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Case Number

Appeal From Order No. 128 of 1982

Advocates

S. N. Shelat with Kamal M. Mehta
P. M. Raval (for No. 1) and S. R. Shah
(for No. 2)

Judges

M.S Shah, J.

Acts

SECTION 3 FOREIGN AWARDS RECOGNITION AND ENFORCEMENT ACT 1961
ARBITRATION AND CONCILIATION ACT 1996
provisions of Section 3 of the Foreign Awards Act. Section 3 of the Foreign Awards Act
Section 34 of the Arbitration Act and under Section 3 of the Foreign Awards Act
Arbitration Act, 1940 or in the Code of Civil Procedure, 1908,
Arbitration Act, 1940 or the Code of Civil Procedure, 1908.
Arbitration Act, 1940 and the Foreign Awards Act
Sections 2 and 3 of the Foreign Awards Act
provisions of Section 45 of the New Act
SECTION 34 ARBITRATION ACT 1940
Section 3 of the Foreign Awards Act
25, 1996. Section 85 of the New Act

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

This appeal challenges the order dated 4 December 1981 of the learned Civil Judge (S.D.), Bhuj, rejecting defendant No. 1's application (Ex. 10) for stay of Special Civil Suit No. 36 of 1979 under Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 (the "Foreign Awards Act").

The plaintiff (Respondent No. 1) sued for damages of Rs. 5,17,232/-, alleging that it purchased 20,000 M. Tons of soybean oil from defendant No. 1 (the appellant) under a contract dated 17 August 1977 and that the cargo, shipped by defendant No. 2 on vessel M.T. Split, resulted in a net shortage of 97.783 M. Tons on arrival at Kandla. The suit was filed in the Court of the learned Civil Judge (S.D.), Kutch at Bhuj.

Defendant No. 1 applied under Section 3 of the Foreign Awards Act (Ex. 10) seeking a stay, relying on Clause 25 (the arbitration clause) in the contract. Defendant No. 2 also applied for a stay under Section 34 of the Arbitration Act, 1940 and Section 3 of the Foreign Awards Act, producing a letter from the plaintiff indicating that the plaintiff had referred its claim to arbitration in London.

The Trial Court rejected both applications on two grounds: (i) that the arbitration clause applied only if the oil was of non-USA origin and there was nothing on record to show the cargo was non-USA origin; and (ii) that defendant No. 2 was not a party to the sale contract between plaintiff and defendant No. 1, so the claim could not be split up for arbitration — the Trial Court relied on decisions of the Andhra Pradesh, Calcutta and Nagpur High Courts for that conclusion.

The present appeal was admitted in 1982, and this Court granted an ad-interim stay of the suit which remained in operation during the pendency of the appeal.

Legal Issues Presented

Whether the Trial Court erred in rejecting the stay application under Section 3 of the Foreign Awards Act when defendant No. 1 averred that the cargo was of non-USA origin and the plaintiff did not controvert that assertion.
Whether defendant No. 2, being a party to the Charter Party with defendant No. 1, was a "person claiming through or under" defendant No. 1 and therefore entitled to invoke Section 3 of the Foreign Awards Act to seek a stay.
Whether the fact that an applicant (defendant No. 1) included statements about surveyor evidence or otherwise addressed merits in its application disentitled the applicant from seeking a stay under Section 3.
Whether the Arbitration and Conciliation Act, 1996 (the "New Act") — specifically Section 45 — applied to the case and supported referral to arbitration, given repeal provisions in Section 85 and the pendency of proceedings.
Whether and to what extent the Court could or should direct the place of arbitration so as to avoid imposing excessive cost or inconvenience on the plaintiff.

Arguments of the Parties

Appellant (Defendant No. 1) — Principal Contentions

The cargo was loaded at a port in Brazil and defendant No. 1 specifically averred in Ex. 10 that the oil was of non-USA origin; the plaintiff did not deny that assertion, so the Trial Court was wrong to say there was nothing on record to show non-USA origin.
The principal sale contract between plaintiff and defendant No. 1 is distinct from the Charter Party between defendant Nos. 1 and 2; defendant No. 2 was agent of defendant No. 1 (as shown by the Charter Party) and accordingly both defendants could move under Section 3 of the Foreign Awards Act and there was no improper splitting of the claim.
Defendant No. 2's application showed that the plaintiff had itself referred the claim to arbitration (letter to J.M. Baxi & Co., Bombay), so the Trial Court should have stayed the suit.
Filing any reply on merits does not disentitle a defendant from seeking a stay; reliance was placed on Section 45 of the New Act to support referral to arbitration.

