SHRI RAM SHAH Vs. MASTAN SINGH

JUDGEMENT

(1.) THE question in this appeal is whether the proceedings instituted by the plaintiff respondent by filing a suit in forma pauperis should have been stayed under S. 34 of the Arbitration Act (hereinafter referred as ' the Act'). A few facts leading to the present appeal may be noted as follows :

(2.) THE plaintiff-respondent Mastan Singh made an application for leave to file a suit in forma pauperis against M/s. Hindustan Finance Company, R. N. Grover, and Ram Shah, the latter being the partners of the Company. THE relief claimed in the suit was a mandatory injunction requiring the defendants to restore possession of a truck of which they had been forcibly deprived by the defendants. THE suit was instituted on 20th Sept, 1975. On 16th Oct. 1975, the plaintiff applied for a temporary injunction. To this application objections were filed by M/s. Hindustan Finance Company and R. N. Grover, Managing Partner, on 12-12-1975. THEreafter on 9-1-1976 Ram Shah defendant applied under S. 34 of the Act praying that the suit be stayed inasmuch as the parties had by means of an agreement decided to have the matters referred to arbitration, the plaintiff Mastan Singh opposed this application on the ground that the respondents Nos. 2 and 3, having filed objections against the application for temporary injunction, were disentitled from applying under Section 34 of the Act. In the plaintiffs objection it was also alleged that the arbitration agreement was not genuine and contained additions and interpolations. THE objections found favour with the court below and it held that since the respondents Nos. 2 and 3 had by filing objections against the application for temporary injunction taken steps in the proceedings in the suit and the arbitration agreement was also suspicious, the application under S. 34 of the Act must be dismissed. THE application was in these circumstances rejected and that order has been challenged in this appeal.

(3.) BEFORE, however, an application under S. 34 of the Act can be thrown out on account of any such conduct of the applicant, it has to be carefully ascertained as to whether the unequivocal intention to abandon the arbitration agreement can be attributed to him. Every ostensible act or step taken by an applicant in the suit or proceedings instituted would not invariably lead to the conclusion that he has forfeited his right to claim stay of the proceedings under the provision of S. 34 of the Act. The crucial test for determining whether an act is such a step in the proceedings is to see whether the act displays an unequivocal intention to proceed with the suit and give up the right to have the matter disposed of by arbitration.So long as such categorical inference cannot be drawn, we cannot say that the step taken by the applicant discloses any intention not to press the arbitration agreement. In this context frequently cases have arisen in which defendants have chosen to contest injunction applications filed against them by plaintiffs in the suits instituted by the latter and on those facts the controversy has arisen as to whether the mere contesting of injuction applications or filing of objections by the defendants against such applications is sufficient to spell out an intention on the part of the defendants to defend themselves in the suit and not proceed to press the arbitration agreement. We have carefully pondered over this question and we are of the opinion that merely filing of objections against the injunction application is not inconsistent with the defendant' s intention to press the arbitrary agreement. In fact, a contrary view is likely to be highly prejudicial to the defendant. Quite often an interim order, which may be granted by a court on ex parte hearing, may be extremely prejudicial to the defendant who may be under an imperative necessity first to rescue himself from the operation of the interim order and then to decide upon his next step or strategy against the plaintiff. It would be wholly unrealistic to expect a defendant to let himself suffer all the hardship and submit to the injunction order and hold his breath in peace until he has first made an application under S. 34 of the Act and obtained orders of stay from the court. In most cases such an attitude would be fraught with drastic consequences for the defendants. Thus, in our opinion, merely, filing objections against an injunction application made by the plaintiff in the suit instituted by him cannot be construed as a step in the proceedings by the defendant so as to preclude him from claiming the benefit of S. 34 of the Act. In other words, such conduct of the defendant cannot be regarded as conclusive as to his intention not to proceed with the arbitration but to defend himself in the suit itself.