Dismissed

Parcel Carriers (India) Pvt. Ltd. v. Union of India and 2 Ors.

Bombay HC23 Apr 2010WP/1951/2009

Case brief

AI extract

What is this about?

This judgment dismissed two writ petitions filed by parcel logistics companies seeking mandatory extension of lease agreements with Central Railway. The High Court held that the existence of a valid arbitration clause in the lease agreements rendered the writ petitions non-maintainable under Article 226, as Section 8 of the Arbitration and Conciliation Act, 1996 mandates a judicial referral to arb

What did the court decide?

The writ petitions were dismissed; the rule was discharged; parties directed to abide by the arbitration clause and refer the dispute to the sole arbitrator.

Parcel Carriers (India) Pvt. Ltd. Vs Union of India and 2 Ors. — Arbitration | Bombay HC (2010)

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MMJ

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1951 OF 2009

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Parcel Carriers (India) Pvt Ltd. ) a private limited company duly registered ) and incorporated under the Companies Act, ) 1956, having its office at 4, Yallawa Smruti, ) Bamanwada, Justice M.C. Chhagle Road, ) Vile Parle (E), Mumbai 400 099 )..Petitioners

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Versus

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Union of India ) through Ministry of Railways, Rail Bhavan ) New Delhi, 110 001 )

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The General Manager, Central Railway ) having his office at C.S.T. Mumbai 400 002) 3. The Chief Commercial Manager, ) Central Railway, having his office at ) C.S.T. Mumbai 400 001 )..Respondents

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Mr. S. M. Katkam i/b Law Global for the Petitioners. Mr. T. J. Pandian for the Respondents

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WITH

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WRIT PETITION NO.2566 OF 2009

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Scorpion Express Pvt. Ltd. ) A company registered under the Companies ) Act, 1956, having its office at 3, Kewal ) Industrial Estate, Senapati Bapat Marg, ) Lower Parel (West), Mumbai 400 013 )..Petitioner

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Vs.

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Central Railway (names of Zonal Railway/ ) division) of Mumbai Railway ) having their office at Chhatrapati Shivaji ) Terminus, Mumbai )..Respondent

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Mr. N. Engineer i/b RMG Law Associates for the Petitioners

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Mr. T.J. Pandian for the Respondents

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CORAM : J. N. PATEL &

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A.P. BHANGALE, JJ

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RESERVED ON : 16th April, 2010

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PRONOUNCED ON: 23rd April, 2010

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JUDGMENT (Per Shri A. P. BHANGALE, J.) :

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Since common questions of law and facts arise in both these

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petitions, they were heard together and are being disposed of by this common Judgment.

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Rule. Learned counsel appearing for the respondents waives service. By consent, rule is made returnable forthwith in both the petitions.

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By these writ petitions, the petitioners seek issuance of a mandamus or such direction against the respondents to adhere to clause 20.1 of the terms of the lease agreement between the petitioners and the

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Central Railway and for a direction/mandamus to the respondents to enter in to fresh lease agreement for a further period of two years by accepting 25% extra lease freight, as provided under clause 20.1 of the lease agreement.

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Briefly stated the facts in Writ petition No.1951 of 2009 are thus : The petitioners are a private limited company having their registered office at Vile Parle (E), Mumbai. They had entered into an agreement for leasing of parcel space in train No.5645-DN, operating between LTT (Kurla) to Guwahati (Assam) for a period of three years with effect from 27-9-2006 to 26-9-2009 with the respondentCentral Railway. The petitioners were awarded the contract pursuant to the tender floated by the Central Railway for a consideration of Rs.1,43,110/- for making use of the parcel van for a single trip between Kurla Mumbai to Guwahati (Assam).

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So far as the facts in Writ Petition No.2566 of 2009 are concerned, in brief, they read thus:

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The petitioners are a company having its registered office at 3, Kewal Industrial Estate, S.B. Marg, Lower Parel (W), Mumbai 400 013, and

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are engaged in the business of logistics, transporters and exporters.

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According to the petitioners, they had participated in a tender process of the respondents for taking on lease a parcel /space in break van/parcel van in train No.8029/30 from LTT to Shalimar. Accordingly an agreement dated 16^th January 2007 came to be executed between the petitioners and the respondents for giving on lease the said parcel van of 25 tonnes for transportation on weekly basis by the said train with effect from 16^th January 2007 on round trip basis for a period of three years.

