The court has the power to determine the existence of an arbitration agreement when an application for stay of suit is made under Section 34 of the Arbitration Act.

( 1 ) THIS is an appeal under Section 39 of the Indian Arbitration Act (hereinafter referred to as the Act) by the defendant in Civil Suit No. 2-B of 1958 against the order of the First Additional District Judge, Raipur, passed on 25-3-1960 dismissing its application for staying the trial of the suit under Section 34 of the Act.

( 2 ) THE plaintiff alleged that two previous contracts between the parties were settled on 26-9-1957 and replaced by a new contract and the defendant agreed to supply cloth on the terms contained in the new contract. At that time, the defendant had also agreed to pay compensation in respect of 54 bales of cloth which were not supplied under the earlier contracts. The suit is for recovery of damages for breach of the contract, dated 26-9-1957.

( 3 ) ACCORDING to the defendant, two contracts were entered into on 28-5-1957 by the parties according to which it agreed to supply cloth to the plaintiff. These contracts contained Clause 21 as follows :

"all disputes and questions whatsoever which shall arise between the parties hereto out of or in connection with this agreement or as to the construction or application thereof or the respective rights and obligations of the parties hereunder or as to any clause or things herein contained, or any amount or valuation to be made hereunder or as to any other matter in any way relating to these presents, shall be referred to arbitration in accordance with the rules of the Millowners' Association, Bombay, for the time being in force regulating arbitration with respect to piece-goods. "

The allegation that these contracts were replaced by a new contract as alleged in the plaint was denied. The defendant explained that all that took place then was to alter the time and mode of delivery leaving the original contracts intact. The defendant thus claimed that the plaintiff was bound by the arbitration clause to have the dispute settled by arbitration and prayed for stay of the suit.

( 4 ) THE plaintiff, in reply to the application, stuck to his allegation that the contracts were completely substituted by a new contract on 26-9-1957. He admitted the earlier contracts; but pleaded that the conditions which are printed on the back of the contract forms were not brought to his notice and he knew nothing about them. He thus denied that he had agreed to them. He pleaded that as the new contract does not contain a clause or reference to arbitration, there is no question of staying the suit.

( 5 ) THE learned Judge of the trial Court observed that the existence of the arbitration clause in the earlier contracts was disputed by the plaintiff and further the plaintiff relied upon a new contract in the plaint which was disputed by the defendant. He thought that the dispute could be resolved only after evidence and not at that stage; so he dismissed the petition.

( 6 ) SHRI A. P. Sen on behalf of the appellant contends that it was the duty of the trial Court to determine on the materials on record whether the parent contract subsisted as regards arbitration. He further contends that the correspondence itself shows that the so-called subsequent contract was nothing but a modification of some of the terms of the original contract and there was no substitution by a new contract. Shri R. K. Verma for the respondent contends that the suit as brought is based on a new contract and it will succeed or fail on the finding about the existence of that contract. He further says that the validity of the objection of the appellant has to be determined on the allegations contained in the plaint alone and the Court cannot look into any other material to decide whether there was or was not a new contract. ( 7 ) BEFORE considering the merits of these contentions, we may refer to some cases which throw light on the matters in dispute in the context of stay of legal proceedings under Section 34 of the Act. That section corresponds to Section 4 of the English Arbitration Act, 1889, and the