In P. Anand Gajapathi Raju & Ors. v. P.V.G. Raju (Died) & Ors.

, while iterating the

periphery of Section 8 of the 1996 Act, the Supreme Court said that "The conditions
which are required to be satisfied under Sub-sections (1) and (2) of Section 8 before
the Court can exercise its powers are (1) there is an arbitration agreement; (2) a party
to the agreement brings an action in the Court against the other party; (3) subject
matter of the action is the same as the subject matter of the arbitration agreement; (4)
the other party moves the Court for referring the parties to arbitration before it
submits his first statement on the substance of the dispute. .... The language of
Section 8 is per-emptory."

The following factors are to be considered before entertaining an application under

Section 8 of the 1996 Act:

• First question to be analyzed is whether it can be made applicable to a civil

dispute. The Supreme Court while answering the aforesaid question in H.
Srinivas Pai and Anr. v. H.V. Pai (D) thr. L.Rs. and Ors., said that "The Act
applies to domestic arbitrations, international commercial arbitrations and
conciliations. The applicability of the Act does not depend upon the dispute
being a commercial dispute. Reference to arbitration and arbitability depends
upon the existence of an arbitration agreement, and not upon the question
whether it is a civil dispute or commercial dispute. There can be arbitration
agreements in non-commercial civil disputes also."
• The presence of arbitration agreement is another pre-requisite for seeking a
reference under Section 8. Section 7 of the 1996 Act provides the diameter of
the term "arbitration agreement". The importance of arbitration agreement, for
seeking a reference under Section 8, was emphasized by the Supreme Court
in Smt. Kalpana Kothari v. Smt. Sudha Yadav and ors. wherein the Court said
that "As long as the Arbitration clause exists, having recourse to Civil Court
for adjudication of disputes envisaged to be resolved through arbitral process
or getting any orders of the nature from Civil Court for appointment of
Receiver or prohibitory orders without evincing any intention to have recourse
to arbitration in terms of the agreement may not arise."
• Next question which might arise in the step wise analysis of Section 8 is
whether the validity of the arbitration clause can be disputed before the Court,
in front of which an application for reference is made. The answer to the
question was laid in the negative by the Supreme Court in Hindustan
Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums. The Court in this case
held that if the existence of the arbitration clause is admitted, in view of the
 mandatory language of Section 8 of the Act, the courts ought to refer the
dispute to arbitration. The Supreme Court, while raising a presumption for the
validity of an arbitration clause in an agreement, in India Household and
Healthcare Ltd. v. LG Household and Healthcare Ltd., said that the Courts
would construe the agreement in such a manner so as to uphold the arbitration
agreement.
• Section 8 further mandates that the subject matter of the dispute is the same as
the subject matter of the arbitration agreement. While articulating on this pre-
requisite, the Supreme Court in Sukanya Holdings Pvt. Ltd. v. Jayesh H.
Pandya and Anr., said that "The relevant language used in Section 8 is-"in a
matter which is the subject matter of an arbitration agreement". Court is
required to refer the parties to arbitration. Therefore, the suit should be in
respect of 'a matter' which the parties have agreed to refer and which comes
within the ambit of arbitration agreement."
• An application under Section 8(1) cannot be entertained unless accompanied
by original arbitration agreement or a certified copy thereof. Laying emphasis
on section 8(2) for the grant of reference, the Supreme Court in The Branch
Manager, Magma Leasing and Finance Limited and Anr. v. Potluri
Madhavilata and Anr. said that "An analysis of Section 8 would show that for
its applicability, the following conditions must be satisfied: (e) that along with
the application the other party tenders the original arbitration agreement or

duly certified copy thereof."

