( 1 ) THIS is an application under Section 34 of the Arbitration Act filed by the defendants seeking stay of the suit.

( 2 ) THE suit is filed by one Shri Subhash Chander Kathuria impleading Ashok Alloys Steel Pvt. Ltd. as defendant No. l and its shareholders as other defendants. The company has its factory and principal office at Mashirwala Tehsil Paunta Sahib, Distt. Sirnolur, H. P. Its local office is alleged to be situated at New Delhi. All the other defendants are resident of Chandigarh. The plaintiff is in Delhi. The plaintiff had entered into a contract to purchase all the equity shares of the defendants shareholders so as to transfer the ownership in the company to the plaintiff.

( 3 ) THE plaihtiff alleges breach of contract on the part of the defendants and has sued for recovery of the amount of Rs. 50 lacs paid by the plaintiff to the defendants under the contract and interest thereon. The plaintiff also alleges the agreement to have been vitiated by fraud played upon by the defendants.

( 4 ) ACCORDING to the defendants, it is the plaintiff who has been guilty of breach of contract. The plaintiff who was supposed to pay Rs. l,75,00,000. 00 stopped payments soon after the initial payments and that created the whole trouble. There was no fraud played. The agreement between the parties contains an arbitration clause which covers the disputes raised by the plaintiff. The defendants have already initiated proceedings for appointment of arbitrator before a competent Court at Chandigarh. They have always been ready and willing to have the disputes settled by the arbitrator and are still ready and willing to do so. The suit, therefore, deserves to be stayed.

( 5 ) A few events in their chronological order may be noticed here itself as they would be of significance a little later. The agreement between the parties was entered into on 12. 9. 90 (at Delhi - according to the plaintiff, and at Chandigarh - accordingly to the defendants ). On 21st September, 1992 the defendants invoked the arbitration agreement between the parties by giving a notice to the plaintiff staling that disputes had arisen which were liable to be REFERRED TO to arbitration and the plaintiff should mutually agree for appointment of arbitrator. The notice was served on the plaintiff on 3rd October, 1992. The plaintifs sent a telegram acknowledging receipt of the defendants notice but asking for time to take appropriate steps as their lawyer was out of station. On 6. 11. 92, the defendants filed a peititon under Section 20 of the Arbitration Act in the Court of Senior Sub-Judge, Chandigarh. Just two days before, on 4. 11. 92 the plaintiffs had filed the present suit at Delhi. The earliest summons was served on defendant No. 2 on 24. 11. 92. Without taking any step in the proceeding, on 15. 2. 93 application-under Section 34 of the Arbitration Act has been filed by the defendants.

( 6 ) THE application has been contested on behalf of the plaintiff by forcefully raising two preliminary objections. It is submitted that the application does not set out the disputes which are sought to be REFERRED TO to arbitration and so the application does not amount to one under Section 34 of the Arbitration Act. Secondly, there are serious legations of fraud made by the plaintiffs against the defendants and therefore the Court would not exercise its descretion in favour of staying the suit.

( 7 ) THE first question to be examined is whether the allegation of fraud having been played upon by the defendants on the plaintiff while entering into the contract justifies discretion under Section 34 of the Arbitration Act being exercised against the stay of the suit?

( 8 ) SECTION 34 of the Arbitration Act reads as under :

34. Power to stay legal proceedings where there is an arbitration agreement-Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming un