1951 (11) TMI 26 - SC - Indian Laws

Summary

Issues Involved:
1. Whether the respondent was a party to the arbitration agreement.
2. Whether the dispute in the suit falls within the arbitration clause.
3. Conditions for granting a stay under Section 34 of the Arbitration Act.

Detailed Analysis:

1. Whether the respondent was a party to the arbitration agreement:
The Court emphasized that the first essential pre-requisite to making an order of stay under Section 34 of the Arbitration Act is that there is a binding arbitration agreement between the parties to the suit. The plaintiff contended that it acted merely as a broker and not as a contracting party, asserting that the real seller was another firm. The appellate bench of the High Court did not conclusively address whether the plaintiff was a party to the arbitration agreement, which the Supreme Court found necessary to determine. The Supreme Court held that if the respondent was a signatory to the contract, it would suffice to consider them a party to the arbitration agreement for the purposes of Section 34.

2. Whether the dispute in the suit falls within the arbitration clause:
The dispute revolved around whether the plaintiff, who described itself as a broker, could be held liable under the contract. The arbitration clause in the Bought Notes was broadly worded to cover "all matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection with and/or in consequence of or relating to this contract." The Supreme Court noted that if it is established that there is a binding arbitration agreement, the dispute concerning the rights and liabilities under the contract would fall within the arbitration clause. The Court referenced Heyman v. Darwins, stating that the court must decide whether the arbitrator has jurisdiction based on the evidence before it.

3. Conditions for granting a stay under Section 34 of the Arbitration Act:
The Supreme Court outlined the conditions under Section 34 of the Arbitration Act as follows:
- The proceeding must have been commenced by a party to an arbitration agreement against any other party to the agreement.
- The legal proceeding which is sought to be stayed must be in respect of a matter agreed to be referred.
- The applicant for stay must be a party to the legal proceeding and must have taken no step in the proceeding after appearance.
- The applicant must satisfy the Court that they were and still are ready and willing to do all things necessary for the proper conduct of the arbitration.
- The Court must be satisfied that there is no sufficient reason why the matter should not be referred to arbitration.

The third condition was deemed fulfilled, and the fourth condition was for the Court's determination. The controversy centered on the first two conditions. The Supreme Court concluded that the appellate bench should have decided whether the plaintiff was a party to the arbitration agreement, as it would influence the decision on whether the dispute falls within the arbitration clause.

Conclusion:
The Supreme Court allowed the appeal, setting aside the judgments of both the lower courts. It remanded the case back to the appellate bench of the Calcutta High Court to decide whether the respondent was a party to the arbitration agreement. If the respondent is found to be a party, the suit shall be stayed, allowing the appellant to proceed with arbitration. If not, the application for stay will be dismissed. The appellant was awarded costs for the appeal, with further costs to abide by the result.