JUDGMENT
Mishra, J.
1. This appeal is directed against a judgment in an application under Section 34 of the Arbitration Act (Application No. 3299 of 1985) in CS. No. 379 of 1985 to stay the proceedings in C.S. No. 379 of 1985, a suit for winding up a partnership business and for accounts as well as division of assets etc.
2. There as no dispute before us that the partnership was created under an agreement dated 13.4.1973 and was one at will of which the first defendant/ appellant was the managing partner. The plaintiff/ respondent issued a notice on 22.5.1984 demanding rendition of account. The first defendant/ appellant sent a reply to the said notice on 7.6.1984, after which, however, the plaintiff/respondent conveyed by notice dated 13.5.1985 his intention to dissolve the partnership firm and filed the suit for the above reliefs. The defendants, on appearance, filed a petition under Section 34 of the Arbitration Act stating that under Clause 17 of the partnership agreement dated 13.4.1973 any dispute between the parties has to be resolved only with the help of Arbitrators.
3. Clause 17 has been extracted in full in the impugned judgment which reads as follows:
When we decide to dissolve the partnership we shall ascertain the profits or losses upto the date of the dissolution in the usual manner and the same be divided according to our profit sharing ratios as mentioned above. The assets, liabilities, stocks, furniture, machinery, rights and obligations, permits, quotas etc., be shared between us in any manner that may be agreed upon between us either by ourselves or with the help of arbitrators, if need be.
It is conceded before us and it appears that it was so conceded before the learned single Judge that the above clause stipulated an arbitration and the winding up accounts etc., for which the instant suit has been filed is covered by the arbitration agreement. Learned single Judge has clearly recorded a finding in this behalf that the above is an arbitration clause in the agreement, which squarely applies to the suit causes.
4. The trial Court has, however, accepted the contention of the plaintiff/respondent that the application under Section 34 of the Act has been filed beyond the time fixed under the Act, and is, therefore, not maintainable. This finding has been questioned before us on facts as well as law, for, the trial Court has said that the limitation as to filing of the application under Section 34 of the Act is the time allowed for filing written statement and that under the Rules of this Court in its original jurisdiction the written statement has to be filed within two weeks of the service of summons in the suit. In the instant case, the application under Section 34 of the Act has been filed more than two weeks after the service of summons. It is said, however, that after appearance the defendants applied for time for filing the written statement and before filing the written statement they filed the application for stay under Section 34 of the Act. Two citations, (1) a judgment of the Calcutta High Court in the case of Shroff Brothers v. Bisheswar Dayal A.I.R. 1974 Cat. 352 and (2) a judgment of this Court in the case of Indian Oil Corporation Ltd. v. Nainsukdas Baldeodas, 95 L.W. 187 are cited in the judgment for the proposition that a person who had merely entered appearance and asked for time for filing a written statement would be deemed to have taken a step in the proceeding and, therefore, no application for staying the suit could be filed and that it would not be a correct application of Section 34 of the Act if an application is entertained after the expiry of the time for filing the written statement because, on principle there is no difference between a formal application for extension of time to file the written statement and allowing the time for filing the written statement to expire and then make an application for stay under Section 34 of the Arbitration Act, 1940. Section 34 of the Act has made a specific provision that ”at any time before filing a written statement or taking any other steps in the proceeding” any party to an arbitration agreement or any person claiming under him in respect of any matter agreed to be referred to arbitration, may, “apply to the judicial authority before which the proceedings are pending to stay the proceedings”. The condition for making an application under Section 34 to stay the legal proceedings and to ask the parties to seek arbitration is that it should be filed before taking any other step in the proceedings, by the party seeking to enforce arbitration. The two judgments that are the basis for the view of the learned Single Judge appeared to state what is stated by the Supreme Court in the case of State of U.P. v. Janki Saran Kailash Chandra . in that case, one Janki Saran Kailash Chandra filed a suit against the State of U.P. and Divisional Forest Officer, Bijnor for recovery of damages alleging breach of contract. The summons in the suit issued to the State of U.P. was served on the District Government Counsel. On September 2,1966, the District Government Counsel filed an appearance slip in the Court and also put in a formal application praying for one month’s time for the purpose of filing written statement. On October 1,1966 the District Government Counsel filed an application under Section 34 of the Act pleading that there was an arbitration clause in the contract between 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 granted the motion for the stay of suit. On appeal the High Court held that the action of the District Government Counsel in applying for time to file the written statement amounted to taking a step in the proceeding within the meaning of Section 34 of the Act, and set aside the order of the trial Court and rejected the request for stay of proceedings. State of U.P. approached the Supreme Court against the order of the High Court. The Supreme Court observed as under:
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 the suit.
