Clause Providing Managing Director Or Chairman Of Department To Be Sole Arbitrator For Adjudicating Claims Illegal: J&K&L HC

The High Court was considering a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an independent Arbitrator.

The Single-Judge Bench of Justice Tashi Rabstan observed, “Clause 41 of the Lease Deed, which provides the Managing Director/Chairman of the department to be a sole arbitrator for adjudicating the claims/disputes between the petitioner and the department, would be against the law governing the field. Accordingly, this petition is allowed.”

Senior Advocate Pranav Kohli represented the Petitioner while AAG Ravinder Gupta represented the Respondent.

The General Manager, District Industries Center, Udhampur sanctioned the allotment of some portion of undeveloped land in IID Center. In the year 2006, the respondent issued a formal Allotment of land Letter of Intent (LOI) and the petitioner was asked to deposit Rs 30,000 per kanal as premium and advance ground rent of Rs.22,080. The petitioner deposited the amount of Rs 1,42,080. It was averred in the petition that the actual physical possession of the plot was never handed over to the petitioner, because the subject plot was never traceable nor identifiable on spot in the industrial estate.

It was only in December 2020 that the Estate Manager conveyed that the plot no.25-B had been allotted to the petitioner instead of Plot no.25. The Petitioner was aggrieved by the fact that the respondent now issued a communication whereby the petitioner was informed that his lease was cancelled and that the land would be retrieved immediately. Though the land in question /dispute is still in the exclusive possession of the petitioner.

It was the petitioner’s case that an independent arbitrator was required to be appointed in this case because the Managing Director/Chairman Industrial Development Corporation is nominated as arbitrator in terms of the lease deed executed between the parties which is against the prohibition contained in Section 12(5) of Arbitration and Conciliation Act, 1996 read with Schedule 7 thereof.

Referring to the lease deed, the Respondents submitted that there is a clause 41, which talks of referring any doubt, dispute, question or difference to the Sole Arbitration of the Managing Director/Chairman Industrial Development Corporation for arbitration under the Jammu and Kashmir Arbitration and Reconciliation Act.

The Bench placed reliance upon the judgments of the Supreme Court in Haryana Space Application Centre (HARSAC) & Anr. Vs. M/s Pan India Consultants Pvt. Ltd., 2021 AIR (Supreme Court) 653 wherein it has been observed that the Principal Secretary to the Government of Haryana would be ineligible to be appointed as an arbitrator, since he would have a controlling influence on the Appellant Company being a nodal agency of the State.

In view of the facts and circumstances of the case and the judgment passed by the Supreme Court and in view of amended Section 12(5) of the Arbitration and Conciliation Act, 1996 read with the Seventh Schedule, the Bench held that Clause 41 of the Lease Deed, which provides the Managing Director/Chairman of the department to be a sole arbitrator for adjudicating the claims/disputes between the petitioner and the department, would be against the law governing the field.

Thus, allowing the Petition, the Bench appointed Retired District & Sessions Judge R. S. Jain as sole Arbitrator, who would proceed in the matter in accordance with the provisions of the Act to make an award.

Cause Title: Avtar Krishan Suri v. The Estate Manager [Case No. Arb P No.75/2023]

Appearance:

Petitioner: Senior Advocate Pranav Kohli & Advocate Vastav Sharma

Respondent: AAG Ravinder Gupta

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