Respondent No. 1 (Plaintiff) — Principal Contentions

Loading of cargo at a Brazilian port does not conclusively show non-USA origin; cargo could have been of USA origin and transported to Brazil for loading, so there was no clear evidence of non-USA origin.
The arbitration clause relied upon applied only to the sale contract between plaintiff and defendant No. 1 — defendant No. 2 was not party to that contract — therefore the suit could validly proceed against defendant No. 2 and forcing arbitration on one defendant would improperly split the claim; the Trial Court was correct to refuse the stay.
There was nothing on record to show defendant No. 2 was an agent of defendant No. 1; even if a Charter Party existed between defendants, defendant No. 1 might have entered it on behalf of the plaintiff.
The appellant's application also contained a reply on the merits, which, the plaintiff argued, disentitled the defendants from seeking a stay.
Practical fairness: arbitration in London would impose costs potentially exceeding the plaintiff's claim of Rs. 5,17,232/-, so the Court should exercise discretion against staying the suit.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Renusagar Power Co. P. Ltd. v. General Electric Company, AIR 1985 SC 1156 (= 1984 Arb. LR 240)	Authority for the mandatory nature of Section 3 of the Foreign Awards Act: Section 3 contains a non-obstante clause, overrides the Arbitration Act, 1940 and the Code of Civil Procedure, 1908, and uses "shall" making stay obligatory when conditions are satisfied (unlike Section 34 of the Arbitration Act which is discretionary).	The Court relied on this Supreme Court authority to conclude that Section 3 is mandatory and that, where its conditions are met, the Court must stay legal proceedings. This supported setting aside the Trial Court's rejection of the stay application.
Decisions of the Andhra Pradesh, Calcutta and Nagpur High Courts (not specifically named)	Relied on by the Trial Court to support the proposition that the matter could not be split up for arbitration when all defendants are not party to the same arbitration agreement.	The appellate court noted the Trial Court relied on these decisions for its second ground but rejected that reasoning on the facts: the appellate court found the Charter Party showed defendant No. 2 acted as agent of defendant No. 1 and therefore was a party "claiming through or under" defendant No. 1 for the purposes of Section 3.

Court's Reasoning and Analysis

The Court examined each ground on which the Trial Court had rejected the stay applications and addressed additional statutory developments raised on appeal.

1. On the non-USA origin question:

The Trial Court treated defendant No. 1's averment that the oil was of non-USA origin as if it were denied by the plaintiff. The appellate court observed that the plaintiff had not controverted that specific assertion in Ex. 10.
Because the cargo was admittedly loaded at a port in Brazil, and since the plaintiff had not disputed the averment, the Trial Court should have proceeded on the footing that the cargo was of non-USA origin; therefore the Trial Court's first ground for rejection failed.

2. On splitting the claim and the status of defendant No. 2:

The Court acknowledged the general principle that where a suit is based on one cause of action against multiple defendants, the plaintiff should not be required to split claims for arbitration against one defendant and proceed in court against another.
However, the appellate court found as a matter of fact that the Charter Party dated 13-12-1977 between defendant Nos. 1 and 2 established that defendant No. 2 acted as agent of defendant No. 1 and accepted payment on its behalf. Therefore, defendant No. 2 was a "party claiming through or under" defendant No. 1.
Given the language of Section 3 of the Foreign Awards Act — which allows "any person claiming through or under" a party to an agreement covered by the Convention to seek a stay — defendant No. 2 was entitled to invoke Section 3. The Trial Court's second ground therefore failed.

3. On whether the application contained a merits reply that disentitled the defendants:

The Court reviewed the application and concluded that all the appellant had stated was that surveyor evidence, decisive on the subject, was located in Brazil and that the dispute should therefore be resolved by arbitrators in London. This did not amount to a reply on merits that would disentitle the applicant from seeking a stay.
The plaintiff had not raised this contention before the Trial Court, and the Trial Court had not rejected the application for that reason.

