The existence of an arbitration clause does not debar the court from entertaining a writ petition:SC

Even though there is an arbitration clause, the Petitioner herein has not opposed the writ petition on the ground of existence of an arbitration clause. There is no whisper of any arbitration agreement in the Counter Affidavit filed by UPPTCL to the writ petition in the High Court. In any case, the existence of an arbitration clause does not debar the court from entertaining a writ petition. (Para.66)

UTTAR PRADESH POWER TRANSMISSION CORPORATION LTD. AND ANR V. CG POWER AND INDUSTRIAL SOLUTIONS LIMITED AND ANR.

SPECIAL LEAVE PETITION (C) NO. 8630 OF 2020.

Decided on MAY 12, 2021.

Counsel for Respondent: Mr. Ramesh Singh

The two-judge bench comprising Justice Uday Umesh Lalit and Justice Indira Banerjee decided the present case. The special leave petition was filed by Uttar Pradesh Power Transmission Corporation Ltd, the petitioner against a final Judgment of the Allahabad High Court dated 24th February 2020. The Court dismissed the special leave petition stating that the judgment and order of the High Court impugned does not call for inference under Article 136 of the Constitution of India.

CG Power and Industrial Solutions Limited, the respondent number 1 entered into a Framework Agreement for construction of 765/400 KV Substations, at Unnao, Uttar Pradesh with Uttar Pradesh Power Transmission Corporation Ltd., the petitioner. The request was made by the petitioner by the letter dated 5th March 2010. The work was split into four separate contracts, the first contract was for design, engineering, manufacture, testing at works and supply of all required equipment and materials with accessories and auxiliaries, as detailed in the said contract. The second contract covered erection, testing and commissioning at site including unloading, handling. The third contract covered all civil works including materials for commissioning and handing over of the substations and the fourth contract covered operations and maintenance for three years.

During the period from April 2012 to April 2016, there was an audit inspection of the 765 KV Transmission Division, Unnao, where it was pointed out that the lapse on the part of Uttar Pradesh Power Transmission Corporation Ltd , is not deducting labour cess from the bills of the contractor, that is Respondent No.1, in respect inter alia of the First Contact, observing that every employer was required to levy and collect cess at a rate not exceeding 2% and not less than 1% of the cost of construction incurred by an employer and to deposit the same with the Building and Other Construction Workers Welfare Board. Following which the Executive Engineer of the Petitioner informed respondent 1, which they responded to on letter dated 14th September 2016, that for the purposes of the first contract, the company was not covered under the definition of contractor under the Act. The respondent then seeked the opinion of the Labour Commissioner.

The petitioner then informed the respondent no 2, the bank and was instructed to retain an amount of Rs.2,60,68,814/- of Rs.7,10,68,130/- and issue an amended Bank Guarantee extending its validity. By a letter dated 29th December 2018, the Superintendent Engineer of the UPPTCL requested the Executive Engineer, Unnao to recover labour cess for the supply part of the composite contract from the pending bills of the Respondent No.1 and, in case any amount still remained outstanding, to deduct such amount by encashment of the Performance Bank Guarantee for Rs.2,60,68,814/- held to secure the payment of labour cess. Which led to the respondent filing a writ petition before the High Court of Allahabad. By an interim order dated 7th January 2020, the Hon’ble High Court restrained the UPPTCL from encashing the bank guarantee.

Mr. Ramesh Singh appearing on behalf of the Respondent No.1 argued that the first contract was for supply and delivery of equipment and materials. It was a pure supply contract, separate and distinct from the civil works contract. The UPPTCL itself understood the Cess Act as not applicable to the Supply Contract and accordingly did not deduct cess from the invoices/bills of the Respondent.

Even though there is an arbitration clause, the Petitioner herein has not opposed the writ petition on the ground of existence of an arbitration clause. There is no whisper of any arbitration agreement in the Counter Affidavit filed by UPPTCL to the writ petition in the High Court. In any case, the existence of an arbitration clause does not debar the court from entertaining a writ petition. (Para.66)

The Court stated that “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. Reference may be made to Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors. reported in AIR 1999 SC 22 and Pimpri Chinchwad Municipal Corporation and Ors. V. Gayatri Construction Company and Ors, reported in (2008) 8 SCC 172, cited on behalf of Respondent No.1.”(Para 67)

The Court further regarding the Section 226 of the Constitution of India stated that, “It is now well settled by a plethora of decisions of this Court 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” (Para 69).

The Court further stated that “In our considered opinion, the judgment and order of the High Court impugned does not call for inference under Article 136 of the Constitution of India. The Special Leave Petition is, therefore, dismissed.” (para 72)

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Utkarsh Kumar Jayaswal