Srinagar vs Director

Reserved on: 18.12.2025 Pronounced on:26.12.2025 Uploaded on: 26 .12.2025 Whether the operative part or full judgment is pronounced: Full

Arb P. No.27/2025

M/S SOHRAB IQBAL GONI (JV) ...PETITIONERS/APPELLANT(S) Through: - Mr. Azhar-ul-Amin, Advocate.

Vs.

DIRECTOR, TRANSPORT J&K ECONOMIC RECONSTRUCTION AGENCY ...RESPONDENT(S) Through: - Mr. Waseem Gull, GA.

CORAM: HON'BLE MR. JUSTICE SANJAY DHAR, JUDGE

JUDGMENT

1) The petitioner through the medium of present petition

under Section 11(6) of the Arbitration and Conciliation Act,

1996 (for short "the Act of 1996"), has sought appointment

of Arbitrator to adjudicate the disputes between the

petitioner and the respondents arising out of agreement

dated 9th April, 2008.

2) The brief facts leading to the filing of the present

petition are that the respondent Economic Reconstruction

Agency (for short "ERA") on behalf of the Government of

J&K invited bids from eligible contractors for construction

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of 54 meter span bridge over Ferozpora Nalla at Chanapora

Kunzar. In response to the said tender notice, the petitioner

submitted his bid. The same was found lowest and was

accepted by the respondents, as a consequence whereof

agreement dated 9th April, 2008 came to be executed by the

parties. The date of commencement of the work was fixed

as 28 days later.

3) It appears that during construction of the bridge,

disputes arose between the parties over the alleged delay in

completion of the bridge as also its alleged faulty design.

The contract was foreclosed, whereafter the petitioner

issued termination notice in January, 2015 invoking

Clause 6.2 of the General Conditions of the Contract (GCC).

The petitioner claimed that the respondents have

unilaterally and arbitrarily foreclosed the contract and

deprived him of his legitimate profits and investments along

with liquidated and unliquidated damages.

4) It appears that after the disputes arose between the

parties, the High Court in terms of order dated 2nd July,

2018 passed in A.A No.16/2014, appointed Shri Abdul

Rashid Malik, District & Sessions Judge, as Sole Arbitrator

to decide the disputes that had arisen between the parties

in relation to the agreement in question.

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5) Before the learned Arbitrator, the petitioner/claimant

filed its statement of claims in which it claimed that it is

entitled to an amount of Rs.26,52,37,347/ on account of

ten claims, the detail whereof are given as under:

i) Claim for earth work in construction of diversion for an amount of Rs. 4708611/-.

ii) Claim for haltage and losses due to steal issue raised by the Engineer In-charge for an amount of Rs. 8408880/-

iii) Claim for losses due to unprecedented flood of 2010 for an amount of Rs.45164486/-.

iv) Claim for payments withheld in IPC 9th by illegally tempering with variation and losses to the same for an amount of Rs. 38995026/-.

v) Claim on account of loss of profit in new work which was fraudulently taken away and subsequent proceedings of termination of contract by the claimant for an amount of Rs. 12723751/-.

vi) Claim for labour cess deducted arbitrarily and illegally from our running bills for an amount of Rs. 877722/-.

vii) Claim for losses suffered due to arbitrary deduction of liquidity damages from claimant running bills and other illegally withheld money in form of cash and Bank guarantees for performance security and retention money for an amount of Rs. 20221296/-.

viii) Claim for various losses incurred on account of delays not attributable to the claimant for an amount of Rs.

117045084/-.

ix) Claim for losses due to non issuance of essentially certificates by respondents for an amount of Rs. 7092491/-.

x) Claim for non-performance and breach of contract on part of the respondent for an amount of Rs. 265237347/-.

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6) The respondents filed their statement of defence and

also raised three counter claims. On account of first

counter claim, the respondents claimed an amount of

Rs.1.00 crores against the petitioner/claimant in

accordance with Clause 2.5 of the GCC. The second counter

claim to the tune of Rs.7,18,492/ relates to salary of the

staff of the employer and the third counter claim pertained

to fee of the Arbitrator.

