Uan Max Infra Ltd. vs State Of Madhya Pradesh

Sanjay Yadav, J.—Contending inter alia that in the execution of an agreement for construction/upgradation and maintenance of rural road certain disputes have arisen, the petitioner Contractor has filed this application under Section 11(5) and 6 of Arbitration and Conciliation Act, 1996, for appointment of Arbitrator and resolving of dispute by said Arbitrator.

Learned counsel appearing for the respondents however, has raised an objection as to maintainability of said application under 1996 Act on the ground that under the agreement there exists an Arbitration Clause and being a Works Contract the remedy for resolving the dispute lies with the Arbitration Tribunal constituted under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983.

Clause 4.3.29.2 of the Agreement envisages-

4.3.29.2- Except where otherwise specified in the contract, for the claim valued at Rs 50,000/- or more the decision of the Superintending Engineer of the Circle for the time being in respect of all questions and disputes relating to the meaning of the specification designed, drawing and instructions hereto before mentioned and as to the quality of workmanship or materials used on the mark or as to other question, claim, right matter or thing whatsoever, in anyway arising out of relating to the contract, designs during specifications, estimates, instructions, orders or those conditions or otherwise concerning the work of execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be final provided that the superintending Engineer shall before giving his decision in writing in the matter given to an opportunity of being heard to the parties to the contract.

If any party to the contract is dissatisfied with the final decision of the Superintending Engineer in respect of any matter, he may within 28 days after receiving notice of such decision may refer such dispute to the Arbitration Tribunal constituted under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1982 (No. 2 of 1983).

Though it is contended on behalf of the petitioner that with the decision by Supreme Court in Va Tech Escher Wyass Flovel Ltd. Vs. M.P.S.E. Board and Another, and A.P.S. Kushwaha (SSI Unit) Vs. Municipal Corporation and Others, the remedy under the Arbitration Clause is not available under 1983 Act, therefore, it is within the right of the petitioner to seek appointment of Arbitrator under 1996 Act.

The contentions are however jettison by learned counsel for the respondent.

It is contended that the decision passed by the Supreme Court in Ravikant Bansal v. M.P. Road Development Corporation S.L.P. (Civil) No. 18867/2011 and M.P. Rural Road Development Authority and Another Vs. L.G. Chaudhary Engineers and Cont., the decision held in V.A. Tech, has been held to be per incuriam.

It is urged that since A P S Kushwaha (supra) as is evident from paragraph 7 therein has relied upon V A Tech (supra) the principle of law laid down in these two judgments viz., V A Tech (supra) and A P S Kushwaha (supra) will not be of any help to the petitioner after the decision in L.G. Choudhary (supra).

Considered the rival submissions.

Since it is not in dispute that the contract in question is works contract; therefore, before dwelling on the contentions and counter contentions, and the effect of clause 24 and 25 in the agreement opportune it would to first take note of the law relating to work contract as it is applicable in the State of Madhya Pradesh.

That, the M.P. Madhyastham Adhikaran Adhiniyam, 1983, which received the assent of President on 7th October, 1983, was enacted to provide for the establishment of a Tribunal to arbitrate in disputes to which the State Government or a Public Undertaking wholly or substantially controlled by the State Government is a party and for matters incidental thereto or connected therewith. And, as observed in State of M.P. and Another Vs. Anshuman Shukla, by their Lordships "14. The Act is a special Act. It provided for compulsory arbitration. It provides for a reference. The Tribunal has the power of rejecting the reference at the threshold. It provides for a special limitation. It fixes a time limit for passing an Award. Section 14 of the Act provides that proceeding and the award can be challenged under special circumstances. Section 17, as noticed hereinbefore, provides for finality of the award, notwithstanding anything to the contrary contained in any other law relating to arbitration."

It was also observed by their Lordships in Anshuman Shukla (supra):

The provisions of the Act referred to hereinbefore clearly postulate that the State of Madhya Pradesh has created a separate forum for the purpose of determination of disputes arising inter alia out of the works contract. The Tribunal is not one which can be said to be a Domestic Tribunal. The Members of the Tribunal are not nominated by the parties. The disputants do not have any control over their appointment. The Tribunal may reject a reference at the threshold. It has the power to summon records. It has the power to record evidence. Its functions are not limited to one Bench. The Chairman of the Tribunal can refer the disputes to another Bench. Its decision is final. It can award costs. It can award interests. The finality of the decision is fortified by a legal fiction created by making an Award a decree of a Civil Court. It is executable as a decree of a Civil Court. The Award of the Arbitral Tribunal is not subject to the provisions of the Arbitration Act, 1940 and the Arbitration and Conciliation Act, 1996. The provisions of the said Acts have no application. 12. Some ripples were caused with a decision in Va Tech Escher Wyass Flovel Ltd. Vs. M.P.S.E. Board and Another, wherein it was held :

3......... In our opinion, the 1983 Act and the 1996 Act can be harmonised by holding that the 1983 Act only applies where there is no arbitration clause but it stands impliedly repealed by the 1996 Act where there is an arbitration clause. We hold accordingly. Hence, the impugned judgment cannot be sustained and we hold that the application under Section 9 of the 1996 Act was maintainable. 13. Placing reliance on the decision in Va. Tech (supra) in a similar facts situation as in the present case Supreme Court in A.P.S. Kushwaha (SSI Unit) Vs. Municipal Corporation and Others, held :

