# FOOD CORPORATION OF INDIA & ANR v. YADAV ENGINEER & CONTRACTOR

- **Citation:** [1983] 1 S.C.R. 95
- **Court:** Supreme Court of India
- **Decided:** 1983
- **Case number:** Civil Appeal No. 3317 B of 1981
- **Bench:** D.A. Desai, A.P. Sen, Baharul Islam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/food-corporation-of-india-anr-v-yadav-engineer-contractor-8805
- **Pages:** 27

## Headnote

Arbitration Act 1940-Sectlon 34-scope o/-
1"f(lking any pther steps ~n
the proceedings" meaniiJg of-notice of motion taken o~_t by plaintiff for interim
injunction-Defendant appeared and prayed for time to reply-Defendant's actio~
whether "step taken in the proceedings''.
'
Practice : atlention of single Judge drawn to a binding decision of Division
Bench of the same High Court-Decision not adverted to--Decision contrary to that
of Division' Bench-Propriety of.
Section 34 of the Arbitration Act 1940 provides that where_ one oft he
parties to an arbitration agreement commences any legal proceedings against the
other party in respect of any matter agreed to be referred to arbitration, any
party to such legal proceedings may at any t.ime
befor~ tbe filing of a. Written
statement or taking any other step~ in the pro<;eedi"'gs apply to· tbe judicial
authority before whicb the proceedings are pending to st_ay the proceedings and
the authority on being satisfied that the opposite party is ready ~nd willillg to do
ajl things necessary to the proper conduct of the arbitration make an order stay·
ing the proceedings.
The contract entered into by the respondent with the appellant Corpora.
tion for handling and transportation of the Corporation's goods contained an
arbitration clause authorising the Managing Director of th¥ Corporation to
appoint an arbitrator in iespect of any dispute
~,rising ou~ 9f tbe
CQntr{l.~t
,.-between the parties.
·
Apprehending.breach of contract, the ·respondent filed a suit for a de<"·
laration that the contract was subsisting on. the date of the suit. The respondent
'prayed- for an ad interim injunction against the Corporation restraining it from
committing breach of the contract. On the notice being issued the District
Manager of the Corporation appeared before tbe Court and sought time to file
reply to the application fQr interim ilijunction. On the next day an application was
filed on behalf of tbe corporation that it was fully ready and· willing to have the
dispute resolved by arbitration under the subsisting arbitration agr~ement and
prayed that the suit be stared as provided in'1 section J4 of the Arbilration A<;:t
JM~
.
A
B
c
D
E
F
G
H
I
A
B·
c
!)
EF
96
SUPREME COURT REPORTS
(1983) J S.C.R.
The respondent alleged that section 34 was inapplicable in ·that when the
District Manager sought time to file a reply to the notice for interim injunction
it was a "step taken in the proceedings" within the meaning of section 34.
'
. _Negativing the respondent's plea the Trial Court ,held that . the dispute ·
was covered by the arbitration clause~ It granted stay of further proceedings
in the suit and this view was upheld by tlte District Judge in the respondent's
appeal.
In the revision petition filed in the "High Court a single Judge although
his attention was drawn to a 'binding precedent of a Division Bench of the same
High Court supporting the view that an application for filing a reply to the
notice,of motion taken out by the plaintiff for interim injunction was n9t a ''step
taken in the proceedings", without adverting to that decision, held that an
application of this· nature was a "step taken in the proceedings''' and that this
'disentitled'the Corporation from invoking the arbitration agreement.
On the question whether, where there is a subsisting valid arbitration
agreement between the parties, entering an appearance and contesting a petition
or notice of motion for interlocutory, order constitutes a "step in tife proc~ed~
ings" as would disentitle· the party to an order under seCtion 34 of the Arbitra·
tion Abt.
Allowing the appeal,
'
. HELD: Contesting the application for interim injunction or for appoint·
mi:nt of a receiver or for interim relief by itself, without anything more, would
not constitute a "step in the proceedings" as would diSentitle the party to an
order under section 34 of the Arbitration Act. (119 F]
I. (a) Section 34 envisages that before a party to the arbitration agree·
meat seeks

## Text

_Characters 0–39,936 of 67,683. This is a partial read: ask again with offset=39936 for what follows._

'
··~
j•
95
FOOD CORPORATION OF INDIA & ANR.
v.
YADAV ENGINEER & CONTRACTOR
(l~gust 6, 1982
[D.A. DESAI, A.P. SEN AND BAHARUL ISLAM, JJ.]
Arbitration Act 1940-Sectlon 34-scope o/-
1"f(lking any pther steps ~n
the proceedings" meaniiJg of-notice of motion taken o~_t by plaintiff for interim
injunction-Defendant appeared and prayed for time to reply-Defendant's actio~
whether "step taken in the proceedings''.
'
Practice : atlention of single Judge drawn to a binding decision of Division
Bench of the same High Court-Decision not adverted to--Decision contrary to that
of Division' Bench-Propriety of.