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Clause 20.1 of the lease agreement, which is relevant for decision in these petitions, reads thus:

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“20.1 Extension of lease is permissible only in case of long term lease of 3 years wherein the same can be extended only once, by 2 more years at a lease rate of 25% more than the lumpsum leased freight rate subject to satisfactory performance by the lease holder without any penalty for overloading or violation of any provision of the contract”.

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Clause 28.0 of the lease agreement which provides for an arbitration in the event of any difference of opinion or dispute between the parties to the lease agreement and which is also relevant for decision in these petitions, reads thus:

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“28.0- In the event of any difference of opinion or dispute between the Railway Administration and the

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Leaseholder as to the respective rights and obligations of the parties hereunder of as the true intent and meaning of these presents or any articles of condition thereof. Such difference of opinion shall be referred to the sole arbitrator or any officer appointed by the General Manager, Central Railway CSTM (name of head Quarter) for the time being whose decision shall be final, conclusive and binding on the parties, the intention of the parties being that every matter in respect of this agreement must be decided by him as sole arbitrator and not taken to a Civil Court. All disputes are subject to the territorial jurisdiction of Courts located in the Mumbai only.”

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According to the petitioners, they rendered extremely satisfactory services and there was no complaint against them of any nature. The petitioners by their respective letters, written prior to the expiry of their respective agreements, had requested the respondent-Central Railway to extend the lease agreement for a further period of two years and expressed their readiness and willingness to pay 25% extra freight. The petitioners by their respective letters had again requested the respondent-Central Railway to grant them extension of lease and also forwarded a copy of the agreement for lease but there was no response from the railway administration. Thus, alleging that their inaction is arbitrary, illegal, mala fide and nothing short of a colourable exercise of power, the petitioners have filed the present

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writ petitions under Article 226 of the Constitution of India praying for the reliefs, as stated above.

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Shri R.B.Dixit, the Deputy Chief Commercial Manager (Freight marketing) Central Railway by his affidavits in reply opposed the petitions on the ground that the petitioners have alternative remedy by way of a civil suit and they are not entitled to invoke the writ jurisdiction. It is further contended that in view of the arbitration clause in the contract between the parties, disputes arising out of the contract needs reference to arbitration and, therefore, the present writ petitions are not maintainable as an alternative remedy is available to the parties. According to the respondents, the contract for leasing with the petitioners expired by efflux of time. It is also contended that as the respondents decided to call for tenders for allotment of the lease, the competent authority by its letters advised the respective petitioners that it has regretted their request for extension of the contract for a further period of two years. Thus, the respondents prayed for the dismissal of the petition.

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10.The learned counsel appearing for the petitioners submitted that the respondents-railway are under contractual obligation to extend the

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term of the lease for two years and that the petitioners are entitled to

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insist upon continuance of the lease and that the respondents be ordered and directed, as prayed for in these petitions, while the learned counsel for the respondents submitted that all the disputes in relation to the arbitration agreement be referred to the arbitration, as already agreed between the parties.

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11.In support of the petitions, reliance is placed upon the ruling in State of Rajasthan Vs. Harishankar Rajendrapal {AIR 1966 SC 296 = (1965) 3 SCR 402}. It was an appeal in which two questions were raised:-

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“1. Whether provisions of Chapter-IV of the Rajasthan Minor Mineral Rules 1955, do not govern grant of mining leases by an auction under the provisions of Chapter V of the Rules ?

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Whether the proviso to Rule 30 gave discretion to the State Government to extend the period of the lease for any period not exceeding five years and that it is not mandatory that the State Government must extend the lease by a period of five years ?”

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12.The Rajasthan High Court has held upon the first question that the rules under Chapter IV are applicable to the mining leases granted under Chapter V and on the second question raised, it was held with reference to the interpretation of Rule 30 that State Government has

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no discretion to fix the initial period of the lease as well as to fix the

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period of extension of the lease. The Apex Court expressed its opinion that the Rajasthan High Court while interpreting the relevant

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Rules has rightly decided the above two questions. The case appears to have been decided with reference to the colour, content and context of the Rules which were relevant to the facts in that case and it cannot be pressed in to service in the facts and circumstances of the present case.