7) The learned Arbitrator, after analysing the pleadings

and oral as well as documentary evidence lead by the

parties before him, passed a detailed award dated

21.01.2022. While making his award, the learned

Arbitrator rejected all the claims of the petitioner/claimant

excepting claim No.7, which relates to losses suffered due

to deduction of liquidated damages from running bills of the

claimant and money withheld in the form of cash and bank

guarantees for performance, security and retention money.

All the counter claims of the respondents were also rejected.

Accordingly, the learned Arbitrator awarded an amount of

Rs.63,13,511/ in respect of claim No.7 in favour of the

petitioner/claimant along with interest @6% from the date

of award till payment.

8) The aforesaid award dated 21.01.2022, came to be

challenged by both the parties by way of separate petitions Arb. P No.27/2025 Page 4 of 19 2025:JKLHC-SGR:389

under Section 34 of the Act of 1996 before Designated

Commercial Court, Srinagar. The learned Commercial

Court, vide order dated 24.04.2025, allowed both the

petitions filed by the parties and set aside the award.

9) After setting aside of the award passed by the learned

Arbitrator, the petitioner has moved the present petition

before this Court seeking appointment of a fresh Arbitrator.

It has been contended that underlying dispute between the

parties is yet to resolved and the learned Designated

Commercial Court has left it open to the parties to carry out

further proceedings before the Arbitrator in future. It has

been submitted that in tune with the observations of the

learned Designated Commercial Court, the petitioner has

served a notice upon the respondents requesting them to

refer the disputes for arbitration in terms of Section 21 of

the Act of 1996 but the respondents have failed to act under

the terms of the contract compelling the petitioner to move

the present petition.

10) The petition has been resisted by the respondents by

filing objections thereto. It has been contended that most of

the claims of the petitioner have been rejected by the

learned Arbitrator because the same are frivolous in nature.

It has been further submitted that there is no legal

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foundation to the present petition and the same deserves to

be dismissed.

11) I have heard learned counsel for the parties and

perused record of the case including the award passed by

the learned Arbitrator and the record of the Designated

Commercial Court, Srinagar.

12) The question that poses itself for determination of this

Court is as to whether in the face of the fact that pursuant

to the first reference made to the arbitration which

culminated into passing of an award and setting aside of

the same under Section 34 of the Act of 1996, a request for

second reference to arbitration is maintainable in the facts

and circumstances of the case.

13) Learned counsel for the petitioner has, while pressing

for reference of the disputes between the parties to

arbitration once again, contended that underlying dispute

between the parties has remained unresolved and because

the learned Designated Commercial Court has left it open

to the parties to take recourse to fresh arbitration,

therefore, there is no legal impediment in referring the

disputes to the arbitration once again for their complete

and final resolution. He has relied upon the judgment of the

Bombay High Court in the case of Batliboi Environmental

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Engineering Ltd. vs. Hindustan Petroleum Corporation

Limited (Arbitration Application No.338 of 2024 decided on

11.03.2025).

