# GENERAL ELECTRIC COMPANY v. RENUSAGAR POWER COMPANY

- **Citation:** [1987] 3 S.C.R. 858
- **Court:** Supreme Court of India
- **Decided:** 1987-08-11
- **Case number:** Civil Appeal No. 2319 of 1986
- **Bench:** O. Chinnappa Reddy, K. Jagannatha Shetty
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/general-electric-company-v-renusagar-power-company-9649
- **Pages:** 27

## Headnote

The Foreign Awards (Recognition and Enforcement) Act, 1961S. 3-Stay of Proceedings in a Court of law while arbitration proceedings are in progress-The expression "before filing a written statement
C or taking any other step in the proceedings" should be construed in the
light of the construction put upon that expression appearing in s. 34 of
the Indian Arbitration Act, 1940.
Section 3 of the Foreign Awards (Recognition and Enforcement)
Act, 1961, which is analogous to s. 34 of the Indian Arbitration Act,
D 1940, provides that, if any party to an agreement to which Art. II of the
convention set forth in the Schedule thereto applies, commences any
legal proceedings in any court against any other party to the agreement
in respect of any matter agreed to be referred to arbitration in such
agreement, any party to such legal proceedings may, at any time after
appearance and before tiling a written statement or taking any other
E step in the proceedings, apply to the court to stay the proceedings and
the court, unless satisfied that the agreement is null and void, inoperative or incapable of being performed or that there is not, in fact, any
dispute between the parties with regard to the matter agreed to be
referred, shall make an order staying the proceedings.
F
The appellant (GEC), a multi-national company, which had
entered into a contract with the respondent (Renusagar), an Indian
company, regarding sale of equipment for a thermal plant, submitted
certain disputes between them for arbitration to the International
Chamber of Commerce (ICC), whereupon, the respondent filed a suit
in the Bombay High Court for a declaration that the claims were not
G arbitrable in terms of the contract. On an application filed by the
appellant, the High Court stayed further proceedings in the suit in
terms of s. 3 of the Foreign Awards (Recognition and Enforcement) Act,
196 I. Appeals filed by the respondent against that order were dismissed
by the Division Bench of the High Court and this Court holding that the
H claims were arbitrable. Meanwhile, the appellant had liled a suit
against a bank in the Calcutta High Court for enforcement of a bank
858
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it'
GENERAL ELECTRIC v. RENUSAGAR
859
guarantee given by it at the instance of the respondent, following which, A
the respondent had also filed a suit-the suit from which the present
appeal arose-in the Court of Civil Judge, Mirzapur praying for a
declaration that t!ie guarantee given by the bank stood discharged and
had become ineffective and unenforceable.
~
A number of applications were filed by the appellant during the B
.(._/
proceedings of the suit. In application 7-C, the appellant purported to
put on record its complaint that it had not received the annexures to the
plaint. In application 8-C, it prayed for rejection of the plaint and the
suit under s. 26 and O.VII, r. 11 read withs. 151 C.P.C. In application
10-C, the appellant requested the court to call upon the respondent to
furnish a complete record of the suit and annexures. On the date fixed c
for filing of written statement, the appellant filed applications 11-C,
12-C and 13-C: ll·C was an application under O.VIII r. 9 ands. 151
C.P.C. seeking postponement of the striking of issues, 12-C was an
application under O.Vlll, r.9 to grant leave to the appellant to file a
subsequent pleading as written statement on merits if the court rejected
"'Jli
the objections taken in the 'preliminary written statement'; 13-C, D
~
which was, referrecrto as the 'preliminary written statement' in ll·C
and 12-C, was an application styled as "Objectiom by the defendant to
the jurisdiction or the Conrt to entertain this snit for declaration and
injunction" setting forth seven reasons in support of the objections
raised, the seventh ground asserting that the suit was liable to be stayed
inter alia under s. 3 of the Foreign Awards (Recognition and EnforceE
~· ment) Act, 1961 and/or s. 34 of the Iaclian Arbitration Act, 1940. In
application 36·C, the appellant r

## Text

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A
B
GENERAL ELECTRIC COMPANY
v.
RENUSAGAR POWER COMPANY
AUGUST 11, 1987
[O. CHINNAPPA REDDY AND
K. JAGANNATHA SHETTY, JJ.)
The Foreign Awards (Recognition and Enforcement) Act, 1961S. 3-Stay of Proceedings in a Court of law while arbitration proceedings are in progress-The expression "before filing a written statement
C or taking any other step in the proceedings" should be construed in the
light of the construction put upon that expression appearing in s. 34 of
the Indian Arbitration Act, 1940.
