Leila Seth ( 1 ) THIS appeal arises out of a judgment and order passed by Mr. Justice S. N. Kumar on 11/04/1980. ( 2 ) SUIT No. 714 of 1979 was filed on 23/06/1979 by the plaintiffs-appellants. The prayers mentioned in the said suit are as follows : " (I) A decree of declaration be passed to the effect that thereexists between the parties NO AGREEMENT to refer thedisputes to the Arbitration of anyone, i. e. there is noarbitration agreement between the parties. (II) And that the appointment of the Arbitrators by thedefendants as well as the Grain and Feed Trade Association,london, is illegal, void and without any jurisdiction. (III) And that the agreement contained in the Plaintiffs letter of 25/01/1979 stands cancelled by the plaintiff s letterdated 3/02/1979 and 12/02/1979 on accountof defaults on the part of the defendants. (IV) That the defendants and each of them be restrained by way ofpermanent Injunction from proceeding with the Arbitrationproceedings in London. (V) Any other relief which this Hon ble Court deems fit in thecircumstances of the case, may also please be awarded. " ( 3 ) ALONG with the said suit an application under Order 39 Rules 1and 2, Civil Procedure Code, being I. A. 1962 of 1979 was also filed. Theprayer in the said application was to restrain the defendants "from proceedingfurther with the arbitration". ( 4 ) ON 25/06/1979 summons were issued in the suit and notice ini. A. 1962 of 1979 was also issued for 14/09/1979. ( 5 ) ON 20/08/1979 another application, under Ordes XXXIX, Rules 1 and 2, Civil Procedure Code, being 1. A. 2474 of 1979 was filed praying for "an ad interim ex-parte injunction order" to restrain the respondents "from proceeding further with the arbitration. ( 6 ) ON 22/08/1979 an ex parte order, staying the pronouncementof the award, was made, leaving the arbitrators free to continue with theproceedings. This I. A. was also directed to be listed on 14/09/1979, the date already fixed. ( 7 ) ON 13/09/1979, respondent No. 1 M/s. Ludwig Wunscheand Company filed an application under section 34 of the Arbitration Act,1940 and section 3 of the Arbitration (Protocol and Convention) Act, Act VIof 1947 for stay of proceedings in suit No. 714/79. The said application being I. A. 2791/79 was also listed before the court on 14/09/1979. ( 7 ) ON 13/09/1979, respondent No. 1 M/s. Ludwig Wunscheand Company filed an application under section 34 of the Arbitration Act,1940 and section 3 of the Arbitration (Protocol and Convention) Act, Act VIof 1947 for stay of proceedings in suit No. 714/79. The said application being I. A. 2791/79 was also listed before the court on 14/09/1979. Noticeof the said application was accepted by counsel for the plaintiffs-appellantsand time was granted for filing a reply and rejoinder. The matter wasdirected to be listed on 7/11/1979. However, further time was soughtand the matter was adjourned from time to time till I A. 2791/79 was finallylisted for arguments and disposal on 12/02/1980. ( 8 ) ON that date, after hearing the arguments, the learned Judge reservedorders. On 11/04/1980 he delivered his judgment and dismissed suitno. 714/79. ( 9 ) THE main contention of learned counsel for the appellants is, thatthe learned Judge acted without jurisdiction in dismissing the suit whiledisposing of an application under section 34 of the Arbitration Act, 1940and section 3 of the Arbitration (Protocol and Convention) Act, Act VI of1937. ( 10 ) THE other contention of learned counsel is that there is a specificprayer in the suit for a declaration to the effect, that there was no agreementto refer the disputes to arbitration. This indicates that the plaintiffs-appellants are challenging the existence of the arbitration agreement and thelearned Judge, erred in recording a finding that there was an arbitrationagreement between the parties which was binding, without framing an issueand allowing the parties to lead evidence in support of their case regarding thequestion of validity and existence of a contract in terms of GAFTA Formsnos. 