M.P.Rural Road
Development Authority & ANR. Vs. M/s. L.G. Chaudhary Engineers & Cont.
[Civil Appeal No. 974
of 2012 arising out of SLP (C) No.907/2011]
J U D G M E N T
GANGULY, J.
1.
Leave
granted.
2.
The
question which falls for consideration in this appeal is whether the provision of
Madhya Pradesh Madhyasthan Adhikaran Adhiniyam, 1983 (hereinafter, `M.P. Act') which
statutorily provides for the parties to the Works Contract to refer all disputes
1 to the Arbitration Tribunal constituted under Section 7 of the Act will continue
to operate in view of the provisions of Arbitration and Conciliation Act, 1996
(hereinafter `A.C. Act 1996') which is a Central Act, subsequently enacted.
3.
The
facts leading to the aforesaid controversy be noted first.
4.
The
appellant-Madhya Pradesh Rural Road Development Authority and Anr., impugning the
judgment of the High Court dated 8.9.2010 in this appeal, entered into a `Works
Contract' with the respondent for construction and maintenance of Rural Road Package
No.1958, District Jhabua.
5.
Clause
24 of the Contract contains the `Dispute Redress Mechanism' and Clause 24.1 of the
same provides as under:
"24.1 If any dispute
or difference of any kind what-so-ever shall arise in connection with or arising
out of this Contract or the execution of work of maintenance of the Works there
under, whether before its commencement or during the progress of Works or after
the termination, abandonment or breach of the Contract, it shall, in the first
instance, be referred for settlement to competent authority, described along with
their powers in the Contract Data, above the rank of the Engineer.
The competent authority
shall, within a period of forty five days after being requested in writing by the
Contractor to do so, convey his decision to the Contractor. Such decision in
respect of every matter so referred shall, subject to review as hereinafter
provided, be final and binding upon the Contract. In case the Works is already in
progress, the Contractor shall proceed with the execution of the Works, including
maintenance thereof, pending receipt of the decision of the competent authority
as aforesaid, with all due diligence."
6.
Under
the `M.P. Act' "dispute" has statutorily been defined under Section
2(d): "2(d) "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"
7.
"Works
Contract" has also been defined under Section 2(i) of the M.P. Act: "2(i)
works contract" means an agreement in writing for the execution of any work
relating to construction, repair or maintenance of any building or superstructure,
dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory, workshop,
powerhouse, transformers or such other works of the State Government or Public Undertaking
as the State Government may, by notification, specify in this behalf at any of its
stages, entered into by the State Government or by an official of the State Government
or Public Undertaking or its official for and on behalf of such Public Undertaking
and includes an agreement for the supply of goods or material and all other matters
relating to the execution of any of the said works"
8.
"Reference
to Tribunal" is statutorily provided under Section 7 of the M.P. Act: "7.
Reference to Tribunal –
a. 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.
b. Such reference shall be
drawn up in such form as may be prescribed and shall be supported by an affidavit
verifying the averments.
c. The reference shall be
accompanied by such fee as may be prescribed.
d. Every reference shall
be accompanied by such documents or other evidence and by such other fees for service
or execution of processes as may be prescribed.
e. On receipt of the reference
under sub-section (1), if the Tribunal is satisfied that the reference is a fit
case for adjudication, it may admit the reference but where the Tribunal is not
so satisfied it may summarily reject the reference after recording reasons
therefor."
9.
From
a perusal of Section 7, it is clear that the nature of the dispute between the parties
in the instant case is covered by the definition under Section 2(d) read with Section
2(1). As such under Section 7 such a dispute has to be statutorily referred to
Tribunal set up under the M.P. Act.
10.
The
case of the appellant is that in view of several breaches in Works Contract by the
respondent, the appellant terminated the Works Contract and encashed the bank guarantee
furnished by the respondent on 25.6.2008.
11.
