P L D 1952 Dacca 22 (PLP)

B. A. Siddiky, and M. H Khondkar, for Respondent. SHAHABUDDIN, C. J.‑

These are appeals from the order passed by the learned Subordinate judge, 3rd Court, Chittagong, staying money suit 2 of 1950 under section 34 of the Arbitration Act, and dissolving the injunction, which he had issued in the said suit. This suit was filed by the appellant, the New Bengal Shipping Company, against the responder.‑, Mr. Eric Lancaster Stump of Singapore and his Managing Agents, Messrs. Barretto Shipping & Trading Co., Ltd., of Singapore, both represented by Captain Mitchell, Master of the vessel called "M. V. King Bay". This vessel was char tered to the appellant by the first respondent, the owner, for nine calendar months from July 1949, for trading in shallow waters and inland rivets of East Bengal on a monthly hire of 850 to be paid by the appellant to the second respondent to the account of the first respondent. According to the charter party the appellant had to provide and to pay for all requisites for sailing the ship, and he had also to pay all charges like Custom dues, etc., except the salary of the Master and the Chief Engineer. Further the appellant had also to advance to3 the Master necessary funds for ordinary disbursement on the vessel's accounts and such advances were to be deducted from the hire. It is also provided in the charter party that while the owner of the vessel had a lien on all cargoes aid sub‑freights belonging to the time‑chatterer, and any bill of lading freight for all claims under the charter, the charters that is the appellant has a lien on the vessel for all moneys paid in advance and not earned. Another clause in the charter party is that any dispute arising under the charter is to be referred to arbitration in London, or such other place as may be agreed to. It is not necessary in these appeals to r‑‑fen to the other claw ‑s of the charter party. The vessel "M. V. King Bay" had been insured by the owner and in October, 1949, it met with an accident as a result of which it had to be repaired. The case of the appellant firm in the plaint is that it bore the cost of repair and it paid ad vances on running account: to the extent of Rs. 53,000, the first respondent through the second respondent cancelled the charter party on the appellant demanding adjustment of accounts of over‑payments ; and that the respondent suggested arbitration at London to which the appellant agreed on condition that the respondents furnished Bank guarantee, which, however, the respondents were not willing to give. The appellant has, therefore prayed for a decree of Rs. 50,000 with further amount which he may hereinafter claim after the payment of Additional Court‑fees, to be enforced by the sale of the Vessel, if the money decreed was not paid ; and also far an injunction restraining the respondent from removing the Vessel or causing any damage to it, pending the trial of the suit. The plaint in this suit was filed on 3rd February 1950 and on the next day an application was presented for the issue of a temporary injunction against the first respondent and Captain Mitchell not to remove the Vessel out of Chittagong Port or cause any damage to it in any way, pending the trial of the suit. The Court granted an ad interim injunction and ordered notice to the respondent. On 7th February 1950, the Chief Engineer of the Vessel appeared and prayed for time to file objections to the appli cation for injunction ; and on 14th February 1950, the petition of objections was filed. In the meantime summons issued in the suit had been served and on 28th February 1950, Captain Mitchell appeared and applied for time ‑to file written statement. Time was granted and on 14th March 1950, Captain Mitchell filed two applications, one for further time for filing written statement and another for staying the suit under section 34 of the Arbitration Act. The latter application was opposed by the appellant on the ground that it did not lie, as prior to its presentation the respon dent had taken steps in the proceedings by asking time to file written statement. For this, reliance was placed on section 34 of the Arbitration Act which is as follows :‑ 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... The learned Subordinate judge rejected this contention. He took the view that though the application for stay under section 34 of the Arbitration Act was not filed at the earliest possible opportunity, the application to file written statement presented on 28th February 1950, could not be regarded as a step in the pro ceedings within the meaning of that expression in section

