Holding

The arbitration clause was sufficiently broad to cover the dispute, but the High Court's interim order directing execution of the work was beyond its jurisdiction and was set aside.

Summary

The Jammu & Kashmir State Forest Corporation awarded a timber extraction contract to Abdul Karim Wani for 6 lakh cft. Wani later claimed entitlement to the remaining 4.08 lakh cft based on alleged custom, practice and assurances, which the Corporation denied. Wani filed an application under the Jammu & Kashmir Arbitration Act seeking a reference of the dispute to arbitration and an interim order permitting him to extract the remaining timber. The High Court referred the dispute to arbitration and granted the interim order, which the Corporation appealed. The Supreme Court examined whether the arbitration clause in the contract covered the claim for additional work and held that it did, but found the High Court exceeded its jurisdiction by directing execution of the work before arbitration. Consequently, the Court set aside the High Court's interim order and allowed the appeal, dismissing Wani's application for reference.

Issues considered

Whether the arbitration clause in the contract subsisted to cover the dispute over entitlement to additional timber work.
Whether the High Court had jurisdiction to grant an interim order allowing the contractor to execute the remaining work.
Whether a dispute must exist under the arbitration agreement before reference to arbitration can be made.
Whether the court should refrain from expressing opinion on the merits of the dispute pending arbitration.

Legislation cited

Arbitration Act, 1940s. 18, s. 20, s. 2(a), s. 41
Code of Civil Procedure, 1908
Jammu & Kashmir Arbitration Act, 2002 (as amended)s. 11, s. 18, s. 20, s. 41, s. 8

Subjects

arbitration agreementreference to arbitrationinterim reliefcourt jurisdictioncontractual disputecustom and practiceJammu & Kashmir Arbitration ActSection 41Section 8Section 11Section 20Section 18

Judgment

~AMMU & KASHMIR STATE FOREST CORPORATION
A
v.
ABDUL KARIM WAN!

MARCH 31, 1989

B [R.S. PATHAK, CJ., SABYASACHI MUKHARJI AND
LAUT MOHAN SHARMA, JJ.]

Jammu and Kashmir Arbitration Act 2002 (Smvt) Sections 8, 11,'
20and 41.

c clauseArbitration Act, 1940--Sections 2(a), 18 and 20. Arbitration
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.

D 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 y-
to 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
-
I

F
tender and was granted the works contract initially with reference to 4
lakh c. ft., and subsequently he was entrusted with an additional work
y
'l
.J, 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.

Paragraph 15 of the Tender Notice stipulated that: "Extension for
the additional volume in the coupe will not be claimed as a matter of
. 4
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, differ- A
ences 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 B
-'- Court for 11 d.irecli11q Ill the C11rpl!fatio11 lo file the 11greement and to
refer t11e dispute to ;m 1wldtrat11r. ·

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 E
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 F
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 x•n!itled IP a!!Y ~0111pen~~t1011 for tbe work done.
,....
Allowing the aPpeal, till' C::<11ir1," G

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 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 applica-
tion filed before the High Court the respondent did not ask for refer-
ence 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
A
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 B
·~. 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' arbit-
ration proceedings and not to frustrate the same. [391E]
c
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
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 refer-
............ able 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
384 SUPREME COURT REPORTS [1989] 2 S.C.R.

A 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 .~

C
798 and Heyman v. Darwins Ltd., [1942] Appeal Cases 356 at 368
referred to.

4. Though under section 4l(b) the Court has power to pass an
-al
,,._
~
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 j;-
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] ·

6. The interim directions given by the High Court that the con-
-
tractor be allowed to do the remaining work of extraction of timber of stan-
F
ding 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,...
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
G
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.
',-
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
A
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. B

The following Judgments of the Court were delivered:

SHARMA, J. The present respondent who is an approved con-
tractor 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, plead- D
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 Cor-
poration. Special leave is granted.

