Mandatory reference to arbitration upheld where interim objections did not waive the arbitration clause or exclude a termination dispute.

Section 8 of the Arbitration and Conciliation Act, 1996 is mandatory where an admitted arbitration agreement covers the dispute and the application is filed before the first statement on the substance of the claim. Contesting interim or incidental proceedings, such as an injunction application, does not amount to waiver of the arbitration clause or submission to civil court jurisdiction. A dispute arising from termination of the contract remained within the arbitration clause, and the proposed blacklisting at the show-cause stage did not exclude arbitration. Procedural objections based on notice, absence of a certified copy of the agreement, or the partner's alleged resignation were rejected, and the matter was directed to arbitration.

---

---

Issues: Whether the application for reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 was maintainable despite the defendants having contested interim proceedings, whether the dispute arising from termination and proposed blacklisting fell within the arbitration clause, and whether the absence of a prior notice, a certified copy of the agreement, or the partner's resignation defeated the request for reference.

Analysis: Section 8 of the Arbitration and Conciliation Act, 1996 is mandatory once an action is brought in a matter covered by an arbitration agreement and the application is made before the first statement on the substance of the dispute. Contesting interlocutory or incidental proceedings, such as an injunction application, does not amount to submission to the civil court's jurisdiction or waiver of the arbitration clause. The existence of a valid arbitration agreement was admitted, and the dispute concerning termination of the contract arose out of the contract and was therefore covered by the arbitration clause. The proposed blacklisting was only at the show-cause stage and did not take the matter outside arbitration. The partner's alleged resignation did not affect the maintainability of the application, and the court's reasoning on notice and procedural objections was held to be erroneous.

Conclusion: The application under Section 8 was maintainable and the parties were required to be referred to arbitration; the objections based on interim contest, notice, certified copy, blacklisting, and resignation failed.

Final Conclusion: The impugned orders were set aside and the dispute was directed to proceed in arbitration, with costs awarded to the appellants.

Ratio Decidendi: Under Section 8 of the Arbitration and Conciliation Act, 1996, reference to arbitration is mandatory where an admitted arbitration agreement covers the substance of the dispute and the application is made before the first statement on the merits, and participation in incidental or interlocutory proceedings does not by itself waive the right to arbitrate.

---