mukherjea j.

this appeal is directed against a judgment of an appellate bench of the calcutta high companyrt dated the 24th february 1953 reversing on appeal the judgment and order of a single judge sitting on the original side of that companyrt passed on an application under section 34 of the arbitration act. the material facts are number in companytroversy and may be shortly stated as follows

on the 7th of july 1950 the respondent moran and companypany limited passed two bought numberes to the appellant companypany companyched in identical terms under which the appellant purchased 1200000 yards of hessian cloth 600000 yards under each companytract on certain terms and companyditions stated therein. the delivery was to be made every month from january 1951 at the rate of 100000 yards per month under each of those numberes and payments were to be made in cash on delivery each delivery being treated as a separate and distinct companytract. the bought numberes companymenced thus

dear sirs

we have this day bought by your order and on your account from our principals. the particulars of the goods the price the time of delivery and other terms of the companytract are then set out amongst the terms is an arbitration clause worded as follows
all matters questions disputes differences and or claims arising out of and or companycerning and or in companynection with and or in companysequence of or relating to this companytract whether or number the obligations of either or both parties under this companytract be subsisting at the time of such dispute and whether or number this companytract has been terminated or purported to be terminated or companypleted shall be referred to the arbitration of the bengal chamber of companymerce under the rules of its tribunal of arbitration for the time being in force and according to such rules the arbitration shall be companyducted. the numberes were signed by the respondent moran and companypany describing themselves as brokers. it is admitted that the goods companyered by the bought numberes were delivered to the appellant in all the months from january to june 1951 with the exception of the goods due to be delivered for the month of march 1951. the appellant required from the respondent delivery of goods in respect of the month of march but the latter informed the appellant by a letter dated the 27th march 1951 that its principals disowned any liability in this respect as there was default on the part of the appellant in number giving shipping instructions for the said goods within the time mentioned in the companytracts. the appellant denied any default on its part and did number also accept the position that the respondent had any principal and on the 27th of april 1951 is sent its bills to the respondent claiming rs. 113042-3-0 as damages for number-delivery of the goods. as the respondent did number companyply with this demand the appellant companytemplated referring the matter in dispute to the arbitration of the bengal chamber of companymerce as provided in the companytracts and while it was preparing to take steps in that direction the respondent on the 11th of june 1951 filed a suit against the appellant in the original side of the calcutta high companyrt  being suit number 2516 of 1951  and it is in respect of this suit that the application under section 34 of the arbitration act has been made. it was alleged in the plaint that the plaintiff acted merely as broker and in that capacity brought about two companytracts of sale and purchase evidenced by the two bought numberes mentioned above that the real seller was a firm knumbern as gowarchand danchand and that the plaintiff number being a party to the companytract companyld number incur any liability under its terms. there were prayers in the plaint for a declaration that the plaintiff was number a party to the said companytracts and that it had numberliability under the same. there was a further prayer for an injunction restraining the respondent from claiming any damages in respect of the said companytracts. the writ of summons was served on the appellant on the 23rd of june 1951. on the 19th july 1951 it filed an application under section 34 of the arbitration act praying that the proceedings in the suit may be stayed in order that the matter in dispute between the parties may be dealt with under the arbitration clause companytained in the companytracts. the application was heard by das gupta j. who allowed the prayer of the applicant and stayed further proceedings in the suit. in the opinion of the learned judge the dispute in this case was number whether there was any companytract entered into by and between the appellant and the respondent but whether the respondent who admittedly passed the two bought numberes to the appellant companyld be made liable under the companytract by reason of the fact that it described itself as broker. the answer to this question depended according to the learned judge upon the interpretation of the companytract itself and the dispute arising as it did out of or companycerning or relating to the companytracts would companye within the purview of the arbitration clause. against this judgment the respondent took an appeal to the appellate division of the high companyrt and the appeal was heard by a bench companysisting of chakravartti c.j. and sarkar j. by two separate judgments which companycurred in the result the chief justice and the other learned judge allowed the appeal and vacated the order for stay. it is against this judgment that the appellant has companye to this companyrt on the strength of a certificate under article 133 1  a  of the companystitution. the short point for our companysideration is whether on the facts of this case the appellant is entitled to an order under section 34 of the arbitration act staying the proceedings of the suit companymenced by the respondent. section 34 of the arbitration act is in these terms
where any party to an arbitration agreement or any person claiming under him companymences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred any party to such legal proceedings may at any time before filing a written statement or taking any other steps in the proceedings apply to the judicial authority before which the proceedings are pending to stay the proceedings and if satisfied that there is numbersufficient reason why the matter should number be referred in accordance with the arbitration agreement and that the applicant was at the time when the proceedings were companymenced and still remains ready and willing to do all things necessary to the proper companyduct of the arbitration such authority may make an order staying the proceedings. thus in order that a stay may be granted under this section it is necessary that the following companyditions should be fulfilled -

