Mandatory contractual amicable negotiations must precede pursuit of contractual remedies.

The petitioner was appointed as an insurance broker to provide insurance-broking and consultancy services to the Madhya Pradesh Warehousing and Logistics Corporation (“MPWLC”) under an agreement dated 24 March 2025. MPWLC issued a show-cause notice dated 30 July 2026 alleging several breaches and sought the petitioner’s explanation. The petitioner submitted a detailed reply on 5 August 2026. Thereafter, MPWLC terminated the agreement by order dated 25 August 2026 with effect from 31 August 2026, relying principally on Clause 1.4(a) of the agreement.

The petitioner challenged the termination on the grounds that MPWLC had failed to comply with the contractual requirements of notice, rectification period, inquiry, and reasonable opportunity of hearing under Clauses 1.4(d) and 1.4(j). It also contended that Clause 1.8 required the parties first to attempt amicable resolution through direct informal negotiations before resorting to arbitration.

MPWLC opposed the petition, contending that the dispute involved disputed questions of fact, that the petitioner had an efficacious alternative remedy under the arbitration clause, and that a fresh tender had subsequently been issued under which insurance services were to be obtained directly from general insurance companies rather than through a broker.

1. Whether MPWLC could terminate the agreement without complying with the contractual requirements relating to breach, rectification, inquiry, and reasonable opportunity of hearing under Clauses 1.4(a), 1.4(d), and 1.4(j).

2. Whether the petitioner’s challenge was premature or barred by the existence of the contractual dispute-resolution mechanism, particularly the requirement of direct informal negotiations under Clause 1.8(a) before arbitration.

3. Whether the fresh Notice Inviting Tender dated 2 September 2026 could proceed while the contractual dispute and termination remained unresolved.

The Court exercised jurisdiction under Article 226 of the Constitution and applied the contractual provisions governing termination and dispute resolution. Clause 1.4(a) permitted termination for failure to perform the scope of work after one month’s notice; Clause 1.4(d) permitted termination for breach only where the breach was not rectified within 30 days of notice; and Clause 1.4(j) required reasonable opportunity to explain, an inquiry, and consideration of the concerned party’s stand before cancellation.

Clause 1.8(a) required MPWLC and the successful bidder to make every effort to resolve disputes amicably through direct informal negotiation, while Clause 1.8(b) contemplated arbitration for disputes that could not be resolved. The Court held that the negotiation requirement was mandatory and a condition precedent to invocation of arbitration.

The respondents’ reliance on Skyline Agro Pvt. Ltd. v. State of M.P., W.P. No. 4915 of 2016, and Smt. Sunita Daryani v. Union of India, W.P. No. 4540 of 2023, was noted but not accepted as requiring dismissal of the petition.

The Court found that the show-cause notice and termination order merely alleged deficiencies and recorded that the petitioner’s reply was unsatisfactory; they did not demonstrate compliance with the contractual requirement of amicable resolution through direct informal negotiations.

The Court treated the word “shall” in Clause 1.8(a) as imposing a mandatory obligation and held that some positive effort by both parties to resolve the dispute was required before arbitration or further consequential action could be pursued.

Since no material showed that MPWLC had undertaken such negotiations either after the show-cause notice or after the termination order, the respondents could not rely on the alternative remedy of arbitration to defeat the writ petition.

The subsequent tender, issued within seven days of termination, risked creating complications and third-party rights while the dispute remained unresolved; therefore, it too could not proceed.

The judgment refers in parts to Clause 1.4(a) when directing amicable settlement, although the reproduced dispute-resolution provision identifies the negotiation obligation as Clause 1.8(a).

The matter was remitted to MPWLC to undertake amicable settlement efforts in accordance with the contractual dispute-resolution requirement and to observe the safeguards under Clauses 1.4(a) and 1.4(j) before taking any fresh decision.

The petitioner was directed to appear before the Managing Director of MPWLC on 18 September 2026. If amicable settlement failed, MPWLC could pass a fresh order, after complying with the contractual procedure and informing the petitioner of the failure of settlement, and could thereafter issue a fresh tender.