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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

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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

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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

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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

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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

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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

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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

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             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

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"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

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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

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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

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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

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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

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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

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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

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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.

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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

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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

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             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

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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

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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

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             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

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             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

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             -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

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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

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             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

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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

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             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

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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.

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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