1. This civil revision has arisen out of the following facts :- The respondents brought a suit against the petitioners for the recovery of Rs. 71,51,265.25 claiming to be due on certain contracts entered between the parties. The suit was filed in the Court of District Judge; Quetta on 27-9-1975. It was admitted on the same day and notices were issued for the appearance of the appellants for 28-10-1975. On that date the case was adjourned to 22-11- 1975 as the Presiding Officer was on leave. On 22-11-1975 the Government Pleader appeared for the appellants Nos. 1 to 3. The case was adjourned to i8-12-1975 as the appellants Nos.4 to 5 had not been served. On this date the Government Pleader made appearance for appellants Nos. 1 to 4 and the case was adjourned to 24-2-1976 for the services of appellant No. 5. In the meantime the suit was transferred to the Court of Civil Judge, First Class, Quetta. It came up before the Civil Judge, First Class, Quetta on 24-2-1976 when Mr. Latafit A.I, the Secretary Communication Government of Baluchistan appeared in Court and submitted that he was making appearance on behalf of defendants Nos. 1 to 3. The defendant No. 5 was also present. The plaintiff and his counsel were absent. It was ordered that the notices be issued for the appearance of the plaintiff and his counsel for 26-4-1976. The case was also fixed for the written statement and the service for the respondent No. 4. On 26-4-1976 the case was adjourned for 19-6-1976 and notices were ordered for the service on defendants except the defendant No 4 who had appeared through Mr. Munawar Ahmed Mirza, Advocate. The diary of the Court of that date further shows that written statement was not filed by the defendants. On 10-6-1976 the Government Pleader appeared for defendants Nos. 1 to 3. The counsel for defendant No. 4 was also present but the defendant No. 5 was absent, though he was present on 24-2-1976. Therefore he was proceeded ex parte. The written statement was not filed.
2. The plaintiff had filed an application under order VIII, rule 10, C. P. C. The counsel for the defendants sought, adjournment for the reply to the said application, therefore, the case was adjourned to 24- 6-1976. On this date of hearing an application was moved on behalf of the defendant No. 5 for setting aside the ex parte order dated 10-6-1976. The counsel for the defendants also filed rejoinder to the application moved by the plaintiffs. He also presented 2 applications, one of the application was under section 34, Arbitration Act praying for staying the proceedings, and the other application under Order VII, rules 19, 20 and 21, C. P. C. Praying for the rejection of the plaint. On 12-7- 1976 the application under section 34 of the Arbitration Act was considered and it was dismissed by the First Class Civil Judge, Quetta on 21-8-1976.
3. The appellants preferred an appeal against that order in the Court of District Judge, Quetta. The appeal was allowed by the learned District Judge, Quetta by order dated 13-10-1976. The order of the District Judge was successfully challenged in the High Court. His Lordship the Chief justice remanded the case with the following direction :- "In these circumstances, I allow the revision application to the extent that the order of the District Judge is set aside and be is directed to hear the appeal filed by defendants/respondents again and record an order in regard to stay of proceeding under section 34 of the Arbitra--petition Act, particularly keeping in mind a fact emerging in the case, arising out of an allegation of the applicant-plaintiff that relief under section 34 of the Arbitration Act was not available to the defendants --respondents by the reasons of their having taken steps in the proceeding."
4. After remand, the learned District Judge heard the arguments of both the learned counsel and dismissed the appeal filed by the appellants, holding that the application under section 34 of the Arbitration Act would be deemed to have been barred as the appellants had participated in the proceedings.