2. As stated in the affidavit of the plaintiff-contractor, the Cor-
poration was created under the Jammu & Kashmir Forest Corporation
Act, 1978 and its main functions·are: (i) to undertake research prog- F
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. stand-
ing 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
386 SUPREME COURT REPORTS [1989] 2 S.C.R.

A 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
B
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 neces-
sitated the filing of the application before the High Court. The Corpo-
c ration 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 trans-
D ported to a distant place through difficult terrain (as has been specifi-
cally 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, there-
fore, no question of entrusting the remaining work to anybody for the
E 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.
F
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:

"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%."
H
)[

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
has been contended before us that since paragraph 15 of the tender c
·~ 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
of the respondent corporation is most derogatory to the

l
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
as above when it was leaving the matter to be decided by the
G

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.

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,
B 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
c 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 consi-
deration of his case by the management when the question of allot-
ment 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 deci-
sion of this Court in Seth Thawardas Pherumal v. The Union of India,
(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
F 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
G 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 J&K STATE FOREST CORPN. v. A.K. WAN! (SHARMA, J.] 389
i+
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 A
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 B
bricks in time whi1=h ca11sed a jam in the kilns and prevented the con-
tractor from placing a fresh stock of unburnt brjcks in the kilns. Conse-
quently 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
c
agreement who made an <J.ward and filed it in cou.rt. On the Constitu-
tion 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=asi 0 nec;I b.y the damage to them was too remote to D
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 Govern-
ment 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, E
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, F
us, the plaintiff contractor is trying to connect the allotment of future
1- work by a reference to paragraph 15 of the tender notice which specifi-
cally 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:
G
"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..~-·
Sent C~S~ the acQievement Of the petitioner W~IS .\~_1(jt;1) iln(l r-J
390 SUPREME COURT REPORTS [1989] 2 S.C.R.

A 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
B
respondent when it takes up the question of allotting the additional
work. In absence of a repudiation by the Corporation of the respon-
dent'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
c under the arbitration agreement. When in the future, the Corporation
makes a decision for the execution of the additionafwork and takes up ·~
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
D 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 connec-
ted with the agreement or the tender notice. We, therefore, do not
agree with the observations of the High Court that the conduct of the )"
Corporation in not taking up immediate deforestation of a part of
E 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
F cannot be referred for a decision of the arbitrator. The order of refer-
ence 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
G 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:
H
J&K STATE FOREST CORPN. v. A.K. WAN! [SHARMA, J.] 391

"41. Procedure and powers of Court.-Subject to
A
the mam provisions of this Act and of rules made there-
under-,

(a)

(b) the Court shall have, for the purpose of, and in B
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 rela-
tion 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
c
or umplfe for making orde,rs with respect to any such
matters."

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 con- D
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 E
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 F
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 al- G
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 direc-
tion 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 H
392 SUPREME COURT REPORTS [19891 2 S.C.R.

Second Schedule speaks of the preservation of subject matter of the
A 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.
B
6. It has been averred before us on behalf of the plaintiff-
n: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
c 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
D 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.
y
7. In the result, the appeal is allowed. The impugned judgment
E 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 appellant-
CQrporation.

SABYASACHI MUKHARJI, J. I have read the judgment pro-
F 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 cover-
ing the dispute in question between the parties. It is, therefore, neces-
sary to refer to certain facts, as I view these.

G This appeal by special leave is directed against the judgment and F
order of the High Court of Jammu & Kashmir, dated 4th June, 1987.
The J ammu & Kashmir Forest Corporation is the appellant. The un-
disputed 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
J&K STATE FOREST CORPN. v. A.K. WANI IMUKHARJI, J.l 393

appellant Corporation, namely, Jammu & Kashmir Forest Corpn. and
A
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 B
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 1l.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 c
quantity of 2 lac cft. sawn volume in compartment No. 59 Marwah, on
the same rates, terms and conditions as contained in the original con-
tract. The sanction appears at pages 26 & 28 of the present appeal
papers before us.
D
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
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 E
80 kms. before it is collected at loading point of Dedpeth.

