Jammu & Kashmir High Court
Eduspark International Pvt. Ltd vs Union Of India And Others on 30 April, 2026
Author: Moksha Khajuria Kazmi
Bench: Moksha Khajuria Kazmi
Sr. No.
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT JAMMU
WP (C) No. 3731/2025
Eduspark International Pvt. Ltd. ..... Petitioner(s)
Through :- Mr. Rahul Pant, Sr. Advocate with
Mr. Rahul Sharma, Advocate &
Mr. Sunil Tilokchandani, Advocate
v/s
Union of India and others .....Respondent(s)
Through :- Mr. Raman Sharma, AAG for R-2 and 3
CORAM: HON'BLE MS. JUSTICE MOKSHA KHAJURIA KAZMI, JUDGE
ORDER
30.04.2026
1. The petitioner herein is a company registered and incorporated under The
Companies Act 1956. The respondent No.1 is having superintendence and
control over Deen Dayal Upadhyay Gramin Kaushalya Yojana(DDU-
GKY). Respondent No.3 is the Chief Operating Officer of Himayat
Mission Management Unit, Jammu and Kashmir State Rural livelihood
mission under the administrative control of Department of Rural
Development and Panchayati Raj, Government of Jammu and Kashmir.
2. This petition has been preferred by the petitioner by invoking the
extraordinary writ jurisdiction of the Court vested under Article 226 of the
Constitution of India, challenging the action of respondent No.3 in issuing
impugned notice of imposition of penalty dated 10 th November, 2025
against the petitioner, to pay a penalty of 2% of the amount released in
favour of the petitioner, amounting to Rs.5,65,048/-. The petitioner has also
challenged the recovery notice issued by respondent No.3 dated 10 th
November 2025, under which respondent No.3 has to recover the entire
WP(C) No.3731/2025 2
amount of Rs.2,82,52,397/-released in favour of the petitioner along with
interest @10% per annum.
3. The petitioner through the medium of instant petition has sought for the
following reliefs-:
―i) issue a writ of certiorari and/or any other writ in the nature of certiorari
thereby quashing and setting aside the Impunged Penalty Notice dated
10th November, 2025 bearing Reference
No.COO/JKSRLN/HMMU/25/2019/2868-2879 issued by respondent
No.3 (Annexure-I to the Petition).
ii) issue a writ of certiorari and/or any other writ, order or direction in the
nature of certiorari thereby quashing and setting aside the Impugned
Recovery Notice dated 10th November, 2025 bearing Reference
No./COO/JKSRLM /HMMU/25/2019/2879-2889 issued by respondent
No.3 (Annexure-I to the petition);
iii) issue Writ of Mandamus and/or any other writ, order or direction in the
nature of Writ of Mandamus thereby directing respondent No.3 to
forthwith withdraw and/or cancel the impugned Penalty Notice dated
10th November, 20225 bearing Reference No.COO/JKSRLN/HMMU/
25/2019/2868-78 issued by respondent No.3.
iv) issue Writ of Mandamus and/or any other writ, order or direction in the
nature of Writ of Mandamus thereby directing respondent No.3 to
forthwith withdraw and/or cancel the Impunged Recovery Notice dated
10th November, 2025 bearing Reference No. No.COO/JKSRLM
/HMMU/25/2019/2879-2889 issued by respondent NO.3 being
Annexure-I to the petition.
v) to declare that the petition has not committed any acts of default that
would render the petitioner liable to any major or minor penalty;
vi) Any other just and equitable order that this Hon’ble Court deems fit be
granted.‖
4. On 29-12-2025, an objection with regard to the maintainability of the
instant petition has been raised by the Court, on account of the fact that
WP(C) No.3731/2025 3
the Memorandum of Understanding duly signed by the petitioner
company and the respondents contains an arbitration clause, which for
facility of reference is reproduced hereunder-:
―9. Arbitration and Applicable Laws:
9.1. The parties hereby agree that any controversy, claim or dispute
arising in connection with this MoU, and which cannot be resolved
amicably, shall be referred to the Chief Secretary (Chairman of the
Executive Council of Jammu and Kashmir State Rural Livelihoods
Mission in the State), whose decision shall be final and binding on all
parties.
9.2. All disputes shall be resolved as per the Government of India policies
and applicable Indian/State Laws.
9.3. If case is filed for judicial remedy, where the Ministry of Rural
Development is the First Party, the case shall be filed in New Delhi.
