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PETITIONER:

RAMJI DAYAWALA & SONS (P) LTD.

Vs.

RESPONDENT:

INVEST IMPORT

DATE OF JUDGMENT09/10/1980

BENCH:

DESAI, D.A.

BENCH:

DESAI, D.A.

SHINGAL, P.N.

CITATION:

1981 AIR 2085 1981 SCR (1) 899

1981 SCC (1) 80

CITATOR INFO :

R 1982 SC1302 (8)

D 1988 SC 30 (5)

R 1989 SC 818 (10,13)

ACT:

Arbitration Act 1940, S. 34; Code of Civil Procedure

1908. S. 15; Arbitration (Protocol and Convention) Act 1937,

S. 3; & Foreign Awards (Recognition & Enforcement) Act,S. 3-

Sub-contract between Indian firm and foreign firm-Sub-

contract incorporating an agreement to refer disputes to a

foreign arbitral tribunal-After execution of agreement

Indian firm repudiating the arbitration agreement-Suit for

recovery in High Court by Indian firm-Foreign firm

contesting that suit to be stayed on account of arbitration

clause in the agreement-Single Judge and Division Bench

deciding stay of suit necessary-Decision-Whether valid-power

of court to stay suit-Exercise of discretion by trial court-

Interference by appellate court.

HEADNOTE:

The appellant (plaintiff), a private limited company, a

labour contractor, entered into a sub-contract with the

respondent (defendant), a Yugoslavia based company which in

turn had entered into a contract with the State Electricity

Board for setting up a power station. The sub-contract dated

July 10, 1961 between the appellant and the respondent

incorporated an agreement to refer all the disputes arising

out of the sub-contract to arbitration by the International

Chamber of Commerce in Paris with the application of

Yugoslav materials and economical law. In carrying out the

work undertaken under the sub-contract,the appellant claimed

that it carried out some extra work for which it was

entitled to recover extra amounts from the respondent, and

as the claims were not satisfied or met with by the

respondent, the appellant filed a civil suit on the original

side of the High Court for recovery of the amount. On a

notice of motion taken out by the appellant, the High Court

granted an ad interim exparte injunction restraining the

respondent from withdrawing the money due to it from the

State Electricity Board.

Pursuant to service of the aforesaid notice of motion

the respondent moved an application under sec. 151 of the

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Code of Civil Procedure, alleging in the petition for stay

that the disputes and differences that arose were in respect

of and/or relating to the sub-contract dated July 10, 1961

and in view of the subsisting agreement to refer disputes or

differences arising under or out of the sub-contract to

arbitration, the suit filed by the appellant should be

stayed. The appellant filed a counter-affidavit contending

that there was no concluded agreement between the parties to

refer all the disputes arising out of the subcontract to

arbitration and alleged that by letter dated July 10, 1961,

the very dated on which the sub-contract was entered into at

Belgrade, the Managing

900

Director of the appellant company informed the respondent

that he had objected to the arbitration clause in the

agreement. It was also averred that a cable was also sent by

the Managing Director on reaching Bombay on July 13, 1961

requiring that the clause regarding arbitration be deleted.

Second contention was that even if it is held that there is

a subsisting arbitration agreement, having regard to all the

circumstances of the case, the discretion should not be

exercised in favour of the defendant-respondent.

The Single Judge granted the petition of the respondent

and stayed further proceedings in the suit filed by the

appellant, and vacated the ad interim injunction granted in

favour of the appellant.

The app