ORDER
1. This is second defendant’s motion of the effect that pending the hearing and final disposal of the arbitration proceeding between the plaintiffs and the second defendant further proceedings relating to the present suit should be stayed under S. 34 of the Arbitration Act (hereafter, the Act ) and the plaintiffs should be directed to refer the subject matter of this suit to arbitration.
2. It is undisputed that between the plaintiffs and the second defendant there is in fact a subsisting arbitration agreement which covers the dispute raised by the plaintiffs against the second defendant in this suit. There is also no dispute that pursuant to this agreement reference has already been made to the arbitrations and the arbitrators are in fact seized of the arbitration proceedings at New Delhi. Certain legal questions having arisen in the said proceedings the same, I understand have been referred for their determination to the Delhi High Court. There is thus a subsisting arbitration agreement between the plaintiffs and the second defendant, the said agreement covers the dispute between the plaintiffs and the second defendant in the present suits, the matter in fact has been referred to arbitration and the arbitration proceedings have commenced before the arbitrations at New Delhi. In all the circumstances, I see no good reasons why relief of stay prayed for in the present motion should not be grated at least as against the section defendant.
3. Learned Counsel for the plaintiffs however, raised tow contentions viz.,
i) The second defendant having filed appearance otherwise than under protest and the Court having issued directions in the suit inter alia for filing written statement, the present motion is belated and liable to be dismissed.
ii) The motion is not maintainable also because, in any event, the first defendant to this suit is not a party to the arbitration agreement .
Hearing rival submissions of the respective Council and considering the authorities cited at the Bar, I see no merit in either of these contentions.
4. Taking upon the first contention we have the recent judgment of the Supreme Court Rachappa Guruadappa V. Gurusidappa Nuranjappa, , wherein earlier rulings have been referred to. Now an application for stay under S. 34 of the Act has to be filed obviously before the filling of the written statement or taking any other step in the proceeding. In the context of any other step in the proceeding, the Supreme Court has held that any other step must undisputebly be such step as would manifestly display an unequivocal intention to proceed with the suit and to give upon the right to have the matter disposed of by the arbitration. The step must be such as would clearly and unambiguously manifest the intention to waive the benefit of arbitration agreement. It is imperative to determine whether a party has evinced or indicated any intention to proceed with the arbitration. Again, after entirely examining both on principle and precedent the meaning to be given to the expression ‘taking step in the proceeding’, the Supreme Court held thus in Food Corporation of India v. Yadav Engineer & Contractor AIR 1983 SC 1302 at p. 1313–
“…….We are clearly of the view that unless the step alleged to have been taken by the party seeking to enforce arbitration agreement is such as would display an 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 indicated that it has abandoned its right under the arbitration agreement to get the dispute resolved by arbitration, any other step would not disentitle the party form 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 constitutes such step as would disentitle the party to an order under S.34 of the Act”
In Nuruddin Abdulhusein V. Abu Ahmed Abdul Jalli , Tendolkar J. held that filing of an unconditional appearance in Court is not a step in the proceeding. As further observed at page 129 of the report–
“…..for the purpose of making an application for stay, the defendant must of necessity file an appearance; and it would be in my opinion against good sense to hold that something which the defendant is bound to do before he can apply for stay is a step in the proceedings it seems to me clear that there is no obligation on the defendant to follow this practice (of filling appearance under protest) of doubtful import and utility and he is at liberty to file an unconditional appearance.”
This view of Tendolkar J. was affirmed by the Supreme Court in its Food Corporation of India’s (AIR 1982 SC 1302) ruling supra holding thus at page 1310 of the report–
“We are, therefore, not disposed to accept the suggestion that in order to avoid any pitfall of being denied the benefit of arbitration agreement the party seeking to enforce the agreement must enter an appearance under protest…..”
5. Applying these tests here there can be no doubt that mere filing of unconditional appearance by the second defendant and/or mere issuance of directions by the Court does not and cannot nullify the second defendants instant motion under S.34 of the Act. Again even when the second defendant filed appearance in this suit as also when the Courts issued directions, the dispute between the plaintiffs and the second defendant had, pursuant to the subsisting arbitration agreement between them already been referred to arbitration and the matter was already pending before the arbitrators. There was, therefore, no question of the second defendant’s displaying an unequivocal intention to proceed with the suit nor any question of the second defendant giving up or waiving the right to have the matter disposed of by arbitration. Indeed, intention and conduct disclosed was just the contrary. By its actions the second defendant has all along shown its unequivocal intention to abide by and not abdicate the arbitration agreement. At no stage did it waive the benefit thereof. If was, in the circumstances, entitled to hold that plaintiffs to this agreement and was justified in asking the plaintiffs to honour it. The first contention thus fails and Is rejected.
6. Turning next to the second condition. It is true that the first defendant is not a party to the arbitration agreement. That however, does not preclude the Court form staying the suit qua the second defendant. There is not bar thereto in S.34 of the Act. The ruling in Hindustan Zinc Limited v. Associated Metals & Minerals Corporation has little relevance to the instant Case. The factual position therein is altogether different form the same here. Indeed, the plaintiffs here have not even claimed any effective decree against defendant No.2. Money decree is claimed only as against defendant No.1 bank which made to defendant No.2 payment under the bank guarantees. The arbitration agreement between the plaintiffs and the second defendant duly acted upon by these parties is, therefore, not rendered nugatory and infructuous only because defendant No.1 is not a party thereto. An arbitration agreement is not to be lightly or easily set at naught nor needles obstruction and hurdle set up in the implementation thereof. Indeed, experience of judicial administration, mounting arrears in incessant delays warrant encouragement to the comparatively much quicker resolution of disputes by and through arbitrations. As observed by the Supreme Court in Rachappa’s ruling supra:
“Arbitration is an alterative procedure for speedy adjudication of disputes between the parties and should normally be encouraged.”
And as again observed by the Supreme Court in Food Corporation of India’s (AIR 1982 SC 1302) ruling supra at page 1305 of the report–
“If the parties enter into an arbitration agreement implying that they would like that the disputes covered by the agreement will be resolved by a forum of their choice, the approach of the Court must be that parties to the contract are held to their bargain. If in breach or derogation of a solemn contract a party to an arbitration agreement approaches the Court and if the other side expeditiously approaches the Court invoking the Court’s jurisdiction to stay the proceedings so that by this negative process the Court forces the parties to abide by the bargain ordinarily the Court’s approach should be and has been to enforce agreements rather than to find loopholes therein.”
It is true the relief under S.34 of the Act is ultimately in the discretion of the Court. There is no rigid or inflexible formula governing the same. But as all judicial discretions, it must be exercised fairly and reasonably. Now, if the second defendant has made out a case, which, in may judgment, it well has, for saty under S.34 of the Act, I see no good and sufficient reason to nevertheless duny relief accordingly to it. Denial of the relief would be denial of justice.
7. In all the circumstances, the following order is passed in this motion:
a) Pending the hearing and final disposal of the arbitration proceedings between the plaintiffs and the second defendant, further proceedings relating on this suit are stayed under S.34 of the Arbitration Act as against the second defendant. Plaintiffs are at liberty to proceed with the suit, if so advised, against the first defendant.
b) Parties to bear their own respective costs of the motion.
8. Order accordingly.