Section 34 of the Arbitration Act 1940 provides that where_ one oft he
parties to an arbitration agreement commences any legal proceedings against the
other party in respect of any matter agreed to be referred to arbitration, any
party to such legal proceedings may at any t.ime
befor~ tbe filing of a. Written
statement or taking any other step~ in the pro<;eedi"'gs apply to· tbe judicial
authority before whicb the proceedings are pending to st_ay the proceedings and
the authority on being satisfied that the opposite party is ready ~nd willillg to do
ajl things necessary to the proper conduct of the arbitration make an order stay·
ing the proceedings.
The contract entered into by the respondent with the appellant Corpora.
tion for handling and transportation of the Corporation's goods contained an
arbitration clause authorising the Managing Director of th¥ Corporation to
appoint an arbitrator in iespect of any dispute
~,rising ou~ 9f tbe
CQntr{l.~t
,.-between the parties.
·
Apprehending.breach of contract, the ·respondent filed a suit for a de<"·
laration that the contract was subsisting on. the date of the suit. The respondent
'prayed- for an ad interim injunction against the Corporation restraining it from
committing breach of the contract. On the notice being issued the District
Manager of the Corporation appeared before tbe Court and sought time to file
reply to the application fQr interim ilijunction. On the next day an application was
filed on behalf of tbe corporation that it was fully ready and· willing to have the
dispute resolved by arbitration under the subsisting arbitration agr~ement and
prayed that the suit be stared as provided in'1 section J4 of the Arbilration A<;:t
JM~
.
A
B
c
D
E
F
G
H
I
A
B·
c
!)
EF
96
SUPREME COURT REPORTS
(1983) J S.C.R.
The respondent alleged that section 34 was inapplicable in ·that when the
District Manager sought time to file a reply to the notice for interim injunction
it was a "step taken in the proceedings" within the meaning of section 34.
'
. _Negativing the respondent's plea the Trial Court ,held that . the dispute ·
was covered by the arbitration clause~ It granted stay of further proceedings
in the suit and this view was upheld by tlte District Judge in the respondent's
appeal.
In the revision petition filed in the "High Court a single Judge although
his attention was drawn to a 'binding precedent of a Division Bench of the same
High Court supporting the view that an application for filing a reply to the
notice,of motion taken out by the plaintiff for interim injunction was n9t a ''step
taken in the proceedings", without adverting to that decision, held that an
application of this· nature was a "step taken in the proceedings''' and that this
'disentitled'the Corporation from invoking the arbitration agreement.
On the question whether, where there is a subsisting valid arbitration
agreement between the parties, entering an appearance and contesting a petition
or notice of motion for interlocutory, order constitutes a "step in tife proc~ed~
ings" as would disentitle· the party to an order under seCtion 34 of the Arbitra·
tion Abt.
Allowing the appeal,
'
. HELD: Contesting the application for interim injunction or for appoint·
mi:nt of a receiver or for interim relief by itself, without anything more, would
not constitute a "step in the proceedings" as would diSentitle the party to an
order under section 34 of the Arbitration Act. (119 F]
I. (a) Section 34 envisages that before a party to the arbitration agree·
meat seeks stay of the suit filed' by the opposite party it must disclose its
unequivocal intention to abide by the arbitration agreement; but once the party
takes steps which may indicate its intention to waive the benefit of the arbitra·
tion agreement or abandons the right to claim the benefit by conduct, such party
would not be entitled to enforce the agreement because there is a breach of the
agreement by both parties di$entitJing them to claim any benefit of the arbitration agreement. (105 DJ
flamji Dayawa/a & Sons (P) Ltd. v. Invest lmpori [1981] l S C.R. 899.
G
followed.
H
(b) The general words "taking any other steps in the proceedings"
follow the specific expression ·'filing a written statemeLt" and both are used for
achieving the same purpose. Therefore the latteT general expression must be
constr,ued e;usdem generis with the specific expression just preceding to bring out
the alnbit of the latter. The expression "written statement" is a term of specific
connotation ordinarily signifying a reply to the plaint fi]ed by the plaintiff.
[106 Ej
'
•
•
_\
i
'·.·
\
FOOD CORPORATION V. YADA V ENGINEER
97
(c) The expression ;,taking a~y other steps in the proceedings" does not
mean that every step taken in the Proceedings would-come "in the way of enforce~
ment of the arbitration ·agreement; the step must be such as ·would clearly and
unambiguously manifest .the intention to waive (he benefit of arbitration agree~
ffient and to acquiesce ill the proceedings commenced again.st the party' and-to
· get the dispute resolved by the court. Inter!ocutory proceedings are incidental
to the main proceedings and stand 'independe~t and alobf of the main dispute.
.When these interiocutory proceedings are. contested it cannot be said that the
party contesting them had displayed an unequivocal intention to waive thC.--.benefit of the arbitration agreement or that it had submitted to the jurisdiction of
the court. [109 E-H]
Uitar Pradesh 'v. Ja~ki Saran Kai/ash Chandra (1974] 1 S.C.R. 31 .• referred
to.
