V/O Tractor Export, Moscow vs M/S. Tarapore & Company & Anr on 28 October, 1969

    PETITIONER:

V/O TRACTOR EXPORT, MOSCOW

 Vs.

RESPONDENT:

M/S. TARAPORE & COMPANY & ANR.

DATE OF JUDGMENT:

28/10/1969

BENCH:

GROVER, A.N.

BENCH:

GROVER, A.N.

SHAH, J.C.

RAMASWAMI, V.

CITATION:

 1971 AIR 1 1970 SCR (3) 53

 1969 SCC (3) 562

 CITATOR INFO :

 R 1981 SC2085 (25,32,33)

 R 1984 SC 667 (7)

 E&D 1985 SC1156 (51)

 F 1987 SC 674 (18)

 RF 1989 SC 818 (9)

ACT:

Foreign Awards (Recognition and Enforcement) Act XLV of 1961, s. 3--"Submission
made in pursuance of an agreement", meaning of Act passed to implement
international convention- Interpretation of Stalutes--Where language is clear
Act must be construed according to their meaning even if against object of
convention-lnjunction-Jurisdiction of Indian Courts to grant injunction
restraining a party in Moscow from Proceeding with arbitration in Moscow-
Arbitration Act, 1940, s. 35, applicability of.

HEADNOTE:

By article 2 of the New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 1958, to which India was a party, each contracting
State, agreed to recognise an agreement in writing under which the parties
thereto undertook to submit to arbitration dispute between them and the Court of
a contracting State when seized of an action in a matter in respect of which
parties have made an agreement "shall at the request of one of the parties refer
the parties to arbitration". To implement this Convention Parliament enacted the
Foreign Awards (Recognition and Enforcement) Act XLV of 1961 Section 3 of the
Act provides, inter alia, that "if any party to a submission made, in pursuance
of an agreement" commences any legal proceedings in any Court any other party to
the submission may at any time after appearance and before filing a written
statement or taking any other step in the proceedings apply to the Court to stay
the proceedings and the Court, unless satisfied that the agreement is null and
void, inoperative or incapable of being performed. shall make an order staying
the proceedings.

In respect of a contract entered into by the respondent, an Indian Firm, with
the appellant, a Russian firm, the respondent instituted a suit in the Madras
High Court alleging breach of contract. Thereafter the Russian firm instituted
proceedings in terms of the arbitral clause in the contract before the Foreign
Trade Arbitration Commission of the U.S.S.R Chamber of Commerce, Moscow. The
Russian firm also entered appearance, under protest, before the Madras High
Court and on the same date filed an application under section 3 of the Act for
stay of the suit. The Indian firm filed an application for an interim injunction
restraining the Russian firm from taking -any further part in the arbitration
proceedings at Moscow. The High Court dismissed the application filed by the
Russian firm for stay of the suit and granted the interim injunction sought by
the Indian firm. In appeal to this Court, the Indian firm contended that s. 3 of
the: Act could be invoked by the Russian firm only if it had implemented the
arbitration agreement by actually submitting the, dispute for arbitration prior
to the institution of the suit. On the questions (i) whether the words "a
submission made in pursuance of an agreement" ill section 3 of the Act meant an
actual or completed reference made pursuant to an arbitration agreement or they
meant an arbitration agreement that has come into existence as a result of
commercial contract and (ii) whether the courts in India could grant an
injunction restraining a party in Moscow from proceeding with the conduct of
arbitration before a tribunal there, 54

HELD : (Per Shah and Grover, JJ.)

The word "submission" in section 3 means an actual submission made in pursuance
of an arbitration agreement or arbitral clause to which the Convention setforth
in the Schedule to the Act applies. If submission means "agreement to refer" or
an arbitral clause in a commercial contract it makes the entire set of words
unintelligible and completely ambiguous. It is difficult to comprehend in that
case, why the legislature should have used the words which follow the term
"submission", namely "made in pursuance of an agreement". If by "agreement" is
meant a commercial contract the words "made in pursuance of" convey no sense.
The difficulties disappear if the word submission, is given the meaning of an
actual submission of a particular dispute to the authority of an arbitrator.
There is no rule. of interpretation by which rank ambiguity can be first
introduced by giving certain expressions a particular meaning and then an
attempt can be made to emerge out of semantic confusion and obscurity by having
resort to the presumed intention of the legislature to give effect to
international obligations. In this country, as is the case in England, a treaty
or international protocol or convention does not become operative by its own
force unless domestic legislation has been introduced to attain a specific
result. Once Parliament has legislated the court must first look at the
legislation and construe the language employed in it. If statutory enactments
are clear in meaning they must be construed according.to their meaning even
though they are contrary to the comity of nations or international law. A clear
deviation from the rigid and strict rule that the courts must stay a suit
whenever an international commercial arbitration, as contemplated by the
protocol and the Conventions, was to take place, is to be found in Section 3. It
is of a nature which is common, to all provisions relating to stay in English
and Indian arbitration laws, the provision being that the application to the
Court for stay of the suit must be made by a party before tiling a written
statement or taking any other step in the proceedings. If the condition is not
fulfilled no stay can be granted. [65 G-66 H; 68 D]

Owners of Cargo on Board the Merak v. The Merak (Owners), (1965) 2 W.L.R. 250,
Unipat A.G. v. Dowty Hydraulic Units, (1967) R.P.C. 401, Barras v. Aberdeen
Steam Trawling & Fishing Co., L.t.d., [1933] A.C. 402 and W. Wood & Son Ltd. v.,
Bengal Corporation, A.I.R. 1959 Cal. 8, referred to. (Per Ramaswami, J.
dissenting.) The expression "submission made in pursuance of an agreement" in
section 3 has to be construed in its historical setting. The word "submission"
must be interpreted to mean tile arbitral clause itself and the word "agreement"
as the commercial or the business agreement which includes or embodies that
clause. In other words the word "submission" in the opening words of the section
means an agreement to refer to arbitration and the words "the agreement to which
the convention setforth in the schedule applies" means the business agreement or
contract containing the arbitral clause. It follows therefore that if there is
an arbitral clause whether this is followed by actual reference to arbitration
or not, the very existence of this clause in the commercial agreement would
render the stay of the suit mandatory under section 3. This view is considered
with the rule of construction that as far as practicable municipal law must be
interpreted by the courts in conformity with international obligations which the
law may seek to effectuate., It is well settled that if the language of a
section is ambiguous or is capable of more than one meaning the protocol itself
becomes relevant, for, there is a prima facie presumption that Parliament does
not intend to act in breach of international law including 55

specific treaty obligations. Article, 2 of the convention imposes a duty on the
court of a contracting state when seized of such an action to refer the parties
to arbitration. Section 3 must therefore be read in consonance with this
international obligation. The doctrine of literal intepretation is not always
the best method for ascertaining the intention of Parliament. The better rule of
interpretation is that a statute should be so construed as to prevent the
mischief and advance the remedy according to the true intent of the makers of
the statute. [79 C-G; 85 C] Owners of Cargo on Board of the Merak v. The Merak
(Owners), (1965) 2 W.K.R. 250, Unipat A.G. v. Dowty Hydraulic Units, (1967)
R.P.C. 401, Barras v. Aberdeen Steam Trawling & Fishing Co. Ltd., [1933]. A.C.
402, W. Wood & Son Ltd., v. Bengal Corporation, A.I.R. 1959 Cal. 8, Shiva Jute
Balling Limited v. Hindley & Company Limited, [1960] 1 S.C.R. 569, Salomon v.
Commissioners of Customs and Excise,. [1966] 3 A.E.R. 871, Ellerman Lines Ltd.
v. Murray [1930] All E.R. 503, Owners of Cargo on Board The Mark v. The Merak,
(1965) 2 W.L.R. 250, Radio Publicity Ltd. v. Compagine Luxem bourgeoise de
Radiodifusion, [1936] 2 All E.R. 721, In Ex P. Campbell, 1870 L.R. 5 Ch. 706,
Webb v. Outrim, [1907] A.C. 81, P Emden v. Pedder, [1904] 1 C.L.R. 91, Barras v.
Aberdeen Steam Trawling Co., [1933] A.C. 402, Bajrang Electric Steel Co. v.
Commissioners for Port of Calcutta, A.I.R. 1957 Cal. 240, W. Wood & Sons Ltd. v.
Bengal Corporation, A.I.R. 1959 Cal. 8, K. E. Corporation v. De Traction, A.I.R.
1965 Bom. 114, R. v. Blape, [1849] Q.B. 769, Eastman Photographic Co. v.
Comptroller ('if Patents, [1898] A.C. 571 and Hawkine v. Cathercole, (1856) 6
D.M. & G 1.

(ii) (Per Shah and Grover, JJ.) The point about the. Russian firm having no
representative in India was not agitated before the High Court and the position
taken up in the plaint was that the-Russian firm was carrying on business in the
U.S.S.R. and at Madras. The principle; em- bodied in s. 35 the Arbitration Act,
1940 cannot be completely ignored while considering the question of injunction.
In the present case when the suit is not being stayed under section 3 of the Act
it would be contrary to the principle underlying s. 35 not to grant an,
injunction restraining the Russian firm from proceeding with the Arbitration at
Moscow. The principle essentially is that the arbitrator should not proceed with
the arbitration side by side in rivalry or in competition as if it were a civil
court. [69 H, 70 H]

 (Per Ramaswami J dissenting.) Even assuming that 3 of the Act is not applicable
this is not a proper case in which the High Court should have issued an
injunction restraining the appellant from proceeding with the arbitration. As a
rule the Court has to exercise its discretion with great circumspection for it
is imperative that the right of access; to the tribunals of a country should not
be lightly interfered with,. It is not sufficient merely to show that two
actions have been started for it is not prima facie vexatious to commence two
actions about the same subject matter, one here and one abroad. The reason of
this reluctance to exercise the jurisdiction is that owing to a possible
difference between the laws of the two countries, the stay of one of the actions
may deprive 'the plaintiff of some advantage which he is justified in pursuing.
Thus he may have a personal remedy in one country and a remedy only against the
goods in another; or a remedy against land in one State but no such remedy in
another., The rule, therefore is that a plea of lis alibi pendens will not
succeed and the court will not order a stay of proceedings unless the defendant
proves vexation in point of fact. He must show that the continued prosecution of
both actions is oppressive or embarrassing, an onus which he will :find it
difficult to discharge if the

56

plaintiff can indicate some material advantage that is likely to result from
each separate action. Each case, therefore depends upon the setting of its own
facts and circumstances. [86 H]

Mettenry v, Lewis, 22 Ch.D. 401, referred to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1208 and 1209 of 1969.