4. On the applicability of the Arbitration and Conciliation Act, 1996:

Counsel for the appellant argued that the New Act (in force from 25 January 1996) applied because arbitral proceedings had not commenced before its commencement; Section 85 repealed the Arbitration Act, 1940 and the Foreign Awards Act except for proceedings already commenced.
The Court considered Section 45 of the New Act, which requires a judicial authority seized of an action covered by an arbitration agreement to refer parties to arbitration at the request of a party or a person claiming through or under him, unless the agreement is null and void, inoperative or incapable of performance.
The appellate court held that, having regard to the language of Section 45 (consistent with the mandatory nature of Section 3), the present suit proceedings were required to be stayed because there was no pleading or material showing that the arbitration agreement was null, inoperative or incapable of performance.

5. On the place of arbitration and fairness considerations:

The Court noted that the appeal had been pending for many years and an interim stay had denied the plaintiff adjudication for about 15 years. It would be unfair to require the plaintiff to incur the likely heavy expense of attending arbitration in London.
Considering convenience and fairness (defendants already had agents and counsel near Kandla/Bhuj/Ahmedabad), the Court directed that arbitration proceedings take place at Kandla or Bhuj or Ahmedabad, or at any other place in India agreed by the parties.

6. Directions and procedural timetable:

The appellate court set aside the Trial Court's order and stayed the suit pending arbitration, gave detailed directions for appointment of arbitrators and strict time limits for entering upon reference and for submission of the award, and provided that if defendants failed to communicate the names of the arbitrators within six weeks the stay would be vacated and the plaintiff could proceed with the suit.

Holding and Implications

Core Holding: The appeal is allowed — the order of the Trial Court is set aside and the proceedings of Special Civil Suit No. 36 of 1979 are stayed pending decision of the disputes by arbitration.

Direct implications and consequences for the parties (as directed by the Court):

The parties are directed to take steps to refer the dispute to arbitration. Arbitration shall take place at Kandla or Bhuj or Ahmedabad, or at another place in India if the parties mutually agree.
Defendants must, within six weeks, communicate to the plaintiff the name(s) of arbitrators to be appointed by the defendants. If the plaintiff agrees, the arbitrator(s) shall enter upon reference within two months and submit an award within three months of entering upon reference.
If there is any difference between the parties, the plaintiff may appoint its own arbitrator within one month of receiving the defendants' request; once appointed, the arbitrators shall enter upon reference within one month and submit their award within three months of entering upon reference.
If defendants fail to communicate the names of arbitrators within the time limit, the stay will stand vacated and the plaintiff shall be entitled to proceed with the suit which the Trial Court shall decide in accordance with law.
The appeal is allowed in the terms above with no order as to costs.

Broader implication: The Court applied the mandatory statutory framework embodied in Section 3 of the Foreign Awards Act (and considered analogous mandatory language in Section 45 of the Arbitration and Conciliation Act, 1996) to require a stay where the statutory conditions are satisfied. The opinion does not purport to lay down a novel precedent beyond the application of existing statutory provisions and the cited Supreme Court authority (Renusagar).

Disposition: Appeal allowed. (No costs ordered.)

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Societe Commercial De Coreales And Financiers v. State Trading Corpn. Of India, New Delhi And Another

1. This appeal is directed against the order dated December 4, 1981 passed by the learned Civil Judge (S.D.), Bhuj, below application Ex. 10 in Special Civil Suit No. 36 of 1979 rejecting the prayer of defendant No. 1 to stay the suit under the provisions of Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 (hereinafter referred to as 'Foreign Awards Act').

2. Respondent No. 1 (hereinafter called 'the plaintiff') filed the present civil suit for recovering damages for a sum of Rs. 5,17,232/- contending that the plaintiff had purchased 20,000 M. Tons of Soyabean Oil from defendant No. 1 (the appellant herein) and that the said cargo was shipped by defendant No. 1 through Vessel 'M.T. Split' belonging to defendant No. 2. The said shipment was make pursuant to the contract dated August 17, 1977 between the plaintiff and defendant No. 1. The cargo arrived at Kandla on February 27, 1978 but the total quantity of cargo actually discharged, according to the plaintiff, came only to 19877.376 M. Tons. According to Survey record, natural loss would come to about 24.841 M. Tons. Therefore, the plaintiff claimed damages for the net shortage of 97.783 M. Tons of Soyabean Oil. The amount of damages was quantified as mentioned above and the plaintiff filed the present suit against the defendants in the Court of learned Civil Judge (S.D.), Kutch at Bhuj.

