# ~AMMU & KASHMIR STATE FOREST CORPORATION v. ABDUL KARIM WANI

- **Citation:** [1989] 2 S.C.R. 380
- **Court:** Supreme Court of India
- **Decided:** 1989-03-31
- **Bench:** R.S. Pathak, Sabyasachi Mukharji, Laut Mohan Sharma
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ammu-kashmir-state-forest-corporation-v-abdul-karim-wani-10395
- **Pages:** 21

## Headnote

Jammu and Kashmir Arbitration Act 2002 (Smvt) Sections 8, 11,'
20and 41.
Arbitration Act, 1940--Sections 2(a), 18 and 20. Arbitration
clause in Contract-How to be construed.
Dispute between parties-Whether referable to arbitration or
not-Court to refrain from expressing opinion on merits of dispute.
Jurisdiction of Court to make interim order-Only 'for the
purpose' of arbitration proceedings-Not to frustrate the same.
The appellant, a Corporation was created under the Jammu &
Kashmir Forest Corporation Act, 1978. One of its main functions was yto undertake the removal and disposal of trees and exploitation of the
E
forest resources entrusted to it by the Government.
The Corporation took a decision for the extraction of timber of a
total volume of 10.08 lakh c. ft. which included the work offelling and
-
removal of trees. The respondent an approved contractor submitted his
tender and was granted the works contract initially with reference to 4
F
lakh c. ft., and subsequently he was entrusted with an additional work
for a further quantity of 2 lakh c. ft. The respondent completed the
entire work under the contract. Thereafter, he claimed that he was
entitled to the remaining volume of the work, namely, 4.08 lakh c.ft. as
per the procedure, practice, custom and usage extended to him. The
appellant denied any such practice, custom or assurance and said that a
G
decision had been taken not to work the area further till the entire
timber ·already extracted was removed to its destination. There was,
therefore, no question of entrusting the remaining work to anybody.
I
y
' '
Paragraph 15 of the Tender Notice stipulated that: "Extension for
. 4
the additional volume in the coupe will not be claimed as a matter of
H
right but may be considered by the Management where the achievement
380
J$>K STATE fO~!:;ST CO~PN. v. A-K. WAN!
381
is I 00 per ce11t," Tlw a_greemeq\ pnwide<I for arbitration which was
cont11inec;I in c!!IUSI' 4~. am! which. stipulate!!! ''t!l!lt 11ny dispute, differences 11r questi\lll l!lat ffi!!Y arise was to l>e referred for arbitration to the
Mllll!lllh•g DireCl\11' 11ftll.f Jammllf {lj: l\asllmir f11rest CorP1Jrati1Jn."
I
The resp1m<!e11t filed a11 !lpp,llcation 1m!ler secUons 8, 11 1111!1 20 of
--1
the J11mm11 1111<! l\ashmlr Arhitrnti1111 Act, ~002 (Smvt) i11 the' High
-'- Court for 11 d.irecli11q Ill the C11rpl!fatio11 lo file the 11greement and to
refer t11e dispute to ;m 1wldtrat11r. ·
A
B
Tile ttl11!1 C11ur-t deprernted. Ille ttltltmle 11£ the Corporation in not
11warl!l!1g tlle remainh1g w11rl\ 111 Ille resp11111!enl. It held that the trees i!l
queslioll hall already lllll'll m11rlletl !Ind. ll;il!, tl!erefore, t1.1 be felled 'one C
-+ l!i:iy or the 110•.er', and !!S. tile fW1tr11et11r's aqiievement was 300 per cent
tie lmd all Ille rlg!lt lt1 cl11im the remahting w11rk as provided in
paragrnpll IS !If the Ten!ler N11ti~11. 'file ftiglt Cil11rt also found that as
tller1l e;dstec;I II lllsPl!te t1111~!1ing the c1>ntracts executed between llte
parties, ii referred Ille mllt!el' 11nder cla11se 42 of t11e agreement to the
namell ;irbilrator, @mely, tile l\1anll~lng lHrector of tbe State Forest
D
Corpor11lio11,
Tiie ffigll Court went f11rtller alld by an h1terim order directed
that llte clllllractor be permilted !ti di! tile re111i1i11i11g work of extraction
(If ti111ber of sta11di11g morked tree~ 11111!. ti•• rntes be !letermined by the
arbitrator ;itler hearll!!l boll\ th@ parties p11rs11l111t Ill tile said interim
order.
"
Aggrieved by Ille afor<>sai<I l!fders qf the Higlt Court the appellant
appealeil to ttiis Cuurt by specl;tl leave,
On the questions! (l) whether !here was any subsisting arbitration
11gree111ent iq ·respefl of tile 111atters so11ght to be referred, and (ii)
wltettier the interj111 or<ler of the High C111Jrl directing the respondent to
do the r<0maiqiqg work was willlQl!t j11risdi~tion, and wheth.er the
resp!lmlel!t was •n!itled IP a!!Y ~0111pen~~t1011 for tbe work done.
-·
x
, ....
