The central legal point established in the judgment is the applicability of an arbitration clause within the Export Credit Agreement to determine the stay of proceedings in the suit and the referral of disputes to an arbitrator.

( 1 ) THE appellant has filed this appeal to challenge the order dated 13. 11. 1982 passed by the learned Additional District Judge whereby the application of the respondent under Section 34 of the Arbitration Act, 1940 was allowed and the suit for recovery filed by the appellant was stayed. A few facts relevant for deciding this appeal are: -

THE appellant who was doing the business of export of handlooms and handicrafts had on 13. 4. 1981 given to the respondent-bank a commercial invoice dated 23. 2. 2001 for Rs. 3,47,225. 00 along with a bill of lading and other connected documents in respect of goods stated to have been exported to one M/s. Dinesh Imports, Canada with instructions to collect payment of the said invoice against documents. Delivery of the consignment was to be given to the importer in Canada against payment at site. Against the invoice value of Rs. 3,47,225. 00 the bank advanced to the appellant a sum of Rs. 3,23,923. 02 paise. Simultaneously with the payment of the amount aforesaid by way of advance, the respondent-bank also got certain documents executed from the appellant. The export documents, it appears, were not retired by the importer in Canada and the payment was thus not made to the bank. Though it is the case of the respondent that the foreign bank had handed over the documents for release of consignment in favour of the purchaser without receiving payment on instructions received from the appellant, however, it is not a matter with which this Court is concerned in the present case. Besides the invoice value of Rs. 3,47,225. 00, the appellant also claimed to be entitled to a sum of Rs. 34,722. 50 paise being the incentive for export. Thus a total sum of Rs. 3,73,267. 00 was allegedly to be paid to the appellant against export of the aforesaid goods for which the documents were to be negotiated through the respondent-bank. Since the sum of Rs. 3,23,923. 02 paise had already been paid by the bank as advance, the appellant filed a suit for recovery of the balance sum along with interest against the bank.

( 2 ) IT was stated in the suit that the goods had been released in favour of the purchaser on instructions having been given by the bank without the payment having been received from the purchaser and consequently the bank was liable to pay the entire value of goods along with incentive. On summons being served upon the defendant/respondent, an application under Section 34 of the Arbitration Act, 1940 was filed by the respondent-bank for stay of the suit stating, inter alia, that at the time of availing overdraft of Rs. 3,30,823. 37 paise against the export documents, the appellant had executed Export Credit Agreement dated 13. 4. 1981 besides executing other documents. It was submitted that the suit of the plaintiff had arisen out of the Export Credit Agreement dated 13. 4. 1981, which contained an arbitration clause providing that in the event of any dispute or difference whatsoever relating to the agreement including the dispute or difference as regards the construction or the validity of the agreement, the same shall be decided by the sole and solitary arbitration of the Chairman of the bank for the time being or in the event of there being no Chairman, the Chief Executive Officer. It was submitted that since there was an arbitration Agreement between the parties and the respondent was always ready and continues to be ready to do all things necessary to the proper conduct of the arbitration when the proceedings commenced and even at the time of filing of the application, the suit was liable to be stayed and cannot be proceeded with.

( 3 ) REPLY to the application was filed by the appellant alleging, inter alia, that the amount given to the appellant was not under the Export Credit Agreement but was against the Packing Credit Limit sanctioned by the bank and as there was no arbitration agreement under the said Packing Credit Limit, there was no question of the suit being stayed or