1. This application has been made under Section 34 of the Arbitration Act by the petitioner for the stay of the suit No. 448 of 1969 and all proceedings relating thereto and arising therefrom. The facts leading to the making of this application are stated hereunder.

2. By exchange of a Bought Note and a corresponding sold note both bearing No. RJ-50521 dated March 16. 1968, through the broker R. L. Saraf and Co.. the petitioner sold to the respondent and the respondent bought from the petitioner 600 Maunds (equivalent to 22394 Kgs.) Agartala Mesta Fibre at the rate of Rs. 38.50 P. per Maund working out at Rs. 103.15 P. per quintal delivery on 31st March, 1968, at the buyers mill siding. The detailed terms and conditions of the said transaction would appear from a copy of the Sold Note annexed as Annexure B to the petition filed herein.

3. The said contract between the parties was subject to the terms and conditions of the East India Jute and Hassian Exchange Association Ltd. relating to contracts for raw jute. All the terms and conditions of the transferable specific delivery contract for raw jute of the East India Jute and Hessian Exchange Association Ltd., Calcutta, were expressly made applicable to the said contract. The Arbitrator named in the said contract was Bengal Chamber of Commerce and Industry.

4. The relevant bye-law of the said Association containing the said arbitration clause contained in Rule 17 of Chapter IX applicable to the contract in the instant case provides as follows, to wit :-

"17. All matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection with and/or in consequence of or relating to this contract including matters relating to insurance and demurrage whether or not the obligations of either or both parties under this contract be subsisting at the time of such dispute and whether or not this contract has been terminated or purported to be terminated or completed shall be referred to the arbitration in accordance with the provisions for reference to arbitration contained in these bye-laws ..... "

5. Pursuant to the said contract the petitioner delivered certain quantities of goods to the respondent and submitted bills for an aggregate sum of Rs. 20,319.37p. on account of price thereof through the brokers to the respondent.

6. On June 6, 1968, the petitioner demanded payment of the aforesaid price. The contract provided payment of the price against presentation of the shipping documents and insurance cover.

7. Between June 6 and August 29, 1968, the petitioner on many occasions demanded payment of the price from the respondent through the broker. The respondent also claimed abatement in price to the extent of an aggregate sum of Rs. 612,96 P. on account of shortage in weight and undercharges and submitted bills in respect thereof to the petitioner. Correspondence passed between the seller, the broker and the buyer between June and October, 1968, with regard to the claim of the seller for the aforesaid price.

8. On September 6, 1968, the petitioner wrote to the Forward Market Commission, constituted under Forward Contract Regulations Act, complaining about non-payment of the aforesaid price by the respondent. By the said letter the petitioner requested the said Commission to direct respondent to make payment.

9. By letter dated September 18, 1968, written to the said Commission, the petitioner enquired of the said Commission as to whether the said Commission intended to intervene in the matter and if it did not intend to intervene, it must say so.

10. By letter dated September 27, 1968, the petitioner demanded payment once again by the respondent within three days and informed the respondent that otherwise it would go to arbitration.

11. On or about October 7, 1968, the petitioner referred its claim for the aforesaid price to the arbitration of the Bengal Chamber of Commerce and Industry in accordance with the arbitration agreement contained and/or made part of the said contract. The Bengal Chamber of Commerce and Industry informed the respondent of the aforesaid reference.

12. On October 28, 1968, the respondent asked for a fortnights time from the arbitrator to file its statement. On October 29, 1968, the Bengal Chamber of Commerce and Industry informed the respondent that time had been granted to it until 9th November, 1968. On November 7, 1968, the respondent again asked for a further fortnights time to file its statement. The Bengal Chamber of Commerce and Industry granted time until 19th of November, 1968. On November 4, 1968 the respondent once more asked for a further fortnights time to file its statement. The Bengal Chamber of Commerce and Industry informed the respondent that if its statement was received by the Chamber before 4-12-1968, it would be considered by the Arbitrator and refused to grant further time. On 4-12-1968 the respondent filed its statement of facts to the claim of the petitioner. The respondent on the said date asked for inspection of the contract. The petitioner offered inspection of the contract which fact was intimated to the respondent by the Bengal Chamber of Commerce and Industry.

13. On December 16, 1968, the petitioner filed its comments on the statement filed by the respondent. On December 26, 1968, the respondent asked for time to file its rejoinder to the aforesaid comments of the petitioner. Such time was granted until January 10, 1969, On January 10, 1969 the respondents Solicitor wrote to the Bengal Chamber of Commerce and Industry asking for further three weeks time to file its rejoinder. Such time was granted until January 21, 1969, on which date the respondents solicitor again prayed for a further fortnights time to file the rejoinder. On January 21, 1969 the Bengal Chamber of Commerce and Industry informed the said solicitor that the rejoinder would be considered by the Arbitrator if it was filed by February 3, 1969. The date for holding the arbitration was fixed on 6th February 1969, and then again to February 14, 1969.

14. On February 10, 1969, the respondents solicitor informed the Bengal Chamber of Commerce and Industry that the respondent had filed a suit upon the whole of the subject-matter of the reference and served a notice under Section 35 of the Indian Arbitration Act. Thereupon the reference was held in abeyance by the arbitrator.

15. Although the petitioners solicitor B. M. Bagaria wrote to the Solicitor of the respondent to supply them with a copy of the plaint it was not supplied until March 15, 1969, notwithstanding several reminders.

16. The present application was made on April 29, 1969. The suit has been filed by the respondent against the petitioner and the said broker R. L. Saraf and Co. for inter alia declaration that the defendant No. 1 i. e. the petitioner has no claim against the plaintiff i. e. the respondent under or in respect of the said contract being contract No. RJ-50521 dated March 16, 1968, or in respect of the aforesaid bills submitted by the defendant No. 2, the broker R. L. Saraf and Co. to the plaintiff i. e. the respondent for the price of the goods sold and delivered by the petitioner to the respondent under the said contract. The respondent has claimed in the said plaint also, cancellation and delivery of the said contract and the said bills and a declaration that the defendant No. 2, i. e. the Broker has no claim against the respondent under the said contract or bills although the respondent admits in the plaint that the defendant No. 2 was a mere broker in respect of the said contract. The respondent has also claimed in the plaint a decree for Rs. 50,000/- as damages for alleged libel published by the defendants i. e. the petitioner as well as the broker concerning the respondent in the way of his business by writing or causing to be written falsely and maliciously the aforesaid two letters dated September 6, 1968, and September 18, 1968, to the Officer Incharge, Regional Office, of the Forward Market Commission and one letter dated 22nd October, 1968, written to the Secretary, East India Jute and Hessian Exchange Association Ltd. A plea of novation has been pleaded in paragraph 8 of the plaint. The said plea is to the following effect :

Sometime prior to October 15, 1968, It was agreed by the defendant No. 2 i. e. the respondent No. 2 (R. L. Saraf and Co., the Broker) for self and on behalf of the defendant No. 1 i. e. the petitioner that the dues of the petitioner for the price of the said goods less the sum due to the respondent for short weight and under charges as well as on account of inferior quality of the said goods would be paid by the defendant No. 2 i. e. the broker to the defendant No. 1 i. e. the petitioner out of the sum due by the defendant No. 2 i. e. the broker to the respondent.

Thus there was in fact or in law no money due by the plaintiff i.e. the respondent to the defendant No. 1 or the petitioner under the said contract.

17. Mr. Bhabra appearing on behalf of the petitioner submitted that the entirety of the suit should be stayed. Mr. Bhabra relied on the arbitration clause of the respondent recited above and submitted that the sole intention of the respondent is to put off the payment of liability as long as possible. There is no allegation against the defendant No. 2 in the plaint according to Mr. Bhabra and the defendant No. 2 has been made a party mala fide in the suit with sole intention of escaping from the obligation of going before the arbitrators, in terms of the arbitration clause contained in the contract. According to Mr. Bhabra the plea of novation as pleaded does not supersede the arbitration agreement of the original agreement for that matter and the dispute between the parties are covered by the arbitration clause contained in the original agreement. The three letters appearing at pages 32-33-34, 65-65 of the annexures to the petition upon the publication whereof the claim in tort has been based contained in fact claims for price under the original contract and are related to the said contract. In that view of the matter Mr. Bhabra contends that the said part of the claim, that is the claim for damages in tort is also covered by the arbitration agreement. The entire suit according to Mr. Bhabra, therefore should be stayed.

18. Mr. Bhabra relied on the cases of Shree Bajrang Jute Mills Ltd. v. Fulchand Kanhaiyalal Co., AIR 1963 Cal 140 [LQ/CalHC/1962/114] : National Co. Ltd. v. Bengal Boating Co. Ltd., (1967) 71 Cal WN 1051; Rungta and Sons Pvt. Ltd. v. Jugometal Tra, Republike, 63 Cal WN 527 : (AIR 1959 Cal 423 [LQ/CalHC/1959/11] ).

