Jammu & Kashmir High Court - Srinagar Bench
Khursheed Ahmad Lone vs Director Social Forestry And on 27 February, 2024
Author: Chief Justice
Bench: Chief Justice
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Sr. No.04
Regular List.
IN THE HIGH C0URT 0F JAMMU & KASHMIR AND LADAKH
AT SRINAGAR
Arb P. No.7/2023
Reserved on:02.12.2023
Pronounced on:27.02.2024
KHURSHEED AHMAD LONE ...Appellant(s)/Petitioner(s)
Through: Mr. Malik Mushtaq, Advocate
Vs.
DIRECTOR SOCIAL FORESTRY AND ...Respondent(s)
OTHERS
Through: Mr. Syed Musaib, Dy. AG
CORAM:
HON'BLE THE CHIEF JUSTICE
JUDGMENT
01. The present application has been filed under Section 11 of the
Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator
to resolve the dispute which according to the petitioner has arisen
between the petitioner and respondents, which however, has been
contested by the respondents.
02. Before we go into the merit of rival claims of the parties, it may be
apposite to briefly refer to the factual background of the case.
03. According to the petitioner, the Department of Social Forestry, Jammu
and Kashmir, Srinagar published a Notice Inviting Tenders for the
sale/felling of 2336 number of poplar trees measuring 177281.07 Sqft.,
at Padgampora Pulwama strip vide tender notice
No.DIR/DSF/M&E/900-910 dated 11.01.2021 on the basis of "as it is
where it is" existing in the Social Forestry Division, Pulwama.
04. The petitioner contends that he took part in the bidding process and was
declared the successful bidder by offering the highest rate of 273/Sq.ft to
the tune of Rs.4,83,97,732/- (Rupees four crore eighty three lac ninety
seven thousand seven hundred and thirty two only). As per the terms of
the tender notice, the successful (highest) bidder was to deposit 50% of
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the bid amount in the shape of Cash/CDR of any Nationalized/Scheduled
Bank of India payable at the Divisional Head Quarter ON SPOT, over
and above the earnest money and the successful bidder was to deposit
the balance of sale value within 4 days. However, because of certain
difficulties faced by the petitioner and considering the fact that he had
already deposited Rs.1 Crore to the Department to take part in bidding
process, he submitted an application to the authorities for allowing him
to pay the balance amount of Rs. 3, 83,97,732/- before completion of the
50% of the allotted work which was duly accepted by the authorities.
Accordingly, the petitioner commenced executing the work. However,
after he started execution of work in the wake of Covid-19 restrictions
there were certain disruptions in the work, because of which, the
authority issued the notice on 25.05.2021 informing him that as he had
failed to deposit the amount of auction in-spite of lapse of more than
four months, the work allotted in his favour would be deemed to be
cancelled.
05. Being aggrieved by such act of the respondents, the petitioner
approached the Principle District Judge, Pulwama and invoked Section
9 of the Arbitration and Conciliation Act, 1996 for interim protection
and the District Court, Pulwama was pleased to pass an order on
26.03.2022 to the effect that in case the petitioner deposits the amount in
compliance of the earlier order passed by the District Court earlier on
30.06.2021, the respondents shall allow him to lift the timber.
06. Thereafter, the petitioner started execution of the contract and started
felling trees under the supervision of officials of the department who
were putting separate marks on the trunks of the felled trees which were
later on entered in the Registry maintained by the officials of the
Department. According to the petitioner while doing so, the officials of
the Department manipulated the records and showed that petitioner had
felled 2336 number of poplar trees though the petitioner had felled only
2250 poplar trees. The petitioner also claims that he had been depositing
the amounts as directed by the Division Forest Officer Pulwama,
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pursuant to the direction of the Principal District Judge Pulwama vide
order dated 26.03.2022.
07. As per the petitioner though as per the NIT the value of the contract was
Rs.4,83,97,732/- (Four crore eighty three lac ninety seven thousand
seven hundred and thirty two only), the Divisional Forest Officer
Pulwama actually received an amount of Rs. 5,15,97,732/- (Rupees five
crore fifteen lacs ninety seven thousand seven hundred thirty two) by
manipulating the accounts as the petitioner had been depositing amount
of 10% of the stock on the direction of the Principal District Judge
Pulwama. Thus, it has been submitted that while complying with the
direction of the District Court Pulwama, because of manipulation by the
officials of the Social Forestry Department Jammu and Kashmir, he had
paid more than the tendered value which is required to be refunded to
the petitioner.