I
' Sansar Chand Deshraj v. State of Madhya Pradesh AIR 1961 MP 322;
Nuruddin Abdulhusseih v. Abu Ahmed Abdul la/Ii, AIR 1950 Born. 127; Ana.ndkumar
Parmanand Kejrjwala & Anr. v. Kamaladevj Hirai a/ Kejrjwal, AIR 1970 Born.
231; Quee~s College Kanetra & Anr. v. The Co/fe~tor, Varanasi & 'ors., AIR 1974
All. 134; Biswanath Rungta v. Orjental Industrja/ Engjneerjng Co, Pvt. Ltd. & Ors.,
AIR 1975 Cal. 222; State of Gujarat & Ors.v. The Ghanshyam Salt Works AIR
1979 Guj. 215; Arjun Agarwal/av. Baidya Nath Roy.& Ors. AIR 1980. Cal. 354;
and M/s. Bhonrila/ Hirala/ & Ors. v. Prdbhu Dayal & A.nr., AIR 1980 Raj .. 97
approved.
'
Suha/ Chandra Bhur v. Md. Ibrahim & Anr., AIR 1943 Cal. 484; AmritraJ. Kothari v. Go/cha Financiers, ,AIR rJ966 Cal. 315; P. GannU Rao v. P. Thiagaraja Rao & Anr., AIR 1949 Madras 582 and Ku·nra Malla Reddy v. Soma Srinivas
.Reddy & Ors., AIR 1978 A.P. 289, not approved •.
In the_ instant case the District Manager of the Corporation only uppeared
before the court in Obedience to the notice on the notice of motion taken out for
ex parte ad interim injunction and Prayed for time to reply. '(he proceedings of
the court did not disclose· any step having been taken by the Corponilion~in the
'proceedings aS would. disentirle the· co·rpora'tion to an order under section 34.
Moreover, the application for stay filed on behalf Of the Corporati_on clearly
stated tha~ the "defendant is ready and Willing 'ichuck' foi- this purpose" which
ineans that it was' ready and willing to 'prOceed with the arbitration when
oommencetl. [119 HJ
,
.
2. If a single Judge hearing a matter is inclined to take a view contrary
to the earlier decision of a Division :(tench of the .same High Court it would be
judicial improoriety to ignore that decision but after referring to the binding
decision he may direct that the papers __ be placed before the Chief Justice of the
High Court to enable him to constitute a larger. division bench to examine the
question. Judicial comity demands that a binding decision to which attention
had been drawn should neither b~ ignored nor over~Iooked, [112·G-H]
.
~
.
.
'
.
'
A
B
c
0
E
F
G
H
.•
98
SUPREME COURT REPORTS
(1983] I S.C.R.
In the instant case although attention of the single Judge was drawn to
the binding decision of a Division Bench of the same High Court be did not
_ refer to it but relied upon ihe decision of another High Court which took the
contrary view.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 3317
B
of 1981.
c
D
E'
F
G
H
Appeal by Special leave from the judgment and order dated
the 20th November. 1981 of the Madhya Pradesh High Court" in
Civil Revision No. 696 of 1981.
K.K. Venugopa/ and S.K. GamiJ.hir for the Appellant.
Soli J. Sorabjee, D.K. Katare and S.S. Khanduja for the
Respondent.
The Judgment of the Court was delivered by
DESAI, J. A fond hope that a decision of this Court with the
sanctfon of Article 141 of the Constitution that the law laid down
therein will be the law of the land would put an end to a raging
controversy amongst various High Courts stands to some extent
rudely shaken when the controversy with a slight variation bas again
been placed in the lap of this Court.
· ·
For highlighting and then resolving the controversy facts in
dispute have a liltle or no relevance save and except mentioning
certain events.
Respondent Yadav Engineer & Contractor, a partnership firm fil~d a suit against Food-Corporation of India, !st
defendant and Shyam Narain Nigam, District Manager of !st
defendant as 2nd defendant, for a declaration that .the contract
between the 'jllaintiff and the l st defendant for handling and transportation of the goods of the l st defendant Corporation was subsisting on 'the date of the suit an.d restraining the defendant from
committing breach of the same by handing over that work to some
one otherthan the plaintiff. The suit was instituted on June I,
1981, in the Court of the III Civil Judge, Class I, Gwalior. In
the suit a notice of motion was taken out purporting to be under
Order XXXIX, rulefl and 2 read withs. 151 of the Code of Civil
Procedure, for an interim injunction restraining the defendants frow
commit'ting a breach of contract and from interfering with ·the work
\>f handlin~ and transport of goods of the !st defendant Corpora-
!
.... \
FOOD CORPORATION v. YADAV E~OINEER (Desai, J.)
99
tion by the plaintiff during the pendency of the suit. On the notice
. of motion being taken out the Court directed notice of the same to
be served and the· same was made returnable on the .next day,
June 2, 1981. On the returnable date the 2nd defendant, District
Manager of the !st defendant Corporation who had .office in the
City of Gwalior was served and .. he appeared through one Shri N.K.