19. Mr. Babulal Jain appearing on behalf of the respondent submitted that the suit should not be and in fact cannot be stayed under Section 34 of the Arbitration Act for the following reasons :-

Because of the said subsequent agreement by way of novation, the original contract bearing No. RJ-50521 dated March 16, 1968, stood superseded in its entirety and there was or is no subsisting arbitration agreement between the Parties. Parties to the arbitration agreement and the parties to the suit are not the same. The defendant No. 2 was or is not a party to the arbitration agreement, but is a party to the suit. The suit cannot be stayed against the defendant No. 2 in any event.

20. Mr. Jain relied on Turnock v. Sartoris, (1889) 43 Ch D 156; Ramdas Dwarkadas v. Orient Pictures, AIR 1942 Bom 332 [LQ/BomHC/1942/51] ; Union of India v. Kishorilal, AIR 1959 SC 1362 [LQ/SC/1959/140] . Mr. Jain submitted that the claim for damages in tort is entirely dehors the contract and cannot be stayed and relied on Chandanmull Jhaleria v. Clive Mills Co. Ltd., AIR 1948 Cal 257 [LQ/CalHC/1947/120] ; Ghewarchand Rampuria v. Shiva Jute Bailing Ltd., AIR 1950 Cal 568 [LQ/CalHC/1949/313] . In any event Mr. Jain submitted that the facts relevant for the decision of the tort-part of the claim are connected with the facts on which the other parts of the suit are based. Thus if the other parts of the suit are stayed, there would be a possibility of conflicting decisions by two forums of competent jurisdiction on the same facts and relied on Taunton-Collins v. Cromie, (1964) 2 All ER 232.

21. It is true as contended by Mr. Jain that the merit of the suit should not be gone into in an application under Section 34 of the Arbitration Act as observed in Gaya Electric Supply Co. Ltd. v. State of Bihar,AIR 1953 SC 182 [LQ/SC/1953/14] , but in order to decide the merits of an application under Section 34, the Court may look into, besides the plaint of the suit, affidavits filed by the parties as well as the correspondence that may have passed between the parties.

22. The contract bearing No. RJ-50521 dated March 16, 1968, admittedly contains an arbitration clause as recited above. The terms of the said clause are very wide indeed. The novation pleaded in paragraph 8 of the plaint does not expressly supersede the original contract dated March 16, 1968, nor does it satisfy or discharge the said original contract. The novation merely seeks to discharge the obligation of the respondent to the defendant No. 1, and provides that the Broker would discharge the liability of the respondent out of the moneys due by the Broker to the respondent.

23. The arbitration agreement is in a sense a collateral agreement and subsists even after the termination or extinguishment of the contract containing it. The petitioner has denied the novation mentioned above. Thus there is a dispute with regard to the novation itself. The said dispute, in my opinion, may be the subject-matter of reference because of the wide terms of the arbitration clause in the instant case.

24. The novation, as pleaded in the plaint, does not in my opinion have the effect of superseding the original contract. Nowhere it has been stated in the plaint that the defendant No. 2 had the authority to enter into the said agreement on behalf of the defendant No. 1. The broker, in law, has no authority indeed to substitute a contract brought through by him. It has not been pleaded either in the plaint that the said contract was ratified by the defendant No. 1. On the face of the plaint it does not seem to me that the said novation is binding on the defendant No. 1 i. e. petitioner. Thus the original contract containing the arbitration clause is subsisting.

25. The suit, so far it seeks for the adjudication of the effect of the original contract dated March 16, 1968, seems to be barred by Section 32 of the Arbitration Act (See Jawaharilals case, AIR 1962 SC 378 [LQ/SC/1961/323] ). However, I am not called upon to decide the same in the instant application.

26. The case of Tumoek v. Sartoris, (1889) 43 Ch D 156 decided that where the subject-matter of a suit consisted of two agreements, one containing an arbitration clause, the other none, and the suit involved the construction of the other agreement and its effect on the agreement containing the arbitration clause, the suit should not be stayed. There the subject-matter of the suit covered by the arbitration agreement was inextricably connected with the subject-matter not agreed to be referred.

27. The decision in AIR 1942 Bom 332 [LQ/BomHC/1942/51] followed the ratio of (1964) 2 All ER 332. There a subsequent agreement not having any arbitration clause materially affected and altered the rights of the parties under an agreement containing an arbitration clause and imposed new liabilities and conferred new rights which could not be adjudicated upon by the arbitrators. So a suit based upon both the agreements could not be stayed.

28. I have already decided that the alleged novation in the instant case as pleaded has neither substituted nor discharged the first contract. Therefore, the ratio in AIR 1959 SC 1359, has no application in the instant case.

29. Copies of letters upon which the claim in tort has been based have been annexed as annexures B, C and D to the petition.

