sub-
mitting to the jurisdiction of the court to decide the case on merits. The
right to have the dispute settled by arbitration has been conferred by
B agreement of parties and that right should not be deprived of by techni-
cal pleas. The Court must go into the circumstances and intention of the
party in the step taken. The conrt must examine whether the party has
abandoned his right under the agreement. In the light of these princi-
ples and looking to the substance of the application dated January 4,
1985, one cannot form an opinion that the defendants have abandoned
their right to have the suit stayed and took a step in the suit to file the
c written statement. (357B-D]
State of UP. v. Janki Saran Kai/ash Chandra, [1974] 1 SCR 31;
Food Corporation of India v. Yadav Engineer, [1983] 1 SCR 95 and
General Electric Co. v. Renusagar Power Co., [1987] 4 SCC 137, relied
D on.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1201
of 1990
From the Judgment and Order dated 5.6.87 of the Punjab and
E Haryana High Court in C.R. No. 556/87.
Mukul Mudgal for the Appellant.
S.S. Javali, Y.P. Rao and Raju Ramachandran for the
Respondents.
F
The Judgment of the Court was delivered by
K. JAGANNATHA SHETTY, J. Special leave granted.
Food Corporation of India filed a suit for recovery of Rs.2 lacs
G against the appellant and respondents 2 to 7 on the basis of an agree-
ment between the parties. After service of notice, the appellant
entered appearance on December 10, 1984. On January 4, 1985, the
appellant filed an application stating as follows: )I
"'fhat the photostat copy of the original agreement and
H other documents which have been produced by the plaintiff
SADHU SINGH v. F.C.I. IJAGANNATHA SHETTY, J.] 355
I
in their evidence are not visible and clear, and it is very
A
difficult for the defendants to inspect and give the written
statement.
3. That it is very essential to get the original documents
produced in the court which are in possession of the
plaintiff so that the defendants may file the written B
statement.
4. It is, therefore, respectfully prayed that the plaintiff
may kindly be ordered to produce the original agreement
and other documents which has been filed with the plaint."
On January 21, 1985, the appellant moved the Court under Sec- C
tion 34 of the Arbitration Act for stay of the proceeding of the suit on
the ground that there exists an arbitration clause in the suit agreement
covering the matter in dispute. The Food Corporation of India con-
tended that the appellant had taken steps in the proceedings of the suit
since an adjournment was taken for filing written statement. It was [)
however, admitted the existence of the arbittation agreement covering
the matter in dispute in the suit. The Trial Court accepted the request
of the appellant and stayed the suit inter-alia observing:
" . . . . . This application did 9ot contain any prayer for
adjournment of the case for filing the written statement. E
The prayer contained in this application was that the
plaintiff be directed to produce the original agreement and
other documents so that the defendants may file the written
statement .....
. . . . . In the present case, the prayer of the defendants that F
\
the plaintiff be directed to file Jhe original agreement and
other documents in the court before they could file the' writ-
ten statement cannot be said to be a step in the proceedings
because it was not a prayer for adj,oumment of the case for
filing writte~tatement."
G
But the Additional District Judge, in the appeal preferred by the
Food Corporation of India has reversed the order of the trial court. He
( was of the view that a written request made by the defendants by their
application dated January 4, 1985 for an adjournment to enable them
to file the written statement was a step in the proceedings and the trial
·court was not justified in staying the suit. Accordingly, he accepted the H
356 SUPREME COURT REPORTS [1990) I S.C.R.
appeal and vacated the stay order and directed the trial court to proceed
A
with the suit in accordance with law.
The High Court of Punjab and Haryana has dismissed the revi-
sion petition of the appellant. The High Court has also observed that
the defendants having moved the application dated January 4, 1985 for
B production of original documents and seeking an adjournment of the
suit to enable them to file written statement would certainly be con-
strued as··a step taken in the proceedings.
Section 34 of the Arbitration Act has received the consideration
of this Court in State of Uttar Pradesh v. Janki Saran Kai/ash Chandra,
[ 1974] I SCR 31, (ii) Food Corporation of India v. Yadav Engineer,
c I 1983] 1 SCR 95 and more recently in General Electric Co. v.
Renusagar Power Co., [ 1987) 4 SCC 137. It may be noted that the
expression "a step in the proceeding" which would disentitle the
defendant from invoking section 34 of the Arbitration Act is not every
step taken by him in the suit. It should be a step to abandon the right to
D have the suit stayed. It should be a step in aid of the progress of the
suit. The step must have been consciously taken with a view to submit
to the jurisdiction of the Court for the purpose of adjudicating the
controversy on the merits. In General Electric Co. 's case this Court
after considering the previous decisions observed (at 155-56):
E " ..... thus a step in the proceeding which would disentitle
the defendant from invoking Section 34 of the Arbitration
Act should be a step in aid of the progress of the suit or
submission to the jurisdiction of the court for the purpose
of adjudication of the merits of the controversy in the suit.
The step must be such as to manifest the intention of the
F party unequivocally to abandon the right under the arbitra-
tion agreement and instead to opt to have the dispute resol-
ved on merits in the suit. The step must be such as to
indicate an election or affirmation in favour of the suit in
the place of the arbitration. The election or affirmation
may be by express choice or by necessary implication by
G acquiescence. The broad and general right of a person to
seek redressal of his grievances in a court of law is subject
•
to the right of the parties to have the disputes settled by a
' forum of mutual choice. Neither right is insubstantial nor
the right can be allowed to be defeated. by any manner
of technicality. The right to have the dispute adjudicated
H by a civil court cannot be allowed to be defeated by vague
SADHU SINGH v. F.C.I. (JAGANNATHA SHEITY, J.] 357
or amorphouse mis-called agreements to refer to 'arbitra- A
tion'. On the other hand, if the agreement to refer to arbit-
ration is established, the right to have the dispute settled by
arbitration cannot be allowed to be defeated on technical
grounds."
In the application filed by the defendants in this case, they only B
sought a direction to the plaintiff to produce the original agreement
l and other documents so that they may file written statement. It was
/ · not stated that they would file the written statement. They never took
any other step submitting to the jurisdiction of the court to decide the
case on merits. The right to have the dispute settled by arbitration has
been conferred by agreement of parties and that right should not be C
deprived of by technical pleas. The Court must go into the circumst-
ances and intention of the party in the step taken. The Court must
examine whether the party has abandoned· his right under the agree-
ment. In the light of these principles and looking to the substance of
~J the application dated January 4, 1985, we cannot form an opinion that D
the defendants have abandoned their right to have the suit stayed and
took a step in the suit to file the written statement.
In the result the appeal is allowed in setting aside the order of the
High Court and·restoring the order of the trial Court.
In the circumstances of the case, we make no order as to costs. E
G.N. Appeal allowed.
1
I
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