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2004 DIGILAW 51 (JK)

Satya Paul Sharma v. State Of J. &K.

2004-03-11

PERMOD KOHLI, S.N.JHA

body2004
Per Honble S.N. Jha, CJ.(Oral) This Civil First Miscellaneous Appeal is directed against an order by which application filed by the appellant for reference of dispute to Arbitrator in terms of section 20 of the Arbitration Act was rejected. Learned Single Judge observed that there was no existing dispute which could be referred for arbitration. 2. Facts of the case are that a chunk of land in Tehsil Kathua was settled with the appellant. The agreement executed on 13.4.1987 permitted the appellant to extract minor minerals namely Sand, Bajri, Stones, clay etc for a period of one year from 15.4.1987. The above settlement was made on payment of a sum of Rs.1,05,500/- as consideration in the shape of royalty- payable in four equal instalments of Rs 26,375/-. The appellant paid the first instalment, but failed to pay the rest. From the order of learned Single Judge,it appears that besides, payment of Rs. 26,375/- as the first instalment at the time of agreement he in all paid Rs. 29,622/- on 8.10.1988, 13.3.89, 9.12.1992 and 26.2.1993. Recovery proceeding in respect of the balance amount was initiated against him under the Jammu and Kashmir Land Revenue Act, 1996 (1939 AD). The appellant came to this Court challenging the recovery proceeding in Writ Petition OWP No. 996/1998. A learned Single Judge of this Court vide order dated 18.5.2000 took the view that there was provision for arbitration in the agreement and the appellate court could invoke arbitration clause. The learned Single Judge thus, disposed of the petition giving liberty to the appellant to exhaust remedy provided under the agreement, but in the meanwhile stayed the recovery proceeding. 3. It is well settled that where court declines to entertain a suit or writ petition and relegates the party to the alternative remedy, any interim order like injunction or stay should not be passed, and therefore, we have reservation about the correctness of the order staying the recovery proceeding. However, it is futile to go into that question, for, the order was not challenged by the other side. The appellant filed Arbitration Application No. 41/2000 for reference of dispute to the Arbitrator under the Arbitration Act which was rejected by order dated 20.12.2001, giving rise to this appeal. 4. Mr. However, it is futile to go into that question, for, the order was not challenged by the other side. The appellant filed Arbitration Application No. 41/2000 for reference of dispute to the Arbitrator under the Arbitration Act which was rejected by order dated 20.12.2001, giving rise to this appeal. 4. Mr. M.K. Bhardwaj, learned counsel appearing for the appellant submitted that the learned Single Judge committed error in rejecting arbitration application on the ground that there was no dispute in existence which could be referred for arbitration. He submitted that in all cases of non-payment of dues, a dispute exists. The dispute in the instant case should have been referred to the Arbitrator for resolution in terms of the agreement. Counsel pointed out that the arbitration application was filed in view of the observation in OWP No. 996/1998 and there could be no justification at all to reject the application. Counsel submitted that there is thus apparent conflict between two orders. 5. Broadly speaking, it is true, where the parties to the agreement agree to get the dispute resolved through arbitration, the dispute should be referred to the Arbitrator. It also sounds logical that where a party disputes his liability or the quantum of dues, a dispute may be said to be existing. In the instant case it appears to us that what the learned Single Judge meant by observing that there is no dispute which could be referred to arbitration, was that the liability to pay the instalments arises from the agreement which the appellant cannot deny. Be that as it may, the recovery proceeding is pending before the concerned authority and we do not want to go into that aspect. We are satisfied, though for different reason, that no case for reference to arbitration is made out and the appeal, therefore, must be dismissed. 6. In order that dispute is referred to the Arbitrator, in the instant case, it goes without saying the same must fall within the scope of arbitration clause. It would be appropriate to quote the arbitration clause contained in para-27 of the agreement as under:- "27. 6. In order that dispute is referred to the Arbitrator, in the instant case, it goes without saying the same must fall within the scope of arbitration clause. It would be appropriate to quote the arbitration clause contained in para-27 of the agreement as under:- "27. Any dispute, differences or question which may at any time arise between the parties hereto or any person claiming under them the touching or arising out of or in respect of contract or matter thereof shall be referred to the arbitration of the Minister-in-charge, Geology and Mining Department, Jammu and Kashmir Government, whose decision shall be conclusive, final and binding on both the parties." (emphasis added) 7. From a bare reading of the above clause, it would be manifest that only such dispute can be referred to arbitration which touches upon or arises out of the contract. The question for consideration is whether