Appeals by special leave from the judgment and order dated December 16, 1968 of
the Madras High Court in O.S. Appeals Nos. 25 and 28 of 1968 and Appeals by
special leave from the judgment and order dated April 12, 1968 of the Madras
High Court in Applications Nos. 105 and 106 of 1968 in C.S. No. II 8 of 1967.

S. Mohan Kumaramangalam, M. K. Ramamurthi, S. M. Ali Mohd., Mrs. Shamala Pappu,
J. Ramamurthv, Vineet Kumar and C. R. Somasekharan, for the appellant.

V. P. Raman, S. N. Srivastava, B. Datta, D. N. Mishra and J. B. Dadachanji, for
respondent No. 1. Rameshwar Nath and Mahinder Narain, for respondent No. 2. The
Judgment of J. C. SHAH and A. N. GROVER, JJ., was delivered by GROVER, J.
RAMASWAMI, J., gave a dissenting Opinion,.

Grover, J. These connected appeals which involve points of importance and
interest in international commercial arbitration arise out of a suit instituted
on the original side of the High Court of Judicature at Madras by M/s. Tarapore
& Co. against. M/s. V. O. Tractoroexport, Moscow. Initially the claim was for a
permanent injunction restraining the Russian firm from realizing the proceeds of
a Letter of Credit opened on June 9, 1965 with the Bank of India Ltd., Madras,
which had also been impleaded as a defendant. Subsequently by an amendment of
the plaint the plaintiff has confined relief to recovery of damages. The facts
chronologically are as follows : A contract was entered into on February 2,
1965, between the Indian and the Russian firms for the supply of earth-moving
machinery for a value of Rs. 66,09,372.00. The machinery was required by the
Indian firm for executing the work of excavation of a feeder- canal as part of
the Farakka Barrage Project. On June 9, 1965. the Indian firm opened a Letter of
Credit with the Bank of India Ltd., for the entire value of the machinery in
favour of the Russian firm. The consignments started arriving at Calcutta in
October 1965. On February 22, 1966, the Indian firm wrote to the Russian firm
saying that there was something wrong with the design and work- 57

ing of motorised scrapers which had been supplied and which formed one of the
items of machinery covered by the contract. One June 6, 1966 came the
devaluation of the Indian rupee by 57.48% as a result of -which the amount that
became payable by the Indian firm to the Russian firm under the contract
increased by Rs. 25 lakhs or so. On June 20, 1966, the Russian firm demanded an
increase in the Letter of Credit owing to the devaluation. On August 1, 1966,
the Indian firm served a notice on the Russian firm containing the main
allegations relating to breech of contract on the part of the Russian firm. The
letter was called upon to remedy the breaches and pay compensation. It was made
clear that until this was done the Russian firm would not be entitled to encash
the Letter of Credit for the balance amount. On August 4, 1966, the Indian firm
filed a suit on the original side of the Madras High Court and obtained an ex
parte order of injunction in respect of the operation of the Letter of Credit.
On August 14, 1966, the parties arrived at a settlement at Delhi after mutual
discussion. Pursuant to the agreement the suit was withdrawn by the Indian firm
but no amicable settlement, as contemplated, took place. The Indian firm
instituted a suit (No. C.S. 118 of 1967) on the original side of the Madras High
Court on August 14, 1967. It also filed an application for an interim injunction
in the matter of the operation of the Letter of Credit. On October 26, 1967,
another application was filed for an interim injunction against the encashment
of the devaluation drafts. On November 4, 1967, the Russian firm instituted
proceedings in terms of the arbitral clause in the contract before the Foreign
Trade Arbitration Commission of the U.S.S.R. Chamber of. Commerce,, Moscow. On
November 14, 1967, the Russian firm entered appearance under protest _ before
the Madras High Court in the suit filed by the Indian firm. On the same date
the, Russian firm filed an application under s. 3 of the-Foreign Awards
(Recognition and Enforcement) Act XLV of 1961, hereinafter -called the Act. A
prayer was made for stay of the suit. On January 15, 1968, the Indian firm filed
an application for an interim injunction restraining the Russian firm-from
taking any further part in the arbit proceedings at Moscow. We are not concerned
with the branch of the litigation which came up to this Court at a prior stage
in respect of the interim injunctions granted by the single judge with regard to
the operation of the Letter of Credit, and the subsequent arrangement made for
payment as a result of devaluation. It is sufficient to mention that the appeals
brought to this Court were allowed on November 26, 1968, and the temporary
injunction granted by the learned single judge relating to the operation of the
Letter of Credit was vacated. Sup. CI/70-5

58

The application which had been filed by the Russian firm for stay of the suit
under S. 3 of the Act was dismissed by Ramamurthi J., on April 12, 1968. The
application of the Indian firm for an interim injunction restraining the Russian
firm from taking any further part in the arbitration proceedings at Moscow was,
however, granted. The Russian firm preferred appeals against the orders of the
learned single judge before a division bench. The bench maintained the orders of
Ramamurthi, J. The present appeals have been brought by the Russian firm by
special leave both against the order of the division bench and against the
judgment of the learned single judge. This was presumably done because there was
some controversy about -the finality of the orders which had been made by the
single judge of the High Court. The questions which have to be determined in
these appeals are quite narrow. The first question is whether the words "a
submission made in pursuance of an agreement" mean an actual or completed
reference made pursuant to an arbitration agreement or they mean an arbitration
agreement that has come into existence as a result of a commercial contract.
According to the appellant firm whenever there is an arbitration agreement or an
arbitral clause in a commercial contract of the nature mentioned in the
Convention the court is bound to stay the suit provided the other conditions
laid down in s. 3 are satisfied. On this approach the word "submission" is to be
understood as an arbitration agreement or arbitral clause relating to existing
or future differences and the word "agreement" means an agreement of a
commercial or business character to which the Convention applies. The respondent
firm maintains that the critical words submission?' and "agreement" must be
given their natural and grammatical meaning and the word "submission" made in
pursuance of an agreement can only mean an actual submission of the disputes to
the arbitral tribunal. The word "agreement" can have reference to and can be
construed ,only in the sense of an arbitration agreement or an arbitral clause
in a commercial contract. It cannot mean a commercial contract because an
arbitration - agreement cannot be stated to have been made pursuant to a
commercial ,contract. In other words, if submission has to be taken in the sense
of an arbitration agreement it would render the words " submission made in
-pursuance of an agreement" meaningless and unintellip. The second question
relates to the jurisdiction of the courts in this country to grant an injunction
restrationing a party which is in Moscow from proceeding with the conduct of
arbitration before a tribunal there. Even if the courts have jurisdiction to
grant an injunction, it is said, it would not be a proper exercise of that
jurisdiction in the circumstances of the 59

present case to give an injunctory relief. The learned single judge has decided
certain other controversial issues but the division bench did not go into them
nor do we propose to deal with them unless the decision on the true and correct
interpretation of S. 3 of the Act goes in favour of the appellant firm.

The Act has been enacted to enable effect to be given to the Convention on the
recognition and enforcement of foreign arbitral awards done at New York on June
10, 1558, to which India is a party. In the statement of objects and reasons it
has been pointed out that the procedure for settlement through arbiration of
disputes arising from internation trade was first regulated by the Geneva
Protocol On Arbitration Clauses 1923 and the Geneva Convention On the Execution
of Foreign. Arbitral Awards to which India was: a party and which was given
effect to in India by the Arbitration (Protocol and Convention) Act, 1937. The
provisions of the Act may be noticed. Sections 2 and 3 are in these terms :

       S.2 "In , this Act unless the context otherwise requires, "foreign
awards" means an award oil differences between persons arising out of legal
relationships, whether contractual or not, considered as commercial under the
law in force in India made on or after the 11th day of October 1960

       (a) In pursuance of an agreement in writing for arbitration to which the
Convention setforth in the Schedule applies and

       (b) in one of such territories as the Central Government being satisfied
that reciprocal provisions have been made may, by notification in the Official
Gazette, declare to be territories to which the said Convention applies."

       S.3 "Notwithstanding anything contained in the Arbitration Act, 1940, or
in the Code of Civil Procedure, 1908, if any party to a submission made in
pursuance of an agreement to which the Convention set forth in the Schedule
applies, or any person claiming through or under him commences any legal
proceedings in any Court against any other party to the submission or any person
claiming through or under him in respect of any matter agreed to be referred any
party to such legal proceedings may, at any time after appearance and before
filing a written statement or taking any other step in the proceeding apply to
the Court to stay the proceedings and the Court unless satisfied that the

       60

       agreement is null and void, inoperative or incapable of being performed
or that there is not in fact any dispute between the parties with regard to the
matter agreed to be referred shall make an order staying the proceedings."

       The Schedule contains the Convention on the recognition and enforcement
of foreign arbitral awards. Article II may be reproduced with advantage :

    Article II

       "1. Each Contracting -State shall recognise an agreement in writing under
which the parties undertake to submit to arbitration all or any differences
which have arisen or which may arise between them in respect of defined legal
relationship, whether contractual or not, concerning a subject-matter capable of
settlement by arbitration.

