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Arbitration Clause does not bar invocation of Writ Jurisdiction

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Adwitiyaa Das

In a recent judgment of Union of India v Tantia Construction Private Limited [2011 (4) SCALE 745], the Supreme Court of India has held that the existence of an arbitration clause in an agreement does not bar the parties from invoking the writ jurisdiction of the High Courts and the Supreme Court without exhausting the alternative remedies available to them.

In this case, East Central Railways (ECR), a public sector undertaking, had issued a tender in relation to the construction of a rail over-bridge at Bailey Road over the proposed railway alignment over the Ganga Bridge at Patna for an approximate cost of Rs. 15.42 crores (the “Project”) which was awarded to Tantia . However, owing to necessity of additional work, Tantia was requested to undertake the same at the pre estimated cost quoted by it at the time of tender documentation. Tantia resisted this by moving to the Patna High Court, which stated that the entire work could not be thrust on Tantia at its risk and cost. The Union of India appealed to the Supreme Court, arguing that since the agreement between the parties had an arbitration clause in respect of all disputes, the Writ Court was not competent to decide the issue involved in the dispute which had been raised by the respondent company.

Union of India’s arguments were based on Section 5 and Section 8 of the Arbitration and Conciliation Act, 1996, which read as follows:

Section 5: Extent of judicial intervention. Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.

Section 8 (1): A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

Further, the maintainability of the writ petition on account of the arbitration clause included in the agreement between the parties was also questioned.

Tantia argued that on account of an alteration in the design of the Project, which included a completely new work project, a fresh tender needed to be floated since the new work could not be treated to be part of the initial contract. Tantia submitted that it had never been it’s intention to execute the entire work, including the variation on account of the alteration of the design, at the same rates that it had submitted for the initial work in relation to the Project.

In this case, the Supreme Court referred to and relied on the decisions of Harbanslal Sahnia v. Indian Oil Corporation Limited (2003) 2 SCC 107; Whirlpool Corporation v. Registrar of Trade Marks (1998) 8 SCC 1; National Sample Survey Organization and Another v. Champa Properties Limited and Another (2009) 14 SCC 451 and Hindustan Petroleum Corporation Limited and Ors. v. Super Highway Services and Another (2010) 3 SCC 321 wherein the Supreme Court observed that the rule of exclusion of writ jurisdiction by availability of an alternative remedy, was a rule of discretion and not one of compulsion and there could be contingencies in which the High Court exercised its jurisdiction inspite of availability of an alternative remedy.

In relation to the same, the Supreme Court held “Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution

On a concluding note, the Supreme Court observed that an alternative remedy would not be an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court by the concerned parties and if there is a fit case for invoking the writ jurisdiction, the Courts can go ahead and do so.

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