1988 PLP 1150 (MLD)

This appeal calls in question the judgment passed by the learned Fifth Senior Civil Judge, (South) Karachi, dated 3‑5‑1987, declining to stay further proceedings in suit No.1385 of 1986 on the application of the appellant under section 34 of the Arbitration Act. The circumstances, forming the background of this appeal are that, the respondent had filed a suit against the appellant, which came up for hearing before the learned Fifth Senior Civil Judge. On 10‑12‑1986, the appellant file a written statement in the case, raising certain preliminary objections and one of the objections was that, the suit was not maintainable, an view of an arbitration clause in the lease deed between the parties. However, at the same time, the, appellant also filed an application under section 34 of the Arbitration of the Act (hereinafter referred to as "the Act"), requesting the Court to stay further proceedings in the suit for aforesaid reason, which was also stated by it in its preliminary objections. It is also pertinent to note here that the written statement was filed by the appellant "without prejudice" to the preliminary objections taken by it in its written statement and the application under section 34 of the Arbitration Act. However, the learned judge declined to stay further proceedings. The reasons mentioned by him ill the impugned order are as follows: "The record shows that defendants' counsel appeared in matter on 10‑12‑1986 and has also filed W.S. and the application under disposal on the same day. Learned counsel for the defendant argued that as he had filed application under section 34 of Arbitration Act before filing W.S. therefore, has not waived his right to get the matter stayed for disposal of dispute in between the parties through arbitrators, but these arguments advanced by learned counsel for defendant does not appeal to reason because the W.S. and the application under disposal both were filed by the defendant on one and same day. Therefore, the defence plea by defendant that he fast placed application under disposal and then has moved W.S. carries no weight, because if a person by his act displays an unequivocal intention to proceed with the suit it is presumed that he has given up his right to have the matter disposed of by arbitration as this done was by the defendant in the present case." The appellant is consequently aggrieved by such order. I have heard Mr.Sajid Zahid, learned counsel for the appellant, and Mr. Amanullah learned counsel for the respondent. It has been contended by Mr.Sajid Zahid that since the appellants had clearly filed . their written statement without prejudice to their right to invoke section 34 of the Arbitration Act, the learned Civil Judge was clearly in error, while holding that by filing its written statement the appellant had shown its intention to proceed with the suit. Reliance has been placed by the learned counsel on a number of cases, namely, Badshah Meah Sowdagar v. Noorul Haq and others P L D 1967 Dacca 250, Ghulam Qadir & Co. v. Government of Pakistan P L D 1962 W.P. Lah. 948, Pakistan International Airlines Corporation v. Paksaf Dry Cleaners P L D 1981 S C 553 and Union of India v. Shiri Nath Bihari Sharma A I R 1957 Pat.

697. In the first case a prayer was made to file an objection to the application for appointment of a receiver filed by the plaintiff. It was held that the same was not sufficient to defeat the defendant's prayer for stay of further proceedings in the suit under section 34 of the Act. 1n the next case, reported in P L D 1962 (W.P.) Lah. 948, the filing of a preliminary objection (also described as written statement) was held not to be a step in the proceedings so as to debar the defendant from invoking section 34 of the Act. In the next case reported in P L D 1981 S C 553, a prayer for an adjournment to file a written statement was held to be far from sufficient to act as a bar against making of an application under section

34. It was, however, held in that case, that a true test for determining whether an act, amounts to taking of a "step in proceedings" depends upon to circumstances of each case. In the last case cited by Mr.Sajid Zahid, the High Court of Patna went to the extent of holding that filing of a written statement in a suit by the defendant (although at the direction of the Court) would not be construed as a step in the proceedings for the purposes of section 34 of the Act if the defendant was ready and willing for the arbitration. The argument of Mr. Amanullah, on the other hand, is that, admittedly, the appellant appeared twice before the learned Civil Judge after receiving summons from the Court in respect of the suit and obtained adjournments with a view to filing written statement m the case, therefore, the appellant had waived its right under section 34 of the Act to the stay of proceedings in the suit. Reliance has been placed by him on Uzin Export Import Enterprises v. M.Iftikhar and Company Ltd. P L D 1986 Kar. 1 which is a judgment given by a Division Bench of this Court in a High Court appeal arising from a judgment given by a Single Judge of this Court, reported in 1987 C L C 2205. In order to appreciate the respective arguments put forth by the learned counsel, it is necessary to reproduce section 34 of the Arbitration Act which provides as follows:‑ "

34. Power to stay legal proceedings where there is an arbitration agreement. Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings 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 n; 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 willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceeding." A plain reading of the above section clearly indicates that any party desirous of Invoking it must before Filing of a written statement in the case or taking any further steps in the proceedings, apply to the Court for stay of the proceedings on the case. In the present case, no doubt, the appellant obtained adjournments to file its written statement and in fact it filed the same on 10‑12‑1986, as pointed out above but admittedly, the same was filed "without prejudice" to the preliminary objections taken therein or in the application filed by it under section 34 of the Act. With the use of the expression "without prejudice", in the written statement, the appellant made it clear that by filing of the same, it had not waived its right to invoke the provisions of section 34 of the Act. It may be pointed out that the object behind section 34 clearly appears to be that the party invoking the B same must act at the earliest possible opportunity and for such reason any delay in invoking the section or taking of steps m the proceedings would be construed 'as‑,a waiver of such right. Such clearly was not the case in the instant case as nothing was done by the appellant which may be construed as waiver on its part ‑‑ to assert its right under section 34 of the Act. The cases referred to by Mr.Sajid Zahid, in my opinion, therefore, fully support his contention. MrAmanullah has referred, to the two judgments of this Court, but the facts of these cases are clearly distinguishable, as there, after filing of the written statement, the defendant had proceeded with the case without indicating his intention to invoke the provisions of section 34 of the Act. Consequently, the judgment of the learned Single Judge, rejecting the application of the defendant, was upheld by the Division Bench. I am: consequently, of the view that the learned Civil Judge was clearly in error while dismissing the appellant's application by the impugned order. For the aforesaid reasons, I allow this appeal and set aside the impugned border, dated 3‑5‑1987, and further order that the proceedings pending before the learned Fifth Senior Civil Judge, Karachi, in suit No.1M5 of 1986, shall be stayed in terms of section 34 of the Arbitration Act. There will be no order as to costs. H.B.T./P‑60/K Appeal allowed.