Supreme Court of India
MP RURAL ROAD DEVELOPMENT AUTHORITY & ANR.versusM/S. L.G. CHAUDHARY ENGINEERS & CONT.
- Citation
- 2012 INSC 49
- Decided
- 24 January 2012
- Disposal
- Matter referred to larger bench
- Bench
- A K GANGULY
Holding
The Madhya Pradesh Arbitration Tribunal Act, 1983 is saved by Section 2(4) of the Arbitration and Conciliation Act, 1996 and continues to apply; the dispute must be arbitrated under the M.P. Act, and the Va Tech decision is per incuriam.
Summary
The M.P. Rural Road Development Authority entered into a works contract with L.G. Chaudhary Engineers for road construction. After alleged breaches, the Authority terminated the contract and encashed the contractor's bank guarantee, leading to a dispute. The contractor sought arbitration under the Arbitration and Conciliation Act, 1996, but the Authority argued that the Madhya Pradesh Arbitration Tribunal Act, 1983 (M.P. Act) required the dispute to be referred to the state tribunal. The Supreme Court examined whether the M.P. Act survives the later central legislation and whether a dispute arising from the termination of a works contract falls within the definition of "works contract" under the M.P. Act. The Court held that the M.P. Act is saved by Section 2(4) of the 1996 Act and continues to operate, and that the earlier Va Tech decision was per incuriam. Consequently, the appeal was allowed and the arbitration must proceed under the M.P. Act, not the 1996 Act.
Issues considered
- Whether the provisions of the Madhya Pradesh Arbitration Tribunal Act, 1983 are displaced by the Arbitration and Conciliation Act, 1996.
- Whether a dispute arising from the termination/cancellation of a works contract falls within the definition of "works contract" under the M.P. Act and must be referred to the state tribunal.
- Whether the Supreme Court's decision in Va Tech Escher Wyss Flovel Ltd. v. MPSE Board is per incuriam and binding.
- Whether there is a repugnancy between the two Acts under Article 254 of the Constitution.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11, s. 2, s. 2(4), s. 2(5), s. 40, s. 41, s. 43, s. 85, s. 9
- Madhya Pradesh Arbitration Tribunal Act, 1983s. 16(2), s. 17-A, s. 17-B, s. 19, s. 2(4), s. 2(5), s. 2(d), s. 2(i), s. 4, s. 5, s. 6, s. 7, s. 8, s. 9
Subjects
ArbitrationStatutory arbitrationMadhya Pradesh Arbitration Tribunal ActArbitration and Conciliation Act 1996Per incuriamRepugnancy of statutesWorks contractTermination of contractConcurrent legislation
Judgment
[2012] 2 S.C.R. 162
A MP RURAL ROAD DEVELOPMENT AUTHORITY & ANR.
v.
M/S. L.G. CHAUDHARY ENGINEERS & CONT.
(Civil Appeal No. 974 of 2012)
JANUARY 24, 2012
B
[ASOK KUMAR GANGULY AND GYAN SUDHA
MISRA, JJ.]
Arbitration: Whether the provision of Madhya Pradesh
C Arbitration Tribunal Act, 1983 which statutorily provides for the
parties to the Works Contract to refer all disputes to the
Arbitration Tribunal constituted u/s. 7 of the 1983 Act will
continue to operate in view of the provisions of Arbitration and
Conciliation Act, 1996 which is a Central Act, subsequently
D enacted - In view of difference of opinion, matter referred to
larger bench - Madhya Pradesh Arbitration Tribunal Act, 1983
- Arbitration and Conciliation Act, 1996.
The appellant had entered into a 'Works Contract'
E with the respondent for construction and maintenance of
Rural Road Package. Clause 24 of the Contract contained
the 'Dispute Redress Mechanism'. The case of the
appellant was .that in view of several breaches in Works
Contract by the respondent, the appellant terminated the
Works Contract and encashed the bank guarantee
F furnished by the respondent.
·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
G filed a writ petition 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
H 162
M.P. RURAL ROAD DEV AUTHORITY v. L.G CHAUDHARY 163
ENGINEERS & CONT
rejected. In the pending dispute, the respondent A
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
provided for adjudication of disputes by the Arbitral B
Tribunal under the Madhya Pradesh Arbitration Tribunal
Act, 1983 (M.P. Act). Then on 24.6.2010 respondent filed
an application under Section 11 of the Arbitration and
Conciliation Act, 1996 (A.C. Act 1996) for appointment of
an Arbitrator before the High Court. On 8.9.2010, the High c
Court allowed the application of the respondent and
appointed an arbitrator by placing reliance on a decision
of the Supreme Court in *Va Tech Escher Wyass Flovel
Ltd. Vs. MPSE Board.
