2005 (12) TMI 591 - HC - Indian Laws

Summary

Issues:
1. Adjustment of payments received through encashed Bank Guarantees on a First In First Out basis.
2. Challenge to the maintainability of the writ petitions based on the nature of the subject matter and the existence of an arbitration clause.

Analysis:

Issue 1: Adjustment of payments received through encashed Bank Guarantees
The writ petitions sought a writ of mandamus for directing the Respondents to adjust payments received via encashed Bank Guarantees on a First In First Out basis. The Petitioners had provided Bank Guarantees as per Interconnect Agreements, but financial difficulties arose, leading to the invocation of several Bank Guarantees by the Respondents. The Petitioners contended that a Shareholders Agreement superseded previous Agreements, limiting the liability to a certain amount. However, the Respondents initiated steps for recovering dues, leading to the present dispute.

Issue 2: Challenge to maintainability based on subject matter and arbitration clause
Two main contentions challenged the maintainability of the writ petitions. Firstly, it was argued that the subject matter, involving contractual disputes with BSNL and MTNL, fell outside the purview of writ jurisdiction. Secondly, the existence of an arbitration clause between the parties was highlighted, suggesting that the Petitioners should seek relief through arbitration rather than through writ proceedings. Previous judgments were cited to support the contention that disputes relating to contracts should not be entertained under Article 226 of the Constitution, emphasizing the need to adhere to contractual terms and seek resolution through appropriate legal avenues.

The judgment ultimately dismissed the writ petitions, emphasizing that the extraordinary jurisdiction under Article 226 of the Constitution was not warranted in this case. It was highlighted that the disputed questions of fact, the implementation of the First In First Out basis, and other complex matters should be addressed through civil suits or arbitral proceedings rather than through writ jurisdiction. The decision underscored the importance of respecting contractual obligations and pursuing appropriate legal remedies in contractual disputes, thereby setting a precedent for similar cases involving contractual matters and the exercise of writ jurisdiction.