SC expounds: Court can refer parties to Arbitration only with Written Consent of the Parties. Read Judgment

12 Mar 2018

Categories: Arbitration Latest News

March 12,2018:

Apex Court Bench enunciated that Reference of the parties to arbitration based on oral consent given by the counsel without a written memo of instructions does not fulfill the requirement under Section 89 CPC.

Supreme Court has expounded that,"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".

Apex Court Bench comprising of Justice Gogoi and Justice R Banumati further enunciated that in the absence of arbitration agreement, Court can refer the parties to the arbitration only with the written consent of the parties either by way of a joint memo or joint application and not on oral consent given by their counsel.

SC Bench made the abovestated observations in an appeal preferred by KSEB against High Court order wherein one of the questions raised was whether the High Court was right in referring parties to the Arbitration on the oral consent given by the counsel without written instruction from the party.

In the present case, in the Writ Petition filed by Contractor Kurien E Kalathil, the HC, with the consent of the counsel for the parties, referred the matter to sole Arbitrator Justice KA Nayar to resolve dispute relating to items which they could not amicably resolve, even though there was no such arbitration agreement between the parties.

Order of HC directed KSEB to pay Rs.12,92,29,378 with simple interest at the rate of 9% per annum in the dispute arising out of a contract between the board and the contractor, was challenged before the apex court.

Bench stated that,“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 the 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”.