SINHA, C.J. - (1.) THIS is an appeal against an order passed by Sen, J. refusing to stay a suit under the provisions of Section 34 of the Indian Arbitration Act, 1940 (hereinafter referred to as "the said Act"). The suit concerned is suit No.2306 of 1966 (P. N. Djakarta Lloyd v. Asiatic Shipping Co. Private Ltd.). In that suit, which was filed in this Court on or about 21st November, 1966, the brief allegations in the plaint are as follows: It is stated that the plaintiff was the owner of a vessel, namely, S. S. Capella and that by a charter party dated October 28, 1963 made between the plaintiff and the defendant No.1, the Asiatic Shipping Co. Private Ltd., the appellant before us, it was agreed, inter alia, that the said vessel then in the Bay of Bengal would proceed to the port of Calcutta and the defendant No.1 as the charterer would load goods and cargo therein and would proceed to Djakarta and Surabaya in Indonesia and deliver the cargo, on being paid "16,000 as freight. It is further alleged that the defendant No.2, Associated Commercial Co. of India Private Ltd. in consideration of the plaintiff entering into the charter party, guaranteed the payment of "16,000 to the plaintiff. It is further alleged that the said vessel reached the port of Djakarta and duly delivered the cargo but the defendant No.1 failed and neglected to pay the said "16,000 or any part thereof and the guarantor also has failed to make any payment. The charter party is admitted and it is also admitted that in the charter party there is an arbitration clause which runs as follows: Any dispute arising under this Charter Party is to be referred to arbitration in London, one Arbitrator to be employed by the Charterers and the other by the owners, and in case the Arbitrators shall not agree, then to the decision of an Umpire to be appointed by them. The Award of the Arbitrators or the Umpire to be final and binding on both parties. The Arbitrators including the Umpire to be commercial men."
(2.) THE appellant made an application in the Court below on the 2nd February, 1967 asking for stay of proceedings under Section 34 of the said Act. THE learned Judge, by his order dated July 7, 1967 has refused to grant a stay. THE ground upon which the stay was refused is as follows: THE learned Judge has noticed that in the suit the claim is not only against the principal debtor but also against guarantor. Admittedly, there is no arbitration agreement with regard to the guarantor. THErefore, the suit will have to be decided as against defendant No.2. THE learned Judge has rightly observed that a decision upon the liability of a guarantor necessarily involves the determination of the question as to whether the principal debtor was liable, for if the principal debtor was not liable no liability cold be attributed to the guarantor. Now, the principal debtor wants to go to arbitration in London. Apart from the fact that nothing whatsoever has happened in London but everything happened in India and the Far East, the Learned Judge has expressed an apprehension that the same issue as regard the liability of the principal debtor will have to be gone into, both in the suit and in the arbitration proceedings and there was every likelihood of conflicting findings. THErefore, by using his discretion he has held that he is not inclined to exercise his discretion in this case and on the facts of the instant case refused to stay the suit. THE application was accordingly dismissed. As soon as the judgment was delivered, the learned Counsel for the appellant made a prayer for filing a written statement. This appears from the judgment itself and is as follows: "Mr. Chaudhuri submits that in view of the pendency of this application his client has not filed any written statement and he wants three weeks' time to file written statement. Mr. Chaudhuri's client will have three weeks' time to file the written statement". The learned Judge thereafter gave directions for expeditious hearing, for discovery and inspection and further directed that the suit should appear in the prospective list eight weeks from the date of the order. He further gave liberty to the parties to apply for an early hearing.
(3.) MR. Banerjee, appearing on behalf of the respondent, took a preliminary point that the appellant has already taken a step in the proceeding" and consequently is not entitled to a stay. I shall deal with this point presently but will go into the merits of the case first, because we are against the appellant on merits. I do not think that it can be seriously disputed at this point of time that Section 34 is not an absolute bar on the Court in continuing the suit. In other words, an arbitration agreement is not an absolute bar to the jurisdiction of the Court to hear a suit. The position, however, has been succinctly stated in a Supreme Court decision, Printers (Mysore) Private Ltd. v. Pothan Joseph, AIR 1960 SC 1156. It has been pointed out that an arbitration agreement does not affect the jurisdiction of the Court, but where parties have entered into an agreement for arbitration, normally the Court would decide the rights of the parties according to their agreement. But the Court has always a discretion to grant the stay or not and this discretion, of course, should be exercised judicially. In our opinion, in the facts and circumstances of this case, the discretion has been exercised judicially and we agree with the reasonings given by the learned Judge in not granting the stay. I have stated above the reasoning of the learned Judge and it is not necessary to repeat it. MR. Chaudhuri, appearing on behalf of the appellant, has taken two other points before us. He argued that the defendant No.2 was not a guarantor and there is no evidence to establish the guarantee. That being so, the facts taken into account by the learned Judge were non-existent. The short answer to this is that in an application under Section 34, the Court cannot go into the merits of the case and decide the rights of the parties, particularly to the arbitration agreement. See Gaya Electric Supply Co. Ltd. v. State of Bihar, AIR 1953 SC 182. It is also pertinent to observe that this point was never taken in the petition at all. It is impossible, to deal with it when it states an important point going to the root of the case, and was not taken in the petition so that the other side has not been able to answer the same. The next point was not the constituent attorney so far as the filing of the plaint is concerned because the power of attorney did not give him the power. Again this is a point that has not been taken in the petition and in any event, I cannot understand this point being raised in this application, because if the plaint is defective and suit is non-existent, the question of stay does not arise. In that case an appropriate application may be made. In our opinion, these contentions by the appellant are of no substance and cannot be allowed.;