Background

Indian law of arbitration is given in the Arbitration and

Conciliation Act 1996. The background of the act is taken
from UNCITRAL Model 1985 . the objective of this act is to
minimize the function of law and provide a platform where
disputed parties resolve the dispute privately and more
efficient within less time.
In present, Arbitration and conciliation Act 1996 as
amended in 2015 follow a certain level of uniformity. The
Act is a composite piece of legislation.The act is divided into
four parts, out of four there are two parts which play a
significant role. Any matter which is commercial in nature,
whether these matter comes out or not to a contract can be
go for arbitration, but public policy always kept in mind,
while apply the method of arbitration. There are certain
example like matrimonial dispute,criminal matters,
insolvency matters which are not dealt by arbitration
because of public policy.
We are going to discuss and focus on the section 8 of
Arbitration and Conciliation Act ,where court play a role to
minimum extent that is reference under part I. The basic
principle of the Act is “ No judicial authority will intervene
the matter which is dealt by part I of the Act except where so
provided in this part. Section 5 would not have any
application under section 8 of the Act which deals with the
power of reference. The reason behind this is that section 5
prohibit the intervention of court , if disputed matter is
within the limit of part I except those which is specifically
given under this part1.

1
1 Sukanya Holding Pvt. Ltd. V. Jayesh H. Panda AIR 2003 SC 2252
Section 82

(1) A judicial authority before which an action is brought in

a matter which is the subject of an arbitration agreement
shall, if a party so applies not later than when submitting his
first statement on the substance of the dispute, then,
notwithstanding any judgment, decree or order of the
Supreme Court or any court, refer the parties to arbitration
unless it finds that prima facie no valid arbitration
agreement exists.

(2) The application referred to in subsection (1) shall not be

entertained unless it is accompanied by the original
arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a
certified copy thereof is not available under section (1), and
the said agreement or certified copy is retained by the other
party to that agreement, then, the party so applying shall file
such application along with a copy of arbitration agreement
and a petition praying the Court to call upon the other party
to produce the original arbitration agreement or its duly
certified copy before that Court.

(3) Notwithstanding that an application has been made

under sub-section (1) and that the issue is pending before
the judicial authority, an arbitration may be commenced or
continued and an arbitral award made.

2
Arbitration and Conciliation Act, 1996 ( As amended 2016)
Object of section 8 of the Act

The object of this section is to ensure the parties that a

matter dealt by arbitration shall not be intervene by any
court of law, except specifically provided by part 1 of the Act.
This section provide a way or platform ,where disputed
parties can resolve their dispute through private manner.
Through this section, disputed party take the recourse of
judicial authority and take stay on legal proceeding and go
for arbitration.

Application of section 8 of the Act

The language of this section of the Act is peremptory in

nature. Therefore, the judicial authority is bound to refer the
matter for arbitration, if judicial authority find the valid,
operative and enforceable arbitration agreement between
the disputed parties3. This section have two fold that is stay
on legal proceeding and refer the matter to arbitration.
Nothing is left to decide on the part of court after the matter
is referred to arbitration tribunal. If the judicial authority
refuse to entertain the application of reference ,then appeal
against the refusal may be file under section 37 of the Act. If
the party is aggrieved by award, then he can challenge the
award under section 34 of the Act. The court, where we
challenge the award will be a court as defined in section 2(e)
of the Act , but court under section 8 of the Act is any court
where we made application of reference3.

The court held that no discretionary power was given to

judicial authority if all the condition that was laid down in

3
Dr. N. V. PARANJAPE, LAW RELATING TO ARBITRATION AND
CONCILIATION IN INDIA 109 (CENTRAL LAW AGENCY,ALLAHABAD,7TH edn.
2016)
the section exists while application filed to reference before
judicial authority4.
As amended in 2015, section 8 says that if dispute arise
between the parties of arbitration agreement and one party
approach to court related some claim then other party can
raise an objection that matter should be referred to
arbitration because the dispute is subjected to arbitration
agreement Such objection must be come before submit his
first statement on the subject matter of dispute. It is
required that such application must contain the original
arbitration agreement or a certified copy thereof, otherwise
he make a request to court to call upon other party to
produce original arbitration agreement or certified copy of it.
If the judicial authority find that a valid arbitration
agreement over the subject matter of dispute exist, then
judicial authority shall refer the matter to arbitration5. If the
other party file written statement and raised an objection
later, then he can’t claim for reference. It was presumed that
he waived his right to objection.

