K.C. Agrawal J. - (1.) This is an appeal under Section 39 of the Arbitration Act against the judgment of the Civil Judge, Allahabad dated 12.9.79 rejecting the application of defendants 5 to 8 for stay of proceedings of the suit under Section 34 of the Arbitration Act.
(2.) Suit No. 113 of 1979 was filed by M/s Swadeshi Cotton Mills Co. Ltd., for recovery of Rs. 25449/principal sum and Rs. 6350.40 as interest. The plaintiff alleged that it carries on business of manufacture of cloth, yarn and other textile goods at Kanpur, Naini and other places. The defendant No. 1 is a partnership firm duly incorporated and registered under the Indian partnership Act and defendants 2, 3 and 4 are its partners, Defendant 5 is another partnership firm of which defendants 6 to 8 were its partners. The plaintiff claimed that defendant 5 entered into an agreement with the plaintiff for the sale of staple fibre yarn and synthetic blended yarn manufactured by the plaintiff. The agreement, entered into between the plaintiff and defendant 5 inter alia provided : (i) that the firm shall secure orders for the goods manufactured by the plaintiff; (ii) that the responsibility of the plaintiff shall cease as soon as the goods leave the premises of the plaintiff and thereafter they shall be at the risk and responsibility of the firm and the purchaser ; (iii) that the truck receipts along with the relevant documents were to be sent by the plaintiff to the firm on the purchasers as per instructions of the firm, through a Bank and if the documents are not retired on presentation, the firm shall pay immediately the cost of the goods and all expenses incurred by the plaintiff ; and (iv) that the firm shall be responsible in all respects and all the losses were to be made good by it and its partners." Defendant No. 2 on behalf of defendant No. 1 placed orders with the plaintiff at Naini through defendant No. 5 on 1.9.75 for supply of 11 cases of 50 Kgs. each of 2/32 S Polyster Viscose yarn at the rate of Rs. 50/- per Kg. and further 11 cases of 2/406 Polyster Viscose yarn at the rate of Rs. 73/- per kg. F.O.R. Bombay. That in pursuance of the order aforesaid, the plaintiff supplied goods. Upon the despatch of goods, the plaintiff sent bills and challans. Defendant No. 2 returned the documents from the Bank for and on behalf of defendant No. 1. But subsequently the defendants did not pay the same inspite of the demands. Hence, the suit was filed for the recovery of the amounts mentioned above.
(3.) After filing the suit, defendants 5 to 8 applied for stay under Section 34 relying upon the clause of agreement which contained an arbitration clause. The application was rejected. After perusal of the record, we find that no arbitration agreement exists between the plaintiff and defendants 1 to 4. Since defendants 1 to 4 are not party to the agreement which was entered into between the plaintiff and defendants 5 to 8, they are not bound by the arbitration clause. The suit was filed by the plaintiff for recovery of the amounts not only against defendants 5 to 8 but also defendants 1 to 4. In these circumstances there being no arbitration clause between the plaintiff and defendants l to 4, there was no question of staying the proceedings of the suit under Section 34. The application is liable to be rejected. It is true that under the agreement, the liability to pay the unpaid price of the goods was on the sale promoters i.e. defendants 5 to 8 still since the goods had been sold to defendants I to 4, the primary liability to pay its price was on them. As observed above, since they are not a party to the agreement containing the arbitration clause, their dispute with the plaintiff cannot be referred to the arbitration. Consequently, the learned Civil Judge was right in rejecting the application under Section 34. In the result, the appeal fails and is dismissed with costs. Appeal dismissed.;