Section 3 of the Foreign Awards (Recognition and Enforcement)
Act, 1961, which is analogous to s. 34 of the Indian Arbitration Act,
D 1940, provides that, if any party to an agreement to which Art. II of the
convention set forth in the Schedule thereto applies, commences any
legal proceedings in any court against any other party to the agreement
in respect of any matter agreed to be referred to arbitration in such
agreement, any party to such legal proceedings may, at any time after
appearance and before tiling a written statement or taking any other
E step in the proceedings, apply to the court to stay the proceedings and
the court, unless satisfied that the agreement is null and void, inoperative or incapable of being performed or that there is not, in fact, any
dispute between the parties with regard to the matter agreed to be
referred, shall make an order staying the proceedings.
F
The appellant (GEC), a multi-national company, which had
entered into a contract with the respondent (Renusagar), an Indian
company, regarding sale of equipment for a thermal plant, submitted
certain disputes between them for arbitration to the International
Chamber of Commerce (ICC), whereupon, the respondent filed a suit
in the Bombay High Court for a declaration that the claims were not
G arbitrable in terms of the contract. On an application filed by the
appellant, the High Court stayed further proceedings in the suit in
terms of s. 3 of the Foreign Awards (Recognition and Enforcement) Act,
196 I. Appeals filed by the respondent against that order were dismissed
by the Division Bench of the High Court and this Court holding that the
H claims were arbitrable. Meanwhile, the appellant had liled a suit
against a bank in the Calcutta High Court for enforcement of a bank
858
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GENERAL ELECTRIC v. RENUSAGAR
859
guarantee given by it at the instance of the respondent, following which, A
the respondent had also filed a suit-the suit from which the present
appeal arose-in the Court of Civil Judge, Mirzapur praying for a
declaration that t!ie guarantee given by the bank stood discharged and
had become ineffective and unenforceable.
~
A number of applications were filed by the appellant during the B
.(._/
proceedings of the suit. In application 7-C, the appellant purported to
put on record its complaint that it had not received the annexures to the
plaint. In application 8-C, it prayed for rejection of the plaint and the
suit under s. 26 and O.VII, r. 11 read withs. 151 C.P.C. In application
10-C, the appellant requested the court to call upon the respondent to
furnish a complete record of the suit and annexures. On the date fixed c
for filing of written statement, the appellant filed applications 11-C,
12-C and 13-C: ll·C was an application under O.VIII r. 9 ands. 151
C.P.C. seeking postponement of the striking of issues, 12-C was an
application under O.Vlll, r.9 to grant leave to the appellant to file a
subsequent pleading as written statement on merits if the court rejected
"'Jli
the objections taken in the 'preliminary written statement'; 13-C, D
~
which was, referrecrto as the 'preliminary written statement' in ll·C
and 12-C, was an application styled as "Objectiom by the defendant to
the jurisdiction or the Conrt to entertain this snit for declaration and
injunction" setting forth seven reasons in support of the objections
raised, the seventh ground asserting that the suit was liable to be stayed
inter alia under s. 3 of the Foreign Awards (Recognition and EnforceE
~· ment) Act, 1961 and/or s. 34 of the Iaclian Arbitration Act, 1940. In
application 36·C, the appellant requested the court to decide the issues
~
regarding maintainability of the suit and the jurisdiction of the court
before proceeding with the suit. In application 65-C, the appellant
reiterated that the two issues referred to in 30-C should be heard first
and decided before the case was proceeded upon on merits. The Civil F
Judge rejected application 65·C commenting that such a request was
being repeatedly made. The appellant challenged that order by a petition under Art. 227 which was dismissed by the High Court in limine
with the direction that the appellant should make a fresh application
~~.
setting out the relevant facts in the spirit of s. 3 ortbe Foreign Awards
ft
(Recognition and Enforcement) Act and the Civil Jndge ohonld dispose G
of the same in accordance with law. Accordingly, the appellant filed
application 83-C praying for stay of the suit in terms of s. 3 of the said
Act which was rejected by the Civil Jndge who held that the objection
raised on the basis of that provision must, in the circumstances of the
case, be considered to have been abandoned and the appellant con- H
. sidered to have elected to proceed with the suit. The revision application
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860
SUPREME COURT REPORTS
[1987] 3 S.C.R.
filed against that order was dismissed by the High Court which held
that the plaint as initially presented had been completely answered by
the appellant in application 13-C which was clearly in the nature of a
written statement in the case.
