Existence Of Arbitration Clause Does Not Debar Court From Entertaining A Writ Petition In Contractual Matter: Supreme Court

The existence of an arbitration clause does not debar the court from entertaining a writ petition, the Supreme Court observed in a judgment passed on Wednesday (12 May 2021).

In this case, the Allahabad High Court allowed a writ petition filed by CG Power and Industrial Solutions Limited challenging the directions issued by Executive Engineer, Unnao UPPTCL it to remit Labour Cess amounting to Rs.2,60,68,814/-, under Sections 3 sub-section (1) and (2) of the Building and Other   Construction Workers' Welfare Cess Act, 1996,  read with Rules 3 and Rule 4 (1), (2) (3) and (4) of the Building and Other Construction Workers Welfare Cess Rules, 1998, and also Section 2 (1)(d), (g) and (i) of the Building and Other Construction Workers (Regulation of Employment and Condition of Service) Act, 1996.

In appeal, the court noted that the contract between the parties contained an Arbitration Clause, but there is no mention of any arbitration agreement in the Counter Affidavit filed by UPPTCL to the writ petition in the High Court.

"66...In any case, the existence of an arbitration clause does not debar the court from entertaining a writ petition.

67. It is well settled that availability of an alternative remedy does not prohibit the High Court from entertaining a writ petition in an appropriate case. The High Court may entertain a writ petition, notwithstanding the availability of an alternative remedy, particularly (1) where the writ petition seeks enforcement of a fundamental right; (ii) where there is failure of principles of natural justice or (iii) where the impugned orders or proceedings are wholly without jurisdiction or (iv) the vires of an Act is under challenge.", the bench comprising Justices Uday Umesh Lalit and Indira Banerjee said.

The bench noted that in Harbanslal Sahnia and Ors. v. Indian Oil Corporation Ltd. reported in (2003) 2 SCC 107, the Supreme Court had set aside impugned order of the Indian Oil Corporation terminating the dealership of the Appellants, notwithstanding the fact that the dealership agreement contained an arbitration clause.

The bench reiterated that relief under Article 226 of the Constitution of India may be granted in a case arising out of contract.

"However, the writ jurisdiction under Article 226, being discretionary, the High Courts usually refrain from entertaining a writ petition which involves adjudication of disputed questions of fact which may require analysis of evidence of witnesses. Monetary relief can also be granted in a writ petition", the Court said.

The bench, while dismissing the appeal, held that UPPTCL has no power and authority and or jurisdiction to realize labour cess under the Cess Act in   respect of the first contract by withholding dues in respect of other contracts and/or invoking a performance guarantee. There is no legal infirmity in the finding of the High Court that UPPTCL acted in excess of power by its acts impugned, when there was admittedly no assessment or levy of cess under the Cess Act, it said.

Case: Uttar Pradesh Power Transmission Corporation Ltd. Vs. CG Power And Industrial Solutions Limited [SLP(C) 8630 OF 2020]
Citation: LL 2021 SC 255
Coram: Justices Uday Umesh Lalit and Indira Banerjee 

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