J & K Forest Company vs State of J & K

In this suit, the defendant who was summoned in this court has made application under section 34 of the Arbitration Act wherein he has submitted

that as the matter in controversy between the parties arises out of and relates to the subject matter of the agreement dated 2231960 executed by

the parties to the suit, therefore the suit be stayed and parties referred to arbitrator pursuant to Clause 44 of the agreement which provides that

every dispute which may at any time arise between the parties in respect of the agreement or the ' subject matter thereof shall be referred to the

Chief Conservator of Forests unless he is a party to the agreement in which case the dispute shall be referred to the Government whose decision

thereon shall be final and binding on both the parties. It is pointed out that the parties are bound to settle their dispute through arbitration as

envisaged in the agreement itself. Keeping in view the nature of the dispute between the parties the ends of justice also demand that the matter be

referred to Arbitration. The defendant was at all material times and is still ready and willing to do all things necessary for the proper conduct of the

arbitration as contemplated under the agreement entered into by the parties. It is therefore, prayed that no further proceedings in the suit be held

and the matter in dispute between the parties be referred to arbitration in accordance with the terms and conditions of the agreement. The

agreement in original has been filed in the case.

The plaintiff has filed his objections to this application. In his objections he has stated that there is no arbitration clause as such in the agreement and

therefore the application does not lie, that the Chie Conservator of Forests has taken decision in the matter and therefore he cannot be an

arbitrator in the case.

I have heard the arguments in the matter raised before me. It is not denied that the dispute out of which the present suit has arisen in the respect of

the agreement and the subject matter thereof and as such the only question to be considered is the application of section 3 4 of the Arbitration Act

This Section provides that :

Where any party to an arbitration or any person claiming under him commences any legal proceedings against any other party to the argument or

any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may at any time before filing a

written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the

proceedings and the authority if satisfied may make an order staying the proceedings

The principal question to be determined in the case is whether there is an arbitration clause in the agreement which would oust the jurisdiction of

the Civil Court. Needless to point out that under section 9 of C. P. C. all suits of civil nature are to be tried by Civil Courts having jurisdiction. But

it is open to a party to a contract to raise the contention that the suit cannot be heard by the civil court in as much as the parties have already

decided to have a judge of their own choice who would in case of dispute opine upon the differences arising between them and give his award.

The parties to a dispute can under law even choose a forum of their own choice if they have reserved that condition or clause before in the

contract. In view of this legal position it is not opened to a party to insist that his claim be heard exclusively by the Civil Court when there is a

covenant in the contract embodying the terms that in the event of any dispute relating to the agreement or to its subject matter, the dispute should

be heard and decided by a man of their choice. Therefore in the instant case we have to see whether there is such a condition and whether there is

an arbitration clause in the agreement. The defendant has relied upon clause 44 of the agreement which is as follows :

Every dispute which may at any time arise between the parries, hereto in respect of this agreement or the subject matter thereof shall be referred

to the Chief Conservator of Forests unless he is a party to the agreement in which case the dispute shall be referred to the Government, whose

decision thereon shall be final and binding on both the parties.

According to these terms it is submitted that the dispute is to be heard and decided either by the Chief Conservator of Forests or by the

Government as arbitrator whose decision is to be final and binding on both the parties. It is immaterial if the word 'arbitrator' has not been

mentioned in the agreement and has been omitted from the clause. The clause as a whole it to be construed so as to know what was the intention

of the parties at the time when the clause was drafted. Reliance is placed on AIR 1947 Lah. 215 and 1961 K. L. J. 58 As against this learned

counsel for the plaintiff has contended that there is no arbitration clause in the agreement. Clause 44, does not say that any dispute between the

parties would be referred to the C. C. F. or to the Government as arbitrator. Omission of the word 'arbitrator' in the clause clearly meant that the

parties never to intended to cloth the C. C F. or the Government with the powers of an arbitrator in the case. In support of his contention reliance

has been placed on 1964 K. L. J. 157.

