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Ram Barai Singh And Company v. State Of Bihar And Others
Factual and Procedural Background
The dispute originates from a works contract dated 6-2-1989 between the appellant-contractor (Ram Barai Singh & Co.) and the State of Bihar. The work was completed and all payments, including labour-escalation costs of Rs 9.53 lakhs, were settled by February 1992. Years later the State withheld the contractor’s security deposit of Rs 30 lakhs, returning only Rs 20 lakhs in December 2002 without interest and simultaneously ordering recovery of the previously-paid escalation amount.
The contractor filed CWJC No. 3686 of 2005 before the Patna High Court seeking interest on the delayed refund and challenging the recovery. A learned Single Judge granted 12% interest and remitted the escalation issue to the Engineer-in-Chief. The State’s LPA No. 877 of 2006 was disposed of with directions to reconsider the matter.
On remand, the Engineer-in-Chief reaffirmed recovery on 21-5-2008. The contractor challenged this through CWJC No. 10173 of 2008, which the Single Judge allowed on 18-2-2009, terming the State’s action arbitrary.
The State appealed in LPA No. 762 of 2009. A Division Bench set aside the Single Judge’s order on 12-1-2011 solely because the contract contained an arbitration clause, holding the writ petition non-maintainable. The present Supreme Court appeal challenges that Division Bench decision.
Legal Issues Presented
- Whether the existence of an arbitration clause in a concluded contract, not invoked by either party, renders a writ petition under Article 226 of the Constitution non-maintainable.
- Whether the Division Bench erred in overturning a Single Judge’s merits decision when the State had never raised the plea of alternate remedy in earlier proceedings.
- Whether, on the facts, the contract had “worked itself out,” negating any subsisting arbitration mechanism.
Arguments of the Parties
Appellant's Arguments
- No objection based on the arbitration clause was ever raised by the State in the writ court or in its memorandum of appeal; therefore, the Division Bench could not reject the writ on that ground.
- The contract had fulfilled its purpose long ago; the arbitration clause was thus inoperative.
- The Engineer-in-Chief’s 2008 demand was an after-thought aimed at offsetting the State’s liability for interest on the delayed refund, rendering the action arbitrary and unreasonable.
- Constitutional writ jurisdiction cannot be ousted merely by the presence of an alternative remedy, especially when the respondent waived that objection.
Respondents' Arguments
This information was not available in the provided opinion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| State of U.P. v. Bridge & Roof Co. (India) Ltd., (1996) 6 SCC 22 | Court may decline writ jurisdiction where an effective contractual arbitration remedy exists. | Cited by the Division Bench; the Supreme Court held the precedent did not mandate dismissal because the State never invoked the arbitration clause. |
| ABL International Ltd. v. ECGC Ltd., (2004) 3 SCC 553 | Availability of an alternative remedy is a ground—though not an absolute bar—to refuse a writ petition. | Also relied on below; the Supreme Court clarified that the case does not bar writs when the alternative remedy is waived. |
Court's Reasoning and Analysis
The Supreme Court observed that the Division Bench overlooked the litigation history and the State’s consistent failure to invoke the arbitration clause. It emphasised these points:
- Existence vs. Invocation of Arbitration: A mere clause does not automatically negate writ jurisdiction; it is for the writ court to decide whether to relegate parties, and the objection must be timely raised.
- Waiver: The State participated fully in multiple writ proceedings without raising the alternative-remedy plea, effectively waiving it.
- Concluded Contract: Since the contract was executed and payments completed in 1992, the arbitration mechanism was practically defunct.
- Merits of Single Judge’s Order: The Single Judge found the State’s belated recovery attempt arbitrary and motivated by an intent to neutralise its own interest liability; the Division Bench never addressed these substantive findings.
- Precedents Distinguishable: Bridge & Roof and ABL International recognise judicial discretion; they do not oblige dismissal where parties chose not to invoke contractual arbitration.
Holding and Implications
APPEAL ALLOWED. The Supreme Court set aside the Division Bench judgment (LPA No. 762 of 2009) and restored the Single Judge’s order in CWJC No. 10173 of 2008. The respondents must pay costs of Rs 25,000 to the appellant within two months.
Implications: The decision underscores that writ jurisdiction remains available despite contractual arbitration, especially where the respondent waives the objection. It reinforces that appellate courts should not upset merits determinations solely on belated pleas of alternate remedy. No new precedent was created, but the Court clarified application of existing principles on alternative remedies and waiver.
Shiva Kirti Singh, J.— Heard the parties. Leave granted. This appeal is directed against the final judgment and order dated 12-1-2011 passed by the Division Bench of the Patna High Court in State of Bihar v. Ram Barai Singh & Co. LPA No. 762 of 2009 whereby the letters patent appeal preferred by the respondents herein was allowed and order of the learned Single Judge dated 18-2-2009 in Ram Barai Singh & Co. v. State of Bihar CWJC 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.
2. The 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 Superintending Engineer concerned 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 lakhs was paid in February 1992. Thus, according to the appellant, the agreement dated 6-2-1989 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 lakhs for a long period. On persistent demand, Rs 20 lakhs out of the security amount, was returned after 10 years in December 2002 and that too without any interest. At that stage the appellant came to know that the Engineer-in-Chief vide an order dated 9-6-2001 had ordered for making a recovery of Rs 9.53 lakhs from the appellant which had been paid long back on account of labour escalation cost.
3. The appellant preferred a writ petition bearing CWJC 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 the writ petition was disposed of on 20-9-2006 CWJC No. 3686 of 2005 allowing 12% interest on account of delay in payment of security amount. The issue of labour escalation cost was remanded back to the Engineer-in-Chief concerned 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.
4. 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 LPA No. 877 of 2006 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 in 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 redetermined by the State expeditiously.”
5. The Engineer-in-Chief passed a fresh order on 21-5-2008 against the appellant overruling 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 the appellant, had no role in the issue which was to be finalised at the stage of the Executive Engineer and the Superintending Engineer. The appellant challenged the order of the Engineer-in-Chief through the writ petition bearing CWJC No. 10173 of 2008 which was allowed by the learned Single Judge on 18-2-2009 CWJC No. 10173 of 2008 by a reasoned order. There is no dispute that the respondents filed a counter-affidavit but did not raise any objection of alternative remedy by way of an arbitration clause in the agreement dated 6-2-1989.
6. The learned Single Judge allowed the writ petition preferred by the appellant by setting aside the order of the Engineer-in-Chief dated 21-5-2008. 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.
7. The aforesaid order of the learned Single Judge dated 18-2-2009 CWJC No. 10173 of 2008 was set aside by the Division Bench LPA No. 762 of 2009 by the order under appeal on the ground already noticed earlier.
8. We find ourselves in agreement with the 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.
9. The Division Bench noticed the judgment of this Court in State of U.P v. Bridge & Roof Co. (India) Ltd. (1996) 6 SCC 22 as well as in ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. (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 resolution”.
10. In our considered view, the aforesaid two decisions did not warrant setting aside of the judgment of the 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 the letters patent appeal.
11. 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.
12. In our view, the 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, the writ petitioner should be relegated to avail alternative remedy or not. But once the 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 the writ petition was not maintainable due to availability of alternative remedy.
13. Having considered the matter on merits as reflected by the order CWJC No. 10173 of 2008 of the learned Single Judge, we find sufficient merit in this appeal and hence it is allowed. The order LPA No. 762 of 2009 under appeal is set aside and the judgment and order CWJC No. 10173 of 2008 of the learned Single Judge is restored along with a costs of Rs 25,000 (Rupees twenty-five thousand) to be paid by the respondents to the appellant within two months.
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