SHAKUNTALA SILK MILLS Vs. SWADESHI COTTON MILLS

JUDGEMENT

(1.) This is an appeal under Sec. 39 of the Arbitration Act against the judgment of the Civil Judge, Allahabad dated 12.9.79 rejecting the application of defendants 5 to 8 for stay of proceedings of the suit under Sec. 34 of the Arbitration Act.

(2.) Suit No. 113 of 1979 was filed by M/s Swadeshi Cotton Mills Co. Ltd., for recovery of Rs. 25449/principal sum and Rs. 6350.40 as interest. The plaintiff alleged that it carries on business of manufacture of cloth, yarn and other textile goods at Kanpur, Naini and other places. The defendant No. 1 is a partnership firm duly incorporated and registered under the Indian partnership Act and defendants 2, 3 and 4 are its partners, Defendant 5 is another partnership firm of which defendants 6 to 8 were its partners. The plaintiff claimed that defendant 5 entered into an agreement with the plaintiff for the sale of staple fibre yarn and synthetic blended yarn manufactured by the plaintiff. The agreement, entered into between the plaintiff and defendant 5 inter alia provided :

(3.) After filing the suit, defendants 5 to 8 applied for stay under Sec. 34 relying upon the clause of agreement which contained an arbitration clause. The application was rejected. After perusal of the record, we find that no arbitration agreement exists between the plaintiff and defendants 1 to 4. Since defendants 1 to 4 are not party to the agreement which was entered into between the plaintiff and defendants 5 to 8, they are not bound by the arbitration clause. The suit was filed by the plaintiff for recovery of the amounts not only against defendants 5 to 8 but also defendants 1 to 4. In these circumstances there being no arbitration clause between the plaintiff and defendants l to 4, there was no question of staying the proceedings of the suit under Sec. 34. The application is liable to be rejected. It is true that under the agreement, the liability to pay the unpaid price of the goods was on the sale promoters i.e. defendants 5 to 8 still since the goods had been sold to defendants I to 4, the primary liability to pay its price was on them. As observed above, since they are not a party to the agreement containing the arbitration clause, their dispute with the plaintiff cannot be referred to the arbitration. Consequently, the learned Civil Judge was right in rejecting the application under Sec. 34. In the result, the appeal fails and is dismissed with costs. Appeal dismissed.