Allowing th

## Text

_Characters 0–39,995 of 53,177. This is a partial read: ask again with offset=39995 for what follows._

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.J ,
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~AMMU & KASHMIR STATE FOREST CORPORATION
v.
ABDUL KARIM WAN!
MARCH 31, 1989
[R.S. PATHAK, CJ., SABYASACHI MUKHARJI AND
LAUT MOHAN SHARMA, JJ.]
Jammu and Kashmir Arbitration Act 2002 (Smvt) Sections 8, 11,'
20and 41.
Arbitration Act, 1940--Sections 2(a), 18 and 20. Arbitration
clause in Contract-How to be construed.
Dispute between parties-Whether referable to arbitration or
not-Court to refrain from expressing opinion on merits of dispute.
Jurisdiction of Court to make interim order-Only 'for the
purpose' of arbitration proceedings-Not to frustrate the same.
The appellant, a Corporation was created under the Jammu &
Kashmir Forest Corporation Act, 1978. One of its main functions was yto undertake the removal and disposal of trees and exploitation of the
E
forest resources entrusted to it by the Government.
The Corporation took a decision for the extraction of timber of a
total volume of 10.08 lakh c. ft. which included the work offelling and
-
removal of trees. The respondent an approved contractor submitted his
tender and was granted the works contract initially with reference to 4
F
lakh c. ft., and subsequently he was entrusted with an additional work
for a further quantity of 2 lakh c. ft. The respondent completed the
entire work under the contract. Thereafter, he claimed that he was
entitled to the remaining volume of the work, namely, 4.08 lakh c.ft. as
per the procedure, practice, custom and usage extended to him. The
appellant denied any such practice, custom or assurance and said that a
G
decision had been taken not to work the area further till the entire
timber ·already extracted was removed to its destination. There was,
therefore, no question of entrusting the remaining work to anybody.
I
y
' '
Paragraph 15 of the Tender Notice stipulated that: "Extension for
. 4
the additional volume in the coupe will not be claimed as a matter of
H
right but may be considered by the Management where the achievement
380
J$>K STATE fO~!:;ST CO~PN. v. A-K. WAN!
381
is I 00 per ce11t," Tlw a_greemeq\ pnwide<I for arbitration which was
cont11inec;I in c!!IUSI' 4~. am! which. stipulate!!! ''t!l!lt 11ny dispute, differences 11r questi\lll l!lat ffi!!Y arise was to l>e referred for arbitration to the
Mllll!lllh•g DireCl\11' 11ftll.f Jammllf {lj: l\asllmir f11rest CorP1Jrati1Jn."
I
The resp1m<!e11t filed a11 !lpp,llcation 1m!ler secUons 8, 11 1111!1 20 of
--1
the J11mm11 1111<! l\ashmlr Arhitrnti1111 Act, ~002 (Smvt) i11 the' High
-'- Court for 11 d.irecli11q Ill the C11rpl!fatio11 lo file the 11greement and to
refer t11e dispute to ;m 1wldtrat11r. ·
A
B
Tile ttl11!1 C11ur-t deprernted. Ille ttltltmle 11£ the Corporation in not
11warl!l!1g tlle remainh1g w11rl\ 111 Ille resp11111!enl. It held that the trees i!l
queslioll hall already lllll'll m11rlletl !Ind. ll;il!, tl!erefore, t1.1 be felled 'one C
-+ l!i:iy or the 110•.er', and !!S. tile fW1tr11et11r's aqiievement was 300 per cent
tie lmd all Ille rlg!lt lt1 cl11im the remahting w11rk as provided in
paragrnpll IS !If the Ten!ler N11ti~11. 'file ftiglt Cil11rt also found that as
tller1l e;dstec;I II lllsPl!te t1111~!1ing the c1>ntracts executed between llte
parties, ii referred Ille mllt!el' 11nder cla11se 42 of t11e agreement to the
namell ;irbilrator, @mely, tile l\1anll~lng lHrector of tbe State Forest
D
Corpor11lio11,
Tiie ffigll Court went f11rtller alld by an h1terim order directed
that llte clllllractor be permilted !ti di! tile re111i1i11i11g work of extraction
(If ti111ber of sta11di11g morked tree~ 11111!. ti•• rntes be !letermined by the
arbitrator ;itler hearll!!l boll\ th@ parties p11rs11l111t Ill tile said interim
order.
"
Aggrieved by Ille afor<>sai<I l!fders qf the Higlt Court the appellant
appealeil to ttiis Cuurt by specl;tl leave,
On the questions! (l) whether !here was any subsisting arbitration
11gree111ent iq ·respefl of tile 111atters so11ght to be referred, and (ii)
wltettier the interj111 or<ler of the High C111Jrl directing the respondent to
do the r<0maiqiqg work was willlQl!t j11risdi~tion, and wheth.er the
resp!lmlel!t was •n!itled IP a!!Y ~0111pen~~t1011 for tbe work done.
-·
x
, ....
Allowing the aPpeal, till' C::<11ir1,"
HELP: (R,S, l'nlhlll\, C::J and L.M. Sharma, J. Majority-Per .
