M/S Tapi Prestressed Products Ltd. & Another vs Mprdc Through The Managing Director

The petitioners have sought appointment of an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short ‘the Central

Act’) to resolve the dispute arising out of a concession agreement executed on 6.3.2003 for development of Jabalpur-Narsinghpur-Pipariya Road,

total length of 140.4 Kms.

The argument of the learned counsel for the petitioners is that the petitioners are not claiming ascertained sum as is contemplated in Madhya

Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (for short ‘the State Act’), therefore, the jurisdiction of this Court can be invoked under

Section 11(6) of the Central Act. Reliance is placed upon a Full Bench judgment of this Court in a case reported as Viva Highways Ltd. Vs. Madhya

Pradesh Road Development Corporation Ltd. (2017) 2 MPLJ 681), particularly, on the following paragraph, which reads as under:-

“76. Shri Amit Seth submitted that money can be ascertained on the basis of average toll collection for a specified period or on the basis of cash

flow chart, financial identical rate of return (FIRR) and yearly cash flow statement (YCFS). We do not see much merit in the said contention. As the

applicants have based their claim to operate the project for a specified period, if they succeed in their claim, they will get extra days for operating the

project. For example, if a concessionaire who is operating a toll plaza succeeds, what he will get will be in terms of extension of days and not in terms

of money which is ascertainable or ascertained. During extended period of operation of projects, how much will be the vehicular movement and how

much toll will be collected cannot be ascertained at this point of time by any process of reasoning. Similarly, while operating a sports complex, how

much the Concessionaire will earn cannot be determined/ascertained by any guess work. For this reason, the claim of the applicants is in terms of

extension of days to operate the project and they are unable to put forth a claim of ascertained money. However, at this stage, it must be made clear

that when a claim is ascertainable and yet the concessionaire has not ascertained the claim in order to wriggle out of definition of “disputeâ€, the

matter would be different and in such cases the forum for adjudication would be the Tribunal under the Adhiniyam of 1983. Hence, each case needs

to be examined in this regard.â€​

Learned counsel for the petitioners submits that in Civil Appeal No.4018/2018 (State of Madhya Pradesh & another Vs. Ashoka Infraways Ltd. &

another) decided on 18.4.2018, the Supreme Court has allowed the appeal in view of the judgment of the Full Bench of this Court in Viva Highways

Ltd. (supra), therefore, the appointment of an Arbitrator is governed by the Central Act. The order passed by the Supreme Court reads as under:-

“It is not disputed that the judgment relied upon in the impugned order has since been overruled by a larger bench of the High Court in Viva

Highways Ltd. Vs. Madhya Pradesh Road Development Corporation reported in 2017 (2) MPLJ 681. Accordingly, the impugned order is set aside

and the appeal is allowed.

It is made clear that if any arbitration proceedings are pending, the same will now be governed by the above judgment of the High Court.â€​

The said order arises out of an order passed by the Division Bench this Court in Arbitration Appeal No.11/2015 (Ashoka Infraways Limited &

another Vs. State of M.P. & another) decided on 4.2.2016. In the said appeal an order passed under Section 9 of the Central Act was under

challenge holding that the dispute was covered under the State Act. One of the arguments raised in the aforesaid order was that the appellants are

entitled to additional days for collecting the toll tax as the delay was caused by the State. The Division Bench of this Court has allowed the appeal and

permitted the appellants to move an application under the Central Act. Once the said judgment has been set aside by the Supreme Court, the finding

returned by the Division Bench of this Court in Ashoka Infraways Ltd. (supra) that the appellants are entitled to toll days is also deemed to have been

set aside.

A Full Bench of this Court in Arbitration Case No.40/2016 (Shri Gouri Ganesh Shri Balaji Constructions “C†Class Contractor Vs. Executive

Engineer, PWD), decided on 3.5.2018, has held that the expression of ‘ascertained amount†appearing in Section 2(1)(d) of the State Act includes

the amount of consequential relief. It was held as under:-

“55. Thus, we hold that the expression “ascertained amount†appearing in Section 2(1)(d) of the State Act includes the amount of

consequential relief. If a particular consequential relief can be claimed, the aggrieved person must claim that relief in a reference otherwise the

reference would not be maintainable. The consequential relief in a case of termination of contract can be the value of the remaining work; value of

revenue recovery certificate would be the consequential relief and the amount of loss computable in terms of money in case of black-listing of the

Firm would be the consequential relief. Such instances are only illustrative and are not exhaustive. The consequential relief in each case would

dependent upon the nature of the contract, relief which can be claimed by an aggrieved person. In terms of Clause (2) of Section 7-A of the State

Act, if the aggrieved person omits to claim a relief though available on the date of seeking reference; he is debarred from claiming such relief in a

subsequent action. Therefore, keeping in view the rule that all claims must be included in one petition, as may be arising on the date of reference, has

to include the consequential reliefs otherwise the reference would be not maintainable, not for the reason that it is not a works contract or it involves

not an ascertained money but for the reason that the aggrieved person though could claim ascertained amount but having omitted to claim so, the

reference would not be maintainable and would be liable to be declined.â€​

In Civil Appeal No.4017/2018 (M/s Gangotri Enterprises Ltd. vs. Madhya Pradesh Road Development Corporation and Another) decided on

18.04.2018, the Supreme Court held that the expression “ascertained money†as used in Section 2(1)(d) of the State Act will include not only the

amount already ascertained but the amount, which may be ascertained during the proceedings on the basis of the claims/counter claims of the parties.

