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PETITIONER: JAMMU & KASHMIR STATE FOREST CORPORATION

       Vs.

RESPONDENT: ABDUL KARIM WANI

DATE OF JUDGMENT31/03/1989

BENCH: SHARMA, L.M. (J) BENCH: SHARMA, L.M. (J) PATHAK, R.S. (CJ) MUKHARJI, SABYASACHI (J)

CITATION:  1989 AIR 1498            1989 SCR  (2) 380  1989 SCC  (2) 701        JT 1989 (3)    99  1989 SCALE  (1)933

ACT:     Jammu  and Kashmir Arbitration Act 2002 (Smvt)  Sections 8, 11, 20 and 41.     Arbitration  Act, 1940--Sections 2(a), 18 and 20.  Arbi- tration clause in Contract--How to be construed.     Dispute  between parties--Whether referable to  arbitra- tion  or  not--Court to refrain from expressing  opinion  on merits of dispute.     Jurisdiction  of Court to make interim order--Only  ’for the  purpose’ of arbitration proceedings--Not  to  frustrate the same.

HEADNOTE:     The appellant, a Corporation was created under the Jammu JUDGMENT: functions was to undertake the removal and disposal of trees and exploitation of the 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 of felling and removal of trees. The respondent  an approved contractor submitted his tender and was granted the works  contract initially with reference to 4 lakh  c.  ft., and  subsequently he was entrusted with an  additional  work 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,  prac- tice, custom and usage extended to him. The appellant denied any  such  practice,  custom or assurance and  said  that  a 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 right but may be considered by the Management where the achievement 381 is  100  per cent." The agreement provided  for  arbitration

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which  was  contained in clause 42,  and  which  stipulated: "that  any dispute, differences or question that  may  arise was to be referred for arbitration to the Managing  Director of the Jammu & Kashmir Forest Corporation."     The respondent filed an application under sections 8, 11 and 20 of the Jammu and Kashmir Arbitration Act, 2002 (Smvt) in the High Court for a direction to the Corporation to file the agreement and to refer the dispute to an arbitrator.     The  High Court deprecated the attitude of the  Corpora- tion  in not awarding the remaining work to the  respondent. It  held that the trees in question had already been  marked and had, therefore, to be felled ’one day or the other’, and as the contractor’s achievement was 300 per cent he had  all the  right to claim the remaining work as provided in  para- graph  15  of the Tender Notice. The High Court  also  found that  as  there  existed a dispute  touching  the  contracts executed  between the parties, it referred the matter  under clause 42 of the agreement to the named arbitrator,  namely, the Managing Director of the State Forest Corporation.     The  High  Court went further and by  an  interim  order directed that the contractor be permitted to do the  remain- ing  work of extraction of timber of standing  marked  trees and the rates be determined by the arbitrator after  hearing both the parties pursuant to the said interim order.     Aggrieved by the aforesaid orders of the High Court  the appellant appealed to this Court by special leave.     On  the questions: (i) whether there was any  subsisting arbitration agreement in respect of the matters sought to be referred,  and  (ii) whether the interim order of  the  High Court directing the respondent to do the remaining work  was without  jurisdiction, and whether the respondent was  enti- tled to any compensation for the work done. Allowing the appeal, the Court,     HELD: [R.S. Pathak. CJ  and L.M. Sharma, J. Majority-Per L.M. Sharma. J.]     1. The claim raised by the respondent in his application before  the  High Court is not covered  by  the  arbitration clause and cannot be 382 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  relief  in an  appropriate  legal  proceeding [388A-B]     3. The language of the term contained in para 15 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  ques- tion of allotment 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 consideration or not; the prayer is for  refer- ence 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. [388D-E]     4. In the absence of a repudiation by the Corporation of

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the  respondent’s right to be considered, if and when  occa- sion arises, no dispute can be said to have arisen which may be referred for arbitration. [390B]     5.  In order that there may be a reference  to  arbitra- tion,  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.     6.  There  was no justification for the  High  Court  in deprecating  the Corporation for not awarding the  remaining work 10 the contractor when it was leaving the matter to  be 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] 383     8. Section 18 deals with the power of the Court to  pass interim  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 qualifies it by declaring in the Proviso that it cannot be used to the prejudice of any of the powers of  the arbitrator. [391 D-E] H.M.  Kamaluddin v. Union of India, [1983] 4 SCC 417  relied on.     9.  Interim directions can be issued only ’for the  pur- pose  of’ arbitration proceedings and not to  frustrate  the same. [391E]     10. 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  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  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  referable to the arbitration of  the  Managing Director, Jammu & Kashmir State Forest Corporation. [397F-G]   2. Endeavour should always be to find out the intention of the parties, and that intention has to be found out by read- ing the terms broadly, clearly, without being circumscribed. [398B-C]     3.  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  arbi- tration.  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 present time to  refer the dispute arising out of the present contract entered into by the parties as a result of which the 384

