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Issues Involved:
1. Refusal to stay the suit under Section 34 of the Arbitration Act. 2. Applicability of the arbitration clause to the present dispute. 3. Discretion exercised by the trial court in refusing stay. 4. Continuation of the arbitration agreement after the award was set aside. Issue-Wise Detailed Analysis: 1. Refusal to stay the suit under Section 34 of the Arbitration Act: The appeal challenges the order dated 1st June 1962 by Ali, J., who refused to stay the suit for injunction and recovery of Rs. 10,000 filed by the Plaintiff against the Union of India. The Union of India had applied under Section 34 of the Arbitration Act to stay the suit, which was rejected. 2. Applicability of the arbitration clause to the present dispute: Ali, J. rejected the stay application on the ground that the dispute regarding risk purchase was covered by Clauses 7 and 10 of the contract, not by Clause 21-(a) of IAFZ 2120, which pertains to disputes arising from the interpretation or application of contract provisions not previously provided for. The Judge also noted that referring only part of the Plaintiff's relief to arbitration (i.e., the Rs. 10,000 damages) would not be expedient in the interest of justice. 3. Discretion exercised by the trial court in refusing stay: The appellate court acknowledged that discretion exercised by a trial court under Section 34 should not be interfered with lightly. However, it cited precedents indicating that appellate courts should intervene if the trial court's discretion was exercised unreasonably or capriciously, or if relevant facts were ignored. The Supreme Court in Printers (Mysore) Private Ltd. v. Pothan Joseph emphasized that while discretion under Section 34 is broad, it must be judicially exercised, and appellate courts must correct unjudicial exercises of discretion. 4. Continuation of the arbitration agreement after the award was set aside: The appellate court examined whether the arbitration agreement remained intact after the award was set aside. It referred to various authorities, including Morgan Walker and Co. v. Khardah Co. Ltd., which held that an arbitration agreement continues unless explicitly superseded. The court concluded that the arbitration agreement dated 29-7-60 remained valid, and the arbitrator was still seized of the matter. The parties had voluntarily referred all disputes arising from the contract to arbitration, and this agreement was not nullified by the setting aside of the award. The court also discussed the principles under English law and the Indian Arbitration Act, emphasizing that stay of legal proceedings is generally favored when an arbitration agreement exists, unless specific grounds for refusal are present. The conditions for granting a stay under Section 34 were met, including the fact that the dispute was within the scope of the arbitration agreement and the Union of India had not taken any steps in the legal proceedings after appearance. Conclusion: The appellate court found that the trial court erred in refusing the stay. It held that the arbitration agreement was still in effect, and the disputes should be resolved through arbitration as initially agreed by the parties. The appeal was allowed, and the suit was stayed under Section 34 of the Arbitration Act, with no order as to costs in the appellate court.
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