The central legal point established in the judgment is the enforceability and validity of the arbitration clause, as well as the appropriate forum for deciding allegations of fraud in a contract.

JUDGMENT

Harries, C.J. - This is an appeal from an order of Sinha J. dated 4-5-1949 allowing en application for stay of a suit pending arbitration proceedings.

2. On 9-9-1944 the appellant entered into a contract with the Dominion of India for the supply of bales of hay. The contract contained an arbitration clause which was clause 21 of the contract. That clause reads as follows:

"Any dispute or difference arising out of this contract, settlement of which is not hereinbefore provided for, shall be referred to the arbitration of the officer sanctioning the contract whose decision shall be final & binding".

3. In a note appended to the contract there is a provision that in the case of contracts made by the Military Farms Department the District Commander concerned shall be the arbitrator under clause 21. It is conceded that the contract in question was a contract made with the Military Farms Department & therefore the Dist. Commander was the arbitrator named in the contract.

4. On the last day of limitation, the appellant brought a suit for damages for breach of contract. The resp. applied for a stay of the suit pending arbitration. The appellant objected to the stay being granted firstly on the ground that if a stay was granted his claim would be barred by limitation. The learned Judge very rightly pointed out that by filing the suit on the very last day of limitation the appellant took a very grave risk. It appears that the respondents were prepared to undertake not to raise this question of limitation before the arbitrators. But whether that undertaking is a valid one or not I need not consider.

5. It was also suggested before Sinha J. that a stay should not be granted, as the contract provided that a person deeply interested in the performance of the contract was to be the arbitrator. It must be remembered that the parties entered into this contract with their eyes open & the appellant well knew that in case of disputes the District Commander would be the arbitrator. Knowing that, I cannot see that the appellants can now complain that the dispute should be referred to the District Commander. Similar provisions are found daily in building contracts in which the architect who is really an agent of the building owner is named as the arbitrator & the courts have always granted a stay of suits pending references in these building matters.

6. It was further suggested that the suit should not be stayed because an allegation of fraud had been made in the plaint. It is quite clear that the plff. never pleaded that he was induced to enter into this contract by reason of any fraud played upon him. However he did complain in para 17 of the plaint that it had been represented to him that no sales tax would be payable on the hay sold. It is suggested that this representation was made with intent to deceive & that it did deceive the plff. Sales tax was found to be payable & the plff. suffered a loss of Rs. 1029/- . This claim for Rs. 1029/- is a very small item in the plff's total claim. There was a claim for damages of Rs. 1,14,000/- & as I have said, the issues relating to that claim do not involve fraud at all. Where the whole existence of a contract is challenged on the ground of fraud, courts have held that an arbitrator is not a suitable tribunal to decide such a question & where such an allegation is made the suit in which this question of fraud is raised should not be stayed. That was held in the case of Narsingh Prasad v. Dhanraj Mills' A. I. R. (30) 1943 in which it was held that it Is not for an arbitrator to decide whether a contract as put forward by one of the parties contained forged clauses or interpolations or contained a clause which had been inserted as the result of fraud, mistake or such like. Such disputes go to the 'factum' & existence of the contract & should be decided & must be decided by the civil courts. Where the subsequent contract is impeached on grounds of fraud, that question must be decided by the courts & havi