It is, further, the case of the respondent that "as per the proce-
dure, 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 F
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 G
the compartment for extraction would be given to any other con-
. tractor.

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 respon- H
·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.
B
It was further asserted that there was also the practice in the
Corporation tbat once a compartment was handed over to the con-
tractor 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
c 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.

E 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
F depot. Once that decision was there the instances quoted by the con-
tractor proved useless, according to the appellant. It, however, very
clearly appears that in compartment No. 59 Marwah marked standing
,J
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
G such timber had been extracted, removed and taken to the loading
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
J&K STAIB FOREST. CORPN. v. A.K. WAN! [MUKHARJI, J.] 395

the said timber till other extracted timber was taken to the depot. The A
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
Ii) . marked timber.
B
l 'i The learned Judge by his impugned judgment and ordei: depre-
·• 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 respon-
dent. In the present case, the learned Judge noted that the perform-
ance of the respondent contractor as 300%. The respondent was
X entitled to the grant of this contract even if his performance had
c
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 D
directed to adjudicate upon the same and submit his award within the
statutory period of four months.

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 stand- E

- ing 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 F
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
.:if sides. It was contended on behalf of the appellant that the learned G
Judge travelled beyond the scope of his jurisdiction. It was submitted
that there was no subsisting arbitration agreement covering the entire
area of 10,08,000 cft. There were only two subsisting contracts one
being a contract for felling trees of 4 lacs cft dated 6th March, 1986,
and another for 2 lacs cft in addition, dated 28th October, 1986. The
agreement dated 6.3.86 provided that dispute in respect of these H
396 SUPREME COURT REPORTS [1989] 2 S.C.R.

A should be referred to arbitration but there was, according to the appel-
lant, no subsisting contract in respect of the remaining 4 lacs cft. The
respondent had only a right to be considered in respect of the rest and
yet no contract had been granted to him. Therefore, there being no
subsisting contract there was no scope for reference to arbitration. In
nly opinion, it is not the correct way to look at the facts of this case. It
B appears from the first agreement, which is at page 142 onwards of the
present paper-book that it contained, inter a/ia, the following clauses.

"The quantum of work under each activity/sub-activity is
estimated and a~ such cannot be guaranteed and can be
increased or decreased upto 25% by the General Manager
Ext. East Jammu East on the contract rates subject to prior
c approval of the Managing Director.

Any subsequently marking earned out in a section/unit
under work with the contractor shall be included in this
increase of 25%."
D
It also contained clause 15 which was to the following extent:

"Extension for the additional volume available in the .,
coupe will not be claimed as matter of right. But may be y !!-~
considered by the Management where the achievement is
100%."

Clause 17 of the said agreement which provided for reference to
arbitration was the following:
-
"Any dispute, difference, question which may at any time
F arise between the parties in respect of the works to be
executed by the contractor(s) shall be referred for arbitra-
tion to the Managing Director J&K SFC whose decision
~··
shall be final and binding on both the parties."

In r<!spect of the second contract that similar terms were there,
G was not disputed before us. Therefore, even though where the f.
achievement of the contractor was 100% the contractor had a right
only to be considered for grant of the additional work. In this case it
was contended on behalf of the appellant-Corporation that the Cor-
poration could not be compelled by the process of an application under
Section 20 of the Arbitration Act to grant addi.tional work to the con-
H .tractor. On the other.hand, the contractor had pleaded that where the
J&K STAIB FOREST CORPN. v. A.K. WAN! [MUKHARJI, J.] 397
j.. ~-·
achievement of the contractor in respect of the subsisting contract was
A
100% the contractor had a right to be considered for grant of the addi-
tional work, while in this case his performance was 300%. Additional
volume available in the coupe was liable to be granted to him or, at
least, he was entitled to be considered in accordance with equity and
justice. The contractor has further alleged that while others in similar
-~ position had been granted this additional work, he had been wrong- B
' fully denied. His claim was that he having fulfilled 300% performance,
• was entitled to the remaining work of the additional work.

