The court has the discretion to stay a suit and refer the dispute to arbitration under Section 34 of the Indian Arbitration Act, 1940, but it will not do so if there is sufficient reason to believe that the arbitrator will not act fairly or that it is otherwise improper for the arbitrator to decide the dispute.

Tek Chand, J.

1. This is a first appeal under Section 39 of the Arbitration Act from the order of the Subordinate Judge 1st Class, Amritsar, rejecting the application of the appellants Messrs Narain Cold Storage Ltd. Amritsar, instituted a suit for the recovery of Rs. 56,767/- as the principal sum and interest relating to the price of potatoes supplied in excess of the contracted quantity. The appellants who were defendants in the trial Court presented an application under Section 34 of the Indian Arbitration Act of 1940 alleging that the agreement dated the 19th January, 1951, entered into between the parties provided that a difference or dispute arising between them was referable to the arbitration of the officer sanctioning the contract. It was also alleged that the appellants were willing and ready to make a reference to the arbitrator and that the suit should not proceed in view of the provisions of Section 34 of the Act.

2. Exhibit D. 2 is tender dated the 19th January, 1951, whereby the defendants agreed to supply a quantity of potatoes, it being agreed that the approximate requirements which were to be deemed only as a rough guide were 4,88,400 lbs. at tendered rates. Para 22 Exhibit D. 2. provided.-

"Any dispute or difference arising in the interpretation or application of the provisions of this contract, settlement of which is not herein before provided for, shall be referred to the arbitration of the officer sanctioning the contract, whose decision shall be final and binding. "A demand for arbitration in respect of a claim shall be in writing and made within six months of the date of the termination of the contract and where this provision is not complied with, the claims shall be deemed to have been waived and absolutely barred."

In this case "the officer sanctioning the contract" was AA & QMG/AQMG Area/Brig i/c Adm. (Command/AQMG/Q-1 Army HQ. The tender was accepted on behalf of the President of India by the General Officer Commanding, East Punjab Area, Jullundur Cantt. In July, 1951, there were movements of military troops in Amritsar area and the plaintiffs were called upon by C. A. S. C. Jullundur Cantonment to sign a declaration to the effect that the plaintiff company would not claim compensation for any excess supply of potatoes over and above the contracted quantity. As the plaintiff-respondent was unwilling to do so the military authorities pressed the view that the contractors were bound to supply any excess quantity on the ground that the quantity mentioned in the tender was only approximate. The contracting firm was also told that in case the demand of the military authorities is not met the provision of clause 11 would be attracted. On this the extra quantity of potatoes over and above the contracted quantity was supplied under protest, the total excess being 8,19,539 lbg. The plaintiffs Instituted the suit claiming the price of the excess quantity supplied at the market rate with interest at six per cent per annum.

3. On behalf of the defendants an application was submitted under Section 34 of the Indian Arbitration Act for staying legal proceedings in view of the presence of an arbitration agreement.

4. The position which was taken by the plaintiffs to this contention of the defendants was that there was no valid and subsisting agreement between the parties relating to the quantity supplied in excess and even if so, no reference could be made to the arbitrator as the period for the said reference had expired. It was also contended that the defendants were never ready or willing to dp everything for the proper conduct of the arbitration. The plaintiffs also urged that the officer sanctioning the contract was not only himself a party but he had rejected the claim of the plaintiff, and as arbitrator could not bring to bear on the matter an attitude of strict impartiality. The contractor pleaded that in these circumstances it would not be in the interests of justice, fair play and equity that the