News Details

Writ court can intervene even if arbitration clause exists

                          IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION
                       CIVIL APPEAL NO. 11465  OF 2014
                  [Arising out of S.L.P.(C)No.8101 of 2011]
M/s. Ram Barai Singh & Co.                     .....Appellant
State of Bihar & Ors.                                 .....Respondents
                               J U D G M E N T
Heard the parties.  Leave granted.
This appeal is directed against final judgment and  order  dated  12.01.2011 passed by the Division Bench of Patna High Court in L.P.A.  No.762  of  2009 whereby the Letters Patent Appeal preferred by the  respondents  herein  was allowed and order of the learned  Single  Judge  dated  18.02.2009  in  Writ Petition bearing C.W.J.C. No.10173 of 2008 was set aside on the sole  ground that there was an arbitration clause in an  agreement  between  the  parties and since such alternative remedy was not  availed  by  the  appellant,  the writ petition itself was not maintainable. Learned counsel for the appellant has assailed the aforesaid  order  of  the Division Bench on facts as well as on law.  On law, it  was  contended  that the writ petition could not have been held not maintainable,  more  so  when no such objection was taken by the other side. On facts,  it  was  submitted that the agreement noticed by the  Division  Bench  no  doubt  contained  an arbitration clause entitling either of the parties to invoke arbitration  by the concerned Superintending Engineer in case of any dispute arising out  of the agreement but the Division Bench failed to  notice  that  the  agreement itself was no longer in existence because the work was completed  long  back and payments  including  payment  on  account  of  labour  escalation  costs amounting to Rs.9.53 lacs was paid in February  1992.   Thus,  according  to the appellant, the agreement dated 06.02.1989 had worked itself out  and  it was much  later  that  a  dispute  arose  when  the  respondent  authorities withheld the security amount of the appellant  of  Rs.30  lacs  for  a  long period.  On persistent demand, Rs.20 lacs out of the  security  amount,  was returned after 10 years in December 2002 and that too without any  interest.
 At that stage appellant came to know that Engineer-in-Chief vide  an  order dated 09.06.2001 had ordered for making a recovery of Rs.9.53 lacs from  the appellant which had been paid long back  on  account  of  labour  escalation cost.
The appellant preferred a writ petition bearing C.W.J.C.No.3686 of  2005  to claim the interest on undue delay in  refunding  the  security  deposit  and against  the  direction  for  recovery  of  labour  escalation  cost.    The respondents did not raise plea of arbitration clause and that writ  petition was disposed of on 20.09.2006 allowing 12% interest on account of  delay  in payment of security  amount.   The  issue  of  labour  escalation  cost  was remanded back to the concerned Engineer-in-Chief who was directed to pass  a reasoned order after hearing the appellant or his representative,  within  a fixed period.  The appellant was granted liberty to seek his  remedy  if  he was aggrieved by the order that may be passed by the Engineer-in-Chief.
The respondents preferred a Letters Patent Appeal bearing No.877 of 2006  in which also they did not raise the issue of  alternative  remedy  by  way  of arbitration clause.   The  LPA  was  disposed  of  on  11.12.2007  with  the following direction :
".... .... Since the matter is going on remand, the State has to  apply  its
mind afresh to the facts and circumstances of the case and,  therefore,  the
direction, as quoted above would be juxtaposition to the  order  of  remand.
The question of payment of interest by either side, however, will  abide  by
the ultimate determination of the question by the State of Bihar.
      It goes without saying that the  matter  would  be  examined  and  re-
determined by the State expeditiously."
The Engineer-in-Chief  passed  a  fresh  order  on  21.05.2008  against  the
appellant over-ruling the various  grounds  and  objections  raised  by  the
appellant in his representation relating to merits of the matter as well  as
jurisdiction of the Engineer-in-Chief who, according to  appellant,  had  no
role in the issue which was to  be  finalized  at  the  stage  of  Executive
Engineer and the Superintending  Engineer.   The  appellant  challenged  the
order of Engineer-in-Chief through writ petition bearing  C.W.J.C.  No.10173
of 2008 which was allowed by the learned Single Judge  on  18.02.2009  by  a
reasoned order.  There is  no  dispute  that  respondents  filed  a  counter
affidavit but did not raise any objection of alternative remedy  by  way  of
an arbitration clause in the agreement dated 06.02.1989.
The learned  Single  Judge  allowed  the  writ  petition  preferred  by  the
appellant  by  setting  aside  the  order  of  the  Engineer-in-Chief  dated
21.05.2008.  The Court found that the Engineer-in-Chief  had  raised  demand
of interest in the year 2008 along with refund  of  labour  escalation  cost
only to offset the State's liability to pay interest on refund  of  security
deposit  after  a  delay  of  about  10  years.   Thus  the  action  of  the
respondents was held to be for ulterior  reasons  and  objection  to  labour
escalation cost after a long gap from its actual  payment  was  held  to  be
arbitrary and unreasonable.