the dispute arising from the non-payment of instalments is a dispute touching upon or arising out of or in respect of the contract. It is admitted position that cause of action for the appellant to approach this Court was initiation of recovery proceeding under the Land Revenue Act. Admittedly, the proceeding has been initiated with respect to the amount due under the agreement. As stated above, the appellant was required to deposit three more instalments of Rs. 26,375/- each, but he committed defaults in making deposit(s). He deposited Rs.29,622/- only and that too beyond stipulated dates. From the agreement it is clear that payment was by way of royalty. Though royalty was/is payable in terms of the agreement, as submitted on behalf of appellant, the liability arises not from the agreement, but from the statute relating to mines and minerals. We drew attention of the learned counsel to the provisions of Mines and Minerals (Regulation and Development) Act, 1957 and Jammu and Kashmir Minor Mineral Concession Rules, 1962. Shri Bhardwaj submitted that the Act does not provide for payment of royalty with respect to minor mineral. He referred to section 14 of the Act which makes the provisions of section 9 dealing with royalty not applicable to minor minerals. Submission of counsel over-looks the provisions of section 15 of the Act, clause(g) whereof empowers the State Government, to frame rules relating to fixing and collection of rent, royalty, fees, dead rent etc. He referred to section 14 of the Act which makes the provisions of section 9 dealing with royalty not applicable to minor minerals. Submission of counsel over-looks the provisions of section 15 of the Act, clause(g) whereof empowers the State Government, to frame rules relating to fixing and collection of rent, royalty, fees, dead rent etc. in respect of minor minerals, the manner in which they shall be payable. The Jammu and Kashmir Minor Mineral Concession Rules, 1962 has been framed under SRO 58 dated 10.4.1962 in exercise of power conferred by section 51(1) of the said Act. Chapter-IV of the said Rules deals with mining leases. Under Rule 40, lease is granted for a period of one year at the first instance. Rule-41 lays down the conditions of mining lease. The very first condition is that the lessee shall pay royalty on the minor minerals despatched from the leased area at the rate specified in the Schedule as in force on the date of the grant of the lease. 8. It is thus clear that the liability to pay royalty is a condition of the grant of mining lease. The agreement merely incorporates the said liability. Thus merely because the agreement contains such a clause, it does not mean that the liability arises from the agreement. Any possible dispute relating to non-payment of royalty, therefore, cannot be said to be a dispute touching upon or arising out of the agreement. It thus follows that such a dispute cannot be referred to arbitration, in terms of arbitration clause contained in para-27 of the agreement. 9. Shri Bhardwaj then submitted that the appellant had deposited Rs. 26,375/- as security, credit of which has not been allowed while determining the liability. He submitted that a direction may be issued to work out the appellants liability taking into account the said deposit. 10. The submission at the first glance appeared to be attractive but it transpires that the appellant had merely pledged CDR No. A-072020 dated 15.4.1987 of the Jammu and Kashmir Bank, Branch Kathua as security. Had he deposited cash security and the money being lying with the respondents, the Court could direct them to adjust the amount, alongwith interest accrued thereon, and calculate his liability. As the Supreme Court has observed more than once, the government cannot run on bank guarantees or the like. Had he deposited cash security and the money being lying with the respondents, the Court could direct them to adjust the amount, alongwith interest accrued thereon, and calculate his liability. As the Supreme Court has observed more than once, the government cannot run on bank guarantees or the like. If money had been lying with the respondents, there could be justification for its adjustment on the principle of unjust enrichment, but as the money never came into the hands of the respondents, that principle will clearly not be applicable. In the circumstances, no direction can be issued for any adjustment of the amount. 11. It is admitted position that recovery proceeding is pending in respect of the dues under the Land Revenue Act, clause 28 of the agreement lays down that all sums dues from the lessee under the agreement shall be recovered as arrears of land revenue. It was open to the appellant to take such plea as available to him at the stage of filing objections in terms of section 72 of the Land Revenue Act but instead of doing that he indulged in futile litigation allowing the quantum of dues to swell in the meantime for which he has to thank himself. 12. Be that as it may, having said thus far, we would refrain from making any further observation, we would rather clarify that the observations made hereinabove, were meant for disposal of this appeal alone and should not therefore, be construed as our opinion on merit of the case. 13. Adverting to the appeal, we find no infirmity in the order of learned Single Judge. The appeal is accordingly dismissed. There will be no order as to costs.