The question which arose for consideration in the D
instant appeal was whether the provision of the Madhya
Pradesh Arbitration Tribunal Act, 1983 which statutorily
provides for the parties to the Works Contract to refer all
disputes to the Arbitration Tribunal constituted under
Section 7 of the Act will continue to operate in view of the E
provisions of Arbitration and Conciliation Act, 1996 which
is a Central Act, subsequently enacted.
Referring the matter to larger bench, the Court
HELD: F
Per Ganguly, J: 1. Perusal of Section 7 of the Madhya
Pradesh Arbitration Tribunal Act, 1983 (M.P. Act) showed
that the nature of the dispute between the parties in the
instant case was covered by the definition under Section G
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. Reading of Section 2(4) of A.C. Act
1996 would show that Part-I of A.C. Act 1996, which is
from Section 2 to Section 43, shall, except sub-section 1 H
164 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 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
B rule made thereunder. Similar provision relating to
statutory arbitration was also there in Section 46 of
Arbitration Act, 1940. 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
c 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
0 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. Under the M.P. Act, dispute has a special meaning
E as defined under ·section 2(1 )(d) of the Act whereas
dispute has not been defined under the A.C. Act 1996.
[Paras 9, 23, 24, 25) [176-F; 179-E-F-G; 180-B-D]
2. The M.P. Act provides for the establishment of a
tribunal to arbitrate in disputes to which the State
F 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
G 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. The term of office and
salaries and allowances are also statutorily provided
under Sections 5 and 6 of the M.P. Act. Section 8
H provides for the procedure to be followed by the tribunal
M.P. RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 165
ENGINEERS & CONT.
on receipt of reference and Section 9 provides for the A
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 B
orders as may be necessary for the ends of justice or to
prevent abuse of the process of the tribunal. Section 17-
8 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. c
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 0
revisional court under SeCtion 115, CPC. It is clear from
the. said enumeration of the statutory provision that under
the M.P. Act the parties' autonomy in the choice of arbitral
tribunal is not there. In **State of Madhya Pradesh and
another vs. Anshuman Shukla, this Court while referring
E
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 F
special limitation and fixes a time limit for passing an
award. It has also been hel.d that Section 14 of the M.P.
Act provides that the award can be challenged under
special circumstances and Section 17 provides for finality
of the award, notwithstanding anything to the contrary G
contained in any other law relating to arbitration. All these
features of the Act were pointed by this Court in
**Anshuman Shukla to show that there is inconsistency
between the provisions of A.C. Act 1996 and those of the
M.P. Act. It is clear, therefore, that in view of the finding H
166 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 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 did not either notice the previous decision of a
B co-ordinate Bench of this Court in **Anshuman Shukla
or the provisions of Section 2(4) of A.C. Act 1996.
Therefore, the decision of this Court in *Va Tech was
rendered per incuriam. The decision in **Va Tech, having
been rendered in per incuriam cannot be accepted as a
c precedent to decide the controversy in this case. [Paras
26, 27, 28, 29, 30, 41] [180-E-G; 181-H; 182-A-H; 183-F-H;
186-0]
, **State of Madhya Pradesh and another vs. Anshuman
Shukla (2008) 7 SCC 487: 2008 (8) SCR 349; The Bengal
D Immunity Company Limited vs. The State of Bihar and others
1955 (2) SCR 603; State of UP. and another vs. Synthetics
and Chemicals Ltd. and another (1991) 4 sec 139; Municipal
Corporation of Delhi vs. Gurnam Kaur (1989) 1 SCC 101:
1988 (2) Suppl. SCR 929 - relied on.
E
*Va Tech Escher Wyass Flovel Ltd. Vs. MPSE Board &
another 2011(13) sec 261 - per incurium
Ravikant Bansal vs. M.P. Rural Road Development
Authority and Anr. 2012 (3) SCC 513 - referred to.
F
Young vs. Bristol Aeroplane Company, Limited 1944 (1)
K.B. 718; Young vs. Bristol Aeroplane Company, Limited
1946 Appeal Cases 163; Morelle Ld. vs. Wakeling & another
(1955) 2 QB 379 - referred to.
G
: 4. 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 said
H submissions. The argument of repugnancy is also not
M.P. RURAL ROAD DEV AUTHORITY v. L.G CHAUDHARY 167
ENGINEERS & CONT
tenable. In view of Entry 13 of the Concurrent List in the A
Vllth Schedule of the Constitution, 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 46of1940 B
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 c
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 of M.P. Act 1983 under sub-sections 2(4) and
0
2(5) thereof. Therefore, there cannot be any repugnancy.
