Writ Jurisdiction Can't Be Invoked In Contractual Disputes Involving Disputed Facts Where Arbitration Clause Exists: Allahabad High Court

The Allahabad High Court has held that a writ petition under Article 226 of the Constitution is not maintainable in a contractual dispute where the controversy involves disputed questions of fact and remedy of arbitration is available to the aggrieved party under the agreement.The Court declined to entertain a challenge to the termination of a fisheries lease and the forfeiture of security, holding that the competing claims over the leased area and the sums due under the contract could be resolved only after the parties led evidence before the agreed forum.The bench of Justice Neeraj Tiwari and Justice Sudhanshu Chauhan held,“the present writ petition is not maintainable for the reason that an alternative and efficacious remedy by resorting to arbitration is available to the petitioner, and more so as the present controversy involves disputed questions of fact which can only be adjudicated after the parties have adduced their respective evidence.”Petitioner applied and secured the fishing rights of the Sharda Sagar Reservoir in Pilibhit through an e-tender floated by the UP Fisheries Development Corporation, for a term of 10 years. An agreement was executed on 29 August 2023, and the petitioner deposited a security amount of Rs. 67,70,825 via fixed deposit receipts, apart from other sums.Shortly after the petitioner began fishing, his employees were detained and their boats seized by forest authorities, who claimed that the area fell within the Pilibhit Tiger Reserve, where fishing was prohibited. Petitioner contended that a substantial part of the reservoir was unavailable to him as 683.88 hectares lay in the core area of the tiger reserve, a portion fell within Uttarakhand, and several villages within the reservoir had no water at all. Relying on the National Register of Large Dams, which recorded the reservoir's area as 5,765 hectares, petitioner submitted that the fishable area fell short of the advertised 6,880 hectares by 1,798.88 hectares, amounting to a fundamental breach by the Corporation. It was on this account that the petitioner had defaulted on the installments.By the impugned order dated 28 September 2024, the UP Fisheries Development Corporation terminated the agreement, forfeited the security, and called upon the petitioner to deposit Rs. 1,82,67,040, and directed the banks to release the bank guarantee in its favour.The UP Fisheries Development Corporation contended that the writ petition was not maintainable, as the agreement contained an arbitration clause and the controversy involved disputed questions of fact. It submitted that the lease had been taken on an “as-is-where-is” basis, that the tender required a bidder to inspect the reservoir before bidding, and that only a small part of the reservoir was unfit for fishing. The petitioner argued that the arbitration clause was not an absolute bar, and that the parties had already exchanged pleadings in a long-pending petition.The Court found that the respondents had not seriously disputed the shortfall in the allotted area and had given only an evasive reply on the point, so that the petitioner's contention prima facie had force. It held that actual area made available, the effect of any shortfall on the installments payable, the amount recoverable, and the validity of the termination were all disputed questions of fact that required evidence and could not be adjudicated under Article 226.Rejecting the petitioner's reliance on the judgment of the Supreme Court in Harbanslal Shania v. Indian Oil Corporation Ltd., the Court observed that the dealership in that case had been terminated in breach of the principles of natural justice and without any disputed facts. In the case before the Court, it held that several notices had been issued to the petitioner before termination, and no violation of fundamental rights had been shown, so the exception did not apply.The Court also declined to retain the petition merely because it had been pending long and pleadings had been exchanged. Relying on State of UP v. Ehsan, it held that a serious dispute on a question of fact, on which the material on record was inconclusive, was itself a compelling reason to relegate the party to the alternative remedy.The Court dismissed the writ petition with liberty to the petitioner to invoke arbitration under the Arbitration and Conciliation Act, 1996 within six weeks. The impugned orders were directed to remain stayed until then, the stay to stand automatically vacated after six weeks. Case Title: Netra Pal Singh v. State of U.P. and 2 OthersClick Here To Read/Download Order

Writ Jurisdiction Can't Be Invoked In Contractual Disputes Involving Disputed Facts Where Arbitration Clause Exists: Allahabad High Court

Upasna Agrawal

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Writ Jurisdiction Can't Be Invoked In Contractual Disputes Involving Disputed Facts Where Arbitration Clause Exists: Allahabad High Court

Upasna Agrawal

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