Condition pre-requirement for invoking the power.

The Order of the Court was as follows :

The defendants are the petitioners. The petitioners are public corporations which supply petroleum products and its offices. Tenders are called for and the petitioner enter into a contract for supply of petroleum products with the successful tenderers. The relationship between the parties are governed by the contract between them. According to the respondent, the petitioners had illegally and unlawfully taken action suspending the supply of petroleum products on the ground that the respondent was guilty of malpractice by supplying adulterated petroleum products. A letter was issued on 29.8.2000 demanding the reimbursement of an amount towards lab testing charges etc. According to the respondent this demand was unlawful and therefore, the suit was filed. The respondent also filed an application for interim injunction restraining the 3rd and 4th petitioners from giving effect to the order dated 29.8.2000 and from preventing the respondent from participating in the future tenders. The petitioner filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 before the Court below for referring the petitioner and respondent to arbitration proceedings as per Clause 51 of the agreement between them. This was dismissed and therefore, the present civil revision petition has been filed.

Mr. Ranganatha Reddy, learned counsel appearing for M/s. King and Patridge for the petitioners referred to the contract between the parties especially Clause 51. As per Clause 51 of the contract, any dispute or difference of any nature whatsoever, claim, cross-claim, counterclaim or let off the Corporation against the contractor(s) or regarding any rights, liability act omission on account of any of the parties hereto arising out of or in relation of this agreement/contract shall be referred to the sole arbitration of the Chairman and Managing Director/Director (Marketing) of the Corporation are his nominees. Section 51(e) of the said contract gives the right to prefer a cross to the parties against whom the arbitration proceedings have been initiated that is to say the respondents in the proceedings in respect of any matter without seeking a formal reference and the Arbitrator will deal with the same as if the matter has been referred to him originally and forms part of the reference. The manner in which the award shall be made are all set down in contract and it also specifically states that the Arbitrator shall be entitled to exercise all powers under the Indian Arbitration and Conciliation Act, 1996. The learned counsel therefore, submitted that when there is a arbitration agreement the parties are bound to refer the matter to arbitration and they cannot go before the Civil Court. Further, the learned counsel submitted that Section 8 of the Arbitration and Conciliation Act provides that a judicial authority before which an action is brought in a matter which is a subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. According to the learned counsel, the language is peremptory. The judicial authority namely the Civil Court has no option but to refer the matter to arbitration. Section 8 of the Arbitration and Conciliation Act lays down certain conditions which are prerequisite for invoking the power under the said section.(1) There must be an arbitration agreement.

(2) The party to that agreement must initiate legal proceedings against the other party.

(3) The subject matter of this proceeding should be a matter covered by the arbitration agreement.

(4) The parties who applies under Section 8 of the Act shall do so before submitting his first statement before the judicial authority.

(5) The applicant shall be accompanied by the original agreement or a duly certified copy.

The learned counsel submitted that all these criteria are satisfied and therefore, the Cou