Modi, Advocate, filed the letter of authority (Vakalat) in favour of
the learned advocate on behalf of 2nd. defendant and the l~arned
advocate prayed for time for 'reply and arguments to the plaintiff's
application for temporary injunction'. The court acced~d to the
request and posted the matter on June 3, 1981. An endorsement
appears in the record that the I st defendant Food Corporation of
India was not served though the , endorsement reads 'absent'.
However, the last line in the proceeding makes it clear that the case
was posted on June 3, 1981' 'for reply argumennts and awaiting
service
on June 3, 1981'. When- the matter came up on the
·next day, i.e. June 3, 1981, an application was moved on· behalf· of
.
'
!st defendant inviting the attention of the Court to ·the subsisting
11rbitration· agreement between the ·plaintiff and the !st defendant
and which agreement authorised the Managing Director of the !st
defendant to appoint an arbritrator in respect of any dispute
arising out of the contract between the plaintiff and the lst defendant. It was-also stated that the !st defendant desires to have the
dispute, if any, resolved by arbitration under the subsisting arbitration agr,eement and that the defendant is fully ready and willing
(ichhuk) to go to arbitration. · The application concluded with a pra_y_er th.at under the circumstances the suit may be stayed as provided
in s. 34 of the Arbitration Act, 1940 ('Act' for short);
The learned trial Judge was of the view that the dispute between the parties is covered by the arbitration agreement set out in
Article 19 of the contract between the plaintiff and the !st defendant.
The learned Judge negativeq the contention that.an application ·made
by the 2nd defendant for filing reply to the notice of motion taken
out by the plaintiff for interim injunction is a step take11 in the
proceedings in view of the binding decision of a Division Bench of
~ .. -·•.
the Madhya Pradesh High Court in Sansar Chand Deshra}v. State
of Madhya ,Pradesh.(') The learned judge accordingly
~ranteq stay
(1) A.I.R. 1961 MP 322.
A
B
D
E
F
G
I
A
B
/
c
D
F
G
H
'
100
SUPREME COURT REPORTS
(1983] I S.C.R.
of further proceedings in the suit as prayed for on behalf .of the
!st defendant. Plaintiff preferred an. app~al in the Court of the
'· "'
District Judge, Gwalior. The learned ITI Additional District Judge,
before whom the appeal came up for hearing, agreed with the view
taken by the learned trial judge and confirmed the order. granting
stay of further proceedings in the suit and dismissed the appeal..·
Undaunted even by this second rejection plaintiff approached the High
Court in revision under s·. 115 of the Code of Civil Procedure. The
learned judge, though his attention was drawn to the binding decision of the Division Bench of the same High Court, did not refer to
it in the judgment and relied upon a decision of ihe Adhara Pradesh
High Court in Bajaj International v. Indian Tobacco Suppliers(')
11nd held that an application for filing reply to a notice of motion
for interim injunction is a step taken in the proceeding, which would
disentitle the party from invoking the arbitration agreement. In
support of this conclusion the learned judge also .relied upon Abdul
Qudoos v. Abdul Gani,(2) which decision clearly does not support
any such proposition. The learned judge further observed that even
if the view that the application filed by the 2nd defendant praying
for time to reply to the notice of motion for interim injunctioμ may
not be treated as a step in the proceeding, yet the 1st . defendant
would not be entitled to a discretionary order under s. 34 of the Act
on the·gro1md that one of the conditions necessary for invoking the
jurisdiction of the court under s. 34 is not satisfied inasmuch as
nowhere in the application the !st defendant bas stated that the
!st defendant at the time when the proceedings were commenced
and still ·remains ready and willing to do all things ne.cessary for
the proper conduct-0f·the arbitration. For this additional reason
which was never urged on behalf of the plaintiff either in the trial
court or in the 1st appellate court and as would be presently pointed
out which is contrary to the record the High Court interfered
•
in
revision, rSet aside the order of the trial court granting
stay and confirmed by the appellate 1>ourt and rejected the application for stay of proceedings in tbe suit.
Hence this appeal by special leave.
Section 34 of the Act reads as under :
• •
\·
"34. Where any party to an arbitration
agree-
.l- •'
ment or any person claiming under him commences
(I) 'AIR 197.8 AP 8.
(2)JA.Ul.. 1954 Na~. 33Z,
•
,
..
!i9ob .CORPORATiON v. YADAV ENGi~EER (besal, J.)
101
any legal proceedings against any other party to the
agreement or any person claiming nnder him in respect of any matter agreed to be referred, any party to
, such legal proceedings 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 pending to stay the proceedings;
, and if satisfied that there is no snfficient reason why
the matter should. not be referred in f1Ccordance with
the arbitration agreement and that the. apP,licant was,
at the time when the proceedings. were commenced,
and still remains, ready and willing to do all things
necessary to the prop.er conduct of the arbitration, ·
such authority may make an order staying the proceedings."
The contours of the controversy are confined to one of the negative requirements of s. 34 to be fulfilled by a party seeking the
discretionary relief of stay of proceedings to qualify for the same.
