1. This order will dispose of two matters:—

(1) the main application of the petitioner under Section 20 of the Arbitration Act for filing the arbitration agreement and referring the matter to the arbitration of the Chief Conservator of Forests, the arbitrator designate in the agreement, and (2) for issue of temporary injunction restraining the Forest Department from reauctioning the lease which was sanctioned in favour of the petitioner.

2. The petition as well as the rejoinder to the petition is a very lengthy one, I shall briefly summarise the relevant portions of the petition and the rejoinder. The petition avers that Compartment No. 12.D.P.P.F Division was leased out to him for the years 1961-1963 for a tendered offer of Rs. 4,02,211.69 for a marked volume of 5,03,454 Cft: of timber, mostly of fir species; that the petitioner extracted only a small quantity of timber as the area gets snow-bound much earlier than the setting in of winter; that the Forest Department is at an altitude of 10,000 ft.; and timber can be removed therefrom by floating it through the Dudh Ganga Nalia, which is floatable only for two months in a year; that in spite of the best efforts of the petitioner, he could extract only a small portion of the timber; that in 1962 floods in the stream and 1964 and 1965 disturbances and Indo-Pak conflict respectively resulted in not enabling the petitioner to extract the requisite quantity of timber; that the petitioner was granted extension upto November 1968 ultimately but the letter of extension dated 26-9-1967 was delivered to him late, thus not making it possible for him to take due benefit of the extension granted; that supplementary markings were made to the tune of 82,000 Cft.; but this volume was never handed over to the petitioner; that under similar circumstances other contractors had been granted extensions but it was not done in the case of the petitioner; that the responsibility of not allowing the petitioner to work out the lease properly was upon the Forest Department; that the Conservator had by his letter No. 3872-3874 C/vii dated 20-2-1970 cancelled his lease and ordered a writ of demand to be issued against the petitioner; that this cancellation was not in accordance with law and no show cause notice for this order had been given to the petitioner; that the Conservator of Forests had no right to cancel the lease nor are there any reasons to support this order; that the extensions granted to the petitioner have always been communicated to him very late, leaving no period for working out the lease; that there were recommendations for the extension of the lease by the D.F.O and the Range officer concerned; that there are claims and counter claims; that Cl. 44 of the agreement makes all disputes between the parties referable to arbitration; that the matter be referred to the arbitration of the Chief Conservator of Forests, who is the Arbitrator nominated in the agreement.

3. In reply to this long petition, the respondent's learned counsel Mr. Anil Dev Singh in his objections to the petition has stated that the petitioner has not shown any sufficient cause for filing of the agreement and referring the matter to arbitration; that no dispute in terms of Cl. 44 of the agreement is made out; that the petitioner took the contract knowing fully well the conditions prevailing in the Forest; that the allegations about the early snow-falls are totally unconnected with the facts whether the dispute has to be referred to the arbitration or not; that the petitioner had not been working satisfactorily from the very beginning of the lease and in order to help the petitioner, a loan of Rs. 50,000/- was secured on the responsibility of the department for him; that no timber of the petitioner was washed away during flood; that the department has been very generous to the petitioner in extending the period of execution by four years; that the extensions were given to the petitioner from November 1964 to November 1968; the allegations of the petitioner that extension letters or orders were communicated to the petitioner rather late are denied by the respondents and it is stated that extension of time of a lease is not a matter of right. It is stated that the supplementary marking was conducted and handed over to the petitioner in time; that the petitioner has been given four extensions already and no more indulgence can be shown to him. Many other paragraphs of the petition are denied. The allegations of claims and counter-claims are denied. There are no disputes between the parties for which the arbitration clause could be invoked. The allegations of differences are all mala fide and are made only to evade the payment of royalty due from the petitioner to the department. Ordinarily all this detail summary of the pleadings was not necessary but because it has been strongly argued by the learned counsel for the respondent that there is no dispute which can be referred to arbitration. I thought it necessary to give the version of the two parties in rather detail. The learned counsel for the respondents has argued at length that there is no dispute, as contemplated by the Arbitration Act, which can be referred to arbitration. He has cited some authorities also in support of his contention. These authorities are 1915 AC 499 & AIR 1962 SC 406 & AIR 1937 Oudh 436. In order to understand and appreciate the arguments of the learned counsel for the parties I must quote Cl. 44 of the agreement between the parties. This clause runs as under:—

“Every dispute which may at any time arise between the parties hereto in respect of this agreement or the subject-matter thereof shall be referred to the Chief Conservator of Forests unless he is a party to the agreement in which case the dispute shall be referred to the Government, whose decision thereon’ shall be final and binding on both the parties.”