In case for judicial remedy, where the First Party is Himayat Mission
Management Unit, Jammu and Kashmir State Rural Livelihoods
Mission, the case shall be filed in the respective court in the State
Headquarters.‖
5. Learned counsels for the parties were directed to file affidavits, which
stand filed by the counsels.
6. Mr. Pant, learned senior counsel appearing for the petitioner- Company,
states that Clause 9 of the MOU does not amount to an arbitration
agreement within the meaning of Section 2(b) and Section 7 of the
Arbitration and Conciliation Act, 1996. He has relied upon Alchemist
Hospitals Ltd. v. ICT Health Technology Services India (P) Ltd., 2025
SCC Online SC 2354 to strengthen his argument that the Clause 9 of
memorandum of understanding is not decisive of the parties, it only
contemplates the possibility of going for Arbitration, possibility of the
parties agreeing to Arbitration. Moreover, the Chief Secretary (chairman
WP(C) No.3731/2025 4
of the executive Council of Jammu and Kashmir, State Rural Livelihood
Missions in the UT) being an instrument of the state and an interested
party, cannot be considered as a private terminal, as such cannot
adjudicate upon the dispute in an impartial manner; Clause 9 neither
specifies the procedure for adjudicating the disputes, nor does it specify
the seat of arbitration under the rules; Clause 9.3 of MOU expressly
provides an option to the parties to pursue judicial remedies before the
court of law. Learned senior counsel appearing for the petitioner has
placed reliance on the following judgments:
1. Raichurmatham Prabhakar v. Rawatmal Dugar, (2004) 4
SCC 766;
2. Jagdish Chander v. Ramesh Chander and others, (2007) 5
SCR 720; and
3. Perkinds Eastman Architects DPC and another v. HSCC
(India) Ltd.
7. Mr. Pant would also argue that in terms of section 12 (5) of Arbitration
and Conciliation Act 1996, Chief Secretary, who is also the Chairman of
the State Rural Livelihood Mission, is ineligible to be appointed as an
arbitrator regardless of any prior agreement entered into between the
parties. For facility of reference, Section 12(5) of the Arbitration and
Conciliation Act, 1996 and 7th Schedule of the Act is reproduced
hereunder:
“12. Grounds for challenge—
……………….
……………………..
(5) Notwithstanding any prior agreement to the contrary, any
person whose relationship, with the parties or counsel or the
subject-matter of the dispute, falls under any of the categories
WP(C) No.3731/2025 5specified in the Seventh Schedule shall be ineligible to be
appointed as an arbitrator.‖
THE SEVENTH SCHEDULE[See section 12(5)] Arbitrator’s relationship with the parties or counsel
1. The arbitrator is an employee, consultant, advisor or has any other
past or present business relationship with a party.
2. The arbitrator currently represents or advises one of the parties or an
affiliate of one of the parties.
3. The arbitrator currently represents the lawyer or law firm acting as
counsel for one of the parties.
4. The arbitrator is a lawyer in the same law firm which is
representing one of the parties.
5. The arbitrator is a manager, director or part of the management, or
has a similar controlling influence, in an affiliate of one of the parties if
the affiliate is directly involved in the matters in dispute in the
arbitration.
6. The arbitrator’s law firm had a previous but terminated involvement
in the case without the arbitrator being involved himself or herself.
7. The arbitrator’s law firm currently has a significant commercial
relationship with one of the parties or an affiliate of one of the parties.
8. The arbitrator regularly advises the appointing party or an affiliate
of the appointing party even though neither the arbitrator nor his or her
firm derives a significant financial income therefrom.
9. The arbitrator has a close family relationship with one of the parties
and in the case of companies with the persons in the management and
controlling the company.
10. A close family member of the arbitrator has a significant financial
interest in one of the parties or an affiliate of one of the parties.
11. The arbitrator is a legal representative of an entity that is a party in
the arbitration.
12. The arbitrator is a manager, director or part of the management, or
has a similar controlling influence in one of the parties.
13. The arbitrator has a significant financial interest in one of the
parties or the outcome of the case.
