1. This is a notice of motion taken out by the defendants to stay this suit pursuant to Section 34 of the Arbitration Act, 1940. Several points were raised by the plaintiffs in the affidavit of Tribhowandas Valjee Mehta, a munim of the plaintiffs, in their affidavit in reply dated 17th June, 1942, but Mr. Desai for the plaintiffs has relied only upon two points, (1) that there is no binding agreement to refer, and (2) that the defendants were not ready and willing at the date of the filing of the suit to refer the matters to arbitration. In para. 2 of the plaint it is alleged that on 20th November, 1940 the plaintiffs placed an offer with the defendants for the purchase of 12 tons of galvanised plain iron sheets of the size and price therein mentioned C.I.F Bombay, shipment January and/or February at sellers' option subject to sellers' ability to obtain steamer space, the country of origin being America. The terms and conditions of the offer were set out on the back of the indent and they are to be found in Ex. A to the affidavit of Naranji Liladhar Kara, a partner in the defendant firm dated 7th May, 1942. In para. 4 of the plaint it is alleged that the defendants accepted the offer and in para. 5 the plaintiffs alleged that on receipt of that letter there was a concluded contract.
2. Thereafter difficulties are alleged by the defendants to have arisen in connexion with the shipment of the goods from America. The correspondence relating thereto is set out in Ex. C to the plaint beginning with a letter dated 4th December, 1940 and ending with a letter dated 28th January, 1941. The substance of that correspondence is this, that unless the plaintiffs intimated to the defendants their willingness to extend the time for shipment the defendants would treat the order as cancelled. Thereafter, nothing ap pears to have been done until December 1941 when correspondence started between the respective attorneys which is set out in Ex. D to the plaint. By a letter of 4th December, 1941 the plaintiffs' attorneys called upon the defendants to inform them whether the goods sold had been shipped and when they were expected to arrive, so that their clients might pay the price of the goods against the documents. In the defendants' solicitors' letter of 16th December, 1941 it is expressly stated that the defendants had accepted the order. The request for extension of time to which I have already referred is then set out and it is stated that by their letter of 24th January, 1941 the defendants informed the plaintiffs that they were constrained to consider the order as cancelled. Further correspondence took place and the plaintiffs' attorneys threatened legal proceedings. In a letter from the defendants' attorneys dated 7th January, 1942 they state that if any proceedings should be taken against the defendants the defendants would defend those proceedings.
3. The suit was filed on 27th March, 1942. The writ of summons was served on the defendants on 9th April. Then by their attorneys' letter of 14th April, 1942 which is exhibited to the affidavit of Naranji Liladhar, the arbitration clause, to which I shall presently refer, is set out and it is alleged that the defendants have been and are ready and willing to refer the dispute to arbitration, and the plaintiffs are called upon to submit the matter to arbitration. The plaintiffs' attorneys by their letter in reply dated 15th April, 1942 part of Ex. B of the same affidavit, alleged that the defendants were not entitled to have the suit stayed under S. 34, a notice of motion in this behalf having been threatened in the letter of 14th April if arbitration were not agreed to. This motion was registered on 13th May. The plaintiffs had taken out a summons for directions in this matter, but the defendants did not appear on the hearing thereof, and an order for a transfer to the commercial cause was made on 16th April, 1942, and directions were given. That order was served upon the defendants on 7th May, 1942. It is plain that the defendants have not taken any steps in the action which have precluded them from asking for a stay. I come now to the first point raised by Mr. Desai, viz., as to whether there is or is not a binding agreement to refer. That depends upon the meaning to be attributed to the first part of condition 14 of the terms and conditions in the contract. The material words are as follows:
Any complaint, claim, dispute, doubt or question (not otherwise settled by mutual consent) arising out of this indent, may at the instance of either party hereto be referred to arbitration to two European merchants with power, in the event of disagreement, to appoint an umpire.