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13.The learned counsel for the petitioners then placed reliance upon the ruling in Gujarat State Financial Corporation Vs. M/s. Lotus Hotels Pvt Ltd. {(1983) 3 SCC 379}, in which the principle of promissory estoppel was explained as to when it can be invoked. With reference to the earlier rulings, it was held that instrumentality of the State cannot act in very unreasonable and arbitrary manner with the public and if their act cause harm, injury flowing from their unreasonable conduct, mandamus under Article 226 of the Constitution of India may be issued.

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14.Next reference is made to the ruling in Harbanslal Sahnia & Anr.

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Vs. Indian Oil Corporation Ltd. & Ors. {(2003) 2 SCC 107} to

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submit that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies :

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(i) where the writ petition seeks enforcement of any of the fundamental rights

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(ii) where there is failure of principles of natural justice, or

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(iii) where the orders or proceedings are wholly without jurisdiction or the vires of an act is challenged.

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In the peculiar facts and circumstances of that case, it was held that the petitioners’ dealership, which was their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such exceptional circumstances due to the first two contingencies, which were held attracted and applicable, the impugned order of termination of the dealership of the appellants (petitioners) was quashed and set aside. However, in the present case, there are no such averments in the petition to consider the case as extraordinary

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or exceptional to issue the mandamus, as prayed for by the

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petitioners.

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16.On the other hand, making reference to Empire Jute Company Ltd.

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Vs. Jute Corporation of India Ltd. & Anr. {(2007) 14 SCC 680}, the learned counsel for the respondents, while opposing the petitions, submitted that there can be no quarrel over the settled propositions of law. According to him, writ petition is an exceptional remedy to be granted in a well deserving exceptional case in extraordinary situation where the fundamental rights have been infringed or there is gross violation of the principles of natural justice and when the order or proceeding impugned, is illegal or wholly without jurisdiction and indefensible. In order to submit that writ petition is not ordinarily maintainable if an arbitration clause exists and disputes between the parties are covered thereby, the writ Court should not ordinarily exercise its power of judicial review to issue mandamus, as prayed for by the petitioners. It was observed that when disputed questions of the facts and law were involved, the High Court should have left the parties to avail the remedy under the arbitration clause that existed in the contract. The Apex Court

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observed thus :

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“22. The legal position has undergone a substantial change, having regard to Section 5 of the Arbitration and Conciliation Act, 1996 vis-a-vis provisions of the Arbitration Act, 1940. The said provision read as under:-

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“5. Extent of judicial intervention – Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.”

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In terms of the 1940 Act, even a civil suit could have been entertained subject of course to exercise of the court’s jurisdiction under Section 21 thereof. Section 5 of the 1996 Act takes away the jurisdiction of the court. There cannot be any doubt whatsoever that the provision of the 1996 Act must be given effect to.

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As the disputed questions of facts as also the law are required to be determined by the arbitrator, we are of the opinion that all disputes between the parties should be directed to be resolved upon taking recourse to the arbitration agreement contained in Clause 9.0 of the sale order.”

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17.According to the learned counsel for the petitioners, the respondent-

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railway were bound to extend the lease period in favour of the petitioners as the word “may” is capable of meaning “must” or “shall” in the light of the context and where discretion is conferred upon a public authority coupled with an obligation, the word “may” which denotes discretion should be construed to mean a command, as is

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observed in the State of U.P. Vs. Jogendra Singh {(1964) 2 SCR

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197}. The interpretation has to be with reference to the context. The word “may” ordinarily confers discretion. It is not mandatory but directory in nature, as is held in People for Elemination of Stray Troubles by its Convener Dr. Rosario Menezes & Ors. vs. State of Goa by its Chief Secretary {2009 (1) BCR 501 (FB)}. The relevant portion of the observation reads thus:

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“165. It is true that the word “may” is capable of meaning “must” or “shall” in the light of context and where a discretion is conferred upon a public authority coupled with an obligation, the word “may”, which denotes discretion, needs to be construed to mean command. See, (Rangaswami Textile Commissioner Vs. Sagar Textiles Mills (P) Ltd.), 1977 DGLS (soft) 56 : 1977(2) SCC 578. It is equally true, that the word “may” is primarily permissive and only in certain circumstances, it is treated as mandatory. It is used to give discretion to Courts/public authority. The word “may” in sub-section (2) of section 191-BA, in my view, is not mandatory but directory in nature.”