14. The arbitrator regularly advises the appointing party or an affiliate
of the appointing party, and the arbitrator or his or her firm derives a
significant financial income therefrom. Relationship of the arbitrator to
the dispute
15. The arbitrator has given legal advice or provided an expert opinion
on the dispute to a party or an affiliate of one of the parties. 16. The
arbitrator has previous involvement in the case. Arbitrator’s direct or
indirect interest in the dispute
WP(C) No.3731/2025 6
17. The arbitrator holds shares, either directly or indirectly, in one of
the parties or an affiliate of one of the parties that is privately held.
18. A close family member of the arbitrator has a significant financial
interest in the outcome of the dispute.
19. The arbitrator or a close family member of the arbitrator has a
close relationship with a third party who may be liable to recourse on
the part of the unsuccessful party in the dispute.
Explanation 1.–The term ―close family member‖ refers to a spouse,
sibling, child, parent or life partner.
Explanation 2.–The term ―affiliate‖ encompasses all companies in
one group of companies including the parent company.
Explanation 3.–For the removal of doubts, it is clarified that it may
be the practice in certain specific kinds of arbitration, such as maritime
or commodities arbitration, to draw arbitrators from a small, specialized
pool. If in such fields it is the custom and practice for parties frequently
to appoint the same arbitrator in different cases, this is a relevant fact to
be taken into account while applying the rules set out above.‖
8. In the affidavit filed by learned counsel for the respondent Nos.2 & 3, Mr.
Raman Sharma, it is stated that the MOU read with Sanction order and
applicable DDU-GKY SOPs and Guidelines provide a structured and
comprehensive mechanism for imposition of penalty and for filing of an
appeal against such penalty being imposed. It is stated that the Recovery
Notice dated 10.11.2025 along with SF 10.3E, Notice of Penalty arose
from project closure assessment upon expiry of tenure and non-
achievement of mandatory placement benchmarks as stipulated under
DDU-GKY Guidelines. According to the respondents, the earlier penalty
related to submission of forged documents for financial disbursal, where
recovery pertains to independent assessment of non-performance and
failure to meet sanctioned milestones at closure stage. It has further been
stated that the contractual relationship between the parties is governed by
the Sanction Order and the MOU. While the MOU contains an arbitration
WP(C) No.3731/2025 7
clause for adjudication of disputes, therefore, present writ petition is not
maintainable. It is further stated that Clause 10.03.02 clearly provides for
suo motu imposition of penalty and filing of appeal against such penalty.
For facility of reference, Clause 10.3.2 of the DDU-GKY Guidelines is
reproduced hereunder:-
―10.3.2 Suo Motu Imposition of Penalty
Notwithstanding the process delineated in 10.3.1 above, in exceptional
cases (for example, diversion or funds, fraudulent practices, persistent
defaults, actions that affect the safety of candidates), the competent
authority may decide to impose penalty suo motu on a PIA. In such
cases, penalty will be imposed directly on the PIA without issuance of
any Alert or Notice. However, the PIA will retain the right to appeal
against the penalty, and the appeal process will be followed as
described above.‖
9. Heard learned counsel for the parties and perused the material on record.
10. Learned senior counsel appearing for the petitioner has fairly conceded
that in terms of clause 10.3.2 (supra) there is a provision for filing of an
appeal against the impugned penalty notice dated 10.11.2025, before the
competent authority, as such petitioner-company would not press upon
relief No. (i) and (iii) made in the prayer part of the writ petition, for that
petitioner would avail the remedy available in terms of clause 10.3.2 of
DDU-GKY Guidelines. Ordered accordingly.
11. As far as appeal preferred by the petitioner against the penalty order dated
22.04.2022 by way of an Appeal dated 13.05.2022 is concerned, the same
is presently pending before the Appellate Authority on account of
petitioners continued failure to comply with the mandatory directions
issued during the appellate proceedings. The earlier penalty imposed in
the year 2022 was on account of submission of forged placement
WP(C) No.3731/2025 8
documents for the purpose of financial dispersal, however, the subsequent
action taken in the year 2025, which culminated into issuance of notice of
imposition of penalty and recovery notice dated 10.11.2025, arose out of a
separate and an independent assessment conducted at the time of project
closure, upon expiry of project tenure and evaluation of overall
performance.
12. Learned counsel for the respondent has stated that the MOU dated 30. 08.
2018, read with the sanction order dated.19.07.2018, the applicable DDU
– GKY SOPs and guidelines provide a structured and comprehensive in-
house mechanism under clause 9 of the Arbitration and applicable laws,
as such on account of alternate efficacious remedy available to the
petitioner, writ petition under Article 226 would not be maintainable.
