Judgment

SHAH, J. : 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 July 5, 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.

"Arbitration: Any dispute arising out of the contract is to be settled by arbitration in New York according to the rules of the American Arbitration Association."

Between September 1956 and August 1957 the respondents supplied 5478 tons of manganese ore. Dispute having arisen between the parties about the liability of the respondents to ship the balance of the goods not delivered, the appellants referred them on or about January 15, 1958 to the arbitration of the American Arbitration Association and claimed compensation on the plea that the respondents had unlawfully made default in shipping the balance of the goods agreed to be sold. On February 2, 1958 the respondents commenced an action on the original side of the High Court of Calcutta claiming a decree that the written contract dated July 5, 1955 be adjudged void and delivered up and cancelled, that a perpetual injunction be issued restraining the appellants, their servants and agents from taking steps in purported enforcement of the said contract and that a declaration (if necessary) be made that the said contract stands discharged and that the parties have no rights and obligations thereunder. It was the case of the respondents that the appellants had accepted manganese ore shipped till August 1957 in full satisfaction of their liability and that the contract was discharged and the rights and liabilities of the parties thereunder came to an end. In the alternative the respondents pleaded that the appellants had repudiated the contract or had committed breaches thereof and on that account also the contract stood discharged or had become void or voidable at their option and that they had avoided the same. In the further alternative they pleaded that the contract had become impossible of further performance and that the same stood frustrated or discharged and they were exempted from further performance thereof. The appellants thereupon petitioned the High Court of Calcutta for an order that the proceedings in suit No. 194 of 1958 commenced by the respondents be stayed by an order under S. 34 of the Arbitration Act X of 1940, and that an injunction be issued restraining the respondents, their agents and servants from proceeding with the hearing of the suit. Ray J. who heard the petition held that to the agreement to submit the disputes to arbitration to a foreign arbitral body S. 34 of the Indian Arbitration Act, 1940, applied that the remedy of the party aggrieved by the manager in which the proceedings are conducted, or by the award was to contest the arbitration proceeding and the award in the foreign tribunal, according to the law applicable thereto, and that there was no sufficient reason for not staying the action filed in breach of the agreement to refer the disputes arising under the contract to arbitration. In appeal under the Letters Patent against the order, the High Court held that the Court of first instance had not exercised its discretion properly for it had failed to take into consideration certain important circumstances emerging from the evidence, viz that all the evidence regarding the contract and the disputes was in India, that there were on account of the restrictions imposed by the Government of India special difficulties in securing foreign exchange for producing evidence before a foreign arbitration tribunal, that it would be impossible for the respo