30. The first letter, being annexure B was written to the Officer-in-charge, Regional Office, Forward Market Commission, complaining to him of the non-payment of the price by the buyer and asking him to direct the buyer and broker to pay the said price.

31. The second letter being the letter dated 18th September, 1968 a copy whereof is annexure C to the petition, was written to the Secretary, East India Jute and Hessian Exchange Association Ltd. with copies to the aforesaid Officer-in-charge Forward Market Commission, the respondent and the Broker. In the said letter the previous letter was referred to and it was pointed out that the same was not attended to. The Association was requested to intervene in the matter and take steps.

32. The last letter dated 22nd October, 1968, being Annexure D, was written to the Secretary of the said East India Jute and Hessian Exchange Association Ltd. wherein the petitioner denied the arrangement pleaded by the buyer in their letter dated 15th October, 1968, and again requested to see that the payment was made.

33. A perusal of the said letters would show that all that the seller wrote in the said letters was the fact of non-payment of the price of the goods sold and delivered by the petitioner to the respondent and requested the addressee of the said letters to take steps to recover the dues of the petitioner in accordance with the provisions of law i. e. the provisions of the Forward Contract Regulations Act and the rules and bye-laws of the said Association. The subject-matter of the letters was the breach by the seller of one of the terms of the contract between the parties i. e. the term for the payment of price. The claim in tort, if it is at all tenable, would depend solely on the decision of the said dispute namely, whether the seller, i. e. the respondent was obliged to pay the price to the petitioner and if so whether he had paid the same to the petitioner. That claim of the respondent in the suit cannot be said to be un-related to the transactions covered by the said contract bearing No. RJ-50521 dated March 16, 1968. The said claim appears to be closely connected with and related to the said original contract. The crux of the claim in tort will depend on the question as to whether the respondent is liable to pay the price of the goods sold and delivered to him by the petitioner and whether he has paid the same. These two issues or disputes are clearly matters agreed to be referred. The subject-matter of the suit in regard to the claim for the damages pertain to the terms and conditions of the contract dated March 16, 1968, and should be stayed in view of the ratio in (1967) 71 CWN 1051 and Woolf v. Collis Removal Service, (1948) 1 KB 11 : (1947) 2 All ER 260.

34. In (1947) 2 All ER 260 there was a claim made in the plaint in negligence and not under the contract. That claim was for damages in tort. Notwithstanding the same it was held by the Court of Appeal in England in the said case that there was a sufficiently close connexion between the said claim and the transaction between the parties so as to bring the said claim within the ambit of the arbitration clause contained in the contract between the parties in the said case. The arbitration clause in the said case read as follows :

If the customer makes any claims upon or counter-claim to any claim by the contractors, the same shall in case of difference be referred to the decision of two arbitrators (one to be appointed by each party). All the provisions of the Arbitration Act, 1889, or any modification in force for the time being shall apply. The arbitration shall, unless otherwise agreed, be held in the town in which the contractors office at or from which the contract was made is situate, and the making of an award shall be a condition precedent to any right of action or counter-claim."

The transaction between the parties was a contract of carriage for removal of furniture and effects of the plaintiff in the said case by the defendants to their store at Marlow, Buckinghamshire, and there safely to keep and take care of the same, and that, in breach of the said contract the defendants in the said suit removed the goods to a different place, i. e. Hawes Hill Park Braywood, Berkshire. There some of the same goods were lost and others were damaged. There was further an alternative claim for damages based on negligence of the defendants as mentioned earlier. In view of the wide terms of the arbitration clause contained in the said agreement between the said parties mentioned above the said claim was in tort also held to be a matter agreed to be referred although did not arise "under" the contract. The word in the arbitration clause was "claims" and were held to include all claims that were sufficiently closely connected with the transaction between the parties. In the instant case the arbitration clause is in the widest possible term as in the said case (1947) 2 All ER 260 but the arbitration clause makes all matters or disputes or question or claims arising out of or concerning or in connexion with or in consequence of or relating to the contract between the parties in the instant case subject-matter of reference to arbitration. The claim for damages in tort in the instant case certainly concerns or is connected with or is in consequence of or relates to the contract between the parties.

35. In that view of the matter, in my opinion the same is certainly a matter agreed to be referred.

36. In my opinion the claim for damages, although a claim in tort, is inextricably connected with the transaction between the parties and brings that part of the claim also within the ambit of the arbitration clause.

37. For the reasons stated above the suit as against the defendant No. 1 must be stayed.

38. The respondent shall pay the costs of and incidental to this application.

39. The interlocutory order of injunction shall continue until Monday week. There shall be stay of operation of the order until Monday week.

Petition allowed; suit stayed.