5. The appellants being aggrieved have challenged the order of the two Courts below. I have heard the learned counsel for the parties. The learned counsel for the petitioners has submitted that the petitioners had not submitted to the jurisdiction of the civil Court. No written statement had been filed and the proceedings were adjourned from time to time without any progress. The application moved by the respondents on 10-6-1976 was contested by the petitioners and the jurisdiction of the Court was challenged. According to the learned counsel these facts clearly constitute that the petitioners had not submitted to the jurisdiction of civil Court. They had pressed into service the arbitration clause of the agreement executed between the parties. On the other hand the learned counsel for the respondents has submitted that the petitioners by their own conduct and acts had submitted to the jurisdiction of the Court and therefore they were debarred to seek the assistance of the arbitration clause in the agreement. The parties' learned counsel have also cited case-law in support of their respective contention. Before resolving the real controversy, I would discuss the case-law cited by the counsel and on which I could lay my hand.
6. The first case which can be considered in favour of the petitioners contention is Sahadey Singh Rajeshwar Singh v. Punjab State (AIR 1957 Pb. 222). Where in' a suit against the Government, on the date fixed for appearance of the defendant, the Government Pleader appeared voluntarily without any authority from Government to represent it in the case and asked for adjourn--ment for filing a written statement on the assumption that in due course he would receive instructions from the Government. It was held that "it cannot be said that the Government i.e. The defendant, took any step at all in the proceedings. In any case application for adjournment in such circumstances really amounts to an application to get time to discover the exact nature of the suit and nothing more. It cannot at all be said that the application in the present case was made with a view to take a step in the proceedings within section 34 of the Arbitration Act."
7. The authority is distinguishable from the facts of the present case. In the reported case, the adjournment was obtained by the Government Pleader for seeking instructions from the Government and no substantial act was done which amounted to a step in proceedings. In case The Province of the Punjab v. Messrs Irfan (PLD 1956 Lah.442), it was observed that "the criterion to decide was (a) whether an application was made to the Court either on summons or orally and (b), whether the act was such as would indicate that the party was acquiescing in the method adopted by the other side of having the dispute decided by the Court. If this criteria was applied it could not be reasonably said that the Punjab Province had acquiesced in the method of adjudication adopted by the other side. In this case the Government Pleader appeared on behalf of the Province (defendant) on the first day of hearing and the order passed by the Court was; "The Government pleader seeks adjournment for instructions. To come up on the 8th of November 1952". It was held, that the act of the Government Pleader did not constitute a step in the proceedings within the meaning of section 34 of the Arbitration Act.
8. PLD 1967 Dacca 250). In a suit for dissolution of partnership and for accounts, the plaintiffs on the very next day after filing the suit moved an application for appointment of a receiver. The defendants made a prayer for time to file objection to the application for appointment of receiver.
9. On the date fixed for show cause the defendants filed a petition under section 34 of the Arbitration Act, 1940 and simultaneously with the petition filed an objection to the application for appointment of a receiver. The application under section 34 of the Arbitration Act was resisted on the ground that the defendant applicant had asked for time to file objection to the application for appointment of receiver. This, it was urged, amounted to taking steps in the proceedings of the suit so as to bar an application under section 34; It was held, "The plaintiff in the case had made an application for appointment of a receiver only a day after the filing of the suit. The defendants, obviously, therefore, could not be aware of the case which the plaintiff was seeking to make out in the plaint. A mere prayer to file an objection to an application for appointment of receiver, under circumstance, cannot amount to acquiescence in the proceedings and the suit itself. The defendants at the earliest opportunity had made it clear that they intended to pray in aid section 34 of the Arbitration Act, 1940 for staying the proceedings in the suit. The fact that they also filed a written objection to the application for appointment of a receiver in the circumstances could not be very material."