... It was contended on behalf of the appellant before us that there
cannot be any application for filing of an arbitration agreement for the
arbitrator in respect of the contract which had not been entered into. l
am unable to accept this submission. Clause 17 of the arbitration c
~

x agreement provided that any dispute, difference, question which
might at any time arise between the parties in respect of the works to
be executed by the contractor(s) should be referred to the arbitration of
the Managing Director of the Jammu & Kashmir State Forest Corpn .
. Thetefore, it appears to me that dispute which had arisen between the D
parties in respect of the "works to be executed" by the contractor was
·a dispute which was referable in terms of the clause 17 and the dispute
was, according to the pleadings, the custom, practice and procedure of
...,., granting additional volume of available coupe where the timber trees
had been marked but not extracted to be considered by the Govern-
men! for grant of the contract. The contract alleged if such proper E

-
.....
consideration or lawful consideration in accordance with the principles
of equity and justice had been made, the contract would have been
granted to the contractor. Therefore, the contractor claimed that he
was entitled to the grant of additional volume of work. in my opinion,
~~ there was a dispute whether the contractor was entitled to the grant of
• additional volume of the work. Such dispute was a dispute between the F
parties in respect of the "works to be executed by the contractor."

. •• I am clearly of the opinion that the dispute in this case 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
.... .l( read with clause 17, the dispute in this case was clearly referable to G
arbitration of the Managing Director, Jammu & Kashmir State Forest
Corpn.
~·
An arbitration agreement is one which is defined in Section 2(a)
of the Arbitration Act, 1940 as a written agreement to submit present
or future differences to arbitration. There was, in this case, an arbitra- H
398 SUPREME COURT REPORTS [1989] 2 S.C.R.

tion agreement, that is to say, the parties had been ad idem. The
A
agreement was in writing. It was not a contingent or a future contract.
It was a contract at present time to refer the dispute arising out of the
present contract entered into by the parties as a result of which the
contractor got a right or a privilege to ask for consideration of grant of
the further work. It was not as sought to be argued a mere right to get
B the additional work. Hence, in my opinion, it could not be contended
that there was no agreement. 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. This
contention of the appellant cannot, therefore, be accepted.
-
In the light in which I have read the facts, I am unable to accept
c the position that the claim raised by the plaintiff in this application
before the High Court was not covered by the arbitration clause. The
amplitude of the arbitration clause, in my opinion, was wide-enough
and should be so read for the reasons mentioned hereinbefore. If that
is the position then the order of reference by the High Court was not
D bad and cannot be set aside. I am unable to agree that the decision of
this Court in Seth Thawardas Pherumalv. The Union of India, [1955] 2
S.C.R. 48 indicated that in the facts of this case, there could not be
reference to the arbitration. That was a case where the appellant, a
contractor, entered into a contract with the Dominion of India as it
then was for_ supply of bricks. A clause in the contract required all
E disputes arising out of or relating to the contract to be referred to
arbitration. Disputes arose and the matter was duly referred. The
arbitrator gave an award in the contractor's favour. It was held that it
was not enough for the contract to provide for arbitration but some-
-
thing more was necessary. An arbitrator only got jurisdiction when
either, both the parties specifically agreed to refer specified matters
F or, failing that, the court compelled them to do so under the arbitra-
tion clause if the dispute was covered by it. That case was mainly
concerned with a specific question of law. This Court referred to the
decision of this Court in A.M. Mair & Co. v. Gordhandass Sagarmull,
[1950] S.C.R. 792 at 798 where this Court quoted a passage from
Viscount Simon's speech in Heyman v. Darwins Ltd., [1942] Appeal
G Cases 356 at 368. Here in this case the clause as I read it gave the 'f- ..
respondent a right to be considered. The respondent's grievance was,
if properly considered his performance being 300% achievement he
was entitled in the facts and circumstances set out hereinbefore to the
grant of the contract and further similarly placed persons had been so
given. That right had not been duly considered. That is the dispute in
H the present case and that dispute is clearly referable to the arbitration
J&K SfATE FOREST CORPN. v. A.K. WAN! [MUKHARJ!, J.] 399

:.. 4- clause as mentioned hereinbefore. I am, therefore, unable to accept the
A
position that the order of reference passed by the High Court is bad.