4. Under this clause if there was any dispute at any time between the parties, not only in respect of this agreement but also about the subject-matter of the same, the dispute had to be referred to the arbitration of the Chief Conservator of Forests or the Government as the case may be. This clause is so general that any difference between the parties on any matter connected with this contract, the terms whereof had been incorporated in the lease agreement, had to be referred to arbitration.

5. As such arguments are often made on behalf of the Government in such matters, I would like to state something of the legal position in this behalf. Section 2(a) of the Arbitration Act defines an “arbitration agreement” as a “written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not.” The words of this sub-clause of this section are very wide and can embrace within their fold all matters and it is only a negligible percentage of matters, which can fall outside this definition. The words which are very significant are “present or future differences.” The section does not use the word “dispute.” “Difference” is a much wider term than “dispute.” I may have differences with ‘B’ on any point but at the same time I may not have dispute over that matter with him. “Differences” indicates the working of the mind of a particular party with respect to a certain matter. “Dispute” is a more positive term; when such differences assume a more definite and concrete form, they become dispute.

6. Before discussing authorities let me take the facts of this case. There is hardly any matter on which there is not a contest between the parties. The petition contains 22 paragraphs, most of the allegations contained in these paragraphs, are denied by the respondents, as I have indicated above. So clearly there is not only difference between the parties on only a few points but there are claims and counter-claims, allegations and refutations by the parties. Some of the matters alleged in the petition are very important and their adjudication one way or the other is very material for the parties. I may mention only some of them to show that this is not only a fit case which should be referred to arbitration but to elucidate that very few of such cases are so strong as the present one. For instance the allegation of flood in 1962; that of disturbances in 1964 and Indo-Pak conflict of 1965 have according to the petitioner, affected the working of the lease properly by him; the use of converted sawn timber as fire-wood by the Army people, the late communication of orders of extension; the cancellation of the lease; the claims and counter claims are matters which are very material and which should be decided by somebody in order to hold how much, if any amount is due from the petitioner to the Forest Department and so on. The argument that there is no dispute which should be referred to arbitration appears to me to be meaningless, devoid of any force and has to be rejected. Having expressed my view in these terms, I would like to discuss some authorities also. First let me take the authorities cited by the learned counsel for the Respondents.

7. In 1915 AC 499 the ratio decidendi is that if the repudiation of a claim is on the ground which goes to the very root of the contract, arbitration clause cannot be invoked. In that case in a contract of insurance, the insurance company repudiated the claim on the ground of fraud and arson; when such is the case it is correct no reference to arbitration can be made.

8. AIR 1962 SC 406 also is to the same effect and says that:—

“Where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open court, that would be a sufficient cause for the Court not to order an arbitration agreement to be filed and not to make the reference. But it is not every allegation imputing some kind of dishonesty, particularly in matters of accounts, which would be enough to dispose a Court to take the matter out of the forum which the parties themselves have chosen. Merely because some allegations have been made that accounts are not correct or that certain items are exaggerated and so on that is not enough to induce the Court to refuse to make a reference to arbitration. It is only in cases of allegations of fraud of a serious nature that the court will refuse to order an arbitration agreement to be filed and will not make a reference.”

9. In that case however, the trial court had dismissed the application under Section 20 of the Arbitration Act and the High Court had allowed it and referred the matter to arbitration. On appeal the Supreme Court upheld the order of High Court and dismissed the appeal.

10. AIR 1937 Oudh 436 is not at all applicable to this case because that authority says that:—

“Where the arbitrators though not partial to one party, cannot yet command the confidence of the other (Opposite) party, it is wholly inequitable to compel that other party to submit themselves to their arbitration.”

11. Therefore none of the authorities cited by Mr. Anil Dev Singh covers the facts of this case and helps him.

12. Halsbury in the Laws of England, Vol. 2, (edition 1953) third edition page 6 says that:—

“The dispute or difference which the parties to an arbitration agreement agree to reifer must be of a justiciable issue triable civil. A fair test of this is whether the difference can be compromised lawfully by way of accord and satisfaction. Thus an indictment for an offence of a public nature cannot be the subject of an arbitration agreement, nor can disputes arising out of an illegal contract, nor disputes arising under agreements void under the Gaming Act, 1945. Equally, dispute leading to a change of status as a petition for divorce, cannot be referred nor it seems, can any agreement purporting to give an arbitrator the right to give a judgment in rem. Similarly there is no dispute within the meaning of an agreement to refer disputes where there is no controversy in being, as when a party admits liability and simply fails to pay or when a cause of action has disappeared owing to the application, where it now continues to apply, of the maxim actio personalis moritur cum persona.”