This court, in V.A. Tech Escher Wyass Flovel Ltd. vs. M.P. S.E. Board (C.A. No. 3746/2005 decided on 14.1.2010) held that the provisions of the Act would apply where there was an Arbitration clause and the provisions of the 1983 Adhiniyam would apply where there was no Arbitration clause. In this case it is not in dispute that the contract between the parties contained an arbitration clause (clause 29). The decision of the High Court that the provisions of the 1983 Adhiniyam would apply and sole arbitrator appointed by the designate of the Chief Justice lacked inherent jurisdiction, cannot therefore be sustained. Though the said Arbitration clause provided for reference of disputes to a three member Arbitration Board, the designate chose to appoint a sole arbitrator and that order dated 11.5.2007 attained finality. 14. However, the aspect of applicability of the Act of 1983 or the Act of 1996 in a ''works contract'' came to be considered in M.P. Rural Road Development Authority and Another Vs. L.G. Chaudhary Engineers and Cont., wherein after taking into consideration the provisions of Act 1983 being saved under Section 2(4) and 2(5) of 1996 Act declared the decision in V A Tech (supra) being per incuriam, holding:

If this Court compares the provisions of the M.P. Act with A.C. Act 1996 then the Court finds that the provisions of M.P. Act are inconsistent with the provisions of A.C. Act 1996. The M.P. Act is a special law providing for statutory arbitration in the State of Madhya Pradesh even in the absence of arbitration agreement. Under the provisions of A.C. Act 1996 in the absence of an arbitration agreement, arbitration is not possible. There is also difference in the formation of arbitration tribunal as is clear from Section 2(1)(d) of A.C. Act 1996. Again under A.C. Act 1996, arbitral tribunal is defined under Section 2(1)(d) as a sole arbitrator or a panel of arbitrators. But under M.P. Act such a tribunal is created under Sections 3 and 4 of the Act. And under the M.P. Act dispute has a special meaning as defined under Section 2(1)(d) of the Act whereas dispute has not been defined under the A.C. Act 1996.

It is clear from its long title that the M.P. Act provides:

.... for the establishment of a tribunal to arbitrate in disputes to which the State Government or a public undertaking [wholly or substantially owned or controlled by the State Government], is a party, and for matters incidental thereto or connected therewith. 20. The structure of the Tribunal under the Madhya Pradesh Act is also different from the structure of a Tribunal under the AC Act, 1996.....

It is clear from the aforesaid enumeration of the statutory provisions that under the M.P. Act the parties'' autonomy in the choice of Arbitral Tribunal; is not there.

(emphasis supplied)

It is clear, therefore, that in view of the aforesaid finding of a co-ordinate Bench of this Court on the distinct feature of an arbitral tribunal under the said M.P. Act the provisions of M.P. Act are saved under Section 2(4) of A.C. Act 1996. This Court while rendering the decision in Va Tech (supra) has not either noticed the previous decision of a co-ordinate Bench of this Court in Anshuman Shukla (supra) or the provisions of Section 2(4) of A.C. Act 1996. Therefore, we are constrained to hold that the decision of this Court in Va Tech (supra) was rendered per incuriam.

The M.P. Act of 1983 was made when the previous Arbitration Act of 1940 was in the field. That Act of 1940 was a Central Law. Both the Acts operated in view of Section 46 of 1940 Act. The M.P. Act 1983 was reserved for the assent of the President and admittedly received the same on 17.10.1983 which was published in the Madhya Pradesh Gazette Extraordinary dated 12.10.1983. Therefore, the requirement of Article 254(2) of the Constitution was satisfied. Thus, M.P. Act of 1983 prevails in the State of Madhya Pradesh. Thereafter, A.C. Act 1996 was enacted by Parliament repealing the earlier laws of arbitration of 1940. It has also been noted that A.C. Act 1996 saves the provisions 24 of M.P. Act 1983 under sub-sections 2(4) and 2(5) thereof. Therefore, there cannot be any repugnancy. (See the judgment of this Court in T. Barai vs. Henry Ah Hoe.)

It is clear from the aforesaid observation that in instant case the latter Act made by the Parliament i.e. A.C. Act 1996 clearly showed an intention to the effect that the State Law of Arbitration i.e. the M.P. Act should operate in the State of Madhya Pradesh in respect of certain specified types of arbitrations which are under the M.P. Act 1983. This is clear from Sections 2(4) and 2(5) of A.C. Act 1996. Therefore, there is no substance in the argument of repugnancy and is accordingly rejected.

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.

This view that in respect of works contract it is the Tribunal constituted under 1983 Act and no other forum is available was concurred with by Hon''ble Justice Gyan Sudha Mishra in the following terms:

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. 16. Thus, there remains no iota of doubt that in case of works contract covered by the provisions of 1983 Act, any dispute is compulsorily has to be raised before the Tribunal constituted under the Act of 1983 which necessarily means that the forum under 1996 Act are excluded.

In view whereof, this Court decline to entertain the application under Section 11(5)(6) of 1996 Act and dismiss the application however with a liberty to the petitioner to avail the remedy available to him under the Agreement in question and under the 1983 Act.

There shall be no costs.