General Electric Company vs Renusagar Power Company on 11 August, 1987

Supreme Court of India
General Electric Company vs Renusagar Power Company on 11 August, 1987
Equivalent citations: 1987 SCR (3) 858, 1987 SCC (4) 137
Author: O C Reddy
Bench: Reddy, O. Chinnappa (J)
           PETITIONER:
GENERAL ELECTRIC COMPANY

	Vs.

RESPONDENT:
RENUSAGAR POWER COMPANY

DATE OF JUDGMENT11/08/1987

BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
REDDY, O. CHINNAPPA (J)
SHETTY, K.J. (J)

CITATION:
 1987 SCR  (3) 858	  1987 SCC  (4) 137
 JT 1987 (3)   277	  1987 SCALE  (2)257


ACT:
    The	 Foreign Awards (Recognition and  Enforcement)	Act,
1961-S.	 3--Stay  of  Proceedings in a Court  of  law  while
arbitration  proceedings  are  in  progress--The  expression
"before filing a written statement 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.



HEADNOTE:
    Section  3	of the Foreign Awards (Recognition  and	 En-
forcement)  Act,  1961, which is analogous to s. 34  of	 the
Indian Arbitration Act, 1940, provides that, if any party to
an agreement to which Art. 1I of the convention set forth in
the  Schedule thereto applies, commences any legal  proceed-
ings  in any court against any other party to the  agreement
in  respect of any matter agreed to be referred to  arbitra-
tion in such agreement, any party to such legal	 proceedings
may, at any time after appearance and before filing a  writ-
ten  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,  inop-
erative	 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  stay-
ing the proceedings.
    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  arbitra-
tion to the International Chamber of Commerce (ICC),  where-
upon,  the respondent filed a suit in the Bombay High  Court
for  a	declaration that the claims were not  arbitrable  in
terms of the contract. On an application filed by the appel-
lant, the High Court stayed further proceedings in the	suit
in  terms  of s. 3 of the Foreign  Awards  (Recognition	 and
Enforcement)  Act,  1961. Appeals filed	 by  the  respondent
against	 that order were dismissed by the Division Bench  of
the  High Court and this Court holding that the claims	were
arbitrable.  Meanwhile,	 the  appellant	 had  filed  a	suit
against a bank in the Calcutta High Court for enforcement of
a bank
 859
guarantee  given  by it at the instance of  the	 respondent,
following  which, 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	 the
guarantee given by the bank stood discharged and had  become
ineffective and unenforceable.
    A  number  of applications were filed by  the  appellant
during the 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.  20 and O.VII, r. 11 read with s.  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 for	 filing	 of  written
statement,  the	 appellant filed applications 1c,  12-C	 and
13-C:  11-C was an application under O.VIII r. 9 and s.	 151
C.P.C. seeking postponement of the striking of issues,	12-C
was  an application under O.VIII, r.9 to grant leave to	 the
appellant to file a subsequent pleading as written statement
on merits if the court rejected the objections taken in	 the
'preliminary  written statement'; 13-C, which was,  referred
to as the 'preliminary written statement' in 11-C and  12-C,
was an application styled as "Objections by the defendant to
the  jurisdiction  of the Court to entertain this  suit	 for
declaration  and injunction" setting forth seven reasons  in
support of the objections raised, the seventh ground assert-
ing  that the suit was liable to be stayed inter alia  under
s.  3  of the Foreign Awards (Recognition  and	Enforcement)
Act, 1961 and/or s. 34 of the Indian Arbitration Act,  1940.
In  application 30-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 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 of the Foreign  Awards
(Recognition and Enforcement) Act and the Civil Judge should
dispose 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 Judge 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
considered  to	have elected to proceed with the  suit.	 The
revision application
860
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 contained 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  writ-
ten statement was filed and before any step in the  proceed-
ing  was taken. Looking to the substance of the	 matter	 and
ignoring technicalities, we are firmly of the view that	 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 proceed-
ings,  s. 3 of the Foreign Awards (Recognition and  Enforce-
ment)  Act vests no such discretion in the Court. Under	 the
latter	Act it is mandatory that the proceedings  should  be
stayed	if  the 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 and 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
or s. 3 of the Foreign Awards (Recognition and	Enforcement)
Act  may  be  filed "before filing a  written  statement  or
taking	any other step in the proceedings." It is  competent
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  adjudi-
cation	of  the merits of the controversy in the  suit.	 The
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 and general right of a person to seek redressal of
his grievance in a
	861
court of law is subject to the right of the parties to	have
the  disputes settled by a forum of mutual  choice.  Neither
right  is insubstantial 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 cannot be  allowed
to  be defeated by vague or amorphous mis-called  agreements
to refer to 'arbitration'. On the other hand, if the  agree-
ment  to refer to arbitration is established, the  right  to
have the dispute settled by arbitration cannot be allowed to
be defeated on 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  no	 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  objec-
tions  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 Awards (Recognition and  Enforce-
ment) Act. The words occur in the decision of this court  in
State of Uttar Pradesh v. Janki Saran Kailash 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 contro-
versy 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 proceeding  before
the  court in whatever manner but were meant to cover  only'
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 whatev-
er ground, are in truth not aids to the progress of the suit
but  hurdles to such progress. Adjudication of	such  objec-
tions cannot be termed as adjudication of the mertis of	 the
controversy  in	 the  suit. An invitation to  the  court  to
reject a plaint or
862
dismiss	 a suit on a ground not touching the merits  of	 the
controversy  between  the parties, but on a ground  such  as
insufficiency  of  the court fee  paid,	 maintainability  of
suit,  territorial jurisdiction, etc., is really  to  enable
the  proceeding 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 on. It is a step in	 aid
of  arbitration and not in aid of the progress of the  suit.
In that view, 8-C can hardly be called an invitation to	 the
court to
adjudicate upon the merits of the controversy, when in	fact
it  is designed to prevent the court from touching upon	 the
merits of the controversy. [880B-G]
    (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  objections to the trial of  the  suit  on
merits,	 which were loosely described as 'objections to	 the
jurisdiction  of the Court and objections to  the  maintain-
ability 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 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 the defendant  chose
to deny in his application inviting decision on his prelimi-
nary  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 of fact in the plaint with a view to  explain
the preliminary objections raised by him or he may deny	 the
averments of fact by way of abundant caution so as not to be
understood  as having admitted (by not denying)	 the  plaint
averments. [881E-H; 882A-C]
    State  of Uttar Pradesh v. Janki Saran Kailash  Chandra,
[1974] 1 S.C.R. 31, referred to.
 863
    Food  Corporation of India v. Yadav Engineer,  [1983]  1
S.C.R. 95, relied on.



JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2319 of
1986.

From the Judgment and Order dated 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.

L.M. Singhvi, Depanker Gupta, P.L.’ Dubey, N.R. Khaitan,
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
Company, 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 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 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 For-
eign Awards (Recognition and Enforcement) Act, 196 1 seeking
a stay of the suit. On August 19, 1982 GEC also filed a suit
in the Calcutta High Court against the United Commercial
Bank to enforce a bank guarantee given by the bank at the
instance of Renusagar. On November 25, 1982, 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
864
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
MVA 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 of ICC.
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
‘under s. 20 and Order VII r. 11 read with s. 151 of the
Code of Civil Procedure’ praying that the court may be
pleased to reject the plaint and the suit. In this applica-
tion, it was stated that the suit was in abuse of the proc-
ess 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 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 in s. 20 of the Code of Civil Proce-
dure 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. The
defendant then proceeded to state that they reserved the
right to take 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 upon Renusagar to furnish a complete record of
the suit and annex-

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 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 state-
ment by GEC, GEC filed three applications before the Mirza-
pur Court: 11-C, 12-C and 13-C. 13-C was styled as “objec-
tions by the defendant to the jurisdiction of the court to
entertain this suit for declaration and injunction.” The
document began with the statement: “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 plaint, the suit was barred
by limitation. The plaint was, therefore, liable to be
rejected 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 or s. 15 1 of the CPC. The seventh
ground was: “Similarly the suit is liable to be 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/or
s. 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 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 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
866
plaintiff in this plaint to be settled by
arbitration without prejudice to the defence
of want of cause of action, the bar of limita-
tion 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 prayer made in the application (13-
C) was:

“For the above reasons it is prayed that the
plaint be either rejected for failure to
disclose the cause of action or as being
barrred for limitation on the face of it, or
it be returned to be plaintiff for presenta-
tion 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 En-
forcement) 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 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 court
and the preliminary written statement dated 21st February,
1983 was obviously to 13-C which was verified at Singapore
on February 21, 1983.