08. Accordingly, the petitioner served a notice to the respondent- Director
Social Forestry Department of Social Forestry J&K, Jammu to appoint
an Arbitrator to resolve the dispute which had arisen in terms of Dispute
Redressal Mechanism provided in the agreement, vide legal notice dated
02.01.2023 which was also duly received by the respondents. As there
was no response from the authorities, having no other alternative, the
petitioner has approached this Court by filing this application for
appointment of an Arbitrator to resolve the dispute.
09. The respondents by filing objection have resisted this application and
have taken three preliminary objections viz:-
(i) Firstly, it has been contended that the contract entered
between the parties is not governed by the Jammu and
Kashmir Arbitration and Conciliation Act, 1997 which has
been repealed on 31.10.2019 by the J&K Reorganization
Act, 2019.
(ii) Secondly, the contract was not governed by the Arbitration
and Conciliation Act, 1996 as it is a contract simplicitor
where the applicability of the Act, 1996 is not attracted.
(iii) Thirdly, it has been submitted that there is no arbitration
agreement/arbitration clause in the contract within the
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meaning of Section 7 of the Arbitration and Conciliation Act,
1996.
(iv) Clause 18 of the contract which has been relied upon by the
petitioner as the basis of this application merely reads as
under:-
I8. In case of any dispute between the
department and the purchaser/successful bidder
in respect of any sale covered under this auction
notice, the decision of the Director, department
of Social Forestry J&K shall be final and
binding on both the parties.
10. It has been submitted that a bare perusal of the aforesaid clause would
show that the clause referred to and relied upon by the petitioner is not
an arbitration agreement/clause and it falls foul of Section 7 of the
Arbitration and Conciliation Act, 1996.
11. It has been accordingly contended that the dispute raised by the
petitioner is not arbitrable, and as such, invocation of Section 11 of the
Act of 1996 for appointment of the Arbitrator is totally misconceived
and deserves to be dismissed in limini.
12. The respondents also have made detailed pleadings to deny the
averments and allegations made by the petitioner of the alleged
manipulation of records and the respondent authorities have also denied
that they had received extra payment of Rs.3 crore 20 lacs.
13. In support of their claim, the respondents have relied on the decision of
this Court in "Arshad Hussain versus General Officer Commanding
(GOC), decided on 28th January, 2022.
14. On the other hand, the petitioner has relied on the decision of the
Hon‟ble Supreme Court in "Karnataka Power Transmission
Corporation Limited and another versus Deepak Cables (India)
Limited", (2014) 11 SCC 148.
15. Heard learned counsel for the parties and perused the materials on
record.
16. From the pleadings it is evident that there is a dispute which has arisen
between the parties. While the petitioner claims that he has been made to
pay more than tender amount by alleging that same was done by
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manipulation of records by the official respondents of the Department,
the said allegation has been denied by the respondents. The fact that the
claim of the petitioner has been denied by the respondents clearly
indicates the existence of a dispute.
17. Having held that there is a dispute, the next issue which needs to be
decided is, whether there is any arbitration clause in the contract
agreement which would enable the parties to resolve the dispute through
arbitration and not by the usual legal mode.
18. In this regard, the term of the contract which the petitioner claims to be
the arbitration clause is to be found at Clause 18 of the agreement which
has been quoted above.
19. A perusal of the said Clause 18, would show that it does not specifically
mention that the dispute between the parties shall be referred to an
arbitrator. What the aforesaid clause mentions is that the dispute shall be
referred to the Director, Social Forestry Department Jammu and
Kashmir, Srinagar Kashmir, whose decision shall be final and binding
on the parties.
20. The question which arises for consideration is as to whether the
aforesaid clause can be deemed to be an arbitration clause within the
meaning of Section 7 of the Arbitration and Conciliation Act, 1996.
21. There has been many instances in the past when similar doubts had
arisen as to whether any such clause amounts to an Arbitration clause or
not, which had been considered by the Hon‟ble Supreme Court in a
catena of decisions.
