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J&K and Ladakh high court refers family disputes over hotel properties to sole arbitrator on consent, sets aside receiver order
Case Title: Mohammad Rafeeq Karnai v. Bashir Ahmad Karnai and Ors.
Case No.: Arb P No. 4/2025 c/w CM(M) No. 380/2025 with CM(M) No. 485/2025
Coram: Justice Sanjay Dhar
Citation: (2026) ibclaw.in 5275 HC
Date of Decision: 08 September 2026
The High Court of Jammu & Kashmir and Ladakh has referred all disputes between five brothers and their mother, arising from a family settlement deed that matured into a consent decree, to a sole arbitrator. The Court acted on a consensus reached by counsel during the hearing and set aside an order of the Executing Court appointing a Receiver for a hotel in Srinagar.
Justice Sanjay Dhar was dealing with a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 and two petitions under Article 227 of the Constitution of India against an order dated 26.08.2024 passed by the Additional District Judge, Srinagar in execution proceedings.
Background
Hilal Ahmad Karnai filed a suit for declaration, partition, injunction and rendition of accounts on 10.08.2021 against his four brothers and their mother. During the pendency of the suit, the parties entered into a Settlement Deed dated 23.12.2021, and the suit was disposed of by a consent judgment and decree dated 20.04.2022.
The deed covered hotels, houseboats, a donga boat and properties in Srinagar and New Delhi. Clause (xix) provided that any dispute as to interpretation, operation or enforcement of the deed would be referred to an arbitrator appointed mutually by the parties, with the seat at Srinagar.
Under clause (ix), Bashir Ahmad Karnai was to operate Hotel Grand Centre Point for two years, after which the operator was to be nominated by the parties by voting. His brothers alleged that he did not vacate the position after two years, did not render accounts and misappropriated and diverted funds. He denied these allegations.
Parallel Proceedings
The Court noted several proceedings pending between the parties. In the execution petition, the Executing Court appointed a Receiver for the hotel by order dated 26.08.2024. A petition under Section 9 of the Act was pending before the Principal District Judge, Srinagar, a suit for rendition of accounts had been filed, and Hilal Ahmad Karnai had moved an application under Order XXIII Rule 3 CPC seeking recall of the compromise decree.
The Court also noted proceedings initiated by M/s Regenta Hotels Private Limited, the franchisor, which had a Franchise Agreement with the partnership firm running the hotel. The High Court of Karnataka, by order dated 12.03.2026, had referred the disputes between the franchisor and the firm to a sole arbitrator.
Court's Observations
The Court observed that the bone of contention was the operation and management of Hotel Grand Centre Point. It held that clause (xix) is an arbitration agreement comprehensive enough to cover disputes as to interpretation, operation and enforcement of the deed among the parties or their legal representatives.
During the hearing, counsel for all parties agreed that all disputes between the parties, including those in the other pending litigation between the brothers and the application seeking recall of the compromise decree, could be referred to an Arbitral Tribunal. They also agreed that any interim arrangement could be sought from the arbitrator and that the Receiver order could be set aside so that the arbitrator could pass a fresh order, if needed, without being influenced by it.
The Court also took note that arbitration between the franchisor and the partners of the firm was already underway, and held that care had to be taken to avoid overlap between the two sets of disputes.
Directions
In view of the consensus, the Court referred all disputes between the brothers and their mother relating to the joint properties, including those on interpretation, operation and enforcement of the Settlement Deed and the claim of Hilal Ahmad Karnai for recall of the deed, to arbitration. Justice Rashid Ali Dar, former Judge of the High Court, was appointed as the Sole Arbitrator.
The arbitral costs and fee were directed to be borne by the parties equally, subject to the final award on costs. The arbitrator was given liberty to pass interim measures under Section 17 of the Act, but must first issue notice to Regenta Hotels Private Limited to safeguard its rights under the franchise agreement. The arbitrator was also directed not to deal with any aspect or claim that is the subject matter of the arbitration constituted pursuant to the Karnataka High Court order.
The order dated 26.08.2024 appointing the Receiver was set aside. The Section 9 petition before the Principal District Judge, Srinagar was dismissed, since interim measures were left to the arbitrator. The execution petition, the Order XXIII Rule 3 CPC application and the suit for rendition of accounts were stayed till the conclusion of the arbitration or until further orders, whichever is earlier.
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