1987 (6) TMI 398 - HC - Indian Laws

Summary

Issues Involved:
1. Constitutionality and arbitrariness of the M.P. Madhyastham Adhikaran Adhiniyam, 1983.
2. Whether the Act is an enactment under Entry No. 13 of List III of the Seventh Schedule of the Constitution.
3. Interpretation of the word "shall" in Section 7(1) of the Act.
4. Independence and impartiality of the Tribunal constituted under the Act.
5. Whether arbitration proceedings were pending and saved under Section 20(2) of the Act.
6. Retrospective operation of the Act and its effect on existing agreements.

Detailed Analysis:

1. Constitutionality and Arbitrariness of the M.P. Madhyastham Adhikaran Adhiniyam, 1983:
The petitioner challenged the Act as arbitrary and violative of Article 14 of the Constitution, arguing it discriminates by applying only to works contracts with claims of Rs. 50,000/- or more and not to other contracts. The court held that the presumption is always in favor of the constitutionality of an enactment, emphasizing that reasonable classification is permissible under Article 14. The Act's classification of works contracts is reasonable, aiming to ensure speedy and impartial arbitration by an independent Tribunal. The court cited several Supreme Court precedents supporting the principle that reasonable classification does not violate Article 14, thereby upholding the Act's validity.

2. Enactment under Entry No. 13 of List III of the Seventh Schedule:
The petitioner argued that the Act is not an enactment under Entry No. 13, which pertains to arbitration. The court clarified that arbitration can be statutory, not just consensual, and the Act provides for statutory arbitration. The provisions of the Arbitration Act, 1940, apply to statutory arbitrations unless inconsistent with the specific statute. The court concluded that the Act is indeed an enactment under Entry No. 13, providing for statutory arbitration of disputes arising from works contracts with the State.

3. Interpretation of "Shall" in Section 7(1) of the Act:
The petitioner contended that "shall" in Section 7(1) should be read as "may" to preserve the parties' discretion to refer disputes. The court disagreed, stating that "shall" imposes a mandatory obligation on parties to refer disputes to the Tribunal, ensuring the Act's purpose is not frustrated. The court emphasized that the Tribunal's jurisdiction is exclusive for disputes it can cognize, reinforcing the mandatory nature of the referral process.

4. Independence and Impartiality of the Tribunal:
Concerns were raised about the Tribunal's independence, given its members' appointments by the State. The court noted that the Tribunal is headed by a High Court Judge and includes senior judicial and executive members, ensuring impartiality. The court found no merit in the argument that the Tribunal is subservient to the State, emphasizing that the Tribunal's composition and procedural regulations ensure its independence and fairness.

5. Whether Arbitration Proceedings Were Pending and Saved under Section 20(2):
The petitioner argued that arbitration proceedings were pending due to prior notices for arbitrator appointment, thus saved under Section 20(2). The court clarified that arbitration commences when a reference is made to the arbitrator, not merely upon notice. Since references were made after the Act's commencement, no proceedings were pending to be saved under Section 20(2). The court held that disputes must be referred to the Tribunal, as mandated by the Act.

6. Retrospective Operation of the Act and Its Effect on Existing Agreements:
The petitioner contended that the Act should not retrospectively affect existing agreements. The court explained that the Act does not expressly repeal the Arbitration Act but impliedly supersedes it for works contracts. Section 20(2) preserves only pending proceedings, not future ones based on prior agreements. The court held that the Act's provisions apply to all disputes arising after its commencement, regardless of prior agreements, emphasizing the legislative intent for statutory arbitration.

Conclusion:
The court dismissed the petitions, upholding the M.P. Madhyastham Adhikaran Adhiniyam, 1983, as constitutional and valid. The Tribunal's jurisdiction was affirmed, and the disputes were directed to be referred to it for adjudication. The court awarded costs to the respondent, reinforcing the Act's applicability and the Tribunal's role in resolving disputes under works contracts with the State.