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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]     Seth Thawardas Pherumal v. The Union of India, [1955]  2 SCR 43 distinguished.     A.M. Mair & Co. v. Gordhandass Sagarmull [1950] SCR  792 at  798 and Heyman v. Darwins Ltd., [1942] Appeal Cases  356 at 368 referred to.     4.  Though  under section 41(b) the Court has  power  to pass  an interim order or injunction or appointment  of  re- ceiver,  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  arbitra- tor. If the Court does so, then the decision of the  dispute becomes academic because the contract is executed. [399D-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 land proceedings before the  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  contractor be allowed to do the remaining work  of  ex- traction  of timber of standing marked trees was beyond  the competence of the Court. [399F-G]     7.  It would be unjust to deprive any party of its  dues simply  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. ]400B]     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  of 1989. 385     From the Judgment and Order dated 4.6.1987 of the  Jammu and Kashmir High Court in Application No. 180 of 1987. Altar Ahmed and S.K. Bhattacharya for the Appellant.     S.N. Kacker, E.C. Agarwala and Ms. Purnima Bhat for  the Respondent. The following Judgments of the Court were delivered:     SHARMA,  J.  The present respondent who is  an  approved contractor  of the Jammu & Kashmir State Forest  Corporation (appellant  before us) filed an application under ss. 8,  11 and 20 of the Jammu & 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  arbi- trator.  Jammu & Kashmir Arbitration Act is similar  to  the Arbitration  Act, 1940, enacted in identical  language.  The Corporation  objected, pleading inter alia that  the  entire work  allotted to the plaintiff contractor under the  agree- ment had been completed by him without any dispute, and  the present claim of the plaintiff is not covered by the  agree- ment in question or its arbitration clause A learned  single Judge of the High Court allowed the prayer for reference  to

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the  dispute described in the respondent’s application,  and further  granted an interim relief. This judgment  is  under challenge  before this Court by the  defendant  Corporation. Special leave is granted.     2. As stated in the affidavit of the  plaintiff-contrac- tor,  the Corporation was created under the Jammu &  Kashmir Forest Corporation Act, 1978 and its main functions are: (i) to  undertake  research programmes 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 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.  standing 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  deci- sion by the authorities had 386 been  taken  for extraction of a total  standing  volume  of 10,08,000 cft., the plaintiff was entrusted with the extrac- tion 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 addition- al  work  in accordance with the practice prevalent  in  the Corporation and assurances given to him. It was alleged that since  the  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 necessitated the filing of the application before  the High  Court.  The Corporation 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 in  ques- tion  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  re- moved.  Admittedly  the timber had to be  transported  to  a distant place through difficult terrain (as has been specif- ically mentioned by the contractor himself) and was,  there- fore,  likely to take a considerable time.  The  Corporation said that a decision had been taken not to work the Compart- ment  further till the entire timber already  extracted  was removed  to  its destination, and there was,  therefore,  no question of entrusting the remaining work to anybody for the 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.     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 terms  and  condi- tions  of  the agreement. The 15th paragraph of  the  tender notice reads thus:

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                       15.  Extension  for  the  additional               volume  available  in the coupe  will  not  be               claimed as matter of right. But may be consid-               ered  by the Management where the  achievement               is 100%."               387               The arbitration clause being Clause 42 of  the               agreement states thus:               "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 binding  on               both the parties." As  it appears from the plaintiff’s application  before  the High   Court,   his  claim  was  rounded   on   "procedure", "practice," "custom", and "assurances extended to the  peti- tioner 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 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"  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 deprecated the attitude of the Corporation in the following words:               "The contention of the learned connsel for the               respondents  is  that the respondents  do  not               want  the  remaining timber  to  be  extracted               presently for unknown reasons and as such  the               corporation  cannot be compelled for grant  of               sanction  for extraction of  remaining  marked               timber. 1 think the attitude of the respondent               corporation  is most derogatory to  the  facts               and  circumstances of the case when the  peti-               tioner  is  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 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 388 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,  the  appropriate forum  for  the respondent will be a court of  law  directly granting  the relief in an appropriate legal proceeding.  It

