Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. — (2010) 8 SCC 24 

Citation: (2010) 8 SCC 24 

Petitioner: Afcons Infrastructure Ltd.  

Respondent: Cherian Varkey Construction Co. (P) Ltd.  

Date of Judgement: 26/07/2010 

Bench: R.V. Raveendran and J.M. Panchal, JJ.  

FACTS AND BACKGROUND OF THE CASE 

A contractual arrangement between the parties was the source of the conflict. Afcons  Infrastructure Ltd., the appellant, was hired by the Cochin Port Trust to carry out specific  building projects, such as roads and bridges. Afterward, Afcons hired Cherian Varkey  Construction Co. (the first respondent) to do part of the work. Cherian Varkey filed a lawsuit  for Rs. 210,70,881 plus interest, alleging non-payment for the job completed under the  subcontract. The subcontract lacked an arbitration clause. Cherian Varkey submitted an  application under Section 89 of the CPC in March 2005, asking the trial court to determine  parameters for a settlement and send the case to arbitration. Afcons disagreed, claiming that  mutual consent was necessary for arbitration to continue. 

Afcons appealed to the Kerala High Court after the trial court granted the application under  Section 89. The High Court maintained the lower court's ruling, holding that a prior arbitration  agreement was not necessary under Section 89. Afcons took the issue to the Supreme Court  because they were not satisfied.  

ISSUES INVOLVED 

1. Whether  the  clause  gives  the  court  the  authority  to  refer  parties  to  a  lawsuit to arbitration without both parties' assent come up? 2. Regarding the arguments made, two issues come up for discussion: a. How should a court carry out the implementation of Section 89 and  Order 10 Rule 1A of the Code? 

b. Does reference to arbitration under section 89 of the Code require the  assent  of  all  parties  to  the  lawsuit? Does the ADR Process need to be mentioned?

3. Cases needing court protection, such as lawsuits  for declaration of title  against  the government and  claims against juveniles, gods, and  people  with mental disabilities. 

ARGUMENTS FROM THE PETITIONERS SIDE 

1. The appellants contended that a legitimate agreement between parties is  necessary  for  arbitration  by  deLinition  and  in  accordance  with  the  Arbitration and Conciliation Act of 1996. They argued that this essential  criterion is not and cannot be superseded by Section 89 CPC. 

ARGUMENTS FROM THE RESPONDENTS SIDE 

1. Unless the judge has a thorough discussion with both parties, the court will not be able  to determine the conditions of the settlement. It is neither practical nor feasible for the  court to determine the terms of settlement based only on the pleadings. Therefore, a  major obstacle to courts applying section 89 of the Code is the necessity that the court  create the terms of settlement. Therefore, by comparing "terms of settlement" to a  "summary of disputes," this Court attenuated this ambiguity in Salem Bar (II), meaning  that the court is simply needed to establish a "summary of disputes" rather than "terms  of settlement." How should one understand section 89?