Discretionary stay under arbitration law may be refused where foreign arbitration would cause serious prejudice and practical difficulty.

A stay of suit under section 34 of the Arbitration Act, 1940 remains discretionary even where the arbitration clause requires reference to a foreign tribunal. The court may refuse stay if sufficient reason exists, including serious practical difficulty in presenting the case abroad or prejudice to a party. On the facts, the evidence and witnesses were in India, sending them to New York would have caused substantial difficulty and risked an ex parte proceeding, and those circumstances justified refusal of stay. The refusal to stay the suit was therefore upheld.

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Issues: Whether the suit should be stayed under section 34 of the Arbitration Act, 1940 despite the arbitration clause requiring arbitration in New York.

Analysis: The power to stay proceedings under section 34 applies even where the agreed reference is to a foreign arbitral tribunal, but the relief is discretionary and depends on whether sufficient reason exists for refusing to hold the parties to their bargain. On the facts found, the evidence and witnesses relating to the dispute were in India, there were serious practical difficulties in taking them to New York, and compelling arbitration there would in effect prejudice the respondents and risk an ex parte proceeding. The trial judge had not fully addressed these relevant circumstances, and the appellate court was therefore justified in interfering with the exercise of discretion.

Conclusion: The refusal to stay the suit was upheld and the request for stay under section 34 was rejected.

Final Conclusion: The appeal failed because sufficient reason existed to decline a stay and leave the parties to have the dispute tried in India.

Ratio Decidendi: A stay of suit under section 34 of the Arbitration Act, 1940 is discretionary even in cases involving foreign arbitration, and it may be refused where the circumstances show sufficient reason, including serious prejudice or practical impossibility in effectively presenting the case before the foreign tribunal.

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