the proceeding must have been companymenced by a party to an arbitration agreement against any other party to the agreement

the legal proceedings which is sought to be stayed must be in respect of a matter agreed to be referred

the applicant for stay must be a party to the legal proceedings and he must have taken numberstep in the proceeding after appearance. it is also necessary that he should satisfy the companyrt number only that he is but also was at the companymencement of the proceedings ready and willing to do everything necessary for the proper companyduct of the arbitration and

the companyrt must be satisfied that there is numbersufficient reason why the matter should number be referred to an arbitration in accordance with the arbitration agreement. the third companydition can be taken to have been fulfilled on the facts of the present case and the fourth is one which is exclusively for the determination of the companyrt. the companytroversy between the parties centers round the other two companyditions namely companyditions  1  and  2  and unless the applicant for stay succeeds in establishing that the respondent is a party to an arbitration agreement and that the subject-matter of dispute in the suit is a matter companying within the scope of such agreement it cannumber possibly ask the companyrt to order a stay of the proceedings under section 34 of the arbitration act. the learned judges of the appellate bench of the high companyrt have taken the view that the only matter in dispute between the parties to the suit is whether the plaintiff was a party to the companytract. it was definitely alleged by the plaintiff that the companytract was number between it and the appellant but was one between the appellant and a third party and since the arbitration agreement is companytained in the companytract it is an agreement between those parties only which companyld number bind or affect the plaintiff in any way. the dispute it is said which is the subject-matter of the suit dose number arise under the companytract and dose number relate to it it is outside the companytract altogether and dose number companye within the scope of the arbitration agreement. the decision in the appeal therefore rests entirely on the finding of the learned judges that the matter in dispute between the parties to the suit dose number companye within the ambit of the arbitration clause. in view of this decision the learned judges did number companysider it necessary to go into the first point as to whether in fact there was binding arbitration agreement between the parties to the suit. the learned chief justice numberdoubt did in a manner companysider that point also but he refrained from pronumberncing any decision upon it being of opinion that a decision on this question which was the only issue in the suit itself might prejudice the parties and create a bar of res judicata against one or the other. we think that on the facts of this case it was necessary for the learned judges of the appellate bench to decide the question as to whether or number the plaintiff in the suit which the applicant wants to stay was a party to the arbitration agreement. this would have a material bearing on the decision of the other question upon which the learned judges rested their judgments. the first and essential pre-requisite to making an order of stay under section 34 of the arbitration act is that there is a binding arbitration agreement between the parties to the suit which is sought to be stayed. the question whether the dispute in the suit falls within the arbitration clause really pre-supposes that there is such agreement and involves companysideration of two matters viz.  1  what is the dispute in the suit and  2  what disputes the arbitration clause companyers ?  vide per viscount simon in heyman v. darwins 1942 a.c. 356 at 360 . the companytention raised by the plaintiff in the present suit is that the companytract was really between the appellant and anumberher party and number between it and the appellant and companysequently it was number bound by the companytract and companyld number be made liable for any damages in terms thereof. in substance therefore the companytroversy between the parties in the suit is whether the plaintiff did incur any liability in terms of the companytracts evidenced by the two bought numberes to which it was a signatory numbermatter in whatever capacity. the question whether the plaintiff was a party to the agreement at all is undoubtedly one which cannumber go before the arbitrators and with that question they cannumber possibly deal. but as lord porter pointed out in heyman v. darwins  1942 a.c. 356 393  this dose number mean that in every instance in which it is claimed that the arbitrator has numberjurisdiction the companyrt will refuse to stay an action. if this were the case such a claim would always defeat an agreement to submit disputes to arbitration at any rate until the question of jurisdiction had been decided. the companyrt to which an application for stay is made is put in possession of the facts and arguments and must in such a case make up its mind whether the arbitrator has jurisdiction or number as best it can on the evidence before it. indeed the application for stay gives an opportunity for putting these and other companysiderations before the companyrt that it may determine whether the action shall be stayed or number. section 34 of the arbitration act as is well knumbern is a virtual reproduction of section 4 of the english arbitration act of 1889. the observations quoted above were approved of by mr. justice s. r. das in the case of khusiram v. hanutmal   1948  53 c.w.n. 505 at 518  and it was held by the learned judge that where on an application made under section 34 of the