22. In this regard, one may refer to the decision in "Jagdish Chander versus
Ramesh Chander and others, (2007) 5 SCC 719, wherein the Hon‟ble
Supreme Court had culled out the principles to determine as to what
constitutes an arbitration agreement. We may refer to para 8 of the
aforesaid decision in Jagdish Chander (supra) wherein it was held:-
8. This Court had occasion to refer to the attributes or essential
elements of an arbitration agreement in K K Modi v. K N
Modi [1998 (3) SCC 573], Bharat Bhushan Bansal vs. U.P. Small
Industries Corporation Ltd. [1999 (2) SCC 166] and Bihar State
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Mineral Development Corporation v. Encon Builders (I)(P)
Ltd. [2003 (7) SCC 418]. In State of Orissa v. Damodar Das [1996
(2) SCC 216], this Court held that a clause in a contract can be
construed as an 'arbitration agreement' only if an agreement to refer
disputes or differences to arbitration is expressly or impliedly spelt
out from the clause. We may at this juncture set out the well settled
principles in regard to what constitutes an arbitration agreement:
(i) The intention of the parties to enter into an arbitration agreement
shall have to be gathered from the terms of the agreement. If the
terms of the agreement clearly indicate an intention on the part of
the parties to the agreement to refer their disputes to a private
tribunal for adjudication and willingness to be bound by the decision
of such tribunal on such disputes, it is arbitration agreement. While
there is no specific form of an arbitration agreement, the words used
should disclose a determination and obligation to go to arbitration
and not merely contemplate the possibility of going for arbitration.
Where there is merely a possibility of the parties agreeing to
arbitration in future, as contrasted from an obligation to refer
disputes to arbitration, there is no valid and binding arbitration
agreement.
(ii) Even if the words 'arbitration' and 'arbitral tribunal (or
arbitrator)' are not used with reference to the process of settlement
or with reference to the private tribunal which has to adjudicate
upon the disputes, in a clause relating to settlement of disputes, it
does not detract from the clause being an arbitration agreement if it
has the attributes or elements of an arbitration agreement. They are:
(a) The agreement should be in writing. (b) The parties should have
agreed to refer any disputes (present or future) between them to the
decision of a private tribunal. (c) The private tribunal should be
empowered to adjudicate upon the disputes in an impartial manner,
giving due opportunity to the parties to put forth their case before it.
(d) The parties should have agreed that the decision of the Private
Tribunal in respect of the disputes will be binding on them.
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(iii) Where the clause provides that in the event of disputes arising
between the parties, the disputes shall be referred to Arbitration, it is
an arbitration agreement. Where there is a specific and direct
expression of intent to have the disputes settled by arbitration, it is
not necessary to set out the attributes of an arbitration agreement to
make it an arbitration agreement.
But where the clause relating to settlement of disputes, contains
words which specifically excludes any of the attributes of an
arbitration agreement or contains anything that detracts from an
arbitration agreement, it will not be an arbitration agreement. For
example, where an agreement requires or permits an authority to
decide a claim or dispute without hearing, or requires the authority
to act in the interests of only one of the parties, or provides that the
decision of the Authority will not be final and binding on the parties,
or that if either party is not satisfied with the decision of the
Authority, he may file a civil suit seeking relief, it cannot be termed
as an arbitration agreement.
(iv) But mere use of the word 'arbitration' or 'arbitrator' in a clause
will not make it an arbitration agreement, if it requires or
contemplates a further or fresh consent of the parties for reference
to arbitration. For example, use of words such as "parties can, if
they so desire, refer their disputes to arbitration" or "in the event of
any dispute, the parties may also agree to refer the same to
arbitration" or "if any disputes arise between the parties, they
should consider settlement by arbitration" in a clause relating to
settlement of disputes, indicate that the clause is not intended to be
an arbitration agreement. Similarly, a clause which states that "if
the parties so decide, the disputes shall be referred to arbitration" or
"any disputes between parties, if they so agree, shall be referred to
arbitration" is not an arbitration agreement. Such clauses merely
indicate a desire or hope to have the disputes settled by arbitration,
or a tentative arrangement to explore arbitration as a mode of
settlement if and when a dispute arises. Such clauses require the
parties to arrive at a further agreement to go to arbitration, as and
when the disputes arise. Any agreement or clause in an agreement
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requiring or contemplating a further consent or consensus before a
reference to arbitration, is not an arbitration agreement, but an
agreement to enter into an arbitration agreement in future.
23. The said decision in Jagdish Chander (supra) has been consistently followed
by the Hon‟ble Supreme Court in the subsequent decisions, including in
"Karnataka Power Transmission Corporation Limited" (supra)
which is also relied upon by the petitioner.
24. In the aforesaid case, the Hon‟ble Supreme Court while relying on the
decision in Jagdish Chander (supra) referred to the decision of the
Hon‟ble Suprme Court in "State of U.P. versus Tipper Chand", (1980) 2
SCC 341 In the case of Tipper Chand (supra), the Hon‟ble Supreme
Court referred to a case arising out of Jammu and Kashmir in "Dewan
Chand versus State of J&K, AIR 1961 J&K 58. In Dewan Chand
(supra), the clause which was under consideration was similar to the one
in the present case and the same was held to be an arbitration agreement,
as evident from para 5 and 6 of the decision in Dewan Chand (supra),
which reads as follows:
5. I would first take up the question of the validity of the
arbitration agreement. The arbitration clause contained in the
agreement Ex.D runs as follows:
" For any dispute between the contractor and the Department
the decision of the Chief Engineer PWD Jammu and Kashmir,
will be final and binding upon the contractor".
