MALATHI RAJAGOPALAN Vs. FEDERAL BANK LIMITED

JUDGEMENT

(1.) The appellant has filed this appeal to challenge the order dated 13.11.1982 passed by the learned Additional District Judge whereby the application of the respondent under Section 34 of the Arbitration Act, 1940 was allowed and the suit for recovery filed by the appellant was stayed. A few facts relevant for deciding this appeal are: -

(2.) It was stated in the suit that the goods had been released in favour of the purchaser on instructions having been given by the bank without the payment having been received from the purchaser and consequently the bank was liable to pay the entire value of goods along with incentive. On summons being served upon the defendant/respondent, an application under Section 34 of the Arbitration Act, 1940 was filed by the respondent-bank for stay of the suit stating, inter alia, that at the time of availing overdraft of Rs.3,30,823.37 paise against the export documents, the appellant had executed Export Credit Agreement dated 13.4.1981 besides executing other documents. It was submitted that the suit of the plaintiff had arisen out of the Export Credit Agreement dated 13.4.1981, which contained an arbitration clause providing that in the event of any dispute or difference whatsoever relating to the agreement including the dispute or difference as regards the construction or the validity of the agreement, the same shall be decided by the sole and solitary arbitration of the Chairman of the bank for the time being or in the event of there being no Chairman, the Chief Executive Officer. It was submitted that since there was an arbitration Agreement between the parties and the respondent was always ready and continues to be ready to do all things necessary to the proper conduct of the arbitration when the proceedings commenced and even at the time of filing of the application, the suit was liable to be stayed and cannot be proceeded with.

(3.) Reply to the application was filed by the appellant alleging, inter alia, that the amount given to the appellant was not under the Export Credit Agreement but was against the Packing Credit Limit sanctioned by the bank and as there was no arbitration agreement under the said Packing Credit Limit, there was no question of the suit being stayed or the matter being referred to the arbitrator. On the pleadings of the parties, the learned Additional District Judge framed the following issue: -