Thereafter,
on 29.8.2008, the respondent submitted a representation to the appellant against
the encashment of bank guarantee. Prior to that on 5.8.2008, respondent filed a
Writ Petition No. 4491/2008 challenging the encashment of bank guarantee and
the writ petition was disposed of with a direction that the bank guarantee may not
be encashed till the disposal of the representation. Thereafter, on 4.6.2009 the
representation of the respondent was rejected after giving the appellant a personal
hearing.
12.
In
the pending dispute, the respondent submitted additional claim on 24.2.2010 and
requested the appellant to appoint an Arbitrator for adjudicating the dispute between
the parties. On 24.4.2010, the appellant replied that Clause 25 of the Works Contract
specifically provides for adjudication of disputes by the Arbitral Tribunal under
the M.P. Act.
13.
Then
on 24.6.2010 respondent filed an application under Section 11 of A.C. Act 1996
for appointment of an Arbitrator before the High Court. On 8.9.2010, High Court
allowed the application of the respondent and appointed an Arbitrator by
placing reliance on a decision of this Court in Va Tech Escher Wyass Flovel Ltd.
Vs. MPSE Board & another - Civil Appeal No. 3746 and 3747 of 2005.
14.
In
the case of Va Tech (supra), this Court after referring to both the M.P. Act and
the A.C. Act 1996, held that the M.P. Act applies only where there is no arbitration
clause and this Court further held that the M.P. Act stands impliedly repealed by
the A.C. Act 1996 where there is an arbitration clause.
15.
Facts
in connection with the Va Tech (supra) were that Va Tech was awarded a works contract
by the M.P. State Electricity Board and there was an arbitration clause in the
agreement.
16.
Va
Tech filed an application under Section 9 of the A.C. Act 1996 which was rejected
by the learned Additional District Judge and that order was also upheld by the
High Court.
17.
Then
Va Tech filed a special leave petition before this Court. This Court noting the
provision of Section 7 of the M.P. Act came to the aforesaid finding and
ultimately held that the judgment of the High Court in Va Tech cannot be
sustained and opined that application under Section 9 of A.C. Act 1996 is maintainable.
The exact reasoning recorded by this Court in Va Tech is as follows: "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."
18.
Mr.
K.K. Venugopal, learned senior counsel appearing for the appellant submitted that
the Division Bench of this Court, while coming to the aforesaid finding, has not
noticed the relevant provision of the M.P. Act as well as the relevant provisions
of A.C. Act 1996 and as such the same judgment was rendered `per incuriam'.
19.
Learned
senior counsel further submitted that another Division Bench of this Court in a
case in which the Presiding Judge was common with the Bench which rendered the Va
Tech (supra) ruling almost in a situation identical with Va Tech issued notice
and stayed the arbitration proceedings.
20.
In
another case a Division Bench of this Court presided over by the same learned
Judge who gave the Va Tech ruling passed the following order: "This petition
has been filed against the judgment and order dated 11th March, 2011 passed by
the High Court of Madhya Pradesh at Gwalior Bench in Arbitration Case No.4 of 2010.
Learned counsel for the petitioner has relied on a decision of this Court in Civil
Appeal No. 3746 of 2005 decided on 14th January, 2010. We are of the opinion that
the aforesaid decision is distinguishable because in the present case the arbitration
clause itself mentions that the arbitration will be by the Madhya Pradesh Arbitration
Tribunal. Hence, in this case arbitration has to be done by the Tribunal. The
Special leave petition is dismissed."
21.
Relying
on these two subsequent orders in the instant case and in Ravikant Bansal vs. M.P.
Rural Road Development Authority and Anr. - SLP(C) No.18867 of 2011, Mr. Venugopal,
the learned senior counsel submitted that subsequent Division Bench presided
over by the same learned Judge who gave the Va Tech ruling has not followed the
ratio in the case of Va Tech.
22.
The
learned counsel said so to justify his contention that the decision in Va Tech (supra)
was rendered per incuriam.
23.
