Arbitration Clauses Survive Implementation Agreement Disputes Regardless of Contractual Restrictions on Interim Reliefr

In brief

The question

1. Whether the Writ Court was correct in dismissing the petition as non-maintainable due to the existence of an arbitration clause in the Implementation Agreement

The court held

The Court upheld the Single Judge's decision that the writ petition was not maintainable due to the alternative remedy of arbitration

It also directed

Declared Clause 9.2 of the Implementation Agreement unenforceable as it illegally curtailed the tribunal's power to grant interim relief

With the consent of both parties, the Court appointed Mr. Justice Vineet Saran (Retd.) as the Sole Arbitrator. The arbitration is to be conducted in Sikkim per the Fourth Schedule of the Act

The writ appeal was disposed of accordingly

01Facts

The Appellant, TT Energy Private Limited, entered into an Implementation Agreement (IA) on 03.09.2008 with the State of Sikkim for a hydroelectric project

p. 3

On 08.02.2012, the State issued a notification closing the project, leading the Appellant to invoke an arbitration clause in 2014, though proceedings did not progress

p. 3

In 2025, Respondent No. 1 issued a new Request for Proposal (RFP) for the same project

p. 3

The Appellant filed a writ petition (WP(C) No. 68 of 2025) seeking to quash the RFP and enforce the 2008 IA

p. 3

The Single Judge dismissed the petition as not maintainable, holding that the existence of an arbitration clause in the IA survived for dispute resolution despite questions on the IA's subsistence

¶ 11, 13

02Issues

i.1. Whether the Writ Court was correct in dismissing the petition as non-maintainable due to the existence of an arbitration clause in the Implementation Agreement

pp. 2-4

ii.2. Whether Clause 9.2 of the Implementation Agreement, which restricted the Arbitral Tribunal’s power to grant interim relief, is legally enforceable

p. 5

03Law Applied

The court applied the principle of "separability" of arbitration clauses, which ensures that an arbitration agreement remains valid for resolving disputes even if the underlying contract is claimed to be terminated or non-existent

¶ 11

Section 17 of the Arbitration and Conciliation Act, 1996, which empowers Arbitral Tribunals to grant interim measures

pp. 5-6

Statutory powers granted to a tribunal cannot be curtailed by private agreement between parties

p. 6

Provisions in the judgment · 5 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 12 Section 17 Section 4 Section 6 Section 7

04Reasoning

The Court observed that the dispute involved significant factual disagreements—specifically regarding the 2012 project closure and the Appellant's alleged abandonment of earlier arbitration—which are better suited for an arbitral tribunal than a Writ Court

¶ 7

The Division Bench concurred with the Single Judge that the writ jurisdiction under Article 226 cannot be used to oust a valid arbitration clause when disputed questions of fact arise from a contract

¶ 7, 10

Regarding Clause 9.2 of the IA, which prohibited the tribunal from granting injunctions, the Court reasoned that such a clause directly contravenes Section 12 and Section 17 of the Arbitration and Conciliation Act, 1996

p. 6

Since the Respondents agreed not to insist on this clause, the Court found it unenforceable as it attempted to bypass mandatory statutory provisions

¶ 9-10

05Holding

The Court upheld the Single Judge's decision that the writ petition was not maintainable due to the alternative remedy of arbitration

¶ 7

Declared Clause 9.2 of the Implementation Agreement unenforceable as it illegally curtailed the tribunal's power to grant interim relief

¶ 10

With the consent of both parties, the Court appointed Mr. Justice Vineet Saran (Retd.) as the Sole Arbitrator. The arbitration is to be conducted in Sikkim per the Fourth Schedule of the Act

¶ 11-13

The writ appeal was disposed of accordingly

¶ 14

LawLens.High Court of Sikkim

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