However, a Bench of three Judges of the Supreme Court has taken a view that Section 34 of the Act prescribes a mode and method of enforcing the arbitration agreement when a party to the agreement has filed a suit for breach of the agreement and the other party to the agreement is dragged to the Court, by staying the suit at the instance of the other party so dragged to the Court and the first party consequently would be forced to honour the arbitration agreement. But before the other party to the arbitration agreement is entitled to enforce the arbitration agreement by stay of the suit it must disclose its unequivocal intention to abide by the agreement and, therefore, Section 34 obliges such a party to ask for stay of the proceedings before such a party takes any steps which may unequivocally indicate the intention to waive the benefit of the arbitration agreement. Abandonment of a right to seek resolution of dispute as provided in the arbitration agreement must be clearly manifested by the step taken by such party. Once such unequivocal intention is declared or abandonment of the right to claim the benefit of the agreement becomes manifest from the conduct, such party would then 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 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 willingness to do all things necessary to the proper conduct of the arbitration. The legislature by making it mandatory on the party seeking benefit of the arbitration agreement to apply for stay of the proceedings before filing the written statement or before taking any other steps in the proceedings unmistakably 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 statement to the suit it discloses its defence, enters into a contest and invites the Court to adjudicate upon the dispute. Once the Court is invited to adjudicate upon the dispute there is no question of then enforcing an arbitration 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 Ramji Dayawala & Sons (P) Ltd. v. Invest Import . After saying as above, on the underlying intendment of Section 34 of the Act, the Supreme Court in this judgment has proceeded to examine what other steps did the legislature contemplate as being taken in the proceedings which would disentitle the party to the suit from obtaining stay of the proceedings which would have the effect of enforcing the arbitration agreement and has said:
General words ‘taking any other steps in the proceedings’ just follow the specific expression ‘filing a written statement’ and both are used for achieving the same purpose. Therefore, the latter general expression must be construed ejusdem generis with the specific expression just preceding to bring out the ambit of the latter. Expression ‘written statement’ is a term of specific connotation ordinarily signifying a reply to the plaint filed by the plaintiff. Therefore, the expression ‘written statement’ in Section 34 signifies a specific thing, namely, filing an answer on merits to the plaint filed by the plaintiff. This specific word is followed by general words ‘taking any other steps in the proceedings’. The principle of ejusdem generis must help in finding out the import of the general words because it is a well established rule in the construction or statutes that general terms following particular ones apply to such persons or things as are ejusdem generis with these comprehended in the language of the legislature.
The above case sufficiently indicates the principle. But, the Supreme Court has made it more explicit by saying:
That some other step must indisputably be such step as would manifestly display an unequivocal intention to proceed with the suit and to give up the right to 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 enforce 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 arbitration agreement and to acquiesce in the proceedings “commenced against the party and to get the dispute resolved by the Court. A step taken in the suit 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 agreement or the right to get the dispute resolved by arbitration”.
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 receiver 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 pane orders. Therefore, the expression ‘taking any other steps in the proceedings’ must be given a narrow meaning in that the step must be taken in the main proceeding of the suit and it must be such step as would “clearly and unambiguously manifest the intention to waive the benefit of the arbitration agreement and to acquiesce in the proceedings.
