ORDER
Hemant Gupta, J.
1. The challenge in the present revision petition is to the order passed by the courts below whereby the application filed by the petitioner under Section 34 of the Arbitrator Act, 1940 (hereinafter referred to as the Act) for stay of the suit, in view of arbitration clause in an agreement between the parties was declined.
2. The petitioner has awarded contract for the construction of certain quarters to the plaintiff-respondent in pursuance of the tender issued in the year 1987. The plaintiff stopped execution of the work on 6.1.1989. Since the plaintiff failed to complete the contract, the bank guarantee was sought to be encashed by the defendant-petitioner vide letter dated 24.5.1989 and 31.7.1989. The said invocation of the bank guarantee was challenged by the plaintiff in the present suit in which the plaintiff has claimed a decree for permanent injunction and rendition of account and for the recovery of the amount found due from defendant No. 2.
3. It is the case of the petitioner that the agreement Ex.AW1 executed between the parties contained arbitration Clause 75 to refer the dispute between the parties to an Arbitrator. Since the dispute between the parties have arisen which led to encashment of bank guarantee, the matter is required to be decided by an Arbitrator in terms of the said clause. However, learned Trial Court dismissed the application under Section 34 of the Act on the ground that the said clause nowhere explicitly stipulates that the dispute arising in invoking the bank guarantee is referred to the Arbitrator. The appeal against the said order was dismissed by the learned District Judge as well.
4. In my opinion, both the courts have gravely erred in law in appreciating the contention raised by the defendant. The invocation of the bank guarantee was the consequence of the dispute having arisen between the parties. Such dispute was required to be referred to the Arbitrator in terms of Clause 75 of the agreement between the parties. It was not a dispute regarding invoking the bank guarantee but the dispute was whether on account of failure of the plaintiff to execute and complete the contract whether the defendant is entitled to invoke the bank guarantee. Such dispute falls within Clause 75 of the agreement. In terms of Clause 75 of the agreement, the matter is required to be referred to the Arbitrator.
5. In view of the above, the order passed by the courts below are patently illegal and cannot be sustained in law. Consequently, the said order are set aside. The revision petition is allowed with no order as to costs. The learned trial Court is directed to pass appropriate order for referring the parties to an Arbitrator in terms of Clause 75 of the agreement.