L.M. Slt11rm11, J,)
I, The cl1d111 rnlsed lly the r~~pundent in his application before
tile fligh Co11rt Is not ~over•d l!y !tie ~rhi!rnlio!l elapse llOd cannot be
E
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G
H
382
SUPREME COURT REPORTS
[1989] 2 S.C.R.
referred for a decision of the arbitrator. The order of reference passed
by the High Court has therefore to be set aside. [390F]
2. If the foundation of the claim of the respondent be any alleged
assurance or custom or practice, it cannot be said that such claim arises
out of the written agreement between the parties; and so the prayer for
reference has to be rejected. If the case pleaded is true, the appropriate
forum for the respondent will be a Court of Law directly granting the .J
relief in an appropriate legal proceeding [388A-B]
3. The language of the term contained in para IS of the tender
notice is explicit in declaring that the contractor would not be allowed to
claim as a matter of right the additional volume of work. His right
extends only to a consideration of his case by the management when the
j
question of allotment of additional work is taJ<en up. But by the application filed before the High Court the respondent did not ask for reference of a dispute as to whether he is entitled to consideration or not; the
prayer is for reference of a higher claim of immediately getting the
additional work, and this prayer has been allowed. This issue cannot be
said to have any connection with the 15th term of the tender notice or
any other provision thereof or of the agreement. [3E8D-E]
4. In the absence of a repudiation by the Corporation of the
)
respondent's right to be considered, if and when occasion arises, no
dispute can be said to have arisen which may be referred for
arbitration. [3908]
S. In order that there may be a reference to arbitration, existence
of a dispute is essential, and the dispute to be referred must arise under
the arbitration agreement. [390C]
Seth Thawardas Pherumal v. The Union of India, [1955] 2 SCR
48 relied on.
. J
6. There was no justification for the High Court in deprecating
the Corporation for not awarding the remaining work to the contractor
when it was leaving the matter to he decided by the arbitrator. [387G]
7. A Court, while considering the question whether an alleged
dispute between the parties has to be referred for arbitration or not,
should refrain from expressing its opinion on the merits of the dispute
which may embarrass the arbitrator. [387G-H]
J&K STATE FOREST CORPN. v. A.K. WAN!
383
8. Section 18 deals with the power of the Court to pass interim
orders after award is actually filed in Court. So far as clause (a) of
Section 41 is concerned, it .makes only the procedural rules of the Civil
Procedure Code applicable. The source of power to grant interim relief
cannot be traced to clause (a), otherwise clause (b) would become
otiose. So far as clause (b) is concerned, it circumscribes the Court's
power within the limits indicating in the second Schedule, and further
·~. qualifies it by declaring in the Proviso that it cannot be used to the
prejudice of any of the powers of the arbitrator. [39ID-E]
H.M. Kamaluddin v. Union of India, [1983] 4 SCC 417relied on .
.,. 9. Interim directions can be issued only 'for the purpose of' arbitration proceedings and not to frustrate the same. [391E]
JO. The High Court in the instant case, by granting the interim
relief, not in the shape of an injunction in the negative form, but by a
mandatory direction clothing the respondent-plaintiff with the right to
A
B
c
do something which he could have been entitled to only after a final
D
decision on the merits of the case in his favour committed a serious
error. [391G-H]
-°"'!.
['Per Sabyasachi Mukharji, J partly dissenting]
-
............
1. There was a dispute in the instant case, whether the contractor
E
was entitled to the grant of the additional volume of work. Such dispute
was a dispute between the parties in respect of the 'works to be executed
by the contractor'. In that view of the matter and in the light of clause
15 read with clause 17 of the Agreement the dispute was clearly referable to the arbitration of the Managing Director, Jammu & Kashmir
State Forest Corporation. [397F-G]
F
2. Endeavour should always be to find out the intention of the
parties, and that intention has to be found out by reading the terms
broadly, clearly, without being circumscribed. [398B-C]
3. An arbitration agreement is one which is defined in section 2(a)
G
of the Arbitration Act; 1940 as a written agreement to submit present or
future differences to. arbitration. There was, in the instant case, an
arbitration agreement that is to say, the parties had been ad idem. The
agreement was in writing. It was not a contingent or a future contract.
It was a contract at pres.en! time to refer the dispute arising out of the
present contract entered into by the parties as a result of which the
H
A
384
SUPREME COURT REPORTS
[1989] 2 S.C.R.
contractor got a right or privilege to ask for consideration of grant of
the further work. It was not a mere right to get the additional work.
The amplitude of the arbitration clause was wide enough and should be
so read. [397H; 398A-B, C-D],
B
Seth Thawardas Pherumal v. The Union of India. [ 19551 2 SCR
43 distinguished.
A.M. Mair & Co. v. Gordhandass Sagarmull, [1950] SCR 792 at
798 and Heyman v. Darwins Ltd., [1942] Appeal Cases 356 at 368
referred to.
