Section 8 of the Arbitration Act IV

Where an agreement is terminated by one party on account of the breach committed by the other, particularly, in a case where the clause is framed in wide and general terms, merely because the agreement has come to an end by its termination by mutual consent, the Arbitration Clause does not get perished nor is rendered inoperative. This Court, in the case of P. Anand Gajapathi Raju, (2000) 4 SCC 539 has held that the language of Section 8 is peremptory in nature.

Therefore, in cases where there is an Arbitration Clause in the agreement, it is obligatory for the Court to refer the parties to Arbitration in terms of their Arbitration Agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an Arbitrator. Therefore, it is clear that in an agreement between the parties before the Civil Court, if there is a clause for Arbitration, it is mandatory for the Civil Court to refer the dispute to an Arbitrator.

In view of the above, we are of the considered opinion that in the present case, the prerequisites for an application under Section 8 are fulfilled, viz., there is an Arbitration Agreement; the party to the agreement brings an action in the Court against the other party; the subject matter of the action is the same as the subject-matter of the Arbitration Agreement; and the other party moves the Court for referring the parties to Arbitration before it submits his first statement on the substance of the dispute. We have come to the conclusion that the Civil Court had no jurisdiction to entertain a suit after an application under Section 8 of the Act is made for Arbitration. In such a situation, refusal to refer the dispute to Arbitration would amount to failure of justice as also causing irreparable injury.

Hon’ble Justice R.K. Agrawal, Hema Khattar v. Shiv Khera, [Civil Appeal No. 8837 of 2016].