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2010 (II) OLR (SC) — 889
R. V. RAVEENDRAN AND J M PANCHAL, JJ.
Afcons Infrastructure Ltd. & Anr. … Appellants
Versus
Cherian Varkey Construction Co. (P) Ltd. & Ors. … Respondents
CIVIL APPEAL NO.6000 OF 2010
(Arising out of SLP (C) No.760 of 2007)
Decided on 26th July, 2010.
The object of Section 89 of the Code is that settlement should be attempted by adopting an appropriate ADR process before the case proceeds to trial. Neither Section 89 nor Rule 1A of Order 10 of the Code is intended to supersede or modify the provisions of the Arbitration and Conciliation Act, 1996 or the Legal Services Authorities Act, 1987. On the other hand, Section 89 of the Code makes it clear that two of the ADR processes - Arbitration and Conciliation, will be governed by the provisions of the AC Act and two other ADR Processes - Lok Adalat Settlement and Mediation (See : amended definition in para 18 above), will be governed by the Legal Services Authorities Act. As for the last of the ADR processes – judicial settlement (See : amended definition in para 18 above), Section 89 makes it clear that it is not governed by any enactment and the court will follow such procedure as may be prescribed (by appropriate rules).
Rule 1A of Order 10 requires the court to give the option to the parties, to choose any of the ADR processes. This does not mean an individual option, but a joint option or consensus about the choice of the ADR process. On the other hand, Section 89 vests the choice of reference to the court. There is of course no inconsistency. Section 89 of the Code gives the jurisdiction to refer to ADR process and Rules 1A to IC of Order 10 lay down the manner in which the said jurisdiction is to be exercised. The scheme is that the court explains the choices available regarding ADR process to the parties, permits them to opt for a process by consensus, and if there is no consensus, proceeds to choose the process. (Paras - 29 and 30)
2. CIVIL PROCEDURE CODE, 1908 - Sec. 89 and Order 10, Rule 1-A - The stage at which the Court should explore whether the matter should be referred to ADR processes, if after the pleadings are complete, and before framing the issues, when the matter is taken up for preliminary hearing for examination of parties under Order 10 of the Code - Detail stated. (Para - 41)
3. INTERPRETATION OF STATUTE - Where the words of the statute are clear and unambiguous, the provision should be given its plain and normal meaning, without adding or rejecting any words - Departure from the literal rule, by making structural changes or substituting words in a clear statutory provision, under the guise of interpretation will pose a great risk as the changes may not be what the legislature intended or desired - Legislative wisdom cannot be replaced by the Judge's views.
There is however an exception to this general rule. Where the words used in the statutory provision are vague and ambiguous or where the plain and normal meaning of its words or grammatical construction thereof would lead to confusion, absurdity, repugnancy with other provisions, the courts may, instead of adopting the plain and grammatical construction, use the interpretative tools to set right the situation, by adding or omitting or substituting the words in the Statute. When faced with an apparently defective provision in a statute, courts prefer to assume that the draftsman had committed a mistake rather than concluding that the Legislature has deliberately introduced an absurd or irrational statutory provision. Departure from the literal rule of plain and straight reading can however be only in exceptional cases, where the anomalies make the literal compliance of a provision impossible, or absurd or so impractical as to defeat the very object of the provision. We may also mention purposive interpretation to avoid absurdity and irrationality is more readily and easily employed in relation to procedural provisions than with reference to substantive provisions.(Paras - 20 and 21)
4. CIVIL PROCEDURE CODE, 1908 - Sec. 89 - Whether the Section empowers the Court to refer the parties to a suit to arbitration without the consent of both parties ? - Held, a Civil Court exercising power under the section cannot refer a suit to arbitration unless all the parties to the suit agree for such reference. (Para - 49)
5. CIVIL PROCEDURE CODE, 1908 Sec. 89 - Arbitration - Where there is no pre-existing arbitration agreement between the parties, the consent of all the parties to the suit will be necessary for referring the subject matter of the suit to arbitration under the section. (Paras - 34.4)
JUDGMENT
R.V.RAVEENDRAN, J. — Leave granted. The general scope of Section 89 of the Code of Civil Procedure (‘Code’ for short) and the question whether the said section empowers the court to refer the parties to a suit to arbitration without the consent of both parties, arise for consideration in this appeal.
2. The second respondent (Cochin Port Trust) entrusted the work of construction of certain bridges and roads to the appellants under an agreement dated 20.4.2001. The appellants sub-contracted a part of the said work to the first respondent under an agreement dated 1.8.2001. It is not in dispute that the agreement between the appellants and the first respondent did not contain any provision for reference of the disputes to arbitration.
3. The first respondent filed a suit against the appellants for recovery of Rs.210,70,881 from the appellants and their assets and/or the amounts due to the appellants from the employer, with interest at 18% per annum. In the said suit an order of attachment was made on 15.9.2004 in regard to a sum of Rs.2.25 crores. Thereafter in March 2005, the first respondent filed an application under Section 89 of the Code 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 dated 24.10.2005 to the 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.
4. In the meanwhile, the High Court of Kerala by order dated 8.9.2005, 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.
5. The trial court heard the said application under Section 89. It recorded the fact that first respondent (plaintiff) was agreeable for arbitration and appellants (defendants 1 and 2) were not agreeable for arbitration. The trial court allowed the said application under Section 89 by a reasoned order dated 26.10.2005 and held that as the claim of the plaintiff in the suit related to a work contract, it was appropriate that the dispute should be settled by arbitration. It formulated sixteen issues and referred the matter to arbitration. The appellants filed a revision against the order of the trial court.
6. The High Court by the impugned order dated 11.10.2006 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 arbitration. The High Court also held that the concept of pre existing arbitration agreement which was necessary for reference to arbitration under the provisions of the Arbitration & Conciliation Act, 1996 (‘AC Act’ for short) was inapplicable to references under Section 89 of the Code, having regard to the decision in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya & Anr. [2003 (5) SCC 531]. The said order is challenged in this appeal.
7. On the contentions urged, two questions arise for consideration:
(i) What is the procedure to be followed by a court in implementing Section 89 and Order 10 Rule 1A of the Code ?
(ii) Whether consent of all parties to the suit is necessary for reference to arbitration under Section 89 of the Code ?
8. To find answers to the said questions, we have to analyse the object, purpose, scope and tenor of the said provisions. The said provisions are extracted below :
“89. Settlement of disputes outside the court. - (1) Where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the Court may reformulate the terms o
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