C
4. Though under section 4l(b) the Court has power to pass an
interim order or injunction or appointment of receiver, the Section does
not empower the Court to direct execution of the contract, the extent of
which is in dispute and is a matter referable to be adjudicated by the
arbitrator. If the Court does so, then the decision of the dispute be·
D comes academic because the contract is executed. [3990-E]
5. Where the question is whether the contract was to be executed
by the respondent, if the contract is in fact executed by the respondent
by virtue of the order of the Court, then nothing remains of the dispute.
There is nothing arbitrable any more and proceedings before the
E arbitrator cannot be forestalled by interim order by ordering execution
of the contract before it is decided whether the contractor had any right
to the contract for additional work in the grab of preservation of the
property. [399E-F] ·
F
6. The interim directions given by the High Court that the contractor be allowed to do the remaining work of extraction of timber of standing marked trees was beyond the competence of the Court. [399F-G l
.~
,,._
7. It would be unjust to deprive any party of its dues simply
.i,...
G
because the work has been done in view of a wrong order or incorrect
order of the Court of justice when there was no stay. l400BJ
8. The work In the instant case, has indisputably been done
pursuant to an order of the Court of law and the party who has done the
work must be paid its remuneration. [400C]
CIVIL APPELLATE.JURISDICTION: Civil Appeal No. 2121
H of 1989.
-
al
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j;-
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J&K STATE FOREST CORPN. v. A.K. WAN! [SHARMA, J.I
385
From the Judgment and Order dated 4.6.1987 of the Jammu and
Kashmir High Court in Application No. 180 of 1987.
Altaf Ahmed and S.K. Bhattacharya for the Appellant.
S.N. Kacker, E.C. Agarwala and Ms. Purnima Bhat for the
Respondent.
The following Judgments of the Court were delivered:
A
B
SHARMA, J. The present respondent who is an approved contractor of the Jammu & Kashmir State Forest Corporation (appellant
before us) filed an application under ss. 8, 11 and 20 of the Jammu &
C
Kashmir Arbitration Act, 2002 (Smvt.), on the original side of the High
Court of Jammu & Kashmir praying for a direction to the Corporation
defendant to file an agreement between them fully described therein,
and to refer the dispute mentioned in the application to an arbitrator.
Jammu & Kashmir Arbitration Act is similar to the Arbitration Act,
1940, enacted in identical language. The Corporation objected, pleadD
ing inter alia that the entire work allotted to the plaintiff contractor
under the agreement had been completed by him without any dispute,
and the present claim of the plaintiff is not covered by the agreement
in question or its arbitration clause A learned single Judge of the High
Court allowed the prayer for reference to the dispute described in the
respondent's application, and further granted an mterim relief. This E
judgment is under challenge before· this Court by the defendant Corporation. Special leave is granted.
2. As stated in the affidavit of the plaintiff-contractor, the Corporation was created under the Jammu & Kashmir Forest Corporation
Act, 1978 and its main functions·are: (i) to undertake research progF
rammes and to render technical advice to the State Government on the
matters relating to forestry, (ii) to manage, maintain and develop
forests transferred or entrusted;to it by the Government, and (iii) to
undertake removal and disposal of trees and exploitation of forest
resources entrusted to it by the Government. In February 1986 the
Corporation invited tenders for extraction of timber from an area G
described as Compartment No. 59-Marwa which included the work of
felling and removal of trees. The plaintiff submitted his tender ·and was
ultimately granted the work contract with reference to 4 lac cft. standing volume timber. Subsequently in 1987 he was also entrusted with an
additional work contract for a further quantity of 2 lac cft. in the said
Compartment 59-Marwa. Although a decision by the authorities had . H
A
B
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D
E
F
386
SUPREME COURT REPORTS
[1989] 2 S.C.R.
been taken for extraction of a total standing volume of 10,08,000 cft.,
the plaintiff was entrusted with the extraction work of only 6 lac cft.
Thus 4,06,000 cft. of standing volume remained in the area to be
extracted later. According to his case the plaintiff was entitled to get
this additional work in accordance with the practice prevalent in the
Corporation and assurances given to him. It was alleged that since the
Managing Director of the Corporation was not agreeable to allow this
additional work, the plaintiff approached the Chief Minister of the
State who asked the Managing Director to allot him the remaining
work. The Manging Director first agreed to issue necessary orders but
later refused to carry out the Chief Minister's direction which necessitated the filing of the application before the High Court. The Corporation denied any such practice and refuted the allegation about any
assurance given on its behalf as also the statement about the Managing
Director agreeing at one stage to allot the additional work irt question
on the intervention of the Chief Minister. It was further stated by the
Corporation that a large amount of extracted timber was lying in the
area and had to be removed. Admittedly the timber had to be transported to a distant place through difficult terrain (as has been specifically mentioned by the contractor himself) and was, therefore, likely
to take a considerable time. The Corporation said that a decision had
been taken not to work the Compartment further till the entire timber
already extracted was removed to its destination, and there was, therefore, no question of entrusting the remaining work to anybody for the
present. A decision as to how and when the additional trees will be
felled and the timber removed is for the Corporation to make and it is
under no obligation to the contractor in this regard. So far as the work
allotted to the contractor under the agreement is concerned, it is
already complete without giving rise to any difference between the
parties.
