A dispute as to the factum and validity of an agreement, including allegations of fraud or misrepresentation going to the very root of the contract, cannot be referred to arbitration under an arbitration clause in the agreement.

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 Sec.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:

"That if any dispute arises between the parties regarding this Agreement and in respect of the Managing Agency the same shall be referred for decision to two Arbitrators one to be nominated by each party and in case of difference between the arbitrators on any point the same shall be referred to an Umpire to be appointed by the Arbitrators before proceeding with the Arbitration which shall be governed by the provisions of the Indian Arbitration Act now in force or of any Act of the Legislature passed in substitution or modification thereof."

It is alleged in the plaint that the plaintiff started working the colliery and in pursuance of the terms of the agreement he paid to the defendant Rs. 20,000.00 as salami. deposited Rs. 30,000.00 with him as security and thereafter paid Rs. 8,000.00 on the 1st of September 1948, as the price of coal raised from the colliery and a sum of Rs. 6,500.00 as the minimum royalty up to July 1948.

3. Sometime in June 1949. disputes arose between the parties. According to the defendant, there were various breaches of the terms and covenants on the part of the plaintiffs and so under Clause 25 of the agreement he nominated an arbitrator and called upon the plaintiff to nominate his own. The plaintiff accordingly nominated his arbitartor and thereafter the parties appeared in the arbitration proceedings and submitted their respective case. On the 31st of July 1949, the arbitrators after hearing the lawyers of the parties framed issues. One of them was:

"Whether the Managing Agency dated 287671948 is vitiated by fraud and misrepresentation of the petitioner P.P. Mukherjee and voidable at the option of the opposite party Sagarmal Agarwal?"

On the 15th of February 1950, the parties were informed by the arbitrators that evidence would commence on the 21st of February 1950. On that date a sitting of the arbitrators was held and the parties filed a joint petition praying for extension of time. The sitting was adjourned to the 13th of March 1930, for evidence on behalf of the present plaintiff and the plaintiff was called upon to come ready with evidence on that date. The plaintiff, however, did not appear or adduce any evidence before the arbitrators on the date fixed and later on he along with other members of his family, instituted the present suit on the 31st of May 1951, in the Court of the Subordinate Judge at Dhanbad for a declaration that the agreement is not a managing agency but a lease and is void for want of registration and is further vitiated by fraud and misrepre