Supreme Court: High Court shouldn't Exercise it's Writ Jurisdiction in Arbitrable Matters Unless Issue Involves Public Interest

Supreme Court: High Court shouldn't Exercise it's Writ Jurisdiction in Arbitrable Matters Unless Issue Involves Public Interest

The Supreme Court (SC) on 26 March 2021, in the case titled Rapid Metro Rail Gurgaon Limited (Appellant) v. Haryana Mass Rapid Transport Corporation & Ors. (Respondents) stated that a High Court (HC) in its jurisdiction under Article 226 of the Constitution should restrain from entertaining a dispute that is arbitrable, unless the fundamental issue involves the question of public interest.

The SC bench consisting of Justices DY Chandrachud, MR Shah, and Sanjiv Khanna stated that "The High Court's exercise of its writ jurisdiction under Article 226 in the present case was justified since non-interference, which would have inevitably led to the disruption of rapid metro lines for Gurgaon, would have had disastrous consequences for the general public."

It added that "As a measure of abundant caution, we clarify that ordinarily, the High Court in its jurisdiction under Article 226 would decline to entertain a dispute which is arbitrable."

The SC made the aforesaid observations while considering appeals filed by the respondents against the order passed by the Punjab and Haryana High Court (HC) in writ petitions filed by Haryana Mass Rapid Transport Corporation (challenging termination notices issued by RMGL).

The HC entertained the writ petition although there was an arbitration clause. An appeal was filed before the Apex Court against the order of the HC and it noted that "The High Court in its jurisdiction under Article 226 would decline to entertain a dispute which is arbitrable. Moreover, remedies are available under the Arbitration and Conciliation Act, 1996 for seeking interim directions either under Section 9 before the Court vested with jurisdiction or under Section 17 before the Arbitral Tribunal itself."

The Top Court disposed of the appeal and issued the following directions-

(i) "HSVP shall within three months from the date of the present judgment deposit into the Escrow Account 80 percent of the debt due as determined in the reports of the auditors dated 23 June 2020, in the case of RMGL and RMGSL respectively;

(ii) The deposit into the Escrow Account shall continue to be maintained in Escrow, subject to any order that may be passed by NCLAT or any competent statutory authority, and shall not be appropriated by the Escrow Bank without specific permission;

(iii) RMGL and RMGSL on the one hand, and HSVP on the other, are at liberty to pursue their rights and remedies in pursuance of the arbitration clause contained in the Concession Agreements on all matters falling within the ambit of the arbitration agreement, including the validity of the notices of termination, any past or future inter se claims and liabilities as envisaged in the order of the High Court dated 20 September 2019, as modified on 4 October 2019 and 15 October 2019;

(iv) In terms of clause (v) of the order of the High Court dated 20 September 2019, in the event of any dispute arising about the correctness of the CAG report, in regard to the determination of the debt due, any of the parties would be at liberty to raise a dispute in the course of arbitral proceedings;

(v) Upon compliance with the directions contained in (i) above, RMGL and RMGSL shall execute and handover to HSVP all documents which are required for effectuating the transfer of operations, maintenance, and assets to HSVP or their nominees to fulfill the obligation of the concessionaires in Article 25 of the Concession Agreement dated 9 December 2009 and clause (vi) contained in the order of the High Court dated 20 September 2019, as modified on 4 October 2019 and 15 October 2019; and

(vi) The writ petitions filed before the High Court by the respondents shall stand disposed of."

The SC while disposing of the matter based on aforesaid directions also clarified that its' judgment shall not affect any ongoing investigation or criminal proceedings regarding the IL&FS group of companies.