Section 8 of the Arbitration and Conciliation Act, 1996 is mandatory and requires the Court to refer parties to arbitration if the agreement contains an arbitration clause. Finality of the order of the sole arbitrator binds both parties.

JUDGMENT :

Alok Aradhe, J.

1. This appeal filed under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act' for short) emanates from an order dated 22.03.2019 passed by the Trial Court insofar as it pertains to rejection of an application filed by the appellant under Section 8 of the Act, inter alia on the ground that the appellant has not assailed the validity of the order dated 07.11.2016 passed by the Arbitrator by which the Arbitrator has held that it has no jurisdiction to adjudicate the dispute between the parties.

2. In order to appreciate the grievance of the appellant, few facts need mention which are stated infra. The appellant is a Government of India undertaking. The appellant entered into an agreement on 25.06.2008 with the respondent who is a transporter. The aforesaid agreement contains an arbitration clause. The arbitration clause reads as under:

"Arbitration:

In case of dispute as regards the satisfactory performance or otherwise of the contract, the decision of the Asst. General Manager - Stores, of the concerned Divisional shall be final and legally binding.

All disputes and differences arising out of or in any way concerning the contract whatsoever shall be referred for decision to 'The Executive Director' of respective BEML Unit, whose decision shall be final and binding on all the parties."

3. A dispute between the parties arose. Thereupon, the respondent filed CMP No. 132/2012 before this Court under Section 11(6) of the Act seeking appointment of an independent Arbitrator. A Bench of this Court, by an order dated 14.12.2012, referred the matter to the Executive Director of the appellant, as sole arbitrator, as provided in the arbitration clause. At the stage of recording of the evidence before the Arbitrator, the respondent filed an objection with regard to jurisdiction of the Arbitrator. The aforesaid objections was adjudicated by an Arbitrator by an order dated 07.11.2006 and it was held that the Arbitrator has no jurisdiction to adjudicate the dispute. The operative portion of the order passed by the Arbitrator reads as under:

"Heard both the parties and proceed to pass the following orders:

Perused the ruling passed in the citation relied by the claimant, I am satisfied that the ruling passed in the above citation applies to the facts and circumstances of the case. Further the claimant had made sincere efforts to amicably settle the matter for which the respondent failed. Therefore, I take cognizance of the ruling passed by the Supreme Court holding that this Tribunal has no jurisdiction to adjudicate the instant dispute. The claimant is permitted to withdraw the claim and liberty is afforded to the claimant to initiate appropriate legal remedies for recovery of the amount. Further the period consumed covering the instant arbitration proceedings is excluded from the period of limitation in order to enable the claimant to initiate an appropriate legal remedy, in the interests of justice and equity."

4. It is pertinent to mention here that the order dated 07.11.2016 passed by the Arbitrator has attained finality and has not been assailed by any of the parties to the lis. In pursuance of the liberty granted by the Arbitrator, the respondent initiated the proceeding on 24.06.2017 before the Civil Court for recovery of the amount in question. In the civil suit, the appellant filed an application under Section 8 of the Act on 04.01.2018 which was rejected by the Trial Court inter alia on the ground that the appellant has not challenged the validity of the order dated 07.11.2016 passed by the Arbitrator. The said order is under challenge in this appeal.

5. Learned counsel for the appellant submitted that the provisions of Section 8 of the Act are mandatory in nature and the respondent by filing a petition namely under Section 11(6) of the Act before this Court, has admitted the existence of the arbitration agreement. Therefore, it is submitted that the Trial Court erred