6. The clause thus contained in the agreement is in writing
and is signed by the both parties. There is no dispute on this
question. Mr. Prakash appearing for the plaintiff argued that
as there are no words in this agreement showing that there has
been actual submission or reference to arbitration by any of
the parties, hence this is not an arbitration agreement within
the meaning of S.2(a) of the Arbitration Act. It is also
contended that the word, "Arbitration Act. It is also
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contended that the word, "Arbitration." Has not also been
used in the clause.
23. This Court in the aforesaid case of Dewan Chand (supra) held that even
if the words that reference should be made to the Chief Engineer to act
as the arbitrator are not used, it would not be material, as the substance
of the agreement has to be looked into, as explained in paragraph 7, 8
of the aforesaid decision which reads as follows:-
"7. Section 2(a) of the Arbitration Act reads as under:
"Arbitration Agreement means a written agreement to submit
present or future differences to arbitration, whether an
arbitrator is named therein or not".
A perusal of this clause clearly shows that all that the statute
requires is that there should be a written agreement to submit
a dispute to arbitration. It is not necessary that the words
"reference" or "arbitration" should actually be used in the
agreement, if the agreement in substance amount to an
arbitration agreement within the means of S.2 cl.(a) of the
Arbitration Act.
8. The clause of the agreement quoted above, clearly indicates
that the parties have agreed that any dispute between the
contractor and the department i.e., the plaintiff and the
defendant should be referred to the Chief Engineer and that
his decision shall be final and binding on the parties. It is true
that the word "reference" is not used in this clause nor it has
been mentioned that the Chief Engineer should be the
arbitrator, but looking to the substance of the clause, there can
be no doubt, that the parties agreed that any dispute between
them should be settled by the Chief Engineer.
In my opinion, whenever, there is an arbitration clause
the Court should look to the substance rather than to the form
of it and the mere fact that words like "reference" or
"arbitrator" do not find place in the said agreement does not
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show that the agreement is not an arbitration agreement
within the meaning of S.2(a) of the Arbitration Act. I am
fortified in my view by the decision of the Lahore High Court
report in Governor-General v. Simla Banking and Industrial
Co.,, AIR 1947 Lah 215, where their Lordships made the
following observations:
"It is true that the words „arbitration‟ „arbitrator‟ or
„Arbitration Agreement‟ do not appear in the clause but that
is, in my view, immaterial as long as the parties can be found
to have agreed to allow the matter to be decided by a person
of their own selection whose decision was to be final,
conclusive, and binding on them".
Under these circumstances, I am clearly of the view that
clause 10 of the agreement between the parties is an
agreement which amounts to an arbitration agreement within
the meaning of S. 2(a) of the Arbitration Act and, therefore,
the application of the defendant on this ground is
maintainable.
25. The aforesaid decision in Dewan Chand (supra) was approvingly
referred to by the Hon‟ble Supreme Court in Tipper Chand (supra) in
which it was held as follows:-
5. Mr. Dixit relied on Governor-General v. Simla Banking
and Industrial Company Ltd. AIR 1947 Lah 215, Dewan
Chand v. State of Jammu and Kashmir AIR 1961 J & K
58 and Ram Lal v. Punjab State. In the first of these
authorities the clause appearing in the contract of the parties
which was held by Abdur Rahman, J., to amount to an
arbitration agreement was practically, word for word, the
same with which we are concerned here but we are of the
opinion that the interpretation put thereupon was not correct.
As pointed out by the High Court such a clause can be
interpreted only as one conferring power on the
Superintending Engineer to take decisions all by himself and
not by reason of any reference" which the parties might to
him.
6. In the Jammu and Kashmir case the relevant clause was
couched in these terms:
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For any dispute between the contractor and the
Department the decision of the Chief Engineer PWD Jammu
and Kashmir, will be final and binding upon the contractor.
The language of this clause is materially different from
the clause in the present case and in our opinion was correctly
interpreted as amounting to an arbitration agreement, In this
connection the use of the words "any dispute between the
contractor and the Department" are significant. The same is
true of the clause in Ram Lal's case (supra) which ran thus:
In matter of dispute the case shall be referred to the
Superintending Engineer of the Circle, whose order shall be
final.