       2. The term "agreement in writing" shall include an arbitral clause in a
contract or an arbitration agreement, signed by the parties or contained in an
exchange of letters or telegram.

       3. The Court of a Contracting State, when seized of an action in a matter
in respect of which the parties have made an agreement within the meaning of
this article, shall, at the request of one of the parties. refer the parties to
arbitration, unless it finds that the said agreement is null and void,
inoperative or incapable of being performed." In order to resolve the
controversy on the first question the history of the International Protocols and
Conventions as a result of which legislation had to be enacted in England and
India as also the relevant provisions of the Arbitration law may be set out. The
Geneva Protocol On Arbitration Clauses, 1923 recognised the validity of an
agreement between each of the Contracting States whether relating to existing or
future differences between parties subject respectively to the jurisdiction of
different Con- tracting States by which the parties to a contract agreed to
submit to arbitration all or any differences that might arise in connection with
such contract relating to commercial matters or to any other mater capable of
submission by arbitration whether or not the arbitration was to take place in a
country to whose jurisdiction none of the parties was subject. Article 4 of the
Protocol was as follows,

        61

       "The tribunals of the Coiitracting Parties, on being seized of a dispute
regarding a contract made between persons to whom Article applies and including
an arbitration agreement whether referring to present or future differences
which is valid in virtue of the said Article and capable of being carried into
effect, shall refer the parties on the application of either of them to the
decision of the arbitrators..........."

In order to give effect to this Protocol the Arbitration Clauses (Protocol) Act,
1924 was enacted in England. Section 1 (1) of that Act contained provisions
similar to s. 3 of the Act with certain differences. When the aforesaid Act of
1924 was enacted the meaning of "submission" as contained in s. 27 of the
English Arbitration Act, 1889 was a written agreement to submit present or
future differences to arbitration whether an arbitrator was named therein or
not."

The Arbitration (Foreign Awards) Act, 1930 was enacted to give effect "to a
certain convention on the execution of arbitral awards and to amend sub-s. (1)
of s. 1 of the Arbitration Clauses (Protocol) Act, 1924 which provision was
described in s. 8 as one "for staying of legal proceedings in a court in respect
of matters to be referred to arbitration under agreements to which the Protocol
applies". The Arbitration Act, 1889 was amended by the Arbitration Act of 1934
which also provided for other matters relating to arbitration law in England. In
sub-s. (2) of s. 21 the expression "arbitration agreement" was defined to mean"
a written agreement to submit present or future differences to arbitration
whether an arbitrator was named therein or not". Although the definition of the
expression " arbitration agreement" was introduced by the amendment made by the
Arbitration Act of 1934 the definition of the word "submission" contained in s.
27 of the Arbitration Act of 1889 remained unaffected and unchanged. To complete
the history of legislation in England mention may be made of the Arbitration
Act, 1950 which repealed the earlier enactments. Section 4(2) of this Act
provided for, stay when legal proceedings were commenced in court by any party
"to a submission to arbitration made in pursuance, of an agreement to which the
protocol set out in the First Schedule to this Act applies". The Schedule to
this Act contained the Geneva Protocol on Arbitration Clauses of 1923 and the
Geneva Con- vention on the execution of foreign arbitral awards of 1927. In this
Act the definition of "submission" contained in the Act of 1889 was omitted. By
s. 32 "arbitration agreement" was defined to mean "a written agreement to submit
present or future differ-

62

ences to arbitration, whether an arbitrator is named therein or not".

In India the Arbitration (Protocol and Convention) Act, 1937 was enacted for the
first time to give effect to the Protocol and the Convention of 1923 and 1927
respectively. This was done as the Government wanted to meet he widely expressed
desire of the commercial world that arbitration agreements should be ensured
effective recognition and protection. Section 3 of the 1937 Act employed the
same language as is contained in s. 3 of the Act except with some minor
differences. Both the Geneva Protocol of 1923 and the Convention of 1927 were
appended as Schedules to this Act. So far as the ordinary arbitration law was
concerned, prior to the enactment of the Indian Arbitration Act, 1940 there were
two sets of laws applicable to what were called Presidency towns and areas which
did not fall within those towns: The Indian Arbitration Act, 1899 applied to
cases where the subject matter submitted to arbitration was of a nature that if
a suit were to be instituted it could be instituted in a Presidency town.
Section 4(b) contained the definition of the word " submission" which was
similar to the definition in the English Act of 1889. In the Civil Procedure
Code of 1882 Part V dealt with arbitration. These provisions were applicable to
such areas which were outside the Presidency towns. When the Civil Procedure
Code, 1908 was enacted it contained in the IInd Schedule similar provisions for
arbitration. There was, however, no definition of "submission" or "arbitration
agreement". The Arbitration Act, 1940 was meant to consolidate and amend the law
relating to arbitration in India.' The word "submission" was not defined but the
word "arbitration agreement" in s. 2(a) was stated to mean a written agreement
to submit present or future differences to arbitration whether the arbitrator
was named therein or not.

The phraseology which has been employed in the English statute and the Indian
enactment for giving effect to the Protocol and the Conventions relating to
arbitration is practically the same. In the English Act of 1924 the words used
were identical with the words to be found in S. 3 of the Act, namely, "a
submission made in pursuance of an agreement". The only change which has been
effected in the English Arbitration Act of 1950 in s. 4(2) is' that the words
"to arbitration" have been inserted, within the words "submission" and "made".
Among the authoritative text book writers there has been a good deal of
divergence of opinion on the meaning of the above phraseology. In the 8th Edn.
of the Conflict of Laws by Dicey and Morris, Rule 182 has been formulated which
is based on S. 4(2) of the English Arbi- tration Act 1950. Referring to s. 4(2)
and the meaning of the

63

words "a submission to arbitration made in pursuance of an agreement to which
the protocol applies" the, authors are of the view that this condition is
satisfied if the parties have agreed to submit present or future disputes to
arbitration. The Court is, according to them, under a duty to stay proceedings
although no arbitrators have been appointed. The word "submission" must be
regarded as synonymous with the term "arbitration agreement" in the Pro- tocol
and the term "agreement to which the Protocol applies" is used "to identify the
commercial or business contract between the parties". This statement is based on
the judgment of Scarman, J., in Owners of Cargo on Board the Merak v. The Merak
(Owners) (1). Even before the pronouncement of this judgment preference for the
view which later on came to be expressed by Scarman J., had been indicated in
the 7th Edn. of the same book. (See pages 1075 to 1076). According to the well
known work of Russell on Arbitration, 17th Edn., the English translation of the
Protocol is most obscure. This is what has been stated at page 79

       "The words of the section, however, would seem to limit its operation to
cases where some sort of "agreement to submit" is followed by an actual
"submission" made "pursuant to" it. (Presumably, the word " submission" here
bears its natural meaning, of "a submission written or not) of an - actual
dispute to the authority of an arbitral tribunal, "rather than the statutory
meaning which it bore

       under the 1889 Act and which is now borne by the phrase "arbitration
agreement)". Thus the common case, of an agreement -to refer which is never
followed by a submission because the claimant prefers to sue instead, is
apparently outside the section, although the Protocol clearly meant it to be
covered; see the French text of Article 4".

The English translation of the French text in the 1950 Act has been stated to be
a mistranslating. It has been suggested that the Parliament may have enacted not
the true text of the Protocol but a very limited interpretation of the false
translation. In Halsbury's Laws of England, Third Edn., Cumulative Supplement
1968, Vol. 11, Arbitration, p.

2. reference has been made to the decision of Scarman I., in The Merak(1), which
was affirmed on appeal and which has been followed in Unipat A.G. v. Dowty
Hydraulic Units(1) the statement in the text being that this provision of law
applies although no actual submission to arbitration has been made.

(1) (1965) 2 W.L.R 250.

(2) [1967] R.P.C. 401.

64

In the Merak(1), Scarman J., react s. 4(2) of the Act of 1950 with the
translation of the Protocol in the First Schedule to the Act. According to him
the Protocol was concerned with two agreements--One, a contract commercial in
character or giving rise to a difference relating to matters that were either
commercial or otherwise 'capable of settlement by arbitration between parties
subject to the jurisdiction of different contracting States; the other an
arbitration agreement whereby the parties to such a contract agreed to submit
their differences to arbitration. (The arbitration agreement might itself
included in and simultaneous with the commercial or business contract). Section
4(2) of the Act was intended to make the same -distinction between the parties'
business contract and their arbitration agreement. He proceeded to say: " It
uses the term "submission to arbitration" to identify the protocol's agreement
to submit their differences to arbitration and the term "agreement to which the
protocol applies" to identify the commercial or business contract between the
parties. Section 4(2), in my opinion, applies to agreements to submit to
arbitration made in pursuance of a contract to which, because of its character
and the character of its parties, the protocol applies. The words "in pursuance
of", merely establish the link that there must be

       between the agreement to submit present or future differences to
arbitration and the agreement of a commercial or business character between
parties of a certain class to which the protocol applies. They have in this
context no temporal significance".

One of the main reasons which prevailed in The Merak(1) was that by construing
"submission to arbitration" as an actual submission of an existing dispute to a
particular arbitrator, it would make "non-sense of the Protocol". Now, as stated
in Halsbury's Laws of England, Vol. 36,-page 414, there is a presumption that
Parliament does not assert or assume jurisdiction which goes beyond the limits
established by the common consent of nations and statutes are to be interpreted
provided that their language permits, so as not to be inconsistent with the
comity -of nations or with the established principles of International Law. But
this principle applies only where there is an ambiguity and must give way before
a clearly expressed intention. If statutory enactments are clear in meaning,
they must be construed according to their meaning even though they are contrary
to the comity of nations or International Law. (1) (1965) 2 W.L.R. 250.

