Broad arbitration clauses can cover disputed novation and related defamation claims when both remain tied to the contract.

A broadly worded arbitration clause covering disputes arising out of or relating to the contract was held to extend to a claim based on an alleged subsequent arrangement, because the pleaded novation did not clearly supersede the original contract and the broker's impleadment did not alter the contractual framework. The Court also held that a defamation claim framed in tort remained arbitrable where the alleged defamatory correspondence arose in the course of efforts to enforce payment under the contract and could not be determined without reference to the contractual terms and dealings. The stay order was therefore not interfered with.

---

---

Issues: (i) Whether the suit was liable to be stayed under Section 34 of the Arbitration Act, 1940 despite the plea of a subsequent agreement amounting to novation and the impleadment of the broker as a third party; (ii) Whether the claim for damages for defamation, though framed in tort, fell within the scope of the arbitration clause.

Issue (i): Whether the suit was liable to be stayed under Section 34 of the Arbitration Act, 1940 despite the plea of a subsequent agreement amounting to novation and the impleadment of the broker as a third party.

Analysis: The arbitration clause was couched in wide terms and covered disputes arising out of, concerning, in connection with, in consequence of, or relating to the contract. The pleaded subsequent arrangement did not clearly supersede or discharge the original contract, and the alleged novation itself was disputed. The pleadings did not show any adequate basis for treating the broker as altering the contractual framework so as to take the dispute outside the original arbitration agreement. The Court could look into the plaint and connected documents to see whether the subject-matter remained within the arbitration clause.

Conclusion: The dispute about the alleged subsequent agreement remained arbitrable, and the suit was rightly stayed as against the contractual claim.

Issue (ii): Whether the claim for damages for defamation, though framed in tort, fell within the scope of the arbitration clause.

Analysis: The alleged defamatory correspondence arose in the course of efforts to realise payment under the contract. Determination of the tort claim required recourse to the contract, its payment terms, and the surrounding dealings between the parties. A claim framed in tort does not escape arbitration where it has a sufficiently close and direct nexus with the contractual relationship and the dispute cannot be resolved without reference to the contract.

Conclusion: The defamation claim was held to be connected with the contract and therefore within the arbitration clause.

Final Conclusion: The Court found no reason to interfere with the stay order, holding that both the dispute over the alleged subsequent arrangement and the tort claim were covered by the wide arbitration agreement.

Ratio Decidendi: Where an arbitration clause is broadly worded, disputes about an alleged subsequent arrangement that does not clearly extinguish the original contract, and tort claims having a direct and inextricable nexus with the contract, are arbitrable and the suit may be stayed under Section 34.

---