3. Defendant No. 1 (the appellant herein) submitted application Ex. 10 under Section 3 of the Foreign Awards Act, relying on Clause 25 (i.e., the Arbitration Clause) in the contract entered into between the parties and prayed for stay of the suit proceedings.

4. Defendant No. 2 also submitted an application for stay of the suit under Section 34 of the Arbitration Act and under Section 3 of the Foreign Awards Act pointing out that the Charter Party entered into between the parties provide for resolution of disputes through arbitration and the plaintiff itself had written a letter to M/s. J.M. Baxi & Co. Bombay dated 7th March stating that they had referred their claim for short delivery of 96.783 M. Tons of cargo in terms of chapter party to arbitration at London and have nominated Mr. Ralphlewzis, Manager, Berisform Commodities Ltd., 50 Mark lane, London EC 3 as their arbitrator. A photocopy of the said letter was also produced by defendant No. 2 along with the application. Defendant No. 2 therefore, submitted that since the plaintiff itself had taken recourse to arbitration proceedings, the Civil Court at Bhuj may not proceed with the present suit and the suit proceedings may be stayed.

5. The Trial Court rejected both the applications on the following grounds :

(i) The arbitration Clause in the contract would be applicable only if the oil is of non-USA Origin but there is nothing an record to show that the suit cargo was of non-USA Origin.

(ii) Only the plaintiff and defendant No. 1 were parties to the suit contract under which defendant No. 1 had sold the suit cargo, but defendant No. 2 was not a party to the contract and, therefore, the matter cannot be split up for referring the matter to arbitration. For this purpose reliance was placed by the Trial Court on decisions of the Andhra Pradesh, Calcutta and Nagpur High Courts.

The present appeal is directed against the aforesaid order of the Trial Court.

6. While admitting the appeal in 1982 this Court had granted ad-interim stay of the suit proceedings and the said stay has continued to operate since then.

7. At the hearing of the appeal, learned Counsel for the appellant (defendant No. 1), has made the following submissions to assail the order of the Trial Court :

(i) The cargo in question, that is, Soyabean Oil, was loaded at a Port in Brazil and the appellant/defendant No. 1 had made a specific averment in the application Ex. 10 that the Oil was on non-USA origin. There was no denial by the plaintiff of the aforesaid specific assertion made by defendant No. 1 and, therefore, the Trial Court erred in observing that there is nothing on record to show that the suit cargo was of non-USA origin.

(ii) The contract between the plaintiff and defendant No. 1 was the main contract on the basis of which the present suit was filed. The Charter Party agreement was between defendant No. 1 and defendant No. 2 which would show that defendant No. 2, the shipper was agent of defendant No. 1 and, therefore, it was open to both the defendants to apply for stay of proceedings under Section 3 of the Foreign Awards Act. Hence, there was no question of splitting up the claim as held by the Trial Court.

(iii) The application submitted by defendant No. 2 stated that the plaintiff itself had referred its claim to arbitration and, therefore, the Trial Court ought not to have rejected the application given by the defendants for staying the suit.

8. On the other hand, Mr. P. M. Raval, learned Counsel for the respondent No. 1 (original plaintiff) has submitted as under :

(i) Merely because the cargo was loaded at the Port of Brazil does not mean that the cargo of non-USA origin. It might be that the cargo might have been of USA origin and taken to Brazil and then loaded into the vessel in question from the port in Brazil. It is therefore submitted that there was no clear evidence to show that the cargo was of non-USA origin.

(ii) The arbitration clause relied upon by the appellant (defendant No. 1) was for the contract between the plaintiff and defendant No. 1 to which defendant No. 2 was not a party and therefore, the suit was not required to be stayed because the suit could go on against the defendant No. 2 and such eventuality would amount to splitting up of claim and therefore, the Trial Court was justified in rejecting the application filed by respondent No. 1 for stay of the proceedings.

As far as the claim against defendant No. 2 is concerned, it is not against No. 2 in its capacity as the alleged agent of defendant No. 1 because there is nothing on record to show that defendant No. 2 was agent of defendant No. 1. Even if the Charter Party Agreement was entered into by defendant Nos. 1 and 2, defendant No. 1 might have done so on behalf of the plaintiff.

(iii) The application filed by the appellant before the Trial Court for stay of the proceedings also contained appellant's reply on merits of the dispute and therefore also, the suit proceedings are not required to be stayed.