Allowing the appeal and staying the suit,
HELD: Application 13-C contaiued a prayer for the stay of the
suit under s. 3 of the Foreign Awards (Recognition and Enforcement)
Act, 1961 and it was made before the written statement was flied and
before any step in the proceeding was taken. Looking to the substance
of the matter and ignoring technicalities, we are firmly of the view that
c the defendant sought a stay of the suit before filing a written statement
or taking any other step in the suit and that he never abandoned his
right to have the suit stayed. {883A-C]
(i) While s. 34 of the Indian Arbitration Act vests in the Court the
discretion to stay or not to stay the proceedings, s. 3 of the Foreign
D A wards (Recognition and Enforcement) Act vests no such discretion in
the Court. Under the latter Act it is mandatory that the proceedings
should be stayed ifthe conditions prescribed are fulfilled. But, whether
it is a defendant who invokes the discretion of the Court under s. 34 of
the Indian Arbitration Act or whether it is a defendant who seeks to
enforce the right under s. 3 of the Foreign Awards (Recognition aud
E Enforcement) Act, it is necessary that he should not have disentitled
himself, from doing so either by filing a written statement or by taking
any other step in the proceedings. His application to the Court, be it
under s. 34 of the Indian Arbitration Act ors. 3 ofthe Foreign Awards
(Recognition and Enforcement) Act may be filed "before flling a written statement or taking any other step in the proceedings." It is compeF
tent then only and not thereafter. [871G·H; 872A-C]
(ii) A step in the proceeding which would disentitle the defendant
from invoking s. 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
G step must be such as to manifest the intention of the party unequivocally to abandon the right under the arbitration agreement and instead
to opt to have the dispute resolved 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 acquiescence. The broad
H
and general right of a person to seek redressal of his grievance in a
GENERAL ELECTRIC v. RENUSAGAR
861
' )-
court of law is subject to the right of the parties to have the disputes A
settled by a forum of mutual choice. Neither right is insubstantial and
neither right can be allowed to be defeated by any manner of technicality. The right to have the dispute adjudicated by a Civil Court
canuot be allowed to be defeated by vague or amorphous mis-called
agreements to refer to 'arbitration'. On the other hand, if the
t agreement to refer to arbitration is established, the right to have the
B
dispute settled by arbitration cannot be allowed to be defeated on
~-j.--
technical grounds. [879A-D]
-
·,
(iii) (a) In the present case, in application 7-C, GEC purported
to put on record their complaint that they had not received the
annexures to the plaint. By uo stretch of imagination could it possibly
be said that 7-C indicated either an abandonment of arbitration or an
affirmation of the suit. 8-C was an application requesting the court to
reject the plaint and the suit for the reasons set forth in the application.
One of the grounds urged was that the Mirzapur Court had no territorial jurisdiction. Another ground was that the plaint was insufficiently stamped. Yet another ground was that the plaint disclosed
no cause of action. Every one of the objections was in the nature of
a preliminary objection to the trial of the suit on the merits of the
dispute between the parties. Every one of the objections was what
may be called a threshold objection pleaded as a bar to any further
hearing of the suit. None of the objections invited .an adjudication on
the merits of the controversy. [879E-G]
(b) The expression 'merits of the controversy in the suit' does not
occur either under s. 34 of the Arbitration Act or s. 3 of the Foreign
c
D
E
F
'f Awards (Recognition and Enforcement) Act. The words occur in the
decision of this court in State of Uttar Pradesh v. Janki Saran Kai/ash
Chandra where the court said, "taking other steps in the suit proceedings connotes the idea of doing something in aid of the progress of the
suit or submitting to the jurisdiction of the Court for the purpose of
adjudication of the merits of the controversy in the suit." The words
"adjudication of the merits of the controversy in the suit" were not
used to take in every adjudication which brought to an end the proceed-
")" ing before the court in whatever manner but were meant to cover only G
such adjudication as touched upon the real dispute between the parties
which gave rise to the action. Objections to adjudication of the disputes
between the parties, on whatever ground, are in truth not aids to the
progress of the suit but hurdles to such progress. Adjudication of such
objections cannot be termed as adjudication of the mertis of the conH
troversy in the suit. An invitation to the court to reject a plaint or
862
SUPREME COURT REPORTS
I 1987] 3 S.C.R.
A
dismiss a suit on a ground not touching the merits of the controversy i '
between the parties, hut on a ground such as insufficiency of the court
fee paid, maintainability of suit, territorial jurisdiction, etc., is really to
enable the proceedii)g before the arbitrator to go on and far from an
election to abandon arbitration and continue the suit. Every threshold
bar to a suit set up by a defendant is a step to allow the arbitration to go
'
B
on. It is a step in aid of arbitration and not in aid of the progress of the 1
suit. In that view, 8-C can hardly be called an invitation to the court to '
adjudicate upon the merits of the controversy, when fa fact it is
_.,;--
designed to prevent the court from touching upon the merits of the
controversy. (880B-G]
c
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F
G
H
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(c) Applications 11 ·C, 12'C and 13-C have to be read together
and reading them together it is clear that the defendant raised objecy
tions to the trial of the suit on merits, which were loosely described as
'objections to the jurisdiction of the Court and objections to the
maintainability of the suit' and which were requested to be disposed of
•
first, with a further request that if the objections were rejected the
defendant may then be allowed to file a proper written statement on
).o..
