JUDGMENT 1. The plaintiff in O.S.No.98 of 1980 on the file of the Subordinate Judge, Madanapalle filed the second appeal. The suit was filed against the respondent for recovery of a sum of Rs.12,840/- with interest. The respondent was appointed as a dealer of the plaintiff, to market the textiles manufactured by them. It was pleaded that the respondent did not account for a sum of Rs.12,840/- and that he did not pay the same in spite of the demands. 2. The respondent filed written statement admitting the fact that he was appointed as a dealer. However, he pleaded that he does not owe any amount to the plaintiff and that the entire stock entrusted to him was accounted for. 3. Through judgment dated 30-11-1989, the trial court decreed the suit. Thereupon the respondent filed A.S.No.41 of 1991 in the court of the Additional District Judge, Madanapalle. The appeal was allowed on 09-06-1997 and the decree passed by the trial court was set-aside. Hence, this second appeal. 4. Sri M. N.Narsimha Reddy, the learned counsel for the appellant submits that the only ground on which the lower appellate court reversed the judgment of the trial court was not even pleaded either in the written statement in the trial court or in the grounds of appeal before the lower appellate court, and despite the same, judgment and decree of the trial court were set-aside. He submits that the view taken by the lower appellate court does not accord with Section 34 of the Arbitration Act, 1940 (X of 1940) (for short ' the Act'). 5. Sri N.Pramod, the learned counsel for the respondent, on the other hand, submits that a pure question of law was raised before the lower appellate court and there was no necessity of any pleading or ground for this purpose. He contends that when admittedly there is a specific arbitration clause in the agreement between the plaintiff and the defendant, the only course open to the appellant was to have recourse to arbitration. 6. The suit was filed for recovery of an amount of Rs.12, 840/- on the ground that the respondent did not account for the stock worth of that amount. There was no dispute that the respondent was appointed as a dealer. The controversy was only about the accounts. 6. The suit was filed for recovery of an amount of Rs.12, 840/- on the ground that the respondent did not account for the stock worth of that amount. There was no dispute that the respondent was appointed as a dealer. The controversy was only about the accounts. The trial court framed the following issues for its consideration: "i. Whether the alleged supply of goods by the defendant to Tirupati as alleged in Para 5 of his written statement is true and binding on the plaintiff and whether any amount is to be given credit to in that regard? ii. Whether the defendant is bound to pay only the cost price of the goods that were not found with him and not liable to pay interest on such amount as alleged in Para 6 of the written statement? iii. Whether the particulars of the account copies prepared by the plaintiff are correct and whether he is entitled to recover any amount from the defendant? iv. Whether the suit is bared by limitation? v. To what relief?" 7. On behalf of the plaintiff, PW.1 was examined and Exs.A.1 to A.14 were marked. Defendant deposed as DW.1 and he filed Exs.B.1 to B.5. The trial court had undertaken extensive discussion on various factual aspects and ultimately decreed the suit. The lower appellate court did not express any view on the findings recorded by the trial court; particularly as regards the accounts between appellant and the respondent. However, the decree of the trial court was set-aside only on the ground that an arbitration clause exists in Ex.A.1- the dealership agreement. The relevant portion of the judgment reads as under: " Admittedly there is an agreement Ex.A.1 entered into between the appellant and the respondent. That agreement contained an arbitration clause. As per that Arbitration Clause No.13 all disputes and difference arises between the parties regarding any matter shall be referred to the Director of Handlooms and Textiles, Madras and the decision of the Director of Handlooms and Textiles shall be final, conclusive and binding on both the parties. In view of this clause the matter shall be referred to the Director of Handlooms and Textiles for adjudication and so there is no need to this court to discuss the evidence of the parties and correctness of the judgment of the court below. In view of this clause the matter shall be referred to the Director of Handlooms and Textiles for adjudication and so there is no need to this court to discuss the evidence of the parties and correctness of the judgment of the court below. For these reasons I hold that the decree and judgment of the lower court is liable to be set-aside." Therefore, it needs to be seen as to how far the view taken by the lower appellate court is correct. 8. It is no doubt true that whenever there exists a clause for arbitration between the parties, they have to abide by the same and pursue the remedy of the arbitration before any adjudication of the dispute is sought in a court. Section 34 of the Arbitration Act makes this aspect clear. It needs to be kept in mind that by itself, Section 34 of the Arbitration Act does not prohibit filing of a suit. It only enjoins stay of further proceedings in the suit, till the remedy of arbitration is exhausted. Even the limited embargo placed upon the proceedings before the court, is subject to an important rider, namely, that the plea must have been raised as early as possible, and before the written statement is filed. The provision reads as under: Section 34 of the Arbitration Act: " Power to stay legal proceedings where there is an arbitration agreement:- Where any party to an arbitration agreement or any person claiming under him commences 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 no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings." 9. From this, it is clear that if a plea about the existence of arbitration clause is not raised in a suit either through a written statement or in any other form, before filing it, the embargo placed upon Section 34 of the Arbitration Act does not enure to the benefit of the defendant. 10. In the instant case, admittedly the respondent did not raise any plea based on Section 34 of the Arbitration Act in his written statement or at any stage in the suit. Further, in the grounds of appeal before the lower appellate court also no such plea was taken. Even assuming that the plea was raised at the right earnest, the only result would have been that the proceedings before the court would have remained or kept in a dormant state, till the parties exhaust the remedy of the arbitration. The lower appellate court did not take these aspects into account. It had not only accepted the plea which appears to have been advanced at the stage of the arguments in the appeal for the first time, but also terminated the entire proceedings before the court. Such a recourse is opposed to the very letter and spirit of Section 34 of the Arbitration Act. 11. The learned counsel for the respondent submits that his client has become very old and financially weak and that he cannot bear the burden of the decree at this length of time. A request is made for reduction of the rate of interest and to extend the facility of instalments. The learned counsel for the appellant strongly opposed the same. 12. Having regard to the facts and circumstances of the case, the rate of interest awarded by the trial court is reduced from 12% p.a. to 6% p.a. subject to the condition that the respondent shall deposit half of the decretal amount so calculated by the end of December, 2007 and the balance, by the end of January, 2008. In default, the rate of interest would remain at 12% per annum. 13. With the modification indicated above, the second appeal is allowed. There shall be no order as to costs.