(iv) In any view of the matter, the Court should exercise its discretion in not staying the suit proceedings because the suit claim is hardly for an amount of Rs. 5,17,232/- with interest and that if the plaintiff-Corporation is driven to arbitration, which may take place at London, the costs which the plaintiff-Corporation would have to incur may even exceed the plaintiff's claim.

As far as the first contention raised by the learned Counsel for the appellant is concerned, the Trial Court appears to have proceeded on the footing as if the assertion made by defendant No. 1 that the Oil was of non-USA origin was denied by the plaintiff. The question of leading any evidence by defendant No. 1 in support of the aforesaid assertion would have arisen only if the plaintiff had denied such an assertion. Since the plaintiff had not controverted the specific assertion made by defendant No. 1, the Trial Court should have proceeded on the footing that the cargo in question was of non-USA origin especially in view of the fact that the cargo was admittedly loaded at a Port in Brazil and not at any Port in the USA. The first ground given by the Trial Court for rejecting the application, therefore, cannot be upheld.

9. The second ground which appealed to the Trial Court also does not appear to be well founded. It is true that in a suit based on one cause of action, if there are two defendants in the suit, the Court cannot require the plaintiff to split up a part of the claim for referring the matter to arbitration in respect of one defendant and proceed with the other part of the suit against the other defendant. However, in the instant case, the question of splitting would not arise because admittedly the Charter Party agreement for shipping of the cargo was executed on 13-12-1977 between defendant No. 1 and defendant No. 2 for carrying the cargo of Soyabean Oil from Brazil to India. It is thus clear that defendant No. 2 was acting as an agent of defendant No. 1 and, therefore, defendant No. 2 had accepted the purchase price of the cargo in question on behalf of defendant No. 1. Under these circumstances, a bare reading of Section 3 of the Foreign Awards Act clearly shows that not only the party to the arbitration agreement but also a party claiming through a party to the arbitration agreement would be entitled to invoke provisions of Section 3 of the Foreign Awards Act. Section 3 of the Foreign Awards Act reads as under :

"3. Notwithstanding anything contained in the Arbitration Act, 1940 or in the Code of Civil Procedure, 1908, if any party to an agreement to which article ii of the convention setforth 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 arbitration agreement or any person claiming through or under him in respect of any matter agreed to be referred to arbitration in such agreement, 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."

In view of the above it must be held that defendant No. 2 was a party claiming through or under defendant No. 1 in respect of the subject-matter of the suit and also in respect of the subject matter of the dispute in question which is sought to be referred to arbitration and, therefore, defendant No. 2 was also entitled to apply to the Court to stay the suit proceedings. The second ground which appealed to the Trial Court must also, therefore, fail.

10. As regards Mr. Raval's contention that the application of defendant No. 1 contained a reply merits of the dispute, it is required to be noted all that the appellant had stated in the said application was that looking to the subject matter of controversy between the parties, the evidence of surveyors was decisive and the same was available at Brazil and therefore, the dispute should be resolved by arbitrators at London. Hence, the application in question cannot be said to contain any reply on merits of the dispute between the parties.

The plaintiff had also not raised any such contention before the Trial Court and the Trial Court has also not rejected the application on any such ground.

11. On the aforesaid question, the learned Counsel for the appellant has further submitted that during pendency of this appeal", the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the New Act') have come into force with effect from January 25, 1996. Section 85 of the New Act provides for repeal of the Arbitration Act, 1940 and the Foreign Awards Act except in respect of arbitral proceedings which had already commenced. In the instant case, the arbitral proceedings had not commenced on the date of commencement of the New Act. Appeal is a continuation of the original proceedings. Moreover, the suit is still pending and, therefore, since the issue is not concluded till now, the provisions of the new act would apply.

The learned Counsel has, therefore, placed reliance on the provisions of Section 45 of the New Act which read as under :

"45. Power of judicial authority to refer parties to arbitration. - Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that said agreement is null and void, inoperative or incapable of being performed."

It is submitted on behalf of the appellant without prejudice to their contention that no reply was filed on merits, that filing of reply on merits does not disentitle the defendant from praying for stay of suit.

In my view there is great force and substance in the submission of the learned Counsel for the appellant. In view of the language of the aforesaid provisions of section 45 also, the proceedings of the present suit are required to be stayed as there is neither any pleading, much less any material on record, to show that the arbitration agreement is null and void, inoperative or incapable of being performed.