12-C was an application to grant leave to the defendant
to file a subsequent pleading as written statement on merits
if the court rejected the objections taken in the prelimi-
nary 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 written statement raising their pleas in
defence to Renusagar’s suit. However, in the first paragraph
it was stated:

867

“The defendant has filed in this
Hon’ble Court an application under s. 20 and
Order VIII Rule 9 read with s. 15 1 CPC for
rejection of the plaint with special costs to
the defendant on January 15, 1983. The defend-
ant has also placed on record on January 17,
3983 that a copy of the plaint was supplied
without annexures and documents and without
the injunction application said to have been
filed. 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 plead-
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 objec-
tions 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:
“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 Jurisdiction aspect of the suit and its
apparent non- maintainability and these
sought to be decided as prelimi- nary
questions of law.”

“7. Without prejudice of the preliminary
objections referred to hereinabove and deemed
to be incorporated herein as stated this
defendant shall now deal with the plaint para-
wise and on merits ……….. ”

The plaintiff objected to the presentation of the writ-

ten statement on the ground that it was filed outside court
hours. The plaintiff also filed an application for postpone-
ment of the date of settlement of
868
issues. On August 4, 1983, the defendant filed an applica-
tion (19-C), requesting the court to settle the issues on
August 18, 1983 itself without further postponement. There-
after the case was adjourned from time to time. On October
19, 1983, the plaintiff filed an application (2c) requesting
the court to set the defendant ex parte as not having filed
any written statement and to decree the suit. On August 1,
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,
1984 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
(2) Whether the present suit is maintainable against the
defendantapplicant who neither resides nor carries on busi-
ness in India.”

On February 2, 1985, the Mirzapur Court rejected the appli-
cation, 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
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 to apply its
mind to the provisions contained in s. 3 of
the Act. Shri R.S. Dhawan who appears along-
with Shri V.N. Deshpande has stated at the bar
that amongst other contentions advanced before
the learned Civil Judge, he had pointedly
pressed that in view of the aforesaid provi-
sions further proceedings in the suit should
be stayed. We have no doubt that such an
argument must have advanced by him. Nonethe-
less, the learned Civil Judge had not given
any decision on this point. We, therefore,
consider it 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 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 obser-
vations the writ petition is dismissed sum-
marily.”

Consequent on the order of the High Court in the appli-

cation under Art. 227, GEC filed another application (83-C)
before the Mirzapur Court on April 15, 1985 expressly set-
ting 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 con-
tentions raised in 13-C were reiterated. This application
(83C) 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 to proceed with the suit. The
revision application referred by GEC to the High Court of
Allahabad 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 applica-

870

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 that it was apparent to them that the emphasis
in 13-C was on the other objections and not on the objec-
tions under sec. 3 of the Foreign Awards 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 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 Renusa-
gar 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
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 (Recog-
nition & 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 de-
fendant 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 York, on the th day of June, 1958, to which
India is a party and for purposes connected therewith’. The
Convention is set-forth in the 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. Except s. 3, we are not concerned with the remaining
provisions of the Act. Section 3 is as follows:

“Stay of proceedings in respect of matters to
be refer-

871

red to arbitration:-Notwithstanding anything
contained in 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 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 satis-
fied that the agreement is null and void,
inoperative or incapable of being performed or
that there is not, in fact, any dispute be-
tween the parties with regard to the matter
agreed to be referred, shall make an order
staying the proceedings.”

Section 3 of the Foreign Awards (Recogni-
tion & 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 proceed-
ings 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 will-
ing to do all things necessary to the proper
conduct of the arbitration, such authority may
make an order staying the proceedings.”