If
this Court looks at Section 2(4) of A.C. Act 1996, it will appear that Part-I of
A.C. Act 1996, which is from Section 2 to Section 43, shall, except sub-section
1 of Sections 40, 41 and 43, apply to every arbitration under any other
enactment for the time being in force where the arbitration was pursuant to an arbitration
agreement except insofar as the provisions of this Part i.e. Part-I are inconsistent
with the other enactment or with any other rule made thereunder.
24.
Similar
provision relating to statutory arbitration was also there in Section 46 of Arbitration
Act, 1940. Section 46 is set out below: "46. Application of Act to statutory
arbitration - The provisions of this Act, except sub-section (1) of Sec. 6 and Secs.
7, 12, 36 and 37, shall apply to every 11 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 this Act is inconsistent with that other enactment or with any rules made
thereunder.
25.
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.
26.
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. The structure of the
tribunal under the M.P. Act is also different from the structure of a tribunal under
the A.C. Act 1996. It is clear from Section 4 of the M.P. Act that the composition
of tribunal and their qualification is statutorily provided which is set out
below: "4. Chairman and Members of Tribunal and their qualifications.-
1. Subject to sub- section
(2) and (3), the State Government may appoint a chairman and as many members to
the Tribunal as it may consider necessary. (1-a) The State Government may, in consultation
with the Chairman, designate one of the Judicial Members as the Vice-Chairman
who in the event of occurrence of any vacancy in the office of the Chairman by reason
of his death, resignation, leave or otherwise, shall during such vacancy, discharge
the functions of the Chairman.
2. No person shall be appointed
as Chairman of the Tribunal, unless he is or has been a Judge of a High Court.
3. No person shall be qualified
for appointment as a member of the Tribunal, unless-
i.
he
is or has been a District Judge of not less than seven years standing: or
ii.
he
is or has been a Revenue Commissioner or has held a post equivalent to the rank
of Revenue Commissioner for a total period of not less than five years, or
iii.
he
is or has been:-
a. Chief Engineer in the
service of the State Government in Public Works, Irrigation or Public Health Engineering
Department; or
b. a Chief Engineer in the
service of the Madhya Pradesh Electricity Board; or
c. a Senior Deputy Accountant
General of the Office of the Accountant General, Madhya Pradesh, for a period
of not less than five years. Provided that in the case of clause (iii), in exceptional
circumstances, the State Government may, relax the prescribed minimum period of
five years to three years."
27.
The
term of office and salaries and allowances are also statutorily provided under
Sections 5 and 6 of the M.P. Act. Section 8 provides for the procedure to be followed
by the tribunal on receipt of reference and Section 9 provides for the Constitution
of Benches and Chairman's power of distribution of business.
Under Section 16(2)
of the M.P. Act there is a time limit for giving the Award which is absent in A.C.
Act 1996. Section 17-A of the M.P. Act confers inherent power on the Arbitral tribunal
to make orders as may be necessary for the ends of justice or to prevent abuse of
the process of the tribunal. Section 17-B also provides for power conferred on the
tribunal for correction of clerical or arithmetical mistakes.
No such power is given
to an arbitral tribunal under A.C. Act 1996. Section 19 of the M.P. Act gives High
Court the suo motu power of revision. The High Court has also been given the power
of revision to be exercised on an application made by an aggrieved party within
three months of the award. While doing so, the High Court is to act like a revisional
court under Section 115 of the CPC.
28.
It
is clear from the aforesaid enumeration of the statutory provision that under the
M.P. Act the parties' autonomy in the choice of arbitral tribunal is not there.
29.
In
State of Madhya Pradesh and another vs. Anshuman Shukla - (2008) 7 SCC 487, this
Court while referring to the M.P. Act and dealing with the nature of the arbitral
tribunal constituted under the said Act held that the said Act is a special Act
and provides for compulsory arbitration. It provides for a reference and the tribunal
has been given the power of rejecting the reference at the threshold.
It also held that the
M.P. Act provides for a special limitation and fixes a time limit for passing
an award. It has also been held that Section 14 of the M.P. Act provides that the
award can be challenged under special circumstances and Section 1617 provides for
finality of the award, notwithstanding anything to the contrary contained in any
other law relating to arbitration.
