Arbitration Clause in Commercial Contracts Bars Writ Jurisdiction for Disputes Involving Interpretation of Contractual Terms

The Petitioner, M/s Shah Caters, entered into a Memorandum of Agreement (MoA) dated 11.09.2024 with the Archaeological Survey of India (ASI) to provide cafeteria services at the Red Fort Complex

Clause 5 of the MoA stipulated that no license fee would be payable for periods when the monument was closed for Independence Day and Republic Day celebrations

The Petitioner deducted pro-rata fees for these closures and for an extraordinary closure following a bomb blast in December 2025

While these payments were initially accepted, a new officer issued a demand notice dated 20.05.2026 for ₹7,42,560/- and a subsequent termination notice dated 05.06.2026 for non-payment

The Petitioner challenged these notices via a writ petition, while the Respondent raised a preliminary objection regarding maintainability due to an arbitration clause in the MoA

1. Whether the High Court should entertain a writ petition under Article 226 of the Constitution of India when the underlying contract contains an arbitration clause for dispute resolution.

2. Whether the dispute regarding the interpretation of license fee waivers and factual payments constitutes a public law element justifying writ jurisdiction.

The court applied the principle that while an arbitration clause is not an absolute bar to writ jurisdiction, it should be exercised sparingly in contractual matters

It relied on State of U.P. v. Bridge & Roof Co. (India) Ltd., which held that interpretation of private contracts is a matter for arbitration or civil courts, not writ petitions

The court further cited ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. and Joshi Technologies International Inc. v. Union of India to emphasize that disputes involving complex factual matrices and contractual rights should be relegated to the agreed alternative dispute resolution mechanism

It referenced Unitech Ltd. v. Telangana State Industrial Infrastructure Corpn., noting that relief under Article 226 requires a showing of state arbitrariness that violates constitutional mandates under Article 14

The Court reasoned that the dispute is fundamentally rooted in the private law realm of a contract (the MoA) and lacks an independent "public law element"

The controversy involves interpreting Clause 5 of the MoA and verifying factual claims regarding payment history, correspondence, and periods of closure

Under the doctrine established in McDermott International Inc., the interpretation of such terms falls within the expertise of an arbitral tribunal

The Court observed that because the adjudication requires an appreciation of evidence and the "contractual conduct" of the parties, it is unsuitable for summary writ proceedings

The mere allegation of "arbitrariness" in a demand notice does not override the parties' conscious decision to resolve disputes via arbitration

The Court dismissed the petition, directing the Petitioner to invoke arbitration or other legal remedies. It clarified that no opinion was expressed on the merits of the license fee demand, leaving all contentions open for the arbitral tribunal