Jammu & Kashmir High Court - Srinagar Bench
Nasir Hamid Khan vs Zaffar Abbas Din on 24 September, 2021
Author: Chief Justice
Bench: Chief Justice
S. No. 02
IN THE HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT SRINAGAR
CJ Court
(i) AP No. 08/2019
Nasir Hamid Khan ......Petitioner(s)
Through: Mr. Zaffar Shah, Sr. Adv. with Mr. Manzoor A. Dar, Adv.
Vs.
Zaffar Abbas Din ......Respondent(s)
Through: Mr. K. A. Ganai, Advocate
(ii) AA No. 04/2020
Nasir Hamid Khan ......Petitioner(s)
Through: Mr. Zaffar Shah, Sr. Adv. with Mr. Manzoor A. Dar, Adv.
Vs.
Zaffar Abbas Din ......Respondent(s)
Through: Mr. K. A. Ganai, Advocate
Coram:
HON'BLE THE CHIEF JUSTICE
ORDER
24-09-2021
1. Heard Mr. Zaffar Shah, learned Sr. counsel assisted by Mr. Manzoor A. Dar, learned counsel appearing for the petitioner and Mr. K. A. Ganai, learned counsel appearing for the respondent.
2. The first petition is under Section 11 (6) of the J&K Arbitration and Conciliation Act, 1997, for the appointment of an independent Arbitrator for resolving the dispute between the parties in respect of an agreement dated 4th May, 2013. The other is Arbitration Appeal under Section 37 of the Act against the order dated 07-02-2020 passed on an application under Section 9 of the Act.
3. The petitioner submits that in terms of arbitration clause contained in the agreement, he had given a notice dated 17- 09-2018 to the respondent for referring the dispute to the arbitration in accordance with clause 17 of the agreement suggesting some names of the Arbitrator. The respondent gave reply to the said notice on 01-10-2018 contending that since there exists no dispute, there is nothing to refer to the Arbitrator.
4. The petitioner, therefore, argues that since the agreement contains an arbitration clause and he has invoked the same so as to refer the dispute between the parties to the sole Arbitrator, but the respondent has failed to respond by appointing or naming any Arbitrator, this court has jurisdiction to refer the dispute to the arbitral tribunal.
5. In defence, the submission of the respondent is that the arbitration clause has to be read with clause 5 of the agreement which provide that the agreement shall be initially for a period of five years and after every five years, fresh agreement shall be entered into between the parties. Since the said agreement has elapsed by efflux of time, the arbitration agreement contained therein also ceased to exist, the petitioner has no right to demand any arbitration.
6. In support of his argument, learned counsel for the respondent has relied upon AIR 1959 Calcutta 526 "Damodar Shah, Arbitrator v. Union of India", AIR 1959 SC 1362 "Union of India v. Kishori Lal Gupta and Bros.", AIR 1987 J&K 25 "Ghulam Hassan Dar v. Controller of Aerodrome and Anr." and (2007) SCC 703 "Iron Steel Co. Ltd v. Tiwari Road Lines" to reiterate that once the agreement itself has ceased to exist, the arbitration clause also comes to an end in which circumstances there cannot be any reference of any dispute to the Arbitrator.
7. It would be beneficial to extract clause 5 and 17 of the agreement for the sake of convenience.
5. "That the agreement shall be initially valid for five years and after every five years fresh agreement along with fresh terms & conditions shall be entered between the parties. If the sales are satisfactory the agreement shall be renewed for another five years carrying similar renewal clause and if the sales are not satisfactory the agreement shall be terminated after first five years, on mutual consent basis.
17. That should any dispute or difference arise between the parties the parties agree that the same shall be referred to a Sole Arbitrator to be appointed by the parties with their mutual consent. The proceedings before the Arbitrator shall be governed by Jammu and Kashmir Arbitration and Conciliation Act, 1997. The decision of the Arbitrator shall be final and binding on the parties. The Arbitrator shall not be bound to pass a reasoned award. The Arbitrator shall hold his sittings at Srinagar."
8. The fact discloses that respondent is the owner of the five storied building and has under the agreement allowed the entire ground floor portion of it to be occupied by the petitioner for business purposes/running of a departmental store with the specific condition that the respondent would be entitled to share of four percent on the total gross sale in any calendar month provided the sale exceeds Rs. 15 lacs in that month. In the event, the sale is less than Rs. 15 lacs per month, the respondent will be entitled to receive Rs. 30,000/- for that month and a share of 2% of the total gross sale of the business carried from the said premises in the said month.
9. It may be pertinent to note that the agreement in question is in relation to sharing of profits of the business rather than that of leasing out of any premises.
10.The nature of the agreement as described above clearly indicates that it is a profit-sharing agreement in connection with the property of the respondent provided by him to the petitioner for running a departmental store. It is not exactly a lease agreement.
11.The authorities relied upon from the side of the respondent are all in relation to lease agreements, on the contrary counsel for the petitioner has placed reliance on (2011) 14 SCC 67 "SMS Tea Estates Private Limited v. Chandmari Tea Company Private Limited" which reads as under;
12. "When a contract contains an arbitration agreement, it is a collateral term relating to the resolution of dispute, unrelated to the performance of the contract. It is as if two contracts-one in regard to the substantive terms of the main contract and the other relating to resolution of disputes-had been rolled in to one, for purposes of convenience. An arbitration clause is therefore an agreement independent of the other terms of the contract or the instrument. Resultantly, even if the contract or its performance is terminated or comes to an end on account of repudiation, frustration or breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract."
12. A plain reading of the aforesaid decision would reveal that ordinarily an agreement between the parties is in two parts; one relating to the business and the conditions thereof and the other relating to the resolution of the dispute which might contain an arbitration clause. The second part of the agreement relating to the dispute redressal system continues to remain in force even if the agreement has expired or has ceased to exist.
13. It further holds that in view of Section 16 of the Arbitration Act, the Arbitrator is the sole authority to rule about his jurisdiction and, as such, all questions of the above nature shall also be considered and decided by the him, if necessary.
14. In terms of clause 5 of the agreement, after five years the agreement was renewable under certain conditions and was terminable on mutual consent. According to the petitioner, the agreement was unilaterally terminated by the respondent without considering its renewal and thus disputes have arisen.
15. In view of the aforesaid facts and circumstances, I consider that it is a fit case where arbitral issues arise for consideration and the dispute between the parties should be referred to an independent Arbitrator in accordance with clause 17 of the agreement. Accordingly, I appoint Hon'ble Mr. Justice Mohammad Yaqoob Mir, Former Chief Justice of Meghalaya High Court leaving it open for the respondent to take all objections regarding jurisdiction of the Arbitrator or with regard to the facts that the agreement had seized to exist and the disputes were no longer referable to him who will rule on the point in accordance with law.
16. The Arbitrator is requested to enter upon the arbitration and proceed to resolve the disputes between the parties in accordance with law within the time specified in law after charging his fee as may be agreed upon.
17. The parties are also set at liberty to approach the Arbitrator for any interim protection or direction, if necessary, and it will be open for the Arbitrator to consider the same notwithstanding the decision of the Principal District Judge, Anantnag, dated 7th February, 2020, passed on an application under Section 9 which is subject matter of an appeal before this Court.
18. Thus, the Arbitration Application and the Appeal both are disposed of as above.
(PANKAJ MITHAL) CHIEF JUSTICE Srinagar 24.09.2021 Sakeena SAKEENA MOLVI I attest to the accuracy and authenticity of this document 28.09.2021 03:03