When In Doubt, Do Refer: J&K And Ladakh High Court Refers Contract Dispute To Arbitration Despite Non-Invocation Of DRE Mechanism
The Court appointed former CJ Ali Mohammad Magrey as Sole Arbitrator, holding that unresolved questions of arbitrability and jurisdiction can be decided by the arbitral tribunal.
Justice Sanjay Dhar, Jammu and Kashmir and Ladakh High Court
The Jammu & Kashmir and Ladakh High Court has appointed a sole arbitrator to adjudicate disputes arising out of a construction contract between M/s Hassan Roads Construction Company Pvt. Ltd. and the J&K Economic Reconstruction Agency (ERA), holding that the existence of a contractual Dispute Review Expert (DRE) mechanism did not prevent reference to arbitration in the facts of the case.
Placing reliance on the Supreme Court's principle that courts should follow the approach of “when in doubt, do refer”, the Court observed that the arbitration clause was of wide amplitude and that the arbitral tribunal could determine jurisdictional objections under Section 16 of the Arbitration and Conciliation Act, 1996.
.Justice Sanjay Dhar while citing Maharashtra State Electricity Distribution Company Limited (MSEDCL) v. R Z Malpani, 2026 INSC 342, reiterated, “…courts should follow the principle of ‘When in doubt, do refer’ and lean towards referring matters to arbitration when the arbitration agreement is prima facie existent. Apart from this, in terms of Section 16 of the Arbitration and Conciliation Act, 1996, the arbitral tribunal is competent to rule upon its own jurisdiction. Therefore, it shall be open to the respondents to raise the issue of jurisdiction before the arbitral tribunal itself”.
The Bench further noted, “…the condition in the contract providing for arbitration of only those disputes which have been referred to the Adjudicator/DRE is not possible, particularly on account of decision relating to termination of contract having been taken by the respondents. Therefore, no pre-arbitration procedure available to the petitioner, could have been exhausted by it prior to seeking appointment of the Arbitrator”.
Senior Advocate Z. A. Qureshi appeared for the petitioner and Illyas Nazir Laway, Government Advocate appeared for the respondent.
For the facts, the contractor had approached the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator after disputes arose concerning termination of the contract, unpaid claims, retention money, compensation for delays, bank guarantees and other contractual dues.
ERA opposed the petition, contending that the contractor had bypassed the dispute resolution mechanism contained in the contract. According to the respondents, the contractor was first required to refer disputes to a Dispute Review Expert (DRE) before invoking arbitration and, having failed to do so, was not entitled to seek appointment of an arbitrator.
Rejecting the objection, the Court examined the contractual framework and found that although the agreement identified a named DRE, the mandatory agreement required to be executed jointly between the employer, contractor and DRE under Clause 23.1.1 of the General Conditions of Contract had never been executed. Consequently, the Court held that the DRE mechanism contemplated under the contract was never operational.
The Court further noted that the principal grievances raised by the contractor related to termination of the contract, encashment of bank guarantees, re-tendering of the remaining work and other post-termination measures initiated by ERA. These actions were decisions of the Employer and not of the Project Manager.
Justice Dhar observed that under Clause 24 of the General Conditions of Contract, only decisions taken by the Project Manager could be referred to the DRE. Therefore, the disputes sought to be raised by the contractor were not capable of being effectively adjudicated through the DRE mechanism.
The Court also emphasized that the arbitration clause contained in the Particular Conditions of Contract was broadly worded and covered any dispute or difference arising out of or connected with the agreement. In case of conflict between procedural clauses and the arbitration agreement, courts must lean in favour of preserving arbitration rather than defeating it.
“…no agreement appears to have been executed between the Adjudicator/DRE jointly with respondent-ERA and the petitioner/contractor. Therefore, condition stipulated in Clause 23.1.1 of the GCC has not been satisfied in the present case, as such, the forum of Adjudicator/DRE was not available to the petitioner… the petitioner could not have raised the disputes which are subject matter of the present petition before the Adjudicator/DRE in terms of the Clause 24 of the GCC”, it noted.
However, the Bench noted, “…a perusal of the documents placed on record, which include the communications exchanged between the parties among themselves would make it abundantly clear that settlement between them through the medium of an Adjudicator/DRE was not possible…”.
The Court clarified that questions relating to jurisdiction and maintainability could still be raised before the arbitral tribunal in exercise of its powers under Section 16 of the Arbitration and Conciliation Act, 1996.
Case Title: M/s Hassan Roads Construction Company Pvt. Ltd. v. J&K Economic Reconstruction Agency (ERA) & Ors. (Neutral Citation: 2026:JKLHC-SGR:157)
Appearances:
Petitioner: Z. A. Qureshi, Senior Advocate, Rehana, Babar Bilal Malik, Muzaam Nasir, Advocates.
Respondent: Illyas Nazir Laway, Government Advocate.