REFERENCE TO ARBITRATION.

[Mr. M. GOVINDARAJAN]

                        The expression ‘reference’, with reference to Arbitration and Conciliation Act, 1996 obviously refers to an actual reference made jointly by the parties after disputes have arisen between them for adjudication to named arbitrator or arbitrators.  Therefore a ‘reference’ requires the assent of both sides.

                        ‘Reference to Arbitration’ describes various acts.   It can be by parties themselves or by an appointing authority named in the arbitration agreement or by a court on an application by a party to the arbitration agreement.  This is elaborated as below:

• If an arbitration agreement provides that all disputes between the parties relating to the contract (some agreements may refer to some exceptions) shall be referred to arbitration and that the decision of the arbitration shall be final and binding, the ‘reference’ contemplated is the act of parties to the arbitration agreement, referring their disputes to an agreed arbitrator to settle the disputes.
• If an arbitration agreement provides that in the event of any dispute between the parties, an authority named therein shall nominate the arbitrator and refer the disputes which required to be settled by arbitration, the ‘reference’ contemplated is an act of the appointing authority referring the disputes to the arbitrator appointed by him;
• Where the parties fail to concur in the appointment of arbitrator/arbitrators as required by the arbitration agreement, or the authority named in the arbitration agreement failing to nominate the arbitrator and refer the disputes raised to arbitration as required by the arbitration agreement, on an application by an aggrieved party, the court can appoint the arbitrator and on such appointment, the disputes between the parties stand referred to such arbitrator in terms of the arbitration agreement.

Reference to arbitration can be in respect of all disputes between the parties or all disputes regarding a contract or in respect of specific enumerated disputes.   Where ‘all dispute’ are referred, the arbitrator has the jurisdiction to decide all disputes raised in the pleadings (both claims and counter claims) subject to any limitations placed by the agreement.   Where the arbitration agreement provides that all disputes shall be settled by arbitration but excludes certain matters from arbitration, then, the arbitrator will exclude the excepted matter and decide only those disputes which are arbitrable.   But where the reference to the arbitrator is to decide specific disputes enumerated by the parties/court/appointing authority, the arbitrator’s jurisdiction is circumscribed by the specific reference and the arbitrator can decide only those specific disputes.

                        Though an arbitration agreement generally provides for settlement of future disputes by reference to arbitration, there can be ‘ad hoc’ arbitrations relating to existing disputes.   In such cases there is no prior arbitration agreement to refer future disputes to arbitration.   After a dispute arises between the parties, they enter into an arbitration agreement to refer that specific dispute to arbitration.   In such arbitration, the arbitrator cannot enlarge the scope of arbitration by permitting either the claimant to modify or add to the claim of the respondent to make a counter claim.   The Arbitrator can only decide the dispute referred to him, unless the parties again agree to refer the additional disputes/counter claims to arbitration and authorize the arbitrator to decide them.

                        ‘Reference to arbitration’ can be in respect of reference to disputes between the parties to arbitration, or may simply mean referring the parties to arbitration.   Section 8 of the Act is an example of referring the parties to arbitration.   While Section 11 contemplates appointment of arbitration or taking necessary measures as per the appointment procedure under arbitration agreement, Sec 8 of the Act does not provide for appointment of arbitrator, nor referring of any disputes to arbitration, but merely requires the judicial authority before whom an action is brought in a matter in regard to which there is an arbitration agreement, to refer the parties to arbitration.   When the judicial authority finds that the subject matter of the suit is covered by parties to arbitration, by refusing to decide the action brought before it and leaving it to the parties to have recourse to their remedies by arbitration.  When such an order is made, parties may either agree upon the arbitrator and their disputes to him, or failing agreement, to file an application under Section 11 of the Act for appointment of an arbitrator.   The judicial authority ‘referring the parties to arbitration’ under Section 8 of the Act, has no power to appoint an arbitrator.   It may, however, record the consent of parties to appoint an agreed arbitrator.