Annual Arbitration Review 2018

Kerala State Electricity Board & Anr. V Kurien E. Kalathil & Anr.

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Judgment: Kerala State Electricity Board & Anr. V Kurien E. Kalathil & Anr.

 

Citation: (2018) 4 SCC 793

 

Court: Supreme Court of India

 

Coram: Ranjan Gogoi, R Banumathi

 

Date: March 9, 2018

 

Overview: Supreme Court in this matter had a chance to rule upon whether parties could be referred to arbitration based on mere oral consent given by the counsels representing parties, without there being any written instructions to that effect. The matter came before the Supreme Court by way of an appeal against the order of the Kerala High Court, which had referred the parties to arbitration merely on the oral consent of the counsels.

 

Issue: Whether the order of the High Court was correct in referring the parties to arbitration upon the oral consent of the parties’ counsels, in the absence of any written instructions to that effect?

 

Factual Background:

The State Electricity Board entered into an agreement in 1981 with the contractor for construction of a dam in the state of Kerala. In 1983, after the work had commenced, the Government of Kerala issued a notification through which minimum wages payable to certain categories of workers were revised upwards with effect from the date of the notification. The contractor accordingly claimed labour escalation charges along with claims for additional work carried out by him.

 

So far as the claim on additional work was concerned, with the consent of the counsel for both parties and without existence of an arbitration agreement or written instructions provided by the parties, the High Court referred the parties to arbitration. Pursuant to such reference, an arbitral award came to be passed in favour of the Contractor.

 

The State Board preferred an appeal against the decisions of the High Court before this Court.

 

Analysis:

The Supreme Court exercising its powers under Art 136[1](cite this section in the footnotes) re-appreciated all the evidence to set aside both the judgment of the High Court and the arbitral award passed. Reliance was placed on section 7 of the Act to emphasize that the condition for claiming reference to arbitration u/s 7 is that the parties should apply for the reference. Even for a reference of dispute under Section 89 of the CPC, it can only be done when parties agree for settlement through arbitration.

 

Placing reliance on the judgments of the Supreme Court in Afcons Infrastructure Ltd. & Anr. V. Cherian Varkey Construction Co. (P) Ltd. & Ors[2](cite this) and Shailesh Dhairyawan v. Mohan Balkrishna Lulla[3](cite this), it was held that in the absence of an arbitration agreement, the court can refer parties to arbitration only with written consent of parties either by way of a joint memo or a joint application.

 

Conclusion:

For reference of parties to arbitration oral consent given by the counsel without a written memo of instructions doesn’t fulfill the requirement u/s 89 CPC.

[1]Article 136

[2](2010) 8 SCC 24

[3](2016) 3 SCC 619

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