Judgment:
Ashok Bhan, J.
1. The short point which falls for consideration is:
'Whether proceedings in a suit can be stayed under Section 34 of the Arbitration Act, 1940 (hereinafter referred to as 'the Act'), referring the parties to get the dispute settled through arbitration as per agreement even when one of the defendants after entering appearance files the written statement thus taking steps in proceedings of the suit'.
2. Plaintiff-respondents 1 and 2 (hereinafter referred to as 'the plaintiffs') filed O.S. No. 1296 of 1990 against defendant-appellants and respondent 3 who was arrayed as defendant 5 in the plaint along with the appellants (hereinafter referred to as 'defendants 1 to 4'), seeking dissolution of the partnership firm and directing the defendants to dissolve the partnership, rendering accounts and making payments to which the plaintiffs are ultimately found entitled to. Defendant- respondent 5 who is the son of the first plaintiff entered appearance and filed his written statement admitting the claim of the plaintiffs. Defendants 1 to 4 filed I.A. III under Section 34 of the Act for staying the proceedings in the suit and directing the parties to go in for arbitration as per arbitration clause contained in the partnership deed. I.A. III has been dismissed by the Trial Court holding that once defendant 5 has filed the written statement thus taking a step in the proceedings in the suit, the suit could not be stayed under Section 34 at the instance of defendants 1 to 4 to avoid conflicting position and multiplicity of proceedings.
3. Aggrieved against the order passed by the Trial Court on I.A. III, the present appeal has been filed.
4. The case of the defendant-appellants is that plaintiff-respondents 1 and 2 and defendant 5 are members of the same family and therefore the filing of the written statement by defendant 5 in a collusive manner would not disentitle defendant-appellants to maintain their application under Section 34 of the Act, seeking to stay the proceedings in the suit and referring the parties to get the matter resolved through arbitration as per clause contained in the partnership deed.
5. We have heard the Counsel for the parties. Section 34 of the Actreads:
'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 no 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 proceedings'.
6. Supreme Court of India in Anderson Wright Limited v Moran and Company, determined the scope and ambit of Section 34 of the Actholding that it is necessary that the following conditions should be fulfilled before an order of stay under Section 34 is granted:
'(i) the proceeding must have been commenced by a party to an arbitration agreement against any other party to the agreement;
(ii) the legal proceeding which is sought to be stayed must in respect of a matter agreed to be referred;
(iii) the applicant for stay must be a party to the legal proceeding and he must have taken no step in the proceeding after appearance. It is also necessary that he should satisfy the Court not only that he is but also was at the commencement of the proceedings ready and willing to do everything necessary for the proper conduct of the arbitration; and
(iv) the Court must be satisfied that there is no sufficient reason why the matter should not be referred to an arbitration in accordance with the arbitration agreement'.
7. Judgment apart a bare perusal of Section 34 would show that application for stay of suit under this section can be filed at any time before filing of the written statement or taking any other step in the proceedings of the suit. Where one of the defendants files the written statement against the wishes of other defendants or their knowledge, then would it be a step in the proceedings? In our view, it would be. The firm can act through a partner and act of a partner is binding on the firm unless his act is one of the acts mentioned in Section 19(2) of the Partnership Act. The act of filing the written statement in the suit does not fall in any of the prohibitory sub-clauses (a) to (h) of Section 19(2) of the Partnership Act.
8. A Single Bench of this Court in Haji Mahaboob v Noor Ahamed, held that where one of the defendants took step in the proceedings of the suit, whereas the other had not taken, the other defendant was precluded from asking for a stay of the suit because it would lead to strange results inasmuch as the suit against one defendant is stayed, while the suit against the other defendant has to continue.
9. Similarly in M/s. National Small Industries Corporation Limited, New Delhi v M/s. Punjab Tin Printing and Metal Industries and Others, a Single Judge held that an act of partner is binding on the firm unless the act is one of the acts mentioned in Section 19(2) of the Partnership Act. If one of the partners takes steps in the proceedings of the suit by seeking time to file the written statement, then the same would be deemed to be a request on behalf of the other defendants as well and therefore the suit cannot be stayed under Section 34 of the Act.
10. Situation in the present case is the same. Irrespective of relationship of the plaintiffs with defendant 5 or the collusive nature of the written statement filed, once defendant 5 has filed a written statement thus taking steps in the proceedings of the suit, the proceedings in the suit cannot be stayed under Section 34 of the Act on an application filed by the other defendants as it can lead to passing of contradictory and conflicting orders. The suit has to proceed against defendant 5 as he has filed the written statement and there would be no justification for staying the suit insofar as it is directed against the other defendants. It would lead to anomalous results inasmuch as the suit against some of the defendants would be stayed while the suit against one of the defendants shall continue. It can lead to passing of conflicting order on the same set of fact and ultimately a contradictory decree which in any case has to be avoided.
11. For the reasons stated above, it is held that the order passed by the Trial Court is proper and in accordance with law. Dismissed. No costs.