Jhelum Infra Projects Pvt. Ltd vs T. A. Infra Projects

Sanjay Dhar, J

The petitioner has filed the present petition under Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act of 1996 ) seeking appointment of an Arbitrator for adjudication and reference of the disputes and differences that have arisen between the parties.

According to the petitioner, the respondent had participated in e-tender bearing e-NIT No. 7 of 2012 dated 11.09.2012 relating to the work of water supply of 07 MLD for Kishtwar Town from the Naigadh source. Pursuant thereto, the respondent executed an agreement with the Government of Jammu and Kashmir on 28.02.2013 through the Executive Engineer, PHE Hydraulic Division, Kishtwar. Thereafter, on 03.05.2013, the respondent entered into a sub-contract agreement with the petitioner, whereby the petitioner undertook to execute and complete the work allotted to the respondent, and the respondent agreed to release 98% of the amount received from the Government to the petitioner after retaining 2% from each cheque value. The respondent further agreed to open an ESCROW account for release of the said amount.

It has further been submitted that, pursuant to the aforesaid sub-contract agreement, the petitioner started execution of its part of the contract. However, the respondent failed to adhere to the terms and conditions of the agreement, inasmuch as, it not only withheld an amount in excess of the agreed 2% retention, but also failed to open the ESCROW account as contemplated under the agreement. This prompted the petitioner to institute a civil suit for specific performance of the contract before the learned Commercial Court (Additional District Judge, Bank Cases), Jammu. In the said suit, the respondent admitted the existence of the sub-contract agreement between the parties but contended that, in view of the arbitration clause contained therein, the disputes are liable to be referred to arbitration. Accordingly, vide order dated 06.11.2025, the learned Commercial Court directed the parties to resolve their disputes through arbitration.

It has been submitted that disputes and differences have arisen between the parties on account of the respondent having failed to release 98% of the contractual payment in terms of the sub-contract agreement and having withheld amounts beyond the agreed retention of 2%. It has further been submitted that the respondent also failed to operate the ESCROW account in accordance with the terms of the agreement. It has also been contended that the respondent illegally deducted TDS from the payments, despite the same having already been deducted by the Jal Shakti Department. According to the petitioner, a legal notice invoking the arbitration clause contained in the agreement was served upon the respondent, but no response thereto was received. Hence the present petition.

The respondent has filed objections to the petition. In the objections, it has been contended that the petitioner has not made any request for reference of the disputes to arbitration and, therefore, in terms of Section 21 of the Arbitration and Conciliation Act, 1996, the arbitral proceedings cannot be said to have commenced. It has further been submitted that the legal notice annexed with the petition is undated and that the same was never received by the respondent.

It has further been submitted that the respondent-company emerged as the successful bidder and was awarded the work relating to water supply of 07 MLD for Kishtwar Town from the Naighad source. In this regard, intent dated 18.12.2012 valuing the contract at Rs. 34.23 crores came to be issued by the Chief Engineer, PHE Department, in favour of the respondent. It has been submitted that the petitioner approached the respondent with an offer to execute the work and also to finance the entire execution thereof, including obtaining all requisite bank guarantees, such as, performance bank guarantee, mobilization advance bank guarantee and security deposits guarantee etc. According to the respondent, the petitioner assured that it was financially sound and fully capable of executing the work successfully. Consequently, a sub-contract agreement came to be executed between the parties on 03.12.2013. It has further been submitted that, vide amendment dated 08.02.2016, the contract value of the work assigned to the petitioner was reduced to Rs. 26,68,26,100/- by deleting a portion of the work. It was also agreed between the parties that the respondent would retain 3% on every payment received besides an amount equivalent to the TDS, both under Income Tax Act and the GST Act in addition to deduction of amount.

It has been submitted that the petitioner filed a suit for specific performance of the sub-contract before the Commercial Court, Jammu in which an interim order came to be passed on 03.04.2021. Before the said Court, the respondent took a specific stand that the suit was not maintainable in view of the provisions contained in Section 8 of the Act of 1996. Thereafter, vide order dated 22.11.2024, the application of the petitioner under Order 39 Rules 1 and 2 CPC came to be dismissed. It has further been submitted that the suit was ultimately disposed of by the learned Commercial Court vide order dated 06.11.2025, whereby the parties were directed to resort to arbitration in terms of the arbitration clause contained in the agreement.

I have heard learned counsel for the parties and perused the record of the case.

The main objection raised by the respondent with regard to the maintainability of the present petition is that the petitioner has not invoked the arbitration clause, inasmuch as the legal notice annexed with the petition is undated and the same was never received by the respondent. In this regard, a perusal of the record reveals that although the legal notice initially annexed with the petition is undated, the petitioner has subsequently placed on record, by way of an application, another copy of the legal notice bearing the date 12.11.2025. The petitioner has also produced a copy of the postal receipt, which shows that the said notice was dispatched to the respondent through speed post on the very same date. Thus, there is presumption of service of the legal notice invoking the arbitration clause upon the respondent, particularly when the address reflected in the postal receipt as well as in the legal notice is identical to the address mentioned in the title of the present petition.

So far as the existence of the arbitration agreement is concerned, the same is not in dispute. Clause 12.2 of the sub-contract agreement executed between the parties provides that all disputes and differences, which are not resolved through mutual negotiations, shall be finally referred to a sole Arbitrator in accordance with the provisions of the Arbitration and Conciliation Act, 1996. It has been further provided in the arbitration clause that the place of the arbitration shall be at Jammu J&K and the proceedings shall be conducted in English language. It is also provided therein that the arbitration charges for both the parties shall be borne by the respondent-company.

As per the legal notice served by the petitioner upon the respondent, the respondent was called upon to refer the disputes to arbitration within a period of 15 days from the date of receipt of the notice. However, since the parties have failed to mutually agree upon the appointment of an Arbitrator, this Court is left with no option but to appoint an Arbitrator and refer the disputes and differences that have arisen between the parties for adjudication through arbitration.

In view of the above, the petition is disposed of by referring all the disputes and differences covered by the agreement to the learned Sole Arbitrator in the following terms:

(I) Hon ble Mr. Justice Vinod Chatterji Koul, former Judge of this Court, is appointed as the Sole Arbitrator to adjudicate upon the disputes and differences between the parties arising out of and in connection with the agreement referred to above.

(II) A copy of this order be communicated to the learned Sole Arbitrator by the Registry of this Court within a period of ten days from today.

(III) The learned Sole Arbitrator is requested to forward the statutory statement of disclosure under Section 11(8) read with Section 12(1) of the Act of 1996 to the parties within a period of two weeks from the date of receipt of this order.

(IV) The parties shall appear before the learned Sole Arbitrator on a date and place to be fixed by the learned Sole Arbitrator.

(V) All the arbitral costs and fee of the Arbitral Tribunal shall be subject to final award that may be passed by the learned Arbitrator in relation to the costs.