10. The next case is Md. Esack v. Raja Mian and another (PLD 1969 Daccg 719). In this case the plaintiff instituted a Title Suit on 5-2-1968. On the same day he applied for injunction in respect of the suit property. The learned Judge issued notice on 6-2-68, on the defendants directing them to show cause within three days as to why the ad interim injunction should not be granted. On 9-2-68 the defendants who were two in numbers appeared and filed two petitions. Defendant No. 1 is a full brother of the sole plaintiff Md. Esack and defendant No. 2 is his uterine brother. Defendants prayed for time for two weeks to file objections in one petition and in the other they prayed for direction on the plaintiff to supply copy of the petition for temporary injunction. It is clearly stated that the defendants were asked to show cause against the prayer for injunction but they have been served only with the notice to show cause. It is specifically asserted that they have not been served, with copies of the petition for temporary injunction and the plaint. The next important date is 12-2-196Q, on which date the learned Judge ordered as follows :---- "Requisite etc. Already filed. Issue summon upon the defendant fixing 9-3-1968, for ascertaining contest." Although the learned Judge fixed 9-3-68 for "ascertaining contest," the defendants filed a petition under section 34 of the Arbitration Act, and prayed for stay of further proceedings of the suit, and on the same date they filed another petition for time to file petition against the prayer for temporary injunction.
11. It was held that mere filing of application for adjournment to file reply to application for injunction does not, in circumstance, amount to taking "step in proceeding". A party cannot be said to have acquiesced in suit unless it knew about subject-matter of suit. Intention is a relevant considera-- petition. The next case on this point is Sansarchand Deshraj v. State of M. P. And others (AIR 1961 Madh. Pra. 322). In this case the plaint was filed on 5-8-1951 and on the same day, an application for grant of temporary injunction against the defendants was also made. On 6-8-1959, ex parse temporary injunction restraining the defendants from attaching movable property except cash was passed by the trial Court. On behalf of defendants Nos. 1 and 3 vakalatnama was filed on 1-9- 1959. The counsel for defendants Nos. 1 to 3 stated on that day that he was prepared to file reply to the original application for temporary injunction but as on 1-9-1959 the plaintiff amended his previous application for temporary injunction. The Court ordered the reply to be filed to the amended application on 8-9-1959.
12. It was held that the filing of a reply to the application of the plaintiff for securing temporary injunction and arguing the said application itself does not amount to "taking other steps in the proceedings" by the defendant within the meaning of section 34. In Messrs Prem Nath Pran Nath v.
13. Amba Parshad (AIR 1941 Lah. 64), it was observed that the proceedings within the meaning of section 19, Arbitration Act, 1899 (correspondence to section 34 of Act 1949) commence only when the defendant is supplied with a copy of the plaint and if time is then fixed for the preparation of the written statement, the time for this purpose is necessarily to be given by the Court and it cannot be regarded in any sense as a step taken in the proceedings by the defendant. In Daulat Ram Rala Ram v. State of Punjab (AIR 1958 Pb.19), it was laid down "A prayer for extension of time to put in a written statement undoubtedly indicates a desire to contest the suit on merits in Court and an intention to abandon the right to have the matter disposed of by arbitration. No such intention is exhibited where the prayer is one for time to put in an application, for stay of the suit because of an arbitration clause in the agreement. 1n that case, the indications in fact are just the other way.
14. It was further observed the true test for determining whether an act is a "step in the proceedings" is not so much the question as to whether, it is an application but whether the act displays an unequivocal intention to proceed with the suit and to give up the right to have the matter disposed of by arbitration.
15. The facts of the cases which can be cited in support of the proposition propounded by the counsel for the petitioners have been given in detail and they are self-explanatory. The cases need no detailed discussions. The facts of the cases are quite distinguishable. The rule laid down in those cases applied to those particular cases only and it cannot be extended as a broad proposition to every case. On the first date of hearing a prayer for seeking instruction from the Government or a prayer to file objection to the application for appointment of receiver, which was moved by the plaintiff only a day after the filing of the suit, by no stretch of legal acumen can be held to be a step in proceedings when the other side had not even an iota of material before them. The authorities are therefore inapt.
16. Now we advert to the case-law wherein the term "step in proceedings" has been discussed. The first case is Subal Chandra Bhur v. Md. Ibrahim and another (AIR 1943 Cal. 484). When the counsel for the defendant appears and applies for or obtains time to file his client's affidavit in opposition to the application for appointment of a receiver, and also applies for and obtains directions and leave from the Court to inspect the books of account and records. The conduct of the defendant clearly implies a statement to the effect that the defendant would proceed to defend the action and would not insist on the right to have the disputes disposed of by arbitration, by acting as he does he is taking a step in the proceeding. The fact that he was unaware of the arbitration agreement does make his act anytheless a step in the proceedings if in fact and in law it was a step.