merits and issues struck thereafter. The invitation to the court was not
to proceed with the suit but to refrain from proceeding with the suit
until the preliminary objections were first decided. The preliminary
objections were set out by the defendant in 8-C and 13-C and they were
not of such a nature as to make adjudication on merits of any part of the
real dispute between the parties necessary for deciding the preliminary
objections. While elaborating the preliminary objections, particularly
~· -
in order to explain the contention that the plaint did not disclose a cause
of action, the defendant did choose to controvert several factual averments made in the plaint. We do not think that the circumstance that y
the defendant chose to deny in bis application inviting decision on bis
preliminary objections the allegations of material facts made by the
plaintiff in the plaint changes the character of the applications into a
written statement any more than a reply to a notice of motion seeking an
ad interim injunction acquires the character of a written statement
merely because factual allegations made in the plaint are also dealt with
in the reply. A defendant may consider it necessary to deny the averments offact in the plaint with a view to explain the preliminary objec- y'-
tions raised by him or be may deny the averments of fact by way of
abundant caution so as not to he understood as having admitted (by not
denying) the plaint averments. (881E-H; 882A-C]
State of Uttar Pradesh v. Janki Saran Kai/ash Chandra, (1974] 1
S.C.R.. 31, referred to.
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GENERAL ELECTRIC v. RENUSAGAR [REDDY, J.]
863
Food Corporation of India v. Yadav Engineer, [1983] 1 s.c.R.
95, relied on.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2319
of 1986.
From the Judgment and Order <lated 7.3.1986 of the Allahabad
High Court in Revision Petition No. 454 of 1985.
Shanti Bhushan, S. Dastur, J.J. Bhatt, A. Dayal and K.J. John
for the Appellant.
A
B
L.M. Singhvi, Depanker Gupta, P.L. Dubey, N.R. Khaitan,
C
""(
A.M. Singhvi, U .K. Khaitan, Ajay Jain, Praveen Kumar and C.
Mukhopadhya for the Respondent.
The Judgment of the Court was delivered by
CHINNAPPA REDDY, J, The appellant, General Electric ComD
pany, a multi-national, entered into a contract with the respondent,
Renusagar Power Company Limited, an Indian Company, agreeing to
sell equipment for a Thermal Electric generating plant to be erected at
Renukoot on the terms and conditions set forth in the contract. For the
purposes of this case, it is unnecessary to set out the terms of the
contract and the details of what was envisaged to be done by the
E
parties. It is also unnecessary to set out the various events that took
place subsequently. It is sufficient to state that on March 2, 1982, the
GEC submitted certain disputes between the GEC and Renusagar for
arbitration to the International Chambers of Commerce. On June 11,
1982, Renusagar filed a suit in the Bombay High Court for a declaration that the claims purported to be referred to arbitration by GEC to F
ICC were beyond the scope and purview of the arbitration agreement
contained in the contract and sought an injunction to restrain the GEC
from taking any further steps pursuant to their request for arbitration
addressed to ICC on March 2, 1982. In Renusagar's suit, GEC, on
August 11, 1982 filed a petition under s. 3 of the Foreign Awards
(Recognition and Enforcement) Act, 1961 seeking a ~tay of the suit. G
On August 19, 1982 GEC also filed a suit in the Cakutta High Court
against the United Commercial Bank to enforce a bank guarantee
given by the bank at the instance of Renusagar. On November 25,
1981, Renusagar filed a suit No. 127 of 1982 in the Court of Civil
Judge, Mirzapur praying for a declaration that the guarantee given by
the United Commercial Bank for and on behalf of the plaintiff stood H
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864
SUPREME COURT REPORTS
[1987] 3 S.C.R.
discharged and had become ineffective and unforceable and for a mandatory injunction against the GEC directing and ordering them to
settle the plaintiff's claim regarding 75 MV A Transformers and to
satisfy validly the settlement arrived at of the plaintiff's claim as
mentioned in para 12 of the plaint.
It is useful to refer at this juncture to some of the happenings in
the proceedings in the Bombay High Court. On April 20, 1983, a
learned single Judge of the Bombay High Court dismissed the notice of
motion taken out by Renusagar for stay of the arbitration proceedings
and allowed the application of GEC for stay of further proceedings in
the Bombay High Court. Appeal filed by Renusagar to the Division
Bench of the High Court were dismissed on October 21, 1983. Further
appeals filed by Renusagar to the Supreme Court were also dismissed
on August 16, 1984. The Supreme Court held that the claims of GEC
were arbitrable and that the decision of the court was conclusive on
that issue and would not arise before the court of arbitration ofICC.
D
On January 17, 1983, GEC filed an application (7-C) purporting
~
to put on record their complaint that annexures to the plaint had not
been received by them. On the same day, the Civil Judge made-an
order: "Copy of the plaint has been given to the defendant (GEC) so
that the defendant may file a written statement." On the same day, the
defendant GEC also filed another application (8-C) purporting to be
E 'under s. 20 and Order VII r. 11 read with s. 15 J of the Code of Civil
-
Procedure' praying that the court may be pleased to reject the plaint
-~
and the suit. In this application, it was stated that the suit was in abuse
of the process of the court and an attempt to harass the defendants.
