The court has the discretion to grant a stay of suit under Section 34 of the Arbitration Act, but it must be satisfied that the applicant is ready and willing to proceed to arbitration, that there is no reasonable apprehension of bias on the part of the arbitrator, and that the subject matter of the suit is covered by the arbitration agreement.

( 1 ) THIS appeal is filed under Section 39 of the Indian Arbitration act by the plaintiffs in a suit against an order of the learned Subordinate Judges, Vijayawada graning stay of suit in I. A. No. 1050 of 1972 in O. S. No. 442 of 1971 under section 34 of the Indian Arbitration Act, hereinafter called "the Act".

( 2 ) THE plaintiffs filed the suit O. S. No. 442 of 1971 in the court of the Subordinate Judge, Vijayawada against the Union of Indian represented by the General Manger, South central Railway, Secunderabad (1st defendant) and the Andhra Bank Ltd. , Vijayawada (2nd defendant) , for a decree for Rupees 1,47,085/- in favour of the 1st plaintiff is a firm carrying on construction works by entering into contracts with the Railways. They entered into several contract with the Railways. They entered into several contracts with the Railways. The grievance is that several amounts due to them under the contracts have been wrongfully withheld. It was further alleged that with respect to one contract the 1st defendant committed breach of the contract and that the contractor the 1st plaintiff , is therefore, entitled to recover the suit claim against the 1st defendant. As soon as the suit notice was received by the Railways , they filed an application under Section 34 of the Arbitration Act stating that the dispute and the claim raised in the plaint have to be decided by an arbitrator as per the arbitration clause by which the contract is governed and that the suit should therefore be stayed till the matter is decided by an arbitrator. The application was resisted by the plaintiffs on the following grounds : (1) The disputes between the parties are not covered by the arbitration clause. (2) Plaintiffs 2 and 3 are not parties to the arbitration agreement. Hence there cannot be a partial reference of the disputes to arbitration. (3) The appointment of the General Manger or any other Railway Official of his choice as an arbitrator is opposed to principles of natural justice. (4) The suit contract was rescinded by the 1st plaintiff under the suit notice and with it the arbitration clause also ceases to exist. (5) The suit involves the determination of intricate questions of fact and law which cannot be satisfactorily disposed of by a private arbitrator. (6) The names of the persons whom the General Manger may appoint as arbitrator have not been disclosed and hence the provisions is opposed to principles of natural justice. It was , therefore, submitted that as the relief under Section 34 of the Arbitration Act is discretionary the application for stay should be rejected. During the course of arguments another contention was raised, viz. , that the Railway officials were guilty of dishonesty and fraud. All the pleas raised by the plaintiffs in opposition to the application for stay have been negativated by the Court below. Aggrieved by the order of the lower Court, the plaintiffs filed this appeal.

( 3 ) IN this appeal only three points have been raised by the appellants learned counsel viz. , (1) The defendant failed to aver in their application that they were ready and willing to proceed to arbitration both on the date of the commencement of the suit and also on the date of the application, and this being an important condition for granting relief the application should be dismissed; (2) the General Manager in this particular case was a party to several letters and correspondence prior to the suit and he rejected the plaintiffs claims in the said letters. He would have to figure as a witness at the enquiry and hence he cannot be an arbitrator. Even if he nominates another official is naturally prone to decide in favour of the General Manager; and (3) The 3rd plaintiff is not a party to the contract and hence so far as the dispute raised by him in the suit is concerned it is not covered by the arbitration agreement. There cannot be piecemeal reference to arbitration. Hence this is a case in which the matter should not