14) Per contra, learned counsel for the respondents has

contended that the scope of jurisdiction under Section 11

of the Act of 1996 is materially different at pre-award and

post-award stages. It has been contended that at the post-

award stage, the Court has to take cognizance of earlier

award and the judgment passed under Section 34 of the Act

of 1996. It has been contended that mere setting aside of

the award does not automatically revive a right to re-

arbitrate. According to the learned counsel, in a case where

Arbitral Tribunal has conclusively held a claim legally

untenable and the Court under Section 34 of the Act of

1996 has not rendered any finding, the said claim is

reduced to deadwood. It has been contended that in the

present case, the claims of the petitioner were found to be

untenable by the learned Arbitrator and no finding has

been rendered on merits by the learned Designated

Commercial Court, as such, the disputes between the

parties cannot be again referred to arbitration. In support

of his aforesaid contentions, the learned counsel for the

respondents has placed reliance upon the judgment of

Delhi High Court in the case of Jaiprakash Associates

Limited v. NHPC Limited, 2025 SCC OnLine Del 170. Arb. P No.27/2025 Page 7 of 19

2025:JKLHC-SGR:389

15) It is a well settled principle of law that at the pre-award

stage, the Court's scrutiny is extremely limited and the

Court applies only a prima facie test about the existence of

arbitration agreement and arbitrability of the disputes

arising between the parties. Rejection of an application

under Section 11 of the Act of 1996 at pre-award stage is

confined to cases of manifest non-arbitrability. However,

when a fresh petition under Section 11 of the Act of 1996 is

made after the arbitral award has been set aside, the Court

has to consider the award passed by the Arbitrator and the

order that has been by the Court under Section 34 of the

Act 1996 as also an order that may have been passed by

the Court while exercising its appellate jurisdiction under

Section 37 of the Act of 1996. So, at post-award stage,

Referral Court has to take into account subsequent

developments like the arbitral award and the orders passed

by the Courts under Section 34/37 of the Act of 1996 and

if after considering all these aspects, the Court considering

the second reference is of the opinion that the underlying

dispute between the parties has remained unresolved and

the same is arbitrable, only then second reference is

maintainable. On the other hand, if it is found that claims

of the parties have been determined by the Arbitrator or by

the Court exercising its powers under Section 34/37 of the

Act of 1996 on their merits, then the situation may be Arb. P No.27/2025 Page 8 of 19 2025:JKLHC-SGR:389

different and it may be a case where claims are reduced to

deadwood, hence a second reference would not be

maintainable.

16) The High Court of Delhi has, in the case of Jaipraksh

Associates Limited (supra), which has been relied upon by

the respondents, analysed the legal position on the

aforesaid aspect of the matter in the following manner:

23. While this Court is conscious of the fact that the general rule favours referring disputes to arbitration, it is equally settled that "manifest injustice" remains a key exception to this rule. This Court is of the view that to realise the true and correct meaning to this Court's role of exercising its supervisory role under the Act of 1996, Referral Courts especially at the post-

award stage must step in to prevent the arbitration process from being misused to perpetuate injustice. The concept of manifest injustice extends to scenarios where the dispute is so evidently flawed that it is clear that relegating the parties to arbitration would serve no purpose. The present matter is one such matter. Allowing such claims to go forward would be a waste of resources and an improper use of the arbitration process, which is meant to resolve only those disputes that are legally viable. The present matter falls in the category where "legitimate interference" is necessitated and to prevent wastage of public and private resources. Applying the "eye of the needle" test, this Court has no e hesitation is observing that the prima facie scrutiny of the facts of the present case, leads to a clear conclusion that there is not even a vestige of doubt that the claim is non-arbitrable.

24. This Court is of the view that it is the duty of the Referral Court especially at the post award stage to protect the parties from Arb. P No.27/2025 Page 9 of 19 2025:JKLHC-SGR:389

being forced to arbitrate when the matter is demonstrably non-arbitrable. This is more so also from the perspective that one of the primary rationale behind the enactment of the Act of 1996 was speedy justice and bringing a finality to an ongoing dispute i.e. there be an end to litigation even though a party may remain dissatisfied with the verdict. The Statement of Objects and Reasons reveal that the legislative intent of enacting the Act of 1996 was to provide parties with an efficient alternative dispute resolution system which gives litigants an expedited resolution of disputes while reducing the burden on the courts. If this duty within the limited compass is not exercised and the court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the court.

25. This Court cannot be expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of an arbitrator, else in a situation such as the present one where an award has been set aside and the aggrieved party wants to initiate another round of arbitration only to take a second bite at the cherry, the process of the court would be susceptible to abuse by parties to litigate endlessly which completely goes against the aim and objective of the Act of 1996. If this practice is encouraged, the finality of an award would always be in a limbo.

