Does Arbitration Clause Oust The Jurisdiction Of Supreme Court?
Arbitration: One of the most used form of Alternate Dispute Resolution. Most of the parties to the litigation prefer this kind of dispute settlement mechanism as it is cost effective and less time consuming. Arbitration being the most used form of alternate dispute resolution, is also subject to several questions as well.
Table of Contents
- Issue before Supreme Court
- Rapid MetroRail Gurgaon Limited v. Haryana Mass Rapid Transport Corporation Limited and Ors
- Facts of Case Titled – Rapid MetroRail Gurgaon Limited v. Haryana Mass Rapid Transport Corporation Limited and Ors
- Issue Before High Court
- Held by High Court
- Special Leave Petition before Supreme Court
- Held By Supreme Court
- Sanjana M. Wig v. Hindustan Petroleum Corporation Limited
- Conclusion
Issue before Supreme Court
One such question came before the Supreme Court in the case of Rapid MetroRail Gurgaon Limited v. Haryana Mass Rapid Transport Corporation Limited and Ors., wherein the question before the Supreme Court was whether remedy available to public under Article 226 of the constitution is available in cases, where the matter is to be adjudicated by the arbitrator?
Supreme Court clarifying its stand, held that presence of arbitration clause does not oust the jurisdiction of Supreme Court under Article 226 of the Constitution of India. It however clarified that recourse to public remedy can be justified to be invoked or not, has to be decided on case-to-case basis.
Facts of Case Titled – Rapid MetroRail Gurgaon Limited v. Haryana Mass Rapid Transport Corporation Limited and Ors
The facts of the case are that Haryana Shehri Vikas Pradhikaran (HSVP) awarded two concession agreements to Rapid MetroRail Gurgaon Limited (RMGL) and Rapid MetroRail Gurgaon South Limited (RMSGL), for constructing and developing the rapid rail of metro network. Notably, RMGL and RMGSL formed part of red entities within the IL&FS Group, which were required to secure approval before transferring or encumbering any assets, and such approval was granted to them in relation to the handover of projects under the Concession Agreement.
However, stating the material breaches by Haryana Shehri Vikas Pradhikaran, both RMGL and RMSGL issued notice to HSVP, thereby terminating the concession agreements on the expiry of 90 days from the delivery of the notice. RMGL and RMSGL further stated that they had ensured compliance with the disinvestment requirements under the Concession Agreements; however, HSVP had failed to comply with such disinvestment requirements.
However, aggrieved by the termination notice, HSVP instead of acknowledging the termination notice, sent out its own termination notice of the concession agreements, thereby directing RMGL and RMSGL to handover the development of metro projects to Haryana Mass Road Transport Corporation Limited (HMRTC).
Issue Before High Court
Thereafter, two writ petitions were filed under Article 226 of the Constitution of India before Punjab and Haryana High Court by Haryana Shehri Vikas Pradhikaran and Haryana Mass Road Transport Corporation Limited. The petition prayed for an interim direction to stay the termination notice by RMGL and RMSGL and further prayed for direction to them to continue with the operations of the project.
Held by High Court
Punjab & Haryana High Court, keeping in mind the public sector lenders’ interest and the talks of negotiations going on between the parties, gave its consent order dated 20th September, 2019, thereby directing RMGL and RMSGL to continue operations of the metro line for 30 (thirty) days, within which period the amount of debt due qua the Concession Agreements ascertained under the aegis of the Comptroller and Auditor General of India. Within 30 (thirty) days of such determination, 80% of the debt due would be transferred to the Escrow account as per the terms of the Concession Agreement.
High Court further held that any dispute between the parties arising out of the audit report of the Comptroller and Audit General of India were to be settled through arbitration.
Special Leave Petition before Supreme Court
However, instead of releasing its report, Comptroller and Audit General of India gave disputed adjournments. After a long wait, when the Comptroller and Audit General of India gave its report, RMGL and RMSGL were aggrieved by it. Therefore, aggrieved by the repeated adjournments and the report of the Comptroller and Audit General of India, RMGL and RMSGL filed a special leave petition before the Supreme Court, challenging the order of Punjab & Haryana High Court which directed that any further dispute pertaining to the report of Comptroller and Audit General was to be settled through arbitration. RMGL and RMSGL framed another question as to maintainability of the writ petition before Punjab & Haryana High Court, when there already exists arbitration clause in the concession agreements?
Thus, the question before Supreme Court was whether Special Leave Petition under Article 226 is maintainable when there exists an arbitration clause between the parties?
Held By Supreme Court
Holding the affirmative, Supreme Court observed that in the decision of Sanjana M. Wig v. Hindustan Petroleum Corporation Limited, Supreme Court had already clarified that writ petition is maintainable and can be entertained where public law is involved and the arbitration clause encompasses public law character.
Further, Supreme Court remarked that while the Instant Matter entailed an interplay between the element of public interest on the one hand and the contractual rights of the parties to the Concession Agreement on the other, the issue at heart in the writ petition was the imminent threat that the rapid metro lines would cease to operate upon the expiry of the 90-day notice period preceding the termination.
Supreme Court further held that in the instant matter, the entailed issue is an interplay between the element of public interest on the one hand and the contractual rights of the parties to the Concession Agreement on the other, the issue at heart in the writ petition was the imminent threat that the rapid metro lines would cease to operate upon the expiry of the 90-day notice period preceding the termination.
CONCLUSION
Even though Supreme Court held that even when there exists arbitration clause, when the matter involves larger public interest, writ jurisdiction can be enforced, this case cannot be treated as precedent as Supreme Court clarified that every writ jurisdiction have to be invoked on case-to-case basis looking at its facts.