Arbitration clause alone does not compel a stay; actual submission to arbitration is required, and foreign arbitration may be restrained.

A stay of suit under the Foreign Awards (Recognition and Enforcement) Act, 1961 requires an actual submission or completed reference to arbitration; an arbitration clause alone is not enough. The Court read "submission made in pursuance of an agreement" in its statutory context and declined to equate it with a mere contractual agreement to arbitrate. Where the suit could not be stayed on that basis, the Court upheld interim injunctive relief restraining participation in the Moscow arbitration, treating concurrent foreign arbitration and domestic proceedings as undesirable and prejudicial on the facts found.

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Issues: (i) Whether section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 applies only after an actual submission of the dispute to arbitration, or whether the existence of an arbitration clause in a commercial contract is sufficient to compel a stay of suit. (ii) Whether the High Court was justified in restraining the party from proceeding with arbitration at Moscow by interim injunction.

Issue (i): Whether section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 applies only after an actual submission of the dispute to arbitration, or whether the existence of an arbitration clause in a commercial contract is sufficient to compel a stay of suit.

Analysis: The majority read the expression "submission made in pursuance of an agreement" according to its statutory setting and held that the words do not equate an arbitration clause with an actual reference of disputes. The section was construed as requiring a completed submission or actual reference before the court can be bound to stay proceedings. Although the Convention indicated a wider international policy in favour of referring parties to arbitration, the language chosen by Parliament was treated as controlling, and the court declined to rewrite the provision by treating "submission" as merely an arbitration clause.

Conclusion: The section applies only where there is an actual submission or completed reference, and the mere presence of an arbitration clause is not enough to require a stay.

Issue (ii): Whether the High Court was justified in restraining the party from proceeding with arbitration at Moscow by interim injunction.

Analysis: The majority held that, since the suit could not be stayed under section 3 on the facts found, concurrent prosecution of the foreign arbitration and the Indian suit would be undesirable and inconsistent with the policy underlying arbitration procedure. The court also considered practical hardship and the likelihood of the foreign proceedings becoming effectively one-sided. On that basis, the grant of injunctive relief was treated as a proper exercise of discretion.

Conclusion: The injunction restraining participation in the Moscow arbitration was upheld.

Final Conclusion: The majority upheld the restraint on the foreign arbitration and rejected the attempt to secure a stay of the suit on the basis of the arbitration clause alone.

Ratio Decidendi: Under section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961, a stay of proceedings requires an actual submission or completed reference to arbitration, not merely the existence of an arbitration clause in the underlying commercial contract.

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