Existence Of Arbitration Clause Cannot Operate As Bar For Filing Writ Petition: Calcutta High Court Dismisses Appeals Filed BY FCI & CWC

The intra-court appeals were filed by the appellants- Food Corporation of India (FCI) and Central Warehousing Corporation (CWC), against the order of the Single Judge directing them to disburse the amount deducted from the writ petitioner’s handling and transport bills amounting to Rs 1,46,67,382 within a timeframe.

The Division Bench of Chief Justice T.S. Sivagnanam & Justice Chaitali Chatterjee (Das) held, “Thus, when there is no dispute or differences with regard to the deduction of the demurrage charges between the CWC and the writ petitioner, the question of invoking the arbitration clause would not arise and the existence of such a clause cannot operate as a bar for filing the writ petition with specific reference to the facts and circumstances of the case on hand.”

Advocate Devajyoti Barman represented the Appellant while Advocate Debabrata Saha Roy represented the Respondent.

Factual Background

The writ petition was filed for issuance of a writ of mandamus to direct the appellants to release/ disburse the amount deducted from the writ petitioner’s handling and transport bills on account of demurrage charges. The Petitioner also sought a direction to the appellants not to withhold any amount as deducted from the writ petitioner’s handling and transport bills on account of demurrage charges amounting to Rs. 1,46,67,382.

Arguments

One of the contentions raised by the FCI was that there was no privity of contract between the FCI and the writ petitioner, and a positive direction to pay a particular sum of money could not have been issued to the appellant, FCI. It was further stated that nowhere in the writ petitioner had disclosed as to how the sum of Rs. 1,46,67,382 was computed, and the calculation in that regard was never made known. The CWC contended that the terms and conditions of the agreement between the writ petitioner and CWC were binding upon the writ petitioner and one such condition was an arbitration clause which would operate as a bar for the writ petitioner to maintain the writ petition.

The Senior Advocate appearing for the writ petitioner referred to the affidavit-in-opposition filed in the writ petition by CWC wherein it had been stated that the alleged demurrage charges arose on account of non-availability/ insufficiency of storage place at Central Warehouse, Raninagar and the Warehouse Manager of CWC repeatedly informed the Area Manager of FCI, Jalpaiguri about the shortage of space in accommodating rakes placement since that would exceed beyond the occupancy reserved by and allotted to the FCI thereat.

Reasoning

The Bench, at the outset, explained, “It is well settled that generally the Court should not exercise its writ jurisdiction to enforce the contractual obligation as the primary purpose of the writ of mandamus, is to protect and establish rights and to impose a corresponding imperative duty existing in law. The grant or refusal of the writ is on the discretion of the Court and the writ cannot be granted unless it is established that there is an existing legal right of the applicant or an existing duty of the respondent. Thus, it has been held that the writ does not like to protect or establish a legal right but to enforce one that is already established.”

Coming to the facts of the case, the Bench noted that the writ petitioner entered into a contract with CWC for handling and transportation works in respect of receipts, dispatches, re-bagging, standardization and ex-godowns release, etc. The agreement contained an arbitration clause stating that all disputes and differences arising out of or in any way touching or concerning the agreement shall be referred to arbitration by any person appointed by the Managing Director, CWC, New Delhi.

The Bench was of the view that when there was no dispute as regards the facts and there was no dispute or differences between CWC and the writ petitioner with regard to the correctness of the deduction of demurrage charges by FCI. Thus, the question of resorting to arbitration as provided in the agreement between the writ petitioner and CWC would not arise. Therefore, the writ petition was maintainable and the Single Bench was fully justified in entertaining the writ petition.

As per the Bench, the claim made by the writ petitioner was not barred by limitation as the writ petitioner couldn’t be faulted for having waited till CWC was favoured with an appropriate reply by FCI, more particularly, because the writ petitioner was continuing to perform various other contracts for CWC.The Bench also held that the action of FCI in levying demurrage on CWC was wholly arbitrary, unreasonable and unjustified as the CWC at the very first instance, had lodged a “caveat” stating that they shall not be liable for any demurrage charges. Therefore, FCI was wholly unjustified in taking a stand that the deduction was never challenged or disputed.

Thus, dismissing the appeal, the High Court asked FCI to pay a sum of Rs. 1,46,67,382 to CWC. “...upon receipt of the said amount, CWC shall pay the writ petitioner the said amount within two weeks thereafter”, it concluded.

Cause Title: Chairman-cum-managing Director, Food Corporation of India and Others Versus Sunil Saha and Others (Neutral Citation: 2025:CHC-AS:809-DB)

Appearance:

Appellants: Advocates Devajyoti Barman, Sudhir Kumar Sengupta, Samrat Chowdhury

Respondent: Advocates Debabrata Saha Roy, Pingal Bhattacharyya, Neil Basu, Sankha Biswas

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