All these features of
the Act were pointed by this Court in Anshuman Shukla (supra) to show that there
is inconsistency between the provisions of A.C. Act 1996 and those of the M.P. Act.
In para 28 of the judgment, this Court while referring to the provisions of
M.P. Act held: "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."
(para 28, page 497 of the report)
30.
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.
31.
This
was the only point argued before us by the learned counsel for the appellant.
32.
The
principle of per incuriam has been very succinctly formulated by the Court of Appeal
in 18 Young vs. Bristol Aeroplane Company, Limited reported in 1944 (1) K.B.
718.
33.
Lord
Greene, Master of Rolls formulated the principles on the basis of which a decision
can be said to have been rendered `per incuriam'. The principles are: "Where
the court has construed a statute or a rule having the force of a statute its decision
stands on the same footing as any other decision on a question of law, but where
the court is satisfied that an earlier decision was given in ignorance of the terms
of a statute or a rule having the force of a statute the position is very different.
It cannot, in our opinion, be right to say that in such a case the court is entitled
to disregard the statutory provision and is bound to follow a decision of its own
given when that provision was not present to its mind. Cases of this description
are examples of decisions given per incuriam."
34.
The
decision in Young (supra) was subsequently approved by the House of Lords in Young
vs. Bristol Aeroplane Company, Limited reported in 1946 Appeal Cases 163 at
page 169 of the report.
35.
Lord
Viscount Simon in the House of Lords expressed His Lordship's agreement with the
views expressed by the Lord Greene, the Master of Rolls in the Court of Appeal
on the principle of per incuriam (see the speech of Lord Viscount Simon at page
169 of the report).
36.
Those
principles have been followed by the Constitution Bench of this Court in The Bengal
Immunity Company Limited vs. The State of Bihar and others reported in 1955 (2)
SCR 603 [See the discussion in pages 622 and 623 of the report].
37.
The
same principle has been reiterated by Lord Evershed, Master of Rolls, in Morelle
Ld. vs. Wakeling & another [(1955) 2 QB 379 at page 406]. The principle has
been stated as followed: "...As a general rule the only cases in which decisions
should be held to have been given per incuriam are those of decisions given in ignorance
or forgetfulness of some 20 inconsistent statutory provision or of some authority
binding on the court concerned; so that in such cases some part of the decision
or some step in the reasoning on which it is based is found, on that account, to
be demonstrably wrong......."
38.
In
the case of State of U.P. and another vs. Synthetics and Chemicals Ltd. and another
reported in (1991) 4 SCC 139, this Court held the doctrine of `per incuriam' in
practice means `per ignoratium' and noted that English Courts have developed this
principle in relaxation of the rule of stare decisis and referred to the decision
in the case of Bristol Aeroplane Co. Ltd. (supra). The learned Judges also made
it clear that the same principle has been approved and adopted by this Court while
interpreting Article 141 of the Constitution (see para 41).
39.
In
the case of Municipal Corporation of Delhi vs. Gurnam Kaur reported in (1989) 1
SCC 101, a three- Judge Bench of this Court explained this principle 21 of per incuriam
very elaborately in paragraph 11 at page 110 of the report and in explaining the
principle of per incuriam the learned Judges held: "......A decision should
be treated as given per incuriam when it is given in ignorance of the terms of a
statute or of a rule having the force of a statute......."
40.
In
paragraph 12 the learned Judges observed as follows: "......One of the chief
reasons for the doctrine of precedent is that a matter that has once been fully
argued and decided should not be allowed to be reopened. The weight accorded to
dicta varies with the type of dictum. Mere casual expressions carry no weight at
all. Not every passing expression of a judge, however eminent, can be treated as
an ex cathedra statement, having the weight of authority."
41.
Following
the aforesaid principles, this Court is constrained to hold that the decision in
Va Tech (supra), having been rendered in per incuriam, cannot be accepted as a precedent
to decide the controversy in this case.