17. "The possibility of an arbitration in terms of the agreement becoming infructuous by itself must not in all circumstances and of necessity be a ground for refusing the stay. Such a possibility does not stand in the way of the Court in directing a stay of proceedings. But such a possibility should not be altogether overlooked in determining whether there is any sufficient reason why matters in dispute should not be referred to arbitration. The next case on the point is New Bengal Shipping Company v. Eric Lancaster Stump (PLD 1952 Dacca 22).
18. 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.
19. On 7th February 1950, the Chief Engineer of the vessel appeared and prayed for time to file objections to the application for injunction ; and on 14th February 1959, the petition of objections was filed. In the meantime summons issued in the suit had been served 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.
20. It appears 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 m the contract being given effect to.
21. This is clear from the fact that the objection was not confined to the question of jurisdiction. The petition on the other hand contains ground on the merits of the case. Subsequently, an application asking for time to file written statement, was filed. This application was without reservation. .
22. 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. The next case is Birla Jute Manufacturing Co. Ltd. v.
23. Dullchand Pratapmull (AIR 1953 Cal. 459) : "When a Jute contract is impugned as invalid on the ground that it was entered into in violation of the Ordinance, an arbitra--petition agreement contained in the contract is not severable and capable of having independent effect and accordingly it cannot sustain a reference of the dispute to arbitrators."
24. "An arbitration agreement regarding an unlawful jute contract would attract the ban imposed by section 23, Contract Act."
25. Section 34 confers a discretion on the Court, but it is only a discretion to stay or not to stay the suit after the conditions laid down in the section are found to be satisfied but it is not a discretion to stay the suit even if one of the conditions may be unsatisfied.
26. It is held in F. D. Murlimal Santram v. Messrs Banarsidas & Sons and another (AIR 1935 Sind 62), that an application made to the Court for the postponement of the hearing of the suit is a step in the proceedings. In The Printers (Mysore) Private Ltd. v. Pothun Joseph (AIR 1960 SC 1156), the following observation appeared in para. 7 of the judgment :- "Section 34 of the Act confers power on the Court to stay legal proceedings where there is an arbitration agreement subject to the conditions specified in the section. The conditions thus specified are satisfied in the present case, but the section clearly contemplates that, even though there is an arbitration agreement and the requisite conditions specified by it are satisfied, the Court may nevertheless refuse to grant stay if it is satisfied that there are sufficient reasons why the matter should not be referred in accordance with the arbitration agreement. In other words, the power to stay legal proceedings is discretionary, and so a party to an arbitration agreement against whom legal proceedings have been commenced cannot by relying on the arbitration agreement claim the stay of legal proceedings instituted in a Court as a matter of right. It is, however, clear that the discretion vested in the Court must be properly and judicially exercised.
27. Ordinarily where a dispute between the parties has by agreement between them to be referred to the decision of a domestic tribunal the Court would direct the parties to go before the tribunal of their choice and stay the legal proceedings instituted before it by one of them. As in other matters of judicial- discretion, so in the case of the discretion conferred on the Court by section 34 it would be difficult, and it is indeed inexpedient, to lay down any inflexible rules which should govern the exercise of the said discretion. No test can indeed be laid down the automatic application of which will help the solution of the problem of the exercise of judicial discretion."
28. A partnership contract between the plaintiff and the defendant contained an arbitration clause. In a suit for dissolution of partnership and for accounts filed on 27-2-1947, the plaintiff filed an interlocutory application praying for interim injunction pending disposal of the suit restraining defendant from drawing certain amount. On this application an ex parse order was made granting interim injunction. Due notice to the defendant of the order granting interim injunction was made returnable on 3-3-47. On that date, the defendant applied for ten days' time for filing counter- affidavits and for modification of injunction. By the consent of the plaintiff this request was granted and the order of interim injunction was modified. On the adjourned date (14-3-47) the defendant stated for the first time that he intended filing an application for referring the dispute to arbitration.
