Mandatory referral under arbitration agreement bars civil suit bifurcation and merits review once Section 8 is properly invoked.

Section 8 of the Arbitration and Conciliation Act, 1996 is peremptory: where a valid arbitration agreement exists and the application is filed before the first statement on the substance of the dispute, the civil court must refer the parties to arbitration. The court cannot refuse reference by examining the merits of the suit, retaining general civil jurisdiction, or bifurcating the cause of action, because such splitting is not contemplated by the Act and would undermine speedy dispute resolution and risk conflicting decisions. The Court also held that the availability of interim or injunctive relief does not justify retaining the suit. The contrary orders were set aside and the matter remitted for fresh consideration of the Section 8 application.

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Issues: Whether, once an application under Section 8 of the Arbitration and Conciliation Act, 1996 is duly filed before the civil court before the first statement on the substance of the dispute, the court is bound to refer the parties to arbitration and cannot refuse reference by examining the merits of the suit or bifurcating the cause of action.

Analysis: Section 8 is peremptory in nature. Where an arbitration agreement exists and the statutory conditions for invoking Section 8 are satisfied, the civil court has no discretion to continue with the suit and must refer the parties to arbitration in terms of the agreement. The court's proper enquiry is whether its jurisdiction has been ousted by the special statute, not whether it still retains general civil jurisdiction. Bifurcation of the subject matter of the suit is impermissible, as it is not contemplated by the Act and would defeat the object of speedy dispute resolution, increase delay and cost, and risk conflicting decisions. The approach of treating possible interim or injunctive relief as a reason to retain the suit was found inconsistent with the statutory mandate and the arbitration clause.

Conclusion: The application under Section 8 ought to have been allowed and the dispute referred to arbitration. The contrary orders of the trial court and the High Court were set aside, and the matter was remitted for fresh orders on the Section 8 application.

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