34. He held that as in the objection to the application for injunction it was definitely stated that the Court at Chittagong had no juris diction in view of the clause relating to arbitration in the charter party, it was clear that the intention in asking for time to file written statement was only to reassert that objection. He was, therefore, of opinion that it could not be said that the respon dent waived their right to ask for a stay of the suit. As regards injunction, his conclusion was that though there appeared a prima facie case in favour of the appellant, it had not been made out that if the injunction order was vacated the appel lant would sustain irreparable loss. He, therefore, vacated the prohibitory order, which he had issued. F.M.A. No. 16 of 1950 is against the direction staying the suit under section 34 of the Arbitration Act, and F.M.A. No. 18 of 1950 relates to the vacating of the order of interim injunction. The order of the learned Subordinate judge directing a stay of the suit is not, in our opinion correct, and appeal No. 16 must, therefore, succeed. It is true that the appellant does not deny that he agreed to all disputes arising under the charter party being referred to arbitration and it is also true that no satisfactory explanation is given for filing the suit in spite of such agreement ; but as pointed out by Woodroffe, J. in Sarat Kumar Roy and others v. The Corporation of Calcutta, 11 C W N p. 306 "the issue is not whether upon the facts the proper inference to be drawn is that there was no abandonment of the election to arbitrate, but what is to be seen is whether the particular action of the respondents comes within the terms of the section". To the case in 1 I C W N p. 306, section 19 of Arbitration Act of 1899 applied ; but section 34 of the present Act is word forward the same as section 19 of the old Act. The learned Subordinate judge took the view that this decision did not apply as in that case adjournment was taken without any reservation for filing written statement ; while in the present case at an earlier stage in objecting to the application for injunction the jurisdiction of the Court had been questioned on the basis of the clause in the charter party regarding arbitration. This fact, the learned judge considered as indicative of the intention of the respondent to apply for a stay ; but it appears to us from the petition of objection filed by Captain Mitchell that the main idea in filing that petition was to get the order of ad interim injunction vacated, and not to state that the respondent would insist on the arbitration clause in the contract being given effect to. This is clear from the fact that the objection was not confined to the ques tion of jurisdiction. The petition on the other hand contains grounds on the merits of the case. Subsequently, an application asking for time to file written statement, was filed. This applica tion was as much without reservation as the one in 11 C W N 306 case. Then again there was an application for further time for filing written statement ; and this circumstance does not indicate that the respondents were insisting on referring the matter to arbi tration. At best it may amount to this that they were willing to file written statement under protest; but that we do not think satis fies the requirements of section 34 of the Act. In this connection the following observations of Woodroffe J. in the case mentioned above, with which we agree may usefully be quoted : "Nor can I find any authority or sound reason for the second ground that if an act does constitute a step in the proceedings, it is not a bar if it is done under protest or accompanied by an expression of intention to arbitrate. If this were so, a party might go through most, if not all, of the steps of a suit provided that such a step was accom panied by a protest. A party must submit to the judgment of the Court or not and if his contention is that by reason of the contract of the parties the determination of the dispute is withdrawn from the Court he should not in any manner, conditionally or otherwise invite the Court's judgment on it. Another decision relied on by the learned Subordinate judge is Subal Chandra Bhur v. Khan Bahadur Md. Ibrahim and another (47 C W N page 570). We have been through this decision and in our opinion as pointed out by the learned counsel for the appellant; it does not help the appellant. After a review of several cases, English and Indian, on this question, Das J. observes as follows : " .that in order to constitute a step in the proceedings the act in question must be : (a) an applica tion made to the Court either on summons or something in the nature of an application to the Court, e.g., attending on summons for direction and (b) such an act as would indicate that the party is acquiescing in the method adopted by the other side of having the dispute decided by the Court". Applying this test to the present case, the application presented on 28th February 1950, amounts to a step in the proceedings. As for the intention of the party who ultimately files an application under section 34 of the Act it must be inferred from the particular act in question. Captain Mitchell in his first application raised the question of jurisdiction ; but, as stated already, he did not stop with that objection. He stated grounds on the merits of the case. Even in his later application he asked for adjournment without any reservation, and on a subsequent occasion when he actually filed an application for stay, he still asked for time to file written statement. There is no doubt, however, that the respondents were anxious to have the matter referred to arbitration ; but, the question is whether they took a step in the proceedings before expressing a desire to refer the matter by asking for a stay. In this connection Woodroffe J. in the case, already referred to, observed as follows: " By section 19 it was I think intended to fix a definite limit, a terminus a quo, from which an application of this nature could not be entertained, via., the date of the filing of a written statement or taking any steps in the suit". The point is a very technical one ; but we see no., escape from the words of section 34 of the Act. In Bartlett v Ford's Hotel Co

