State Not Part To Agreement Can't File Section 16 Application: Madhya Pradesh High Court
The Madhya Pradesh High Court bench of Chief Justice Sanjeev Sachdeva and Justice Rajendra Kumar Vani has held that an arbitration agreement entered into between the Ministry of Road Transport and Highways, Government of India, and a private company does not involve or implicate the State Government in any legal capacity. The bench held that such an agreement is exclusively between...
The Madhya Pradesh High Court bench of Chief Justice Sanjeev Sachdeva and Justice Rajendra Kumar Vani has held that an arbitration agreement entered into between the Ministry of Road Transport and Highways, Government of India, and a private company does not involve or implicate the State Government in any legal capacity.
The bench held that such an agreement is exclusively between the central government ministry and the concerned company, thereby excluding any role or involvement of the State Government. As a result, the bench held that the State Government cannot be considered a party to the arbitration agreement or the related arbitral proceedings.
Brief Facts:
The State of Madhya Pradesh, the Petitioners, challenged an order passed by the Arbitral Tribunal. The tribunal ruled that it had no jurisdiction over the matter, following an application under Section 16 of the Arbitration and Conciliation Act, 1996. The State of Madhya Pradesh contended that all works contracts to which it is a party must be referred to the statutory Arbitral Tribunal constituted under the Madhya Pradesh Madhyastam Adhikaran Adhiniyam, 1983. The Petitioners argued that since the contract in question was signed by an officer of the State Government, it falls within the definition of a works contract as outlined in Section 2 (1) (i) of the Adhiniyam of 1983.
On the other hand, T.R.G. Industries Private Limited (Respondent) argued that the State of Madhya Pradesh is not even a party to the arbitration agreement in question. Further, the arbitration clause within the agreement explicitly provided for the reference of disputes to an Arbitral Tribunal in accordance with the Rules of arbitration of the Society for Affordable Redressal of Disputes (SAROD).
The dispute centered around an agreement which pertained to the rehabilitation and up-gradation of two lanes with paved shoulders on the Porsa-Ater-Bhind Road section of the newly declared NH-552 Extension in the State of Madhya Pradesh. The agreement was executed between the Ministry of Road Transport and Highways, Government of India, through the Office of the Chief Engineer, National Highways Zone, Public Works Department, Nirman Bhawan, Bhopal, and the Respondent. The contract stated that the rehabilitation work was entrusted to the authority by the Government of India, and the contract was entered into by the Ministry of Road Transport and Highways. The dispute resolution clause under Article 26 of the agreement specified that any disputes, differences, or controversies between the parties are to be resolved amicably according to the conciliation provisions provided. If conciliation fails, the dispute is to be finally settled by arbitration under SAROD's rules. Additionally, the agreement stipulated that it shall be governed by the laws of India and that the courts in Delhi shall have exclusive jurisdiction over any matters arising from or related to the agreement.
Observations by the High Court:
The High Court noted that the agreement was made between the Ministry of Road Transport and Highways, Government of India, and the Respondent. The Petitioner, the State of Madhya Pradesh, was neither a party to this agreement nor to the arbitral proceedings arising from it. The Petitioner argued that the dispute should be referred to the statutory Tribunal constituted under the Adhiniyam of 1983, but the High Court found this contention to be unsustainable. The Adhiniyam of 1983 applies to works contracts entered into by the State Government or its officials, public undertakings, or corporations, none of which are involved in the petition.
The High Court further noted that the agreement was solely between the Ministry of Road Transport and Highways, Government of India, and the Respondent and not with the State Government or any associated body. The arbitration proceedings were initiated against the Ministry of Road Transport and Highways, which was not the Petitioner before the High Court. Moreover, the arbitration clause in the agreement specifically referred to the rules of arbitration of SAROD (Society for Affordable Redressal of Disputes). The High Court highlighted that if the intention was to refer disputes to the statutory Tribunal under the Adhiniyam of 1983, the agreement would have explicitly mentioned this.
Therefore, the High Court found no merit in the contentions raised by the Petitioner. It further held that the petition filed by the State of Madhya Pradesh was not maintainable.
Case Title: The State Of Madhya Pradesh And Others Versus T.R.G. Industries Private Limited A Company Registered Under The Companies Act 1956 And Others
Case Number: WRIT PETITION No. 12871 of 2024
Shri Ankur Mody - Additional Advocate General for petitioners/State.
Shri Lovkesh Sawhney - Senior Advocate with Shri Tej Singh Mahadik - Advocate for respondent No.1. Shri Rajendra Bhargava with Ms. Priyanka Tonk - Advocate for respondent No.2.
Date of Judgment: 24th OF AUGUST, 2024