Landmark Engineering vs The State of M.P. and Others

Alok Aradhe, J.—By means of this application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ''''the Act, 1996''''), the petitioner seeks appointment of an Arbitrator.

Facts giving rise to filing of the arbitration case briefly stated are that on 31.10.2009, the respondent Chief Engineer, M.P. Public Works Department, Bhopal, floated a notice inviting tender for work of improvement of Amarwara, Umariya, Banki-Bihariya road. The petitioner participated in the tender and its bid was accepted. Thereafter, an agreement dated 1.2.2010 was executed. The respondents terminated the contract of the petitioner by invoking clause 59.2(c) of the agreement. The petitioner forwarded a notice on 25.4.2013 and requested the respondents to appoint an Arbitrator, as per clause 25.3(a) of the agreement and suggested the name of Mr. G.S. Palnitkar, retired Engineer-in-Chief and ex-member of Arbitration Tribunal as an Arbitrator. The notice submitted by the petitioner failed to evoke any response. Thereupon, the petitioner has approached this Court by filing the instant petition on 12.3.2014 under Section 11(6) of the Act.

Learned counsel for the petitioner submits that the provisions of Madhya Pradesh Madhyastham Adkiharan Adhiniyam, 1983 (hereinafter referred to as ''the Act, 1983'') apply only in the absence of an arbitration clause under the agreement and in the instant case, the contract between the parties contains an arbitration clause, therefore, the provisions of 1996 Act are applicable. In support of aforesaid submission, reliance has been placed on the decision of the Supreme Court in the case of A.P.S. Kushwaha (SSI Unit) Vs. Municipal Corporation and Others, AIR 2011 SC 1935 : (2011) 2 ARBLR 452 : (2011) 2 CompLJ 10 : (2011) 2 CTC 717 : (2011) 2 SCALE 627 : (2011) 13 SCC 258 : (2011) AIRSCW 2402 . It is further submitted that since the contract in question has been rescinded, therefore, the ratio laid down in the decision rendered by the Supreme Court in the case of M.P. Rural Road Development Authority and Another Vs.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 , does not apply to the facts of the case and consequently, the decision rendered by the learned Single Judge in the case of State of M.P. and others v. M/s. Lion Engineering Consultant, rendered in Writ Petition No. 4559/14 vide order dated 25.11.2014 has no application to the facts of the case. While referring to a decision rendered in the case of M/s. Jabalpur Corridor (India) Pvt. Ltd. and Another Vs. M.P. Road Development Corporation Ltd. and Others, (2014) 1 MPHT 215 : (2014) 2 MPLJ 276 , it has been contended that the decision rendered by the Supreme Court in A.P.S. Kushwaha''s case (supra) shall prevail. While referring to the order dated 16.9.2013 passed in Arbitration Case No. 20/2012, in the case of M/s. Sai Construction Pvt. Ltd., v. Executive Engineer, Public Works Department, it is submitted that an Arbitrator has to be appointed as per the agreement.

On the other hand, learned Government Advocate for the respondents submitted that the contract in question is a ''works contract'' and therefore, the petitioner has the remedy to approach the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, in view of the law laid down in the case of Lion Engineering (supra). It is further submitted that the decision rendered in the case of A.P.S. Kushwaha (supra) is of no assistance to the petitioner in the facts of the case, as the decision in A.P.S. Kushwaha is based on the case of Va Tech Escher Wyass Flovel Ltd. Vs. M.P.S.E. Board and Another, (2011) 13 SCC 261 , which has been held to be per incuriam in L.P. Choudhary''s case (supra). Learned Government Advocate has also invited the attention of this Court to Section 7 of the 1983 Act.

I have considered the submissions made by learned counsel for the parties. Admittedly, the 1983 Act, which received the assent of the President on 7.10.1983 is an Act to provide for establishment of the Tribunal to arbitrate the dispute to which the State Government or a public undertaking wholly or substantially controlled by the State Government is a party and for matter incidental thereto or connected therewith. The Supreme Court has dealt with the provisions of 1983 Act in the case 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 , wherein, it has been held that the 1983 Act is a special Act and the State of M.P. has created a separate forum for the purpose of determination of dispute arising out of the works contract.