3. Reliance has been placed on behalf of the plaintiff before us
on paragraph 41 of the agreement under which the work contract in
respect to 6 lac cft. was obtained by him, and which says that the terms
and conditions of the tender notice issued by the Corporation will be
G
terms and conditions of the agreement. The 15th paragraph of the
tender notice reads thus:
H
"IS. Extension for the additional volume available in the
coupe will not be claimed as matter of right. But may be
considered by the Management where the achievement is
100%."
)[
J&K STATE FOREST CORPN. v. A.K. WAN! (SHA&'\IA, J.l
387
..4
The arbitration clause being Clause 42 of the agreement states thus:
A
"42. Any dispute, difference or question which may at any
time arise between the parties in respect of the work to be
~
executed by the second party under this agreement shall be
referred for arbitration to the Managing Director, J & K.
State Forest Corporation, whose decision shall be final and
B
~.
binding on both the parties."
As it appears from the plaintiff's application before the High Court,
his claim was founded on "procedure", "practice," "custom", and
"assurances extended to the petitioner to that effect by the respondent
Corporation through its functionaries from time to time." Although it c
·~ has been contended before us that since paragraph 15 of the tender
notice refers to additional volume of work to be allotted in the future,
the agreement between the parties including the arbitration clause
must be interpreted to include within its sweep the present claim of the
respondent to the additional work of extraction, the case for reference
pressed before the High Court rested mainly on the alleged "practice"
D
and "assurances". The High Court has emphasized in its judgment the
fact that the trees in question had already been marked for extraction
and, therefore, have to be felled "one day or the other" and depre-
~ cated the attitude of the Corporation in the following words:
"The contention of the learned connsel for the respondents
E
is that the respondents do not want the remaining timber to
--
be extracted presently for unknown reasons and as such the
I
corporation cannot be compelled for grant of sanction for
extraction of remaining marked timber. I think the attitude
l
of the respondent corporation is most derogatory to the
facts and circumstances of the case when the petitioner is
F
prepared to accept all sorts of offers. It cannot be denied
that the remaining timber is to be extracted one day or the
other and simply to put the petitioner to loss would not be
justifiable in any manner."
~
There was absolutely no justification for the Court to have commented
G
as above when it was leaving the matter to be decided by the
arbitrator. A court, while considering the question whether an alleged
dispute between the parties has to be referred for arbitration or not
should refrain from expressing its opinion on the merits of the dispute
which may embarrass the arbitrator. However, the main issue before
us is whether the dispute mentioned in the contractor's application
H
388
SUPREME COURT REPORTS
[1989] 2 S.C.R.
A could have been referred to arbitration at all.
B
c
4. If the foundation of the claim of the respondent be any
alleged assurance or custom or practice, it cannot be said that such
claim arises out of the written agreement between the parties; and so
the prayer for reference has to be rejected. If the case pleaded is true,
the appropriate forum for the respondent will be a court of law directly
granting the relief in an appropriate legal proceeding. It was, however,
argued on behalf of the respondent before us that in view of paragraph
15 of the tender notice, quoted earlier, which must be treated as a part
of the agreement, the respondent has a right to be considered for
allottment of the additional work since his past performance has been
excellent. We are afraid, the impugned judgment of the High Court
cannot be defended on this basis and the prayer of the respondent for
reference of the dispute, as mentioned in his application before the
High Court, cannot be granted under the 15th paragraph of the tender
notice aforementioned. The language of the said term is explicit in
declaring that the contractor would not be allowed to claim as a matter
D of right additional volume of work. His right extends only .to a consideration of his case by the management when the question of allotment of additional work is taken up. But by the application filed
before the High Court the respondent did not ask for reference of a
dispute as to whether he is entitled to i;onsideration or not; the prayer
is for reference of a higher claim of immediately getting the additional
E work, and this prayer has been allowed. This issue cannot be said to
have any connection with the 15th term of the tender notice or any
other provision thereof or of the agreement. A reference to the decision of this Court in Seth Thawardas Pherumal v. The Union of India,
----- - -
F
G
(195512 SCR-48; will be helpful. The appellant, a contractor, entered
into a contract with the Dominion of India for the supply of bricks. A
Clause in the contract required,
" .•... all questions and disputes relating to the meaning of
the specification and ·instructions hereinbefore mentioned
and as to quality of materials or as to any other question,
claim, right, matter or thing whatsoever in any way arising
out of or relating to the contract, specification, instructions,
orders or these conditions, or otherwise concerning the
supplies whether arising during the progress or delivery of
after the completion of abandonment thereof ... .''._
emphasis added)
H to be referred to arbitration. It was agreed that the bricks would be
)
.:W
i+
J&K STATE FOREST CORPN. v. A.K. WAN! (SHARMA, J.]
