AI Drafter 
TaxTMI 
TaxTMI 
1962 (12) TMI 92
X X X X Extracts X X X X
X X X X Extracts X X X X
....ising out of the contract is to be settled by arbitration in New York according to the rules of the American Arbitration Association." Between September 1956 and August 1957 the respondents supplied 5478 tons of manganese ore. Disputes having arisen between the parties about the liability of the respondents to ship the balance of the goods not delivered, the appellants referred them on or about January 15, 1958 to the arbitration of the American Arbitration Association and claimed compensation on the plea that the respondents had unlawfully made default in shipping the balance of the goods agreed to be sold. On February 2, 1958 the respondents commenced an action on the original side of the High Court of Calcutta claiming a decree that the written contract dated July 5, 1955 be adjudged void and delivered up and cancelled, that a perpetual injunction be issued restraining the appellants, their servants and agents from taking steps in purported enforcement of the said contract and that a declaration (if necessary) be made that the said contract stands discharged and that the parties have no rights and obligations thereunder. It was the case of the respondents that the appellants ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as conceded by the Advocate General appearing on behalf of the appellants that the entire matter would be governed by the Indian laws, the Indian Arbitration Act and the Indian Contract Act and on that account also the discretion of the Court to refuse to stay the suit should be exercised. The High Court accordingly reversed the judgment of Ray, J., and vacated the order passed by him. Against that order, with special leave, this appeal is preferred. We will assume for the purpose of this appeal that s. 34 of the Arbitration Act, 1940 invests a Court in India with authority to stay a legal proceeding commenced by a party to an arbitration agreement against any other party thereto in respect of any matter agreed to be referred, even when the agreement is to submit it to a foreign arbitration tribunal. Where a party to an arbitration agreement commences an action for determination of a matter agreed to be referred under an arbitration agreement the Court normally favours stay of the action leaving the plaintiff to resort to the tribunal chosen by the parties for adjudication. The Court in such a case is unwilling to countenance, unless there are sufficient reasons, breach of the sole....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is essentially a question of fact. In the present case the circumstances, in our judgment, are somewhat peculiar. The appellants in their petition for stay averred that the petition was bona fide, and was filed at the earliest possible opportunity, that the appellants were ready and willing to do all things necessary for the proper conduct of the arbitration proceeding and there was no sufficient reason why the matters in respect of which the suit had been filed could not be referred to arbitration in accordance with the arbitration agreement. The respondents by their counter- affidavit contended that the entire evidence regarding the subject-matter of the suit and all the witnesses in connection therewith were in India and that no part of the evidence regarding any of the aforesaid matters was in New York. They also submitted that the proper law applicable to the contract dated July 5, 1955 was the Indian law and that the Indian law of Contracts would govern the rights and obligations of the parties. They also contended that the suit raised difficult questions of law applicable to the contract, and on that account also they should not be required to submit the dispute to adjudica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nged, that all the evidence in the case relating to the disputes was in India and that was a strong ground for not exercising the discretion in favour of the appellants. It must be observed that having regard to the severe restrictions imposed in the matter of providing foreign exchange to individual citizens it would be impossible for the respondents to take their witnesses to New York and to attend before the arbitrators at the arbitration proceeding to defend the case against them and the proceeding before the arbitrators would in effect be ex parte. That would result in injustice to the respondents. Undoubtedly the appellants would be put to some inconvenience if they are required to defend the suit filed against them in India, but the High Court has considered the balance of inconvenience and the other circumstances and has come to the conclusion, and in our judgment that conclusion is right, that the facts established make out 'sufficient reason' for not granting stay. It was urged by counsel for the appellants that the High Court for reasons which were not adequate interfered with the order which was within the discretion of the trial judge and on that account the....