LexUNION OF INDIA versus BIRLA COTTON SPINNING & WEAVING MILLS LTD.
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2 s.c.R.. SUPREME COURT REPORTS 599 For these reasons I would allow the appeal with costs here and in the High Court. BY CourtT : In accordance with the majority opinion the appeal is dismissed witll costs subject to the directions contained in the judgment. Appeal dismi$sed. UNION OF INDIA v. BIRLA COTTON SPINNING & WEAVII\G MILLS LTD. (B. P. SINHA a. J., J. a. SHAH and N. RAJAGOPALA AYYANGARjj.) .Arbitration-Balance of pl'ice of goods llf1Jplied under o wntract-Liability to pay admitted-Invocation of the a.rbitra- tion clause in the contract to set off money due nnder a different and independent contmct-Whether permi .. ible-Arbitration Act, 1940 (•T of I940), s .. 34. The re•pondent •upplied to the appellants goods of the value of R>. I,06;670.89 nP. under a contract..entered into by the parties and received about Rs. 93,727/- a• part payment. The appellant declined to pay the balance on the pica that an amount of about R5. I0,625i- was due to the appellant under ar:iother contract between the parties. 'l'he re~pondent tl1crc- upon filed a suit before the Senior Subordinate Judge, Delhi, for realisation of the amount. The appellant applied under o. 34 of the Arbitration Act, 1940, for stay of the suit alleging that a dispute had arisen between the parties and there being an arbitration agreement it could be invoked by the appellant. The respondent submitted that there was no <lispute concerning the contract which \Va! covered by any va1icl arhitrati0n clause and which attrarted the application of s. 34· of the Arbitration Act, . . 1963 laxmitlas /Ja/Jysihai ' IL abarw~la v. Nn11abht1i Cht1flilttl Kaharwdfc: 1963 Mareh 27 1963 u.; .. •f truli• v. flirlo C.tlln Spiffllint &W..,.;,,1.lliU1 ltd. tiOO SUPREME COURT REPORTS [1964) VOL. The Subordinate Judge held that before s. 34 could be invoked the suit must raise a dispute in respect of the matter agreed to be referred to arbitration and not independent of it an<l as no dispute was raised by the appellant about its liabi- lity to pay the amount claimed by the respondent arising out of the contract and the only dispute which was sought to be raised was in respect of the liability of the respondent under another contract the suit could not be stayed. An appeal agairnt this order wa. dismissed in limint by the I !igh Court. The present appeal was by way of special leave granted by this Court. It was contended that the terms of the arlJitration agreement included a dispute relating to a refusal to meet the obligations arising under the contract even though the refusal was not founded on any right arising under the terms of the contract. lltld that for e11forcement of the arbitration clause there must exist a dispute; in the absence of dispute between the parties to the arbitration agreement there can be no reference. A plea that the appellant though liable to pay the amount under the terms of the contract would not pay it because it desired to appropriate it towards another claim under another independent contract cannot reasonably be regarded as a dispute "under or in connection" \Vith that contract under which the liability sought to be enforced has arisen. Uttam Chand Saligra1n v. Jewa Mamooji, I.L.R. 46 Cal, Chundanmul!Jahaleria v. Clive .Milt. Co., Ltd., I.L.R. (1946) 2 Cal. 297 and Heyman v. Darwin• Ltd., L.R, [1942] A.C. 356 distinguished. C1vIL APPELLATE juRISDIGTION : Civil Appeal No. 609 of 1961. Appeal by special leave from the judgment and order dated April 12, 1960 of the Punjab High Court (Circuit Bench) at Delhi in First Appeal from Order No. 43-D of l!lGO. N. S. Bindra and R. If. Dhebar, for the appellant. G. B. Pai, .J.B. Dmillclmnji, 0. G .. ilfothur and Raviniler J.:amin, for the respondent. 2 s.c.R.. SUPREME COURT REPORTS 601 1963. March 27. The Judgment of the Court was delivered by SHAHJ.-The Birla Cotton Spinning and Wea- ving Mills Ltd.-hereinafter called 'the Company'- supplied to the Union of India goods of the value of Rs. 1,06,670.89 nP. under a contract dated January 30, 1956 and received Rs. 93, 727/- as part payment of the price .. The Union declined to pay the balance of Rs. 12,943.89 nP. The Company then commenced Suit No. 386 of 1958 in the Court of the Senior Subordinate Judge, Delhi, against the Union of India for a decree for Rs. 10,625/- and Rs. 2, 762.50 nP. as interest from October 12, 1956 till date of suit and interest pe
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