Alfred Henry Lionel Leach, C.J.
1. The appellants are a firm of merchants carrying on business in Madras. For the period from the 1st August, 1936 to the 31st July, 1937, the respondent acted as their 'guarantee' broker in the purchase of groundnuts. The terms of the respondent's employment were embodied in a written agreement, which provided that in the event of any dispute arising under the agreement the dispute should be referred to arbitration in Bombay. The respondent was to be responsible for the weight, quality and refraction of the purchases made by him in the moffasil and the appellants were to be at liberty to refuse any lot of inferior quality despatched to them by him. By refraction was meant allowance for dirt and damaged and half-damaged seeds. The arrangement between the parties was that the respondent should issue certificates of quality before despatching goods to the appellants in Madras. On arrival of the goods the appellants had them examined and if it was found that they were not of the quality stated by the respondent he was responsible for the difference in value. After the agreement had been concluded differences arose with regard to the amount claimed by the respondent as his commission and the appellants accused the respondent of having fabricated documents with reference to the quality of goods supplied by him. On the 29th November, 1937, the appellants gave notice to the respondent of their intention to invoke the arbitration clause of the agreement, and on the 17th December their advocate wrote to the respondent's solicitor informing him that they had nominated a gentleman residing in Bombay as their arbitrator and calling upon him to nominate his arbitrator within seven days. On receipt of this letter the respondent filed the suit out of which this appeal arises. His reason for doing so is that as there have been grave charges of fraud made against him - in fact the appellants went to the length of filing a criminal complaint against him - the questions of issue between him and the appellants should be decided in open Court and not in private arbitration proceedings. Accordingly he applied to the Court for an order staying the arbitration proceedings. On the other hand, the appellants applied for an order staying the suit pending the decision of the arbitration. These applications came before Gentle, J., on the 18th March, 1938. The learned Judge decided that this was a case which should be tried in open Court and he directed the arbitration proceedings to be stayed. The appeal is from that order.
2. The learned Advocate for the appellants properly concedes that the Court has discretion to stay the arbitration proceedings, but he says that this is not a case in which this discretion should be exercised in favour of the respondent's application. The sole question we have got to decide is whether the learned Judge exercised the discretion vested in him properly. We have no hesitation in holding that the discretion which he did exercise was exercised wisely. The questions at issue between the appellants and the respondent involve serious allegations of fraud, and the respondent has the right to ask the Court that matters which affect his honesty and integrity should be decided in open Court. In this connection I will quote a passage from the judgment of Jessel M.R., in Russell v. Russell (1880) 14 Ch. D. 471 to be found at page 476 of the report:
Though I quite agree it is within the discretion of the Court to say, where one of the two partners desires it, that a dispute shall not be referred to arbitration, yet I must consider for a moment which of the two partners does desire to exclude arbitration. Does the party charging the fraud desire it, or the party charged with the fraud desire it? Where the party charged with the fraud desires it, I can perfectly understand the Court saying,' I will not refer your character against your will to a private arbitrator. It seems to me in that case it is almost a matter of course to refuse the reference.
3. These observations have full application here. There is no substance in this appeal and it must be dismissed with costs which will be taxed in the ordinary way.