119 and 125. ( 11 ) IT was also urged, that the learned Judge, while deciding anapplication under section 34 of the Arbitration Act, 1940, has a limitedjurisdiction and the maximum he could do was to stay the suit, in case hecame to the conclusion that there was an arbitration agreement. ( 12 ) MR. D. K. Syal, learned counsel appearing for the respondents,took a preliminary objection that the appeal was not maintainable, as the suit itself was not maintainable, in view of Order VII rule 11 (d ). Civil Procedure Code. According to him, the plaint had to be rejected, as it was apparent from the statement in the plaint, that it was barred by law. Civil Procedure Code. According to him, the plaint had to be rejected, as it was apparent from the statement in the plaint, that it was barred by law. This, according to him, was because, only an application under section 33 of the Arbitiation Act, 1940 is maintainable, to challenge the existence or validity arbitration an of agreement, and a suit is not maintainable, in view of section 32 of the said Act. ( 13 ) MR. D. K. Syal referred to sections 46 and 47 of the said Act toestablish, that the provisions of the Act, except those expressly excluded,applied to all arbitrations and proceedings thereunder and to "every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and if that other enactment were an arbitration agreement" in so far as the Act is not inconsistent with the other enacment and rules. ( 14 ) MR. Ishwar Sahai, learned counsel appearing for the appellants joined issue with this proposition and referred to a decision of the Supreme Court in Ranusagar Power Co. Ltd. v. General Electric Company and another, (1984) 4 SCC 679 . In the said case, it was held that a suit to challenge theexistence and validity of an arbitration agreement was maintainable, incases of foreign arbitrations as there is no provision equivalent to section32 of the Arbitration Act, in the Foreign Awards (Regulation and Enforcement) Act, 1961. ( 15 ) MR. Ishwar Sahai further urged, that even if a suit was notmaintainable, then the plaint could have been converted into an applicationunder section 33 of the Arbitration Act, if the objection had been taken atthe earliest. But, now in any case, in view of the judgment of the Supremecourt in Ranusagar Power Company s case above mentioned, the suit wasmaintainable. ( 16 ) THE contention of learned counsel for the appellants appears to becorrect on this point. ( 17 ) IN paragraph 52 of the said judgment Mr. Justice Tulzapurkar,speaking for court has observed : "an examination of Sections 3, 5 and 7 of the Foreign Awards Actin juxtaposition with Sections 32, 33 and 34 of the Arbitration Actbrings out these differences. ( 17 ) IN paragraph 52 of the said judgment Mr. Justice Tulzapurkar,speaking for court has observed : "an examination of Sections 3, 5 and 7 of the Foreign Awards Actin juxtaposition with Sections 32, 33 and 34 of the Arbitration Actbrings out these differences. Under Section 32 of the Arbitrationact Suits to challenge the existence or validity of an arbitrationagreement or award as also suits to have the effect (scope) of anarbitration agreement determined are barred and such questionscan be raised only by an application under section 33 of the Actwhereas under the Foreign Awards Act there is no provisionsimilar or akin to Sections 32 and 33 (and that is why a suit of thenature filed by Renusagar qua the arbitration agreement coveredby the Convention is maintainable) but by virtue of sections 3 and7 the same purpose is served though by different procedure. Sections3 and 7 read together disclose a scheme that so far as questions ofexistence, validity and effect (scope) of the arbitration agreementare concerned, the determination thereof by the arbitrators is alsosubject to the decision of the Court and this decioion of the Courtcan be had either before the arbitration proceedings commence orduring their pendency, if the matter is decided by the Court in asection 3 petition, as in the present case. or can be had undersection 7 after the award is filed in the Court and is sought to beenforced under Section 6. " "in effect. Section 3 of the Foreign Awards Act so to say combines in its own armbit both Sections 33 and 34 of the Arbitrationact ; in other words, questions regarding the existence, validity oreffect (scope) of the Arbitration Act are required to be decidedunder Section 3 of the Foreign