4. Mr. Desai contends that merely gives an option to either party to refer to arbitration without involving any obligation upon the other to go to arbitration. I do not agree with this contention. The words in question appear to me to amount to an agreement between the parties that if either of them desire that any dispute arising out of the indent should be submitted to arbitration, it will be submitted to arbitration. If this be not the proper construction to put upon the words, the option given to either party appears to me to be absolutely nugatory. Mr. Desai referred me to (1919) 1 K.B 5931, and to the opening words of condition 11 of the Insurance Policy, which is set out at the bottom of p. 695. The material words are as follows:
If any question shall arise touching this policy or the liability of the company thereunder or the extent or nature of such liability or otherwise howsoever in connexion herewith then the assured and all persons claiming through the assured may refer and shall be bound if the company shall so require to refer the same to arbitration.
5. Mr. Desai submitted that on the true construction of those words the company were entitled to insist upon arbitration, but though the assured had an option to go to arbitration the company were not bound to agree to the exercise of that option if it were exercised by the assured. I am quite unable to accede to this argument. If it be sound the option given to the assured in that case would be nugatory. Similarly in the case before me if Mr. Desai's argument is sound, if either party desires to exercise the option, which the parties have agreed that both shall have, that must be treated as valueless and useless. I hold that is a binding agreement to refer to arbitration. I come now to the next point argued by Mr. Desai, viz., that the defendants were not ready and willing at the date of the filing of the suit to submit the disputes to arbitration. This is not a case in which the defendants had ever denied the factum of the contract. In the letter of 16th December, 1941, from the defendants' attorneys, to which I have already referred, they expressly admitted that they had accepted the order. The attitude taken up by the defendants has been that while admitting that a binding contract had been concluded, they had, in the event which, supervened, become entitled to cancel it. That is a dispute which arises out of an admitted contract and depends upon the evidence adduced in relation to it. Therefore, any argument based upon the denial of the existence of the contract cannot in my opinion hold water.
6. Next Mr. Desai argued that because the defendants were taking up the attitude that they had the right to cancel the contract they could not take advantage of the arbitration clause contained in it if the plaintiffs insisted upon holding them liable under the Contract. I do not agree. There was no obligation upon the defendants to claim arbitration before the plaintiffs filed this suit. The plaintiffs did not, as they might have done, ask the defendants whether they desired to go to arbitration before filing this suit. They filed the suit notwithstanding the arbitration clause which I hold to be binding upon them. Mr. Daphtary for the defendants referred me to 47 Mad. 1642 where the Appeal Court held that the mere fact that the defendant, who was threatened with legal proceedings for breach of a contract containing an arbitration clause, did not, before the institution of the suit, insist on the arbitration clause, but relied on it for the first time after the suit was filed, was no ground for not granting his application for stay of proceedings under the Arbitration Act. With respect I agree with the reasoning of that decision.
7. I see no reason whatever why this suit should not be stayed. The nature of the dispute between the parties appears to me to be eminently suitable for determination by commercial arbitrators, and seeing that the parties have, by an arbitration agreement, which I hold to be binding upon them, agreed, to submit any dispute arising out of the contract to arbitration, I think, I ought to give effect to that agreement. Consequently, I stay this suit.
8. The plaintiffs must pay the costs of this notice of motion. When this matter was before me on 30th June and I gave the defendants leave at their own costs to amend the notice of motion, I stated that the plaintiffs were to have the costs of the adjournment and that I should quantify those costs when the motion came on again before me. I quantify the costs which the plaintiffs are to have as the costs of the adjournment at Rs. 60. The costs which they would ordinarily have to pay to the defendants on this motion, the plaintiffs having failed, would be Rs. 175, but as the defendants, on the quantification which I have now made, will have to pay Rs. 60 to the plaintiffs, treating the costs as set off, the order which I make is that the plaintiffs should pay to the defendants Rs. 115 on this notice of motion.
G.N/V.S
9. Suit stayed.