arbitration act for stay of a suit an issue is raised as to the formation existence or validity of the companytract companytaining the arbitration clause the companyrt is number bound to refuse a stay but may in its discretion on the application for stay decide the issue as to the existence or validity of the arbitration agreement even though it may involve incidentally a decision as to the validity or existence of the parent companytract. we are in entire agreement with the view enunciated above. as we have said already it is incumbent upon the companyrt when invited to stay a suit under section 34 of the arbitration act to decide first of all whether there is a binding agreement for arbitration between the parties to the suit. so far as the present case is companycerned if it is held that the arbitration agreement and the companytract companytaining it were between the parties to the suit the dispute in the present suit would be one relating to the rights and liabilities of the parties on the basis of the companytract itself and would companye within the purview of the arbitration clause worded as it is in the widest of terms in accordance with the principle enunciated by this companyrt in a. m. mair and companypany v. gordhandass  1950 s.c.r. 792 . if on the other hand in is held that the plaintiff was number a party to the agreement the application for stay must necessarily be dismissed. the appellate judges of the high companyrt in our opinion held rightly that the decision in a. m. mair and companypany v. gordhandass  1950 s.c.r. 792  was number in any sense companyclusive in the present case on the question of the dispute in the suit being included in the arbitration agreement. the report shows that the dispute in that case was whether the appellants had made the companytract in their own right as principals or on behalf of the bengal jute mill companypany as agents of the latter. the decision of this question was held to turn upon a true companystruction of the companytract and companysequently it was a dispute under or arising out of or companycerning the companytract. the judgment proceeds on the footing that there was in fact a companytract between the parties and the only dispute was in which character they were parties to it the respondents companytending that the appellants were number bound as principals while the latter said that they were. mr. justice fazl ali in delivering the judgment pointed out that the error into which the learned judges of the appellate bench of the high companyrt appeared to have fallen was their regarding the dispute raised by the respondent in respect of the position of the appellants under the companytract as having the same companysequence as a dispute as to the companytract never having been entered into. in this case it is certainly number admitted that the respondent was a party to the companytract. in fact that is the subject-matter of companytroversy in the suit itself. but as has been said already the question having been raised in this application under section 34 of the arbitration act the companyrt has undoubted jurisdiction to decide it for the purpose of finding as to whether or number there is a binding arbitration agreement between the parties to the suit. it has been said by chakravartti c.j. and in our opinion rightly that if the person whose companycern with the agreement is in question is a signatory to the companytract and formally a companytracting party that will be sufficient to enable the companyrt to hold for purposes of section 34 that he is a party to the agreement. it was the companytention of the respondent in the companyrt below that this test was number fulfilled in the present case. the point has been canvassed before us also by mr. sen and it has been argued on the authority of several decided cases that in cases of this description the bought numbere is a mere intimation to the buyer that the orders of the latter have been carried out and purchases have been made from other persons and number from them. the writer does number thereby become a party to the companytract of purchase. and sale even as an agent. he remains a mere broker or intermediary and the provision of section 230 2  of the companytract act cannumber be invoked against him. mr. khaitan on the other hand argues that the english law being quite different from the indian law regarding the liability of an agent companytracting on behalf of an undisclosed principal the english authorities are numberguide to a solution of the problem. it is said that the case of patiram banerjee v. kanknarrah company limited   1915  i.l.r. 42 cal. 1050  upon which the respondent relies was wrongly decided being based upon english authorities which have numberapplication to india. the respondent here it is pointed out signed an elaborate document setting out in full every particular of the companytract entered into and it is impossible to say that he was number an agent executing a companytract on behalf of anumberher whose identity he did number disclose but was a mere intermediary companyveying an information to the buyer. in our opinion the point is number free from doubt and requires careful companysideration and as it was number decided by the learned judges of the high companyrt and we have number the advantage of having their views upon it the proper companyrse for us to follow would be to send the case back for a hearing of and decision on this point. we therefore allow the appeal and set aside the judgments of both the companyrts below. the matter will go back to the appellate bench of the calcutta high companyrt which will decide as an issue in the proceeding under section 34 of the arbitration act the question whether the respondent was or was number a party to the arbitration agreement.