In the 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 E
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 F
is set aside. In that view of the matter the arbitration
proceeding may proceed under M.P. Act of 1983 and not
under A.C. Act 1996. [Paras 43-48] [186-F-H 187-B-E; 188-
B-D]
G
T. Barai vs. Henry Ah Hoe and another AIR 1983 SC 150
M. Karunanidhi vs. Union of India and another (1979) 3 SCC
431: 1979 (3) SCR 254 - relied on.
Per Gyan Sudha Misra, J: (Partly dissenting)
H
168 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 1. Perusal of Section 7 of the Madhya Pradesh
Arbitration Tribunal Act showed 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
B 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
c 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.
Thus, on a perusal of the definition of 'works contract', it
D 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
E 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
F 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
G 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
H house, transformers or such other works of the State
' I
M.P. RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 169
ENGINEERS & CONT.
Government or Public Undertaking including an A
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 B
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 Justice Ganguly, disputes
arising out of execution of works contract has to be c
referred to the M.P. State Arbitration Tribunal and not
under the Arbitration and Conciliation Act, 1996. [Paras
4, 5] [189-A-C, G-H; 190-A-E]
2. But in so far as the instant matter is concerned, the
facts disclosed that the appellant M.P. Rural Road D
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 E
Arbitration Tribunal. 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 F
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. v. Anand Co-op L(C) Society
as also in view of the persuasive reasoning assigned in
the judgment and order reported in Heyman & Anr. Vs. G
Darwins, Limited 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'
H
170 SUPREME COURT REPORTS (2012] 2 S.C.R.
A 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'. However, the same
B does not even vaguely include the issue or dispute
arising out of cancellation and termination of contract
due to which this question would not fall within the
jurisdiction of M.P. State Arbitration Tribunal so as to be
referred for adjudication arising out of its termination. Fall
c 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
which held it permissible for the Arbitrator to adjudicate
D 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
E 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'. If the
F 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
G 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
H contract itself has been terminated, cancelled or
M.P. RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 171
ENGINEERS & CONT.
repudiated as it has happened in the instant case, then A
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 B
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. Hence,
the nature of the dispute which falls within the definition
of 'works contract' under Section 2(i) of the M.P. Act, 1983 c
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 0
existence at all by virtue of its cancellation/termination,
then 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 E
Tribunal only in respect of certain specified types of
arbitration enumerated under Section 2 (i) of the M.P. Act,
1983. [Paras 6-9) [190-F-H; 191-A-H; 192-A-G]
3. The impugned order of the High Court by which
the dispute relating to termination of works contract by F
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 G
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 H
172 SUPREME COURT REPORTS [2012] 2 S.C.R.
A within the definition of 'works contract' under Section 2(i)
of the M.P. Act of 1983. In order to avoid any ambiguity,
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
B 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. The question as to whether the dispute
c 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
0 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
E 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
F independent arbitrator under the Arbitration and
Conciliation Act, 1996 and not to M.P. State Arbitration
Tribunal. 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
G 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.
H State Tribunal. [Paras 10-12] (192-H; 193-A-H; 194-A-C]
M.P. RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 173
ENGINEERS & CONT.
Maharshi Dayanand University & Anr. v. Anand Co-op A
L(C) Society 2007 (5) SCC 295: 2007 (5) SCR 596 - relied
on.
Heyman & Anr. Vs. Darwins, Limited 1942 (1) All E.R.
337 - referred to. B
Case Law Reference
Asok Kumar Ganguly:
2011(13) sec 261 per incuriam Paras13-15,
19, 22, 30,
c
41,48
2012 (3) sec 513 referred to Para 21
2008 (8) SCR 349 relied on Para 29,30
D
1944 (1) K.B. 718 referred to Para 32,34
1946 Appeal Cases 163 referred to Para 34,38
1955 (2) SCR 603 referred to Para 36
E
(1955) 2 QB 379 referred to Para 37
(1991) 4 sec 139 relied on Para 38
1988 (2) Suppl. SCR 929 relied on Para 39
AIR 1983 SC 150 relied on Para 46 F
1979 (3) SCR 254 relied on Para 46
Gyan Sudha Misra:
2007 (5) SCR 596 relied on Para 7 G
1942 (1) All E.R. 337 referred to Para 7
CIVIL APP ELLATE JURISDICTION : Civil Appeal No. 974
of 2012.
H
174 SUPREME COURT REPORTS [2012] 2 S.C.R.
A From the Judgment and Order dated 08.09.2010 of the
High Court of M.P. at Indore in AC No. 14 of 2010.