42.
In
reply the learned counsel for the respondent only submitted that the M.P. Act is
repugnant to A.C. Act 1996 since the same is a later Act made by Parliament. The
learned counsel referred to the provisions of Article 254 of the Constitution.
The learned counsel also urged that in view of the provision of Section 85 of A.C.
Act 1996, the M.P. Act stands impliedly repealed.
43.
The
said argument cannot be accepted. The provision for repeal under Section 85 of A.C.
Act 1996 does not show that there is any express repeal of the M.P. Act. Apart from
that the provision of Section 2(4) of A.C. Act clearly militates against the
aforesaid submissions.
44.
The
argument of repugnancy is also not tenable. Entry 13 of the Concurrent List in the
VIIth Schedule of the Constitution runs as follows: 23 "13. Civil procedure,
including all matters included in the Code of Civil Procedure at the commencement
of this Constitution, limitation and arbitration."
45.
In
view of the aforesaid Entry, the State Government is competent to enact laws in
relation to arbitration. 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.
46.
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 and another reported in AIR 1983 SC 150).
In this connection the
observations made by the Constitution Bench of this Court in the case of M. Karunanidhi
vs. Union of India and another reported in (1979) 3 SCC 431 are very pertinent
and the following observations are excerpted: "......It is, therefore, clear
that in view of this clear intention of the legislature there can be no room for
any argument that the State Act was in any way repugnant to the Central Acts.
We have already pointed
out from the decisions of the Federal Court and this Court that one of the important
tests to find out as to whether or not there is repugnancy is to ascertain the intention
of the legislature regarding the fact that the dominant legislature allowed the
subordinate legislature to operate in the same field pari passu the State Act
47.
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 25 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.
48.
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.
49.
There
will be no order as to costs.
.......................J.
(ASOK KUMAR GANGULY)
New
Delhi
January
24, 2012
M. P. Rural Road
Development Authority & ANR. Vs. M/S. L.G. Chaudhary Engineers & Cont.
[Civil Appellate
Jurisdiction Civil Appeal No.974 of 2012 arising out of SLP (C) No.907/2011]
J U D G E M E N T
Gyan Sudha Misra, J.
1.
Leave
granted.
2.
While
concurring and endorsing the reasonings assigned in the judgement of learned Justice
Ganguly, I propose to add and thus partly dissent on certain aspects involved in
the instant appeal which would have a bearing on the relief granted to the
respondent by the High Court which appointed an arbitrator under the
Arbitration and Conciliation Act, 1996 for adjudication of the dispute in regard
to cancellation of the works contract between the contesting parties therein.
3.
In
this context, Section 7 of the Madhya Pradesh Madhyasthan Adhikaran Adhiniyam, 1983
(hereinafter referred to as the `M.P. Arbitration Tribunal Act, 1983') needs to
be reiterated which itself lays down as follows: "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."
4.
On
perusal of the aforesaid provision enumerated under Section 7, it is explicitly
clear that the matter in the event of existence of a dispute between the
parties in certain categories of cases where the State of Madhya Pradesh is a
contracting party, the dispute shall be referred in writing to the tribunal irrespective
of the fact whether the agreement contains an arbitration clause or not. From this
provision it is clearly apparent that reference of any dispute to the tribunal postulates
an existence of a works contract and the definition of `works contract' under Section
2 (i) of the M.P. Arbitration Tribunal Act, 1983, it has clearly and unequivocally
been specified as to what is a `works contract' in relation to which the dispute
is required to be referred in writing to the tribunal.
We may therefore meticulously
recollect the definition of `works contract' which lays down as follows:- "works
contract" means an agreement in writing for the execution of any work relating
to construction, repair or maintenance of any building or superstructure, dam,
weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory
workshop, powerhouse, transformers or such other works of the State Government or
Public Undertaking as the State Government may, by notification, specify in this
behalf at any of its stages, entered into by the State Government or by an official
of the State Government or Public Undertaking or its official for and on behalf
of such Public Undertaking and includes an agreement for the supply of goods or
material and all other matters relating to the execution of any of the said
works."