It is not necessary . to reproduce all the relevant conditions for
attracting the application of s. 34. One of the conditions to be
·satisfied before an order under s. 34 can be obtained is that the
party to the legal proceeding has at any time before filing a written
statement or ta)<:lng any other s'teps in the proceedings applied to the
judicial authority for stay of proceedings. In other words, a party
, seeking stay of proceedings must move the court with an application
under s. 34 before filing the written statement. to the suit or before
taking any other steps in the proceedings.
Admittedly, application
in the present proceedings · was filed before fili~g the written
. statement. The q'uestiori is whether the .second pre-condition is
satisfied in that the applicati-On under s. 34 was filed before taking
any other &teps in the proceedings. What does the expression 'before
.taking any other steps in the proceedings' signify? Before ascertaining
the scope and ambit of the expression it would be worthwhile to
briefly narrate the raison d'etre for prescribing this condition.
.
'
. -Ordinarily as provided in s. 9 of ;he Code 'or Civil Procedure
all suits of a civil nature except suits· of which cognizance is either
expressly or impliedly barred would be triable by the cou~ts set up
for the purpose. If the dispute is of a civil nature the forum is one
or the other court set up for the purpose. The State courts have been
..
B
c
D
E
F .
G
H
A
B
c
D
E
F
•
G
H
\
SUPREME CoURT REPORTS
U9s3i i s.c.a.
set up fdr an easy access by persons who seek resolution of their
disputes. They must be disputes of civil nature and the cognizance
of which is not either expressly or impliedly barred. Civil courts
set up by the State having defined jurisdiction will be the forum for
resolution of such disputes.
Ordinarily, therefore, whenever a
dispute· of a civil nature arises the party Claiming relief would
approach the court having jurisdiction to resolve the dispute._ The
party against whom relief is sought will be informed of the cogni·
zance of the dispute being taken by the court and it must come forth
and either concede that the dispute is genuine in whole or in part or
• defend the action. Sometimes a dispute as to jurisdiction, territorial
Or· pecuniary, is raised hut apart from such specific exclusions
claimed by a party civil courts are set up .with the object of resolving
civil disputes. A forum thus may readily be available and presumed to
be easily accessible. This is the prescribed mode of·ac~ess to justice.
Arbitration Act carves out an exception to the general rule that the
forum for resolution of civil disputes is the civil court having jurisdiction to deal with the same by providing that the parties to a dispute
by agreement unto themselves may choose a forum of their choice
for settlement of disputes between them in preference to the State
Courts.
Undoubtedly, for making these agreements enforceable
sanction of law is necessary. · That is the object underlying the Act.
Industrial revolution bringing into existence international commer- ·
cial transactions led to a search for finding a forum outside the
municipal law courts ·involving protracted and dilatory legal
process for simple, uninhibited by intricate rules of evid.ence and
legal grammar. This explains resort to forums for arbitration at
international level.
No two contracting parties are under any legal
obligation to provide for an arbitration agreement. · If the parties
enter into an arbitration agreement implying that they would like
that the disputes covered by the agreement will be resolved by a
•
•
forum of their choice, the approach of the court must be that
parties to the contract ar; held to their bargain. If in breach or
derogation of a solemn contract a party to an arbitration agreement
approaches the court and if the other side expeditiously approaches
the court ·invoking the court's jurisdiction to stay the proceedings so
that by this negative process the court forces the parties to abide by
the bargain, ordinarily the court's approach should be and has been
to enforce agreements rather than to find loopholes therein. More
often it is found tbat solemn contracts are entered into on the
clearest understanding that any dispute arising out of the contract
\
t
}
\)
FOOi> CORPORATION v. YADAV ENGINE~R (Desai, J.J
JM
aQd covered by the contract shall be referred to arbitration. It may
be that one or the other party may not have entered into the contract
in the absence of an arbitration agreement. Therefore when in breach
of an arbitration agreement a party to. the agreement rushes to the
.
.
·court, unless a clear case to the contrary is made out the· approach
of the court sl,iould be to hold partie~ to their bargain provided
necessary condition§ for invoking s." 34 are satisfied.
Arbitration Act prescribes various methods by which an arbit·
ration agreement can.be enforced. Section 20 enables parties to an
arbitration agreement to approach the Court in the ci.rcumstances
therein mentioned for a direction that the agreement be filed in the
court and on suth agreement being filed the Court is empowered to
make an order of reference to the arbitrator. Provisions of Chapter
IV provide for arbitration in. suits. Section 34 prescribes one other
method of enforcing arbitration agreement if a party' to an arbitration agreement in breach' of it approaches the court and files a
suit in respect of a dispute
covered by the arbitratfon agreement.
.
