Disputes concerning interpretation, enforcement, and recall of a consent settlement were referred to arbitration.

The parties, mostly members of the Karnai family, jointly owned and operated various properties, including Hotel Grand Centre Point, Rajbagh, Srinagar.

During a pending partition and related suit, the parties executed a Settlement Deed dated 23.12.2021, which was subsequently incorporated into a consent judgment and decree dated 20.04.2022 passed by the Additional District Judge, Srinagar.

Clause XIX of the Settlement Deed contained a broad arbitration agreement covering disputes concerning its interpretation, operation and enforcement.

Mohammad Rafeeq Karnai and Manzoor Ahmad Karnai initiated execution proceedings seeking enforcement of the consent decree and production of hotel accounts.

In those proceedings, the Additional District Judge appointed a Receiver to supervise the hotel’s affairs, examine financial transactions, investigate alleged diversion of funds, and regulate withdrawals and management of the hotel by order dated 26.08.2024.

Mohammad Rafeeq Karnai also filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator under Clause XIX of the Settlement Deed.

Related proceedings under Section 9 of the Arbitration and Conciliation Act, a suit for rendition of accounts, and an application under Order XXIII Rule 3 CPC seeking recall of the compromise decree were also pending.

Separately, Regenta Hotels Private Limited had commenced proceedings concerning the franchise arrangement relating to Hotel Grand Centre Point.

Whether disputes concerning the interpretation, operation and enforcement of the Settlement Deed dated 23.12.2021, including disputes arising from the consent decree and the claim for its recall, were referable to arbitration under Clause XIX of the Settlement Deed?

Whether the Receiver appointed by the Additional District Judge in the execution proceedings ought to continue, or whether interim-management issues should be left to the arbitral tribunal under Section 17 of the Arbitration and Conciliation Act, 1996?

Whether the pending Section 9 proceedings, execution proceedings, suit for rendition of accounts, and application under Order XXIII Rule 3 CPC should continue during the arbitration?

Whether the proposed arbitration should be structured so as not to overlap with the separate arbitration concerning Regenta Hotels Private Limited and the franchise agreement?

The Court applied Section 11(6) of the Arbitration and Conciliation Act, 1996, which empowers the competent court to appoint an arbitrator where the parties fail to agree on the appointment mechanism.

Sections 11(8) and 12(1), concerning disclosure by the proposed arbitrator; and Section 17, which permits an arbitral tribunal to grant interim measures during the arbitration.

The Court treated Clause XIX of the Settlement Deed as a comprehensive arbitration agreement covering disputes regarding the interpretation, operation and enforcement of the settlement.

Section 9 proceedings were considered unnecessary once the arbitral tribunal was constituted and empowered to grant interim relief under Section 17.

The Court also exercised supervisory jurisdiction under Article 227 of the Constitution while setting aside the Receiver’s order and issuing directions concerning the related proceedings.

The Court found that the disputes concerning the management of Hotel Grand Centre Point, rendition of accounts, alleged diversion of profits, and the parties’ obligations under the Settlement Deed fell squarely within the broad language of Clause XIX.

Since the parties themselves agreed to refer all connected family disputes—including Hilal Ahmad Karnai’s application seeking recall of the compromise decree—to arbitration, the Court appointed a sole arbitrator by consent.

The Court considered it inappropriate for the civil court-appointed Receiver to continue exercising extensive supervisory powers when the arbitral tribunal could address interim-management issues under Section 17.

Accordingly, the Receiver’s order was set aside and the parties were directed to approach the arbitrator for interim measures.

At the same time, the Court recognised that Regenta Hotels Private Limited was involved in a separate arbitration concerning the franchise agreement.

It therefore directed the arbitrator not to adjudicate matters already pending before the Karnataka-appointed tribunal and required notice to Regenta before any interim order affecting its franchise rights was passed.

To prevent parallel or conflicting adjudication, the Section 9 petition was dismissed, while the execution proceedings, the Order XXIII Rule 3 CPC application, and the suit for rendition of accounts were stayed until conclusion of the arbitration or further orders.

Hon’ble Mr. Justice Rashid Ali Dar, former Judge of the High Court, was appointed as the Sole Arbitrator.

The arbitrator was authorised to consider interim measures under Section 17, subject to notice to Regenta Hotels Private Limited and without deciding matters pending before the separate Karnataka arbitral tribunal.

The Receiver’s appointment order dated 26.08.2024 was set aside; the pending Section 9 petition was dismissed; and the execution proceedings, the application seeking recall of the compromise decree, and the suit for rendition of accounts were stayed until the arbitration concluded or further orders were passed.

The connected petitions were disposed of accordingly.