Arbitration clause reference is mandatory on admitted agreement, and jurisdictional refusal can be revised under CPC Section 115.
Where the existence of an arbitration agreement is admitted and a timely Section 8 application is made, the civil court must refer the parties to arbitration; the tribunal, not the civil court, decides whether the dispute falls within the arbitration clause under Section 16. Refusal to make the reference in such circumstances is a jurisdictional error and a failure to exercise jurisdiction. The revisional court may interfere under Section 115 CPC where that refusal, if corrected, would terminate the suit. The order declining reference was therefore set aside and the parties were directed to proceed to arbitration.
Issues: (i) Whether, where the existence of an arbitration agreement is admitted, the civil court can examine the applicability of the arbitration clause to the dispute or must refer the parties to arbitration; (ii) whether refusal to refer the dispute to arbitration in such a case is revisable under Section 115 of the Code of Civil Procedure, 1908.
Issue (i): Whether, where the existence of an arbitration agreement is admitted, the civil court can examine the applicability of the arbitration clause to the dispute or must refer the parties to arbitration.
Analysis: Section 8 of the Arbitration and Conciliation Act, 1996 is mandatory in terms and requires the judicial authority to refer parties to arbitration once an action is brought in a matter covered by an arbitration agreement and a timely application is made. Section 16 of the Act confers on the arbitral tribunal the power to rule on its own jurisdiction, including objections as to the existence or validity and applicability of the arbitration agreement. On the admitted facts, the civil court was not competent to decide whether the dispute fell within the arbitration clause; that question had to be left to the arbitrator.
Conclusion: The civil court was bound to refer the dispute to arbitration, and its refusal to do so was unsustainable.
Issue (ii): Whether refusal to refer the dispute to arbitration in such a case is revisable under Section 115 of the Code of Civil Procedure, 1908.
Analysis: The impugned order, if made in favour of the applicant, would have brought the suit to an end. The refusal to refer the matter despite an admitted arbitration clause amounted to a jurisdictional error and a failure to exercise jurisdiction. In that situation, the revisional court could interfere under Section 115 of the Code of Civil Procedure, 1908.
Conclusion: The revision was maintainable and interference was warranted.
Final Conclusion: The order refusing reference to arbitration was set aside and the parties were directed to proceed to arbitration, with the revision disposed of accordingly.
Ratio Decidendi: Once the existence of an arbitration agreement is admitted and a timely application under Section 8 is made, the civil court must refer the parties to arbitration, leaving questions about the clause's applicability to the arbitral tribunal under Section 16; refusal to do so constitutes a revisable jurisdictional error when it prevents termination of the suit.
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