65

We may look at another well recognised principle. In this country, as is the
case in England, the treaty or International Protocol or convention does not
become effective or operative of its own force as in some of the continental
countries unless domestic legislation has been introduced to attain a specified
result. Once, the Parliament has legislated, the, Court must first look at the
legislation and construe the language employed in it. If the terms of the
legislative enactment do not suffer from any ambiguity or lack of clarity they
must be given effect to even if -they do not carry out the treaty obligations.
But the treaty or the Protocol or the convention becomes important if the
meaning of the expressions used by the Parliament is riot clear and can be
construed in more than one way. The reason is that if one of the meanings which
can be properly ascribed is in consonance with the treaty obligations and the
other meaning is not, so consonant, the meaning which is consonant is to be
preferred. Even where an Act had been passed to give. effect to the convention
which was scheduled to it, the words employed in the Act had to be interpreted
in the well established sense which they had in municipal law (See Barras v.
Aberdeen Steam Trawling & Fishing Co. Ltd.(1).

The approach in "The Merak" appears to have been dominated by the Protocol of
1923 and the question to be examined is whether the language of s. 4(2) of the
English Act of 1950 and s. 3 of the Act contains any such ambiguity or suffers
from any such lack of clarity as would justify the use of the Protocol to the
extent made in the English case. The term 'submission' as defined in the English
Act of 1889 and the Indian Act of 1899, was meant to cover both an arbitration
clause by which the parties agreed that if disputes arose they would be referred
to arbitration and also an actual submission of a particular dispute or disputes
to the authority of a particular arbitrator. For the sake of convenience, a
distinction could be made calling the first "an agreement to refer" and the
second, "a submission". The term-"arbitration agreement" as defined by the
English Act of 1950 and the Indian Act of 1940 also covers both "an agreement to
refer" and "an actual submission". Turning to the words used in s. 3 of the Act
"submission made in pursuance of an agreement to which the convention setforth
in the schedule applies", the first critical expression "submission" can have
both the meanings in view of the historical background of the legislation which
was enacted to give effect to the Protocol and the Conventions. If this term is
to be given the larger meaning of including of "an agreement to refer" as also
"an actual submission" of a particular dispute, it has to be determined which
meaning would be appro-

(1) [1933] A.C. 402.

66

priate in the context in which the term "submission" has been used in s. 3 of
the Act. If "submission" means "agreement to refer" or an "arbitral clause" in a
commercial contract, it makes the entire set of words unintelligible and
completely ambiguous. It is difficult to comprehend in that case why the
Legislature should have used the words which follow the term "submission",
namely, "made in pursuance of an agreement". This brings us to the true import
of the expression "agreement". If by " agreement" is meant a commercial contract
of the nature mentioned in the, "Merak", the words "made in pursuance of" convey
no sense. Another anomaly which militates against the estab- lished rule of
interpretation would arise if by the word "agreement" is meant a commercial
contract. It cannot, even by stretching the language bear that meaning in the
second part of s. 3 which reads

       ".......... The court unless satisfied that the agreement is null and
void, inoperative or incapable of being performed or that there is not in fact
any dispute between the parties with regard to the matter agreed to be referred
shall make an order staying the proceedings."

Here "agreement" can have reference to and mean not the com- mercial contract to
which the convention setforth in the Schedule applies but only the agreement to
refer or the arbitral clause. Unless the context so compels or requires, the
same meaning must ordinarily be ,attributed or given to the same words used in
the section. The above difficulties completely disappear if "submission" isgiven
the second meaning of an actual submission of a particular dispute or disputes
to the authority of a particular arbitrator. The words which we are construing
then have a clear, consistent and intelligible meaning,, namely, an actual
submission made in pursuance of an arbitration agreement or arbitral clause to
which the convention setforth in the Schedule applies. The words "in pursuance
of" are also thus saved and not rendered otiose. The courts have to be guided by
the words of the statute in which the legislature of the country has expressed
its intention. If s. 3 cannot be so read as to permit the meaning of the word
"submission" to be taken as an arbitral clause or an agreement to refer, the
courts would not be justified in so straining the language of the section as to
ascribe the meaning which cannot be warranted by the words employed by the
legislature. We are aware of no rule of interpretation by which rank ambiguity
can be first introduced by giving certain expressions a particular meaning and
then an attempt can be made to emerge out of semantic confusion and obscurity by
having resort to the 67

presumed intention of the legislature to give effect to international
obligations.

It is true that by taking the above view the purpose and object behind the
Protocol and the conventions may not be fully carried out. The intention
underlying Art. 4 of the Protocol of 1923 and Art. 2 of the Convention of 1958
undoubtedly appears to be that whenever the parties have agreed -that their
differences arising out of a commercial contract be referred to an arbitration,,
the court of a contracting State when seized of an action in the matter, shall
refer the parties to an arbitration unless it finds that the agreement is null
and void or is inoperative or incapable of being performed. We apprehend it
would hardly be conducive to international commercial arbitration not to have
legislation giving full and complete effect to what is provided by the Protocol
and the Conventions. He also share in full measure the anxiety and the effort of
those who desire to respect the terms of international Protocols and Conventions
in letter and spirit. But we are bound by the mandate of the legislature. Once
it has expressed its intention in words which have a clear signification and
meaning, the courts are precluded from speculating about the reasons for not
effectuating the purpose underlying the Protocol and the conventions. The
consistent view of the Indian courts on the interpretation of the critical words
in s. 3 of the Act of 1937 has not been in favour of what prevailed in the
"Merak". In the leading case in W. Wood & Son Ltd. v. Bengal Corporation(1),
Chakravarti C.J. while delivering the judgment of the court, examined the
various aspects of the question including the terms of the Protocol of 1923 and
the Convention of 1927 and said : "If the agreement to which the Protocol
applies is an agreement for arbitration, there cannot possibly be an agreement
in pursuance of that agreement. Section 3 must, therefore, be construed as
contemplating a case where not only is there an arbitration agreement in force
between the parties but there has also been an actual reference to arbitration."
The learned Single Judge has given some reasons why in England as also in India
the Statutes insist upon an actual submission before a stay of the suit can be
granted. It has, been pointed out that in different countries the law relating
to arbitration is naturally different. Actual submission has been made a
condition precedent for granting stay but the court has been left with no
discretion in England and in India. In some of the other countries the order for
stay of a suit contrary to the arbitral (1) A.I.R. 1959 Cal. 8.

68

clause is discretionary, there being no difference between the municipal
arbitration and arbitration under the Protocol. It was presumably for this
reason that the Parliament insisted upon a real dispute between the parties and
an actual reference or submission to an arbitration to resolve the particular
point or points in dispute as a condition for stay. We do not consider that it
would be right to speculate about the reasons which prevailed with the
Parliament in enacting s. 3 of the Act in the language in which it has been
done. It is abundantly clear that the Parliament did not employ language which
would indicate an unequivocal intention that in the presence of an agreement to
refer to an arbitral clause in a commercial contract, the provisions for
granting stay under the section would immediately become applicable irrespective
of an actual submission or a complete reference. As it was open to the
legislature to deviate from the terms -of the Protocol and the Convention it
appears to have given only -a limited effect to the provisions of the 1958
Convention. A clear deviation from the rigid and strict rule that the courts
must stay a suit whenever an international commercial arbitration as
contemplated by the Protocol and the Conventions, was to take place, is to be
found in s.3. It is of a nature which is common to all provisions relating to
stay in English and Indian arbitration laws, the provisions being that the
application to the court for stay of the suit must be made by a party before
filing a written statement or taking any other step in the, proceedings. If the
condition is not fulfilled, no stay can be granted. It cannot thus be said that
s. 3 of the Act or similar provisions in the prior Act of 1937 or the English
Statutes were enacted to give effect in its entirety to the strict rule
contained in the Protocol and the Conventions.

Another significant feature which cannot escape notice is that the Parliament in
England and India must be presumed to have been aware when the English Act of
1950 and the Act were enacted that the expression 'submission' had been
abandoned in the Arbitration Acts and, instead, the term 'arbitration agreement'
had come to be defined as meaning what submission meant :according to the
definitions in the English Act of 1889 and Indian Arbitration Act of 1899.
Notwithstanding this, the expression 'submission' was employed in Sec. 4(2) of
the English Act of 1950 and Sec. 3 of the Act. If the intention was to have the
wider meaning the proper and correct term to use was "arbitration agreement" and
logically those words would have been employed. It is more plausible that the
Parliament by retaining the expression 'submission' wanted to give it the
meaning of an actual submission, as by then there had been firm expression of
opinion in the well-known work of Russell on Arbitration and by jurists like
Prof. Arthur Nassbaum in an article "Treaties on Commercial

 69

Arbitration" in Vol. 56 of the Harvard Law Review, pointing to that meaning
being given to 'submission'. -In India, the High Courts had uniformally and in
unequivocal terms taken that view. (See W. Wood & Son Ltd.Supra). The language
in the relevant article of the Convention of 1958 had also undergone a change.
According to Art. II, the term "agreement in writing' was to include an arbitral
clause in a contract or an arbitration agreement and that term was stated to
mean something by which the parties undertook to submit to arbitration all or
any differences which had arisen or which might arise between them in respect of
any defined legal relationship whether contractual or not concerning a subject
matter capable of settlement by arbitration. Thus, the term "agreement in
writing" embraced an arbitral clause or an agreement simpliciter to refer to
arbitration as also an actual submission of the disputes to the arbitrator. It
was equivalent to "Arbitration Agreement' as defined in the Act. By not using
that term and by employing the expression 'submission' in Sec. 3 the Parliament
appears to have indicated an intention to restrict the meaning of that
expression to an actual submission or a complete reference. Whatever way Sec. 3
of the Act is looked at, it is difficult to reach the conclusion that
'submission' means an agreement to refer or an arbitral clause and does not mean
an actual submission or completed reference, and that the word' "agreement"
means a commercial contract and not an agreement to refer or an arbitral clause.

