Mandatory referral to arbitration applies before a substantive defence, while Section 22 suspension is limited to protected proceedings.

A valid arbitration agreement, coupled with a Section 8 request made before the first substantive statement, requires the judicial authority to refer the parties to arbitration and not retain the suit merely because the agreement is disputed. The court also noted that the defendant had not waived the right to invoke arbitration. Section 22 of the Sick Industrial Companies Act did not suspend the suit because the proceedings were not of the class specifically protected by that provision. The operative effect was that arbitration was to proceed and the suspension request failed.

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Issues: (i) Whether the suit was liable to be referred to arbitration under the arbitration clause and Section 8 of the Arbitration and Conciliation Act, 1996. (ii) Whether all proceedings in the suit were liable to be suspended under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (i): Whether the suit was liable to be referred to arbitration under the arbitration clause and Section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The agreement contained an arbitration clause and the defendant sought reference to arbitration before filing a written statement or taking any substantive step in the suit. The Court noted that Section 8 uses mandatory language and that, once an arbitration agreement exists and the statutory conditions are satisfied, the judicial authority must refer the parties to arbitration. The defendant had not waived the right to invoke Section 8, and the plaintiff could not avoid the arbitration clause merely by disputing the agreement.

Conclusion: The suit was not maintainable and the parties were required to proceed to arbitration under the Arbitration and Conciliation Act, 1996.

Issue (ii): Whether all proceedings in the suit were liable to be suspended under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Section 22 was considered in relation to the nature of the suit and the reliefs sought. The Court found that the suit did not fall within the class of proceedings covered by the statutory bar and that the pending proceedings therefore did not warrant suspension under that provision.

Conclusion: Section 22 did not justify suspension of the suit proceedings.

Final Conclusion: The application for reference to arbitration succeeded and the companion request for suspension of proceedings failed as unnecessary, leaving the suit to be dealt with in accordance with the arbitration clause.

Ratio Decidendi: Where a valid arbitration agreement exists and an under Section 8 is made before the first substantive statement, the Court must refer the parties to arbitration and cannot retain the suit merely because the agreement is disputed; Section 22 of the SICA applies only to proceedings of the kind specifically protected by that provision.

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