Arbitration stay limited to disputes within the submission; valuation-only clauses do not cover breach or rescission claims.

Section 34 stay was available only if the pending suit concerned a matter actually covered by the arbitration submission. The Court held that a narrowly framed clause confined to differences over valuation could not be extended to disputes about alleged breach of contract or valid rescission of the agreement. The plaintiff's claim was founded on breach and rescission, not on valuation of the undertaking or payment of any balance due after valuation, so the suit fell outside the arbitration agreement. A stay of proceedings was therefore not warranted, and the appeal succeeded.

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Issues: Whether the suit was in respect of a matter agreed to be referred to arbitration so as to justify a stay under section 34 of the Indian Arbitration Act.

Analysis: The right to stay proceedings depended on whether the subject-matter of the suit fell within the arbitration submission. The plaint was founded on alleged breach and rescission of the agreement, not on a dispute over valuation of the undertaking or payment of the balance found due after valuation. The arbitration clause was narrowly framed and referred only differences or disputes over valuation. A clause so limited could not be extended to cover questions of breach of contract or whether the agreement had been validly rescinded. The validity of the plaintiff's substantive claim could not be examined at this stage; the only enquiry was whether that claim was within the submission.

Conclusion: The suit was not within the scope of the arbitration agreement, and a stay under section 34 was not warranted. The appeal succeeded.

Final Conclusion: A stay of proceedings can be granted only when the dispute brought before the court is one the parties have actually agreed to arbitrate, and a narrowly drafted clause confined to valuation does not extend to disputes as to breach or rescission of the underlying agreement.

Ratio Decidendi: Section 34 applies only where the pending suit concerns a matter covered by the arbitration submission, and a limited clause referring only valuation disputes cannot be stretched to include disputes arising from alleged breach or rescission of the contract.

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