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Stay of suit in Foreign Arbitration
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The provisions of Section 34
of the old Act for stay of suit did not apply to foreign arbitrations.
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Foreign arbitrations taking
place outside India might be either those to which the Protocol
of 1923 or the Convention of 1927 or the New York Convention
of 1958 applies. Or, they might be arbitration proceedings
commenced in foreign countries to which the protocol or the
conventions did not apply. In the case of arbitration taking
place outside India to which the protocol or the conventions
applied, if the party against whom arbitration proceedings
had been initiated filed a suit in India, the same might be
stayed under Section 3 of the 1937 Act. If the New York Convention
applies to the foreign arbitration, stay can be obtained under
Sec.3 of the 1961 Act.
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The procedure under both the
enactments was substantially the same.
In order that Section 3 of the 1961 Act might be attracted
essential requisites to be fulfilled in that behalf are :-
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that there should be an
agreement to which Article 2 of the 1958 Convention applied,
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that a person who was a
party or privy to such an agreement or a person claiming
through him commenced a legal proceedings in any court
against the party to the said agreement,
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that the proceedings commenced
were in respect of a matter which was agreed to be referred
to arbitration in such an agreement.
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that the adversary in the
said proceedings had not filed any written statement or
had not taken any other step in the proceedings before
making an application for the stay of proceedings under
the said section.
Further, the arbitration agreement should not
be null and void or inoperative or incapable of being performed.
On the above conditions being satisfied, the Court would make an
order of stay.
In the case of arbitration proceedings to which the Protocol or
the Conventions do not apply, a party which had entered into a contract
of which an arbitration clause forms an integral part will not receive
assistance of the court where it seeks to resile from it and courts
will see that the parties are bound by the bargain. The court has
power to order stay of suit commenced in India in the exercise of
its inherent powers. But this it will do only when on a consideration
of all circumstances, it is satisfied that a stay of suit should
be ordered. It is open to the court to refuse stay in the exercise
of its discretion notwithstanding the arbitration agreement.
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