K.K. Venugopal, Mishra Saurabh, Puja Dhar, Ankur Talwar,
B.S. Banthia, Vias Upadhyay, Dr. Vipin Gupta, Anand Dixit and
Pratyush Tripathi for the appearing parties.
9
The Judgment of the Court was delivered by
GANGULY, J. 1. Leave granted,
C 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 to the Arbitration Tribunal constituted under Section
D 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.
E
4. The appellant-Madhya Praaesh 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
F 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:
G "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
thereunder, whether before its commencement or during
the progress of Works or after the termination,
H abandonment or breach of the Contract, it shall, in the first
M.P RURAL ROAD DEV. AUTHORITY v. LG CHAUDHARY 175
ENGINEERS & CONT. [ASOK KUMAR GANGULY, J.]
· instance, be referred for settlement to competent authority, A
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 B
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 c
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 D
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
E
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, F
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 G
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"
H
176 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 8. "Reference to Tribunal" is statutorily provided under
Section 7 of the M.P. Act:
"7. Reference to Tribunal - (1) either party to a works
contract shall irrespective of the fact whether the
B agreement contains an arbitration clause or not, refer in
. writing the dispute to the Tribunal.
(2) Such reference shall be drawn up in such form
as may be prescribed and shall be supported by an
affidavit verifying the averments.
c
(3) The reference shall be accompanied by such fee
as may be prescribed.
(4) Every reference shall be accompanied by such
documents or other evidence and by such other fees for
D
service or execution of processes as may be prescribed.
(5) 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
E 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
F 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
G terminated the Works Contract and encashed the bank
guarantee furnished by the respondent on 25.6.2008.
11. The'reafter, on 29.8.2008, the respondent submitted a
representation to the appellant against the encashment of bank
H guarantee. Prior to that on 5.8.2008, respondent filed a Writ
· M.P. RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 177
ENGINEERS & CONT. [ASOK KUMAR GANGULY, J.]
Petition No. 4491/2008 challenging the encashment of bank A
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. 8
12. In the pending dispute, the respondent submitted
additional claim on 24.2.201 O 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 C
the Works Contract specifically provides for adjudication of
disputes by the Arbitral Tribunal under the M.P. Act.
13. Then on 24.6.201 O 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 D
allowed the application of the respondent and appointed an
Arbitrator by placing reliance on a decision of this Court in Va
Tech Escher Wyass Flove/ Ltd. Vs. MPSE Board & another -
Civil Appeal No. 3746 and 3747 of 2005.
E
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.
F
15. Facts in connection with the Va Teqh (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.
G
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. H
178 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 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
m·aintainable. The exact reasoning recorded by this Court in Va
Tech is as follows:
B
"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.
c
Hence, the impugned judgment cannot be sustained and
we hold that the application under Section 9 of the 1996
Act was maintainable."
D 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
E 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
F 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:
G '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.
H Learned counsel for the petitioner has relied on a
M.P. RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 179
ENGINEERS & CONT [ASOK KUMAR GANGULY, J.]
decision of this Court in Civil Appeal No. 3746 of 2005 A
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
8
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 c
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
0
in the case of Va Tech.
22. lhe 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 AC. Act 1996, it E
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 F
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 G
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 arbitration
under any other enactment for the time being in force, as H
180 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 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
8
with A.C. Act 1996 then the Court finds that the provisions of
M.P. Act are inconsistent with the provisions of AC. 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
C in th~ 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 AC. Act 1996. Again
under AC. Act 1996, arbitral tribunal is defined under Section
2(1 )(d) as a sole arbitrator or a panel of arbitrators. But under
D 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.G. Act 1996.
E 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
F therewith. The structure of the tribunal under the M.P. Act is also
different from the structure of a tribunal under the AC. 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:
G "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.
H (1-a) The State Government may, in consultation with the
M.P. RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 181
ENGINEERS & CONT [ASOK KUMAR GANGULY, J.]
Chairman, designate one of the Judicial Members as the A
Vice-Chairman who in the event of occurrenc.e 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.
B
(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-
c
{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
0
Cbmmissioner 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 E
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
F
{c) a Senior Deputy Accountant General of
the Office of the Accountant General, Madhya
Pradesh,
for a period of not less than five years.
G
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 H
182 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 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
B 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
c 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
0
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
E 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
F 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
G 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 17
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
H
M.P. RURAL ROAD DEV. AUTHORITY v. LG CHAUDHARY 183
ENGINEERS & CONT. [ASOK KUMAR GANGULY, J.]
