(2018)1 SCeJ 550
9th March, 2018
Arbitration and Conciliation Act, 1996, Section 7 - CPC, 1908, Section 89 - Arbitration - Reference To Arbitration - When there was no arbitration agreement between the parties, without a joint memo or a joint application of the parties, on the oral consent of the counsel, the High Court ought not to have referred the parties to arbitration - After pointing out the disputed claims of additional work and on the oral consent of the counsel for the appellant, the High Court has referred the parties to arbitration appointing arbitrator - Arbitrator/ Tribunal is a creature of the contract between the parties - There was no arbitration agreement between the parties - Jurisdictional pre-condition for reference to arbitration under Section 7 of the Arbitration and Conciliation Act is that the parties should seek a reference or submission to arbitration - In reference of a dispute to arbitration under Section 89 CPC, the same can be done only when parties agree for settlement of their dispute through arbitration in contradistinction to other methods of alternative dispute resolution mechanism stipulated in Section 89 CPC - Insofar reference of the parties to arbitration, oral consent given by the counsel without a written memo of instructions does not fulfill the requirement under Section 89 CPC - Since referring the parties to arbitration has serious consequences of taking them away from the stream of civil courts and subject them to the rigour of arbitration proceedings, in the absence of arbitration agreement, the court can refer them to arbitration only with written consent of parties either by way of joint memo or joint application; more so, when government or statutory body like the appellant-Board is involved.
(vi) CPC, 1908 , Section 89 - Oral consent given by the counsel without a written memo of instructions does not fulfill the requirement under Section 89 CPC - Referring the parties to arbitration could be made only when the parties agree for settlement of the dispute through arbitration by a joint application or a joint affidavit before the court. Afcons Infrastructure Ltd. and Anr. v. Cherian Varkey Construction Co. (P) Ltd. and Ors. (2010) 8 SCC 24, followed.
Arbitration and Civil court - Referring the parties to arbitration has serious civil consequences - Once the parties are referred to arbitration, the proceedings will be in accordance with the provisions of Arbitration and Conciliation Act and the matter will go outside the stream of the civil court - Under Section 19 of Arbitration and Conciliation Act, the arbitral tribunal shall not be bound by the Code of Civil Procedure and the Indian Evidence Act - Once the award is passed, the award shall be set aside only under limited grounds - Hence, referring the parties to arbitration has serious civil consequences procedurally and substantively. When there was no arbitration agreement between the parties, without a joint memo or a joint application of the parties, the High Court ought not to have referred the parties to arbitration.
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