The next question is whether the High Court was justified in granting an interim
injunction restraining the Russian Firm from proceeding with arbitration at
Moscow. The position of the Russian firm is that neither it nor the Foreign
Trade Arbitration Commission of the U.S.S.R. Chamber of Commerce which is seized
of the arbitration proceedings is amenable to the jurisdiction of the courts in
India. The presence in India of the party sought to be injuncted is a condition
pre-requisite for the grant of an injunction. Altematively, the Indian Firm has
been guilty of breach of the agreement to refer the matter to arbitration at
Moscow and therefore it has disentitled itself to the exercise of the Court's
discretion in its favour in the matter of granting an injunction.

Now, it is common ground that the point about-the Russian Firm having no
representative in India was not agitated before the High Court. The position
taken up in the plant was that the Russian Firm was carrying on business in the
U.S.S.R. and at Madras. The controversy before the High Court- appears to have

70

been confined only to what is stated in Para 5 of the counteraffidavit of the
Russian Firm, namely, that in the presence of the Arbitration agreement in the
contract entered into between the parties, the only proper remedy for the Indian
Firm was to submit the disputes to the arbitration tribunal at Moscow.

The rule as stated in Halsbury's Laws of England, Vol. 21, at page 407, is that
with regard to foreign proceedings, the court will restrain a person within its
jurisdiction from instituting or prosecuting suits in a foreign court whenever
the circumstances of the case make such an interposition necessary or, proper.
This jurisdiction will be exercised whenever there is vexation or oppression. In
England, Courts have been very cautious and have largely refrained from granting
stay of proceedings in foreign Courts (Cheshire's Private Industrial Law, 7th
Ed. pages 108-110). The injunction is, however, issued against a party and not a
foreign court.

Although it is a moot point whether Section 35 of the Arbi- tration Act, 1940,
will be applicable to the present case, (Shiva Jute Baling Limited v. Hindley &
Company Limited(1) it was assumed that' section 35 applied to protocol
arbitration.) The principle embodied in that section cannot be completely
ignored while considering the question of injunction. According to that Section
no reference nor award can be rendered invalid by reason only of the
commencement of legal proceedings upon the subject of the reference, but when
legal proceedings upon the whole of the subject matter of the reference have
been commenced between all the parties to the reference and a notice thereof has
been given to the arbitrators or umpire, all further proceedings in a pending
reference shall, unless a stay of proceedings is granted under section 34, be
invalid. If the venue of the arbitration proceedings had been in India and if
the provisions of the Arbitration Act of 1940, had. been applicable, the suit
and the arbitration proceedings could not have been allowed to go on
simultaneously and either the suit would have been stayed under section 34 or it
was, not stayed, and the arbitrators were notified about the pendency of the
suit, they would have had to stay the arbitration proceedings because under
section 35 such proceedings would become invalid if there was identity between
the subject-matter of the reference and the suit. In the present case, when the
suit is not being stayed under section 3 of the Act it would be contrary to the
principle underlying Set. 35 not to grant an injunction restraining the Russian
Finn from proceeding with the arbitration at Moscow. The principle essentially
is that the arbitrators should not proceed wit

(1) [1960] 1 S.C.R.1569.

7 1

the arbitration side by side in rivalry or in competition as if it were a Civil
Court.

Ordinarily, a party which has entered into a contract of which an arbitral
clause forms an integral part should not receive the assistance of the court
when it seeks to resile from it. But in the present case a suit is being tried
in the courts of this country which, for the reasons already stated, cannot be
stayed under section 3 of the Act in the absence of an actual submission of the
disputes to the arbitral tribunal at Moscow prior to the institution of the
suit. The only proper course to follow is to restrain the Russian Firm which has
gone to the Moscow Tribunal for adjudication of the disputes from getting the
matter decided by the tribunal so long as the suit here is pending and has not
been disposed of.

In this context, we cannot also ignore what has been repre- sented during the
arguments. The current restrictions imposed by the Govt. of India on the
availability of foreign exchange of which judicial notice can be taker,, will
make it virtually impossible for the Indian Firm to take its witnesses to Moscow
for examination before the Arbitral tribunal and to otherwise properly conduct
the proceedings there. Thus, the proceedings before that tribunal are likely to
be in effect ex parte. The High Court was, therefore, right in exercising
discretion in the matter of granting an interim injunction in favour of the
Indian Firm. The appeals fail and are dismissed but in view of the peculiar
nature of the points involved, there will be no order as to costs.

Ramaswami, J. I regret I am unable to agree with the judgment pronounced by
Grover, J.

The first respondent had entered into a contract with the Government of India
for the excavation work in the feeder canal of the Farakka Barrage project. To
fulfil this contract with the Government of India and for the excavation work
the first respondent required certain construction machinery such as scrapers,
both towed and motorised, crawlers, tractors and bulldozers. The respondent No.
1 agreed to purchase them from the appellant and the latter agreed to supply and
deliver and the terms and conditions of the contract were embodied in a document
dated February 2, 1965 signed by both the parties. In pursuance of the contract
the first respondent opened a confirmed irrevocable and divisible letter of
credit with the second respondent for the entire value of the equipment, that
is, Rs. 66,09,372/- in favour of the appellant negotiable through the Bank of
Foreign Trade of the U.S.S.R., Moscow. Under the said letter of credit the
second respondent was required to pay to the appellant on production of the 72

documents particularised in the letter of credit along with the drafts. - One of
the conditions of the letter of credit was that 25 % of 'the amount should be
paid on the presentation of the specified documents and the balance of 75%
within one year from the date of the first payment. On the strength of the
contract the -appellant supplied all the machinery which it undertook to supply
by about the end of December, 1965. After the machinery was used for some time
the first respondent complained that the machinery did not conform to the terms
and conditions of the contract and consequently it had incurred and continued to
incur considerable loss. Meanwhile the Indian rupee was devalued on June 6, 1966
and in consequence the price of the machinery went up by about 57.48 %. The
increase in the price of the machinery was in accordance with the gold clause of
the contract entered into between the parties. Clause 13 of the Contract read as
follows : "The sellers and the buyers shall take all measures to settle amicably
any disputes and differences which may arise out of or in connection with this
contract. In case of the parties being unable to arrive at an amicable
settlement, all disputes are to be submitted without application to the ordinary
courts for the settlement by Foreign Trade Arbitration Commission at the
U.S.S.R. Chamber of Commerce in Moscow in accordance with the Rules of Procedure
of the said Commission. The Arbitration award will be final and binding upon
both parties."

Ignoring this clause the first respondent instituted a suit C.S. 134 of 1966 in
the Madras High Court and obtained an ex parte injunction against the appellant
and the second respondent restraining them from negotiating the letter of
credit. The 'appellant protested that the first respondent should not have
instituted a suit in violation of the arbitration clause in the contract. By a
subsequent agreement dated August, 14, 1966 the appellant and the first
respondent agreed to settle the matter amicably in accordance with the contract.
The appellant consented to extend the payment of letter of credit by one year
and the first respondent thereupon withdrew the suit in C.S. 134 of 1966. The
respondent No. 1 is said to have accepted the devaluation drafts representing
increase in the price of the machinery consequent on the devaluation of the
Indian rupee in accordance with the clause in the contract. Though
correspondence was going on between the parties, no settlement could be arrived
-at. When the time came for the payment of the balance of 75% of the letter of
credit the first respondent instituted a suit C.S. 118 of 1967 in the Madras
High Court in violation of the arbitral clause and obtained an ex parte
injunction against the appellant from operating the letter of credit. On
November 5, 1967 the appellant instituted- arbitral proceedings 73

before the Foreign Trade Arbitration Commission of U.S.S.R. Chamber of Commerce,
Moscow in accordance with cl. 13 of the contract for payment of the price of the
machinery. Notice was issued to the first respondent to choose its nominee to
represent it in the Arbitration Commission and the date of hearing was also
notified by the first respondent. But the first respondent failed to appear
before the Foreign Trade Arbitration Commission. Thereafter the appellant
entered appearance in C.S. 118 of 1967 under protest and filed an application
No. 2604 of 1967 before the High Court under s. 3 of the Foreign Awards
(Recognition -and Enforcement) Act, 1961 (45 of 1961) for the stay of the suit.
The first respondent also filed an application No. 106 of 1968 before the High
Court praying that the appellant should be restrained from taking part in the
arbitration proceedings at Moscow. After hearing the parties Ramamurthi J.,
dismissed the application of the appellant No. 2604 of 1967. The learned Judge
allowed the application of the first respondent and granted an injunction
restraining the appellant from taking part in the arbitral proceedings at
Moscow. The appellant preferred, appeals O.S.A. 25 and 26 of 1968 against the
orders of Ramamurthi, J. The appeals were dismissed by a Division Bench of the
High Court on December 16, 1968.

The question involved in this case is : What is the true interpretation and
effect of s. 3 of the Foreign Awards (Recognition and Enforcement) Act- 1961 (45
of 1961) (hereinafter referred to as the Act). Section 3 of the Act states

       "Notwithstanding anything contained in the Arbitration Act, 1940 or in
the Code of Civil Procedure, 1908, if any party to a submission made in
pursuance of an agreement to which the Convention set forth in the Schedule
applies, or any person claiming through or under him commences any legal
proceedings in any Court against any other party to the submission or any person
claiming through or under him in respect of any matter agreed to be referred any
party to such legal proceedings may, at any time after appearance and before
filing a written statement or taking any other step in the proceedings, apply to
the Court to stay the proceedings and the Court unless satisfied that the
agreement is null and void, inoperative or incapable of being performed or that
there is not in fact any dispute between the parties with regard to the matter,
agreed to be referred shall make an order staying the proceedings."

