2006 (4) TMI 150 - HC - Customs

Writ petition dismissed for bypassing arbitration clause, parties advised to resolve through arbitration

The court dismissed the writ petition, holding that the petitioner could not bypass the arbitration clause and seek remedy under Article 226 of the ... Withdrawal of auction lot prior to physical delivery - conditions of sale - arbitrariness and Article 14 - contractual character of auction sale - arbitration clause ousting writ jurisdictionWithdrawal of auction lot prior to physical delivery - conditions of sale - arbitrariness and Article 14 - Validity of the impugned order withdrawing the auctioned goods and whether it was arbitrary or violative of natural justice. - HELD THAT: - The Court held that condition No. 11 of the general conditions of sale expressly permits withdrawal of any lot at any time before it is actually physically delivered out of the campus without disclosing reasons, subject to refund of any payment made. The petitioner did not contend that the goods had been physically delivered out of the campus. Given that the petitioner participated in the E-auction after accepting the general conditions of sale, he cannot challenge the respondents' right to withdraw the lot on the ground that reasons were not disclosed. The factual matrix of the cited Supreme Court authority relied upon by the petitioner was materially different and involved discrimination and non-application of mind; those observations do not render the present withdrawal arbitrary. The Court also noted the administrative sensitivities in auctions of confiscated/uncleared cargo which may justify non-disclosure of reasons. [Paras 8, 9, 10, 11, 12]The impugned withdrawal order is not arbitrary or violative of natural justice and is permissible under condition No. 11 of the conditions of sale.Contractual character of auction sale - arbitration clause ousting writ jurisdiction - Whether the petitioner can invoke writ jurisdiction under Article 226 in respect of contractually governed auction-sale disputes which contain an arbitration clause. - HELD THAT: - The Court concluded that the auction sale is a contract between the parties and not a statutory contract; consequently the parties' rights and obligations are governed by the contract. Condition No. 28 provides for reference of disputes to arbitration. In view of settled law that where an effective contractual remedy such as arbitration exists, extraordinary writ jurisdiction is not to be invoked to enforce contractual rights, the petitioner is bound to seek relief by arbitration. The Court relied on precedent establishing that arbitrators can decide questions of fact as well as law and that the existence of an alternative contractual remedy is a good ground to decline exercise of Article 226 jurisdiction. [Paras 15, 16, 17, 19, 20]The petitioner is bound by the arbitration clause in the conditions of sale and cannot maintain the writ petition; the matter should be pursued by arbitration.Final Conclusion: The writ petition was dismissed: the withdrawal of the auctioned goods was permitted under the conditions of sale and not arbitrary, and the petitioner is bound by the arbitration clause in the auction conditions, so the court declined to exercise writ jurisdiction. Issues Involved:1. Whether the title of goods passed to the petitioner upon payment.2. Whether the impugned order violated principles of natural justice.3. Whether the respondents' action was arbitrary and in violation of Article 14 of the Constitution.4. Whether the petitioner can bypass the arbitration clause and seek remedy under Article 226 of the Constitution.Detailed Analysis:1. Whether the title of goods passed to the petitioner upon payment:The petitioner argued that since he had paid the entire sale consideration and other statutory dues, the title of the goods had passed to him. However, the court noted that according to Condition No. 11 of the general conditions of sale, any lot could be withdrawn from the sale before it was physically delivered out of the campus without disclosing reasons. The court found that the goods were not physically delivered to the petitioner, and hence the title had not passed to him.2. Whether the impugned order violated principles of natural justice:The petitioner contended that the impugned order was a non-speaking order and was passed unilaterally without affording an opportunity of hearing, thus violating the principles of natural justice. The court, however, found that Condition No. 11 explicitly allowed the withdrawal of goods from sale without disclosing reasons, and the petitioner had accepted this condition by participating in the auction. Therefore, the court held that the order did not violate principles of natural justice.3. Whether the respondents' action was arbitrary and in violation of Article 14 of the Constitution:The petitioner relied on the Supreme Court decision in Union of India v. Dinesh Engineering Corporation to argue that the respondents' action was arbitrary. The court distinguished the facts of the present case from those in the cited decision, noting that there was no rival claimant and no evidence of discrimination or arbitrary rejection to favor another bidder. The court concluded that invoking Condition No. 11 was not arbitrary and did not violate Article 14.4. Whether the petitioner can bypass the arbitration clause and seek remedy under Article 226 of the Constitution:The court emphasized that the auction sale was a contractual matter governed by the terms of the contract, including an arbitration clause (Condition No. 28). Citing precedents, the court held that contractual disputes should be resolved through arbitration as stipulated in the contract and not through a writ petition under Article 226. The court reiterated that the extraordinary remedy under Article 226 cannot be invoked to enforce contractual obligations when an effective alternative remedy, such as arbitration, is available.Conclusion:The court dismissed the writ petition, stating that the petitioner could not bypass the arbitration clause and seek remedy under Article 226 of the Constitution. The petitioner was advised to resolve the dispute through arbitration as provided in the general conditions of the auction sale. The court found no violation of principles of natural justice or Article 14 and upheld the respondents' right to withdraw the auctioned goods as per the agreed terms.