HEADNOTE: Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961, which is analogous to s. 34 of the Indian Arbitration Act, 1940, provides that, if any party to an agreement to which Art. 1I of the convention set forth in the Schedule thereto applies, commences any legal proceed- ings in any court against any other party to the agreement in respect of any matter agreed to be referred to arbitra- tion in such agreement, any party to such legal proceedings may, at any time after appearance and before filing a writ- ten 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, inop- erative 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 stay- ing the proceedings.

The appellant (GEC), a multi-national company, which had entered into a contract with the respondent (Renusagar), an Indian company, regarding sale of equipment for a thermal plant, submitted certain disputes between them for arbitra- tion to the International Chamber of Commerce (ICC), where- upon, the respondent filed a suit in the Bombay High Court for a declaration that the claims were not arbitrable in terms of the contract. On an application filed by the appel- lant, the High Court stayed further proceedings in the suit in terms of s. 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961. Appeals filed by the respondent against that order were dismissed by the Division Bench of the High Court and this Court holding that the claims were arbitrable. Meanwhile, the appellant had filed a suit against a bank in the Calcutta High Court for enforcement of a bank guarantee given by it at the instance of the respondent, following which, the respondent had also filed a suit--the suit from which the present appeal arose--in the Court of Civil Judge, Mirzapur praying for a declaration that the guarantee given by the bank stood discharged and had become ineffective and unenforceable.