Pakistan Case LawM/s. AL-FARIDIA INDUSTRIES Versus M/s. ALFA INSURANCE CO. LTD. and 4 others
The petitioner sought leave to appeal against a judgment dismissing their appeal against an order staying proceedings under Section 34 of the Arbitration Act 1940. The petitioner argued that the respondents, by repeatedly seeking adjournments to file a written statement, had taken 'steps in the proceedings,' thereby waiving their right to invoke the arbitration clause. The trial court and the appellate court had previously held that the respondents' conduct did not constitute a 'step in the proceedings' sufficient to disentitle them to arbitration, noting that the arbitration agreement was a condition precedent to any right of action. The Supreme Court granted leave to appeal, identifying a significant legal question regarding whether seeking multiple adjournments to file a written statement constitutes a 'step in the proceedings' under the Arbitration Act 1940. Furthermore, the Court noted a potential issue regarding the stay of a suit involving multiple defendants where the arbitration agreement existed only between the plaintiff and two of the five defendants.
- Does seeking adjournments to file a written statement constitute a 'step in the proceedings' under Section 34 of the Arbitration Act 1940?
- Can a suit be stayed under Section 34 of the Arbitration Act 1940 when the arbitration agreement exists only between the plaintiff and some, but not all, of the defendants?
ORDER
SALEEM AKHTAR, J.---The petitioner seeks leave to appeal against the judgment of the learned Judge in Chambers whereby FAO filed by it against the order of the learned trial Court staying the proceedings in Court and referring the matter to arbitration under section 34 of the Arbitration Act, was dismissed.
2.The petitioner filed suit for recovery of Rs,57,42,417 against the respondents. On service of summons the respondents appeared on 27-5-1990 and Vakalatnama was filed on behalf of respondents Nos. 1, 2, 4 and 5 while the Advocate for respondent No, 3 was present. The hearing was adjourned to 20-6-1990 for filing written statement by the respondents. On this date the Judge was on leave, but from the order-sheet it seems that the respondents' counsel requested for time to file written statement and the case was put off to 1-9-1990. In the same manner as the Judge was on leave, similar orders were recorded for 1-9-1990, 20-10-1990, 17-11-1990 and 22-12-1990 when again the matter was put off to 22-1-1991 for filing written statement as the Advocate for the respondent sought time for the said purpose. On 22-1-1991 counsel for the respondents once more requested for time as the written statement was not ready. The case was adjourned to 9-3-1991 for filing written statement. On this date respondents Nos. 1 and 2 filed application under section 34 of the Arbitration Act for stay of the proceedings, which was allowed by the learned trial Court. The appeal filed against the said order was also dismissed by the impugned judgment.
There is no dispute that there is an arbitration clause in the insurance policy issued by respondents Nos. 1 and 2. The objection taken by the petitioner was that by seeking adjournments for filing written statement the respondents have taken steps in the proceedings, therefore, application under section 34 cannot be granted. This contention was repelled by both the Courts. In the impugned judgment it was observed as follows:--
"In the instant case, although the defendants had submitted the petition under section 34 of the Act after considerable time, yet the conduct could not be taken as palpable as to disentitle them to benefit of availing the arbitration clause. The service of the defendants in this case had completed on the 20th of June, 1990, and thereafter the learned trial Court remained on long leave. The order dated the 22nd of January, 1991, suggests that the learned Civil Judge had resumed the duties by that time and on that day the case was adjourned and posted to the 9th of March, 1991, for filing the written statement as requested by the learned counsel. On the 9th of March, 1991, instead of filing the written statement, the application in question was filed. Whether a particular act of the defendants amounts to a step in the proceedings is necessarily a question of fact and the Court while determining has to take into account the contents of the petition as well as the surounding circumstances of the case. The learned trial Court was not far wrong in answering the question of fact in favour of the applicant. There was no evidence on the record that the appellant had filed Insurance Policy Agreement along with the plaint under Order VII, rule 14, C.P.C., or that its copy was sent to the defendants or their counsel so that they could invoke the arbitration clauses 18 and 19. The agreement appended with the application under section 34 of the Act expressly stipulated that reference to an arbitration was a condition precedent to any right of action or suit upon that insurance policy."
3.The learned counsel for the petitioner contended that several adjournments sought by respondents Nos. 1 and 2 seeking time to file written statement were conscious acts and would amount to taking steps in the proceedings. Besides this contention we have noted that the petitioner had filed suit against five respondents and the arbitration agreement seems to have been only with respondents Nos. 1 and 2. In these circumstances, question arises whether suit can be stayed under section 34 of the Arbitration Act. Leave is granted.
Judges on this bench
- Ajmal Mian2,984 judgments
- Saleem Akhtar1,928 judgments