13. Clause 9.1 of the MOU clearly states that if the parties agreed that any
controversy, claim or dispute arising in connection with the MOU, which
can’t be resolved amicably, shall be referred to chief secretary, who is
also the Chairman of the Executive Council of Jammu & Kashmir State
Rural Livelihood Mission of the State, whose decision shall be final and
binding.
14. Mr Pant, learned counsel for the petitioner states that clause 9 of MOU
doesn’t amount to arbitration agreement within the meaning of section
2(b) and section 7 of the arbitration and conciliation act, 1996.
15. Learned counsel for the petitioner as well as respondent has relied upon
M/s Alchemist (supra) wherein it has been held that the clause of
Arbitration must show a clear, unequivocal intention to arbitrate, to be
WP(C) No.3731/2025 9
valid under section 7 of the Arbitration and Conciliation Act, 1996. The
use of word arbitration is not sufficient if the process lacks finality or
binding effect. The complaining party shall seek amicable settlement
remedies inter se rather than a definitive submission of arbitration, failing,
which the party has the option to proceed to the Courts of law. It has
further been held that the individuals designated as arbitrator under the
clause are the respective chairman of the parties themselves. Ordinarily,
Arbitration contemplates reference to a neutral third party, a process
supported by Section 12 with Seventh Schedule of Arbitration and
Conciliation Act, which ipso facto disqualify the Clause from being an
arbitration agreement. Since this may be waived under the proviso to
section 12 (5), it remains a significant circumstance in discerning the true
intention of the parties. It is further held that once the view has been taken
that there is no agreement, then the only option available to the parties is
to approach Courts of law.
16. Mr Pant has also relied upon judgment of Chhattisgarh High Court, in
case titled Shri Om Prakash, Bansal Educational and Social Welfare
trust v. Union of India of India, 2023:CGHC:33076, which has been
upheld by Supreme Court. Paragraph No.18 of the judgment, is relevant
for our purposes and set out below:
―18. From perusal of Clause 8 of the MOU, it is evident that there is no
clause for referring the disputes between the parties to the Arbitrator
and it only provides for a mechanism to resolve the dispute amicably
and the order passed by the State Government shall be binding. The
judgments cited by the learned counsel for the applicant are not
applicable to the facts of the case in hand and on the contrary, the
WP(C) No.3731/2025 10decision rerndered by the Supreme Court in Mahanadi Coalfields Ltd.
and another v. IVRCL AMR Joint Venture, 2022 SC Online SC
960.‖
17. Supreme Court in Central Organisation for Railway Electrification v
M/S ECI SPIC SMO MCML (JV) A Joint Venture Company, 2024
INSC 857, which is a constitutional Bench judgment, has held that
unilateral, appointment of a sole arbitrator is biased and violate principles
of independence and impartiality. In public-Private contracts, excessive
control by government body over arbitrator’s selection violates the
constitutional right of equality under article 14 of the Constitution of
India. This judgment has considered the Perkins Eastman (supra) and
TRF Limited. V/s Energo Engineering Projects Limited, (2017) 7
SCR 409 wherein it was held that the test to determine the possibility of
bias is directly relatable to the interest the person appointing an arbitrator
has in the outcome of the dispute, a person having an interest in the
dispute cannot and should not have any role in charting out any course of
dispute resolution by having the power to a point and arbitrator. Paragraph
No.56 of the Central Organization for Railway Electrification (supra)
is relevant and is reproduced hereunder:
―56. With these findings and observations, I summarise my
conclusions as follows:
I. Dispute resolution through arbitration encompasses two
independent yet interdependent principles: contractual
freedom as party autonomy and statutory obligation as
duty to constitute an independent arbitral tribunal.
II. Party autonomy in making of an arbitration agreement is
an essential feature of arbitration. It commences with
choosing the members of the arbitral tribunal, extends to
the procedure that would apply for its conduct, and
WP(C) No.3731/2025 11concludes with the method by which an award could be
challenged before a court. It is thus a brooding and
guiding spirit of arbitration. Party autonomy is
sufficiently incorporated in the Arbitration Act, along
with a restraint on judicial intervention.
III. The moment parties choose arbitration over ordinary
civil proceedings for dispute resolution, their duty to
establish an independent and impartial tribunal arises.
