Can High Court entertain a writ petition, notwithstanding the existence of Arbitration Clause in the contract?

Uttar Pradesh Power Transmission Corporation Ltd. Vs CG Power And Industrial Solutions Limited [SLP(C) 8630 OF 2020]

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.

The court also noted the existence of the arbitration clause in the contract executed between the parties. However it was of the view that:

In any case, the existence of an arbitration clause does not debar the court from entertaining a writ petition. 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;
  2. Where there is failure of principles of natural justice or
  3.  Where the impugned orders or proceedings are wholly without jurisdiction or
  4. The vires of an Act is under challenge.

The court relied upon Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors. reported in AIR 1999 SC 22, Pimpri Chinchwad Municipal Corporation and Ors. V. Gayatri Construction Company and Ors, reported in (2008) 8 SCC and Harbanslal Sahnia and Ors. v. Indian Oil Corporation Ltd reported in (2003) 2 SCC 107.

The bench reiterated that relief under Article 226 of the Constitution of India may be granted in a case arising out of contract, however, it dismissed the appeal stating 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.

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