It may be straightaway noticed that 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
Awards (Recognition & Enforcement) Act vests no such discre-
tion 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
872
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 neces-
sary 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. or s. 3 of
the Foreign Awards (Recognition & Enforcement) Act may be
filed “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 ar-
rived 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 judgment
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
* 1. Ford’s Hotel Company Ltd. v. Bartlett (1896(I) AC 1)

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 (1984 (2) All Eng. LR 545)
**1. Raymond v. Adrema Ltd. (37 DLR (2d) 9)

2. Fathers of Confederation Bldgs. Trust v. Pigott Con-
struction Company Limited 44 DLR (3d) 265)
* * * 1. Russell on Arbitration (20th Edition)

2. Commercial Arbitration by Mustil & Boyd.

873

ideology, its constitutional direction and strategies and
its statutes and precedents. Foreign precedents are to be
read and remembered in their setting, out never to be ele-
vated 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 consideration of the Supreme Court in State of U.P .v.
Janki Saran Kailash 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 Kailash Chandra
(supra), the facts were that the summons in a suit institut-
ed against the State of 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 grant-
ed as prayed for. On October 1, 1966, the District Govern-
ment Counsel filed an application under s. 34 of the Arbi-
tration Act pleading that there was an arbitration clause in
the agreement between the parties, that the State was will-
ing to have the matter referred to arbitration and that the
suit should therefore, be stayed. The Trial Court stayed the
suit. But, on appeal, the High Court took the view that the
application for time for filing the written statement was a
step in the proceedings within the meaning of that expres-
sion in s. 34 of the Arbitration Act and the defendant was
therefore, disentitled to claim that the suit should be
stayed. The Supreme Court affirmed the decisions of the High
Court observing, “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 interfering under Art. 136 of
the Constitution.” The Court then proceeded to discuss the
scope and meaning of s. 34 of the Arbitration Act and went
on to observe:

“To enable a defendant to obtain an order
staying the suit, apart from other conditions
mentioned in s. 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 proceedings.
In the present case the written statement was
indisputably not filed before the application
for stay was presented. The question is wheth-
er any other step was taken in the proceeding
as contemplated by s. 34 and it is this point
with which we are directly concerned in the
present case. Taking other steps in the suit
874
proceedings connotes the idea of doing some-
thing 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.”

Thereafter, the Court also noticed that the State had
taken benefit of the appearance of the District Standing
Counsel and his successful prayer for adjournment of the
case by one month for the purpose of filing the written
statement. Dealing with the question whether the High Court
had interfered with the discretion of the Trial Court, it
was observed,
“If the appellants’ application was for ad-
journment for the purpose of filing a written
statement, then there is no question of any
exercise of the discretion by the Trial Court.
Discretion with regard to stay under s. 34 of
the Arbitration Act is to be exercised only
when an application under that Section is
otherwise competent. Incidentlly 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.”

The Court then added,
“Keeping in view the long delay after the
institution of the suit and the fact that the
suit is for a very heavy amount by way of
damages for breach of contract, it will, in
our opinion, be more satisfactory on the whole
to have the suit tried in a competent court of
law in the normal course rather than by a lay
arbitrator who is not bound either by the law
of evidence or by the law of procedure.”

In Food Corporation of India ,,,. Yadav Engineer (supra)
the question arose whether the appearance of the defendant
and his prayer for time to reply to the notice of motion
taken out by the plaintiff for an interim injunction could
be said to amount to a step in the proceeding so as to
disentitle the defendant from seeking a stay of the proceed-
ing under sec. 34 of the Arbitration Act. First interpreting
sec. 34 without the aid of authority, Desai, J. speaking for
the court, observed that if a party to an arbitration agree-
ment sought to enforce the agreement by seeking a stay of
the suit, he was obliged to disclose his unequivocal inten-
tion to abide by the agreement by asking for stay
875
before taking any step which may unequivocally indicate
otherwise, that is, a step which may unequivocally indicate
the intention to waive the benefit of the arbitration agree-
ment.

