Foreign awards stay and anti-arbitration injunction turn on completed reference, not merely an arbitration clause.

Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 was construed by the majority as requiring an actual submission of the dispute or a completed reference to arbitration before a suit could be stayed; a mere arbitration clause or agreement to refer was not enough. The majority also accepted that a court may restrain a party within its jurisdiction from pursuing parallel foreign arbitration where justice and avoidance of competing proceedings so require, and treated practical hardship from foreign exchange restrictions as supporting relief. The dissent would have read the provision with the Convention and legislative history to treat an arbitration clause itself as sufficient for a mandatory stay, without prior reference.

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Issues: (i) whether Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 required an actual submission or completed reference to arbitration before a court could stay a suit, and (ii) whether the court could restrain a party from prosecuting arbitration proceedings in Moscow.

Issue (i): whether Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 required an actual submission or completed reference to arbitration before a court could stay a suit

Analysis: The majority read the words "submission made in pursuance of an agreement" in their ordinary sense and in the historical setting of the legislation. It held that the phrase could not be treated as synonymous with a mere arbitration clause or agreement to refer, because that would make the statutory language, including "made in pursuance of", meaningless. The provision was construed as requiring an actual submission of the dispute or a completed reference to arbitration before the suit was instituted. The Convention and earlier arbitration instruments were considered relevant only so far as the statutory language was ambiguous, but not to rewrite clear words.

Conclusion: Yes. A stay under Section 3 was available only where there had been an actual submission or completed reference; a mere arbitration clause was not enough. This conclusion was against the appellant.

Issue (ii): whether the court could restrain a party from prosecuting arbitration proceedings in Moscow

Analysis: The majority held that, since the suit in India could not be stayed under Section 3, it was proper to prevent parallel prosecution of the Moscow arbitration. It relied on the principle that a court may restrain a party within its jurisdiction from proceeding with foreign litigation or arbitration where justice so requires, and also on the need to avoid competing proceedings on the same subject matter. The practical difficulty caused by foreign exchange restrictions, which would make effective participation in Moscow difficult, supported the grant of relief.

Conclusion: Yes. The injunction restraining participation in the Moscow arbitration was upheld. This conclusion was against the appellant.

Final Conclusion: The majority affirmed the High Court's refusal to stay the suit and upheld the injunction against participation in the foreign arbitration, so the appeals failed.

Ratio Decidendi: Under Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961, a stay of suit is available only on an actual submission or completed reference to arbitration, not on the existence of a mere arbitration agreement or clause.

Dissenting Opinion: Ramaswami J. held that the statutory phrase should be read in light of the Convention and its legislative history, so that an arbitration clause in a commercial contract was enough to trigger a mandatory stay without prior actual reference. On that view, the injunction against the Moscow arbitration should not have been granted and the appeals should have been allowed.

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