Case Details:
The dispute arose from a contract/agreement dated September 30, 2021, executed between the Market Administrative Committee (MAC), Fruit & Vegetable Market, Narwal, Jammu, and M/s Singh Traders, owned by S. Charanjeet Singh. The appellant had approached the court seeking:
- Refund of Rs.7,48,650 deposited under the contract.
- Return of two Fixed Deposit Receipts (FDRs) of Rs.40,000 each, dated September 16, 2021, along with interest.
- Compensation of Rs.10 lakh for the alleged frustration of the contract and subsequent loss of goodwill.
- A permanent injunction restraining the respondents from enforcing the terms of the contract.
The appellant alleged that the contract became incapable of performance due to the respondents' failure to shut down illegally operated eateries, canteens, and reharis around the premises, affecting business operations.
Court's Analysis of Arbitration Clause:
The respondents, represented by Senior Advocate Mr. Rahul Pant, argued that the contract contained an arbitration clause and that the dispute should be referred to arbitration. Referring to Section 8 of the Arbitration and Conciliation Act, 1996, Mr. Pant contended that the respondents had invoked the arbitration clause in their written statement, thereby complying with legal provisions.
Justice Oswal emphasized the mandatory nature of Section 8, stating:
“It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising therefrom.”
The court also referenced P. Anand Gajapathi Raju v. P.V.G. Raju (2000) 4 SCC 539, where the Supreme Court held that if the subject matter of the suit is covered by an arbitration agreement, the judicial authority has no discretion but to refer the dispute to arbitration.
Waiver of Arbitration Rights?
The appellant’s counsel, Senior Advocate Mr. Vikram Sharma, argued that since the respondents had already filed a detailed written statement, they had waived their right to arbitration. However, the court rejected this contention, noting that the respondents had raised a preliminary objection on the maintainability of the suit due to the arbitration clause, thus preserving their right.
Modification of the Trial Court’s Order
While upholding the trial court's order, the High Court modified one aspect, stating that the parties should not approach the nominated arbitrator, an official of the respondents. Instead, Justice Oswal ruled:
“The learned trial court ought not to have granted liberty to the parties to approach the nominated arbitrator, who was the official of the respondents. Independent arbitrator is required to be appointed.”
Conclusion and Final Directions
The High Court disposed of the appeal by referring the matter to arbitration, with directions for the appointment of an independent arbitrator. The decree sheet has been ordered to be prepared accordingly.
Key Highlights:
- Contract Value: Rs.7,88,650 (Including FDRs and compensation claim).
- Court Ruling: Reference to arbitration under Section 8 of the Arbitration Act.
- Independent Arbitrator: To be appointed in place of nominated arbitrator from the respondent’s department.
This verdict reinforces the mandatory referral of arbitrable disputes to arbitration, reaffirming the principle that once an arbitration clause is invoked, judicial authority has no discretion but to refer the parties to arbitration.
Read The Judgment Here
keywords: Arbitration clause, contract dispute, Section 8 of Arbitration Act, independent arbitrator, J&K High Court judgment, Arbitration and Conciliation Act.
