Mandatory arbitration reference can extend to agreements made during pending proceedings, leaving no further adjudication in court.

An arbitration agreement executed during the pendency of an appeal can still attract Section 8 of the Arbitration and Conciliation Act, 1996, because the phrase "a matter which is the subject of an arbitration agreement" is not limited to pre-existing agreements. The Court treated Section 8 as mandatory where the disputes fall within a valid arbitration agreement, the court action concerns the same subject matter, and the request for reference is made before the first substantive statement or is otherwise not opposed on the facts. Once arbitration is agreed, the pending proceeding requires no further adjudication, and the parties' rights, obligations, and remedies shift to the Act, including award challenge procedures. Section 42 was held not to limit this reference power.

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Issues: Whether, on an arbitration agreement entered into during the pendency of an appeal, the Court was required to refer the parties to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, and what would be the effect on the pending proceedings.

Analysis: The arbitration agreement satisfied the requirements of Section 7 of the Arbitration and Conciliation Act, 1996. Section 5 of the Act reflects the legislative policy of minimal judicial intervention in matters governed by Part I. Reading Section 8 in that setting, the expression "a matter which is the subject of an arbitration agreement" was held not to be confined to agreements existing before the action was brought; it also covers an agreement brought into existence while the proceeding is pending. The statutory conditions for reference were treated as satisfied where there was an arbitration agreement covering the disputes, the action was brought in court on the same subject matter, and the other party sought reference before submitting its first statement on the substance of the dispute, or did not object to the reference in the circumstances of the case. The language of Section 8 was treated as mandatory, and the Court held that once the parties agreed to arbitrate, nothing remained to be decided in the original action or appeal. The proceeding was not merely stayed; the rights, obligations, and remedies of the parties were to be governed by the Arbitration and Conciliation Act, 1996, including the challenge to the award. Section 42 was held not to control the court's power under Section 8 in the present context.

Conclusion: The Court was bound to refer the parties to arbitration, and the pending appeal ceased to require any further adjudication.

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