Section 3 refers to the Convention which is set forth in the schedule. It is an
international protocol to which this country was a signatory and which was
effected at New York on June 10,

1/70-6

74

1968. Article 2 of this Convention has three clauses and reads as follows :

       I Each Contracting State shall recognise an agreement in writing under
which the parties undertake to submit to arbitration at or any differences which
have arisen or which may arise between them in respect of defined legal
relationship, 'whether contractual or not, concerning a subject-matter capable
of settlement by arbitration.

       2. The term "agreement in writing" shall include an arbitral clause in a
contract, or an arbitration agreement, signed by the parties or contained in an
exchange of letters or telegrams.

       3. The Court of a Contracting State, when seized of an action in a matter
in respect of which the parties have made an agreement within the meaning of
this article, shall, at the request of one of the parties, refer the parties to
arbitration, unless it finds that the said agreement is null and void,
inoperative or incapable of being performed." The argument of the first
respondent is that s. 3 of the Act can be invoked by the appellant only if it
had implemented the arbitration agreement by actually submitting, the dispute to
the arbitrator or arbitrators prior to the institution of the suit. In the
present case if there was any such reference to arbitration it was only on
November 4, 1967, that is, about three weeks after the suit bad been filed in
the High Court. The contrary view point was put forward by Mr. Mohan
Kumaramangalam on behalf of the appel- lant. It was said that s. 3 of, the Act
should be interpreted in the context of the articles of the Convention set out
in the schedule and it was not necessary that there should be an actual
submission to, arbitration before the institution of the suit. If there was an
arbitral clause -whether this was followed by reference to arbitration by any of
the parties or not the very existence of this clause in the commercial agreement
would render stay of the suit mandatory under s. 3 of the Act. The argument was
that art. 2 of the Convention makes it clear that under the Convention the court
of contracting State must, when seized of such an action refer the parties to
arbitration. Section 3 of the Act must be read in consonance with this
obligation. Any interpretation of that section which will restrict this
obligation could be justified only if the plain words necessitate such a
reading. The argument of the appellant is that the words "if any party to a
submission made in pursuance of an agreement to which the convention set forth
in the schedule applies" really mean that the submission is the arbitral clause
itself

        75

and the agreement is a commercial agreement which includes or embodies that
clause.

It is necessary in this connection to refer to the legislative history of the
section. The reason is that both the expressions submission" and "agreement of
arbitration" have got a special meaning because of the evolution of the statute
law. The English Arbitration Act of 1889 (52-53 Vic.c.49) is the first amending
and consolidating statute relating to arbitration. Section 27 of the Act defined
submission as follows :

       "Submission means a written agreement to submit present or future
difference to arbitration whether an arbitrator is named therein or not."

There is no definition of "agreement" as such and no difference is made between
a mere arbitral clause, that is an agreement to refer to an arbitration and an
actual submission to arbitration after the disputes have arisen. A submission
defined by s. 27 comprehends both meanings. Section 4 of the 1889 Act provided
that if any party to a submission commenced any legal proceedings against any
other party to a settlement the latter may apply to the court concerned to stay
the proceedings and the court if it is satisfied that there is no reason why the
matter should not be referred in accordance with the submission may make an
order staying the proceedings. In the Indian Arbitration Act of 1889 s. 4(b)
defines "submission" in exactly the same terms as s. 27 of the English Act of
1.889, that is, a submission means a written agreement to submit present or
future differences to arbitration whether an arbitrator is named or not. In the
Arbitration Clauses (Protocol) Act of 1924 (14 & 15 Geo. V c. 39) we have the
phrase "submission made in pursuance of an agreement" and the phrase
"submission" appears to be employed in the special statutory sense. Section 1 of
this Act states

       "Staying of Court proceedings in respect of matters to be referred to
arbitration under commercial agreements.--(1) Notwithstanding anything in the
Arbitration Act, 1889, if any party to a submission made in pursuance of an
agreement to which the said protocol applies or any person claiming through or
under him, commences any legal proceedings in any Court against any other party
to the submission, or any person claiming through or under him, in respect of
any matter agreed to be referred, any party to such legal proceedings may at any
time after appearance, and before delivering any pleadings or taking other steps
in the proceedings, apply to that Court to stay the proceedings, and that Court
or a Judge thereof, unless satisfied that the agreement or

       76

       arbitration has become inoperative or cannot proceed, shall make an order
staying the proceedings.

       Clause 1 of the Schedule states

       "Each of the contracting States recognises the validity of an agreement
whether relating to existing or future differences between parties, subject
respectively to the jurisdiction of different Contracting States by which the
parties to a contract agree to submit to -arbitration all or any differences
that may arise in connection with such contract relating to commercial matters
or to any other matter capable of settlement by arbitration, whether or not the
arbitration is to take place in a country to whose jurisdiction none of the
parties is subject. Each contracting State reserves the right to limit the
obligation mentioned above to contracts as commercial under its national law.
Any Contracting State which avails itself of this right will notify the
Secretary-General of the League of Nations in order that the other contracting
States may be so informed."

In 1930 the Arbitration (Foreign Awards) Act, 1930 (20 Geo. 5, c. 15) was
enacted in order to give effect to the 1927 Geneva Convention on the execution
of arbitral awards. Section 8 of this Act explains the phrase "arbitration
agreement" by reference to the 1924 Act.

The next statute in England is the Arbitration Act, 1934 (2425 Geo. V c. 14).
Section 8 read along with the First Schedule dealt with the powers of the court,
among other matters, to pass various orders such as interim injunction.
appointment of receiver, orders for preservation of properties or for protecting
rights of parties etc. Section 21 of this Act defines the expression
"arbitration agreement" to mean a written agreement to submit present or future
differences to arbitration whether an arbitrator is named or not. Nothing was
said about the definition of "submission" in S. 27 of the Act of 1889. Virtually
the effect is that in the place of the word "submission" the phrase "arbitration
agreement" is substituted and has a synonymous meaning.

In India the Arbitration Act, 1889 was repealed and replaced by the Arbitration
Act of 1940. The Act dealt with only municipal or local arbitrations and so far
as foreign arbitration was concerned, the Indian Protocol Act of 1937 (Act 6 of
1937) was enacted. Section 3 of this Act states : "Notwithstanding anything
contained in the Arbitration Act, 1899, or in the Code of Civil Procedure, 1908,
if any party to a submission made in pursuance of an agreement to which the
Protocol set forth in the First

       77

       Schedule as modified by the reservation subject to which it was signed by
India applies, or any person claiming through or under him, commences any legal
proceeding in any Court -against any other party to the submission or any person
claiming through or under him in respect of any matter agreed to be referred,
any party to such legal proceedings may, at any time after appearance and,
before filling a written statement or taking any other steps in the proceedings,
apply to the Court to stay the proceedings : and the Court unless satisfied that
the agreement or arbitration has become inoperative or cannot proceed, or that
there is not in fact any dispute 'between the parties with regard to the matter
agreed to be referred, shall make an order staying the proceedings.

       The First Schedule of this Act contains articles of the 1923 Convention
of which Art. 1 reads as follows

       "Each of the contracting States recognises -the validity of an agreement
whether relating to existing or future differences between parties subject
respectively to the' jurisdiction of different Contracting States by which the
parties to a contract agree to submit to arbitration all or any differences that
may arise in connection, with contract relating to commercial matters or to any
other matter capable of settlement by arbitration, whether or not the
arbitration is to take place in a country to whose jurisdiction none of the
parties is subject."

       The Second Schedule contains' the 1927 Convention and Art. 1 reads as
follows :

       "In the territories of any High Contracting Party to which the present
Convention applies, an arbitral award made in pursuance of an agreement, whether
relating to existing or future differences (hereinafter called 'a submission to
arbitration') covered by the Protocol on Arbitration Clauses opened at Geneva on
September 24, 1923, shall be recognised as binding and shall be enforced in
accordance with the rules of the procedure of the territory where the award is
relied upon, provided that the said award has been made in a territory of one of
the High Contracting parties to which the present Convention applies and between
persons who are subject to the jurisdiction of one of the High Contracting
parties.

       To obtain such recognition or enforcement, it shall further be necessary

       78

       (a) That the award has been made in pursuance of a submission to
arbitration which is valid under the law applicable thereto; (b) That the
subject-matter of the award is capable of settlement by arbitration under the
law of the country in which the award is sought to be relied upon;

       (c) That the award has been made by the Arbitral Tribunal provided for in
the submission to arbitration or constituted in the manner agreed upon by the,
parties and in conformity with the law governing the arbitration procedure;

       (d) That the award has become final in the country in which it has been
made, in the sense that it will not be considered as such if it is open to
opposition, appeal or pourvoi en cassation (in the countries where such forms of
procedure exist) or if it is proved that any proceedings for the purpose of
contesting the validity of the award are pending;

       (e) That the recognition or enforcement of the awards not contrary to the
public icy or to the principles of the law of the country in which it is sought
to be relied upon."

       It should be noticed that Art. 1 of the 1927 Convention defines an
arbitration agreement" as "a submisison to arbitration".

       The next event in the legislative history is the New York Convention
adopted at the United Nations Conference in June, 1958 on International and
Commercial Arbitrati

ons. It

       was felt that the international conventions uptil then reached did not
effectuate a speedy settlement of disputes and did not meet the requirements of
international trade and commerce and disputes arising therefrom and that there
should be some modification and the Convention was agreed to by almost all the
countries. India accepted the same and enacted the Foreign Awards (Recognition
and Enforcement) Act, 1961 to implement the conventions so far as India was
concerned. This Act of 1961 repealed the Protocol Act of 1937. With regard to S.
3, the provision concerning stay of proceedings in a civil court in violation of
the arbitral clause. the language is the same as in the Protocol Act of 1937.

