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TMI Blog2012 (1) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 thereunder, 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 Contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and stayed the arbitration proceedings. 20. In Anr. 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 v. 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal 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 equiva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial 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 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 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 Ltd. to one Bench. The Chai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds 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 Ltd. v. The State of Bihar and Ors. 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. v. Wakeling and Anr. (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 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.... (page 406) 38. In the case of State of Utter Pradesh and Anr. v. Synthetics and Chemicals Ltd. and Anr. reported in (1991) 4 SCC 139, this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il 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 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 v. Henry Ah Hoe and Anr. reported in AIR 1983 SC 150). In this connection the observations made by the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks contract shall irrespective of the fact whether the agreement contains an arbitration clause or not, refer in writing the dispute to the Tribunal. 53. 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 mainten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, 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. 55. 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. 56. 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 and Anr. v. Anand Co-op L(C) Society 2007 (5) SCC 295, as also in view of the persuasive reasoning assigned in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 58. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lone 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. 61. 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. 62. Consequently, the instant appeal stands partly allowed. There will be no order as to costs. 63. 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. - - TaxTMI - TM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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