A court has the discretion to decline to stay a suit and enforce an arbitration clause when the action is bona fide and repudiates the contract altogether, and when there is a well-founded apprehension of bias on the part of the specified arbitrator.

M. ANANTANARAYANAN, OFFG; C. J. :- This appeal involves a question of considerable interest and some importance, with regard to the impact of S. 34 of the Arbitration Act 10 of 1940, upon a pending suit, wherein the basis of the suit itself is the void nature of the contract between the parties. The facts, tersely stated and as essential for our present purpose, are as follows :

2. The plaintiffs in this action are the Coromandel Engineering Co., (P.) Ltd. In 1956, the Government of India commenced a scheme for a building for the Madras Customs department. Tenders were invited for the construction of certain pile foundations, and the Central Public Works Department also furnished a Bore chart relating to the locality, and indicating the strata of soil at four places, as a result of boring operations. The plaintiffs then made a tender

and entered into a contract with the defendant, viz., the Union of India, represented by the Secretary to Government, Ministry of Works. According to the case of the plaintiffs, for the technical reasons furnished by them in paragraph 12 sub-clauses (a) to (g) of the plaint, the contract itself was void and unenforceable, for a mutual mistake of fact. It is not necessary, for our present purpose, to canvass the technical data, liberally furnished in the plaint, upon which this claim is founded. Ultimately, in paragraph 24 of the plaint, the plaintiffs prayed for a declaration that the suit contract was void for mutual mistake, and claimed a sum of Rs. 73,888 odd, being the value of the work done by them, upon the void contract, deducting certain deposits. In the alternative, the suit was for recovery of certain sums, in case the court held that the contract was valid and binding on the parties.

3. In pursuance of the arbitration clause (clause 25) to be found in the contract, which is set out in the judgment of the learned Judge (Sadasivam, J.) the defendant applied under Section 34 of the Arbitration Act, for stay of all further proceedings in the pending suit. This application was resisted by the plaintiffs upon two main grounds. Firstly, such an application for stay, which is a matter entirely within the judicial discretion of the court of trial, could not be granted, where the very basis of the action was the void character of the contract, whether this flowed from fraudulent misrepresentation or mutual mistake, or any other ground admitted in law as an adequate ground for the avoidance of a contract. Next, the arbitration clause itself made the Additional Chief Engineer, C. P. W. D. the sole arbitrator, and he was not merely a salaried employee of the defendant (the Government of India), but it happened that he had special knowledge of this contract upon the facts relating to its attempted performance, because of certain negotiations between the parties, which took place at Delhi prior to the filing of the application for stay. That special knowledge led the plaintiffs to a reasonable apprehension of a bias, hence, on principles of natural justice, this binding term as to the arbitration by the Additional Chief Engineer was no longer enforceable. On that ground also, the stay ought not to be granted.

4. The matter was discussed by the learned Judge (Sadasivam, J.) in an order, in which the main considerations are fully set forth. Following certain authorities cited by him, the learned Judge was clearly of the view that on both the grounds raised by the plaintiffs, the application for stay by the defendant (the Union of India) ought not to be allowed. It was dismissed with costs, and the State has instituted this appeal.

5. At the outset, itself, a reference both to the pleadings and to one or two leading decisions in which the relevant principles are discussed becomes essential. One decision, which is of considerable interest, upon the principles is Monro v. Rognor Urban District Council, 1915-3 KB 167 also cited by the learned Judge. That was a case in which the plaintiff refused to comp