“Abandonment of a right to seek
resolution of dispute as provided in the
arbitration agreement must be clearly mani-
fested by the’ step taken by such party. Once
such unequivocal intention is declared or
abandonment of the fight to claim the benefit
of the agreement becomes manifest from the
conduct, such party would then not be entitled
to enforce the arbitration agreement because
there is thus a breach of the agreement by
both the parties disentitling both to claim
any benefit of the arbitration agreement.
Section 34 provides that a party dragged to
the court as defendant by another party who is
a party to the arbitration agreement must ask
for stay of the proceedings before filing the
written statement or before taking any other
step in the proceedings. That party must
simultaneously show its readiness and willing-
ness 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 pointed
out that filing of the written statement
discloses such conduct on the part of the
party as would unquestionably show that the
party has abandoned its rights under the
arbitration agreement and has 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 state-
ment 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 arbitra-
tion agreement by forcing the parties to
resort to the forum of their choice as set out
in the arbitration agreement. This flows from
the well settled principle that the court
would normally hold the parties to the bargain
(see Ramaji Dayawala & Sons (P) Ltd. v. Invest
Import,
[ 1981] (I) SCR 399.”

Posing next the question what other steps the legislature
contemplated as disentitling a party from obtaining stay of
the proceedings, the
876
learned Judges applied the principle of ejusdem generis and
held:

“That some other step must indis-
putably be such step as would manifestly
display an unequivocal intention to proceed
with the suit and to give up the right to have
the matter disposed of by arbitration. Each
and every step taken in the proceedings cannot
come in the way of the party seeking to en-
force the arbitration agreement by obtaining
stay of proceedings but the step taken by the
party must be such step as would clearly and
unmistakably indicate an intention on the part
of such party to give up the benefit of arbi-
tration 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 which would disentitle the
party from obtaining stay of proceeding must
be such step as would display an unequivocal
intention to proceed with the suit and to
abandon the benefit of the arbitration agree-
ment or the right to get the dispute resolved
by arbitration.”

The learned judges then proceeded to consider the question
whether an appearance in the suit to contest an interlocuto-
ry application, such as, an application for appointment of
receiver or ex parte ad interim injunction, disclosed an
unequivocal intention to proceed with the suit and give up
in the benefit of the arbitration agreement. The question
was answered as follows:

“Incidental proceedings for appoint-
ment of receiver or for interim injunction are
for the protection either of the property or
the interests of the parties. Now, when ex
parte orders are obtained on ex parte aver-
ments the other party cannot be precluded from
coming and pointing out that no case is made
out for granting interim relief. It would be
too cumbersome to expect the party first to
apply for stay and then invite the court under
s. 41(2) of the Act to vacate the injunction
or to discharge the receiver. Giving the
expression ‘taking any other steps in the
proceedings’ such wide connotation as making
an application for any purpose in the suit
such as vacating stay, discharge of the re-
ceiver or even modifying the interim orders
would work hardship and would be inequitous to
the party who is willing to abide by the
arbitration agreement and yet be forced to
suffer the inequity of ex parte orders. There-
fore, the expression tak-

877

ing 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 intention to
waive the benefit of the arbitration agreement
and to acquiesce in the proceedings. Interloc-
utory proceedings are incidental to the main
proceedings. They have a life till the dispos-
al of the main proceeding. As the suit or the
proceedings is likely to take some time before
the dispute in the suit is finally adjudicat-
ed, more often interim orders have to be made
for the protection of the rights of the par-
ties. 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 arbitra-
tion agreement or that it has submitted to the
jurisdiction of the court. When ex parte
orders are made at the back of the party the
other party is forced to come to the court to
vindicate its right. Such compulsion cannot
disclose an unambiguous intention to give up
the benefit of the arbitration agreement.
Therefore, taking any other steps in the
proceedings must be confined to taking steps
in the proceedings for resolution of the
substantial dispute in the suit. Appearing and
contesting the interlocutory applications by
seeking either vacation thereof or modifica-
tion thereof cannot be said to be displaying
an unambiguous intention to acquiesce in the
suit and to waive the benefit of the arbitra-
tion agreement. Any other view would both be
harsh and inequitous and contrary to the
underlying intendment of the Act. The first
party which approaches the court and seeks an
ex parte interim order has obviously come to
the court in breach of the arbitration agree-
ment. By obtaining an ex parte order if it
forces the other party to the agreement to
suffer the order or by merely contesting be
imputed the intention of waiving the benefit
of arbitration agreement, it would enjoy an
undeserved advantage. Such could not be the
underlying purpose of s. 34. Therefore, in our
opinion, to effectuate the purpose underlying
s. 34 the narrow construction of the expres-
sion ‘taking any other steps in the proceed-
ings’ as hereinabove set out appears to ad-
vance the
878
object and purpose underlying s. 34 and the
purpose for which the Act was enacted.”