The second challenge to the order of the High Court was that the
order so far as it directed under Section 20 of the Arbitration Act that
the petitioner be allowed to do the remaining work of extraction of
timber of standing market trees in compartment No. 59 Marwah, was B
wholly without jurisdiction. For this reference may be made to Section
.. 41 of the Arbitration Act which provides that for the purpose of and in
relation to arbitration proceedings, the Court has such powers to pass
interim orders for detention, preservation, interim custody and sale of
any property-the subject matter of the reference for preservation or
inspection of any property or thing-the subject-matter of the refer-
_)( ence or as to which any question may arise therein for taking of c
samples and making observations and experiments; for securing the
amount in difference in the reference; for granting an interim injunc-
tion and appointing a receiver as the Court has in relation to any
proceeding before it. But though under Section 41(b) the Court has
power to pass an interim order of injunction or appointment of D
receiver, in my opinion, 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
'r' does so then the decision of the dispute becomes academic because the
contract is executed. Where the question is whether the contract was
to be executed by the respondent, if the contract is in fact executed by E
the respondent by virtue of the order of the Court, then nothing re-
- mains of the dispute. There is nothing arbitrable any more and pro-
ceedings before the arbitrator cannot, in my opinion, be forestalled by
interim order by ordering execution of the contract before it is decided
whether it had any right to the contract for additional work in the garb
of preservation of the property. F

In that view of the matter, I am clearly of the opinion that 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 in compartment No. 59, Marwah" was beyond the com-

- petence of the Court. In this respect I agree with my learned brothers.

But so far as the Court directed that the rates be determined by
G

the arbitrator after hearing both the parties, this direction, in my
opinion, was clearly within the jurisdiction provided this dispute was
referred to the arbitration. In this case unfortunately after the order of
the High Court was passed and before any order of stay could be H
I

400 SUPREME COURT REPORTS [1989) 2 S.C.R.
~~

-
A passed by this Court in a petition under Article 136 of the Constitu-
tion, the respondent had done the work of extraction of timer of stand-
ing marked trees in compartment No. 59 Marwah. Therefore, it would
be inappropriate to interfere with this order. The events have over-
reached the decision of the Court. It would be unjust to deprive any
party of its dues simply because the work has been done in view of a
B
wrong order or incorrect order of the Court of justice when there was ~ -Ii-
no stay. Would it be just to deprive a suitor of his dues in this manner
under Article 136 of the Constitution? I have no doubt in my mind that »
it would be unjust. The work indisputably has been done pursuant to
an order of the Court of law and the party who has done the work must
be paid its remuneration. How would that remuneration be settled,
c would it be by a decree in the suit or would it be by adjudication of an
award? In the view I have taken that there was a valid reference on the -,(_ .,,
contention of the respondent, this question which was incidental
thereto must be decided along with that contention. In any view of the
matter, however, for determining the work done pursuant to the
liberty or right given by the High Court which was not stayed by this
D Court arbitration undoubtedly is a better method of finding out the
dues in respect of that work done. I would not, therefore, in any event
alter this direction of the High Court.

In the aforesaid view of the matter, in my opinion, it would be
inappropriate to interfere with the interim direction of the High Court
y
E though the direction was beyond jurisdiction. In the premises I would
have disposed of the appeal by directing the arbitrator to determine
the rates in respect of the extraction of the remaining timber of stand- ..
ing marked trees in compartment No. 59 Marwah.

In fae aforesaid view of the matter, I would have made no order
F as to costs.

N.V.K. Appeal allowed.