Section 34 prescribes a method by which the other party to
the. arbitration agreement bY. satisfying the conditions·prescribed in
s. 34 can enforce the arbitration agreement by obtaining an order
·of stay of the suit. It is crystal clear that once the suit is stayed the
. party who in breach _of the arbitration agreement approaches the
court for relief will be forced to go to arbitration and thus the court
by this negative attitude of declining to proceed further with the
proceedings brought before ·it would enforce the arbitration agreement. In order, therefore, to satisfy the court that the other party
to the arbitration agreement who would be defendant in the suit is
ready and willing to abide by the arbitration agreeme.nt and ready
to take all steps necessary for the proper conduct of the arbitration, ·
it must show that it is not waiving or abandoning its right under
the arbitration agreement or submitting to the jurisdiction of the
court thereby accepting the forum selected by the plaintiff for resolution of dispute and acquie.scing in it. In order to steer clear of this
charge the provision is made in s. 34 for a:n application by the party
who is brought to the.court by the opposite party in breach of the
• arbitration agreement io apply for stay before filing the written
statement or before taking any other steps in ~he proceeding. This
A
B
c
D
E
F
G
H
A
B
c
D
E
F
G
tt·
104
slli>RBMB COURT REPOll.ts
[198j) I s.C.Il.
explains the purpose and object
in s. 34.
underlying the provision contained
/
The contention and the resultant issue in.dispute must now be
neatly framed. The primary-issue is: what action on the part of the·
defendan_t who is- sued in a court of law and-Who has a subsisting
valid arbitration agreement with the plaintiff, would_ constitute step
in the proceeding so as to disentitle him to stay of the suit which,
if granted, would enable ·him to enforce the arbitration agreement ?
Would entering an appearance and contesting petition or notice of
motion for interlocutory order constitute ·such step in the s~it or
proceedings as would disentitle the party to an order ·under s. 34 ?
The subsidiary point is, whether where in a suit filed in a court, a
prayer for an ex parte ad interim injunction is made either by an
application or by .a notice of motion or an application is made for
appointment of a receiver and either . ex parte ad interim injunction
is granted or. ex parre receiver is. appointed and the copies of the
pleadings and the order are served upon the defendant, if the
defendant appears and requests the-court either to ·vacate the injunction or discharge the receiver or modify the orders"witbout filing a
· written· statement or making an. application for filing a written statement to the plaint, could be be said to have tak_en a step in the
proceedings so as to disentitle him from obtaining stay of the
,suit ?
,
Let the precedents rest for the time being and let an attenipt
be. made to ascertain the underlying intendment in enacting the
conditibμ in s. 34 which prescribes a mode of enforcing the arbitration agreemenf to the effect that if a party to an arbitration agreement commences an action. the other party to the agreement, if)t
desires to enforce the agreement, may seek stay of the suit before
either filing written state~ent or taking "other steps in the proceeding.
Ordinarily the court would respect the sanctity of contracts: A
valid arbitration agreement between the parties obliges bot~ the
parties to the . agreement t9 ' act according to the terms of the
agreement. A valid arbitration agreement envisages resolution of·
dispute by a forum of the choice· of the parties and displaces the
state courts. Ordinarily, a party to a valid arbitration agreement
is not entitled unilaterally to commit a breach of the agreement or
ignore the agreement.
Now, if a party to an arbitration agreement
bas a· dispute to be resolved arisia·g out of the contract i.n which the
arbitration ~greement is incorporated and instead of invoking the
·'
' l
Moo CORPORATION v. YADAV ENGINEER (Desai, J.)
105
· arbitratfon agreement- by inviting the parties to. appoint the arbit.rator.
it rushes to the court.in breach of the _agreement and files a suit, the
other party is undoubtedly entitled to enforce the agreement. True,
the other party is equally entitled to waive the benefit of the arbit·
ration agreement. If the other party desires to waive' the benefit of
the agreement it can appear in the suit and contact the suit. Such
· conduct would. demonstrably, show that both the parties have waived
the b~nefit flowing from the arbitration .agreement of getting the
dispute between them resolv.ed by a forum of their choice. But if .
the first party in breaph of the agreement files a suit the other party
to the agreement . must have an option and opportunity to enforce
the arbitration agreement. Section 34 prescribes a mode. and method
of enforcing the arbitration agreement. When a party to the agree·
ment has filed a suit in breach of the -agreement and' the other party
to the agreement is dr~gged to the court, by staying .the suit at the
·instance -of the other party so dragged to the court the first party
consequently would be forced to honour the arbitration agreement ..