Commenting on the precedents the Supreme Court in this judgment has quoted the above observation in State of U.P. v. Janki Saran Kailash Chandra and has said:
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.
The Supreme Court has in this judgment then said:
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 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 indicate 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 from seeking relief under Section 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 Section 34 of the Act.
Thus it is clear from what has been stated as the law on the subject by the Supreme Court that there is no authority as such for making an application under Section 34 of the Act only until the time prescribed for the filing of the written statement. Filing of the written statement alone would show the unequivocal intention to proceed with the suit. In Section 34 it is so stated that application for stay should be filed before the filing of the written statement and not thereafter. Taking any other steps in the proceedings’ has been interpreted by the Supreme Court also to mean that it should be such as would display an unequivocal intention to proceed with the suit and to give up the right to have the matter disposed of by arbitration and thereby to indicate that it has abandoned its right under the arbitration agreement to get the dispute resolved by the arbitration. Any other step would not disentitle the party from seeking relief under Section 34. It will be, therefore, necessary to examine any such case not in the light of what has been said in the judgment of the Calcutta High Court in the case of Shroff Brothers v. Bisheswar Dayal or the judgment of this Court in the case of Indian Oil Corporation Ltd. v. Nainsukdas Baldeodas, 95 L.W. 187. There is nothing in the language of Section 34 as has been clarified by the Supreme Court in the case of Food Corporation of India v. Yadav Engineer and Contractor A.I.R. 1982 S.C. 1302, that a definite period is contemplated for filing the petition under Section 34 of the Act. There is also no intention to keep or fix the time limited to the statutory declarations of the period of filing the written statement but actual filing of the written statement or taking any other step which may give the basis to hold that the defendant has intended to give up his right under the agreement. We have also difficulty in accepting that the period for the filing of the written statement is fixed by law. Order 5, Rule 1 of the Original Side Rules of this Court says:
If the defendant intends to defend the suit, he shall, within the period limited by the summons served on him, file in Court a written statement setting out the grounds of his defence in the form prescribed by the Code, and also stating his address for service: Provided that a defendant may “file his written statement within a further period of five days if the plaintiff or his advocate consents and signifies such consent by endorsement on the written statement The costs of obtaining and granting consent shall be costs in the cause. The defendant shall, within the said period, give notice to the plaintiff that he has filed a written statement, and of his address for service.
The limitation aforementioned for the filing of the written statement is expanded subject to the leave of the Court to be obtained against summons under Rule 5 of Order 5 of the Original Side Rules of this Court which says:
After the expiration of the time limited by Rule 1 or Rule 3 of this order, a written statement shall not be filed without leave of the Court to be obtained on Master’s summons. The application shall be accompanied by an affidavit “stating the grounds of defence and the application may be granted on such terms as the Master thinks fit.
In the counter that plaintiff/respondent filed in the suit to show what steps taken by the defendants/appellants according to him were indications of unequivocal intention to proceed with the suit, he has stated as follows:
They (the applicants) have taken steps to file counter on a number of occasions in the Application No. 2633. of 1985 for appointing a receiver and this amounts in law to taking steps. The steps taken by the petitioner indisputably show that there was intention in unequivocal terms, to proceed with the suit and this would give us the right to have the matter disposed of by arbitration. The petitioners/applicants wanted a set of pleadings and documents from the respondent/plaintiff and have taken the documents for the purpose of preparing written statement and this amounts to taking of proper steps.
and further,
The applicants/defendants 1 and 2 cannot be heard to contend that they are ready and willing to go ahead with arbitration in view of their misconduct/latches proved duly. For filing counter in the application for appointment of receiver, they took time from this Hon’ble Court on three occasions, ultimately filed it only after the Court positively told that the Court would not grant any further extension of time. Moreover, for filing a written statement, as contemplated under the Original Side Rules under Order 4, Rule 5, having expired, the application for stay of the proceedings under Section 34 is besides being barred by time highly belated and the request for stay cannot be countenanced. It is also submitted that the defendants entered appearance into petition was listed for orders, and the vakalath was filed in this suit and therefore he should have filed the written statement within two weeks thereof and the applicant’s failure to file an “application under Section 34 seeking stay within the time allowed by law for filing the written statement precludes him from getting the stay.