We need hardly say that this clause refers not only to a
dispute between the parties to the contract but also
specifically mentions a reference to the Superintending
Engineer and must therefore be held to have been rightly
interpreted as an arbitration agreement.
26. In the present case, the contractual clause which the petitioner claims to
be the Arbitration clause is similarly worded as in the said case of
Dewan Chand (supra). In the said case also there was no mention of the
words "arbitration" or the expression "reference to arbitration".
27. This Court is satisfied with that Clause 18 of the contract in the present
case amounts to an Arbitration clause, inasmuch as, the intention of
parties was to refer the decision to the Director, Social Forestry
Department which shall be final and binding on the parties. While
arriving at his decision, obviously, the Director would be required to
hear the parties and return a finding as regards the correctness or
otherwise of the claim and such finding and decision will be final and
binding. Thus, even if the aforesaid clause does not mention the words
"Arbitration" or "Arbitration Tribunal" the fact that the decision of the
Director, Social Forestry Department Jammu and Kashmir will be final
and binding on the parties, the ingredients required as to what constitute
arbitration are present in as explained in Jagdish Chander (supra) case.
The Director, certainly, under the circumstances acts as the arbitrator.
28. As regards the contention that the contract in issue is a contract
simplicitor devoid of any arbitration agreement so as to attract the
Arbitration and Conciliation Act, 1996, it is also without any merit in
view of the finding arrived at above.
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29. The other argument raised by the learned counsel for the respondents is
that Arbitration and Conciliation Act, 1996 is not applicable in the
present case is without any merit, inasmuch as, after the implementation
of the Jammu and Kashmir Reorganization Act of 2019, it is the
Arbitration and Conciliation Act, 1996 which will be applicable to deal
with any matter relating to arbitration within the Jammu and Kashmir.
30. Before parting, I would like to deal with the decision of this Court in
Arshad Hussain (supra) relied upon by the learned counsel for the
respondents. A perusal of this decision will show that the "clause of the
contract" regarding which the question arose whether it amounts to
arbitration clause or not, reads as follows, (as mentioned in para 32 of
the judgment):
"25. In case of any dispute in respect of interpretation of this
agreement, the decision of the GOC will be final and
binding".
The finding of the Court is recorded in para 45 and 46 which
are reproduced herein below:-
"45. The Court held that the aforesaid clauses do not
postulate any intention on part of the parties to the
agreement to refer there disputes to a private tribunal
for arbitration and the said clauses do not provide that
the arbitral tribunal has been empowered to adjudicate
upon the dispute between the parties.
46. Similar is the position with clause 25 of the
agreement, it does not provide that the arbitral tribunal
is empowered to adjudicate upon the disputes between
the parties. It only provides for the decision on the
interpretation of the agreement and as such does not
express intention of the parties to refer their disputes to
a tribunal.
31. Thus, it is clearly evident that the aforesaid clause merely enables the
parties to refer to the GOC for interpretation of the agreement and there
was no intention of the parties to refer their "dispute" to the GOC, hence
it cannot be said to be arbitration clause/arbitration agreement to settle
the dispute between the parties.
In the present case, such is not the case, as it was the intention of
the parties to refer to the Director of Social Forestry Department in case
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of any dispute arising out of the sale covered under the auction notice,
whose decision shall be final and binding on the parties.
Hence, this decision in "Arshad Hussain" (supra) is not
applicable in the present case.
32. Accordingly, for the reasons discussed above, this Court is satisfied that
the petitioner has been able to make out his case for referring the dispute
which has arisen between the parties to an Arbitrator. Since the
respondents have failed to refer the dispute to the Director, Social
Forestry Department Jammu and Kashmir in terms of Clause 18 of the
contract agreement, this Court will proceed to appoint an arbitrator to
resolve the dispute between the parties.
33. Petition is accordingly, allowed by appointing Mr. Hon‟ble Justice
Hakim Imtiyaz Hussain, retired High Court Judge to act as the
Arbitrator, who will proceed in the matter subject to his consent, in
accordance with the provisions of the Act before whom the parties will at
liberty to raise all objections. The Ld. Arbitrator, after affording
opportunity of hearing to both the parties, shall make the award within
the time provided in the Act after charging the prescribed fee along with
the incidental expenses to be shared by the parties.
34. Learned Arbitrator be accordingly informed.
35. The petition is disposed of accordingly.
(N. KOTISWAR SINGH)
CHIEF JUSTICE
SRINAGAR
27-02-2024
Shameem H.
Whether the order is reportable: Yes/No
Whether the order is speaking: Yes/No.