17) The High Court of Bombay has, in the case of Batliboi

Environmental Engineering Ltd (supra), the judgment

relied upon by learned counsel for the petitioner, noted the

legal position enunciated by Delhi High Court in Jaipraksh

Associates Limited's case (supra) and has distinguished

the said judgment in the following manner:

35. Finally, Mr. Andhyarujina would cite a decision by a Learned Single Judge of the

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Delhi High Court in the case of Jaiprakash Associates. The submission is that, without losing sight of the limited scope of jurisdiction available to a Section 11 Court, the Delhi High Court has refused to refer parties to arbitration in a post-award reference on grounds of public policy, and refused to permit what was dead wood and non-

arbitrable to be dragged into arbitration afresh. In Jaiprakash Associates, an arbitral tribunal had adjudicated on merits that there was no evidence to enable granting of the claim raised by the applicant in the Section 11 Petition. Yet, the same arbitral tribunal awarded damages of Rs. 60 crores. The winning party (the party that was awarded Rs. 60 crores) without evidence filed a petition to set aside the award since it was of the view that it ought to have been paid even more. In disposal of that Petition, the Section 34 Court set aside the arbitral award but on grounds totally contrary to the grounds of challenge to the award, and held that when the arbitral tribunal had found that there is no evidence or basis to make a claim, it could never have awarded damages of Rs. 60 crores. This decision of the Section 34 Court was not challenged, and instead, the party went in for a second initiation of arbitration.

36. In those circumstances, the Delhi High Court ruled that it was a second bite at the cherry and a dead wood claim was being pursued. Evidently, in Jaiprakash Associates, the arbitral tribunal had clearly ruled that the party seeking the second round of arbitration had no legs to stand on. This was a case of the arbitral tribunal returning findings on merits that there was no evidence. Yet, without any merit, damages of Rs. 60 crores had been awarded. The Section 34 Court set aside the award, not on the petition of the party that was asked to pay Rs. 60 crores but on a challenge mounted by the party that was awarded the damages despite the arbitral finding that the claim for damages had no legs to stand on. The judgement under Section 34 was not challenged despite the availability of a statutory right to appeal. Therefore, that judgement became absolute and final. In that context, the Delhi High Court ruled that Arb. P No.27/2025 Page 11 of 19 2025:JKLHC-SGR:389

evidently dead wood was being pursued and a second bite at the cherry was being sought.

37. The Delhi High Court took pains to articulate the facts of the case to explain why it was deviating from the normal rule that the parties to an arbitral dispute would be free to commence arbitration afresh. A clear judicial finding was allowed to become absolute without exercise of the statutory right to appeal. It is in this context that the claims were held to be stale and dead. This is totally different from the facts at hand. In the instant case, the Supreme Court has clearly held that it was not opining on the merits. This meant that the Supreme Court was not endorsing the findings in the Section 37 Judgement, if that were to be regarded as a ruling on merits. In fact, by explicit reference to the jurisdiction under Section 37 read with Section 34 of the Act, the Supreme Court made it clear that it was endorsing the view that the Arbitral Award was untenable. The attempt to defend the Arbitral Award with a chart was also unsuccessful. Unfortunately for HPCL, the position in law that would follow is that the parties were restored to their pre-Arbitral Award positions for the proceedings to start afresh. No exceptional circumstances such as the one found in Jaiprakash Associates can be discerned for a similar view to be taken by me in these proceedings.

