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"(F) Foreign Awards (Recognition and Enforcement) Act (45 of 1961), Section 3 - Stay under - Grant of, resulting in rendering suit dead for all practical purposes - No ground for refusing stay - When conditions under Section 3 are satisfied Court must grant stay. (Arbitration Act (1940), Section 34)"

Where Supreme Court considered the scope of Section 33 of the Act and Section 3 of the Foreign Awards Act, at paragraphs 58 and 59, wherein it is held as follows:

"58. It was next contended by Counsel for Renusagar that a stay, if granted as sought by G.E.C. in a petition under Section 3, it would render Renusagar's suit dead for all practical purpose and there will be nothing left to be decided in the suit either because the suit is stayed indefinitely or alternatively because the decision on the issue would operate as res judicata in the suit, and, therefore, no relief of stay should be granted which will have such effect merely on a prima facie view or a pro tanto finding on the issue of arbitrability of the claims. In support counsel relied upon a decision of the Allahabad High Court in Strauss Company's case (AIR 1921 All. 275) (supra), a case arising under the earlier Indian Arbitration Act 1899 - where that High Court has expressed the view that "a stay order under Section 19 of the Arbitration Act, when the arbitration has in fact taken place, is sufficient finally to dispose of the suit". In other words, the contention was that a Section 3 petition could not be a proper stage to decide the issue of arbitrability of the claims but the same should be decided in the suit when it will be finally tried. If regard be had to the provisions of Section 3 as well as the legal position arising under decided cases, the contention will be found to be devoid of any substance. It may be that a stay of the suit either under Section 3 of the Foreign Awards Act or under Section 34 of the Arbitration Act, 1940 may have the effect of finally disposing of the suit for all practical purposes as pointed out by the Allahabad High Court. But that is no reason why the relief of stay should be refused by the Court if the concerned legal provision requires the Court to do so. Here we are concerned with Section 3 which makes it obligatory upon the Court to stay the legal proceedings if the conditions of the Section are satisfied and what is more the Section itself requires that before any stay is granted the Court should be satisfied that the arbitration agreement is valid, operative and capable of being performed and that there are disputes between the parties with regard to the matters agreed to be referred to arbitration (conditions (v) and (vi) mentioned earlier). In other words, the Section itself indicates that the proper stage at which the Court has to be fully satisfied about these conditions is before granting the relief of stay in a Section 3 petition and there is no question of the Court getting satisfied about these 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 thereon after considering such material.