2011 (7) TMI 1308 - HC - Indian Laws

Summary

Issues involved:
The judgment deals with the issue of the maintainability of a civil writ petition in light of an arbitration clause in a dealership agreement.

Summary:
1. The respondent, a petitioner, had its retail outlet dealership terminated by the appellant-Corporation due to a change in land ownership without approval. The respondent filed a civil writ petition seeking to quash the termination decision, which was allowed by the Single Judge. The appellant argued that the petition was not maintainable due to the arbitration clause in the agreement.

2. The main issue raised was the maintainability of the civil writ petition in light of the arbitration clause in the dealership agreement, which mandated arbitration for dispute resolution.

3. The Single Judge held that despite the availability of an alternative remedy through arbitration, the High Court could still entertain the writ petition in certain circumstances justifying the exercise of extraordinary writ jurisdiction under Article 226.

4. The appellant contended that the respondent should have pursued arbitration as per the agreement, citing relevant judgments supporting the referral of disputes to arbitration. The cancellation of the dealership was considered a determinative right suitable for arbitration.

5. The respondent opposed the appellant's arguments, relying on a Supreme Court judgment stating that the existence of an arbitration clause does not preclude parties from approaching the High Court for relief without exhausting alternative remedies.

6. The Division Bench disagreed with the Single Judge's decision, citing Supreme Court precedent that an arbitration clause generally bars invoking the writ jurisdiction of the High Court unless exceptional circumstances warrant otherwise.

7. The Bench emphasized that in commercial transactions like this case, the role of an arbitration clause is crucial, and without patent illegality or violation of fundamental rights, the Court should defer to arbitration proceedings.

8. Ultimately, the Bench allowed the appeal, setting aside the Single Judge's judgment and directing the parties to initiate arbitration proceedings without prejudice to their rights.