When parties have entered into an arbitration agreement, it is in their best interest to refer the matter to arbitration. The court should encourage settlement of disputes through alternate dispute resolution mechanisms.

A.K. Sikri, J.- The plaintiff has filed this suit for recovery of Rs.84,17,996.80. Further, a sum of Rs. 17,00,754/- is claimed on account of non-supply of Central Sales Tax Form C. The suit is founded on the allegations that the defendant No. 1 which is the sole proprietorship concern of the defendant No. 2 was appointed as stockist of the plaintiff and a super stockist agreement dated 20th April, 1999 was entered into between the parties. The defendant No. 1 was appointed as the super stockist for the territory of Uttar Pradesh on non-exclusive basis. Under the said agreement, the goods were to be supplied by the plaintiff to the defendants and the defendants were to sell those goods. It is averred that the plaintiff used to regularly supply material to the defendants and the defendants were sending payments on regular intervals. The plaintiff and the defendants were maintaining a running account. There are other allegations made in the plaint stating the reasons because of which disputes arose between the parties as according to the plaintiff there were huge outstanding and the plaintiff had to write various letters to the defendants for making the payments. As on 1st April, 2005 a sum of Rs. 99,93,663.80 became due and payable. The plaintiff addressed letter dated 25th May, 2005 bringing to the attention of the defendants the aforesaid outstanding and asking the defendants to liquidate the same. After various reminders, the defendants made some payments, the details whereof are given in para 13 of the plaint and which are as under:

Date of cheque Amount Cheque detailsDate of credit

23.5.2005Rs. 5,00,000/-767284 4.6.2005

Standard Chartered

7. 6.2005Rs. 5,00,000/-76728513.6.2005

Standard Chartered

16. 6.2005 Rs. 5,00,000/- 76728622.6.2005

Standard Chartered

24.6.2005Rs. 5,00,000/-76728729.6.2005

Standard Chartered

30.6.2005Rs. 5,00,000/-7672888.7.2005

Standard Chartered

2. It is further alleged that some differences between the defendant No.2 and his father arose in respect of some family properties and on this pretext and to win the sympathy of the plaintiff, the defendants got huge credits from the plaintiff company. The plaintiff was expecting that the defendants would make payment. However, the defendants filed a suit in the Court of Senior Civil Judge, Kanpur for permanent injunction restraining the plaintiff herein from terminating the stockist agreement. On receiving the summons from the said COlll1 in the aforesaid suit filed by the defendants, the plaintiff came to know of the, intentions of the defendants that they were not willing to make further payment and wanted to entangle the plaintiff in some or the other litigation. Thus on coming to know of this intention, the plaintiff filed the instant suit for recovery.

3. The defendants filed their written statement, inter alia. stating that the suit is burred under the provisions of the Arbitration Act as, admittedly the invoices Issued by the plaintiff Itself contained an arbitration clause which is In the following terms :

“Disputes before referring to the court would be referred to an Arbitrator.”

4. Thereafter, present application has been filed under Order 7 Rule 11 of the Code of Civil Procedure (CPC) seeking rejection/dismissal of the plaint/suit on the basis of same plea, namely, existence of an arbitration agreement between the parties. Apart from this ground, two other grounds are pressed by the learned Counsel for the defendants for dismissal of the suit and I shall deal with those submissions first. These are:

(a) The suit does not disclose any cause of action. In this behalf, reference is made to para 27 of the plaint dealing with the cause of action and opening sentence of this para states that "cause of action arose on 1st August, 2005 when the plaintiff received summons of the suit filed by the defendants in Kanpur". On the basis of this averment in the opening part of the said para, learned Counsel for the defendants submitted that receipt of summons in th