MICHAEL GOLODETZ Vs. SERAJUDDIN AND CO

JUDGEMENT

(1.) THE Appellants are a firm carrying on business as importers, in the name and style of "Mr. Golodetz and Company" at 120, Wall Street' New York in the United States of America. THE respondents are a firm carrying on business, among others, as exporters of manganese ore and their principal office of business is at Bentinck Street in the town of Calcutta. By a contract in writing dated 5/07/1955 the respondents agreed to sell and the appellants agreed to buy 25,000 tons of manganese ore on the terms and conditions set out therein. THE contract contained the following arbitration clause.

(2.) WE will assume for the purpose of this appeal that S. 34 of the ARBITRATION AND CONCILIATION ACT, 1940 invests a Court in India with authority to stay a legal proceeding commenced by a party to an-arbitration agreement against any other party thereto in respect of any matter agreed to be referred, even when the agreement is to submit it to a foreign arbitration tribunal. Where a party to an arbitration agreement commences an action for determination of a matter agreed to be referred under an arbitration agreement the Court normally favours stay of the action leaving the plaintiff to resort to the tribunal chosen by the parties for adjudication. The Court in such a case is unwilling to countenance, unless there are sufficient reasons, breach of the solemn obligation to seek resort to the tribunal selected by him, if the other party thereto still remains ready and willing to do all things necessary for the proper conduct of the arbitration. This rule applies to arbitrations by tribunals, foreign as well as domestic. The power enunciated by S. 34 of the Arbitration Act is inherent in the Court: the Court insists unless sufficient reason to the contrary is made out upon compelling the parties to abide by the entire bargain, for not to do so would be to allow a party to the contract to approbate and reprobate, and this consideration may be stronger in cases where there is an agreement to submit the dispute arising under the contract to a foreign arbitral tribunal. A clause in a commercial transaction between merchants residing in different countries to go to arbitration is an integral part of the transaction, on the faith of which the contract is entered into, but that does not preclude the Court having territorial jurisdiction from entertaining a suit at the instance of one of the parties to the contract, even in breach of the covenant for arbitration. The Court may in such a case refuse its assistance in a proper case, when the parry seeking it is without sufficient reason resiling from the bargain. When the Court refuses to stay the suit it declines to hold a party to his bargain, because of' special reasons which make it inequitable to do so. The Court ordinarily requires the parties to resort for resolving disputes arising under a contract to the tribunal contemplated by them at the time of the contract. That is not because the Court regards itself bound to abdicate its jurisdiction in respect of disputes within its cognizance: it merely seeks to promote the sanctity of contracts, and for that purpose stays the suit. The jurisdiction of the Court to try the suit remains undisputed but the discretion of the Court is on grounds of equity interposed. The Court is therefore not obliged to grant stay merely because the parties have even under a commercial contract agreed to submit their dispute in a matter to an arbitration tribunal in a foreign country. It is for the Court, having regard to all the circumstances, to arrive at a conclusion whether sufficient reasons are made out for refusing to grant stay. Whether the circumstances in a given case make out sufficient reasons for refusing to stay a suit is essentially a question of fact.

(3.) IT was urged by counsel for the appellants that the High Court for reasons which were not adequate interfered with the order which was within the discretion of the trial Judge and on that account the order must be set aside. But the High Court has pointed out that Ray, J., 'did not give full, proper and adequate consideration to all the circumstances and failed to apply his mind to the relevant affidavits from which it emerged that all the evidence relating to the dispute was in India and that he did not express his views on the diverse contentions raised and remained content to observe that he was not in a position to decide the questions raised thereby, and granted stay because he did not find any compelling reasons for exercising the discretion against the appellants. This criticism of the High Court appears not to be unjustified. The High Court was therefore competent on the view expressed in interfering with the discretion.