Afcon Infrastructure vs
Cherian Varkey
Construction
K. R. Sarada, 20BLA1110
Introduction
Court: The Supreme Court of India
Brief: In this case, the appellant filed a revision petition against the order
passed by the Trial Court under Section 89 of Civil Procedure Code. The
appellant filed a revision petition against the order before the High Court,
the High Court dismissed the petition.
Citation: 2010 (8) SCC 24
Date of Judgment: 26th July, 2010
Bench: Justice R. V Raveendran, Justice J. M Panchal
Parties:
1. Appellant: M/s Afcons Infrastructure Ltd & Anr
2. Respondents: M/s Cherian Varkey Construction Co(p) Ltd & Ors
Facts of the Case
Cochin Port Trust (second respondent) entrusted the work of construction of certain bridges and roads
to the appellants under an agreement. The appellants sub-contracted a part of the said work to the first
respondent under an agreement. The respondent did not formulate any provision for reference of the
disputes to arbitration.
The first respondent filed a suit against the appellants for recovery ofRs.210,70,881from the
appellants and their assets and the amounts due to the appellants from the employer, with interest at
18% per annum.
The first respondent applied section 89 of the Code of Civil Procedure,1908 before the trial court
praying that the court may formulate the terms of settlement and refer the matter to arbitration.
The appellants filed a counter application submitting that they were not agreeable for referring the
matter to arbitration or any of the other ADR processes under section 89 of the Code.
In the meanwhile, the High Court of Kerala allowed the appeal filed by the appellants against the
order of attachment and raised the attachment granted by the trial court subject to certain conditions.
While doing so, the High Court also directed the trial court to consider and dispose of the application
filed by the first respondent under section 89 of the Code.
Facts of the Case
The Trial court after hearing the parties allowed the said application under section 89 of the code.
Then, the Appellants filed the revision petition against the order of the Trial court.
The High Court dismissed the revision petition holding that the apparent tenor of section 89 of the
Code permitted the court, in appropriate cases, to refer even unwilling parties to the arbitration. This
order was challenged in the Supreme Court as an Appeal.
Legal Provision
Section 89 of Code of Civil Procedure: Settlement of
disputes outside the court.
Rule- 1A under Order 10 of the Code of Civil Procedure:
Direction of the court to opt for any one mode of
alternative dispute resolution.
Issues of the Case
What is the procedure to be followed by a court in
implementing Section 89 and Order 10 Rule 1A of
the Code of Civil Procedure Code?
Whether consent of both sides to the suit is
mandatory for reference to arbitration as a process
under Section 89 of the Code of Civil Procedure?
Judgment
• Supreme Court pronounced that it’s not necessary for the court to formulate and
reformulate the terms of possible settlement before referring the dispute to
arbitration. It’s sufficient even if court merely describes the nature of dispute or its
summary and makes the reference.
• Section 89 starts with words- ‘where it appears to the court that there exists
elements of settlement’. This amply implies that only those cases suitable for
ADR should be referred by courts to ADR and cases which are not suited for ADR
process should not be referred under Section 89 of the Code.
• The apex court also held that it’s not ‘Mandatory’ to refer the parties to any ADR
process in all cases. Where case falls under an excluded category, the court need
not refer it to ADR process. In all other cases, reference to ADR is a must.
• It was also held that a civil court cannot refer a suit to arbitration unless all the
parties to the suit agree for such a reference. Thus, consent of parties in suit will
be necessary for referring the subject-matter of the suit to arbitration.
The Apex Court decided the appeal filed by the appellant was
allowed. The order of the trial court referring the matter to
arbitration and the order of the High Court was set aside. The court
refers the matter to the trial court to consider and decide on a non-
adjudicatory ADR process.
Conclusion