       The question presented for determination is what is the true meaning -and
effect of the words "it any party to a submission made in pusuance of the
agreement to which the said protocol applies"? in s. 3 of the Act. Even at the
time of the Act of 1889 the word "submission" had received a special meaning as
including a mere

        79

       agreement to refer to arbitration as well as an actual reference or
submission to arbitration and this special meaning was given statutory
recognition in the Act of 1889 by defining submission' in this special manner.
In the Arbitration Clauses (Protocol) Act, 1924 the phrase "submission made in
pursuance of the agreement" is used and the word "submission" is employed in the
statutory sense. In the Indian Arbitration Act, 1889 s. 4(b) defines submission
in exactly the same terms as s. 27 of the English Act of In the English
Arbitration Act of 1934 the word agreement' is defined in s. 21(2) as a "written
agreement to submit present or future differences to arbitration whether the
arbitrator is named therein or not". It is clear, therefore, that the expression
"arbitration agreement" and the word "submission" are synonymous and connote the
same idea. In my opinion the expression "submission made in pursuance of an
agreement" in s. 3 of the Act must be construed in its historical setting. The
word

        " submission" must, therefore, be interpreted to mean the arbitral
clause itself and the word "agreement" as the commercial or the business
agreement which includes or embodies that clause. In other words the word
"submission" in the opening words of the section means an agreement to refer to
arbitration and the words "the agreement to which the Convention set forth in
the schedule -applies" mean the business 'agreement or contract containing the
arbitral clause. It follows, therefore, that if there is an arbitral clause
whether this is followed by actual reference to arbitration or not, the very
existence of this clause in the commercial agreement would render the stay of
the. suit mandatory under s. 3 of the Act. The view that I have, expressed is
also consistent with the rule of construction that as far as practicable the
municipal law must be interpreted by the courts in conformity with international
obligations which the law may seek to effectuate' It is well settled that if the
language of a section, is ambiguous or is capable' of more than one meaning the
protocol itself becomes relevant for there is a prima facie presumption that
parliament does not intend to act in breach of international law, including
specific treaty obligations. - In the words of Diplock, L.J. in Salomon v.
Commisisoners of

       Customs and Excise(1).

       "If the terms of the legislation are clear and unambiguous they must 'be
given effect' to whether or not they carry out Her Majesty's treaty obligations,
for the sovereign power -of. the Queen in Parliament extends to breaking
treaties lsee Ellerman Lines Ltd. v. Murrey(2)1 and any remedy for, such a
breach of an international obligations lies in a forum other than Her Majesty's
own

       (1) [1966] 3 All E.R. 871 at 875 -876.

       (2) [1930] All F.R, 503.

       80

       courts. If the terms of the legislation are not clear, however, but are
reasonably capable of more than one meaning, the treaty itself becomes relevant,
for there is a prima facie presumption that parliament does not intend to act in
breach of international law, including therein specific treaty obligations; and
if one of the meanings which can reasonably be ascribed to the legislation is
consonant with the treaty obligations and another or others are not, the meaning
which is consonant is to 'be preferred. Thus, in case of lack of clarity in the
words used in the legislation, the terms of the treaty -are relevant to enable
the court to make its choice between the possible meanings of these words by
applying this presumption."

Applying this principle to the present case it is manifest that art. 2 of the
Convention which is contained in the Schedule to the Act imposes a duty on the
Court of a contracting State when seized of such an -action to refer the parties
to arbitration. Section 3 of the Act must, therefore, be read in consonance with
this international obligation and any interpretation of S. 3 which would
restrict the obligation or impose a refinement not warranted by the Convention
itself will not be justified. This view is also borne out by the reasoning of
Scarman J., in Owner of Cargo on Board The Merak v. The Merak(1). In that case
the plaintiffs' timber was shipped abroad the Merak under bills of lading which
stated that the voyage was "as per charter dated April 21, 1961" and contained a
clause incorporating "all the terms, conditions, clauses .... including clause
30 contained in the said charter party". Clause, 30 mas irrelevant to a bill of
lading and was inserted in mistake for the arbitration clause 32. 'The
incorporation clause was followed by a clause giving para- mount effect to the
Hague Rules. In the course of the voyage the cargo was damaged and just -within
12 months of the final discharge of the cargo the plaintiffs, as indorsees of
the bills of lading, issued a writ claiming damages from the Merak's owners, who
relying on the arbitration clause, moved for a stay (if the proceedings under
section 4 of the Arbitration Act, 1950. The plaintiffs opposed the motion on the
grounds that the arbitration clause was not incorporated in the bills of lading;
that the dispute did not arise out of the April charter party or any bills of
lading issued thereunder; and that the arbitration clause must in any event be
rejected because it was repugnant to the paramount clause giving effect to the
Hague Rules, which by article III, rule 6 provided for bringing 'suit' and not
for arbitration. Scarman J. holding that section 4(2) of the Arbitration Act,
1950 gave effect to the inten-

(1) [1965] 2 W.L R 250 at 262-263.

        81

tion of the protocol on arbitration clauses to which the sub-section related,
rejected the plaintiffs' contentions and stayed the proceedings. In the course
of his judgment Scarman J., observed as follows :

       "In my opinion, the sub-section must be read together with the protocol
as it stands translated into the English of the First Schedule to the Act.
Article 1 of the tran- slated protocol provides for the recognition of the
validity of an agreement whether relating to existing or ,future differences
whereby the parties to a contract agree to submit to arbitration differences
arising in connection with that contract, and expressly reserved to contracting
states the right to limit the obligation of recognition to contracts which are
considered commercial. Article 4 provides that the tribunals of the contracting
states, on being seised of a dispute regarding a contract which includes an
arbitration agreement whether referring to present 'or future differences, shall
refer the dispute to arbitration. Thus the protocol is concerned with two
agreements--One, a contract commercial in character or giving rise to a
difference relating to matters that are either commercial or otherwise capable
of settlement by arbitration, between parties subject to the jurisdiction of
different contracting states; the other, an arbitration agreement whereby the
parties to such a contract agree to submit their differences to arbitration. It
is clear from the protocol that the arbitration agreement may itself be included
in and simultaneous with the commer- cial or business contract between the

 parties.

       In my opinion section 4(2) -of the Act is intended to make the same
distinction between the parties' business contract and their arbitration
agreement, and no other distinction. It uses the term "submission to arbitration
to identify the protocol's agreement to submit, their differences to arbitration
and the term "agreement to Which the protocol applies' to identify the
commercial or business contract between the parties. Section 4(2) in my opinion,
applies to agreements to submit to arbitration made in pursuance of a contract
to which, because of its character and the character of its parties, the
protocol applies. The words "in pursuance of" merely establish the link that
there must be between the agreement to submit present or future differences to
arbitration and the agreement of a commercial or business character between
parties of a certain -class to which the protocol applies. They have in this
context no temporal significance.

       82

       see no reason for having to construe 'submission to arbitration' as an
actual submission of an existing dispute to a particular arbitrator. The Act of
1950 does not say that I must. It makes nonsense of the protocol so to do. The
Act of 1924 which first introduced the sub-section, was an Act to give effect to
the protocol ,arid there is respectable, though now antiquated,

       authority, namely, the repealed section 27 of the Act of 1889, for giving
a wider meaning to 'submission' if the context so requires. The term 'submission
to arbitration' is not now defined by statute, and must, -in my opinion, be
given a meaning appropriate to its context. While, no doubt, it is often
convenient to use the term to distinguish an actual reference of a particular
dispute to arbitration from an 'arbitration agreement' it would be wrong so to
do in construing this particular subsection. Accordingly, I find myself able to
say that the subsection gives effect to the intention of the protocol, the
intention clearly being that when there is a business contract between parties
subject to different contracting states those parties 'are to be referred to
arbitration if they have so agreed, whether their agreement relates to present
or future differences."

       The same view is expressed in Dicey & Morris, The Conflict of Laws, 8th
edn. p. 1075 :

       Section 4(2) of the Act imposes upon the court a duty to stay the
proceedings if a party relies on 'a submission to arbitration made in pursuance
of 'an agreement to which the Protocol applies'. This condition is satisfied if
the parties have agreed to submit present or future disputes to arbitration. The
term 'submission' includes an agreement to refer. The court is therefore under a
duty to stay the proceedings although no arbitrators have been appointed, Find
the fact that an arbitration clause is, included in the contract between the
parties suffices for the application of section 4(2). There is thus no
discrepancy between the section and Article 4 of the Protocol to which it
purports to give effect. According to Article 4 the court must "refer the
Parties to the decision of the arbitrators" if the contract between the parties
includes "an arbitration agreement whether referring to present or to future
differences." The word "submission" used in section 4(2) must be regarded as
synonymous with the term 'arbitration agreement' in the Protocol and the term
'agreement to which the protocol applies' is used in the section 'to identify
the commercial

        83

       or business contract between the parties'. The controversy surrounding
the interpretation of section 4(2) (to which reference, was made in the previous
edition of this book) was left undecided in Radio Publicity Ltd. v. Compagnie
Luxembourgecise de Radiodifusion(1). It was, however, settled by the decision of
Scarman J. in The Merak(2) and the point was not disputed in 'the Court of
Appeal."

If the opposite view for which respondent No. I contends is adopted and if it is
held that the section only applies if the parties have submitted an actual
dispute to arbitration the purpose of s. 3 of the Act and of the ratification of
the New York Protocol of 1958 by India would have been largely frustrated. Such
an interpretation would be contrary to the avowed object and intention of the
Act which is "to give effect to the Convention -on the recognition and
enforcement of foreign arbitral awards" done at New York on June 10, 1958. When
there is ambiguity in the language of the section it is the duty of the court to
adopt that construction which will effectuate the object of the Act and not
nullify the intention of Parliament and make the provision devoid of all
meaning.

