Arbitration and Conciliation Act, 1996
45. Power of judicial authority to refer parties to arbitration.—
Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
Null and void agreement
In the absence of any serious challenge to the commercial contract or to the arbitration agreement, it has to be found that the agreement was valid, operative and capable of being performed and that there are disputes between the parties with regard to the matters agreed to be referred to arbitration; State of Orissa v. Klockner & Co., AIR 1996 SC 2140.
Referral is mandatory
A judicial authority does not have discretion for refusing to refer the parties to arbitration. Section 45 of the 1996 Act uses the mandatory expression ‘shall’ and makes it obligatory upon the judicial authority to refer the parties to arbitration, if conditions specified therein are fulfilled. Stay of suit is mandatory if the conditions specified in section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 are fulfilled; State of Orissa v. Klockner & Co., AIR 1996 SC 2140.