1. In this case plaintiff filed a suit in the Presidency Court of Small Causes at Bombay to recover the customs duty and other charges paid by him in respect oil certain cases of piece-goods which arrived in Bombay. In April 1929 the plaintiff indented for nine cases of piece-goods from the defendants' firm. The plaintiff's contention was that the goods were not of the same quality and colour, and two arbitrators were appointed to decide if the cases were of the contract colour and shade. In April 1930 the arbitrators agreed in their decision that the goods were not of the contract colour or shade. They, however, differed on another point. Subsequently the plaintiff cancelled the contract and refused to take delivery. The defendants made an application to the High Court to have an umpire appointed, and in August 1930 Wadia J. refused the application on the ground that only one point was referred to the arbitrators, namely, the quality of the goods, and the arbitrators had agreed upon the dispute which was referred to them, and if they differred on a point which was outside the scope of the reference, there was no ground to appoint an umpire and it was more a concern of the parties. In October 1930 the plaint in the present suit was filed, and though no separate application was made for a stay of the suit under Section 19 of the Indian Arbitration Act or under Clause 18 of the second schedule to the Civil Procedure Code, the point was raised by the defendants in their defence which contained sixteen points.
2. The question as to whether there should be a stay of the suit was first decided by the fifth Judge of the Court of Small Causes in February 1931. He proceeded on the ground that Wadia J. in his judgment observed that the legal consequence of the unanimous finding was the concern of the parties and none of the arbitrators, and on a consideration of the events that occurred the learned trial Judge was of opinion that the defendants were not entitled to have the suit stayed to enable the parties to have a recourse to a second arbitration. The case then went on before the Small Cause Court Judge, evidence was led by the defendants and eventually a decree was passed in favour of the plaintiff for Rs. 903-3-0 and costs. An application was made to the Full Court, and the Full Court differing from the view of the trial Court as to the construction of Clauses 21 and 22 in the contract and as to the effect of the judgment of Wadia J., set aside the decree of the trial Court and ordered a stay of the proceedings.
3. It is contended before us, first, that under Section 38 of the Presidency Small Cause Courts Act, the defendants ought to have gone to the Full Court against the original order. Further, it is contended that after the defendants acquiesced in going on with the suit on the merits, they could not re-agitate the same question before the Full Court, and assuming that it was open to re-agitate the question before the Full Court, the Full Court was not right in interfering with the discretion of the trial Court, and, lastly, it was contended that on the merits, in view of the decision of Wadia J., the Full Court was not competent to adopt the construction which it placed on Clauses 21 and 22 of the contract, and on the merits the order of the Full Court was wrong.
4. The first question with which I shall deal in this application is whether the Full Court had jurisdiction to stay, or acted with material irregularity in staying the proceedings in the suit after the trial Court refused to stay them either under Section 19 of the Indian Arbitration Act or under Clause 18 of the second schedule to the Civil Procedure Code. It appears from the proceedings of the trial Court that after the trial Court refused to stay the proceedings, evidence was led on behalf of the defendants, the suit was contested and a decree was passed in favour of the plaintiff. After the decree was passed by the trial Court in pursuance of its decision that there was no ground for stay of the proceedings, the question arises as to whether the Full Court could stay the proceedings.
5. In Ram Prosad Surajmull v. Mohan Lal Lachminarain I.L.R. (1920) Cal. 752 it was held that where an action has been commenced upon a contract which contains a provision for reference to arbitration, even if a reference to arbitration has been made before the commencement of the suit, the award is of no effect, unless the suit has been stayed pending the arbitration ; and that if the Court has refused to stay an action, or if the defendant has abstained from asking it to do so, the Court has seisin of the dispute and it 13 by its decision, and by its decision alone, that the rights of the parties are settled. In that case reference is made to the case of Doleman & Sons v. Ossett Corporation  3 K.B. 257 where it was observed by Farwell L.J. that the plaintiff cannot be deprived of his right to have recourse to the Court when the agreement is a mere agreement to refer, unless the Court makes an order to that effect under Section 4 of the English Arbitration Act, .1889 (corresponding to Section 19 of the Indian Arbitration Act, 1899). In Ram Prosad's case there was an arbitration and also an award, and the Court having refused to stay the action, it was held that the Court had seisin of the dispute and it was by its decision, and by its decision alone, that the rights of the parties were to be settled.
6. In the present case on the point on which there is alleged to be a fresh difference of opinion between the parties, there has been no arbitration and an award, but it is contended on the one side that under Clause 22 there is a provision for reference to arbitration, while the right to refer to arbitration has been denied by the other side. The Court, as a matter of fact, refused to stay the action, and it is difficult to hold that the alleged agreement set up in Clause 22 would enable the Full Court, after a decree has been passed by the trial Court, to stay the suit.
7. The same view was taken in the case of Appavu v. Seeni I.L.R. (1917) Mad. 115 where it was held that a private reference to arbitration of a subject of a dispute does not prevent either party filing a suit in a Court of law in respect of the same matter; that the arbitrators thereupon become functus officio and any award by them is without jurisdiction ; and that where there is a previous agreement to refer a matter to arbitration and a suit is filed in respect of the subject-matter of that agreement, the Court has a discretion under Section 18 of the second schedule to the Civil Procedure Code to stay the trial of the suit. It was observed at page 117 as follows :-
In order to provide against the contumacious conduct of a plaintiff who has agreed to refer, but who wants to resile from it by instituting a suit, Section 18 of the second schedule has bean introduced. Under that section if the Court is appraised that an agreement to refer was entered into, it may stay the trial of the suit. In a given case, the Court may consider that the arbitrators would be able to decide the case far more efficaciously than the Court itself. In such a case, the Court may ask the arbitrator to give his decision. But the discretion is in the Court, the paramount idea being that a tribunal constituted by the parties should not come in conflict or usurp the function of the tribunal which the sovereign has provided.