29. In view of this he stated that he had not filed a counter-affidavit. On application by defendant for stay of proceedings under section 34.
30. It was held that the defendant did take a step in proceedings within the meaning of section 34 both on 3-3-47 and 14-3-47 when the interlocutory application came on for hearing.
31. PLD 1965 Dacca 260). It has been held that an application for time for written statement amounts to taking step in proceedings. In Mst. Razia Begum v. Khan Bahadur Allah Bukhsh Gauble (PLD 1961 Kar. 225), it is held: "The applicant's negligent conduct amounted to waiver." Therefore, the proceedings were not stayed. I entirely agree with the principle laid down in these authorities and they can be safely relied upon in favour of the respondents.
32. The examination of the case-law boils down to this position that the due weight must be given to an arbitration clause and the parties are bound by such an agreement. In a contract with the Government, as the case in hand, there is always an arbitration clause in the agreement. In the event of any, dispute, the matter would be referred to the arbitration. Therefore, the parties entered into agreement with the Government cannot turn somersault unless Government/defendant did not elect to go before the arbitration or takes some steps in the proceedings which debar the defendant subsequently to move an application for 'staying the suit. It is always a question of fact whether a particular act of the defendant amounts to a step in the proceedings. No hard and fast rule can be made in this behalf but the following circum--stances are relevant facts to determine the conduct of the defendant in this behalf:
(a) A party has before him information enabling him to elect between trial before a Court of law and trial between an arbit--rator.
(b) The defendant has full knowledge about the claim of the defendant, set out in the plaint and this knowledge can be deducted from the fact that defendant has received the copy of the plaint.
33. After having fully conversant with the facts of the plaintiff's case, if the defendant did not exercise his right of arbitration at the earliest and going on attending the Court though no progress has been made in the case and the case is being adjourned either at the instance of the parties or by the Court.
(c) The delay caused due to the lethargic attitude of the defendant or his negligence are some of the facts showing that the defendant does not want to get the aid of arbitration clause.
34. Coming to the facts of the present case it is clear that the Government Pleader had appeared on behalf of the appellants 1 to 4 on 18-12-1975. On 24-2-1976 when the case was taken up on transfer by the Civil Judge Mr. Latafit A.I, Secretary Communication was present on behalf of the defendants Nos. 1 to 3. On 26-4-1976 the representative of the defendant No. 4 and his counsel were present.
35. The defendants had not filed written statement and the case was adjourned to 10-6-1976 when the counsel for defendant No. 4 and the Government Pleader for defendants Nos. 1 to 3 were also present. The written statement was again not filed. The counsel for the plaintiff filed an application under Order VIII, rule 10 read with Order VIII, rule 1, C. P. C. Praying that the decree be granted against the defendant as required by Order VIII, rule 10, C. P. C. The counsel for the defendant requested for adjournment to file the reply. The counsel for the defendants on the next date of hearing i.e. 24-6-1976 moved an application for setting aside ex parte order against defendant No
5. The counsel for the defendant had also filed reply to the application moved by the plaintiff's counsel under Order VIII, rule 10 stating therein that the provisions of Order VIII, rule 10 are directory and the period of 90 days would commence from 10-6-1976. In the same application it was stated that the Court has no jurisdiction to proceed with the matter and there is arbitration clause in the agreement. The counsel for the defendants had moved two applications on the same day one application was under section 34 of the Arbitration Act stating that the matter be stayed and the reference of the dispute be made to the nominated arbitrator. The second application was under Order VII, rules 19, 20 and 21 of the C. P. C. According to this application the plaintiffs had not complied with the provisions of Order VII. The plaint is therefore defective and merits rejection. The aforesaid facts would show that the appellants had taken the steps in proceedings. No reason has been assigned as to what are the circumstances which prevented the appellants from moving the application at the earliest stage of the proceedings. It is not the case of the appellants that they had not received the copy of the plaint and they were unaware of the subject-matter of the suit. In fact the application moved by the appellants under Order VII, rule 19 etc., wherein they had submitted that the plaint ofthe respondents be rejected, to my mind is "a step further" in the proceedings. In fact appellants wanted the Court to reject the plaint of the plaintiffs as the provisions of Order VII had not been complied with.
