Writ Not Maintainable When Efficacious Remedy Before The Arbitrator Is Available: Madhya Pradesh High Court

The bench of Justice Gurpal Singh Ahluwalia held that merely because the nominated arbitrator is the managing director of the respondent corporation, it cannot be assumed that it would not be able to fairly discharge its functions as an arbitrator.

Facts

The petitioners (Rice Millers) entered into several agreements with Respondent (MP State Corporative Marketing Federation) for milling of paddy. In terms of the agreement, the entire paddy was to be milled within a period of 45 days. Upon failure, the respondent could impose penalty or refuse to accept the converted rice.

A dispute arose between the parties when the respondent refused to accepted the stocks available with the petitioners due to their failure to follow the timeline within which the entire supply was to be made. Thereafter, the impugned order was issued by respondent no.2 (Managing Director) wherein it was decided that the stock would be taken subject to imposition of penalty.

Aggrieved thereby, the petitioners challenged the order before the High Court

Submissions of the Parties

The petitioner challenged the order on the following grounds:

• The penalty were to be imposed only on those rice millers who failed to return/submit at least 60% of the rice, but the petitioner do not fall within that contractual condition.
• The petitioners cannot be forced to invoke arbitration to challenge the impugned order since the respondent no.2 (issuing authority) is itself the arbitrator, therefore, the arbitration would not serve any purpose.

The respondent made the following counter-submissions:

• The entire rice was to be returned/deposited within 45 days, failure would result in penalty.
• The issue of extension was to be decided by the Union of India, the extension cannot be claimed as a matter of right.
• Any dispute has to be referred to arbitration in terms of the agreement, writ is not maintainable.

Analysis by the Court

The Court observed the petitioners have no right to claim extension under the contract. It observed that the issue of extension is for the Union of India to decide and the respondent did pursue the matter with Union of Indian which declined to extend it.

The Court observed that the grievance of the respondent can be addressed through arbitration. It held that a writ would not be entertained when the petitioners fail to avail the efficacious contractual remedy before the Arbitrator.

The Court held that merely because the nominated arbitrator is the managing director of the respondent corporation, it cannot be assumed that it would not be able to fairly discharge its functions as an arbitrator.

The Court held that merely because Respondent No.2 is required to perform administrative duties, it cannot be assumed that it would fail to perform its duties as an arbitrator as per the law. It held that issuance of a notice and deciding on a dispute are two different aspects that can be performed by the Respondent No. 2.

Accordingly, the Court held that the writ cannot be entertained due to available of efficacious contractual remedy.

Case Title: Ramesh Kumar Khandelwal v. The State of Madhya Pradesh, WP No. 11123 of 2019

Date: 10.04.2024

Counsel for the Petitioners: Mr. Ravindra Nath Tripathi

Counsel for the Respondent: Mr. H.K. Golhani and Mr. Shobit Aditya

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