1. Q B. at page 852 it was observed as follows : "We cannot review the proceedings of the Legisla ture, and say that something which is clearly within words used in the section is not within their meaning on the grounds that the Legislature ought not to have so provided. The section no doubt provides a somewhat drastic remedy for an abuse which existed under the previous legislation on the subject, namely, that after causing much delay a defendant finally ought to compel a reference of the action." This observation which is quoted in 11 C. W. N. 306 at page 309 refers to section 4 of the English Arbitration Act, which is to the same effect as section 34 of the present Indian Arbitration Act, and is therefore, applicable to the case before us. There it was held that taking out a summons for further time to deliver defence was a step in the proceedings disentitling a party to a stay under the English Act. On appeal against this decision, reported in Appeal Cases 1896, Lord Halsbury agreed with trial judge and observed as follows : "The intention of the Legislature in giving effect to the contract of the parties, and saying that one of them should be entitled to make an application to insist that the matter should be referred accord ing to the original agreement, was that they should at once, and before any further proceedings were taken, specify the terminus a quo, and that if an application to stay proceedings was made under those circumstances, then that the Court should enforce the contractual obligation to go to arbitration." On behalf of the appellant our attention has been drawn to P. Gannu Rao v. P. Thigaraja Rao and another A I R (36) 1949 Mad. 582, where after a review of the various decisions the same view was taken in 11 C. W. N, 306 and the English case cited above. The decision of the Allahabad High Court in the case of United Provinces Government v Sri Har Narh, reported in. A I R (36) 1.949 All. 611, which is also cited on behalf of the appellant is also to the same effect. The learned Advocate for the respondents contends that in the Arbitration Act of 1940; which is the Act applicable to the present case, sections V and 33 were enacted to prevent litigants from resorting to dilatory devices in order to render arbitration agree ment infructuous and ineffective for all practical purposes, and that as these provisions were not incorporated in the old Act, or even in the English Act decisions based on section 19 of the Arbitration Act of 1899, or section 4 of the English Act did not apply. We are unable to accept this contention. As pointed out in Chaturbhuj Mohanlat v. Bhicam Chand Chororia and Sonny 53 C W N 410, are relied on by the learned Advocate for the respondents, sections 31 and 33 were introduced to prevent parties to arbitration agreement from nullifying its effect ; but the fact remains that the Legislature while introducing these sections did not think it fit to vary section 19 of the old Act, but incorporated it wholly into the new Act of 1940 as section

34. Therefore the decisions in 11 C. W. N. 570 and the English case cited above in our opinion, apply to these cases. The learned Advocate for the respondent then relies on certain decisions, none of which, in our opinion, applies to the facts of this case. In the case of Bhowani Das Ramgobind Pannachand Luchmipat and another 52 Cal. 453, the question now under consideration was not before the learned judge. There the question was a different one. In the case of Roop Kishore v. United Provinces Government, A I R (32) 1945 All. 24, it is no doubt stated that it may be possible in some cases not to hold an application for time to file written statement as a step in the proceedings; but it is also stated there that prima facie such an application should be treated as a step in the proceedings within the meaning of the section, and the whole burden should be upon the defendant to establish the circumstances, which will lead to the result that effect should not be given to the prima facie meaning of the application. In the present case no such circumstances are alleged. It is however argued that the applica tion of. February 28tb 1950,. was made by Captain Mitchell, who is not a party to the suit; and if that application amounts to a step in the proceedings, it cannot be said to constitute a step taken by the respondent. There is no force in this contention also. There is nothing on record to show that Captain Mitchell in filing this application was acting on his own, and not as a representative of the respondent. Nor has any representation been made by the respondent that what Captain Mitchell did was not binding on them. It is significant that the very application under section 34 of the Act, which the respondent press in this appeal, was filed by Captain Mitchell; and if that application is to be taken as an application on behalf of