36. The learned counsel for the appellants has contended that the Govern--ment Pleader had no authority to appear in Court on behalf of appellants. But this was not the case of appellants either before the trial Court or before the First Appellate Court. Mr. Munawar Ahmed Mirza or the appellants had not challenged anywhere in the proceedings that the Government Pleader had no authority to appear in Court. In fact the Government Pleader used to appear in Court alongwith Mr. Mirza himself who represented only defendant No. 4 before the trial Court. The application moved by Mr. Munawar Ahmed Mirza under Order IX, rule 7, C. P. C. In the Court of Civil Judge belies the contention that the Government Pleader was not empowered to appear in Court. Para. 2 of the aforesaid application stipulates "that the defendant No. 5 and the Department have engaged Mr. Munawar Ahmed Mirza, Advocate, alongwith the Government pleader to defend the instant case."
37. Under Order XXVII, rule 4, C. P. C. The Government Pleader in any Court shall be the agent of the Government for the purpose of receiving processes against the Government issued by such Court.
38. No stamped power or vakalatnama is required. The Government Pleader need not file any vakalatnama under Order XXVII, rule 2. The Government Pleaders are authorised to act for Government as their recognised agent without any power of attorney. If an authority is needed a reference can be made to Messrs Nabi Bakhsh & Sons v. Pakistan through the Secretary, Ministry of Industries and NaturalResources (Industries Division), Karachi (PLD 1960 Kar. 566).
39. The reasonable conclusion from the above discussion is that the appellants, had taken many steps in the proceedings.
40. Apart from the fact that the steps in the proceedings had been taken in this case, the language of section 34 of the Arbitration Act makes it clear that it is the discretion of the Court to stay the proceedings, and such a discretion must be exercised judicially and not in an arbitrary or whimsical manner. The word "may" has been used in the section. As observed earlier the arbitration clause must be given effect to. It is held in Messrs Gabole Brothers v. Government of Pakistan (PLD 1972 Kar. 515), that "In these curiously cloured contracts, the contractor is bound by the terms and conditions of the contract".
41. An identical view was taken in Bachna Ram Sawan Ram v. The State of Punjab (AIR 1962 Pb. 85).
42. But this general rule can be varied in exceptional circumstances, where the allegation of fraud has been made or there are other facts which would lead to show that it is doubtful if the arbitrator would act in a fair and impartial manner. It has been held in Andhra Co-operative Spinning Mills Ltd., Guntakal v. C. Srinivasan (AIR 958 Andh. Pra) that :--- "A party to the arbitration agreement is not as of right entitled to the stay of proceedings and the question whether or not the Court shall exercise the power given to it under section 34 is entirely one of discretion though that discretion is undoubtedly to be exercised judicially. In doing so it will consider the question whether it should refuse stay in a case where allegations of fraud have been made and whether the party against whom they are made desires them to be investigated of enquired into in open Court." In Gauri Shankar & Sons v. Union of India General Manager, E. I. Rly. AIR 1953 All. 446.
43. Section 34 does not make it obligatory on the Court to necessarily refer the dispute to arbitration. It gives the Court a discretion to stay the proceedings in Court "if it is satisfied that there is no sufficient reason why the matter should not be referred to in accordance with the arbitration agreement." We are of the opinion that even if otherwise the case had been one which fell within the purview of the arbitration agreement we would have refrained from staying the proceedings in Court and referring it to arbitration."