The court emphasized the mandatory nature of referring parties to arbitration when a valid and subsisting arbitration agreement exists, as per Section 8 of the Arbitration and Conciliation Act 1996.

1. This Civil Revision Petition is filed against the order dated 6.4.2011 made in IA.No.604/2010 in OS.No.162/ 2010 by the learned District Judge, Kanyakumari at Nagercoil.

2. The Respondent herein has instituted a suit in OS.No.162/2010 on the file of the learned District Judge, Kanyakumari at Nagercoil for recovery of Rs.50/- lakhs from the Defendant with future interest at 12 per cent p.a. from the date of the plaint till the date of decree and at 6 per cent p.a. till realization. The claim of the Respondent/ Plaintiff is based on a Memorandum Of Understanding entered into between the Plaintiff and the Defendant which contained a clause that all the differences and disputes relating to the agreement arising out of the deed shall be resolved by arbitration under the Arbitration Act and the decision of the arbitration shall be final and binding on both parties. There was exchange of notices between the parties. According to the Respondent/Plaintiff, the Petitioner/ Defendant had no intention to perform the legal obligation under the agreement and it was reasonably felt that the Defendant has abandoned the agreement. In the said circumstances, the Respondent/ Plaintiff has filed the suit for recovery of money.

3. In response to the summons issued by the Trial Court, the revision petitioner/Defendant entered appearance and filed an application in IA.No.604/2010 under Section 8 of the Arbitration and Conciliation Act 1996 (hereinafter referred to as the Act) read with Section 151 of CPC and Order 7 Rule 11 of CPC.

4. In the affidavit filed in support of the application in IA.No.604/2010, it was the case of the Petitioner/ Defendant that several disputes and differences arose between the Plaintiff and the Defendant and the Petitioner also raised tenable contentions regarding the liability and alleged disbursement. So, in view of the disputability of the claim, he sought for reference of the dispute to arbitration in view of specific clause in the memo of understanding to refer the dispute for arbitration.

5. The application in IA.No.604/2010 was contested by the Respondent/ Plaintiff by filing a written argument, wherein it is contended that no independent application was filed by the Revision Petitioner under the provisions of the Act and the application was not accompanied by the original Memo of Understanding and therefore, Section 8(1) and (2) of the Act was not complied with. Since the agreement itself is denied by the Revision Petitioner in her reply notice, she is disentitled from seeking to enforce the arbitration clause.

6. The Trial Court rejected the application on the ground that there was no concluded contract between the parties and the very amount stated have been paid by the Respondent to the Petitioner is under dispute and the same involves question of fact requiring adjudication by civil court.

7. Mr. D. Nallathambi, the learned counsel for the Revision Petitioner contended that it was mandatory for the Trial Court to refer the dispute to arbitration when admittedly there was an arbitration clause in the Memorandum of Understanding. The learned counsel would submit that Section 8 of the Act mandates a judicial authority before whom an action is brought in a matter which is subject of arbitration agreement to refer the parties to arbitration. He would contend that the Trial Court is not justified in refusing to refer the parties to arbitration by holding that there was no concluded contract between the parties and the dispute involves serious questions of fact requiring adjudication by the civil court. The learned counsel further challenged the findings of the Trial Court that the Petitioner is disentitled to get the relief under Section 8 of the Act as he has failed to produce the original agreement as untenable and referred to a decision of this court reported in 2008-6-MLJ-24 (Union of India owning the Southern Railway by its General Manager, Southern Railway, Chennai and another Vs. Rajesh Damani