Understanding the Role and Power of Judicial Authority in Referring Parties to Arbitration: A Look into the Arbitration and Conciliation Act

The Arbitration and Conciliation Act has become the cornerstone of dispute resolution in India. The Act’s primary function is to minimize court involvement in arbitration proceedings, thereby expediting the process. However, the Act also likens the court’s role to that of a guiding force, stepping in only when necessary to lend its aid to the proceedings. It’s crucial to understand the power and role that judicial authority holds in referring parties to arbitration.

The Interplay of Section 8 and 45

The arbitration referral mechanism is primarily covered under Section 8 and 45 of the Act. Essentially, these sections provide courts the power to refer parties to arbitration if an arbitration agreement exists between them.

1. Section 8: This section allows a party to an action in a matter, which is the subject of an arbitration agreement, to apply to the judicial authority to refer the parties to arbitration. The condition being the issue of such a request before submitting the first statement on the substance of the dispute.
2. Section 45: It directs that a judicial authority, when seized of an action in a matter which is capable of settlement by arbitration under an agreement, shall refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

Judgments Highlighting The Judicial Power

Several judgments have consolidated and clearly defined the role and power of judicial authorities in matters of arbitration referrals.

1. Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya and Anr: The Supreme Court held that where an action is brought to a legal court in a matter which is the subject of arbitration agreement, parties must be referred to arbitration. The Court cannot refuse to refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.
2. Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd: The Supreme Court clarified that a mere existence of an arbitration agreement does not by itself bar the jurisdiction of the courts under section 9 of the Act. The jurisdiction of the court to decide on issues like the existence or validity of an arbitration agreement is unimpaired.
3. Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc: This judgment stated that if any part of a composite transaction covered by an arbitration agreement could be severed, only that part would be referred to arbitration, and the rest would remain before the judicial authority.

Conclusion

In summary, while the courts are typically tasked with minimizing their involvement in arbitration proceedings, they play a crucial role when disputes arise over the applicability, validity or existence of an arbitration agreement. Such measures ensure that while the integrity and autonomy of the arbitration process are preserved, justice is also served in every possible way.

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