PRAMADA PRASAD MUKHARJEE Vs. SAGARMAL AGARWALA

JUDGEMENT

(1.) THE question for decision in this appeal is whether an action commenced by the plaintiffs should, on the application of the defendant, who is the appellant before us, be stayed, pursuant to Section 34 of the Indian Arbitration Act, 1940 (Act X of 1940), in order that the matters in dispute between the parties may be dealt with by the arbitrators under the arbitration agreement. THE trial Court has declined to stay the suit. THE defendant has, therefore, come up to this Court in appeal.

(2.) THE defendant has a lease-hold interest in a colliery in village Patlaoari in the Jharia Coalfield in the district of Manbhum, fully specified in Schedule A to the plaint. On the 28th of June 1948, there was an agreement between the plaintiff No. 1 (hereinafter referred to as the plaintiff: other plaintiffs being junior members of his family) and the defendant, under which the latter granted what is described as a managing agency of the colliery for a term of seven years to the plaintiff on certain terms and conditions fully set out in the agreement and made over possession of the colliery together with the machinery, building and structures appertaining thereto, to the plaintiff, and the plaintiff came into possession of the colliery on the 29th of June 1948. THE agreement contains 25 clauses. Clauses 1 to 24 set out the obligations which the parties undertook towards each other and Clause 25 is the arbitration clause which reads as follows:

(3.) IT is clear that the dispute between the parties is as to the factum and validity of the agreement itself. On the allegations of the parties, two questions emerge for decision in the suit: (1) whether the agreement is vitiated by fraud or misrepresentation or both, and (2) whether it is a lease and as such void for want of registration. The point for consideration is whether these questions can go to the domestic tri- bunal for decision under the arbitration clause. The contention of Mr. Lal Narayan Sinha is that the words of Clause 25 are of sufficient amplitude and confer power on the arbitrators to decide the dispute raised in the suit. This contention, in our view, is not correct. There is nothing in the deed to show that the arbitrators were empowered to decide the question of legality or fraud going to the very root of the contract. The attack is on the contract as a whole and the dispute is whether there is a binding contract between the parties. If the plaintiff's allegation of fraud and misrepresentation is proved or the document, on construction, is held to be a lease, and as such void for want of registration, the arbitration clause which is only a part of the contract must perish along with the other clauses. IT is well-settled that if there be in a suit allegations and counter-allegations of fraud or misrepresentation in bringing a contract into existence, such a suit is independent of the contract, and the dispute must be decided by the Court and not by the domestic tribunal, for the repudiation is of the contract it self, and not of the obligations arising out of the contract. The points in dispute cannot, therefore, go to the arbitrators under the submission clause and the suit cannot, in our view, be stayed under Section 34 of the Indian Arbitration Act, which provides: