( 1 ) THIS appeal arises from an order passed by the Principal Subordinate Judge, Anantapur on 6. 7. 1993 in I. A. No. 18 of 1992 in O. S. No. 79 of 1991, by which it was held that there is no dispute with regard to the payment of amount mentioned under Exs. B. 2 and B. 3 by the defendant to the plaintiff, and therefore, there was no necessity of referring the matter to arbitration.

( 2 ) IT appears that the parties entered into an agreement in the year 1980 for business transactions, which continued upto 1987. In April 1987 certain disputes arose regarding discount, brand, goodwill, development etc. , which could not be settled amicably between the parties. The agreement contained and arbitration clause. Efforts were made to refer the disputes for arbitration, but the same did not materialise. The respondent-plaintiff, eventually caused a notice dated 15-2-1991 to be served upon the appellant-defendant, by which the plaintiff took a stand that there was no need for any arbitration and withdrew its consent for arbitration. A suit was therefore filed for recovery of Rs. 44,14,358. 00 from the appellant-defendant. I. A. No. 18 of 1992 was filed by the defendant alleging that the suit could not be decided on merits in view of the arbitration clause in the original Agreement and that the proceedings in O. S. No. 79 of 1991 were liable to be stayed and the disputes were liable to be referred to arbitration. The plaintiff resisted the said application by saying that by the acknowledgment of liability dated 29-3-1988, agreement dated 29. 3. 1989 and letter dated 26-4-1988 the defendant agreed to pay the outstanding amount to the plaintiff in instalments, and that there was no dispute which could be referred to arbitration. The appellant-defendant also filed O. P. No. 147 of 1991 on the filed of the I Additional Judge, City Civil Court Hyderabad for appointment of an Arbitrator for adjudicating the disputes.

( 3 ) THE learned Counsel for both the parties were heard at length and the following questions emerge from the submissions made on behalf of both the parties, for consideration in the appeal : (1) Whether the original contract stood substituted by the subsequent agreement which did not envisage any dispute to referred to arbitration; (2) Whether the parties settled their disputes by mutual agreement which dispensed with the necessity of referring the disputes to arbitration; and (3) Whether the defendant forfeited the right of referring any dispute to arbitration by stepping into the suit proceeding.

( 4 ) IN the plaint of O. P. No. 147 of 1991 which appear on the record of the case as Ex. A-1, it is averred in paragraph 6, by the present appellant that the plaintiff entered into an agreement with the defendant in the year 1980 and the transactions between the parties continued upto 1987. Another agreement was entered into between the parties in the month of April, 1987 and that the defendant was selling electrical goods in the name of Lepakshi much prior to the entering into business transactions with the respondent and that the appellant had been instrumental in popularising the trade name of Lepakshi since 1974. In its written statement against the plaint in O. P. No. 147 of 1991, the present respondent contended, as stated in paragraph 4 of the said plaint (sic. written statement), that there were practically no disputes, and that the appellant was illegitimately withholding the dues of the respondent. It is further contended in the said para that it was not completely true , that there was an arbitration clause for referring the disputes between the parties regarding discount, brand, goodwill, advertisement etc. According to the respondent, it was the unilateral and unreasonable claim of the appellant for enhancement of discount abnormally. The disputes raised by the appellant, however were ultimately withdrawn according to the present respondent, and that the agreement to discharge the debt due to the respo