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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 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  of right additional volume of work. His right extends only to a consideration  of his case by the management when the  ques- tion of allotment 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 consideration or not; the prayer is for  refer- ence 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. A reference  to the decision of this Court in  Seth  Thawardas Perumal  v.  The Union of India, [1955,] 2 SCR 48,  will  be helpful.  The appellant, a contractor, entered into  a  con- tract with the Dominion of India for the supply of bricks. A Clause in the contract required,               "  .....  all questions and disputes  relating               to  the meaning of the specification  and  in-               structions  hereinbefore mentioned and  as  to               quality of materials or as to any other  ques-               tion, claim, right, matter or thing whatsoever               in  any way arising 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) to be referred to arbitration. It was agreed that the bricks would be 389 prepared in lots and it would be the duty of the  Government to  remove the bricks as soon as they were ready for  deliv- ery.  In  order to keep to the schedule  for  delivery,  the contractor had to prepare ’kateha’ bricks and place them  in his  kilns for baking, and while this lot was baking he  had to prepare another lot of ’kateha’ bricks ready to take  the place of the baked bricks as soon as the Government  removed them. At a certain stage the Government department failed to remove  the baked bricks in time which caused a jam  in  the kilns  and  prevented the contractor from  placing  a  fresh stock of unburnt bricks in the kilns. Consequently the stock pile of kateha bricks kept on mounting up when the rains set in,  destroying  88 lacs of katcha  bricks.  The  contractor claimed  the loss arising out of the neglect of the  Govern- ment department in performing its duty in time. The  Govern- ment  denied  the claim and a reference of the  dispute  was made to the arbitrator designated in the agreement who  made an  award and filed it in court. On the Constitution  coming into  force the Dominion of India was replaced by the  Union of  India as the defendant in the case and it was  contended on  its behalf that the katcha bricks did not form  part  of the  contract and that the loss that was occasioned  by  the damage to them was too remote to be covered by the  arbitra-

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tion  clause.  The  second ground of defence  was  based  on Clause 6 of the agreement which absolved the Government from any  liability for a damage to unburnt bricks. The stand  of the contractor was that the chief reason of the  destruction of  the katcha bricks was the failure of the  department  to lift the monthly quota of the bricks in accordance with  the written  agreement; and, Clause 6 of the agreement  referred only to such cases where the department had no control,  and would not cover a case of its own default. The Supreme Court did  not agree with him and set aside the award, inter  alia observing, that if he chose to contract in the terms includ- ing  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 before us, the plaintiff contractor is  trying  to connect  the  allotment  of future work by  a  reference  to paragraph  15 of the tender notice which  specifically  says that  additional  work could not be claimed as a  matter  of right. The High Court, therefore, was not correct in  inter- preting the aforementioned Clause 15 in the following words:                         "There  was clause 15 in the  tender               notice  according to which extension of  addi-               tional volume available in the coupe would not               have  to  be claimed by the  contractor  as  a               matter  of fight but he would have to be  con-               sidered  by the management where his  achieve-               ment  was  100%.  In  the  present  case   the               achievement of the petitioner was 300% and               390               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 respondent when it  takes up the question of allotting the additional work. In 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.  In order that there may be reference to  arbi- tration, existence of a dispute is essential and the dispute to be referred to arbitration must arise under the  arbitra- tion agreement. When in the future, the Corporation makes  a decision for the execution of the additional work 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  Corpo- ration refuses to consider the claim. Neither the  agreement nor  the  tender notice deals with the 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 connected  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 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 cannot be referred  for  a decision of the arbitrator.  The  order  of reference passed by the High Court, therefore, has to be set

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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 order automatically  disap- pears,  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 in s. 41(b) which is quoted below: 391                        "41.   ,Procedure   and   powers   of               Court.--Subject to the main provisions of this               Act and of rules made thereunder-                        (a)........................................ ........                        (b)  the  Court shall have,  for  the               purpose  of, and in 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 relation to, any  proceed-               ings before the Court:                        Provided  that nothing in clause  (b)               shall  be taken to prejudice any  power  which               may  be vested in an arbitrator or umpire  for               making  orders with respect to any  such  mat-               ters."     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 concerned, it makes only the  proce- dural  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 it by declaring in the Provi- so  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 ease  the  plain- tiff-contractor was allowed by the High Court to execute the extraction work which was the subject matter of the arbitra- tion.  Mr. Kacker, appearing for the plaintiff.  respondent, argued that in pursuance of this part of the impugned  judg- ment  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 challenged  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 direction clothing  the  plaintiff 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 1 of the 392 Second Schedule speaks of the preservation of subject matter of  the reference and paragraph 3 also highlights  that  as-