The relevant extract reads as under:-

“2. Our attention has been drawn to the definition of “dispute†under Section 2(d) of the Madhya Pradesh Madhyastham Adhikaran

Adhiniyam, 1983 (“1983 Actâ€​) which is as follows:

“ 'dispute' means claim of ascertained money valued at Rupees 50,000 or more relating to any difference arising out of the execution or non-

execution of a works contract or part thereof.â€​

We consider it appropriate to clarify that the expression “ascertained money†as used in Section 2(d) of the 1983 Act will include not only the

amount already ascertained but the amount which may be ascertained during the proceedings on the basis of claims/counter claims of the parties.â€

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The Full Bench of this Court in Viva Highways Ltd. (supra) has observed that if a concessionaire, who is operating a toll plaza succeeds; what it

will get will be in terms of extension of days and not in terms of money which is ascertainable or ascertained. The said finding of the Full Bench in

Viva Highways Ltd. (supra) no longer holds good in view of the order passed by Supreme Court in M/s Gangotri Enterprises Ltd.’s case (supra).

Therefore, in terms of Supreme Court order in M/s Gangotri Enterprises Ltd. (supra), the ascertained money as used in Section 2(1)(d) of the State

Act will include not only the amount already ascertained but the amount which may be ascertained during the proceedings on the basis of

claims/counter claims of the parties. Therefore, the amount to be collected in the toll days is the consequential relief, required to be claimed in

proceedings under the State Act only.

Another aspect required to be examined in the present case is as to whether the provisions of the State Act would prevail over the Central Act.

Section 2 of the Central Act read as under:-

Definitions.- (1) In this Part, unless the context otherwise requires, -

**Â Â Â Â **Â Â Â **

(3) This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration.

(4) This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in

force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as

the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder.

(5) Subject to the provisions of sub-section (4), and save in so far as is otherwise provided by any law for the time being in force or in any agreement

in force between India and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto.

It is also pertinent to note here that Civil Appeal No.2615/2018 (State of Madhya Pradesh and others Vs. Gammon India Ltd.) was also decided

along with Civil Appeal No.974/2012 (Madhya Pradesh Rural Road Development Authority and Another Vs. M/s L.G. Choudhary Engineers and

Contractors) by the Supreme Court on 8.3.2018. The Court held that the State Act will prevail over the Central Act. The said appeal was against an

order of this Court rejecting an objection that the Arbitration and Conciliation Act, 1996 will not apply as the proceedings under the State Act were

pending before the Arbitral Tribunal. The Supreme Court examined the contentions and held as under:-

“Learned counsel for the State has drawn our attention to Section 2(4) of the Central Act which is as follows:

“This part except sub-section (1) of Section 40, Sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in

force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as

the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder.â€​

It was pointed out that the above provision was in pari materia with Section 46 of the Arbitration Act, 1940 which was interpreted by this Court in

Dhanrajamal Gobindram v. Shamji Kalidas & Co. (1961) 3 SCR 1020 : AIR 1961 SC 1285. This Court held:-

“Section 46 makes the provisions of any other enactment or any rules made thereunder to prevail over the Arbitration Act, if inconsistent with the

latter. In view of these several provisions, it is clear that the Arbitration Act applies to all Arbitrations and Chap. II makes it applicable also to

arbitrations, in which the arbitration agreement is asked to be filed in Court under Section 20 subject, however, to this that the provisions of any other

enactment or rules made thereunder, if inconsistent with the Arbitration Act, are to prevail.â€​

The same view was taken in Punjab State Electricity Board, Mahilpur v. Guru Nanak Cold Storage & ICE Factory, Mahilpur and Another (1996) 5

SCC 411 in para 12 which is as follows:

“Sections 6(1), 7, 12, 36 and 37 have expressly excluded from the operation of statutory arbitration. The rest of the provisions per force would get

attracted. But the provisions of the appropriate statute or rules should necessarily be consistent with the provisions of the Arbitration Act. In that

event, despite absence of an arbitration agreement, rest of the provisions of Arbitration Act would apply (as if there was an arbitration agreement

between the parties) and the dispute becomes arbitrable under the Arbitration Act, as if there was an arbitration agreement between the parties. If

there is any inconsistency, then the provisions of the Arbitration Act do not get attracted. Section 33 expressly gives power to the civil court to decide

the existence or validity of the arbitration agreement or the award as such. If this question was to arise, necessarily the civil court would be devoid of

jurisdiction to decide the dispute on merits but only in the forum of arbitration. The existence and validity of the arbitration agreement should be

decided by the civil court. The arbitrator cannot clothe himself with jurisdiction to conclusively decide it by himself as a jurisdictional issue. It is for the

court to decide it. The dispute on merits should be resolved by the arbitrator and the legality of the award would be subject to decision by the court

under Section 33â€​.

In view of above, we are of the view that the State law will prevail in terms of Section 2(4) of the Central Act. The reference under the State law

was valid and could be decided in accordance with the State.â€​

(emphasis supplied)

In view of the aforesaid, the State Act would prevail over the Central Act. Therefore, the reference to an Arbitrator under the Central Act would

not be maintainable as the State Act has occupied the field of arbitration in relation to works contract. In other words, any dispute relating to works

contract whether there is arbitration clause or not, has to be decided by the statutory Arbitral Tribunal under the State Act.

The Central Act becomes inapplicable in view of Section 2 of the Central Act; therefore, the remedy of the petitioners is only under the State Act

and not under the Central Act.

Thus, the present petition is dismissed but with liberty to the petitioners to take recourse to statutory arbitration under the State Act.