The aforesaid order of the learned Single Judge  dated  18.02.2009  was  set
aside by the Division Bench by the order under appeal on the ground  already
noticed earlier.
We find ourselves in agreement with case of the appellant that the  Division
Bench failed to notice the relevant facts including the history  of  earlier
litigation.  It also failed to notice that the agreement itself  had  worked
out long back and in the earlier round of  litigation  as  well  as  in  the
present round the respondents never raised any objection  on  the  basis  of
arbitration clause.
The Division Bench noticed the judgment of this Court in the case  of  State
of U.P. & Ors. v. Bridge & Roof Company (India) Ltd.  (1996)  6  SCC  22  as
well as in the case of ABL International  Ltd.  &  Anr.   v.  Export  Credit
Guarantee Corporation of India Ltd. & Ors.  (2004) 3 SCC 553 for  coming  to
the  conclusion  that  where  the  contract  itself  provides  an  effective
alternative remedy by way of reference to arbitration,  it  is  good  ground
for declining to exercise extraordinary jurisdiction under  Article  226  of
the Constitution of India and that the Court will  not  permit  recourse  to
other remedy without invoking the remedy by way of arbitration, "unless,  of
course, both the parties to the dispute agree on  another  mode  of  dispute
In our considered view, the aforesaid two decisions did not warrant  setting aside of the judgment of learned Single Judge without going into merits  and dismissing the writ petition at appellate stage  on  ground  of  alternative remedy when no such objection was taken by  the  respondents  either  before the writ court or even in the Memorandum of Letters Patent Appeal.
In our view, a constitutional remedy by  way  of  writ  petition  is  always available to an aggrieved party and an arbitration clause  in  an  agreement between  the  parties  cannot  ipso  facto  render  a  writ  petition   "not maintainable" as wrongly  held  by  the  Division  Bench.   Availability  of alternative remedy is definitely a permissible ground for refusal by a  writ court to exercise its jurisdiction  in  appropriate  cases.   But  once  the respondents had not objected  to  entertainment  of  the  writ  petition  on
ground of availability of alternative remedy, the  final  judgment  rendered on merits cannot be faulted and set aside only on noticing by  the  Division Bench that an alternative remedy by way of  arbitration  clause  could  have been resorted to.
In our view, learned counsel for the appellant  has  made  out  a  case  for setting aside the order under appeal both on the facts noticed  above  which show that there  was  no  existing  agreement  because  the  work  had  been completed and payment had already been  made  long  back  and  also  on  the question of law raised in this appeal that a constitutional  remedy  through a writ petition cannot be held to be not available and not  maintainable  on account of an alternative remedy.  It is for  the  writ  court  to  consider whether in an appropriate case,  writ  petitioner  should  be  relegated  to
avail alternative remedy or not.  But once writ petition is heard at  length and decided against one or the other party on merits, such a  decision/order cannot be held to be bad in law only on the ground that  writ  petition  was not maintainable due to availability of alternative remedy.
Having considered the matter on merits as reflected  by  the  order  of  the learned Single Judge, we find sufficient merit in this appeal and  hence  it is allowed.  The order under appeal is set aside and the judgment and  order of the learned Single Judge is restored along with  a  cost  of  Rs.25,000/- (Rupees twenty  five  thousand)  to  be  paid  by  the  respondents  to  the appellant within two months.
                       [M.Y. EQBAL]
                             [SHIVA KIRTI SINGH]
New Delhi.
December 17, 2014.
ITEM NO.1A             COURT NO.10               SECTION XVI
               S U P R E M E  C O U R T  O F  I N D I A
                       RECORD OF PROCEEDINGS
Civil Appeal No. 11465 of 2014 in Petition(s) for Special Leave to Appeal
(C)  No(s).  8101/2011
M/S RAM BARAI SINGH & CO.                      Appellant(s)
STATE OF BIHAR & ORS.                          Respondent(s)
Date : 17/12/2014 This appeal was called on for judgment today.
For Petitioner(s)
                     Mr. Gaurav Agrawal,Adv.
For Respondent(s)
                     Mr. Gopal Singh,Adv.
            Hon'ble Mr. Justice Shiva Kirti Singh  pronounced  the  judgment
of the Bench comprising of Hon'ble Mr. Justice M.Y. Eqbal and His Lordship.
            Leave granted.
            The appeal is allowed in terms of the signed judgment.
(Sukhbir Paul Kaur)                 (Indu Pokhriyal)
   Court Master                       Court Master
      (Signed reportable judgment is placed on the file)