Awards Act before a stay of legalproceedings contemplated therein could be granted and the right tohave legal proceedings stayed contained in Section 34 of thearbitration Act is also to be found in the some Section 3. " ( 18 ) IT is therefore, apparent that the preliminary objection raised by Mr. D. K. Syal for the respondents cannot be sustained. " ( 18 ) IT is therefore, apparent that the preliminary objection raised by Mr. D. K. Syal for the respondents cannot be sustained. ( 19 ) WE feel that there is merit in the main contention of learnedcounsel for the appellants, that, while deciding an application under section 34 of the Arbitration Act or 3 of the Arbitration (Protocol and Convention) Act, Act VI of 1937, the court should not have dismissed the suit but should havestayed it, if it was satisfied that an arbitration agreement existed. ( 20 ) IN this view of the matter, we were inclined to allow the appeal andremit the case to the single judge. But in order to ascertain whether anyuseful purpose would be achieved in following this course, we enquired frommr. Sahai the real nature of his grievance. He submitted that the appellantswere prejudiced by the dismissal of the suit by the trial court, as they weredenied an opportunity of proving their allegations. According to counsel,the appellants were entitled to lead evidence to establish that there was noarbitration agreement. ( 21 ) COUNSEL relied on the observation in Mithailal Gupta v. Inland Auto Finance, AIR 1968 MP 33 , wherein that court had observed that "an affidavitin support of an application is no evidence, it is intended merely to satisfythe court, prima facie that the allegations in the application are true so thatthe Court may issue notice to the opposite party and the Court may act uponit if the opposite party does not contest the allegations in the application. " ( 22 ) THE Madhya Pradesh High Court had gone on to observe thatsince the plaintiff was denied an opportunity of proving the issue of fact and the matter had been decided merely on submissions made by the parties in the application under section 34 of the Arbitration Act and the reply thereto, the finding could not be sustained. ( 23 ) IN the above mentioned case of Renusagar Power Co. Ltd. , inparagraph 98, the Supreme Court has opined that a stay of the suit eitherunder Section 3 of the Foreign Awards Act or under Section 34 of thearbitration Act, 1940 may have the effect of finally disposing of the suit forall practical purposes. ( 23 ) IN the above mentioned case of Renusagar Power Co. Ltd. , inparagraph 98, the Supreme Court has opined that a stay of the suit eitherunder Section 3 of the Foreign Awards Act or under Section 34 of thearbitration Act, 1940 may have the effect of finally disposing of the suit forall practical purposes. But that is no reason why the relief of stay should berefused by the court when section 3 makes it obligatory upon the court tostay the legal proceedings if the conditions of the section are satisfied. The"section itself indicates that the proper stage at which the Court has to befully satisfied about hese conditions is before granting the relief of stay in asection 3 petition and there is no question of the Court getting satisfied aboutthese conditions on any prima facie view or a pro tanto finding thereon. Parties have to put their entire material before the Court on these issues (whichever may be raised) and the Court has to record its finding thereonafter considering such material. " ( 24 ) A perusal of the impugned judgment, would indicate that when the matter was heard, both counsels agreed to proceed on the basis that themrtter "be decided on the basis of the documents placed on record. "according to the learned Judge, it was also agreed that the "suit wasmaintainable because for deciding an application for stay of the suit the mainquestion to be first decided by the Court would be about the existence of thearbitration agreement and if the finding was that there was anarbitrationagreement all the prayers in the suit would automatically fail. " ( 25 ) WITHOUT going into the facts, whether the appellants wereprejudiced, because an order for affidavits was not expressly made, we askedlearnsd counsel what evidence