the respondent, we fail to see how the application of February 28th 1950, can be treated differently. We, therefore, consider that the weight of authority is entirely against the view taken by the learned Subordinate Judge. The application of February 28th 1950, was in our opinion, a step in the proceedings, and as the application under section 34 of the Act was made subsequently, the suit should not have been stayed. The order of the learned Subordinate judge in this respect is, therefore, set aside and the suit is directed to be taken up for trial and disposed of expeditiously. As regards the other appeal, F. M. A. 18 of 1950, the conclu sion of the learned Subordinate Judge on the question of injunction is in our opinion correct. The main grounds urged for the appellant is that the first respondent, the owner of the Vessel has no property in Pakistan and if the Vessel is removed from l the appellant would have no means of realising the fruits of the decree, which he hopes to obtain in the suit ; but the appellant when he entered into an agreement with the respondent knew full well that the first respondent had no property in Pakistan. The agreement was entered into, partly at Singapore, and partly at Calcutta outside the Pakistan Dominion. Further the appellant is a party to the agreement providing for arbitration in London. That being so the appellant cannot now be allowed to say that because respondent has no property in Pakistan he should be restrained by an injunction Affidavits were filed in connection with the Rule for ad interim injunction during the pendency of the appeal, and in these affidavits it is alleged that the first respondent's financial position is not satisfac tory ; but these allegations appear to be based mainly on the fact that be has no other asset in Pakistan except the Vessel in question, which is at Chittagong Port. It is also alleged that the first respondent was thinking of selling his ship, but this is denied by him. After the appeal was beard in part, an affidavit was sought to be filed containing other allegations with regard to the financial condition of the respondent ; but we declined to admit this affidavit, as we saw no reason to admit additional evidence. Further the facts, which the learned counsel mentioned in this connection, relate to a period anterior to the signing of the charter party. We have not been shown any material indicating that since the signing of the charter party the financial condition of the first respondent has deteriorated in any way. The dispute is one which is to be settled by looking into the account's, and as far as we can see there is no reason to think that there has been any lack of bona fides on the part of the respondent. The Vessel has already been detained for two months and it is not disputed that its daily expenses even when in port are heavy. In the circumstances its further detention till the disposal of the suit might involve expenditure of an amount which may easily exceed even the highest amount for which the appellant hopes to get a decree. In fact the appellant appears to have realised, this aspect of the matter; for one of the grounds of appeal is that the lower Court should have at least asked for security from the first respondent. The learned counsel for the appellant contends that a Bank guarantee may be demanded as an alternative to the injunction. In this connection it is to be observed that no satis factory reason is given as to why the appellant rushed to the Court in spite of the arbitration clause. The reason in the plaint is that it had demanded Bank guarantee from the respondent which they were not willing to furnish; but it is represented on behalf of the res pondent that they were prepared to give Bank guarantee, provided the appellant firm itself gave a similar guarantee; but the appellant was not willing to do so. The learned judge accepted this version of the respondent, and it is not shown to us that this conclusion is incorrect. However, it is conceded on behalf of the appellant that the second respondent is a firm of standing and there is no reason to doubt its financial stability and the first respondent undertakes to furnish to the satisfaction of the lower Court within one week from 20th April 1950, a guarantee from respondent No. 2 for the discharge of any liability which may be fixed on the respondent No. 1 by the ultimate decision in the suit provided the appellant undertakes to give to the satisfaction of the lower Court a similar guarantee through its local agent re garding any liability that may ultimately be fixed against him in the suit, and also to pay the Customs dues relating to the Vessel in question, within the aforesaid period. The appellant undertakes to give the required guarantee and pay the Customs dues within the period mentioned above. In these circumstances we see no reason to interfere with the order of the learned Subordinate judge, vacating the prohibitory order of injunction on the respondent. This appeal is therefore dismissed. In the circumstances there will be no order as to costs in either appeal. Let the records be sent down without delay and the order issued under Rule 74, Chapter V of Appellate Side Rules. AKBAR, J.‑--I agree. K M. A. Appeal dismissed.