But before the other party to the arbitration egreement is entitled to
enforce the arbitration agreement· by stay of the silit it must disclose
·its unequivocal ihtention to abide by the agreement and, therefore,
s. 34 obliges such a party to ask for stay of the proceedings before
- such a party takes any steps which may unequivocally. indicate the
intention to waive the benefit of the arbitration agreement. Abandon-·
ment of a right. to seek resolution of dispute as' provided in the
arbitration agreement must be clearly-manifested by the-step taken by,
such party. Once such unequivocal intention is declared or abandonment of the right to -claim the benefit of the agreement becomes
manifest from the conduct, such party would then' noi'be entitled
,, to enforce the arbitration agreement because. there is thu_s a breach
of !he agreement by both the par)ies disentitling both to claim any
benefit of the arbitration agreement. ·section 3:4 provides that a
party dragged to the court as defendant ·by another P.arty who is a
party tci the arbitration agreement must ask for stay of the proceedings· before filling the written statement· or before takfog,any pther
step in the proceedings. That party must simultaneously show its
readiness and , willingness to do- all things necessary to the proper
conduct of the arbitration. The legislature by making it mandatory
on the party seeking benefit of the arbitration agreement to apply
for stay of the proceedings before filing the written statement or
before taking any other steps in the proceedings unmistakably poln·
ted out that filing of the written statement discloses such conduct on,
'
A
B
•
c
D
E
F
G
H
A
B
c
D
E
F
G
H
106
Si:JPREM~ coi:JRt REPORTS
[1983) i s.c.k.
the part of the party as would. unquestionably show that the party
has abandoned its rights under the arbitration agreement and bas
disclosed an unequivocal intention· to accept the forum of the court
for resolution of the dispute by waiving its right to get the dispute
resolved by a forum contemplated by the· arbitration agreement.
When the party files written statement to the suit it discloses its
defence, enters into a contest and invites the court to adjudicate
upon the dispute. , Once .the court is invited to adjudicate upon the
dispute there is no question of then enforcing an arbitration agree·.
· ment by forcing the parties to resort to the forum of their choice
as set out in the a.rbiJration agreement. . This flows from the well
settled principle that the court would normally bold the parties
to the bargain (see Ramaji Dayawala & Sons (P) Ltd. v. Invest
Import).(')
Apart from filing .written statement, what other step did the
legislature contemplate as 1being t.aken in the proceedings which·
would disentitle the party to the suit from obtaining stay of the
· pr~~eedings which would have the effect of enforcing the arbitration
agreement ? General words 'taking any other steps in the proceed- .
ings' just follow the specific expression 'filing a written statement'
and both are used for achieving the same purpose. Therefore, the
latter general expression must be construed' ejusdem generis' with the
specific expression just preceding to bring out the ambit of the latter
Expression 'written statement' is a term of speCific co~notation
ordinarily signifying a reply to the plaint filed by the plaintiff.
Therefore, the expression· 'written statement' in . s. 34 signifies a
Lpecific thing, namely, filing an answer on merits to the plaint filed
by the plaintiff. This specific word is followed [by general words
'taking any other steps in the proceedings'.
The principle of
·ejusdem generls. must help.-in"finding·out the import· of the general
words because· it is a well established rule in the construction of
statutes that general terms following particula(ones apply to .such
persons or things as are ejusdem genefis with these comprehended
in
the language of
the legislature.
In
Ashbury
Railway ·
Carriage
& Iran Co. v. Riche,(') the question of construction
of the object of a Company : 'to cllrry on business of mechanical
engineers and general contractors', came in for consideration and
o> [19811 1 s.c.R: 89!f.
(2) (1875) L.R. 7 H.L. 653.
.·~
.J
}
' J
. ..1.
~'
•
4'
FOOD.CORPORATION v. YADAV ENGINEER (Desai, J.)
101 ·
it was said that the generality of the expression 'general contractors'
was limited to the previous words 'mechanical engineers' on the
principle ~f ejusdem generis.
Filing of the written statement would
disentitle the party from seeking enforcement of arbitration agreement by obtaining stay of proceedings because it is such an
~ct/on
behalf of the party entitled to enforce the. arbitration agreement .
which would disclose unequivocal intention of the party to give· up
the benefit of the arbitration .agreement and accept the method in
preference to the one set out in the arbitration agreement to the one
~·
· adopted by the other party by filing the suit and get the dispute
adjudicated upon· by the machinery of the court. If this is the
underlying intendment in providing that application for stay of the
proceedings must be filed before the filing of the written statement, ·
the same conclusion must follow when instead of filing the written
statement the party has taken some other step in the proceedings.·
That some other step must indisputably be such step as would
manifestly display an unequivocal intention to proceed with the
• suit and to give up the right to h,ave the. matter dtsposed of by
arbitration. Each an.d every step taken in the proceedings cannot
come in the way of the party seeking to enforce the arbitration
agreement by obtaining stay of proceedings but
th~ step. taken by
the party must be such, step as would clearly and unmistakebly
indicate an intention on the P.art of such party to give up -the
benefit of arbitration agreement and to acquiesce in the proceedings
commenced against the party and to get the dispute resolved by the
court. · A step taken in the suit wh~ch 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 arbitration;.
If the step in the proceedings contemplated by s. 34 must be
such step as would clearly, unambiguously and unequivocally disclose
the intention of the party taking the step to give up the benefit of the
arbitration agreement or its right of getting the dispute resolved by
arbitration and to acquiesce in the methodoiogy of resoluution of
dispute by court, would an· appearence' in the suit for contesting
interlocutory applications such as application for appointment of
receiver or ex parte ad interim injunction, mandatory or· prohibitory,
and contesting the same be a step which would disclose an unequivocal intention to proceed with the suit and to give up the benefit
A
B
c
D
E
F
G
H
A
B
c
D
E
F
G
H
!OS
sui>REME COURT REPOilts
(1983) i s.C.R.
of ihe arbitration agreement? That is the controversy in the appeal
before us.
Arbitration agreement generally provides for resolution of
disputes either present or future by a forum of the choice- of the
parties. Ordinarily, arbitration agreement· finds its place in contracts, Apprehending that while preforming contract some disputes
may arise, care is taken to incorporate an arbitration agreement in
the contract itself prescribing the forum for resolution of such
disputes. To illustrate, partnership contracts incorporate arbitration agreement for resolution of disputes arising out of the contract of partnership. Building contracts these days incorporate
arbitration agreements. International · commercial transactions also
incorporate
arbitration
agreements. The
purpose
underlying
_ entering into arbitration agreement is to provide for resolution of.
disputes arising from the contract between the parties. Now, if a
party to an arbitration agreement files a suit seeking relief in respect
of disputes arising from 'the contract-the other party to the agreement can either waive tb-e benefit of the arbitration agreement and
acquiesce in the suit or enforce the arbitration agreement. Such
conduci has specifically to be ·in relation to disputes covered by
arbitration agreement. But if a party to an arbitration agreement
files a suit ~nd simultaneously moves an inteilocu\ory application
such as an application for appointment of receiver, usually to be
, found in- suits for dissolution of partnership and rendering accounts,
or for an interim injui1ction to ward off a threatened or continuing
breach of contract, irreparable harm would be suffered by the other
party-to the arbitration agreement if it cannot contest "the interlocu- .
tory application on the pain of abandoning the benefit of aJbitration
agreement. A concrete illustration would be both illuminating and
convincing. In a suit for dissolution of partnership an~ accounts an
application for appointment of receiver as also an application for
interim injunction restraining the defendant .from u_sing the partner- -
ship goods or assets for continuing the busfness are filed. The court
passes ex parte interim order a·nd issues notice calling upon the
defendant to show cause why the same
should not be made
. absolute. In-a running business appointment of a receiver would
thoroughly dislocate the 'business and an injunction would bring to
standstill th~ fl~urishing business. If the defendant appears and
contests th~ application for appointment of receiver as also the
application for injunction, could be be said to display an unequivocal
'
~· v'
·~,
.
·•
j
.'
FOOD CORPORATION v. YADAV ENGINEER'(Desal; J.)
109
intention to give up the .ben~fit of the arbitration ·agreement and to
acquiesce iii the suit? The dispute between the parties is whether
the partnership should be dissolved as per the contract of partnership. Interim injunction applicatio~ or application for appointment ,
of receiver have nothing to do ·directly of substantially with the
terms of the partnership. The main or substantial dispute will be
.
/
covered by the plaint filed in lhe suit.
Incidental proceedings for:
appointment of receiver o'r for interim injunction
ar~ for the protection either of the property or, the interests of the parties.
Now,
when. ex parte orders are obtained on ex parte avermerits the other
party cannot be precluded from coming and pointing: out that no
case is made out for granting interim reiief. It would be too cum,
bersome to expect the ·party first to apply for stay and then inviie
the court under s. 41 {2) of the Act to vacate the injunction or to.
discharge the receiver, Giving the expression 'taking any 0th.er steps .
. in the proceedings' such wide connotation as making an application ·
for any purpose in the suit .such as vacating stay, dischar£e of the
receiver or eyen modifying the interim orders would work hardship
and would be inequitousJo the party who is willing to abide by
the arbitration agreement and yet be forced t-0. suffer the inequ\ty
of ex parte orders. Therefore,· the expression 'taking any other
steps in the proceedings' must be given a narrow meaning in that
the step· must be taken in the main proceeding of the. suit and it
must be such ,step as would clearly and unambiguously manifest the
·fotention to waive the benefit of tlle· arbitration agreement and to
acquiesce in .the proceedings. Interiocutory proceedings are · incidental to the main proceedings. They liave a life till the disposal
of the main proceeding. As the suit or the proceeding is likely to
take some time before the dis'pute in the suit is finally adjudicated,
more often interim orders have to be macie for the protection of the
rights of the parties. Such interlocutory proceedings stand independent and aloof of the main ,dispute between the parties involved
in the suit. They are steps taken. for facilitating the
just and·
fair disposal of the main
dispute. When
these
interlocutory
proceedings are contested it cannot be said that the party contesting
.
.
such proceedings has· displayed an unequivocal intention to ··waive
the benefit of the arbitration agreement or that it has submitte.d
to the jurisdiction of the court~ WI;en ,; parte orders are made
at the back of the party the other party is forced to c6me to the
.
.
/·
9ourt to vindicate its right. Such _compulsion cannot disclose an'
· unambiguous intention to give up .the benefit of the arbitration
\
.
A
'
B
c
0
E
F
G
H
A
'
B
D
E
F
G
H
110
SUPRBMB COURT REPORTS
[1983] I s.c.tt.
.
"'agreement. Therefore,.