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Courts Can’t Refer Parties To Arbitration On Oral Consent Given By Their Counsel

In KSEB v Kurien E Kalathil, in a writ petition filed by contractor Kurien E Kalathil, the high court, 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. The order of the high court that 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.

Supreme Court referring to Afcons Infrastructure Ltd and Anr v Cherian Varkey Construction Co (P) Ltd held 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 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.

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