12. At this stage it is also required to be noted that language of Section 34 of the Arbitration Act, 1940 conferred discretion on the Trial Court to stay or not to stay suit proceedings but the language of Section 3 of the Foreign Awards Act was mandatory as held by the Supreme Court in the case of Renusagar Power Co. P. Ltd. v. General Electric Company (AIR 1985 SC 1156 = 1984 Arb. LR 240). In the said decision, the Supreme Court has observed as under :

"Section 3 opens with a non-obstante Clause giving overriding effect to the provisions contained therein and making it prevail over anything to the contrary contained in the Arbitration Act, 1940 or the Code of Civil Procedure, 1908. Secondly, unlike Section 34 of the Arbitration Act which confers a discretion upon the Court, the Section uses the mandatory expression "shall" and makes it obligatory upon the Court to pass the order staying the legal proceedings commenced by a party to the agreement if the conditions specified therein are fulfilled."

In application Ex. 10, defendant No. 1 had categorically made an averment that defendant No. 2 is a company incorporated under the appropriate laws of Switzerland and the Government of India has, by notification published in the Official Gazette, declared that the convention referred to in Sections 2 and 3 of the Foreign Awards Act applied to Switzerland. There is no dispute on this aspect of the matter even at the hearing of the appeal.

13. In view of the aforesaid discussion, there is no doubt that the disputes which are subject matter of the suit are covered by the arbitration Clause and as per the said arbitration agreement, the disputes are required to be referred to provisions to arbitration and the aforesaid mandatory statutory provisions must be given effect to.

14. It however, appears that the last submission urged by Mr. Raval is relevant. While the plaintiff may be required to prove its claim before the arbitrators, the question is whether the Court should impose any condition about the place of arbitration. Whether arbitration proceedings shall be held at Kandla where the cargo was delivered or at any other place. Mr. Shelat, for the appellant was, however, not very sure whether it would be open to this Court to impose such a condition.

At this stage, it should be noted that on account of pendency of this appeal of defendant No. 1 and the interim stay granted by this Court which has operated for the last 15 years, the plaintiff has been denied adjudication of his claim all these years. If this appeal were to be dismissed, the Trial Court at Kandla could have been directed to decide the suit within some stipulated time limit of a couple of months. The fundamental object of parties agreeing to arbitration and the Court compelling them to abide by such agreement is to save time as well as expenses of litigation. The plaintiff has already lost the advantage of time factor on account of the present appeal and interim stay for 15 years. It would, therefore, be quite unfair and unjust to require to the plaintiff to incur heavy expenses of attending arbitration proceedings at London or in any other foreign country. As far as the defendants are concerned, they already have their agents at Kandla and have also engaged lawyer(s) at Bhuj which is very close to Kandla and at Ahmedabad for this appeal. It is therefore, directed that the arbitration proceedings shall take place at Kandla or Bhuj or Ahmedabad. If for, any reason, both the parties find it more convenient to have the arbitration proceedings at any other place in India, the parties may do so.

15. In the result the order of the Trial Court is hereby set aside and the proceedings of Special Civil Suit No. 36 of 1979 are stayed pending the decision of the disputes by arbitration. The parties are directed to take appropriate steps for referring the dispute to arbitration which shall take place at Kandla or Bhuj or Ahmedabad. If for, any reason, both the parties find it more convenient to have the arbitration at any other place in India, they may do so.

16. The defendants in the suit shall within six weeks from today communicate to the plaintiff the name(s) of the arbitrators to be appointed by the defendants. If the plaintiff agrees with the said request, the arbitrator so selected by the parties shall enter upon reference within two months from today and submit their award within three months from the date of entering upon reference.

If there is any difference between the parties, the plaintiff will be entitled to appoint its own arbitrator within one month from the date of receipt of the request from defendants and thereafter the arbitrators appointed by the parties shall enter upon reference within one month from the date of appointment of arbitrator by the plaintiff and submit their award within three months from the date of entering upon reference.

In case the defendants do not communicate to the plaintiff the names of the arbitrators to be appointed by them within the aforesaid time limit, stay granted hereinabove shall stand vacated and respondent No. 1 plaintiff shall be entitled to proceed with the suit and the Trial Court shall decide the same in accordance with law.

17. The aforesaid directions are required to be given in view of the fact that the plaintiff's claim is pending since 1979.

18. The appeal is accordingly allowed in terms of the aforesaid directions with no order as to costs.

Appeal allowed.

Societe Commercial D... v. State Trading Corpn....