The court then referred to various decisions on the ques-
tion. Thereafter the case of State of U. P. v. Jankisaran
Kailashchandra, (supra) was discussed in detail. After
quoting from the judgment of Justice Dua, the court ob-
served:

“The view herein taken not only does
not run counter to the view we have taken but
in fact clearly supports the view because the
pertinent observation is that taking step in
the proceeding which would disentitle a party
to obtain a stay of the suit must be 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. In other
words, the step must necessarily manifest the
intention of the party to abandon or waive its
right to go to arbitration or acquiesce in the
dispute being decided by court. In fact, the
view taken in this case should have quelled
the controversy but it continued to figure in
one form or the other and that is why we have
dealt with the matter in detail.”
The Court finally concluded the discussion as
follows:

“Having thus critically examined
both on principle and precedent the meaning to
be given to the expression ‘taking steps in
the proceedings’, we are clearly of the view
that unless the step alleged to have been
taken by the party seeking to enforce arbitra-
tion agreement is such as would display in
unequivocal intention to proceed with the suit
and acquiesce in the method of resolution of
dispute adopted by the other party, namely,
filing of the suit and thereby indicate that
it has abandoned its right under the arbitra-
tion agreement to get the dispute resolved by
arbitration, any other step would not disenti-
tle the party from seeking relief under s. 34.
It may be clearly emphasised that contesting
the application for interim injunction or for
appointment of a receiver or for interim
relief by itself without anything more would
not constitute such step as would disentitle
the party to an order under s. 34 of the Act.

‘ ‘
879
Thus we see that it is the view of this court that a step in
the proceeding which would disentitle the defendant from
invoking sec. 34 of the Arbitration Act should be a step in
aid of the progress of the suit or submission to the juris-
diction of the court for the purpose of adjudication of the
merits of the controversy in the suit. The step must be such
as to manifest the intention of the party unequivocally to
abandon the right under the arbitration agreement and in-
stead 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 arbi-
tration. The election or affirmation may be by express
choice or by necessary implication by acquiescence. The
broad and general right of a person to seek redressal of his
grievances in a court of law is subject to the right of the
parties to have the disputes settled by a forum of mutual
choice. Neither right is insubstantial 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
cannot be allowed to be defeated by vague or amorphous mis-
called agreements to refer to ‘arbitration’. On the other
hand, if the agreement to refer to arbitration is estab-
lished, the right to have the dispute settled by arbitration
cannot be allowed to be defeated on technical grounds.
What do we have in the present case? We mentioned at the
outset that GEC filed two applications on January 17, 1983,
7-C and 8-C. In 7-C, GEC purported to put on record their
complaint that they had not received the annexures to the
plaint. By no stretch of imagination could it possibly be
paid that 7-C indicated either an abandonment of arbitration
or an affirmation of the suit. 8-C was an application re-
questing 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 juris-
diction. Another ground was that the plaint was insuffi-
ciently 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 thresh-
old 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. It was said that the return of a
plaint under Order VII r. 10 and the rejection of a plaint
under Order VII r. 11 put an end to the controversy so far
as the court where the proceedings had been instituted and
that the rejection of a plaint under Order VII r. 11 was a
decree within the definition of that expression in Order II
r. 2 of the Civil Procedure Code. It was argued that the
rejection of a plaint for non-disclosure of a cause of
action was also an
880
adjudication of the merits of the controversy in the suit
and reliance was placed on decisions under the Representa-
tion of People Act. We do not think that we can accept the
argument nor are we able to derive any assistance from the
cases cited. In the first place, the expression ‘merits of
the controversy in the suit’ does not occur either under
sec. 34 of the Arbitration Act or sec. 3 of the Foreign
Awards (Recognition and Enforcement) Act. The words occur in
the decision of this court in State of U.P .v. Janki Saran
Kailash Chandra (supra) 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 adjudi-
cation of the merits of the controversy in the suit.” As
often enough pointed out by us, words and expressions used
in a judgment are not to be construed in the same manner as
statutes or as words and expressions defined in statutes. We
do not have any doubt that when the words “adjudication of
the merits of the controversy in the suit” were used by this
court in State of U.P .v. Janki Saran Kailash Chandra
(supra), the words were not used to take in every adjudica-
tion which brought to an end the proceeding before the court
in whatever manner but were meant to cover only such adjudi-
cation 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 merits of the controversy in
the suit. As we said earlier, a broad view has to be taken
of the principles involved and narrow and technical inter-
pretation which tends to defeat the object of the legisla-
tion must be avoided. We are of the view that an invitation
to the court to reject a plaint or dismiss a suit on a
ground not touching the merits of the controversy between
the parties, but a ground such as insufficiency of the court
fee paid, maintainability of suit, territorial jurisdiction
etc. is really to enable the proceeding before the arbitra-
tor 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 on.
It is a step in aid of arbitration and not in aid of the
progress of the suit. In that view, we think that 8-C can
hardly be called an invitation to the court to adjudicate
upon the merits of the controversy, when in fact it is
designed to prevent the court from touching upon the merits
of the controversy.