13. In Heyman v. Darwins, 1942 AC 356 it is held that:—

“………… if the parties are agreed that a binding contract was made, and it is necessary to have recourse to the contract to settle the dispute that has arisen, then it is a dispute arising out of the contract …………”

14. Russel in his book on Arbitration (15th Edn. 39) remarks that:—

“……… “all disputes” or “all claims” by itself is wider than “all disputes arising out of the contract”.”

15. AIR 1954 Cal 245 has referred to a number of English and Indian cases and then held that:—

“There is no doubt that the existence of disputes or differences contemplated by the arbitration clause is an essential condition of and prerequisite to the exercise of the jurisdiction by the Arbitrator.”

A dispute implies an assertion of a right by one party and a repudiation thereof by another………… The repudiation by the other party may be either express or implied and may be by words or by conduct.

Failure to perform the contract and to pay the amount claimed may take place under such circumstances as may justly lead to the inference of repudiation and denial of the right of the other party. Such conduct and stoic silence may be more eloquent than words and may show that the party is disputing his liability. Coupled with other circumstances a failure to pay a claim may constitute a difference between the parties.

Failure to pay under a claim of right is certainly a dispute ………… The claim of right need not necessarily be express. It may and should justly be inferred against the defendant from his sphinx-like silence in an appropriate case. It is not the law that person who desires to evade arbitration may not write letters in answer to a claim explaining justifying his conduct and then turn round and say there is no dispute.”

16. Lord Sumner in Chandanmull v. Donald, 23 Cal WN 707 (FN) (PC) (J) observed thus:—

“………… It is true also that it takes two to make a quarrel. But a dispute may perfectly well arise when only one disputant is articulate and the other stands mute when called upon to plead. What is required is that one party should affirm and the other deny and conduct will do this as well as words. The respondents said in effect “you owe the money and have no excuse for not paying it.” The appellants to my mind in effect retorted nonetheless eloquently though he held his tongue “I owe you nothing I have a defence under the contract.”

17. In AIR 1957 Punj 152 it is held that:—

“It did not make any difference whether the Company said that no damage or loss at all had been caused or whether it is said that some damage had been caused but not as much as was claimed by the insured. In either case it was quite obvious that there was a dispute between them as to the amount of loss or damage and therefore the present dispute between the parties fell within the scope of the arbitration clause in the policy.”

18. AIR 1951 SC 9 is a clear authority on the point. Their Lordships have laid down the test for determining whether there is a dispute arising out of a contract. Hon'ble Fazl Ali and Hon'ble Patanjali Shastri Judges of the Supreme Court have given the criterion with which Hon'ble Mahajan Judge agrees. Their Lordships have said that:

“Whether a party has to have recourse to the contract to establish his case, it is a dispute under the contract.”

19. Reliance has been placed on 1942 AC 356 and on the facts of that case they have stated that where the arbitration clause in a contract provided for reference to arbitration of ‘all matters, questions, disputes, differences and/or claims arising out of and/or concerning’ …………… or relating to this contract’ and the question was whether a party to the contract was acting merely as a broker or was the principal bound by the contract, it was held:—

“as the question turned upon the true interpretation of the contract and the parties had to take recourse to the contract to establish the claim, it was a dispute under or arising out of the contract and thus within the jurisdiction of the arbitrators.”

20. Their Lordships have further held that:

“Once the dispute is found to be within the scope of the arbitration clause, it is no part of the province of the Court to enter into the merits of the dispute.”

21. Therefore clearly in my opinion there are what in the words of Section 2(a) of the Arbitration Act differences between the parties in this case about certain terms of the contract and I should say there is a great dispute between them about many matters contained in the arbitration agreement, therefore, as I said earlier, this is not only a fit case but a fittest (most fit?) case which should be referred to arbitration.

22. I, therefore, direct that the arbitration agreement be filed and the whole case be sent to the Chief Conservator of Forests for arbitration under law.

23. About the second point that is, the prayer for an injunction that the Forest Department should not re-auction the lease, I think the stand taken by the petitioner in that behalf is as untenable as taken by the respondent's learned counsel in the main petition for reference to arbitration.

24. Extension of lease period is not a matter of right which can be enforced by a party. It is at the most a concession which the Forest Department considering all the facts may extend to a lessor. In this case the petitioner has been granted four extensions already and still according to the Forest Department he has not been able to perform his contract. I am not competent to issue such an injunction. That prayer is refused but if the Forest Department thinks that an injunction. That prayer is refused but so without any direction from the Court. As stated above the application of the petitioner for stay is therefore rejected.

25. Order accordingly.