5.
Thus
on a perusal of the definition of `works contract', it is manifestly clear that
while the `works contract' means an agreement pertaining to matters relating to
the execution of any of the work enumerated in the definition of `works contract',
the same does not include the dispute pertaining to termination, cancellation or
repudiation of works contract and the entire nature of transaction laid down therein
relates to disputes which arise out of execution of the nature of work specified
in the `works contract'.
However, the question
whether the `works contract' has been legally repudiated and rightly cancelled
or not is the question or dispute pertaining to termination of works contract
has not been incorporated even remotely within the definition of `works contract'.
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.
6.
But
in so far as the instant matter is concerned, the facts disclose that the appellant
M.P. Rural Road Development Authority cancelled the works contract itself which
was executed in favour of the respondent. In that event, the works contract
between the parties was not in existence at all which would operate as a statutory
mandate for reference of the dispute to the M.P. State Arbitration Tribunal.
7.
It
is no doubt true that if the matter were before an Arbitrator appointed under
the Arbitration and Conciliation Act, 1996 for adjudication of any dispute including
the question regarding the justification and legality as to whether the cancellation
of works contract was legal or illegal, then the said Arbitrator in view of the
ratio of the judgment of the Supreme Court in Maharshi Dayanand University &
Anr. Vs. Anand Co-op L(C) Society, 2007 (5) SCC 295, as also in view of the
persuasive reasoning assigned in the judgment and order reported in Heyman
& Anr. Vs. Darwins, Limited, 1942 (1) All E.R. 337 would have had the
jurisdiction to adjudicate the dispute regarding the justification and legality
of cancellation of works contract also. But the same cannot be allowed to be raised
under the M.P. Act of 1983 since the definition of `works contract' unambiguously
lays down in explicit terms as to what is the nature and scope of `works
contract' and further enumerates the specific nature of disputes arising out of
the execution of works contract which would come within the definition of a
`works contract'.
8.
However,
the same does not even vaguely include the issue or dispute arising out of cancellation
and termination of contract due to which this question, in my considered opinion,
would not fall within the jurisdiction of M.P. State Arbitration Tribunal so as
to be referred for adjudication arising out of its termination.
As already stated, fall
out certainly would be otherwise if the matter were to be adjudicated by an Arbitrator
appointed under the Arbitration and Conciliation Act, 1996 and that would be in
view of the ratio of the decisions of the Supreme Court referred to
hereinbefore which has held it permissible for the Arbitrator to adjudicate even
the dispute arising out of cancellation or termination of an agreement or
contract.
This however, cannot
be allowed to broaden or expand the ambit and scope of the M.P. Act of 1983
where the State Legislature has passed a specific legislation in respect of certain
specified types of arbitration determining as to what are the nature of disputes
to be referred to the M.P. State Arbitration Tribunal and that specifically permits
the reference of dispute arising out of execution of contract but clearly leaves
out any dispute arising out of termination, cancellation or repudiation of
`works contract'.
In order to clarify
the point further, what needs to be emphasized is that if the nature of dispute
referred to the Arbitrator like the instant matter, related to a dispute pertaining
to construction, repair, maintenance of any building super-structure, dam or for
the reasons stated within the definition of `works contract', the matter may be
referred to the M.P. Tribunal in view of the fact that if there is a dispute in
relation to execution of a works contract, then irrespective of the fact whether
the agreement contains an arbitration clause or not, the dispute is required to
be referred to the M.P. State Arbitration Tribunal for adjudication.
But when the contract
itself has been terminated, cancelled or repudiated as it has happened in the instant
case, then the nature of dispute does not fall within the definition of `works
contract' for the sole reason that it does not include any dispute pertaining to
cancellation of a works contract implying that when the works contract itself is
not in existence by virtue of its cancellation, the dispute cannot be referred
to the M.P. State Arbitration Tribunal but may have to be decided by an
Arbitrator appointed under the Arbitration and Conciliation Act, 1996.