Here“The expression ‘first statement on the substance of the

dispute’ contained in section 8(1) must be
contra-distinguished with the expression ‘written statement’.
It employs submission of the party to the jurisdiction of the
judicial authority. What is, therefore, needed is a finding on
the part of judicial authority that the party has waived his
right to invoke the arbitration clause. If an application is
filed before actually filing the first statement on the
substance of the dispute, the party cannot be said to have
waived his right or acquiesced himself to the jurisdiction of
the court. But if the party, even after making the statement
of defence, prays that the matter be referred to arbitration
4
P.A Raju vs. P.B Raju AIR 2000 SC 1886
5 Rastriya Ispat Nigam v. Verma Transport Co., AIR 2006 sc 2800
and the other party has no objection, there is no bar on the
court referring the parties to arbitration.

Section 8(1) says that if subject matter of dispute is brought

before judicial authority, either by one party or by any other
person who claim through or under him then other party
make an application for reference before judicial authority,
but this application of reference must be given before filing
first statement on subject matter of dispute.

Section 8(2) says that if the party applying for reference to

arbitration does not have original or certified copy of
arbitration agreement, then such party can make an
application to court to call upon the other party to produce
the original or certified true copy of arbitration agreement
before the court. If order of refusal to arbitration is passed
by court, then appeal against such order can be made under
section 37 of the Act.

Section 8(3) says that arbitration can be commenced or

continued and concluded by making an arbitral award,
despite the fact that application has been made and issue is
pending before the judicial authority.

This provision creates a right in the person bringing an

action to have the dispute adjudicated by Court, once the
other party has submitted his first statement of defence. But
if the party, who wants the matter to be referred to
arbitration applies to the court after submission of his
statement and the other party who has brought the action
does not object, there is no bar on the court referring the
parties to arbitration6.

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Dr. N. V. PARANJAPE, LAW RELATING TO ARBITRATION AND
CONCILIATION IN INDIA 109 (CENTRAL LAW AGENCY,ALLAHABAD,7TH edn.
2016
Condition for invoke section 8 of the Act
Before modification7
1. There must be an agreement.
2. The dispute before judicial authority is arbitrable.
3. The other party has brought the action in a court.
4. Other party who raised the objection apply for reference
before
submit his first statement on the subject matter of dispute.

After modification8
1. A valid agreement must be in existence.
2. The subject matter of dispute should be same as the
subject matter of arbitration agreement.

3. The other party to that agreement brings an action before

the Court.
4. Objecting party apply for reference before submit his first
statement on the subject matter of dispute.

Effect of amendment in 2015

1. Section 8 of the Act is mandatory in nature, not
discretionary.
2. The amendment provides that such reference has to be
made, although anything is given in any judgement, decree
or order of Supreme Court or any court, if judicial authority
finds that a valid arbitration clause exists9.
3. The amendment provides that non-signatory parties can
go for reference.
7
Renusagar vs Gas Authority of India AIR 1885 SC 1156
8
P.A Raju vs. P.B Raju AIR 2000 SC 1886
9
Booz Hamilton vs. SBI Home Finance (2011) 5 SCC 532
Factors that must be consider, while applying section 8
of the Act.

1. Whether it can be made applicable to civil dispute.

The applicability of the Act does not depend upon the
dispute being a commercial dispute. Reference to arbitration
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 also10.

2. Whether the validity of the arbitration clause can be

disputed before the Court, In front of which an
application for reference is made.

The court held that enquiry under the Section 8 and Section
45 of the Arbitration and Conciliation Act, 1996, is confined
only to the question whether the arbitration agreement is
“null and void, inoperative or incapable of performing it , but
not the legality and validity of substantive contract11”.

3. Whether an application under Section 8(1) cannot be

entertained unless accompanied by original arbitration
agreement or a certified copy thereof.

If party who wish to invoke section 8 of the Act had failed to

file original arbitration agreement or duly certified copy, the
Court was justified in refusing to refer the dispute for
arbitration. Therefore it must be necessary to produce
original arbitration agreement or certified copy of it at the

10
H. Srinivas Pai and Anr. v. H.V. Pai and Ors.(2010) SCR 413
11
Sasan Power Limited vs. North American Coal Corporation India Pvt. Ltd. AIR 2016 SC 465
time of application of reference to arbitration file before the
court12.

