In a significant ruling, the Calcutta High Court has clarified that a writ petition against a third party remains maintainable even when the agreement contains an arbitration clause, provided there are no disputes between the contracting parties. The Division Bench comprising Chief Justice T.S. Sivagnanam and Justice Chaitali Chatterjee (Das) delivered this decision while dismissing appeals filed by the Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) challenging the maintainability of a writ petition filed by a contractor.
The intra-court appeals—MAT 806 of 2024 by FCI and FMA 735 of 2024 by CWC—were filed against the judgment of the Single Judge. The Single Bench had allowed the writ petition and directed both appellants to refund ₹1,46,67,382, which was deducted from the writ petitioner’s bills towards demurrage charges.
"The existence of an arbitration clause between parties to a contract cannot by itself oust the jurisdiction of the High Court under Article 226 when the petition raises issues of arbitrariness by a third party," the court emphasized.
FCI argued that there was no privity of contract between it and the writ petitioner and that the Single Judge should not have issued a direction to pay a fixed amount. FCI also contended that the claim was time-barred, as the deductions were made several years before the petition was filed in 2018.
CWC submitted that its contract with the petitioner had an arbitration clause, which served as a bar to maintain a writ. It further argued that all contractual terms had been clearly set out and accepted by the petitioner.
In contrast, the writ petitioner submitted that the amount deducted was specific and undisputed, and the court was correct in directing payment. It was also submitted that the claim was not time-barred, as the petitioner had continuously made representations from June 2014 to December 2017 and eventually filed an RTI application on December 21, 2017. With no response from the authorities, the petitioner had no option but to move the court.
The High Court acknowledged that generally, courts do not enforce contractual obligations via writ jurisdiction. However, it added:
A writ of mandamus can be issued only when a legal right exists and a corresponding duty is established. It cannot be invoked to create new rights but to enforce existing ones.
Upon examining the records, the court noted that CWC itself had disputed the demurrage charges deducted by FCI. The deductions were initially made by FCI in CWC’s bills, and CWC passed the same onto the writ petitioner. Despite this, CWC consistently maintained that demurrage charges were not applicable in the circumstances and were deducted arbitrarily.
The court referred to a letter dated April 10, 2013, from CWC to FCI that had explicitly opposed such deductions and mentioned that rakes had been placed despite available space, a fact acknowledged by FCI’s own officials. Importantly, FCI did not deny the contents of this communication.
"As there was no dispute between CWC and the petitioner regarding the deductions, the arbitration clause had no bearing. Thus, the writ petition was rightly entertained," the court observed.
The bench also dismissed FCI’s claim that CWC never challenged the deduction, noting that CWC had, through multiple communications, clearly expressed its disagreement. The Court held that the petitioner had acted reasonably in initially relying on CWC to resolve the issue with FCI, especially since the petitioner had other ongoing contracts with CWC.
Regarding limitation, the court ruled in the petitioner’s favor, holding that the representations made between 2014 and 2017 and the lack of any adequate response justified the delay in approaching the court.
"The claim is not barred by limitation. CWC’s inaction, influenced by its administrative association with FCI, unfairly impacted the petitioner, who had no fault," the bench held.
Dismissing both appeals, the Division Bench affirmed the order of the Single Judge directing FCI and CWC to refund the deducted amount.
Case Title: India and Others versus Sunil Saha and Others
Case Numbers: MAT 806 of 2024 and FMA 735 of 2024
Judgment Date: May 6, 2025
Bench: Chief Justice T.S. Sivagnanam and Justice Chaitali Chatterjee (Das)
Advocates:
For Appellants in MAT 806 of 2024 and Respondent in FMA 735 of 2024 – Mr. Devajyoti Barman, Mr. Sudhir Kumar Sengupta
For Appellant in FMA 735 of 2024 and Respondent/CWC in MAT 806 of 2024 – Mr. Samrat Chowdhury
For Respondent/Writ Petitioner – Mr. Debabrata Saha Roy, Mr. Pingal Bhattacharyya, Mr. Neil Basu, Mr. Sankha Biswas