The court was requested to dismiss the plaintiff's suit on that ground as
also on other grounds which were thereafter mentioned. It was stated
F
that the defendant did not reside and no cause of action arose within
the local limits of the jurisdiction of the court. There was a violation of
the stipulation laid down ins. 20 of the Code of Civil Procedure resulting in an abuse of the process of the court. It should entail a dismissal
of the suit. The suit had been fradulently instituted on insufficient
court-fee and for that reason also the suit deserved to be dismissed.
G The defendant then proceeded to state that they reserved the right to
-Itake further objections as preliminary objections to the maintainability
of the suit and craved leave to add to or alter or amend the application
whenever necessary. What is important to be noticed here is that there
was no prayer at this juncture for a stay of the suit. On January 19,
1983, GEC filed an application ( 10-C) requesting the Court to call
H upon Renusagar to furnish a complete record of the suit and annex-
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GENERAL ELECTRIC v. RENUSAGAR [REDDY. J.]
865
ures. The Civil Judge passed an order: "The case is called out. Shri .·\
J.P. Singh, present for the plaintiff. Shri R.S.' Dhawan, Advocate for
the defendant. 10-C by the defendant to direct the plaintiff to give
copies of complete record so that the defendant may plead preliminary
objections. The copies of papers have been given. Now the defendant
may file-W.S. by March 4, 1983. Put up on March 7, 1983 for issues.
Preliminary objections like 7-C and 8-C can be heard and disposed of B
after filing of written statement when the issues may be framed." On
March 4, 1983 which was the date fixed by the Civil Judge for the filing
of a written statement by GEC, GEC filed three applications before the
Mirzapur Court: 11-C, 12-C and 13-C. 13-C was styled as "objections
by the defendant to the jurisdiction of the court to entertain this suit for
declaration and injunction." The document began with the stateC
ment: "The Hon'ble court has no jurisdiction to entertain this suit
because of the following reasons." Seven reasons were set forth. The
first and the fourth grounds related to the territorial jurisdiction of the
court. The second ground stated that the plaint did not disclose any
cause of action and, therefore, was liable to be rejected under Order
VII CPC. The third ground stated that from the statements in the
D
plaint, the suit was barred by limitation. The plaint was, therefore,
liable to be rejcted under Order VII r. 11 D. The fifth ground was to
the effect that the reliefs claimed were untenable on their face and the
suit was liable to be straightaway dismissed on that account. The sixth
ground was that the suit was liable to be stayed under s. 10 ors. IS I of
the CPC. The seventh ground was: "Similarly the suit is liable to be
E
stayed as regards the second relief claimed by the plaintiff under s. 3 of
the Arbitration (Protocol and Convention) Act, 1937 and Foreign
Awards (Recognition & Enforcement) Act, 1961 and/ors. 34 of the
Indian Arbitration Act, 1940 or under all of them.,. Thereafter the
document proceeded to amplify the seven grounds by detailed reference to the allegations in the plaint and by further traversing those
F
allegations. In regard to the seventh ground that the suit was liable to
be stayed under s. 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961, it was stated:
"The present-claim arises out of the only contract between
the parties entered into in 1964. Disputes arising out of or G
related to this contract have to be settled, after being
unable to resolve such disputes by sincere negotiation by
arbitration under the rules of the International Chamber of
Commerce Court of Arbitration because of the provisions
of Art. XVIII of the said contract. The defendant is ready
and willing to have the present dispute raised by the H
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SUPREME COURT REPORTS
[ 1987] 3 S.C.R.
plaintiff in this plaint to be settled by arbitration without
prejudice to the defence of want of cause of action, the bar
of limitation and all other defenses. This Hon. Court is
therefore "bound to stay the present suit under s. 3 of the
Foreign Awards (Recognition and Enforcement) Act,
1961."
The final pr.ayer made in the application ( 13-C) was:
"For the above reasons it is prayed that the plaint be either
rejected for failure to disclose th~ cause of action or as
being barrred for limitation on the face of it, or it be returned to be plaintiff for presentation to a proper forum.
Further, the suit is also liable to be dismissed because
reliefs claimed by the plaintiff are untenable on their face.
Again, alternatively the suit is liable to be stayed under
s. 10 and/or s. 151 CPC in respect of first relief and under
s. 3 of the Foreign Awards (Recognition and Enforcement)
Act, 1961 in respect of the second relief claimed by the
plaintiff in the plaint."
11-C was an application under Order VIII Rule 9 and s. 151 CPC
seeking postponement of the striking of issues from March 7, 1983 to
4th or 5th of April, 1983. In the course of the application it was
recited: "That in keeping with the time schedule fixed by this Hon 'ble
E
Court in effect, that a written statement be filed on March 4, 1983, the
defendant' is filing objections to the jurisdiction of the court to entertain this suit for declaration and injunction to file a subsequent pleading as written statement on merits in the event of the objections taken
in the preliminary written statement dated 21st February, 1983 being
rejected". The reference to the_objections to the jurisdiction of the
F
court and the preliminary written statement dated 2 Lst February, 1983
was obviously to 13-C which was verified at Singapore on Feburary 21,
1983.
