This is the fourth article in a series where we are exploring the interplay between different statutes providing for dispute resolution through arbitration and the Arbitration Act. We have already analyzed the intersection between the Electricity Act and Arbitration Act, the MSMED Act and Arbitration Act and the National Highways Act and Arbitration Act. In this article, we will explore the connection between the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (the “M.P. Act”) and the Arbitration and Conciliation Act, 1996 (the “Arbitration Act”).
Statutory Scheme
The Act came into effect on March 1, 1985. It was created to set up a Tribunal to resolve disputes involving the State Government or Public Undertakings (fully or largely owned or controlled by the State Government), as well as related matters.
As per Section 3 of the Act, the Tribunal is responsible for resolving disputes and issues related to works contracts, including those arising during their execution, performance, or completion. Section 7 outlines the process for referring disputes to the Tribunal.
Section 7 of the M.P. Act provides that either party to a works contract is required to refer any dispute to the Tribunal in writing, regardless of whether the contract contains an arbitration clause. The reference must be made in the prescribed form and supported by an affidavit that verifies the claims. Additionally, the reference should be accompanied by the prescribed fee, along with any necessary documents or evidence, and any additional fees for service or process execution. Once the reference is received, the Tribunal will assess whether the case is suitable for adjudication. If it finds the case appropriate, it will admit the reference; otherwise, it may reject the reference after recording the reasons for doing so.
From the above provision, it is clear that either party to the work contract can refer the dispute having arisen to the tribunal. In this context, it is important to understand the definition of the work contract which is provided under section 2(i) of the Act.
This section provides that a “works contract” is a written agreement for the construction, repair, or maintenance of structures like buildings, roads, dams, and other works specified by the State Government or its agencies. It also includes agreements for supplying goods or materials and services related to these works, as well as concession agreements involving state support. Additionally, contracts for electric lines, water supply, and sewerage systems are considered works contracts. Any undefined terms in this Act will have the meanings given in the Arbitration Act.
A conjoint reading of the above two provisions establishes that when any dispute arises between the parties to the work contract, such a dispute can be referred to the tribunal by either of the parties.
Understanding the Distinction Between the M.P. Act and the Arbitration Act- Whether the MP Act Overrides The Arbitration Act
The primary question that arises is whether the MP Act, being a specific legislation tailored to address disputes arising from works contracts involving the State Government or its instrumentalities, will take precedence over a general statute like the Arbitration Act, which governs arbitration matters broadly without specifying any particular category of disputes.
This issue came up for consideration before the Supreme Court in MP Rural Road Dev. Authority And Anr vs M/S. L.G. Chaudhary Engineers And Cont1., where the Court analyzed the scheme underpinning both statutes. The Court particularly emphasized that the MP Act provides for the resolution of disputes even in the absence of an arbitration agreement, which is in contrast to the basic requirement of the Arbitration Act that an arbitration agreement must exist for the Act to operate.
It was further noted that there is also a difference in the constitution of an Arbitral Tribunal. Section 2(1)(d) of the Arbitration Act specifies that an Arbitral Tribunal shall consist of either a sole arbitrator or a panel of arbitrators, whereas the tribunal under the MP Act is constituted as per Sections 3 and 4 of the Act. Furthermore, the term “dispute” is not defined under the Arbitration Act, but it is specifically defined in the MP Act, outlining the kinds of disputes that can be adjudicated by the tribunal.
Having analysed the provisions of both the statutes, the court held 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 arbitrations which are under the M.P. Act 1983. This is clear from Sections 2(4) and 2(5) of A.C. Act 1996.”
In the above case, Justice Gyan Sudha Misra took a contrary view by opining that as far as the dispute related to the execution of the work contracts is concerned, the MP Act will be given precedence over the Arbitration Act. However, when it comes to the termination of the said contract and any dispute arising related to such termination, it cannot be adjudicated under the MP Act as it talks only about the execution of the work contracts. Consequently, the Arbitration Act will govern such disputes.
In view of the differing views taken by the learned judges, the matter was placed before a bench of three judges in Madhya Pradesh Rural Road Development Authority v. L.G. Chaudhary Engineers and Contractors2, where the court, while disagreeing with the view taken by Justice Gyan Sudha Misra, observed that as per Section 2(4) of the Arbitration Act, the provisions of any other enactment, if inconsistent with the Arbitration Act, shall be given precedence. Therefore, the MP Act shall prevail over the Arbitration Act, as the provisions of the MP Act are inconsistent with the provisions of the Arbitration Act.
The court referred to its own judgment in Dhanrajamal Gobindram v. Shamji Kalidas & Co.3, where, while interpreting Section 46 of the Arbitration Act, 1940, which is in pari materia to the present Section 2(4) of the Arbitration Act, the Court observed that where there is an inconsistency, the provisions of the other statute would take precedence.
The Court further placed reliance on Punjab State Electricity Board v. Guru Nanak Cold Storage4 where it was held that “if there is any inconsistency, then the provisions of the Arbitration Act do not get attracted.”
After analyzing the scheme of the MP Act and referring to its own judgments, the court held that the MP Act would occupy the field even for disputes arising with respect to the termination of work contracts.
The Supreme Court in State of Madhya Pradesh and another vs. Anshuman Shukla5, while highlighting the distinguishing features of the MP Act that set it apart from the Arbitration Act, observed that a special forum has been created under the MP Act for resolving disputes arising, inter alia, from works contracts. The tribunal constituted under the MP Act cannot be considered as one established by the parties themselves. The members of the tribunal are not nominated by the parties, and the disputing parties have no say or control over their appointment.
Emphasizing the powers exercised by the tribunal, the Court noted that it can reject a reference at the threshold. It has the authority to summon records, record evidence, award interest, and impose costs. Its awards are executed as though they were decrees of a court. Importantly, the awards of the tribunal are not subject to the provisions of the Arbitration Act.
All these features were pointed out by the court to demonstrate the inconsistency between the provisions of the Arbitration Act and those of the MP Act.
Conclusion
It can be concluded from the above analysis that the MP Act is a comprehensive code in itself, dealing with the adjudication of disputes related to works contracts executed between a party on one side and the State or its instrumentalities on the other. Such disputes are decided by a specific forum called the Arbitral Tribunal, which is constituted by the Government under the provisions of the MP Act. This tribunal derives its powers from the Act itself.
Although there was some confusion regarding whether the tribunal was empowered to adjudicate disputes arising from the termination of work contracts, as only the phrase “related to the execution of the work contract” had been used in the definition of work contracts, this confusion was put to rest by the Supreme Court in Madhya Pradesh Rural Road Development Authority(supra), which observed that all disputes, whether related to execution or termination, arising from the work contract can be decided by the tribunal constituted under the MP Act.
1CIVIL APPEAL NO. 974 OF 2012
2(2018) 10 SCC 826
3(1961) 3 SCR 1020
4(1996) 5 SCC 411
5(2008) 7 SCC 487
