Stay of suit in Domestic Arbitration

An arbitration agreement being a contract between the parties not to seek redress in court but to have their dispute settled by the arbitration procedure, if in breach of the agreement, a party went to court in respect of the same matter, the opposite party could apply to the court to have the suit stayed. The court would act upon the agreement and stay the suit. But the power to stay was discretionary.

The court was not incompetent to deal with the case itself in a proper case. It would consider whether in an arbitration proceeding either of the parties might not get substantial justice. It might decide to go ahead with the suit if there were circumstances which rendered it highly appropriate that the court should consider the matter rather than the arbitral tribunal. The court might also, under its inherent powers (Section 151 CPC), pass any order that might be necessary to meet the ends of justice or to prevent abuse of the process of the court.

For grant of stay of suit it was necessary for the court to be satisfied regarding the following :



1. the suit sought to be stayed should be in respect of the same subject matter as that referred to arbitration.

2. the person seeking stay was a party to the suit and he should not have taken any steps in the suit, such as, filing a written statement or indicating his intention to contest the suit or get the dispute finally settled by the court and not by arbitration.

3. there was no sufficient reason why the matter should not be referred to arbitration [Section 34].

Section 5 prohibits judicial intervention with arbitration except to the extent expressly permitted in the new legislation. As regards parallel proceedings in court and arbitration Section 8 prescribes that any judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when his first statement on the substance of the dispute is submitted, refer the parties to arbitration. Section 8(3) provides that even though such an application has been made an arbitration may be commenced or continued and an arbitral award made.