AFCONS INFRASTRUCTURE LTD. AND ANR. versus CHERIAN VARKEY CONSTRUCTION CQ. (P) LTD. AND ORS.

Citation: [2010] 8 S.C.R. 1053 · Decided: 26-07-2010 · Supreme Court of India · Bench: R.V. RAVEENDRAN · Disposal: Appeal(s) allowed
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Judgment (excerpt)

[2010] 8 S.C.R. 1053 
AFCONS INFRASTRUCTURE LTD. AND ANR. 
A 
v. 
CHERIAN VARKEY CONSTRUCTION CQ. (P) LTD. AND 
ORS. 
(Civil Appeal No. 6000 of 2010) 
JULY 26, 2010 
[R.V. RAVEENDRAN AND J.M. PANCHAL, JJ.] 
Code of Civil Procedure, 1908: 
B 
c 
s. 89 - Object of - Held: Is to try for settlement between 
the parties by resorting to appropriate ADR process before 
the case proceeds to trial. 
s. 89 - Anomalies in s. 89 and its correct interpretation -
Held: The first anomaly is the mixing up of the definitions of D 
'mediation' and judicial settlement' under clauses (c) and (d) 
of sub-section (2) of s. 89 - The second anomaly is that sub-
section (1) of s. 89 imports the final stage of conciliation 
referred to in s. 73( 1) of the Arbitration and Conciliation Act, 
1996 into the pre-ADR reference stage under s. 89 -
The 
E 
clauses (c) and (d) of sub-section (2) of s. 89 would make 
perfect sense by interchanging the word "mediation" in clause 
(d) with the words 'judicial settlement" in clause (c) - As 
regards second anomaly, it is not possible for the courts to 
formulate or re-formulate the terms of a possible settlement 
F 
at a preliminary hearing to decide whether a case should be 
referred to an ADR process and, if so, which ADR process -
This anomaly was diluted in Salem Bar-II by equating "terms 
of settlement" to a "summary of dispute" - Alternative disputes 
resolution (ADR) processes - Interpretation of statutes. 
s. 89 - Reference to ADR process under -
Whether 
mandatory - Held: Having a hearing after completion of 
pleadings, to consider recourse to ADR process u/s. 89 is 
mandatory - But actual reference to an ADR process in all 
G 
1053 
H 
1054 
SUPREME COURT REPOR rs 
[2010] 8 S.C.R. 
A cases is not mandatory - Where the case falls under an 
excluded category. there need not be reference to ADR 
process - In all other case reference to ADR process 1s a 
must. 
s. 89 - ADR process - Governing statutes - Held: s 89 
8 makes it clear that two of the ADR processes, arbitration and 
conciliation, would be governed by the provisions of the 
Arbitration and Conciliation Act. 1996 and two other ADR 
processes, Lok Ada/at Settlement and Mediation would be 
governed by the. Legal Services Authorities Act, 1987 -
C Judicial settlement is not governed by any enactment and the 
court has to follow such procedure as may be prescribed (by 
appropriate rules) - Arbitration and Conciliation Act, 1996 -
Legal Services Authorities Act, 1987 
D 
s.89, 0.10, r.1A - Procedure to be followed by courts in 
implementing s. 89 and Order 10, r. 1 A - Guidelines laid down. 
s. 89 and 0. 10, r. 1 A - Distinction between - Held: Rule 
1 A of 0. 10 requires the court to give the option to the parties, 
to choose any of the ADR processes ·- This would mean a 
E joint option or consensus about the choice of the ADR 
process -
On the other hand, s. 89 vesis the choice of 
reference to the court. 
s. 89 -
Consent of the parties for reference to ADR 
F processes - Held. For referring matter to arbitration or to 
conciliation, consent of all the parties to the suit is required -
Lok Ada/at, Mediation and Judicial Settlement do not require 
consent of the parties. 
Alternative disputes resolution (ADR) processes: 
G Whether the settlement in an ADR process is binding in itself 
- Held: When the court refers the matter to arbitration under 
s. 89 of the Code, the case goes out of the stream of the court 
and becomes an independent proceeding before the arbitral 
tribunal - Arbitration award is binding on the parties and is 
H executable/enforceable as if a decree of a court - The other 
AFCONS INFRASTRUCIURE LTD. v. CHERIAN VARKEY1055 
CONSTRUCTION CO. (P) LTD. 
four ADR processes are non-adjudicatory and the case does 
A 
not go out of the stream of the court when a reference is made 
to such a non-adjudicatory ADR forum -
As the court 
continues to retain control and jurisdiction over the cases 
which it refers to conciliations, or Lok Adalats, the settlement 
agreement in conciliation or the Lok Ada/at award will have 
to be placed before the court for recording it and disposal in 
B 
its terms - Whenever such settlements reached before non-
adjudicatory ADR Fora are placed before the court, the court 
should apply the principles of Order 23 Rule 3, CPC and 
make a decree/order in terms of the settlement, in regard to c 
the subject matter of the suit/proceeding - In regard to the 
matters/disputes which are not the subject matter of
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