Section 19 of the Indian Arbitration Act and Clause 18 of the second schedule to the Civil Procedure Code give a discretion to the Court. The words are permissive and not imperative. The words 'may make' make it abundantly clear, and the jurisdiction to stay the proceedings arises if the Court is satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission. It is, therefore, largely a matter in the discretion residing in the trial Court. Russell on Arbitration, 11th Ed., p. 102, observes:-
This discretion, in accordance with the ordinary rules of law, must he judicially exercised, but where it has been so exercised it will not readily be interfered with, even though the tribunal which is asked to review it may feel that, if the decision had rested with them, their own conclusion might have been different.
8. In the present case there is not merely an order refusing stay but there is also an acquiescence of the defendants in the order. Under Section 19 of the Indian Arbitration Act taking a step in the proceedings disentitles a party from applying for stay : Ochs v. Ochs Brothers  2 Ch. 121 When the trial Court has refused to stay the proceedings and exercised the discretion in a particular way, and one of the parties, who wished the matter to be referred to arbitration, acquiesces in the order, leads evidence and takes a chance of success in the first Court, it is difficult to hold that an Appellate Court can interfere with that discretion. The powers conferred on Small Cause Courts under Section 38 can bo more properly described as revisional than as appellate powers though not restricted to interference on questions of law. See Sonoo Narayan v. Dinkar Jagannath I.L.R. (1917) Bom. 80: 19 Bom. L.R. 944 and In re 'Shivlal Padma I.L.R. (1909) Bom. 316: 12 Bom. L.R. 130 When a decree has been passed in a suit it is a contradiction in terms to say that the appellate or revisional Court can stay the suit.
9. I think, therefore, that the Full Court had no jurisdiction, after the decree had been passed by the trial Court, to stay the suit or at least acted in the exercise of its jurisdiction with material irregularity in staying the suit.
10. It is unnecessary, therefore, to go into the question as to whether the trial Court was right in its view that under Clauses 21 and 22 it was not necessary to refer the matter to arbitration, and that the judgment of Wadia J. precluded a second reference to arbitration.
11. It is also unnecessary to consider whether an appeal lay to the Full Court from the preliminary decision made by the trial Court in this case that a stay should not be ordered. It is contended on the one hand that the words 'or order' in Section 38 of the Presidency Small Cause Courts Act would include an order of the present character. On the other hand, reliance is placed on the explanation to Section 38, and it is contended that it is only when a decree is passed that an appeal can be filed and no appeal is permissible against an interlocutory order. Assuming, however, that the contention is right that there was no appeal to the Full Court from the preliminary order made by the learned Judge, I am inclined to the view that after the trial Court has exercised the discretion in refusing the stay and ordering the suit to proceed, and the defendants having taken active steps to contest the suit and having led evidence in the suit and a decree having been passed, the Full Court, in my opinion, ought not to have ordered a stay of the proceedings.
12. On these grounds I would reverse the order of the Full Court and restore that of the trial Court with costs throughout on the defendants.
13. I agree. Mr. Desai's argument for the opponents is that the order of the trial Court refusing to refer the dispute to the arbitrators was wrong, that he must have an opportunity of challenging that wrong order, and that he could not do so by appealing immediately inasmuch as no appeal against an interlocutory order could be made, but he was obliged to wait until a decree had been passed, and that in his appeal against the final decision of the trial Court he was entitled to raise the question whether that Court was right in assuming jurisdiction. Now, I am not prepared to say that a party must have an opportunity of challenging a wrong order. There are many orders which cannot be challenged. Secondly, I am not prepared to say that Section 38 of the Presidency Small Cause Courts Act precluded Mr. Desai's client from challenging the order at once on its being made. Section 38 gives the Full Court jurisdiction : where a suit has been contested,' on the application of either party, made within eight days from the date of the decree or order in the suit, to order a new trial to be held, or alter, set aside or reverse the decree or order.' That means, it is contended, and I am prepared to agree, a decree or an order in the nature of a decree, i. a, an order which finally decides one or more of the questions in dispute between the parties. Nevertheless, in my opinion, the opponents could have gone to the Full Court, for one of the principal questions in dispute between the parties at the time was whether there should be a further reference to arbitration or whether the case should be continued in Court, and that dispute was settled finally, so far as the trial Court was concerned, by the order of the trial Judge refusing to refer to arbitration.
14. But assuming that Mr. Desai is right and there is no appeal, still I am not prepared to say that he had a right to challenge the order in appeal against the final decree. What he was asking the Full Court to do was to set aside the decree of the trial Judge not on the ground that it was mistaken or that the Court had no jurisdiction, but on the ground that the learned Judge of the trial Court would have been better advised had he exercised his jurisdiction in another way. This request, in my opinion, should not have been granted. I agree with my learned brother that once the Court had assumed jurisdiction and had actually passed a decree, it was beyond the power of the Full Court to ignore that decree, and treat it as if it was a nullity, and to order a stay of proceedings which had already been finished. On this point the applicant must succeed. I understand that this point was not brought before the learned Judges of the Full Court, and therefore, we have not had the benefit of their view, but I can see no answer to the argument put forward by the learned counsel for the applicant.