FOOD CORPORATION OF INDIA & ANR. versus YADAV ENGINEER & CONTRACTOR

Citation: [1983] 1 S.C.R. 95 · Decided: 06-08-1982 · Supreme Court of India · Bench: D.A. DESAI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

' 
··~ 
j• 
95 
FOOD CORPORATION OF INDIA & ANR. 
v. 
YADAV ENGINEER & CONTRACTOR 
(l~gust 6, 1982 
[D.A. DESAI, A.P. SEN AND BAHARUL ISLAM, JJ.] 
Arbitration Act 1940-Sectlon 34-scope o/-
1"f(lking any pther steps ~n 
the proceedings" meaniiJg of-notice of motion taken o~_t by plaintiff for interim 
injunction-Defendant appeared and prayed for time to reply-Defendant's actio~ 
whether "step taken in the proceedings''. 
' 
Practice : atlention of single Judge drawn to a binding decision of Division 
Bench of the same High Court-Decision not adverted to--Decision contrary to that 
of Division' Bench-Propriety of. 
Section 34 of the Arbitration Act 1940 provides that where_ one oft he 
parties to an arbitration agreement commences any legal proceedings against the 
other party in respect of any matter agreed to be referred to arbitration, any 
party to such legal proceedings may at any t.ime 
befor~ tbe filing of a. Written 
statement or taking any other step~ in the pro<;eedi"'gs apply to· tbe judicial 
authority before whicb the proceedings are pending to st_ay the proceedings and 
the authority on being satisfied that the opposite party is ready ~nd willillg to do 
ajl things necessary to the proper conduct of the arbitration make an order stay· 
ing the proceedings. 
The contract entered into by the respondent with the appellant Corpora. 
tion for handling and transportation of the Corporation's goods contained an 
arbitration clause authorising the Managing Director of th¥ Corporation to 
appoint an arbitrator in iespect of any dispute 
~,rising ou~ 9f tbe 
CQntr{l.~t 
,.-between the parties. 
· 
Apprehending.breach of contract, the ·respondent filed a suit for a de<"· 
laration that the contract was subsisting on. the date of the suit. The respondent 
'prayed- for an ad interim injunction against the Corporation restraining it from 
committing breach of the contract. On the notice being issued the District 
Manager of the Corporation appeared before tbe Court and sought time to file 
reply to the application fQr interim ilijunction. On the next day an application was 
filed on behalf of tbe corporation that it was fully ready and· willing to have the 
dispute resolved by arbitration under the subsisting arbitration agr~ement and 
prayed that the suit be stared as provided in'1 section J4 of the Arbilration A<;:t 
JM~ 
. 
A 
B 
c 
D 
E 
F 
G 
H 
I 
A 
B· 
c 
!) 
E-
F 
96 
SUPREME COURT REPORTS 
(1983) J S.C.R. 
The respondent alleged that section 34 was inapplicable in ·that when the 
District Manager sought time to file a reply to the notice for interim injunction 
it was a "step taken in the proceedings" within the meaning of section 34. 
' 
. _Negativing the respondent's plea the Trial Court ,held that . the dispute · 
was covered by the arbitration clause~ It granted stay of further proceedings 
in the suit and this view was upheld by tlte District Judge in the respondent's 
appeal. 
In the revision petition filed in the "High Court a single Judge although 
his attention was drawn to a 'binding precedent of a Division Bench of the same 
High Court supporting the view that an application for filing a reply to the 
notice,of motion taken out by the plaintiff for interim injunction was n9t a ''step 
taken in the proceedings", without adverting to that decision, held that an 
application of this· nature was a "step taken in the proceedings''' and that this 
'disentitled'the Corporation from invoking the arbitration agreement. 
On the question whether, where there is a subsisting valid arbitration 
agreement between the parties, entering an appearance and contesting a petition 
or notice of motion for interlocutory, order constitutes a "step in tife proc~ed~ 
ings" as would disentitle· the party to an order under seCtion 34 of the Arbitra· 
tion Abt. 
Allowing the appeal, 
' 
. HELD: Contesting the application for interim injunction or for appoint· 
mi:nt of a receiver or for interim relief by itself, without anything more, would 
not constitute a "step in the proceedings" as would diSentitle the party to an 
order under section 34 of the Arbitration Act. (119 F] 
I. (a) Section 34 envisages that before a party to the arbitration agree· 
meat seeks stay of the suit filed' by the opposite party it must disclose its 
unequivocal intention to abide by the arbitration agreement; but once the party 
takes steps which may indicate its intention to waive the benefit of the arbitra· 
tion agreement or abandons the right to

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