The substitution of arbitration in place of civil courts as
an exception under Section 28 of the Contract Act is
only for a forum and not for contracting out of the most
essential feature of a dispute resolution, i.e.,
independence and impartiality must exist in every
forum. This essential feature is the inviolable public
policy consideration under Section 23 of the Contract
Act from which the parties cannot opt out. Arbitration
agreements which are not compliant of this public policy
consideration are void under Section 23 of the Contract
Act. Thus, there is a statutory incorporation of duties of
the parties to the arbitration agreement.
IV. If an arbitration agreement is considered by the court as
not enabling constitution of an independent and
impartial tribunal, any submission that the said
agreement is a binding contract, or it is in exercise of
party autonomy is not tenable as such an agreement will
be against public policy and as such not an enforceable
contract.
V. In view of the statutory incorporation of these duties, it
is not necessary to apply public law principles evolved
in constitutional and administrative laws.
Sourcing these duty obligations from Contract Act and
Arbitration Act is important to maintain the integrity of
the party autonomy and restraint of judicial institutions.
VI. The power to ensure that the arbitration agreement is
compliant of the public policy requirement of
establishing an independent and impartial tribunal is
always of the Court. This principle is recognised and
statutorily incorporated in the Contract Act and the
Arbitration Act. It is the duty of the court to ensure that
the arbitration agreement inspires confidence and it will
enable establishment of an independent and impartial
arbitral tribunal.
VII. Neither public policy considerations under the Contract
Act or the Arbitration Act restrain the parties to the
arbitration from maintaining a panel of arbitrators in any
WP(C) No.3731/2025 12manner. However, arbitration agreements enabling one
of the parties to unilaterally constitute arbitral tribunal
do not inspire confidence of independence and may
violate the public policy requirement of constituting an
independent and impartial tribunal. The court will,
therefore, scrutinise the agreement and hold them to be
invalid if it considers it appropriate.
VIII. The occasion for the court to examine the constitution
of the independent and impartial tribunal under the
arbitration clause will arise when one of the parties
makes an application under Sections 11, 14 or 34. It is
not permissible for the court to give an advance
declaration that all such agreements which enable one
of the parties to unilaterally constitute the arbitral
tribunal would be void per se. No two agreements are
the same and it is necessary for the court to examine the
text and context of the agreement.
IX. All applications pending before the courts challenging
the unilateral appointment clauses will be disposed of
applying the test as to whether such a clause enables
establishment of an independent and impartial tribunal.‖
18. From the above, it becomes quite clear that Clause 9 of the MOU is only
an in-house mechanism subject to the consent of the parties, as such is not
covered in terms of section 2(b) and Section 7 of the Arbitration and
Conciliation Act of 1996. The appointment of chief secretary as arbitrator
who is also the chairman of the executive council of Jammu & Kashmir
State Rural Livelihood Mission of the State is also not in consonance with
Section 12 (5) of the Act read with Seventh Schedule of Arbitration and
Conciliation Act of 1996.
19. Petitioner company has availed remedy under Article 226 of the
Constitution of India against Union of India, through Ministry of Rural
Development, However, as per clause 9.3, in case of judicial remedy
against Ministry of Rural Development case has to be filed in New Delhi
only. With the consent of learned counsel for the petitioner respondent no.
WP(C) No.3731/2025 13
1 i.e. Union of India through Ministry of Rural Development (Respondent
No.1) is deleted from the array of respondents.
20. Registry is directed to update memo of parties and delete prayer no (i) and
(iii) made in the writ petition.
21. In view of above, this Court is of the opinion that in absence of arbitration
clause strictly in terms of Section 2(b), Section 7 and Section 12 (5) read
with Seventh Schedule of Arbitration and Conciliation Act, 1996, this
writ petition is maintainable under Article 226 of the Constitution of
India.
22. Learned counsel for official respondent is directed to file reply within four
weeks. Registry to issue notice to private respondent.
23. Meanwhile, subject to objections till next date of hearing, impugned
recovery notice dated 10-11-2025, shall remain stayed. Alteration/
vacation/ modification on motion.
24. List on 29th June, 2026.
(Moksha Khajuria Kazmi)
Judge
JAMMU
30.04.2026
Manan
Whether the order is speaking : Yes/No
Whether the order is reportable : Yes/No
Vinod Kumar
2026.05.05 11:04
I attest to the accuracy and
integrity of this document
