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2025 Supreme(Sikk) 101

2025 SHC 101
THE HIGH COURT OF SIKKIM : GANGTOK
Meenakshi Madan Rai, J. 
 Swadhi Health Management LLP and Another – Petitioners 
Versus
State of Sikkim and Others – Respondents 
WP(C) No.04 of 2023
Decided On : 29-08-2025
 Advocates Appeared :
For the Petitioner : Mr. Munawwar Naseem, Mr. Harish Gaur and Mr. Bhusan Nepal, Advocates 
For the Respondent : Mr. Aarohi Bhalla, Additional Advocate General with Mr. Thinlay Dorjee Bhutia, Government Advocate 
Ms. Charulata Chettri, Legal Officer, Health and Family Welfare Department

A writ petition is not maintainable for pure contractual money claims involving disputed facts when an alternative, binding arbitration agreement exists between the parties.

Headnote:(A) Constitution of India - Article 226 - Writ jurisdiction - Maintainability - Contractual dispute involving services and payment claims - Where an agreement incorporates an arbitration clause, the writ court should generally decline to adjudicate disputed questions of fact and relegate parties to the agreed arbitral forum. (Paras 6, 8, 11)

(B) Arbitration - Appointment of arbitrator - Statutory provisions regarding bias or independence - A contract naming a government official as an arbitrator is not inherently void, though courts retain the power to intervene if the appointment process or specific arbitrator selection prevents impartial and efficient dispute resolution. (Paras 8, 8(i))

Facts of the case:
A service provider initiated a writ petition against a public authority seeking payment for services rendered under a health management scheme. The authority raised a preliminary objection, arguing that the petition concerned a contractual money claim involving disputed facts and was subject to an arbitration clause within the service agreement.

Findings of Court:
The court observed that the dispute was essentially contractual and involved complex questions of fact regarding the performance of duties and entitlement to payments. The presence of a clear arbitration clause meant that the court should not exercise its extraordinary writ jurisdiction when an alternative, agreed-upon forum existed for resolving such disputes.

Issues: Whether a writ petition is maintainable for a civil money claim arising from a contract when an arbitration clause remains in effect and factual matters are in dispute.

Ratio Decidendi: In purely contractual matters governed by arbitration agreements, where facts are contested and no statutory or constitutional duty is sought to be enforced, the court must adhere to the agreed dispute resolution mechanism rather than entertaining a writ petition under Article 226.

Result: Writ petition disposed of with liberty to the petitioners to pursue the remedy of arbitration.

Table of Content
1. basis of contract formation and alleged non-payment of dues. (Para 1 , 2)
2. conflict between fundamental rights/statutory duties and contractual arbitration clauses. (Para 3 , 4)
3. requirement to exhaust contractual dispute resolution mechanisms. (Para 5 , 6 , 7 , 8 , 9)
4. writ jurisdiction is excluded by the existence of binding arbitration agreements. (Para 10 , 11)
5. dismissal of writ petition with liberty to pursue arbitration. (Para 12)

JUDGMENT :

Meenakshi Madan Rai, J.

1. The root of strife between the Petitioners and the Respondents pivots around the alleged non-payment of Rs. 5,90,00,000/- (Rupees five crores and ninety lakhs) only, towards administration, facilitation and management of the Su-Swastha Yojana, through Su-Swastha Facilitation Centre, for the financial year 2021-22, to the Petitioner No.1 by the State-Respondents.

2. The Petitioners' case, very briefly summarised, is that, the Government sought to launch a Health Scheme for Sikkim Government employees and their dependent family members with the purpose of providing cashless medical treatment. Su-Swastha Yojana was therefore conceived and a Tender floated by the Respondents No.1 and 2 on 02-11-2020, to Award the Contract for the Su-Swastha Yojana Facilitation Centre. The Contract was awarded to the Petitioner No.1 by the Respondents No.1 and 2 after completion of all necessary formalities. The Work Order, bearing No.108/H&FW, dated 04-02-2021, was issued by the Respondents No.1 and 2 in favour of the Petitioner No.1, confirming that the Government of Sikkim had approved the implementation of Su- Swastha Yojana Scheme by the Petitioner No.1 and the Government had accepted to operationalise the Facilitation Centre. One room was allotted to the Petitioners to set up the Facilitation Centre vide Office Order, bearing No.3014/H&FW, dated 05-02-2021. The work commenced on an urgent basis as per the verbal instructions of the Respondents No.1 and 2, consequent upon which the operation of the Facilitation Centre and the Su-Swastha Yojana was taken up by the Petitioners at their own costs and expenses without lapse in terms of Clause 3 of the Contract. With the launch of this Scheme, more than 84,000 (eighty-four thousand) beneficiaries were enrolled in the Su-Swastha Yojana. In the meanwhile, the Service Contract Agreement was also finalised between the Petitioners and the Respondents. Clause 5 of the Contract mentioned that Rs. 5,90,00,000/- (Rupees five crores and ninety lakhs) only, including GST, being an amount of minimum guaranteed consideration, is payable to the Petitioners. The Sikkim Su-Swastha Yojana (Employees Health Scheme) Rules, 2021, were notified by the Respondents No.1 and 2, vide Notification No.237/H&FW, dated 22- 06-2021, while the existing Sikkim Services (Medical Facilities) Rules of 1981 were repealed. The Government Departments were directed to deduct contributions of the Government employees, from their monthly salaries of September, 2021, vide Circular issued by Respondent No.4, dated 07-09-2021. A Demand Notice dated 23- 08-2021 was served by the Petitioners to the Respondents No.2 and 3, requesting them to release payment to the Petitioners in terms of the Contract and a Reminder issued on 07-09-2021. This was followed by another Demand Note, dated 06-10-2021, served on the Respondent No.2, however no payments were made by the Respondents for services rendered by the Petitioner No.1 in the financial year 2021-22. The Respondents thus failed to pay the minimum guaranteed amount in terms of the Contract. A Right to Information Act, 2015, application came to be filed by the Petitioner, dated 29-06-2022, with the Respondents No.1, 2 and 4, in order to obtain necessary documents pertaining to the said Scheme. Respondent No.2 sent a response on 10-08-2022, whereby a copy of the Contract was provided by the Respondents. The responses brought to light that no budgetary allocation was provided by Respondent No.1 in the budget of

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