he would lead, in case, an order for evidencehad been made. He told us that he would like to lead evidence pertainingto the question of the contract never having been concluded and would like to examine Mr. Veena Nayyar on this aspect. In order to cut short the matterof remanding this case, and evidence being recorded by the Single, Judge, wetold Mr. Ishwar Sahai, that we are prepared to record evidence in appeal, if he wished to produce any. ( 26 ) THE arguments were concluded on 1/08/1985. Counselprayed for a brief adjorurnment to obtain instructions, which was granted. In order to cut short the matterof remanding this case, and evidence being recorded by the Single, Judge, wetold Mr. Ishwar Sahai, that we are prepared to record evidence in appeal, if he wished to produce any. ( 26 ) THE arguments were concluded on 1/08/1985. Counselprayed for a brief adjorurnment to obtain instructions, which was granted. On 5/08/1985, counsel informed us, that he had wanted to producems. Veena Nayyar, but he was not in a position to do so as she had left theservice of the appellants and her whereabouts were not known. He alsostated, that apart from her, he did not wish to produce any other witness. In these circumstances, he said, he did not wish to press the point. ( 27 ) THE facts are, that the dealings between the parties commencedwith a letter of 17/10/1978 written by the appellants to M/s. Wilhelmmeinshusen, respondent No. 2, a broker, introducing themselves as exportersof Tapioca Chips. On 31/10/1978 respondent No. 2 replied to thesaid letter and indicated that they would be happy to receive Ms. Veenanayyar in Hamburg to discuss the possibility of mutual business. A "proformacontract sheet in order to stipulate the contract terms" was enclosed forguidance. Conditions of the said proforma were as follows : "this contract is issued under terms and conditions effective at dateof OAFTA London Contract No. 119 which are hereby made apart of this contract except as far as modified above. Both Sellersand Buyers declare acknowledgment and familiarity with GAFTAContract and agree to be bound by its terms and conditions. " ( 28 ) GAFTA stands for "the Grain and Feed Trade Association Ltd. "contract Form No. 119 provides that any dispute arising out of a contractembodying these rules will be referred to arbitration in accordance with therules. ( 29 ) MS. Veena Nayyar, an employee of the plaintiffs, who had writtenthe letter dated 17/10/1978 visited Europe and discussed the businessprospects with the broker. ( 30 ) ON 12/12/1978, Ms. Veena Nayyar wrote to respondentno. 2 in glowing terms thanking him for his hospitality. On the date a telexwas sent by respondent No. 2 to the appellants informing it that a firm bidfor tapicoa chips had been collected. The telex was acknowledged by theappellants an 13/12/1978 and it was confirmed that a quantity of3000 tonnes would be supplied, " (3) shipment feb (4) specifications accept-able. . . . . . ". On the date a telexwas sent by respondent No. 2 to the appellants informing it that a firm bidfor tapicoa chips had been collected. The telex was acknowledged by theappellants an 13/12/1978 and it was confirmed that a quantity of3000 tonnes would be supplied, " (3) shipment feb (4) specifications accept-able. . . . . . ". Subsequently there were further exchanges of telexes, and theappellants sent a telex giving a firm offer of 2000 tonnes Indian tapioca chipsat US dollars 101, FOB Mangalore shipment and February, validity tillmonday. ( 31 ) ON the very same date the broker-respondent No. 2 confirmedhaving sold "2000 tonnes Indian tapioca chips, FOB Mangalore, buyersm/s. Ludig Wunsche, Hamburg, price U. S. dollars 101 net to you. The periodfebruary 12-March 15 was indicated and that the contract was being airmailed. A contract in Form No. 119 dated 15/01/1979 sent by respondentno. 