We have thus seen that there is no rigid time limit and a discretion is given to Court to suitably cause to extend the time for filing the written statement. We have also seen that as held by the Supreme Court, it should not be easily inferred that any other step taken by the party is a display of its unequivocal intention to proceed with the suit. It should be only the steps taken to signify that the party has chosen to enter into a contest and invited the Court to adjudicate upon the dispute on merits that the Court should refuse to stay the proceedings in the Court. Otherwise the Court must ask the parties to abide by the arbitration agreement.
5. Our task in the instant appeal, however, has been made easier by the parties and their respective counsel, who have filed their respective affidavits agreeing to the arbitration as well as to the appointment of the Arbitrators. The plaintiff/ respondent and the second defendant/respondent, who are brothers, have appointed Mr. N. Palaniappan, son of Nachiappa Chettiar, retired District Judge, now residing at No. 14, “Anu Apartments”, 35, Circular Road, Kodambakkam, Madras as their Arbitrator. The defendants 1 and 3, who are appellants 1 and 2, who are father and son, have appointed Mr. V.N. Chidambaram Chettiar son of V. Nagappa Chettiar of Kamala Street, Chokkikulam, Madurai, as their Arbitrator. The parties have agreed that the Arbitrators appointed by them shall together conduct the proceedings and give award on all matters in dispute between them for which purpose after inspection of records etc., they may file their respective claims before the Arbitrators. The two Arbitrators, to avoid any difference of opinion, have in terms of the agreement between the parties, appointed Mr. Y. Sathyamurthy son of CT.Y. Yagappan residing at No. 1, Nagarathinam Colony, Mylapore, Madras-4 as the Umpire. The parties have agreed that in the event of any difference of opinion between the Arbitrators on their giving separate awards, the unresolved dispute shall be placed before the Umpire nominated by the Arbitrators appointed by them and the Umpire’s award shall be final. The Arbitrators and the Umpire have filed their affidavits signifying their consent.
6. Pursuant to a previous order by us the appellants have filed several ledgers etc., in all 88 original account books relating to the partnership firm, M/s. Krishnaveni Theatre, in Court, which are in the custody of the Additional Registrar, Judicial, High Court, Madras. Any party seeking inspection may do so in the presence of the Additional Registrar, Judicial or any officer appointed by him within one week after which, all the records must be forwarded to the Arbitrators by the Additional Registrar, Judicial, at such place and address as they furnish to the Court. The Arbitrators are directed to proceed expeditiously and dispose of the proceedings within a period of three months. In case any dispute is referred to the Umpire, the Umpire shall dispose of the same within two months of the reference by the Arbitrators. In view of the agreement as aforementioned, we see no objection to the appointment of the Arbitrators and the Umpire and to issue directions as above. We accordingly direct for the appointment of Mr. N. Palaniappan, son of Nachiappa Chettiar, retired District Judge residing at No. 14, ‘Anu Apartments’, 35, Circular Road, Kodambakkam, Madras and Mr. V.N. Chidambaram Chettiar, son of V. Nagappa Chettiar residing at Kamala Street, Chokkikulam, Madurai,. as Arbitrators to dispose of the disputes within three months. The parties must file their respective claims before the Arbitrators within two weeks from today. In case the Arbitrators are not in agreement on any issue and they deliver separate awards, they are directed to make a reference of the same to the Umpire within the said period of three months and on receipt of the references, the Umpire is directed to give his award within two months. The Additional Registrar, Judicial, is directed to remit the records to the Arbitrators after one week during which period, the parties must complete their inspection. The costs of the suit and the fees of the Arbitrators and the Umpire etc., are left for settlement by them. Orders if any in this behalf shall be passed, after the award.