TMI Blog1951 (11) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... nuary, 1951, at the rate of 1,00,000 yards per month under each of these notes and payments were to be made in cash 'on delivery, each delivery being treated as a separate and distinct contract. The Bought Notes commenced thus: Dear Sirs, We have this day Bought by your order and on your account from our Principals. The particulars of the goods, the price, the time of delivery and other terms of the contract are then set out and amongst the terms is an arbitration clause worded as follows: All matters, questions, disputes, differences and/ or claims arising out of and/or concerning and/or in connection with and/or in consequence of or relating to this contract, whether or not the obligations of either or both parties under this contract be subsisting at the time of such dispute and, whether or not this contract has been terminated or purported to be terminated or completed, shall be referred to the arbitration of the Bengal Chamber of Commerce -under the rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted. The notes were signed by the respondent, Moran and Company, describing themselves a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation was heard by Das Gupta J. who allowed the prayer of the applicant and stayed further proceedings in the suit. In the opinion of the learned Judge the dispute in this case was not whether there was any contract entered into by and between the appellant and the respondent: but whether the respondent, who admittedly passed the two Bought Notes to the appellant, could be made liable under the contract by reason of the fact that it described itself as broker. The answer to this question depended according to the learned Judge upon the interpretation of the contract itself and the dispute arising as. it did out of or concerning or relating to the contracts would come within the purview of the arbitration clause. Against this judgment the respondent took an appeal to the Appellate Division of the High Court and the appeal was heard by a bench consisting of Chakravartti C.J. and Sarkar J. By two separate judgments which concurred in the result, the Chief Justice and the other learned Judge allowed the appeal and vacated the order for stay. It is against this judgment that the appellant has come to this Court on the strength of a certificate under article 133(1)(a) of the Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement and that the subject-matter of dispute in the suit is a matter coming within the scope of such agreement, it cannot possibly ask the Court to order a stay of the proceedings, under section 34 of the Arbitration Act. The learned Judges of the appellate bench of the High Court have taken the view that the only matter in dispute between the parties to the suit is whether the plaintiff was a party to the contract. It was definitely alleged by the plaintiff that the contract was not between it and the appellant but was one between the appellant and a third party and since the arbitration agreement is contained in the contract, it is an agreement between those parties only, which could not bind or affect the plaintiff in any way. The dispute, it is said, which is the subject-matter of the suit does not arise under the contract and does not relate to it; it is outside the contract altogether and does not come within the scope of the arbitration agreement. The decision in the appeal therefore rests entirely on the finding of the learned Judges that the matter in dispute between the parties to the suit does not come within the ambit of the arbitration clause. In view of this decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always defeat an agreement to submit disputes to arbitration, at any rate until the question of jurisdiction had been decided. The Court to which an application for stay is made is put in possession of the facts and arguments and must in such a case make up its mind whether the arbitrator has jurisdiction or not as best it can on the evidence before it. Indeed, the application for stay gives an opportunity for putting these and other considerations before the court that it may determine whether the action shall be stayed or not. Section 34 of the Arbitration Act as is well known is a virtual reproduction of section 4 of the English Arbitration Act of 1889. The observations quoted above were approved of by Mr. Justice S. R. Das in the case of Khusiram V. Hanutmal (1) and it was held by the learned Judge that where on an application made under section 34 of the Arbitration Act for stay of a suit, an issue is raised as to the formation, existence or validity of the con. tract containing the arbitration clause, the Court is not bound to refuse a stay but may in its discretion, on the application for stay, decide the issue as to the existence or validity of the arbitration agreement ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is certainly not admitted that the respondent was a party to the contract. In fact that is the subject-matter of controversy in the suit itself. But, as has been said already, the question having been raised , in this application, under section 34 of the Arbitration Act, the Court has undoubted jurisdiction to decide it for the purpose of finding as to whether or not there is a binding arbitration agreement between the, parties to the suit. It has been said by Chakravartti C.J. and in our opinion rightly, that if the person whose concern with the agreement is in question is a signatory to,the contract and formally a contracting party, that will be sufficient to enable the Court to hold for purposes of section 34 that he is a party to the agreement. It was the contention of the respondent in the Court below that this test was not fulfilled in the present case. The point has been canvassed before us also by Mr. Sen and it has been argued on the authority of several decided cases that in cases of this description the Bought Note is a mere intimation to the buyer, that the orders of the latter have been carried out and purchases have been made from other persons and not from them. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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