12-C was an application to grimt leave to the defendant to file a
.· subsequent pleading as written statement on merits if the court reG
jected the objections taken in the preliminary written statement. This
application was filed under Order VIII Rule 9.
On March 7, 1983, the court adjourned the case to April 5, 1983
and from time to time thereafter. On May 31, 1983, GEC filed their
H
written statement raising their pleas in defence to Renusagar's suit.
However, in the first paragraph it was stated:
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'}
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GENERAL ELECTRIC v. RENUSAGAR (REDDY, J.)
867
"The defendant has filed in this Hon 'ble Court an appliA
cation under s. 20 and Order VIII Rule 9 read withs. 151
CPC for rejection of the plaint with special costs to the
defendant on January 15, 1983. The defendant has also
placed on record on January 17, 1983 that a copy of the
plaint was supplied without annexures and documents and
without the injunction application said to have been filed. B
The defendant has filed its preliminary written statement
contesting the jurisdiction of this Hon'ble Court to try and
entertain the suit as no cause of action has arisen to the
plaintiff to sue this defendant on March 4, 1983. An
appropriate application under Order VIII Rule 9 read with
s. 151 CPC was also filed for leave to file subsequent pleadC
ings as written statement on merits in the event of the
preliminary written statement and the pleas being rejected
was also filed on the same date."
In the second paragraph, it was added,
"This defendant craves leave of this Hon'ble Court to incorporate the preliminary objections taken hithertofore by
this defendant in its applications and pleadings and preliminary written statement as if the same are set out herein
extenso."
Later in paragraph 6 and 7 of the written statement, it was stated as
follows:
D
E
"6. The plaintiff states and submits that the preliminary
objections are sufficient to dispose of the entire claim in
suit on issues of law alone which go to the root of the F
Jurisdiction aspect of the suit and its apparent nonmaintainability and these sought to be decided as preliminary questions of law."
"7. Without prejudice of the preliminary objections referred to hereinabove and deemed to be incorporated herein G
as stated this defendant shall now deal with the plaint
.
d
't
,,
paraw1se an on men s .......... ..
The plaintiff objected to the presentation of the written statement on the ground that it was filed outside court hours. The plaintiff
also filed an application for postponement of the date of settlement of H
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SUPREME COURT REPORTS
[ 1987] 3 S.C.R.
issues. On August 4, 1983, the defendant filed an application ( 19-C),
requesting the court to settle the issues on August 18, 1983 itself without further postponement. Thereafter the case was adjourned from
time to time. On October 19, 1983, the plaintiff filed an application
(21-C) requesting the court to set the defendant ex parte as not having
filed any written statement and to decree the suit. On August l, 1984,
the Plaintiff, Renusagar filed an application, 25-A, for amendment of
the Plaint. The amendment sought included a prayer for a decree in a
sum of Rs.62,72,272. After contest, the application for amendment
was allowed on October 15, 1984 and GEC was given time to file an
additional written statement. A few days earlier, the defendant had
filed application (30-C) requesting the court to decide the issues regarding maintainability and jurisdiction and stating that the suit may
proceed after decisions on these issues. On this application, the court
made an order on October 15, 1°~4 to the effect that a similar request
had earlier been rejected by the Court on January 19, 1983 and it was
not therefore, open to the Court to reopen the matter.
On November 31, 1984, GEC filed an application (34-D) seeking
time to file a written statement "if so advised" and postponement of
settlement of issues. Time was granted. On January 5, 1985, GEC filed
an application ( 65-C) stating that they had consistently pleaded that
the issues relating to the jurisdiction of the court and maintainability of
the suit should be heard first and reiterating that request prayed that
two issues may be struck and decided before the case was proceeded
upon on merits. The two issues suggested were:
"(1) whether the Hon'ble Court had jurisdiction to try and
-
entertain the suit and
y·
F
(2) Whether the present suit is maintainable against the defendantapplicant who neither resides nor carries on business in India."
G
H
On February 2, 1985, the Mirzaptir Court rejected the application,
commenting that such a request was being repeatedly made. Against
the order of the Mirzapur Court rejecting the application 65-C, GEC
filed a petition under Art. 227 before the Allahabad High Court for
quashing the proceedings in the suit. In ground eight of the petition, it
was stated that GEC had already raised the plea that the suit was liable
to be stayed under s. 3 of the Foreign Awards (Recognition &
Enforcement) Act, 1961. It was also stated in ground no. twelve that
the question of arbitrarbility of the disputes had already been decided
by the Supreme Court. On April 4, 1985, the Allahabad High Court
'
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GENERAL ELECTRIC v. RENUSAGAR (REDDY, J.)
