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TMI Blog1995 (1) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... dent-company on 4-9-1989. Since the transaction involved transfer of shares by a non-resident company, permission of the RBI was obtained subject to certain terms and conditions stipulated by the RBI. The time granted by the RBI was extended from time to time up to 5-9- 1989. According to the first respondent Insotex (India) Limited, they also handed over to the appellant a cheque dated 4-9-1989, for the consider- ation amount and also paid relevant tax on the same. According to Insotex (India) Limited, they had completed all the formalities regarding transfer of shares by the stipulated date 4-9-1989. The first respondent, Insotex (India) Limited, also received a communication from the second respondent-company through a copy of the letter addressed by them to the RBI that the transfer of shares had been effected in the books of account of the company by a resolution of the board of directors on 17-5-1991. Immediately, thereafter, they received another copy of the letter dated 31-7-1991, addressed by the company to the RBI intimating that the board of directors of the second respondent company had, in their board meeting held on 24-7-1991, rescinded the resolution passed on 17-5-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent Nos. 1 and 2 and accordingly, the case is not a fit one for being stayed under section 34 and dismissed the application filed by the appellant. This appeal is against the abovesaid order. 6. The learned counsel for the appellant contended that the contract between the appellant and the first respondent for sale of 13,600 shares is covered by an agreement dated 1/4-9-1989, and that the title of the first respondent to the shares will depend upon the terms of the agreement. If the terms of the agreement had not been complied with, there will be no transfer of shares in favour of the first respondent and accordingly, they will not be entitled to have the shares transferred in their name. That agreement contains an arbitration clause, which provides that, all the disputes which arise out of or in connection with that, shall be referred to arbitration. According to them, the right to have the register of the second respondent company rectified in favour of the first respondent will depend on as to whether the first respondent has obtained title to the shares in question. The CLB is competent under section 111(7) to decide any question in regard to any title of a person who is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a dispute regarding the title of the first respondent to the shares under the terms of the agreement entered into between them. According to them, the terms of the contract have worked out themselves as the formalities have not been complied with within the period stipulated therein. It is not necessary for us to go into that question at this stage. But it has to be noted that, in the proceedings before the CLB, the question of title of the first respondent to the shares may also be relevant and the CLB is also competent to go into that question under section 111(7). The case of the appellant is that the agreement has come to an end by its own terms and the dispute regarding the effect of the agreement is a matter fully covered by the arbitration clause. The arbitration clause contained in the agreement is clause 1( b ) of the agreement, which reads: "( b ). If, for whatever reason, disputes shall arise out of or in connection with the present agreement that cannot be solved by the parties they shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, Paris, France, by three arbitrators appointed in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings before the CLB take in issues which are not covered by the arbitration clause and are also against a party who is not a signatory to the agreement. In other words, the proceedings before the CLB cover also issues not covered by the arbitration clause, though, one of the disputes that may arise is within the arbitration clause. Moreover, it is the action of the second respondent that is challenged before the CLB which is not a party to the arbitration agreement. In the circumstances of the case, it cannot be said that the second respondent is only a formal party. The validity of their action on the ground given by them has also to be considered. For the aforesaid two reasons, we are of the view that the CLB was right when it held that this is not a fit case to be stayed under section 34. 10. It is well settled that the power under section 34 to stay any proceedings before a judicial authority is discretionary. The appellant is a German company and the first respondent is an Indian company. According to clause 7(4) of the arbitration agreement, any dispute has to be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party to a subsisting arbitration agreement in breach or violation of the agreement to refer dispute to arbitration approaches the court, the court would not lend its assistance to such a party and by staying the suit compel the party in breach to abide by its contract. When the parties have agreed to an arbitration by a foreign Arbitral Tribunal the case for stay would be stronger than if there was a domestic arbitration agreement. This proceeds on the assumption that parties not only sought and agreed upon the forum for resolution of dispute but also the law according to which the dispute would be resolved. However, this is not an absolute rule. Granting or refusing to grant stay is still a matter within the discretion of the court. How discretion would be exercised in a given case would depend upon various circumstances. But to grant stay of the suit is still a matter within the discretion of the court...." (p. 2095) 12. Their Lordships also quoted with approval the following passage from Russell on the Law of Arbitration, 19th edition, which reads thus: "The principles established by the authorities can, I think, be summarised as follows: (1) Where plaintiffs sue in En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would never think of incurring such a huge cost to realise such a small sum claimed, and the restriction on the availability of foreign exchange, another vital relevant consideration. The sum total of all these well established circumstances clearly indicate that this was a suit in which when discretion is exercised on well settled judicial consideration no court would grant stay and the stay has to be refused." (p. 2099) 14. In the light of the principles laid down by the Supreme Court in the aforesaid case, we do not think that this is a fit case where we should exercise discretion in favour of the appellant by granting stay of the proceedings under section 34. From the facts of the case, it is clear that the contract was entered into in India; that first respondent is an Indian company; the entire evidence of both the appellant and the respondents is in this country; the contract as a whole was executed and carried out in this country and the whole claim arose in this country. The appellant is a German company and the first respondent is an Indian company and the arbitration has to take place in a third country, viz., Zurich, Switzer- land and we feel that the object of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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