I have considered the question which, is undoubtedly of great importance. It is true that two conflicting views have been expressed by two Single

Benches of this Court on the matter under consideration. The one view is that such like wording as appears in clause 44 of the agreement clothes

the man named therein with the character of an 'arbitrator' regardless of the fact that the words 'Arbitration', 'Arbitrator. Arbitration Agreement' do

not appear in the clause where once the parties have agreed to refer the matter in dispute for adjudication to a person of their own choice and his

decision is to be final, conclusive and binding, he to all intents and purposes is to be deemed as an arbitrator, It is immaterial if the word 'arbitrator'

does not exist in the clause. The contrary view expressed by Bhat J in 1964 K. L J. 157 is to the effect that the language in the clause does not

constitute an arbitration clause at all. What is the essence of the arbitration clause is that the parties must consciously submit to the jurisdiction of a

person in his capacity as an arbitrator and not in any other. The intention of the parties and .the language of the clause must speak that the parties

wanted to cloth the person mentioned in the clause with powers of an arbitrator. The wording of the relevant clause in the agreement with which his

Lordship Justice Bhat was dealing was as following :

In the event of a dispute between the contractor and the department the decision of the Chief Engineer P. W. D. f & K Government shall be final

and binding on both the parties.

While construing the language and while examining the scope of the words used in the said agreement his Lordship came to the conclusion that this

was not an arbitration clause in as much as it did not specifically mention that the Chief Engineer had to act as an arbitrator or that it was so the

intention of the parties. But in the instant case the wording of clause 44 is some what precise, exact and elucidating. Clause 44 says :

Every dispute which may at any time arise between the parties hereto in respect to this agreement or the subject matter thereof shall be referred to

the Chief Conservator of Forests unless he is a party to the agreement, in which case the dispute shall be referred to the Government whose

decision thereon shall be final and binding on both the parties.

The word "" in respect of this agreement or the subject matter there of shall be referred to"" are of significance and these words do not find place in

clause 21 of the agreement with which Bhat J, was dealing. The significance of these words is that the parties have agreed that the dispute shall be

referred to the Chief Conservator of Forests or the Government for adjudication and that such adjudication or decision shall be final and binding on

both the parties. It is not because of the professional skill or because of certain, good traits in his character or because of his official position as has

been argued by the counsel for the plaintiff, that the matter was agreed to be referred to the C. C. F. or to the Government. But it is precisely for

adjudication of the dispute in his capacity as an arbitrator that the name of C. C F or that of the Government has been mentioned. In AIR 1947

Lah. 215, the point has been elaborately dealt with and it has been held that it is immaterial that the word's arbitration, arbitrator, arbitration

agreement do not appear in the clause but so long as the parties can be found to have agreed to allow the matter to be decided by a person of their

own choice whose decision is to be final, conclusive and binding on them, that would make little difference. What is material is that we must know

from the language of the clause that the parties intended to refer the dispute to a man of their choice for adjudication and this would clothe him with

the powers of an arbitrator,

I am, therefore, inclined to adopt the view propounded in AIR 1947 Lah. 215 and 1961 KLJ 58. In my opinion the words employed in clause 44

of the agreement clothe the Chief Conservator of Forests or the Government with the powers of an arbitrater and therefore, this court has no other

alternative but to stay the proceedings in consequence of operation of section 34 of the Arbitration Act, I, therefore, stay the proceedings in the

suit and refer the matter to the Government ""Minister incharge"" of Forest Department for adjudication of the dispute between the parties. I do not

propose to refer the matter to the Chief Conservator of Forests as the plaintiff has in his objections stated that the C C. F. has already taken

decision in the matter and therefore he can't act as an arbitrator in the case. The arbitrator be asked to send his award to this court within two

months from today. The case will come up or* 25th of September 1969 for further proceedings.