869
dismissed the petition in limine observing as follows:-
"We have considered the matter carefully and we are of the
view that so far as the court below has not been called upon
A
to apply its mind to the provisions contained in s. 3 of the
Act. Shri R.S. Dhawan who appears alongwith Shri V.N.
Deshpande has stated at the bar that amongst other contenB
lions advanced before the learned Civil Judge, he had
pointedly pressed that in view of the aforesaid provisions
further proceedings in the suit should be stayed. We have
no doubt that such an argument must have advanced by
him. Nonetheless, the learned Civil Judge had not given
any decision on this point. We, therefore, consider it
C
appropriate that the petitioner should make a fresh application setting out the relevant facts in the spirit of s. 3 of
the Act. This application should be made within a fortnight
from today. If such an application is made within the time
specified by us, the learned Civil Judge will dispose of the
same on merits and in accordance with the law. Till the
D
learned Civil Judge disposes of this application he shall not
proceed further with the hearing of the suit. No other order
is necessary at this stage. With these observations the writ
petition is dismissed summarily."
Consequent on the order of the High Court in the application
E
-. <
under Art. 227, GEC filed another application (83-C) before the
I .
Mirzapur Court on April 15, 1985 expressly setting forth their objection under s. 3 of the Foreign Awards (Recognition & Enforcement)
"'(
Act and praying for a stay of the suit under that provision. Reference
was also made to their earlier applications made on March 4, 1983.
The contentions raised in 13-C were reiterated. This application (83F
C) was rejected by the learned Civil Judge, Mirzapur by an order
dated July 9, 1985. The learned Civil Judge took the view that the
objection raised on the basis of s. 3 of the Foreign Awards Act must, in
the circumstances of the case, be considered to have been abandoned
and the defendant considered to have elected lo proceed with the suit.
"""r'The revision application referred by GEC to the High Court of AlG
lahabad against the order dated July 9, 1985 was dismissed by the High
Court on March 7, 1986.
The High Court referred to the contents of 13-C in great detail
and concluded, "The plaint as initially presented appears to have been
completely answered by the General Electric Company in its applicaH
A
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870
SUPREME COURT REPORTS
[1987] 3 S.C.R.
tion 13-C which it may be remembered was also verified as a pleading,
because in the written statement 16-Ka which was undoubtedly filed
on May 31, 1983, no further facts are referred to ............ 13-C is
clearly in nature a written statement in the case, raising such pleas
which constitute the defence of the General Electric Company to the
~ .
case set-up in plaint as it stood then". The High Court also observed-I
that it was apparent to them that the emphasis in 13-C was on the other \
objections and not on the objections under sec. 3 of the Foreign
Aw.ards Act. The High Court also rejected the further contentions
~-·
advanced on behalf of the General Electric Company that a fresh right
to make an application under sec. 3 of the Foreign Awards (Recognition & Enforcement) Act accrued on the plaint being amended by
-
Renusagar. Stay of the Suit was, therefore, refused. General Electric
Company has preferred the present appeal against the judgment of the Y
High Court of Allahabad under Art. 136 of the Constitution.
Shri Shanti Bhushan, on behalf of the appellant General Electric
Company and Dr. L.M. Singhvi, on behalf of Renusagar addressed
elaborate arguments covering indeed a wide range of facts and law.
They also cited before us a host of cases Indian, English and Canadian.
We do not propose to examine the several side issues and non-issues
which have argued before us. We propose to confine ourselves to the
E
basic questions which were argued before us namely, (a) whether
either 8-C or 13-C could be considered to be a step in the suit so as to
disentitle the defendant from seeking a stay of the suit under sec. 3 of
the Foreign Awards (Recognition & Enforcement) Act, (b) whether
13-C was in the nature of a written statement, the filing of which
precluded the defendant from seeking a stay and ( c) whether the
F
defendant could be said to have abandoned the right to seek a stay in
the circumstances of the case.
The Foreign Awards (Recognition & Enforcement) Act was
enacted 'to enable effect to be given to the Convention on the
Recognition & Enforcement of Foreign Arbitral Awards done at New
G York, on the 10th day of June, 1958, to which India is a party and for
purposes connected therewith'. The Convention is set-forth in they'-
Schedule to the Act and s. 4(i) of the Act provides that a foreign
award shall, subject to the provisions of the Act, be enforceable in
India as if it were an award made on a matter referred to arbitration in
India. Excepts. 3, we are not concerned with the remaining provisions
H of the Act. Section 3 is as follows:
"Stay of proceedings in respect of matters to be refer-
;
"}
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GENERAL ELECTRIC v. RENUSAGAR (REDDY. J.)