389
prepared in lots and it would be the duty of the Government to remove
the bricks as soon as they were ready for delivery. In order to keep to
the schedule for delivery, the contractor had to prepare 'katcha' bricks
and place them in his kilns for baking, and while this lot was baking he
had to prepare another lot of 'katcha' bricks ready to take the place of
the baked bricks as soon as the Government removed them. At a
certain stage the Gowrnment delJartment failed to remove the baked
bricks in time whi1=h ca11sed a jam in the kilns and prevented the contractor from placing a fresh stock of unburnt brjcks in the kilns. Consequently the stQ<;if;: pile of katc·ba. bricks kept. on mounting up when the
rains set in, destroying 881\lcs of ka.\cha bri1=k.s. The contractor claimed
the loss arising out of the neglect of the Government department in
performing its duty in t.ime· Tlw 01wcrnment denied the claim and a
'
reference of tbe dispute was m~dc to \he arbitrator designated in the
agreement who made an <J.ward and filed it in cou.rt. On the Constitution coming into force the Dom.inion. of India was replaced by the
Union of India as the <lefe11dant i11 the case and it was contended on its
behalf that the katcha bricks c;l.id n\lt form part of the contract and. that
the loss that was oc1=asi0nec;I b.y the damage to them was too remote to
be covered by the arbitration. Qll\l!Se. The second ground of defence
was bas.ed on Clause 6 of the <1grecment which absolved the Government from any liability for a damage t<:> unburnt bricks. The stand of
'i°
the contractor was that the cl;iie( reason of the destruction of the
katcha bricks was the fail11re of the department to lift the monthly
quota of the bricks in accordan.ce with the written agreement: and,
Clause 6 of the agreemeμ( referred only to such cases where the
department had nci control, and would not cover a ease of irs nwn
default. The Supreme Court did not agree with him and set aside the
award, inter alia obs~rving, that if \le chose to c;ontract in the terms
including Clause 6 of the written agreement he could not go back on.
his agreement when it did not suit him to abide by it. In the case befon,
us, the plaintiff contractor is trying to connect the allotment of future
1work by a reference to paragraph 15 of the tender notice which specifically says that adqitional work could not be claimed as a matter of
right. The High C<;>ur(, therefore, was not correct in interpreting tht·
aforementioned Clause 15 in the following words:
"Ther~ was cl~use 15 in the tender notice according
to which extension of additional volume available in the
CO\lpe wo11ld not have to be claimed by the contractor as a
matter of right P\lt h~ would have to be considered by tht:
m~nag~mept wh~:r~ his 11chievement \vas H1tlr;-~'. 111 the pn .. ~-·
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Sent C~S~ the acQievement Of the petitioner W~IS .\~_1(jt;1) iln(l
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SUPREME COURT REPORTS
[1989] 2 S.C.R.
under such circumstances the petitioner had all the right to
claim additional work in the said coupe."
Besides, if this view be assumed to be correct, what was there left for
the arbitrator to decide? Further, it is not alleged or suggested that the
Corporation has ever indicated its unwillingness to consider the
respondent when it takes up the question of allotting the additional
work. In absence of a repudiation by the Corporation of the respondent's right to be considered, if and when occasion arises, no dispute
can be said to have arisen which may be referred for arbitration. In
order that there may be reference to arbitration, existence of a dispute
is essential and the dispute to be referred to arbitration must arise
under the arbitration agreement. When in the future, the Corporation
makes a decision for the execution of the additionafwork and takes up
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the question of executing a contract for the purpose, the stage for
consideration of the plaintiff-respondent's claim would be reached and
a dispute may then arise if the Corporation refuses to consider the
claim. Neither the agreement nor the tender notice deals with the
question as to the conditions and time for grant of any additional work
to the plaintiff and if his claim be interpreted as a demand for
immediate allotment of any future work, the same cannot be connected with the agreement or the tender notice. We, therefore, do not
agree with the observations of the High Court that the conduct of the
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Corporation in not taking up immediate deforestation of a part of
Compartment No. 59-Marwa is reprehensible, simply for the reason
that the trees in the area concerned are "to be extracted one day or the
other" or that the plaintiff has the right to claim the additional work on
the ground that his achievement in the past has been more than 100%.
We also hold that the claim raised by the plaintiff in his application
before the High Court is not covered by the arbitration clause and
cannot be referred for a decision of the arbitrator. The order of reference passed by the High Court, therefore, has to be set aside.
5. By the interim order the High Court permitted the plaintiff to
execute the additional work claimed by him without waiting for the
award. On the quashing of the main order of reference, the interim
order automatically disappears, but we would, however, like to briefly
indicate the scope of Court's power to issue interim orders at the time
of reference of a dispute to arbitration, and point out how in the
present case the High Court was in grave error in granting the interim
relief. The relevant provision in the Jammu & Kashmir Arbitration
Act, 2002 (Smvt.) is ins. 4 l(b) which is quoted below:
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J&K STATE FOREST CORPN. v. A.K. WAN! [SHARMA, J.]
391
"41. Procedure and powers of Court.-Subject to
the mam provisions of this Act and of rules made thereunder-,
(a)
(b) the Court shall have, for the purpose of, and in
relation to, arbitration proceedings, the same power of
making orders in respect of any of the matters set out in the
Second Schedule as it has for the purpose of, and in relation to, any proceedings before the Court:
Provided that nothing in clause (b) shall be taken to
prejudice any power which may be vested in an arbitrator
or umplfe for making orde,rs with respect to any such
matters."