18) In the aforesaid case, the High Court of Bombay was

faced with a situation where the award of the Arbitrator was

upheld by the Court while exercising its power under

Section 34 of the Act of 1996 but the Division Bench, while

exercising its power under Section 37 of the Act of 1996,

came to the conclusion that the arbitral award deserved to

be set aside. The judgment of the Division Bench was

challenged before the Supreme Court and the same was

upheld. The learned Single Judge of Bombay High Court, while

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examining the validity of second petition for reference of

disputes to the arbitration, analysed the judgment of the

Supreme Court whereby setting aside of the arbitral award

was upheld by the said Court and concluded that the

Supreme Court did not express opinion on the merits of the

claims of the parties, as such, a second reference was

maintainable. The conclusion arrived at by the learned

Single Judge of Bombay High Court is reproduced as under:

9. In view of the foregoing, I do not think it necessary to burden this judgement with any further prolixity with more analysis of every other judgement cited by either side on the doctrine of merger. In my opinion, the SC Judgement is clearly an opinion that the Arbitral Award ought to have been held as not being sustainable in exercise of the jurisdiction under Section 37 of the Act read with Section 34 of the Act. The Supreme Court explicitly ruled that it was not commenting on the merits. Taking such explicit findings into account and that too in the context of the specific nature of the jurisdiction that Section 34 and Section 37 of the Act entails, I am of the opinion that no case has been made out to deviate from the norm that the parties are restored to the original pre-Arbitral Award position. Therefore, necessarily, this Section 11 Application deserves to be allowed.

19) From the foregoing analysis of the legal position, it

becomes clear that the question whether a second reference

is maintainable after the arbitral award made pursuant to

the first reference has been set aside, has to be decided

having regard to the peculiar facts and circumstances of

each case. If it is found by the Referral Court while

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considering the application for second reference that the

disputes between the parties have been finally resolved in

terms of the arbitral award passed pursuant to first

reference or in terms of the judgment of the Court under

Section 34/37 of the Act of 1996, it would be a case of dead

claim and an application for second reference would not be

maintainable. On the contrary, if the underlying disputes

between the parties have remained unresolved and after

setting aside of the award under Section 34 or 37 of the Act

of 1996 and claims/counter claims of the rival parties have

not been considered on their merits thereby leaving the

underlying disputes unresolved, a second reference is

certainly maintainable. In fact, the Supreme Court has, in

the case of Mcdermott International Inc. vs Burn

Standard Co. Ltd. & Ors. (2006) 11 SCC 181 held as

under:

The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.

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20) In the light of foregoing legal position, let us now

consider the facts of the present case. There is no dispute

to the fact that the learned Arbitral Tribunal pursuant to

the first reference has considered the claims and counter

claims of the parties on their merits. While doing so, the

learned Arbitral Tribunal has found that all the claims of

the petitioner excepting claim No.7 are without any

substance and, accordingly, the same were rejected.

Similarly, all the claims of the respondents were found to

be without any substance and the same were rejected. The

learned Designated Commercial Court, Srinagar, while

considering the applications filed by both the parties under

Section 34 of the Act of 1996, set aside the award. The

relevant extracts of order dated 24.04.2025 passed by the

learned Designated Commercial Court are reproduced as

under:

"As mentioned above, by virtue of both the petitions, the petitioners in the respective petitions, have sought relief u/section 34 of the Arbitration and Conciliation Act for setting aside the arbitral award dated 21-1- 2022 passed by learned Arbitrator Mr. Abdul Rashid malik on various grounds and one of the ground taken by both the petitioners is that arbitrator has passed the award without appreciating the relevant provisions of agreement and has been made in contrary to the terms of the contract. Besides this, as per the parties the award is in violation of statutory provision and principles of natural justice and that same has been passed without application of mind in conflict with public policy. Therefore, this being so, both Arb. P No.27/2025 Page 15 of 19 2025:JKLHC-SGR:389

the petitions are allowed and the award passed by the sole arbitrator on 21-01-2022 is set aside. Nothing said in this order shall affect the further proceedings, if any carried before the arbitrator in future."

