Facts of the Case

The petitioner had been awarded two contracts by the Power Transmission Corporation of Uttarakhand Ltd. in 2016 for upgradation of control and protection systems at substations. Disputes arose between the parties, and the petitioner had already invoked the arbitration clause in the contract, resulting in the Court's own earlier order dated 31.12.2021 appointing an Arbitrator. Arbitration proceedings were underway, with an interim order dated 21.04.2022 restraining coercive recovery steps and a committee formed to explore amicable settlement.

During the pendency of arbitration, the respondent Corporation unilaterally terminated the contract by letter dated 19.01.2023, invoked and forfeited a performance bank guarantee of Rs. 2,66,06,677, and separately withheld a retention amount of Rs. 2,94,34,387 — apportioned towards liquidated damages and GST on liquidated damages. The petitioner filed this writ petition seeking to quash these actions and to recover the forfeited and withheld amounts.

Issues Involved

  1. Whether a writ petition challenging termination of the contract and forfeiture of the bank guarantee (and GST-inclusive retention amount) was maintainable while the same dispute was already pending before a court-appointed Arbitrator.

Petitioner's Arguments

  • The respondent's actions — unilateral termination, invocation of the bank guarantee, and withholding of the retention amount including GST on liquidated damages — were arbitrary and illegal, warranting the Court's intervention.
  • The respondent had taken inconsistent positions during arbitration, evidencing mala fide and arbitrary conduct.

Respondent's Arguments

  • The dispute, including the termination and consequent claims, was already before the Arbitrator appointed by the Court, and the petitioner ought to raise all grievances in that forum rather than through a writ petition.

Court Order / Findings

  • The Court noted that the underlying dispute had originated from the contract, which contained an arbitration clause that the petitioner itself had earlier invoked, resulting in appointment of an Arbitrator by this very Court.
  • Since the Arbitrator had already taken cognizance of the dispute and passed an interim order, the Court held the writ petition ought not to be entertained.
  • The writ petition was dismissed in limine, leaving the petitioner to pursue all its claims — including the bank guarantee forfeiture and the GST-inclusive retention amount — before the Arbitrator.

Important Clarification

The GST component here was simply part of a retention-amount calculation (GST on liquidated damages) in a commercial contract dispute; no GST-law question was examined. The ruling reflects the well-settled principle that once parties have invoked an arbitration clause and an Arbitrator is seized of the dispute, a parallel writ petition on the same contractual grievances will ordinarily not be entertained.

Sections Involved

  • Arbitration and Conciliation Act, 1996 — Section 17 (interim measures by arbitral tribunal)
  • Constitution of India, 1950 — Article 226

Decision – In Favour of

Disposed of against the petitioner — the writ petition was dismissed in limine, leaving all claims to be pursued before the Arbitrator.

Case Details

  • Court: High Court of Uttarakhand at Nainital
  • Case No.: Writ Petition No. 1411 (M/S) of 2023
  • Coram: Justice Ravindra Maithani
  • Date of Order: 27.07.2023

Link to Download the Order

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