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S. 18 deals with the power of Court to pass interim orders after
award is actually filed in Court. So far as clause (a) of s. 41 is conD
cerned, it makes only the procedural rules of the Civil Procedure Code
applicable. The source of power to grant interim relief cannot be
traced to clause (a), otherwise as was pointed out in H.M. Kamaluddin
v. Union of India, [1983] 4 SCC 417, clause (b) would become otiose.
So far as clause (b) is concerned, it circumscribes the Court's power
within the limits indicated in the Second Schedule and further qualifies
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it by declaring in the Proviso that it cannot be used to the prejudice of
any of the powers of the arbitrator. The interim direction can be issued
only "for the purpose of" arbitration proceedings and not to frustrate
the same. In the present case the plaintiff-contractor was allowed by
the High Court to execute the extraction work which was the subject
matter of the arbitration. Mr. Kacker, appearing for the plaintiff
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respondent, argued that in pursuance of this part of the impugned
judgment the plaintiff was able to cut down all the trees in question
before this Court passed an order of stay. In other words it is claimed
on behalf of the plaintiff-respondent that he was able to completely
frustrate the arbitration proceeding in a very short time on the strength
of the interim order. This statement of fact has been seriously ch alG
lenged by the petitioner Corporation; but whatever be the factual
position, the High Court by granting the interim relief, not in the
shape of an injunction in the negative form, but by a mandatory direction clothing the plai_ntiff with the right to do something which he
could have been entitled to, only after a final decision on the merits of
the case in his favour, committed a serious error. Paragraph l of the
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SUPREME COURT REPORTS
[19891 2 S.C.R.
Second Schedule speaks of the preservation of subject matter of the
reference and paragraph 3 also highlights that aspect. The 4th
paragraph which mentions-"interim injunction or the appointment of
a receiver"-has also to be interpreted in that light specially because
of the language of clause (b) of s. 41 and the Proviso thereto. The
second part of the judgment under appeal is also, therefore, set aside.
6. It has been averred before us on behalf of the plaintiffn:spondent that all the trees in question were cut down, and so the
plaintiff must be permitted to complete the remaining work including
their transportation to the destination. The learned counsel for the
Corporation placed reliance on the statements in several affidavits and
contended that if the entire circumstances including the period which
could have been available to the respondent for the purpose of felling
the trees, are examined, there is no escape from the conclusion that
the respondent had felled the trees or majority of them after service of
the stay order passed by this Court. We do not think it necessary to
examine and decide this controversy as in our view the respondent, in
the facts and circumstances of this case, cannot take any advantage
from or claim compensation for the hurried steps he alleges to have
taken under the strength of the illegal order interim in nature, which
we are setting aside.
7. In the result, the appeal is allowed. The impugned judgment
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of the High Court is set aside and the respondent's application filed
before the High Court for reference is dismissed. The respondent shall
pay the costs of this Court and of the High Court to the appellantCQrporation.
SABYASACHI MUKHARJI, J. I have read the judgment proF
posed to be delivered by L.M. Sharma, J. with which the learned Chief
Justice has agreed. With great respect, I am unable to agree with them
on the view that there was no arbitration agreement subsisting covering the dispute in question between the parties. It is, therefore, necessary to refer to certain facts, as I view these.
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This appeal by special leave is directed against the judgment and
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order of the High Court of Jammu & Kashmir, dated 4th June, 1987.
The J ammu & Kashmir Forest Corporation is the appellant. The undisputed facts leading to this appeal are that one Abdul Karim Wani,
the respondent No. 1, filed an application for referring certain matters
alleged to be in dispute to an independent arbitrator; and that for the
H last 15 years the respondent had been working as a contractor for the
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J&K STATE FOREST CORPN. v. A.K. WANI IMUKHARJI, J.l
393
appellant Corporation, namely, Jammu & Kashmir Forest Corpn. and
was carrying on various activities in different forest areas in Jammu.
Province, including felling, machine sawing, pathroo, paccinali, rope
span, mahan and transportation.
It is stated that in February, 1986 the said Corponation issued
tenders for felling, handsawing, pathroo, paccinali and mahanwork of
timber to be extracted from compartment No. 59 Marwah. In response
thereto the petitioner to the original application being the respondent
herein, submitted his quotation and offered the lowest rate of 1 l.74
per cft. and thereby secured the contract. A formal agreement was also
executed between the parties. In October, 1987 after about 7 months
from the issuance of first work order the appellant Corporation
through its General Manager (Extraction) issued a sanction for further
quantity of 2 lac cft. sawn volume in compartment No. 59 Marwah, on
the same rates, terms and conditions as contained in the original contract. The sanction appears at pages 26 & 28 of the present appeal
papers before us.
It appears that the total marking carried out in compartment
No. 59 was 10,08,000 cft. standing out of wh.ich only 6 lac cft. was
sanctioned in favmir of the respondent. The compartment in question
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is at a distance of over 70 kms. from the nearest road point and the
timber extracted from the compartment had to travel by pathroo,
paccinali and mahan through Chenab river for a total distance of
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80 kms. before it is collected at loading point of Dedpeth.
