Seeking Relief Under Article 226 In Contractual Matters Where There Is Existing Arbitration Clause Is Not An Appropriate Remedy: Supreme Court

In the impugned order, the High Court had directed Gujarat Housing Board to refund the amount of Rs Rs.1,66,05,000/- and Rs.21,66,470/- which the Board had forfeited while terminating the contract with V. Vandemataram Projects Private Limited.

While setting aside the High Court's order and relegating the parties to the remedy under the Arbitration Act, the bench in its order said,

"We are of the view that the invocation of Article 226 of the Constitution of India for a contractual matter of this nature, where there was an existing arbitration clause was not the appropriate remedy nor could the High Court have examined this and granted the nature of relief which has been done by the impugned order dated 30.09.2021. We are unable to persuade ourselves on the submission of learned counsel for the respondent that the order passed by the High Court was akin to a consent order. It does not say so, we do not find it from the order."

Facts Of The Case

Gujarat Housing Board floated a tender in the month of January, 2018 the Mukhya Mantri Gruh Yojna for the planning, designing and construction of flat type high rise buildingscum-commercial units for the various income group at Mahemdabad under the Vadodara Division. V. Vandemataram Projects Private Limited offered its bid to the Gujarat Housing Board and upon evaluation of the technical bid as well as the financial bid emerged as the successful bidder. Since V. Vandemataram Projects Private Limited was not able to commence with the work project, the board on June 7, 2021 terminated the contract.

Aggrieved, V. Vandemataram Projects Private Limited approached the High Court for quashing and setting aside the order dated June 7, 2021.

Appearing for the Board, Counsel before the High Court raised objection as regards the maintainability of the present writ-application on the ground of alternative remedy available to the writ-applicant in the form of invoking the arbitration clause.

The High Court asked the Board to refund the amount of forfeit the entire amount Rs.1,66,05,000/- within a period of 15 days from the date of the receipt of the copy of the writ and also asked the Board to issue a fresh tender notice and proceed further with the project. The High Court also asked the Board to refund to V. Vandemataram Projects Private Limited amount of Rs.21,66,470/- with the AUDA deposited by the petitioner at the instance of the Board.

"The client of Mr. Desai is no more interested to undertake this work. In such circumstances, it is open for the Board to issue a fresh tender notice and proceed further with the project. The controversy is with respect to the refund of the amount of Rs.1,66 05,000/- towards the E.M.D Security Deposit as well as the Performance Guarantee. Once we take the view that the termination itself was not justifiable, then we expect the Board to refund this amount at the earliest. We, accordingly, direct the Board to refund this amount of Rs.1,66,05,000/- within a period of 15 days from the date of the receipt of the copy of the writ of this order. At this stage, it was pointed out that the writ applicant deposited an amount of Rs.21,66,470/- with the AUDA at the instance of the Board. This amount shall also be refunded by the Board at the earliest," the High Court said in its order.

The respondent's counsel submitted that on account of the stay of the operation of the impugned order, the appellants have also encashed the bank guarantee. He had also sought to restore the amount encashed qua bank guarantee.

The bench said that although it was not inclined to accept the plea but observed that, "If the respondent had invoked or invokes the process under the Arbitration Act, that is an aspect which can be examined by the Arbitral Tribunal to be constituted in accordance with law."

Since the counsel for the parties were agreeable for the Top Court to appoint an Arbitrator, the bench appointed Ms. Justice Harsha Devani, Retired Judge of the Gujarat High Court, 33, as the sole Arbitrator to enter upon reference and adjudicate the dispute inter se the parties.

Case Title: Gujarat Housing Board & Anr. V. Vandemataram Projects Private Limited| Civil Appeal No. 2093/2022

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