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pect. The 4th paragraph which mentions--"interim  injunction or the appointment of a receiver"--has also to be interpret- ed 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.     6. It has been averred before us on behalf of the plain- tiffrespondent 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  desti- nation.  The  learned  counsel for  the  Corporation  placed reliance  on the statements in several affidavits  and  con- tended that if the entire circumstances including the period which  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  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.     7.  In the result, the appeal is allowed.  The  impugned judgment  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 appellantCorporation.     SABYASACHI  MUKHARJI, J. I have read the  judgment  pro- posed  to  he 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 covering the  dispute  in question between the parties. It is, therefore, necessary to refer to certain facts, as I view these.     This  appeal  by special leave is directed  against  the judgment-  and order of the High Court of Jammu  &  Kashmir, dated 4th June, 1987. The Jammu & Kashmir Forest Corporation is  the  appellant.  The undisputed facts  leading  to  this appeal are that one Abdul Karim Wani, the respondent No.  1, filed  an application for referring certain matters  alleged to he in dispute to an independent arbitrator; and that  for the  last  15  years the respondent had been  working  as  a contractor for the 393 appellant Corporation, namely, Jammu & Kashmir Forest Corpn. and  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 Corporation issued  tenders for felling, handsawing, pathroo,  paccinali and  mahan work of 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 11.74 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  (Extrac- tion)  issued a sanction for further quantity of 2 lac  cft. sawn volume in compartment No. 59 Marwah, on the same rates, terms and conditions as contained in the original  contract. The sanction appears at pages 26 & 28 of the present  appeal papers before us.     It  appears that the total marking carried out  in  com-

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partment  No,  59 was 10,08,000 cft. standing out  of  which only 6 lac cft. was sanctioned in favour 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 80  kms. before it is collected at loading point of Dedpeth.     1t is, further, the case of the respondent that "as  per the  procedure, practice, custom and assurances extended  to the  respondent  by the appellant  Corporation  through  its functionaries,  from time to time," the entire marking  con- ducted  in a particular compartment for extraction  was  re- quired (emphasis supplied) to be handed over to the respond- ent 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 extrac- tion  of  timber including cartage/carriage  of  foodgrains, saws,  tools and implements is very difficult, it was  never intended that the balance work remaining in the  compartment for extraction would be given to any other contractor.     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- 394 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.     It was further asserted that there was also the practice in  the Corporation that once a compartment was handed  over to the contractor for work, it was taken back from him  only after  the  entire available work in  the  said  compartment stood  concluded.  The contractor further alleged  that  the appellant Corporation was not allotting rest of the work  to him contrary to the policy adopted and assurances  extended, as  mentioned  hereinbefore. The  respondent  furnished  in- stances  where  such conduct or procedure of  making  allot- ments,  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 in respect of compartment No. 30-B, Dachhan and 62 Marmat dated 10.3.87, Sh. Rehmatul- lah  Bhat for compartment No. 19A Paddar dated 5.5.87,  Nas- sarnllah 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.     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 depot.  Once that decision was there the instances quoted by the contrac- tor proved useless, according to the appellant. It, however, very  clearly  appears  that in compartment  No.  59  Marwah marked  standing trees were to the extent of 10,08,000  eft. The second aspect emerging is that out of this volume only 6 lac  eft. standing timber had been sanctioned in  favour  of the  contractor on two different occasions, and such  timber had been extracted, removed and taken to the loading  point. The only dispute subsisting was about the rest of the stand-

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ing  trees i.e., 4,80,000 cft. It is not disputed  that  the said  remaining  cfts. have been marked. 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  conten- tion  of  the appellant was that they had  no  intention  to extract 395 the said timber till other extracted timber was taken to the depot.  The  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  com- pelled  to grant or sanction extraction of remaining  marked timber.     The  learned  Judge by his impugned judgment  and  order deprecated  the  conduct of the  authorities  concerned.  He proceeded on the basis that inasmuch as the remaining timber had  to be extracted one day or the other, the  entire  work should  have  been given to the respondent. In  the  present case,  the learned Judge noted that the performance  of  the respondent  contractor as 300%. The respondent was  entitled to  the grant of this contract even if his  performance  had 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 executed between them. The matter in dispute was referred to the  named arbitrator, namely, the Managing Director of  the State  Forest  Corporation, who was 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 him, namely,  the  re- spondent  herein  be  allowed to do the  remaining  work  of extraction of timber of standing 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 to be referred. The second  aspect  in- volved 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 of  timber of  standing marked trees in compartment No. 59 Marwah,  and the rates be determined by the arbitrator after hearing both the sides. It was contended on behalf of the appellant  that the  learned Judge travelled beyond the scope of his  juris- diction.  It  was  submitted that there  was  no  subsisting arbitration agreement covering the entire area of  10,08,000 eft.  There were only two subsisting contracts one  being  a contract  for felling trees of 4 lacs eft dated  6th  March, 1986,  and  another for 2 lacs eft in addition,  dated  28th October,  1986.  The agreement dated  6.3.86  provided  that dispute in respect of these 396 should  be referred to arbitration but there was,  according to  the appellant, 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 my  opinion, it is not the correct way to look at the  facts of this case. It appears from the first agreement, which  is at  page 142 onwards of the present paper-book that it  con-