Section 8 of the 1996 Act mandates that a judicial authority before whom an action is
brought, which is the subject of an arbitration agreement between the
parties, shall refer the parties to arbitration. The Supreme Court, while interpreting
the provisions of the Act, has held that Section 8 of the new Act is not in pari materia
with Section 34 of the old Act and that the two provisions are distinct and different
from each other. The Supreme Court has also clarified that as soon as the matter
before any judicial authority is referred to arbitration, the suit/legal proceedings
pending before it stand disposed of.
What then would be the scope of enquiry before a judicial authority that considers an
application under Section 8 of the Act to refer a matter pending before it to
arbitration?
Under the old Act, the judicial authority, before whom such an application was
moved, was empowered to stay further proceedings only if the following twin
conditions were satisfied:
(i) that there is sufficient reason for referring the matter to arbitration in
accordance with the arbitration agreement; and
(ii) that the applicant was, at the time when the proceedings were
commenced, and still continues to be, ready and willing to do all things
necessary for the proper conduct of the arbitration.
Under the new Act, the power of a judicial authority to refer the parties to arbitration
has been streamlined. The scope for exercising discretion as provided for under the
old Act has been taken away. The Supreme Court has consistently held that the
language of Section 8 is peremptory and it is obligatory for the courts to refer the
parties to arbitration in terms of their arbitration agreement. In contrast to the
conditions for stay envisaged in Section 34 of the old Act, the conditions required to
be satisfied for a court/judicial authority to refer parties to arbitration under Section 8
are:
(i) there is an arbitration agreement;
(ii) a party to the agreement brings an action against the other party to the
agreement;
(iii) the subject-matter of the action is the same as the subject-matter of the
arbitration agreement;
(iv) the other party moves the court for referring the parties to arbitration
before it submits its first statement on the substance of the dispute.
Would this mean that the court/judicial authority acting in terms of the provisions
under the new Act has no power at all to refuse relief under Section 8 assuming that
the applicant has satisfied all the conditions envisaged therein?
Certain exceptions have been carved out of Section 8 when it would be permissible
for the court/judicial authority to decline to refer the parties to arbitration and the
arbitration agreement notwithstanding, continue adjudication of the proceedings.
These exceptions, in practice, are usually applicable to proceedings/actions that arise
out of building contracts/construction agreements where multifarious reliefs are
claimed not only against the parties to the arbitration agreement but also against third
persons, who are strangers to the arbitration agreement. In such an event, it has been
held that the subject-matter of the suit ought not to be bifurcated. Any bifurcation of
the subject-matter of the suit, one to be decided by the Arbitral Tribunal and the other
to be decided by the court/judicial authority would lead to anomalous results. The
Supreme Court noticed that this would inevitably lead to delay and increase the cost
of litigation between the parties. The possibility of two fora passing conflicting orders
cannot also be ruled out if such bifurcation of distinct causes of action is permitted.
Said succinctly, when the subject-matter of the suit/legal proceedings includes
subject-matter of the arbitration agreement as well as other disputes, the parties
cannot be referred to arbitration.

Another exception to Section 8 has been recently noticed by the Karnataka High
Court. The High Court has laid down that the principles of estoppel, waiver and
acquiescence are applicable to a party seeking reference of a matter to arbitration.
The question arose whether it was permissible for a party to an arbitration agreement,
who had earlier contended that the dispute is not arbitrable, to seek reference of the
very same matter to arbitration by invoking Section 8. The High Court, after referring
to Anand Gajapati Raju case has held that if parties are permitted to approbate and
reprobate regarding the arbitrability of the dispute, it would work hardship against the
other party and declined to refer the parties to arbitration under Section 8.
There are two other obvious situations when the court would be justified in refusing
relief under Section 8. They are:
(i) when the power of the court is not invoked before submission of the first
statement on the substance of the dispute; and
(ii) when the original or a duly certified copy of the arbitration agreement is
not filed along with the application seeking reference to arbitration.
It is pertinent to mention here that the Supreme Court in HPCL case has examined
the question relating to the role of the civil court under Section 8 when a contention is
raised before it that the arbitration agreement is inapplicable to the facts of the case.
After referring to the decision of the Constitution Bench in Konkan Rly. case it has
held that the answer to the question lies in Section 16 of the Act which empowers the
Arbitral Tribunal to rule on its own jurisdiction including rule on any objection
relating to the existence/validity/applicability of the arbitration agreement. However,
the Supreme Court in Konkan Rly. case was concerned and decided only on the
power exercised by the Chief Justice or his designate under Section 11 of the Act
and not the power of a civil court under Section 8. The question whether the power
exercised by the civil court under Section 8 is administrative or adjudicatory was not
gone into by the Supreme Court in Konkan Rly. case.
The Supreme Court has now in HPCL case held that if there is an objection before
the civil court as to the applicability of the arbitration clause to the facts of the case,
the same will have to be raised before the Arbitral Tribunal under Section 16 of the
Act and the civil court cannot proceed to examine the applicability of the arbitration

agreement to the facts of the case. (emphasis supplied) The exceptions noticed by the
Supreme Court and the High Courts in their earlier rulings have neither been referred
to nor adverted to in HPCL case. It is submitted that HPCL case requires to be
reconsidered especially in the light of the decision in Sukanya Holdings case and the
other exceptions mentioned above.

2001(4) RAJ 574 (Mad)

Wankanner Jain Social Welfare Society Vs. Jugal Kishore Sapani

The respondent had filed a suit for interim injunction. The petitioner, after receiving
the notice, entered appearance and filed counter and argued the matter. Thereafter the
petitioner moved an application under Section 8.

The court held that filing of the counter by the petitioner was clearly the first
statement on the substance of the dispute and an application, after submitting the first
statement on the substance of the dispute, was not maintainable. It was further held
that filing of the counter by the petitioner points to the petitioner subjecting itself to
the jurisdiction of the Civil Court and accordingly, dismissal of the application under
Section 8 is in accordance with law.

2003(4) RAJ 336 (Kar)

NEPC-MICON Ltd Vs Perfect Engineering (Mysore) Works

The party had made an application under Section 8 for a direction to appoint an
arbitration in terms of the arbitration clause, before the Principal District Judge. The
issue that arose was whether the court can entertain such a prayer and it was held no.
The court stated that it is of utmost importance to note that under the scheme of the
1996 Act, an application simplicitor for referring the matter to an arbitrator is
entertainable only by the concerned Chief Justice of the High Court or any person or
institution designated by him, as has been specifically contemplated under Section
11. In the court's opinion, the lower court had erred in assuming jurisdiction under
Section 8 for entertaining the application.