Prakash Asphaltings and Toll Highways (India) Ltd. vs M.P. State Industrial Development Corporation Ltd.

Prakash Shrivastava, J.—Heard finally with consent.

This application u/S.11(5) of the Arbitration and Conciliation Act, 1996 has been filed for appointment of the independent Arbitrator for resolving the dispute between the parties.

In brief, the case of the applicant is that the bids were invited by the respondent to widen and strengthen 27 kilo meter of State highway No. 27 ie. Mhow - Ghatabillod road and also for reconstruction and repairing of major and minor bridges and culverts through Built Operate and Transfer (BOT) basis on the condition that the contractor would be entitled to recover the toll from the vehicles passing through the road for a particular period. The tender of the applicant was accepted and the agreement was executed. The work was completed and the completion certificate was issued on 7/6/2001. In respect of the deposit of the security amount some dispute had arisen and the respondent had adjusted a sum of 9.80 lakhs from the amount payable to the applicant. There was also a dispute in respect of the construction of bridge on Chainage No. 1.625 by the applicant which according to the applicant was the additional work for which no payment was made nor increase number of toll days were given, therefore, the applicant vide letter dated 26/5/2010 requested the respondent to appoint the Arbitrator under the Arbitration and Conciliation Act and thereafter the correspondence had taken place between the parties, but the Arbitrator was not appointed, hence the present application for appointment of Arbitrator was filed.

Initially this court vide order dated 14/9/2011 had disposed off the arbitration case with a direction to the applicant to approach the Tribunal under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, but thereafter in review petition No. 68/2014 vide order dated 7/1/2015 the earlier order was recalled and the Arbitration Case was restored.

Learned counsel for applicant submits that the agreement between the parties is a concessionaire agreement, therefore, the applicant has no remedy of approaching the Madhyastham Tribunal under the M.P. Madhyastham Adhikaran Adhiniyam. He further submits that the dispute relating to the additional work and unauthorised adjustment of amount is a dispute arising out of the agreement, therefore, the matter is required to be referred to an independent arbitrator.

Counsel for respondent has opposed the application and has submitted that the applicant has remedy of approaching the Madhyastham Tribunal under the M.P. Madhyastham Adhikaran Adhiniyam and that the dispute relating to the additional work is not covered under the agreement.

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

The agreement Annexure P/2 in respect of strengthening and widening of Mhow - Ghatabillod road 27 kilo meter SH No. 27 including reconstruction and repairing of major and minor bridges and culverts on Built Operate and Transfer (BOT) basis, is not in dispute. The para 26.2 of the agreement which provides for the settlement of dispute by way of arbitration reads as under:-

26.2: If a dispute arising out of and/or in connection with and/or in relation to this agreement or breach or termination thereof exists between the parties and the same cannot be settled within thirty (30) days by mutual discussions, such disputes or differences shall be referred to Arbitration under the provisions of the Arbitration and Conciliation Act 1996. The Arbitration panel decision shall be final and binding on the parties.

Provided that the disputes which comes under the provisions of clause(d) of section 2 of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 shall be referred to the Arbitration Tribunal constituted under section 3 of the said Act.

The disputes which are covered by main clause above are to be decided by the arbitrator appointed under the Arbitration and Conciliation Act, 1996 but in terms of the proviso, the disputes covered by Sec.2(d) of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam 1983 are required to be referred to the arbitration tribunal. Sec.2(d) of the Act of 1983 defines the dispute to mean a claim of a certain money valued at Rs.50,000/- or more relating to any difference arising out of the execution or non execution of works contract or part thereof. Works contract has been defined u/S. 2(i) of the Act.

In the present case, the contract between the parties is not a works contract. This issue has already been examined by this court while considering the similar contract in the matter of M/S. Jabalpur Corridor (India) Ltd. and another Vs. Madhya Pradesh Road Development Corporation Ltd. and others in WP No. 6557/2013 by order dated 4/12/2013 whereby this court has held that such a contract is not a works contract, but it is a concession agreement. This Court considering the distinction between the works contract and concession agreement in the matter of M/s/Jabalpur corridor (India) Ltd. (supra) has held as under:-

The expression ''works contract'' as defined in the 1983 Act has a restricted meaning and has special and limited connotation and the same does not include detailed design, financing and operation of the contract. The works contract is a lump sum contract wherein the contractor has to quote the amount for execution of the work based on details furnished by the employer. There is no necessity for creation of any Escrow Account in works contract. In works contract the payment is made against the running account bills prepared by contractor and submitted to the employer periodically. Whereas in concession agreement, the concessionaire has to utilise and arrange the funds. The concessionaire under the agreement after completion of the construction recovers the amount invested by him for completion of the project by way of toll. No State Support Agreement is executed in case of a works contract whereas the same is executed in a case of concession agreement. It is pertinent to mention here that the petitioner is not liable to pay Value Added Tax, Sales Tax and other taxes under the concession agreement which are payable under the works contract. The aforesaid salient features clearly show that there is distinction between the works contract and concession agreement. As stated supra, the State Support Agreement forms an integral part of concession agreement and both have to be read together. By no stretch of imagination State Support Agreement can be termed as ''works contract'', and both the aforesaid agreements contain provisions with regard to resolution of dispute under 1996 Act. For this reason also concession agreement cannot be termed as works contract. 11. The salient features of the present contract indicate that the contract in question is a concession agreement and is not a works contract. Therefore, the plea of the respondent that the applicant has a remedy of approaching the Madhyastham Tribunal under the Act of 1983 cannot be accepted and is hereby rejected.

A further objection has been raised by the respondent that the additional work of construction of bridge as Chainage No. 1.625 is not included in the original agreement, but the counsel for respondent has prima-facie demonstrated by referring to clause 1.1 (i) read with clause 37 of the Special Conditions of Contract that the additional work is covered under the contract. He has also pointed out that the amount of Rs.9.8 lakhs which has been allegedly unauthorisedly adjusted is a dispute arising out of the contract. Thus, at this stage the plea of the respondent for rejection of arbitration case on the ground that the dispute is not covered by the arbitration agreement cannot be accepted. However, the respondent will be at liberty to raise this issue before the arbitrator which will be decided on its own merits without being influenced by any observations made in this order.

Considering the arbitration clause as also the nature of dispute between the parties, I am of the opinion that an independent arbitrator need be appointed for resolving the dispute between the parties. Accordingly Hon.Mr. Justice V.S. Kokje (Retired Judge, High Court of MP) R/o 201, Park Residency, 2/4, Bapna Compound, Racecourse Road, Indore (MP) is appointed as an independent arbitrator for resolving the dispute between the parties. The parties are directed to appear before the learned Arbitrator on 10/4/2015.

Arbitration Case is accordingly disposed off.

C.C. as per rules.