Anshuman Shukla (supra) to show that there is inconsistency A
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 B
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 pe 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 C
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 D
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 E
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 F
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~ co-ordinate Bench of G
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.
H
184 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 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 Young vs. Bristol
B 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:
c "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
D 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."
E
(Page 729)
34. The decision in Young (supra) was subsequently
approved by the House of Lords in Young vs. Bristol Aeroplane
F 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
G 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
H Company Limite.d vs. The State of Bihar and others reported
M.P. RURAL ROAD DEV. AUTHORITY v. L.G. CHAUDHARY 185
ENGINEERS & CONT [ASOK KUMAR GANGULY, J.]
in 1955 (2) SCR 603 [See the discussion in pages 622 and A
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 B
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
inconsistent statutory provision or of some authority binding C
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 ....... "
D
(page 406)
38. In the case of State of U.P. and another vs. Synthetics
and Chemicals Ltd. and another reported in (1991) 4 sec
139, this Court held the doctrine of 'per incuriam' in practice
means 'per ignoratium' and noted that English Courts have E
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 F
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 of.per incuriam very G
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
H
186 SUPREME COURT REPORTS (2012] 2 S.C.R.
A 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:
B " ...... 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
c 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
0 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
E 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.
F
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
G the aforesaid submissions.
44. The argument of repugnancy is also not tenable. Entry
13 of the Concurrent List in the Vllth Schedule of the
Constitution runs as follows:
H "13. Civil procedure, including all matters included in the
M.P. RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 18 7
ENGINEERS & CONT. [ASOK KUMAR GANGULY, J]
Code of Civil Procedure at the commencement of this A
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 B
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 C
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 D
1996 saves the provisions of M.P. Act 1983 under sub-sections
2(4) and 2(5) thereof. Therefore, there cannot be any
repugnaAcy. (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 E
Bench of this Court in the case of M. Karunanidhi vs. Union
of India and another reported in (1979) 3 sec 431 are very
pertinent and the following observations are excerpted:
" ...... ltis, therefore, clear that in view of this clear intention F
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 G
fact that the dominant legislature allowed the subordinate
legislature to operate in the same field pari passu the
State Act."
(para 37, page 450) H
188 SUPREME COURT REPORTS [2012) 2 S.C.R.
A 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 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
B 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, th.ere
is no substance in the argument of repugnancy and is
accordingly rejected.
48. Therefore, appeal is allowed and the judgment of the
C 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.
D
49. There will be no order as to costs.
GYAN SUDHA MISRA, J. 1. Leave granted.
2. While concurring and endorsing the reasonings
E 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
F 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
G 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
s~all irrespective of the fact whether the agreement
contains an arbitration clause or not, refer in writing the
H dispute to the Tribunal."
M.P RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 189
ENGINEERS & CONT. [GYAN SUDHA MISRA, J.]
4. On perusal of the aforesaid provision enumerated under A
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 B
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 c
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 D
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 E
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 F
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
G
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 H
190 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 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 termin<!'tion of works
contract has not been incorporated even remotely within the
definition of 'works contract'. In view of this, the legal and logical
B 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-
C 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
D 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
E 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
F 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
G 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
H regarding the justification and legality as to whether the
M.P RURAL ROAD DEV AUTHORITY v. L.G CHAUDHARY 191
ENGINEERS & CONT [GYAN SUDHA MISRA, J)
cancellation of works contract was legal or illegal, then the said A
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) sec 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 B
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 c
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 D
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 E
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 F
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 G
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 H
192 SUPREME COURT REPORTS (2012) 2 S.C.R.
A 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
B 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
C 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 ifs cancellation, the
0
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
E 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
F 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
G the State Tribunal only in respect of certain specified types of
arbitration enumerated under Section 2 (i) of the M.P. Act,
1983. r
10. As a consequence and fall out of the aforesaid
discussion, the impugned order of the High Court by which the
H
M.P. RURAL ROAD DEV. AUTHORITY v. L.G CHAUDHARY 193
ENGINEERS & CONT. [GYAN SUDHA MISRA, J.]
dispute relating to termination of works contract by the M.P. A
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 nova reference of the dispute to
the M.P. State Arbitration Tribunal. In the alternative, the B
· 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 c
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 0
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 E
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 F
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 G
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 H
194 SUPREME COURT REPORTS [2012] 2 S.C.R.
A 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
B 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.
C There will be no order as to costs.
ORDER
In view of some divergence of views expressed in the two
judgments delivered today by us, the matter may be placed
D before Hon'ble the Chief Justice of India for constituting a larger
Bench to resolve the divergence.
D.G. Matter referred to larger Bench.
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