Case: State of Uttar Pradesh &amp; Another Vs. M/s. Janki Saran Kailash Chandra &amp; Another

2. The plaintiffs had instituted a suit for the recovery of Rupees 69,556.27 by way of damages for breach of contract impleading the State of U. P. (through the Collector of Bijnor) as the first defendant and the Divisional Forest Officer, Bijnor as the second defendant. The summonses in the suit issued to the State of U. P. were served on the District Government Counsel. On September 22, 1966 the said counsel filed an appearance slip in the Court and also put in a formal application praying for one months time for the purpose of filing written statement. This prayer was granted. On October 1,1966 the District Government Counsel filed an application under Sec. 34 of the Arbitration Act pleading that there was an arbitration clause in the agreement between the parties to the suit and the State of U. P. being willing to refer the matter to arbitration the suit should be stayed. The trial Court held that the dispute was subject to arbitration clause and since the State of U. P. had not taken any steps in the suit proceedings and had also not filed the written statement the suit was liable to be stayed. So holding the application of the State Government was allowed and the suit stayed.3. On appeal by the plaintiff the High Court relying on two of its earlier decisions in United Provinces Govt. v. Sri Har Nath, AIR 1949 All 611   and Union of India v. Hans Raj Gupta and Co., AIR 1957 All 91  , held that action of the District Government Counsel in applying for time to file the written statement amounted to taking a step in the proceedings within the meaning of Section 34 of the Arbitration Act. On this view the defendant was held disentitled to claim that the suit should be stayed. The appeal was accordingly allowed and the order of stay set aside.

Court's reasoning:
7. In our view, there is no serious infirmity in the impugned judgment of the High Court and we are unable to find any cogent ground for interference under Article 136 of the Constitution. The legal position with respect to the scope and meaning of Section 34 of the Arbitration Act admits of little doubt, the language of this section being quite plain. When a party to an arbitration agreement commences any legal proceedings against any other party to the said agreement with respect to the subject-matter thereof, then the other party is entitled to ask for such proceedings to be stayed so as to enable the arbitration agreement to be carried out. It is, however, to be clearly understood that the mere existence of an arbitration clause in an agreement does not by itself operate as a bar to a suit in the Court. It does not by itself impose any obligation on the Court to stay the suit or to give any opportunity to the defendant to consider the question of enforcing the arbitration agreement. The right to institute a suit in some Court is conferred, on a person having a grievance of a civil nature, under the general law. It is a fundamental principle of law that where there is a right there is a remedy. Section 9 of theCode of Civil Procedure confers this general right of suit on aggrieved person except where the cognizance of the suit is barred either expressly or impliedly. A party seeking to curtail this general right of suit has to discharge the onus of establishing his right to do so and the law curtailing such general right has to be strictly complied with. To enable a defendant to obtain an order staying the suit, apart from other conditions mentioned in Section 34 of the Arbitration Act, he is required to present his application praying for stay before filing his written statement or taking any other step in the suit proceedings. In the present case the written statement was indisputably not filed before the application for stay was presented. The question is whether any other step was taken in the proceeding as contemplated by Section 34 and it is this point with which we are directly concerned in the present case.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 thein the present case the District Government Counsel also filed in Court the usual appearance slip. If he wanted time for further consultations, he could and should have specifically made a prayer to that effect. It is, however, idle to contend that he can be considered to have merely volunteered without authority to appear and ask for time for filing the written statement. The argument of appearance by a recognized agent as a mere volunteer is extremely difficult to appreciate. The State, as already observed, took the benefit of the adjournment. It will be somewhat irrational and perhaps incongruous to permit the State, after having taken the benefit of this adjournment, to plead that the application for adjournment was not made on instructions and was unauthorised. To accede to the State Government the right to do so would clearly be unjust to the opposite party which could have rightfully objected to the adjournment, had there been any indication that the prayer was not being made on instructions from the State Government. September 2, 1966 was fixed in the summons for filing written statement. Failure to do so would have entailed consequences prejudicial to the State Government. Those consequences were avoided by making an application for extension of time for filing written statement which must have been understood by the opposite party, as also by the Court, to be on instructions by the State Government.9. The argument that the trial Courts discretion has been erroneusly reversed by the High Court is equally devoid of merit. If the appellants application was for adjournment for the purpose of filing written statement, then there is no question of any exercise of discretion by the trial Court. Discretion with regard to stay under Section 34 of the Arbitration Act is to be exercised only when an application under that section is otherwise competent. Incidentally it is worth noting that even the order of the trial Court is not included by the appellant in the paper book and we do not know the reasoning of that Court for granting stay. But on the view that we have taken that omission is of little consequence.