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PETITIONER: P.  ANAND GAJAPATHI RAJU & ORS.

       Vs.

RESPONDENT: P.V.G.  RAJU (DIED ) & ORS.

DATE OF JUDGMENT:       28/03/2000

BENCH: Ruma Pal, D.P.Wadhwa

JUDGMENT:

D E R

     No orders on I.As 3 and 4.

     During  the  pendency of this appeal all  the  parties have  entered  into  an arbitration  agreement.   They  have agreed  to refer their disputes in this appeal and others to Justice  S.   Ranganathan, a retired Judge of this Court  as sole  Arbitrator.  The arbitration agreement is in the  form of an application and has been signed by all the parties and meets  the requirements of Section 7 of the Arbitration  and Conciliation  Act, 1996 (new Act).  The question that arises for  consideration is whether this Court in appeal can refer the  parties  to  arbitration  under   the  new  Act.    The Arbitration  Act, 1940 expressly provided for the parties to a  suit  to apply for an order of reference of  the  subject matter  of  the  suit  (see Sections 21 to  25,  Chapter  IV relating  to arbitration in suits).  There is also authority for  the  proposition  under  the 1940  Act  that  with  the reference  of  the  disputes,  the  suit  itself  may  stand disposed  of.   Part  I of the new Act deals  with  domestic arbitrations.   Section  5, which is contained in Part I  of the  new Act, defines the extent of judicial intervention in arbitration  proceedings.   It   says  that  notwithstanding anything  contained  in any other law for the time being  in force,  in matters governed by Part I, no judicial authority shall  intervene  except  where so provided  in  that  Part. Section  5  brings  out clearly the object of the  new  Act, namely,   that  of  encouraging   resolution   of   disputes expeditiously  and  less  expensively and when there  is  an arbitration  agreement,  the Courts intervention should  be minimal.  Keeping the legislative intention in mind, Section 8  of  the new Act may be construed.  It reads:   Power  to refer  parties to arbitration where there is an  arbitration agreement.

     8(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, refer the parties to arbitration.

     (1)  The  application referred to in  sub-section  (1) shall  not  be entertained unless it is accompanied  by  the original  arbitration  agreement  or a duly  certified  copy thereof.

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

     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.   This last  provision  creates a right in the person bringing  the 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 party who has brought the action does not object,  as  is the case before us, there is no bar  on  the Court  referring  the parties to arbitration.  In our  view, the  phrase  which  is  the   subject  of  an   arbitration agreement  does  not, in the context,  necessarily  require that  the agreement must be already in existence before  the action is brought in the Court.  The phrase also connotes an arbitration agreement being brought into existence while the action  is pending.  Blacks Law Dictionary has defined  the word  is  as  follows:    This  word,  although  normally referring to the present, often has a future meaning, but is not  synonymous  with  shall  have  been.   It  may  have, however,  a  past  signification, as in the  sense  of  has been.

     A  further  question  arises whether the Court  is  in these   circumstances  obliged  to   refer  the  parties  to arbitration  and  if  so with what effect.   In  the  matter before us, the arbitration agreement covers all the disputes between  the  parties in the proceedings before us and  even more than that.  As already noted, the arbitration agreement satisfies the requirements of Section 7 of the new Act.  The language  of  Section  8 is peremptory.  It  is,  therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement.  Nothing remains to be  decided  in  the original action or the  appeal  arising therefrom.   There is no question of stay of the proceedings till  the  arbitration  proceedings conclude and  the  Award becomes  final  in terms of the provisions of the  new  Act. All  the  rights,  obligations and remedies of  the  parties would  now be governed by the new Act including the right to challenge  the  Award.  The Court to which the  party  shall have  recourse to challenge the Award would be the Court  as defined  in  clause (e) of Section 2 of the new Act and  not the Court to which an application under Section 8 of the new Act  is made.  An application before a Court under Section 8 merely  brings to the Courts notice that the subject matter of  the  action  before  it  is the  subject  matter  of  an arbitration   agreement.    This  would   not  be  such   an application  as contemplated under Section 42 of the Act  as the  Court  trying  the  action  may or  may  not  have  had jurisdiction  to  try  the  suit to start  with  or  be  the competent  Court within the meaning of Section 2 (e) of  the new  Act.   We, therefore, allow the application  and  would

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refer  the  parties to arbitration.  No further  orders  are required   in  this  appeal  and   it  stands  disposed   of accordingly.