The Madras High Court had issued an interim order restraining the employees from striking work.
The unions want a 2.57 times hike, but the government, after 23 rounds of talks, has agreed for a 2.44 times raise.
"In the interest of children, students, patients, elders, commuters and larger section of the society, the issue has been referred to the arbitrator to adjudicate the wage dispute and the effective date of such revision of wage", the High Court bench said.
Earlier on Sunday, Dravida Munnetra Kazhagam (DMK) working president MK Stalin urged Tamil Nadu Chief Minister Edappadi K Palanisamy to initiate talks with transport employees and take suitable actions to end the ongoing strike in the state.
Tamil Nadu advocate general Vijay Narayanan submitted to the court that the workers were holding the government to ransom and were not allowing the government transport department to function. Tamil Nadu State Transport minister MR Vijayabaskar said these unions were spreading false information about the government's efforts.
At some places, the government has pressed into service temporary drivers to build pressure on the striking employees and also rid the public of the inconvenience caused due to the strike.
Tamil Nadu has over 22,000 buses with a workforce of about 143,000 employees.
While Chief Minister reiterated the government's willingness to increase wages by 2.44 times, the trade unions have refused to concede and have lambasted the government for the MLA salary hike bill. While the government originally wanted to collect 30% local tax past year, protracted negotiations by theatre owners and representatives of the film industry brought it down to 8% for Tamil films, 15% for other Indian language films and 20% for English films.