21) From the afore-quoted order of the learned Designated

Commercial Court, it is clear that the award of the Arbitral

Tribunal has been set aside on the grounds that both the

parties contend that the said award has been passed

without appreciating the relevant provisions of the

agreement, the same has been made contrary to the terms

of the contract, the same is in violation of the statutory

provision, the same has been passed in violation of the

principles of natural justice, the same has been passed

without application of mind and that the award is in conflict

with public policy. The learned Designated Commercial

Court has not considered the findings of the learned

Arbitrator on their merits and instead, it seems that the

award has been set aside on the basis of concession made

by the parties that the same has been passed in the manner

as indicated above.

22) Had it been a case where the learned Designated

Commercial Court would have either appended its seal of

approval to the award of the learned Arbitrator or had it

been a case where the learned Designated Commercial

Court would have come to a conclusion that even the claim

that has been decided by the learned Arbitrator in favour of Arb. P No.27/2025 Page 16 of 19 2025:JKLHC-SGR:389

the petitioner on its merits is not tenable and thereafter set

aside the award, then the situation may have been different.

But it is a case where the learned Designated Commercial

Court has not rendered any finding of its own on the merits

of the award and has set it aside on the basis of the

concession made by the parties with regard to the manner

in which the award has been passed by the Arbitral

Tribunal. In this view of the matter the underlying disputes

between the parties have remained unresolved. That is why

the learned Designated Commercial Court, in its order

dated 24.04.2025, has made it clear that the said order

shall not affect the further proceedings, if any, carried

before the Arbitrator in future leaving it open to the parties

to take recourse to the arbitration afresh. It is pertinent to

mention here that the order passed by the learned

Designated Commercial Court on 24.04.2025 has attained

finality as none of the parties has assailed the said order by

filing appeal under Section 37 of the Act of 1996.

23) In view of the foregoing facts and circumstances of the

case, the contention of the respondents that the claims of

the petitioner have been reduced to deadwood and the same

have been rendered non-arbitrable, cannot be accepted. It

is clear from the analysis of the facts and circumstances of

the case, as has been undertaken hereinbefore, that

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underlying disputes between the parties have remained

unresolved, therefore, the present petition filed by the

petitioner seeking reference of disputes to arbitration in

accordance with Clause 20.6 of the GCC, which has been

quoted in the petition, is required to be allowed and the

disputes are required to be referred to arbitration afresh.

24) Learned counsel for the petitioner has submitted that

in the present case, the issues involved are more technical

than legal in nature, as such, an Arbitrator with

engineering background needs to be appointed.

25) If we have a look at the nature of claims that were

raised by the parties before the learned Arbitrator,

regarding which learned Arbitrator had framed issues, it

appears that the same are more legal in nature. A perusal

of the claims raised by the petitioner, which have been

quoted hereinbefore, clearly indicate that the issues

involved in the case are more factual than technical in

nature which require appreciation of evidence that may be

led by the parties. It would be, therefore, better if a judicially

trained Arbitrator is appointed for determination of the

disputes between the parties.

26) In view of the above, the petition is disposed of by

referring all the disputes and differences covered by the

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agreement to the learned Sole Arbitrator in the following

terms:

(I) Hon'ble Shri Justice M. K. Hanjura, former Judge of this Court is appointed as the Sole Arbitrator to adjudicate upon the disputes and differences between the parties arising out of and in connection with the agreement referred to above.

(II) A copy of this order be communicated to the learned Sole Arbitrator by the Registry of this Court within a period of ten days from today.

(III) The learned Sole Arbitrator is requested to forward the statutory statement of disclosure under Section 11(8) read with Section 12(1) of the Act of 1996 to the parties within a period of two weeks from the date of receipt of this order.

(IV) The parties shall appear before the learned Sole Arbitrator on a date and place to be fixed by the learned Sole Arbitrator.

(V) All the arbitral costs and fee of the Arbitral Tribunal shall be borne by the parties equally and shall be subject to final award that may be passed by the learned Arbitrator in relation to the costs.

(Sanjay Dhar) Judge SRINAGAR 26.12.2025 "Bhat Altaf-Secy"

Whether the Judgement is speaking: YES Whether the Judgement is reportable: YES Arb. P No.27/2025 Page 19 of 19