Deepak Cables (India) Ltd. vs Managing Director, MPPKVVCL and Others

Prakash Shrivastava, J.—This application under Section 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996 (for short "the Act") has been filed for appointment of the independent arbitrator for resolution of dispute between the parties.

In brief, the case of the applicant is that the applicant was awarded the contract for work of Erection, interconnection with the related plant and equipment, calibration, testing, commissioning the systems together with all accessories and associated equipment (Erection Portion), work of design, engineering, manufacture, fabrication, assembly, pre- shipment, testing at manufacturer''s works, proper packing for transportation and delivery at Indore city (Supply Portion) and in this regard the two separate agreements for erection portion and supply portion dated 19.2.2014 (Annexure A/1 and A/2) were executed. There was a delay in the execution of the contract and the applicant had approached the respondent in terms of the various clauses of the contract for settling the claim, but the respondents had failed to settle the claim therefore, the applicant had sent the letter dated 3.9.2013 invoking Clause 26.4 of the General Conditions of Contract and making a prayer for appointment of arbitrator for resolving the dispute between the parties. Inspite of the receipt of the said letter, the respondents had not appointed the independent arbitrator, therefore, the present application has been filed under Section 11 of the Arbitration and Conciliation Act, 1996.

The respondents have filed their reply taking the stand that the contract between the parties is Works Contract, therefore, the applicant has remedy of approaching the Madhyastham Tribunal under the M.P. Madhyastham Adhikiran Adhiniyam, 1983 (for short "the Madhyastham Adhiniyam") and the present application under Section 11 of the Arbitration and Conciliation Act, 1996 is not maintainable.

I have heard the learned counsel for the parties and perused the record.

Clause 26 of the General Conditions of Contract provides for arbitration and reads as under :-

"26.0 ARBITRATION

26.1 If any dispute or difference of any kind whatsoever shall arise between the owner and the contractor arising out of the contract for the performance of the works whether during the progress of the works or after its completion or whether before or after the termination, abandonment or breach of the contract, it shall, in the first place, be referred to and settled by the Engineer, who, within a period of thirty (30) days after being requested by either party to do so, shall give written notice of his decision to the owner and the contractor.

26.2 Same as hereinafter provided, such decision in respect of every matter so referred shall be final and binding upon the parties until the completion of the works and shall forthwith be given effect to by the contractor who shall proceed with the works with all due diligence whether he or the owner requires arbitration as hereinafter provided or not.

26.3 If after the Engineer has given written notice of his decision to the parties, no claim to arbitration has been communicated to him by either party within thirty (30) days from the receipt of such notice, the said decision shall become final and binding on the parties.

26.4 In the event of the Engineer failing to notify his decision as aforesaid within thirty (30) days after being requested as aforesaid or in the event of either the owner or the contractor being dissatisfied with any such decision, or within thirty (30) days after the expiry of mentioned period of thirty (30) days, as the case may be, either party may require that the matters in dispute be referred to arbitration as hereinafter provided.

26.5 All disputes or differences in respect of which the decision, if any, of the Engineer has not become final or binding, as aforesaid, shall be settled by arbitration in the manner hereinafter provided.

26.6 The arbitration shall be conducted as per provision of Arbitration and Conciliation Act 1996 and / or The Madhya Pradesh Madhyastham Adhikaran Adhiniyam 1983."

In the present case, it is not in dispute that the contract between the parties is Works Contract. The Clause 26.6 provides for conducting the arbitration as per provisions of the Arbitration and Conciliation Act, 1996 and/or the Madhya Pradesh Madhyastham Adhikiran Adhiniyam, 1983 therefore, the issue before this Court is if inspite of the fact that the contract between the parties is Works contract, an independent arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 can be appointed to resolve the dispute between the parties.

Section 7 of the M.P. Madhyastham Adhikiran Adhiniyam, 1983 provides for reference to the Madhyastham Tribunal by a party to a Works Contract. Section 7(1) of the Madhyastham Adhiniyam reads as under :-

"7. Reference to Tribunal - (1) Either party to a works contract shall irrespective of the fact whether the agreement contains an arbitration clause or not, refer in writing the dispute to the Tribunal."

Initially the Supreme Court in the matter of Va Tech Escher Wyass Flovel Ltd. Vs. M.P.S.E. Board and Another, (2011) 13 SCC 261 , had taken the view that the 1983 Act only applies where there is no arbitration clause but it stands impliedly repealed by the Arbitration Act of 1996 where there is an arbitration clause.

The Supreme Court in a subsequent judgment in the matter of Ravikant Bansal Vs. M.P. Rural Road Development Authority and Another, (2012) 3 SCC 513 has distinguished its earlier judgment in the matter of VATECH (supra) and held that if the arbitration clause itself mentions that the arbitration will be done by the Madhyastham Tribunal, then the arbitration has to be done by the Tribunal.

This aspect of the matter has been examined in detail by the Supreme Court in another judgment in the matter of M.P. Rural Road Development Authority and Another Vs. L.G. Chaudhary Engineers and Cont., AIR 2012 SC 1228 : (2012) 2 ARBLR 65 : (2012) 1 SCALE 688 : (2012) 3 SCC 495 : (2012) AIRSCW 1344 : (2012) 2 Supreme 22 , whereby the learned judges of the Supreme Court have held the decision in the matter of VATECH (supra) as per in-curium because while rendering the decision in VATECH (supra), the earlier decision of the coordinate Bench in the matter of State of M.P. and Another Vs. Anshuman Shukla, AIR 2008 SC 2454 : (2008) 2 ARBLR 485 : (2008) 3 CLT 459 : (2008) 8 SCALE 425 : (2008) 7 SCC 487 : (2008) AIRSCW 3760 : (2008) 4 Supreme 335 and the provisions of Section 2(4) of the Arbitration and Conciliation Act, 1996 were not noticed. The difference of opinion between the Hon''ble judges of the Supreme Court in the matter of L.G. Chaudhary (supra) is only on the issue of invoking Section 7 of the Madhyastham Adhiniyam in case of dispute pertaining to termination, cancellation or repudiation of Works Contract, because one of the Hon''ble Judge has taken the view that the dispute arising out of cancellation and termination of contract would not fall within the jurisdiction of Madhyastham Tribunal but the said difference of opinion is not relevant for the present matter, since in this case the dispute does not arise out of cancellation or termination of the contract.

The Supreme Court in the matter of L.G. Chaudhary (supra) in Paragraph 47 has clearly held that the M.P. Act would operate in the State of Madhya Pradesh in respect of certain specified types of arbitrations which are covered under the Madhyastham Act of 1983 and further held in Paragraph 30 that the provisions of M.P. Act are saved under Section 2(4) of the Arbitration and Conciliation Act, 1996. In the matter of Anshuman Shukla (supra) also it has been held that the State of Madhya Pradesh under the Madhyastham Adhiniyam has created a separate forum for the purpose of determination of disputes arising inter alia out of the Works Contract. Thus for a dispute covered under the Madhyastham Adhiniyam, the parties are required to approach Madhyastham Tribunal.

Since in the present case the dispute has arisen in respect of execution of works contract, therefore, keeping in view the judgment in the matter of L.G. Chaudhary (supra) and Anshuman Shukla (supra), I am of the opinion that the present application under Section 11(6) of the Arbitration and Conciliation Act, 1996 is not maintainable and proper remedy available to the applicant is to approach the Madhyastham Tribunal under the provisions of M.P. Madhyastham Adhikiran Adhiniyam, 1983.