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tained, inter alia, the following clauses.               "The quantum of work under each  activity/sub-               activity  is estimated and as 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 approval of the Managing Director.               Any  subsequently  marking carried  out  in  a               section/unit  under work with  the  contractor               shall be included in this increase of 25%."               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 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  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  respect  of the second contract that  similar  terms were  there,  was not disputed before  us.  Therefore,  even though where the 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 Corporation could  not be compelled by the process of an application under  Section 20  of the Arbitration Act to grant additional work  to  the contractor.  On the other hand, the contractor  had  pleaded that where the 397 achievement  of the contractor in respect of the  subsisting contract  was 100% the contractor had a right to be  consid- ered  for grant of the additional 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 wrongfully 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  arbi- tration  agreement  for  the arbitrator in  respect  of  the contract  which  had not been entered into. I am  unable  to accept this submission. Clause 17 of the arbitration  agree- ment  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. Therefore, it appears to me  that  dispute which had arisen between  the  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 Government for  grant

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of the contract. The contract alleged if such proper consid- eration  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  dis- pute  whether  the contractor was entitled to the  grant  of additional  volume of the work. Such dispute was  a  dispute between the 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 read  with  clause 17, the dispute in this case was clearly referable to  arbi- tration  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  arbi- tration. There was, in this case, an arbitra- 398 tion  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 present time  to refer  the dispute arising out of the present  contract  en- tered into by the parties as a result of which the  contrac- tor  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 the additional work. Hence, in my  opin- ion, 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 the position that the claim raised by the  plain- tiff  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 bad and cannot be set aside. I am  unable  to agree  that  the decision of this Court  in  Seth  Thawardas Pherumal v. 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 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 something more was necessary. An arbitrator only got  juris- diction when either, both the parties specifically agreed to refer  specified  matters or, failing that, the  court  com- pelled  them  to do so under the arbitration 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 Cases 356 at 368. Here in this case  the

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clause  as I read it gave the respondent a right to be  con- sidered. The respondent’s grievance was, if properly consid- ered 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 the present case and that dispute  is clearly referable to the arbitration 399 clause as mentioned hereinbefore. I am, therefore, unable to accept  the 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  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,  preserva- tion, 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  reference or as to which any question may arise therein for taking  of samples and making observations and experiments; for  secur- ing the amount in difference in the reference; for  granting an interim injunction 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 receiver, in my  opin- ion, the Section does not empower the Court to direct execu- tion of the contract, the extent of which is in dispute  and is  a matter referable to be adjudicated by the  arbitrator. If  the Court does so then the decision of the  dispute  be- comes  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  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 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.   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  extrac- tion  of timber of standing marked trees in compartment  No. 59, Marwah" was beyond the competence 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 the arbitrator after hearing both the parties, this direction, in my opinion, was clearly within the juris- diction  provided this dispute was referred to the  arbitra- tion. In this case unfortunately after the order of the High Court was passed and before any order of stay could be 400 passed by this Court in a petition under Article 136 of  the Constitution, the respondent had done the work of extraction of  timer  of standing marked trees in  compartment  No.  59 Marwah.  Therefore, it would be inappropriate  to  interfere with this order. The events have overreached 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

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wrong order or incorrect order of the Court of justice  when there  was no stay. Would it be just to deprive a suitor  of his  dues in this manner under Article 136 of the  Constitu- tion?  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  set- tled, 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  re- spondent, 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 Court which was not stayed by this 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  direc- tion  of  the  High Court 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  the aforesaid view of the matter, I would have  made no order as to costs. N.V.K.                                          Appeal   al- lowed.                                 1 ?401