871
red to arbitration:-Notwithstanding anything contained in A
the Arbitration Act, 1940, or in the Code of Civil Procedure, 1908, if any party to an agreement to which Article II
of the Convention set forth in the Schedule applies, or any
person claiming through or under him commences any legal
proceedings in any Court against any other party to the
agreement or any person claiming through or under him in B
respect of any matter agreed to be referred to arbitration in
such agreement, any party to such legal proceedings may,
at any time after appearance and before filing a written
statement or taking any other step in the proceedings,
apply to the Court to stay the proceedings and the Court,
unless satisfied that the agreement is null and void, in- c
operative or incapable of being performed or that there is
not, in fact, any dispute between the parties with regard to
the matter agreed to be referred, shall make an order staying the proceedings."
Section 3 of the Foreign Awards (Recognition & Enforcement)
Act is analogous to s. 34 of the Indian Arbitration Act which is as
follows:-
"Agreement or any person claiming under 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 sufficient reason why the matter should
not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the
proceedings were commenced, 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."
D
E
F
-Y
It may be straightaway noticed that while s. 34 of the Indian G
1
Arbitration Act vests in the Court the discretion to stay or not to stay
the proceedings, s. 3 of the Foreign Awards (Recognition & Enforcement) Act vests no such discretion in the Court. Under the Foreign
Awards (Recognition & Enforcement) Act it is mandatory that the
proceedings could be stayed if the conditions prescribed are fulfilled.
But, whether it is a defendant who invokes the discretion of the Court H
A
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D
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F
G
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872
SUPREME COURT REPORTS
[1987] 3 S.C.R.
under s. 34 of the Indian Arbitration Act or whether it is a defendant
who seeks to enforce the right under s. 3 of the Foreign Awards
(Recognition & Enforcement) Act, it is necessary that he should nqt
have disentitled himself, from doing so either by filing a written statement or by taking any other step in the proceedings. His application to
'{ .
the Court, be it under s. 34 of the Indian Arbitration Act.ors. 3 of the_,
Foreign Awards (Recognition & Enforcement) Act may be filed r
"before filing a written statement or taking any other step in the proceedings." It is competent then only and not thereafter. The question
..,._..
is when may a written statement said to have been filed or when may
any other step said to have been taken in the proceedings?
On the question of the meaning of the expression 'step in the
proceedings', on the question of the proper approach to the solution of
the problem and on allied questions, we were referred by the learned
counsel for GEC and Renusagar to decisions of the *English Courts,
decisions of the **Canadian Courts and ••*passages from textbooks.
We do not propose to refer to them in our judgment-not because we
do not find them instructive; indeed we read them carefully and found
them helpful, but because we think that reference to such persuasive
authority is justified only if there is no guidance from binding authority. The time has perhaps arrived to discourage uninhibited reference
to and extravagant use of foreign precedents, though indeed we
welcome such precedents when they explore virgin territory and
expand the horizons of legal thought. The setting of a foreign judg-
-
y
•
ment is the foreign country's past and present history, its economic ....,.,-
relations, its social relations, its trade and commerce, its traditions, its
values, its needs, the stages of the development of its people, its legal
' I. Ford's Hotel Company Ltd. v. Bartlett (1896(1) AC I)
2. Ochs v. Ochs Brothers (1909 (II) Ch. Dvn. 121)
3. Parker, Gaines & Co. v. Turpin (1918 (I) KB 358)
4. Henry v. Geopresco International Ltd. ( 1975 (2) All Eng. LR 702)
5. Tracomin SA v. Sudan Oil Seeds ( 1983 (I) All Eng. LR 404)
6. In re. The Tuyuti (I984 (2) All Eng. LR 545)
.. I. Raymond v. Adrema Ltd. (37 DLR (2d) 9)
i. Fa1hers of Confederation Bldgs. Trust v. Pigott Construction Company Limited
44 DLR (3d) 265)
••• l. Russell on Arbitration (20th Edition)
2. Commercial Arbitration by Mustil & Boyd.
'
GENERAL ELECTRIC v. RENUSAGAR !REDDY, J.!
873
ideology, its constitutional direction and strategies and its statutes and A
precedents. Foreign precedents are to be read and remembered in
their setting, but never to be elevated to the level of binding precedents and, therefore, to be avoided from frequent and needless
question.
)-
Section 34 of the Indian Arbitration Act has received the consiB
deration of the Supreme Court in State of U.P. v. Janki Saran Kai/ash
"-+-
Chander, [1974 (I) SCR 31] and Food Corporation of India v. Yadav
Engineer, [ 1983 (I) SCR 95].
-
In State of Uttar Pradesh v. Janki Saran Kai/ash Chandra (supra),
the facts were that the summons in a suit instituted against the State of C
Uttar Pradesh were served on the District Government Counsel. On
September 2, 1966, the District Government Counsel entered his
appearance in the suit and also filed a formal application praying for a
month's time for filing a written statement. Time was granted as
prayed for. On October 1, 1966, the District Government Counsel
filed an application under s.