Writ Against Third Party Is Maintainable Despite Arbitration Clause When There Are No Disputes Between Contracting Parties: Calcutta HC

Brief Facts:

The present intra court appeals have been filed against an order passed by the Single Bench in writ petition. By the impugned order, the Single Judge allowed the writ petition and directed both appellants to disburse the amount of Rs. 1,46,67,382/- deducted from the writ petitioner's handling and transport bills within a specified timeframe.

Aggrieved by this direction, the appellants – the Food Corporation of India (FCI) in MAT 806 of 2024 and the Central Warehousing Corporation (CWC) in FMA 735 of 2024 – have filed these appeals.

Contentions:

The FCI submitted that there is 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 submitted that the claim made by the writ petitioner is barred by limitation as the deduction towards the demurrage charges was done by FCI from the amounts payable to CWC and the writ petition having been filed in the year 2018 ought to have been dismissed.

The CWC submitted that the terms and conditions of the agreement between the writ petitioner and CWC were reduced into writing and such terms and conditions are binding upon the writ petitioner and one such condition being an arbitration clause which would operate as a bar for the writ petitioner to maintain the writ petition.

The Writ Petitioner submitted that the quantum of money directed to be paid to the writ petitioner by the learned Writ Court was clearly quantified and not in dispute and therefore, the learned Writ Court was fully justified in issuing the direction to effect payment to the writ petitioner.

It was further submitted that the claim made by the writ petitioner is not barred by limitation, as several representations were made by the petitioner to the appellant, with the earliest dated 06.06.2014 and the most recent communication on 19th December 2017.

Lastly, it was submitted that following this, an application was filed under the Right to Information Act on 21st December 2017. Since the writ petitioner did not receive any response to these communications, they had no other option but to approach this Court and file the writ petition.

Observations:

The court at the outset observed that generally, the Court should not exercise its writ jurisdiction to enforce contractual obligations, as the primary purpose of a writ of mandamus is to protect and establish rights and impose corresponding legal duties.

It further added that the grant or refusal of the writ is at the Court's discretion and can only be issued if an existing legal right of the applicant or duty of the respondent is established. The writ is intended to enforce rights that are already established, not to create new ones.

While keeping in mind the above proposition, the court proceeded to analyse the present case and observed that from the averments in the affidavit-in-opposition filed by CWC to the writ petition, it is clear that CWC disputed and denied the claim for significant demurrage charges and their deduction by FCI. CWC agreed with the writ petitioner that, in the given circumstances, no demurrage charges were leviable or deductible.

It further added that the deduction of demurrage charges was made by FCI in the bills raised by CWC, and consequently, CWC made the same deduction in the bills submitted by the writ petitioner.

Based on the above, it held that since there was no dispute between CWC and the writ petitioner regarding the demurrage charges, the question of invoking the arbitration clause does not arise, and the existence of such a clause cannot bar the filing of the writ petition based on the facts and circumstances of the case.

The court further observed that an important fact from the communication is the footnote in the letter, which was marked to the General Manager (West Bengal, FCI, Kolkata), stating that demurrage and warfare charges were arbitrarily deducted despite correspondence from the Warehouse Manager, CWC, to the Area Office, FCI, Jalpaiguri, regarding vacant space during the rakes' placement.

It further said that the Area Manager, FCI, and other officials were aware of the situation and assured CWC that it would not be held liable for detention. CWC expressed surprise at the deductions. The contents of the letter, dated 10.04.2013, were not disputed by FCI. Since there was no dispute between CWC and the writ petitioner regarding the deduction, resorting to arbitration as per the agreement was unnecessary.

Based on the above, it held that therefore, the writ petition was maintainable, and the learned Single Bench was justified in entertaining it. Further correspondence between FCI and CWC confirmed that FCI was aware that dispatches exceeded storage capacity and should have been canceled, as CWC had informed FCI in 2012.

The court further opined that the agreement was between the writ petitioner and CWC; hence, the petitioner rightly approached CWC first, not FCI. CWC consistently maintained that no demurrage charges were leviable, leading the petitioner to believe CWC would support their claim. Given that the petitioner was also engaged in other contracts with CWC, their decision to wait for CWC's communication with FCI was justified.

It held that therefore, the petitioner's claim is not barred by limitation. CWC's eventual inaction, possibly due to its administrative ties with FCI, unfairly disadvantaged the petitioner, who was not at fault.

The court further observed that the FCI's claim that CWC never challenged the deduction is factually incorrect. CWC had, from the outset, clearly stated through multiple communications that it would not be liable for any demurrage charges. Hence, FCI's stand that the deduction was undisputed is wholly unjustified.

Accordingly, the present appeals were dismissed and the impugned order was affirmed.

Case Title: INDIA AND OTHERS VERSUS SUNIL SAHA AND OTHERS

Case Number: MAT 806 OF 2024 AND FMA 735 OF 2024

Judgment Date: 06/05/2025

Mr. Devajyoti Barman, Adv. Mr. Sudhir Kumar Sengupta, Adv., For the Appellants [in MAT 806 of 2024 and For the Respondent in FMA 735 of 2024]

Mr. Samrat Chowdhury, Adv. ,For the Appellant [in FMA 735 of 2024 and for the Respondent/CWC in MAT 806 of 2024]

Mr. Debabrata Saha Roy, Adv. Mr. Pingal Bhattacharyya, Adv. Mr. Neil Basu, Adv. Mr. Sankha Biswas, Adv. , For the Respondent/Writ Petitioner

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