9.
Hence,
the nature of the dispute which falls within the definition of `works contract'
under Section 2(i) of the M.P. Act, 1983 and one of the contracting parties to
the agreement is the State of M.P., then irrespective of an arbitration agreement
the dispute will have to be referred to the Tribunal in terms of Section 7 of
the Act of 1983.
But if the works
contract itself has been repudiated and hence not in existence at all by virtue
of its cancellation/termination, then in my considered view, the dispute will have
to be referred to an independent arbitrator to be appointed under the
Arbitration and Conciliation Act, 1996 since the M.P. Act 1983 envisages reference
of a dispute to the State Tribunal only in respect of certain specified types
of arbitration enumerated under Section 2 (i) of the M.P. Act, 1983.
10.
As
a consequence and fall out of the aforesaid discussion, the impugned order of
the High Court by which the dispute relating to termination of works contract by
the M.P. Rural Road Development Authority itself was referred to an independent
arbitrator appointed by the High Court under the Arbitration and Conciliation
Act, 1996 needs to be sustained and there is no need for a de novo reference of
the dispute to the M.P. State Arbitration Tribunal.
In the alternative,
the consequence would have been otherwise and the matter could have been referred
to the State Arbitration Tribunal if the dispute between the parties related to
any dispute emerging out of execution of works contract which could fall within
the definition of `works contract' given out within the definition of `works
contract' under Section 2(i) of the M.P. Act of 1983.
In order to avoid any
ambiguity, it is reiterated that in view of cancellation of the works contract itself
which is the position in the instant case, the proceedings before the
Arbitrator appointed by the High Court cannot be treated as non-est so as to
refer the same once again to the tribunal for adjudication as the dispute does not
emerge or pertain to execution of works contract but relates to non-existence
of works contract by virtue of its cancellation.
11.
Thus
the sum and substance of what I wish to emphasize is that the question as to
whether the dispute would be referred to the M.P. Tribunal in terms of Section 7
of the M.P. Act of 1983 or to an independent arbitrator under the Arbitration
and Conciliation Act, 1996 will depend upon the factum whether the works
contract is existing between the parties or not out of which the dispute has
arisen.
In case, the works contract
itself has been repudiated/cancelled, then, in view of its non-existence,
Section 7 of the M.P. Act pertaining to reference of dispute to tribunal would not
come into play at all by virtue of the fact that the dispute relating to
execution of works contract alone can be referred to the tribunal in view of the
specific nature of works contract enumerated within the definition of works
contract under the Act of 1983. However, when the works contract itself becomes
non-existent as a consequence of its cancellation, the matter will have to be referred
to an independent arbitrator under the Arbitration and Conciliation Act, 1996
and not to M.P. State Arbitration Tribunal.
12.
Thus,
while holding that the M.P. Act 1983 should operate in the State of M.P. in respect
of certain specified types of arbitration, the appointment of an independent arbitrator
by the High Court under the Arbitration and Conciliation Act, 1996 needs to be sustained
since the works contract itself is not in existence by virtue of its cancellation
and hence this part of the dispute could not have been referred to the M.P. State
Tribunal.
13.
Consequently,
the instant appeal stands partly allowed. There will be no order as to costs.
......................................J.
(Gyan Sudha Misra)
New
Delhi,
January
24, 2012.
M. P. Rural Road
Development Authority & ANR Vs. M/s. L.G. Chaudhary Engineers & Cont.
[Civil Appeal No. 974
of 2012 arising out of SLP (C) No.907/2011]
ORDER
In view of some
divergence of views expressed in the two judgments delivered today by us, the matter
may be placed before Hon'ble the Chief Justice of India for constituting a
larger Bench to resolve the divergence.
.............................J.
(ASOK KUMAR GANGULY)
.............................J.
(GYAN SUDHA MISRA)
NEW
DELHI,
January
24, 2012.
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