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18.In our view, when the language of the statute is plain and unambiguous, the Court must give effect to the words as used in the statute. It would not be open for the Court to adopt hypothetical construction on the ground that is more consistent with the policy and object of the Act or to have considerations of the equity. The meaning of the word “may” shall have to be construed in the light of

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the colour, content and context of the statute with reference to which

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it may be used. The discussion as to the correct interpretation of the words “may” and “shall” in a contract between the parties need not detain us any longer once we have come across and perused the “arbitration clause” which provides that dispute between the parties shall be referred to arbitration, in view of the Arbitration and Conciliation Act, 1996. It is a special enactment providing special forum for adjudication of arbitral dispute. If the dispute is covered by pre-requisites contained in Section 8 of the Act, the Judicial authority has no option but to refer the dispute for arbitration. In M/s. Agri Gold Exims Ltd. Vs. M/s. Sri Lakshmi Knits and Wovens & ors.

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{JT 2007 (2) SC 602} it was held in paragraph 23 as under:-

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“23. Section 8 of the Act is per-emptory in nature. In a case where there exists an arbitration agreement, the court is under obligation to refer the parties to the arbitration in terms of the arbitration agreement (see Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity Midway Petroleums { JT 2003 (6) SC 1} {(2003) 6 SCC 503} ) and Rashtriya Ispat Nigam Ltd. (Supra). No issue would, therefore, remain to be decided in a suit if existence of the arbitration agreement is not disputed, the High Court, therefore, in our opinion, was right in referring the dispute between the parties to arbitration.”

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Next reference may be made to M/s. Magma Leasing & Finance

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Ltd. Vs. Potluri Madhavilata & Anr. {2009 AIR SCW 7041} wherein while considering the question as to whether the parties must be referred to arbitration under Section 8 of the Arbitration &

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Conciliation Act, 1996, the Apex Court observed thus:

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“21. Section 8 reads thus:

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“8. Power to refer parties to arbitration where there is an arbitration agreement:-

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(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

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(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

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(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”

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An analysis of Section 8 would show that for its applicability, the following conditions must be satisfied: (a) that there exists an arbitration agreement; (b) that action has been brought to the court by one party to the arbitration agreement against the other party; (c) that the subject matter of the suit is same as the subject matter of the arbitration agreement; (d) that the other

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party before he submits his first statement of the substance of the dispute,moves the court for referring the parties to arbitration and (e) that along with the application the other party tenders the original arbitration agreement or duly certified copy thereof.

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Section 8 is the form of legislative command to the court and once the pre-requisite conditions as aforesaid are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfillment of conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration.”

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20.Having considered the latest legal position, it is clear that it is a

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legislative command to the Court once it is found that there is an arbitration agreement between the parties and once an action has been brought to the Court by one party to the agreement on the same subject-matter of the agreement and the other party submitted for reference to the arbitration and when a true copy of the contract containing the “arbitration agreement” is already annexed along with the petition, all the pre-conditions under Section 8 of the Arbitration and Conciliation Act, 1996 are satisfied and, therefore, the parties must refer their dispute to arbitration as per clause 28.0 i.e., the arbitration agreement between them. Merely because the contract has come to an end by its termination, the arbitration clause does not

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get perished nor it becomes inoperative to resolve the dispute.

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21.In our opinion, the parties are duty bound to solve their dispute by mode of arbitration, as agreed by them. We, therefore, direct the parties to abide by the arbitration clause in the contract and to take steps to refer the dispute to the sole arbitrator in Mumbai, as agreed between the parties.

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22.For the reasons stated above, the writ petitions fail and are hereby

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dismissed. The rule is discharged in both the petitions with no order as to costs.

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(J.N. PATEL, J.)

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(A.P. BHANGALE, J.)

Parcel Carriers (India) Pvt. Ltd. v. Union of India and 2 Ors.

Case brief

What is this about?

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Parcel Carriers (India) Pvt. Ltd. v. Union of India and 2 Ors.

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