On behalf of the first respondent it was said that there was a presumption that
the legislature in reenacting a section of the law must be presumed to have been
aware of the intervening judicial interpretation and to have given its approval
to it. The classic statement of the rule is that James L.J. in Ex. p.
Campbell(1)

       "Where once certain words in an Act of Parliament have received a
judicial construction in one of the Superior Courts, and the Legislature has
repeated them without any alteration in a subsequent statute, I conceive that
the legislature must be taken to have used them according to the meaning which a
Court of competent jurisdiction has given them."

But the rule is better and more moderately stated by the judicial Committee in
Webb v. Outrim(4) where the words of Griffith C.J. in the Australian case
D'Emdon v. Pedder(5) are adopted: "When a particular form of legislative
enactment, which has received authoritative interpretation, whether by judicial
decision or by a long course of practice is adopted in the framing of a later
statute, it is a sound rule of construction to hold that the words so adopted
were intended by the Legislature to bear the meaning which has been so put upon
them". Even in this qualified form, however.

(1)[1936] 2All E.R. 721 at p. 726.

(2) [1965] 2 W.L.R. 250.

(3) [1870] L. R. 5 Ch. 706.

(4) [1907] A.C. 81. 89.

(5) [1904] 1 C.L.R. 91.

84

the rule has not been acknowledged without protest (see the speech of Lord
Blanesburgh in Barras v. Aberdeen Steam Trawling Co.(1) The presumption is weak
and is passed on an optimistic fiction. The rule has been criticised by Dr. C.
K. Allen:

       "The second petrifying f`actor is the real or supposed rule (now,
however, questioned) that once a word or phrase has been given a certain
judicial meaning, it is deemed to bear that meaning not only in all subsequent
cases, but in all subsequent statutes. This is an offshoot of the somewhat
optimistic assumption that the legislature must be presumed to know the actual
state of the law. Consequently, if a word has once been given a particular
meaning in any case of authority, however, obscure, in connection with any
statute, however recondite, the draftsman who uses that word in a later
enactment is, so to speak, 'affected with notice' of the judicial
interpretation, however remote it may be from the matter in hand. It need hardly
be said that in the huge mass of our case law this assumption is a transparent
fiction." (Law in the Making pp. 508-9).

Mr. Raman referred to the decisions of the Calcutta High Court and of the Bombay
High Court in Bajrang Electric Steel Co. v. Commissioners for Port of
Calcutta(1), W. Wood & Sons Ltd. v. Bengal Corporation(3) and K. E. Corporation
v. S. De Traction (4 ). It was held in these cases that before the court stays
proceedings under s. 3 of the Act there must be an actual submission by both the
parties to arbitrators of the particular point in dispute. It was argued that in
enacting s. 3 Parliament was not content with a mere readiness of the parties to
go to arbitration but it insisted on something mote, that is, the actual
implementa- tion of the arbitration agreement by the parties concerned by
setting up the machinery of arbitration in motion. I am unable to accept this
line of reasoning. It is not said that there is a long course of practice or a
series of decisions of various High Courts taking a particular view of s. 3 of
the Act. The decisions referred to by the respondent are not numerous -and, it
is unsafe and un- realistic to draw the presumption that Parliament in re-
enacting s. 3 of the Act was aware of the intervening judicial interpretation
and set its seal of approval upon it. In R. v. Bow Road Domestic Proceedings
Court(5) Lord Denning pointed out that though the decision in R. v. Blane(6)
stood for over 100 years, if it was quite au erroneous precedent, the fact that
Parliament had reenacted the provisions of the statute, did not authorise the
erroneous interpretation.

(1) [19331 A.C. 402.

(3) A.I.R. 1959 cal. 8.

(5) [1968] 2 All, E. R. 89 at 911.

(2) A.I.R. 1957 cal. 402.

(4) A.I.R. 1965 Bom. 114.

(6) [1849] Q. B. 769.

85

It is, however, maintained by the respondent that the words " submission" and
"agreement" must be given their natural and grammatical meaning and the word
"submission" made in pursuance of an agreement" can only mean an actual
submission of the disputes to the arbitral tribunal. So the word "agreement" can
have reference to and can be construed only in the sense of an arbitration
agreement or arbitral clause in a commercial contract. It can-not mean a
commercial contract because an arbitration agreement cannot be stated to have
been made pursuant to a commercial contract. The contention is that if
submission has to be taken in the sense of an arbitration -agreement it would
render the words "submisison made in pursuance of an agreement" meaningless and
unintelligible. In my opinion the argument proceeds on a fallacy. A statute
should not be construed as a theorem of Euclid but the statute must be construed
with some imagination of the purpose which lies behind the statute. The doctrine
of literal interpretation is not always the best method for ascertaining the
intention of Parliament. The better rule of interpretation is that a statute
should be so construed as to prevent the mischief and -advance the remedy
according to the true intent of the makers of the statute. The principle was for
example, applied by Lord Halsbury in Eastman Photographic Co. v. Comptroller of
Patents(1) where the question was whether the word 'solio' used as a trademark
was an invented or a descriptive word. In examining this question Lord Halsbury
said: "Among the things which have passed into canons of construction recorded
in Heydon's case we are to see what was the law before the Act was passed, and
what was the mischief or defect for which the law had not provided, what remedy
Parliament appointed and the reason of the remedy". At p. 575 Lord Halsbury
proceeded to state Turner, L.J. in Hawkins v. Cathercole(2), and adding his own
high authority to that of the judges in Stredling v. Morgan(3) -after enforcing
the proposition that the intention of the Legislature must be regarded, at
length the judgment in that case : that the have collected the intention
'sometimes by consi- dering the cause and necessity of making the Act....
sometimes foreign circumstances' (thereby meaning extraneous circumstances), so
that they have ever been guided by the intent of the Legislature, which they
have always taken according to the necessity of the matter, and according to
that which is consonant to reason and good discretion'. And he adds : "We have,
therefore, to consider not merely the words of this Act of Parlia-

       (1) [1898] A.C. 571.

       (2) [1855] 6 D. M, & C. 1.

       (3) [1584] 1 Plowd 204.

       86

       meat but the intent of the Legislature to be collected from the cause and
necessity of the Act being made, from a comparison of its several parts, and
from foreign (meaning extraneous) circumstances so far as they can justly be
considered to throw light upon the subject."

For the reasons expressed I hold that the appellant is entitled under S. 3 of-
the Act for an order of stay of the proceedings in C.S. 118 of 1967 pending in
the Madras High Court on the ground that in terms of the Contract dated February
2, 1965 the parties expressly agreed that all disputes arising out of the
contract should be settled by arbitration by the Foreign Trade Arbitration
Commission of the U.S.S.R. Chamber of Commerce at Moscow. It is not, however,
possible to decide these appeals finally because the respondent has opposed the
application for stay on other grounds also. Ramamurti, J., found that the
arbitral clause in the contract of February 2, 1965 had teased to be effective
as between the parties as a result of the agreement dated August 14, 1966 Ex.
P-32 "and that it will be wholly unrealistic. . . to hold that the moment an
amicable settlement as provided in Ex. P-32 proved futile, the entire contract,
Ex. P-4 revived. . . . " On the further aspect that admittedly s. 3 itself
contains an exception that the mandatory obligation to stay is not incumbent on
the court if the court is satisfied that "the agreement is null and void,
inoperative or incapable of being performed" Ramamurti, J. was apparently of the
view that the alleged nullity of the contract on the basis of mutual mistake
was, a matter that the court has to examine further after recording evidence and
that was a ground on which proceedings cannot be stayed under s. 3. I consider,
therefore, that C.A. 1209 and 1834 of 1969 should be set down for further
hearing on these points. Civil Appeals Nos. 1208 and 1833 of 1969 arise out of
the application No. 106 of 1968 filed by the first respondent for injunction to
restrain the first respondent for taking further part in the arbitration
proceedings in Moscow. Ramamurti J., took the view that since the application
no. 2604 of 1967 for stay of the proceedings in the pending suit C.S. II 8 of
1967 bad been dismissed the first respondent's injunction petition should be
allowed on the ground that the two forums were mutually exclusive. In the
connected appeals I have taken the view that the appellant would be entitled to
an order of stay of the proceedings in C.S. 118 of 1967 under s. 3 of Act 45 of
1961. Even assuming that S. 3 of the Act is not applicable this is not a proper
case in which the High Court should have issued an injunction restraining the
appellant from proceeding with the arbitration. As a rule the Court has to
exercise its discretion with great circumspection for it is imperative that the

        87

right of access to the tribunals of a country should not be lightly interfered
with. It is not sufficient merely to show that two actions have been started for
it is not prima facie vexations to commence two actions about the same subject
matter, one here and one abroad. (See Mcttenry v. Lewis(1). The reason of this
reluctance to exercise the jurisdiction is that owing to a possible difference
between the laws of the two countries, the stay of one of the actions may
deprive the plaintiff of some advantage which he is justified in pursuing. Thus
he may have a personal remedy in one country and a remedy only against the goods
in another; or a remedy against land in one State but no such remedy in another.
The rule ' therefore, is that a plea of lis alibi pendens will not succeed and
the court will not order a stay of proceedings unless the defendant proves
vexation in point of fact. He must show that the continued prosecution of both
actions is oppressive or embarrassing, an onus which he will find it difficult
to discharge if the plaintiff can indicate some material advantage that is
likely to result from each separate action. Each case, therefore, depends upon
the setting of its own facts and circumstances. In the facts of the present case
I am of opinion that no case for injunction has been made out and the order of
Ramamurti, J., dated April 12. 1968 allowing the application of respondent in
no. 106 of 1968 should be set -aside. I would accordingly allow the appeals nos.
1208 of 1969 and 1833 of 1969 with costs.

      ORDER

In accordance with the opinion of the majority the appeals are dismissed. There
will be no order as to costs. Y.P.

(1) 22 Ch. D. 401.

88