The next set of events relied upon by the plaintiff to
deny the defendant’s right to obtain stay in the filing by
GEC of the applications 1c, 12-C and 13-C in the Mirzapur
Court on March 4, 1983.4th
881
March and 7th March were the dates which had been fixed by
the Court for filing the written statement and for the
striking of the issues. The defendant, on March 4, instead
of filing the written statement, filed 11-C, 12-C and 13-C.
13-C, as already mentioned, was styled “objections by the
defendant to the jurisdiction of the Court to entertain a
suit for declaration and injunction”. It began with the
statement, “the Hon’ble Court has no jurisdiction to enter-
tain the suit for the following reasons” and ended with the
prayer:

“for the above reasons it is prayed that the
plaint may be either rejected for failure to
disclose a cause of action or as being barred
by limitation on the face of it, or it be
returned to the 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 s. 3 of the For-
eign Awards (Recognition & Enforcement) Act
196 1 in respect of second relief claimed by
the plaintiff in the suit.”

11-C was an application seeking postponement of the
striking of the issues from March 7 to a later date in the
event of the preliminary objections being rejected. 12-C was
an application to grant leave to file a subsequent pleading
as written statement in the event of the preliminary objec-
tions being rejected. Obviously ll-C, 12-C and 13-C have to
be read together and reading them together, it appears to us
to be clear that the defendant raised objections 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 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 decid-
ed. The preliminary objections were set out by the defendant
in 8-C and 13-C and we have set them out earlier while
narrating the facts. We notice that the preliminary objec-
tions raised were not of such a nature as to make adjudica-
tion 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
882
circumstances that the defendant chose to deny in his appli-
cation inviting decision on his 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 charac-
ter of a written statement merely because factual allega-
tions made in the plaint are also dealt with in the reply. A
defendant may consider it necessary to deny the averments of
the fact in the plaint with a view to explain the prelimi-
nary objections raised by him or he may deny the averments
of fact by way of abundant caution so as not to be under-
stood as having admitted (by not denying) the plaint aver-
ments.