It is, further, the case of the respondent that "as per the procedure, practice, custom and assurances extended to the respondent by
the appellant Corporation through its functionaries, from time to
time," the entire marking conducted in a particular compartment for
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extraction was required (emphasis supplied) to be handed over to the
respondent in compartment No. 59. As regards sale, it is suggested
that as the compartment is situated in one of the remotest area of
Jammu province where making arrangements for extraction of timber
including cartage/carriage of foodgrains, saws, tools and implements is
very difficult, it was never intended that the balance work remaining in
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the compartment for extraction would be given to any other contractor.
The case of the respondent is that acting upon the assurances and
representations of the appellant Corporation that the entire work in
the aforesaid compartment would be handed over to him, the responH
·394
SUPREME COURT REPORTS
11989] 2 S.C.R.
A dent had made adequate arrangement after investing Rs.5 lacs by way
of provision for rations, saws, tools and implements etc. All these
arrangements at that scale were necessary and were made just to
extract entire marked timber from the compartment in question and
not just initially tendered quantity. That would have been wholly
uneconomical.
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It was further asserted that there was also the practice in the
Corporation tbat once a compartment was handed over to the contractor for work, it was taken back from him only after the entire
available work in the said compartment stood concluded. The con·
tractor further alleged that the appellant Corporation was not allotting
rest of the work to him contrary to the policy adopted and assurances
extended, as mentioned hereinbefore. The respondent furnished
instances where such conduct or procedure of making allotments, as
alleged by the respondent, had been followed. We were referred to the
sanction in favour of M/s. Ghulam Hussain, Sukhjinder Singh in
respect of compartment No. 82 Lander on 28.4.87, Mst. Jana Begum
D in respect of compartment No. 30-B, Dachhan and 62 Marmat dated
10.3.87, Sh. Rehmatullah Bhat for compartment No. 19A Paddar
dated 5.5.87, Nassarullah Malik for compartment No. 16 Ramban on
12.5.87 and Irshad Ahmed Shah in respect of compartment No. 62
Sewa dated 4.2.87.
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On behalf of the Corporation and others, it was stated before the
learned Judge of the High Court that there was no assurance and no
practice regarding grant of the contract to the respondent contractor
Abdul Karim Wani, in the manner alleged. Further, it was alleged that
the respondent and the Corporation had decided not to work on the
compartment till the entire extracted timber was removed to sale
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depot. Once that decision was there the instances quoted by the contractor proved useless, according to the appellant. It, however, very
clearly appears that in compartment No. 59 Marwah marked standing
trees were to the extent of 10,08,000 cft. The second aspect emerging
is that out of this volume only 6 lac cft. standing timber had been
sanctioned in favour of the contractor on two different occasions, and
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point. The only dispute subsisting was about the rest of the standing
trees i.e., 4,80,000 cft. It is not disputed that the said remaining cfts.
have been markea. These remained as marked timber which required
to be extracted. The respondent claims preference for grant of contract
of extraction by way under the clause in the relevant sanction. The only
H contention of the appellant was that they had no intention to extract
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J&K STAIB FOREST. CORPN. v. A.K. WAN! [MUKHARJI, J.]
395
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the said timber till other extracted timber was taken to the depot. The
case of the appellant as noted by the learned Judge in his judgment,
was that the remaining timber to be extracted presently for 'unknown
reasons' was not to be then extracted and, as such, the Corporation
could not be compelled to grant or sanction extraction of remaining
marked timber.
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The learned Judge by his impugned judgment and ordei: depreB
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·• cated the conduct of the authorities concerned. He proceeded on the
ballis that inasmuch as the remaining timber had to be extracted one
day or the other, the entire work should have been given to the respondent. In the present case, the learned Judge noted that the performance of the respondent contractor as 300%. The respondent was
X entitled to the grant of this contract even if his performance had
merely been 100%. The learned Judge found that there were two
different points to be examined. He found that there existed a dispute
between the parties touching the agreement exeettted between them.
The matter in dispute was referred to the named arbitrator, namely,
the Managing Director of the State Forest Corporation, who was
directed to adjudicate upon the same and submit his award within the
statutory period of four months.
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The learned Judge went further and as an interim measure
directed·that the petitioner before hlDl, namely, the respondent herein
be allowed to do the remaining work of extraction of timber of standing marked trees in compartment No. 59 Marwah and the rates were to
be determined by the arbitrator, after hearing both the parties. This
order is the subject-matter of the appeal.
The main question involved in this appeal is whether there was
any subsisting arbitration agreement in respect of the matters sought
to be referred. The second aspect involved herein is whether the
learned Judge was justified in making the impugned order by directing
that the petitioner be allowed to do the remaining work of extraction
uf timber of standing marked trees in compartment No. 59 Marwah,
and the rates be determined by the arbitrator after hearing both the
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.:if sides. It was contended on behalf of the appellant that the learned G
Judge travelled beyond the scope of his jurisdiction.