2012 (1) TMI 431 - SC - Indian Laws

2018 (3) TMI 2044 - SC

Issues Involved:
1. Whether the Madhya Pradesh Madhyasthan Adhikaran Adhiniyam, 1983 (M.P. Act) continues to operate in view of the Arbitration and Conciliation Act, 1996 (A.C. Act 1996).
2. Whether the High Court's appointment of an arbitrator under the A.C. Act 1996 was valid.
3. The applicability of the principle of per incuriam to the decision in Va Tech Escher Wyass Flovel Ltd. v. MPSE Board and Anr.
4. The scope and definition of "works contract" under the M.P. Act.
5. The jurisdiction of the M.P. State Arbitration Tribunal versus an independent arbitrator under the A.C. Act 1996 in cases of contract termination.

Issue-Wise Detailed Analysis:

1. Continuance of M.P. Act in View of A.C. Act 1996:
The primary question was whether the M.P. Act, which mandates the referral of disputes to the Arbitration Tribunal, remains operative after the enactment of the A.C. Act 1996. The court analyzed Section 2(4) of the A.C. Act 1996, which states that Part-I of the A.C. Act 1996 applies to every arbitration under any other enactment unless inconsistent with that enactment. The court found that the provisions of the M.P. Act are inconsistent with the A.C. Act 1996, particularly because the M.P. Act provides for statutory arbitration even in the absence of an arbitration agreement, unlike the A.C. Act 1996.

2. Validity of High Court's Appointment of Arbitrator:
The High Court had appointed an arbitrator under the A.C. Act 1996, relying on the Va Tech decision, which held that the M.P. Act is impliedly repealed by the A.C. Act 1996 where there is an arbitration clause. The Supreme Court found that this decision was rendered per incuriam (in ignorance of relevant statutory provisions and precedent) and thus could not be sustained. Consequently, the High Court's appointment of an arbitrator under the A.C. Act 1996 was invalid.

3. Principle of Per Incuriam:
The court applied the principle of per incuriam, which allows a court to disregard a previous decision if it was given in ignorance of a relevant statutory provision or binding authority. The court noted that the Va Tech decision did not consider the provisions of Section 2(4) of the A.C. Act 1996 or the earlier decision in Anshuman Shukla, which highlighted the distinct features of the M.P. Act. Thus, the Va Tech decision was rendered per incuriam and could not be used as a precedent.

4. Scope and Definition of "Works Contract":
The court examined the definition of "works contract" under Section 2(i) of the M.P. Act, which includes agreements for the execution of works such as construction, repair, or maintenance of various structures. The court clarified that disputes arising out of the execution of these works must be referred to the M.P. State Arbitration Tribunal as per Section 7 of the M.P. Act. However, the definition does not include disputes related to the termination or cancellation of the contract.

5. Jurisdiction in Cases of Contract Termination:
Justice Gyan Sudha Misra, while concurring with the main judgment, provided additional reasoning on the jurisdiction issue. She emphasized that disputes related to the termination or cancellation of a works contract do not fall within the definition of "works contract" under the M.P. Act. Therefore, such disputes should be referred to an independent arbitrator under the A.C. Act 1996, not the M.P. State Arbitration Tribunal. This distinction was crucial in determining the appropriate forum for resolving the dispute.

Conclusion:
The appeal was allowed, and the High Court's judgment based on the Va Tech decision was set aside. The court held that arbitration proceedings should proceed under the M.P. Act of 1983 and not under the A.C. Act 1996. However, in cases where the works contract itself has been terminated, the dispute should be referred to an independent arbitrator under the A.C. Act 1996. The matter was referred to the Chief Justice of India for constituting a larger Bench to resolve the divergence in views.

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