In such a situation, the question to be considered is
did the defendant intend it to be a written statement or was
the document capable of being construed as setting out
unreservedly the case which the defendant wished to put
forward? Was it meant to answer the plaint? We do not think
either 8-C or 13-C is capable of being so construed. Neither
the title of the documents nor the prayer in the documents
would justify their being dubbed as written statements. We
have referred to their contents and we do not think it
possible to view 8-C or 13-C as meant to answer the plaint.
They were objections and not answer to the Plaint. We are
unable to hold that either of them can be treated as a
written statement. It is of interest to note here that the
plaintiff himself filed an application 21-C requesting the
court to set the defendant ex parte on the ground that he
did not file any written statement. Obviously the plaintiff
never considered 13-C to be a written statement. We are also
unable to hold that either of them can be said to be a step
in the proceeding. We have already explained why 8-C cannot
be treated as a step in the proceeding. The same reasons
apply to 13-C also. 13-C invited the court to consider the
preliminary objections amongst which was a prayer to stay
the suit under s. 3 of the Foreign Awards (Recognition &
Enforcement) Act. An invitation to the court to decide the
preliminary objections was in fact a request to the court
not to proceed with the trial of the suit on merits. We are
unable to hold that 13-C was an invitation to the court to
adjudicate upon the merits of the controversy, when in fact
as we said in the case of 8-C, it was designed to prevent
the court from touching upon the merits of the controversy.
It was argued that the defendant himself sought permission
for filing additional pleadings if preliminary objections
were rejected and, therefore, the defendant himself thought
that 13-C was a pleading, namely, a written statement. Our
attention was also invited to the written statement filed on
May 31, 1983 in which the preliminary objections filed
earlier were referred to as preliminary
883
written statement. We do not think we will be justified in
harping upon a word here or a word there. As we said earli-
er, we propose to look at the substance of the matter and
ignore the chaff. Looking to the subStance of the matter, we
find that before May 31, 1983, that is, the date on which
the written statement was filed, the defendant did not take
any step in the suit. The applications filed by him were not
in aid of the progress of the suit, but to request the court
to refrain from proceeding with the suit. 13-C contained a
prayer for the stay of the suit under s. 3 of the Foreign
Awards (Recognition & Enforcement) Act and we hold that, in
terms of that provision, it was made before the written
statement was filed and before any step in the proceeding
was taken.

An argument which was presssed before us was that the
conduct of the defendant was such that he must be considered
to have abandoned his right to have the suit stayed under s.
3 of the Foreign Awards (Recognition & Enforcement) Act. We
do not think there is any substance in the submission. On
the one hand, we have the outstanding circumstances that the
defendant was proceeding with the arbitration. On the other
hand, we have also the circumstance that the defendant filed
13-C one of the prayers of which was a stay of the suit
under s. 3 of the Act. The argument was that the defendant
did not press his application and did not seek the orders of
the court on 13-C. This would not be a correct picture of
the events since we find that even on January 19, 1983, the
court made an order that preliminary objections like 7-C and
8-C could be heard and disposed of after filing of written
statement when the issues may be framed. We also find that
at every stage the defendant kept referring to his prelimi-
nary objections and never for a moment abandoned them. 30-C
was another application filed by him requesting the court to
decide the preliminary objections regarding jurisdiction and
maintainability of the suit. On this the order was that it
was not competent for the court to reopen the order dated
January 19, 1983. It was therefore, not the defendant’s
fault that the preliminary objections were not decided.
Later again the defendant filed 34-C requesting the court to
frame preliminary issues and try them on the question of the
jurisdiction of the court and the maintainability of the
suit. This application was also rejected by the court with
the comment that the request was being repeatedly made. It
was against this order that the defendant went to the High
Court with the application 65-C. The High Court directed the
defendant to file an application for the trial court spe-
cially requesting that court to apply its mind to the provi-
sions of s. 3 of the Foreign Awards (Recognition & Enforce-
ment) Act and pointedly pressing the contention relating to
that provisions. Pursuant to this direction, the defendant
filed 83-C
884
before the trial court and it is on the orders made on this
application that the present appeal has come before us. The
submission of the learned counsel for the plaintiff was that
the appeal before us arose directly from the order made on
the application 83-C not on the application 13-C. According
to the learned counsel, 13-C must be considered to have been
given up and since 83-C was filed long after the filing of
the written statement, it was incompetent. We are unable to
agree. 13-C was never abandoned by the defendant. On the
other hand 83-C also expressly refers to 13-C. 83-C is a
reiteration and revival of 13-C with emphasis on the objec-
tion relating to s. 3 of the Foreign Awards (Recognition &
Enforcement) Act.

Looking to the substance of the matter and ignoring
technicalities, we are firmly of the view that 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. The appeals,
therefore allowed with costs and the suit No. 127 of 1982 in
the court of Mirzapur stayed under s. 3 of the Foreign
Awards (Recognition & Enforcement) Act. In the view that we
have taken we do not think it necessary to consider the
further question raised by the learned counsel for the
appellant that the amendment of the plaint introducing a
substantially new cause of action gave the defendant a fresh
right under s. 3 of the Foreign Awards Act.

H.L.C.						      Appeal
allowed.
885



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