4. Can non-signatory parties go for reference under

section 8 of the Act?

Non-signatory party can’t go for reference under section 8 of

the Act13 , but after judgment14 in 2013 non-signatory
parties can be referred to arbitration under section 8 of the
Act. Now in 2015 amendment “ Claim under through or
under” was added.

5. Can a dispute of tenancy be referred to Arbitration

under section 8 of the Act

The court held that such type of dispute that is dealt by

special or other law can’t go for reference under section 8 of
the Act because the very objective of section 2 says that no
special or other law shall be affected by the Act 1996.

6. Can two proceeding that is legal proceeding in court

and arbitral proceeding in Arbitral tribunal be possible?

Although the code of civil procedure does not permit two

court concurrently proceed with same cause of action
between the same parties, but section 8(3) doesn’t prohibit
to commence or continuance of arbitral proceeding.Thus
section 8(3) permits both the arbitration proceeding and
legal proceeding run simultaneously15.

12
Atul Singh vs. Sunil Kumar Singh AIR 2008 SC 1016
13
Sukanya Holding Pvt. Ltd. vs Jayesh H Panda AIR 2003 SC 2252
14
Chloro Control Ltd vs Severn trent Water Purification AIR( 2013) 1 SCC 641
15
Booz Hamilton vs SBI Home finance Ltd AIR 2011 SC 2507
Meaning of expression “Reference”

“Reference”was defined under section 2(e) of Arbitration

Act 1940 to mean “a reference to arbitration”. Now, under
the Arbitration and Conciliation Act, 1996 has been dropped
and instead of that, the expression “arbitration agreement”
has been used. A reference requires the assent of the both
sides. If one side is not prepared to submit a matter to
arbitration when there is an agreement between them that it
should be referred, the recourse must be had to the court16.

Meaning of expression “Judicial Authority”

The Supreme Court stated that the term “judicial authority”

would comprehend wide meaning. This term is not confined
to only bodies that function purely judicially in nature, this
also include quasi- judicial bodies and customer forum.Here
this term court also include that court which is not covered
under section 2(e) of the Act, it means that section 8 can be
invoked before any court17.

Difference between section 34 of arbitration act 1940

and section 8 of arbitration and conciliation act 199618.

1. Section 34 of the Act 1940 gave power of discretion, but

section 8 of the Act 1996 is mandatory in nature.

2. Section 34 of the Act 1940 gave power to stay on legal

proceeding, but section 8 of the Act 1996 give power to stay
of legal proceeding and reference to arbitration if prima
facie, valid agreement exists.

16
Krishan Keshav, Alternative Dispute Resolution 177 (Singhal Law Publication, New Delhi, edn 2016
17
S.B.P &Co` vs Patel Engineering Ltd. AIR 2006 SC 450
18
Rahtriya Ispat Nigam vs. Verma Transport Co. AIR 2006 SC 2800
Difference between section 89 of Civil procedure code
and section 8 of this Act.

1. Under section 89 of C.P.C no requirement of arbitration

agreement, but under section 8 of this Act, valid arbitration
agreement must be in existence.
2. Under section 89 of C.P.C power of reference is
discretionary in nature, but under section 8 of the Act power
of reference is mandatory, if all the condition is satisfied.
3. Under section 89 of C.P.C power of reference is used by
court, but under section 8 of this act power of reference is
used by judicial authority.

Stay of legal proceeding may be refused19

1. Where the judicial authority apprehend that the contract

is vitiated by fraud or bias.

2. Where the judicial authority thinks that no adequate

relief can be granted to the parties through arbitration.

3. If the contract that contain arbitration clause is void and

unenforceable.
4. Where it appears to the court that party had waived his
right to apply for stay before submission of first
statement on the substance of the dispute.

5. The claims or suits which based on Negotiable

Instrument such as Hundis can’t be stayed by the court
or judicial authority.

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Dr. N. V. PARANJAPE, LAW RELATING TO ARBITRATION AND CONCILIATION IN INDIA 117
(CENTRAL LAW AGENCY,ALLAHABAD,7TH edn. 2016