In the case of Va Tech (supra), the Supreme Court held that the provisions of 1983 Act would apply to a case where there is no arbitration agreement and in case where the agreement contains an arbitration clause, the provisions of 1996 Act would apply. Reliance was placed in Va Tech''s case (supra) by the Supreme Court in the case of A.P.S. Kushwaha (supra) and similar view was taken. However, the Division Bench of the Supreme Court in the case of L.G. Choudhary''s (supra) in para 42 held that the decision in Va Tech is per incuriam. Hon''ble Justice Gyan Sudha Mishra concurred with the view taken by Hon''ble Justice A.K. Ganguly and has held that dispute arising out of execution of works'' contract has to be referred to the M.P. State Arbitration Tribunal and not under the 1996 Act. The relevant paragraphs of the judgment are reproduced below for the facility of reference:

"42. Therefore, appeal is allowed and the judgment of the High Court which is based on the reasoning of Va Tech (supra) is set aside. This Court holds the decision in Va Tech (supra) has been rendered in per incuriam. In that view of the matter the arbitration proceeding may proceed under M.P. Act of 1983 and not under A.C. Act 1996.

In view of this, the legal and logical consequence which can be reasonably drawn from the definition of ''works contract'' would be, that if there is a dispute between the contracting parties for any reason relating to works contract which include execution of any work, relating to construction, repair or maintenance of any building or super-structure, dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory, workshop, power house, transformers or such other works of the State Government or Public Undertaking including an agreement for the supply of goods or material and all other matters relating to the execution of any of the said works, the same would fall within the ambit of the definition of ''works contract'' and hence all disputes pertaining or arising out of execution of the works contract will have to be referred to the M.P. State Arbitration Tribunal as envisaged under Section 7 of the Act of 1983. Hence, in addition to the reasons assigned in the judgment and order of learned Brother Justice Ganguly, disputes arising out of execution of works contract has to be referred to the M.P. State Arbitration Tribunal and not under the Arbitration and Conciliation Act, 1996."

It is pertinent to note that in the instant case, admittedly, the contract in question is a works contract.

Section 7(1) of the 1983 Act reads as under:--

"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."

Thus, from perusal of Section 7(1) of the Act, it is evident that irrespective of the fact whether the agreement contains an arbitration clause or not, the dispute has to be referred to the Tribunal constituted under the 1986 Act. It is trite law that statutory provision would prevail over provisions of the agreement. Therefore, the contention of the petitioner that since the agreement contains an arbitration clause, therefore, the provisions of 1996 Act would apply, cannot be accepted.

So far as reliance placed by the petitioner on the decision rendered in the case of Jabalpur Corridor (supra) is concerned, this Court on the basis of interpretation of the agreement held the same to be a concession agreement and not a works contract. Therefore, in the facts of that case, it was held that the dispute between the parties has to be resolved in accordance with the 1996 Act. Alternatively, it was held that even if the contract in question is considered to be a work contract, then also, in view of the decision laid down by the Supreme Court in the case of A.P.S. Kushwaha (supra), the dispute has to be resolved as per the provisions of 1996 Act. However, in the case of Jabalpur Corridor (supra), it has not been noticed that the decision in the case of A.P.S. Kushwaha is based on the view taken in VA Tech (supra), which was held to be per incuriam in L.G. Choudhary''s case, and the submission pertaining to works contract has been dealt with by way of alternative submission only. Therefore, the decision in the case of Jabalpur Corridor (supra) is of no assistance to the petitioner in the facts of the case, as admittedly, in the instant case, the agreement in question is a works contract.

In view of preceding analysis, the inevitable conclusion is that the application under Section 11(6) of the Act, is not maintainable. However, the petitioner is granted the liberty to approach the Madhya Pradesh Arbitration Tribunal for redressal of his grievance in accordance with law. With the aforesaid liberty, the case is disposed of.