Supreme Court: The bench of Dr. DY Chandrachud* and MR Shah, JJ has held that the presence of an arbitration clause within a contract between a state instrumentality and a private party does not act as an absolute bar to availing remedies under Article 226.
“If the state instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie.”
In the case where it was argued that a remedy for the recovery of moneys arising out a contractual matter cannot be availed of under Article 226 of the Constitution, the Court clarified that the recourse to the jurisdiction under Article 226 of the Constitution is not excluded altogether in a contractual matter. A public law remedy is available for enforcing legal rights subject to well-settled parameters.
“The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority. In determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. But equally, it is well-settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena.”
The Court, however, made clear that though the presence of an arbitration clause does not oust the jurisdiction under Article 226 in all cases, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked.
[Unitech Ltd. v. Telangana State Industrial Infrastructure Corporation, 2021 SCC OnLine SC 99, decided on 17.02.2021]
*Judgment by: Justice Dr. DY chandrachud