2 was despatched to the appellants and the number indicated in the saidcontract was 3044. ( 32 ) THEREFORE, it is quite clear that on 15/01/1979 the partieswere ad idem and the contract was complete. ( 33 ) ON 16/01/1979, respondent No. 2, informed the plaintiffthat the buyers had agreed to the shipment period being 25th February till 15/03/1979. On the same day, the plaintiffs wrote to respondent No. 2and queried the credentials of the buyers Respondent No. 2 repliedstaling inter alia, that the appellants were protected as per GAFTA No. 119. ( 34 ) THE air-mailed contract sent on 15/01/1979 was receivedby the appellants on 22/01/1979. It was in GAFTA Form No. 119and para 27 set out the arbitration clause which is as follows : "any dispute arising out of contract shall be setteled by arbitrationin London in accordance with the Arbitration Rules of theGrainand Feed Trade Association Limited No. 125 in force at the timeand date of the contract, such Rules forming part of the contractand of which both parties shall be deemed to be cognisant. " ( 35 ) ON 25/01/1979, the appellants telexed respondent No. 2,referring to the said contract No. 3044 and requesting that a letter of creditbe opened immediately. Certain changes were sought to be incorporated bythe appellants, but respondent No. 2, informed them, on the same date, thatthis way not possible. ( 36 ) ON 30/01/1979 referring to both the telexes of 25/01/1979, the appellants agreed and requested that 21 days preadvice be considered. Certain changes were sought to be incorporated bythe appellants, but respondent No. 2, informed them, on the same date, thatthis way not possible. ( 36 ) ON 30/01/1979 referring to both the telexes of 25/01/1979, the appellants agreed and requested that 21 days preadvice be considered. There is no mention in any of these documents of any other letter of 2 5/01/1979. ( 37 ) ON facts, the main argument of learned counsel for the appellants, was that the proforma which was alleged to have been enclosed with the letter of 31/10/1978 by respondent No. 2 had never been received by the appellants and as such they were unaware of the conditions in GAFTA Form No. 119. Accordingly, the question of a agreeing to arbitration did not arise. ( 38 ) THOUGH there was some dispute as to whether this proforma hadbeen received by the appellants, it was admitted by counsel on 1/08/1985, in court, after examining the record that the said proforma and theletter had been received on 3/11/1978. He submitted that hisearlier contention had been based on the affidavit of Ms. Veena Nayyar, dated 18/12/1979 wherein she had stated "that no proforma on thecontract sheet in form No. 119 of GAFTA, London, was ever received by thedeponent from Mr. Suckfull in or about the month of October or November,1978 as alleged. " ( 39 ) MR. Joachim Suckfull, in his affidavit, dated 22/11/1979, asserted that the letter of respondent No. 2 dated 31/10/1978 had beenacknowledged by a letter dated 3/11/1978 of appellants confirmingtherein that the proforma contract terms were by and large acceptable tothem. This assertion has not been denied by Ms. Veena Nayyar, in theaffidavit, nor has she asserted that the said letter dated 3/11/1978was not written by M/s. Raunaq International Eimited to respondentno. 2. ( 40 ) ACCORDINGLY, learned counsel conceded that the proforma musthave been received by the appellants as it had been acknowledged by the letterof 3/11/1978. ( 41 ) THE learned Single Judge after considering all the documents hadcome to the conclusion that the contract entered into by the partics wassubject to the GAFTA rules which included an arbitration agreement. Heparticularly noticed that the telex of 25/01/1979 sent by the appellantsreferred to (GAFTA) Contract Form No. 3044. which admittedly includedthe arbitration clause. We entirely agree with his conclusion. Heparticularly noticed that the telex of 25/01/1979 sent by the appellantsreferred to (GAFTA) Contract Form No. 3044. which admittedly includedthe arbitration clause. We entirely agree with his conclusion. Furthermore,he was definitely justified in dismissing the suit, because the primary questionto be decided, both in the suit and in the application under section 34 of thearbitration Act/section 3 of the Arbitration (Protocol and Convention) Act,was the existence of an arbitration agreement between the parties. In view ofhis conclusion that there was an arbitration agreement, the order "not to staythe suit but to dismiss the same" was inevitable. ( 42 ) ACCORDINGLY, we find no reason to interfere and thus dismiss the appeal. There will be no order to costs.