‘Works Contract’ Under Bhopal Municipal Corporation, Comes Under Madhya Pradesh Arbitration Tribunal . Court Cant Appoint An Arbitrator Under Section 11 Of A&C Act, 1996

The Madhya Pradesh High Court has ruled that the court cannot appoint an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) when an overriding remedy is available to the party under the Madhya Pradesh Madhyastam Adhikaran Adhiniyam, 1983.

The bench of Justice Anand Pathak was dealing with an application filed under Section 11 of the A&C Act seeking appointment of Arbitrator to adjudicate the dispute between the parties in relation to a works contract.

The court held that since the contract awarded to the applicant by the Bhopal Municipal Corporation was a ‘Works Contract’, a remedy was available to the applicant to make a reference to the ‘Madhyasthan Tribunal’, i.e., the Madhya Pradesh Arbitration Tribunal, under Section 7 of the Adhiniyam, 1983.

The court referred to the Supreme Court’s decision in MP Rural Road Development Authority vs. L.G. Chaudhari and another, (2018) 10 SCC 826, where it was ruled that the State law, i.e., the Adhiniyam, 1983, will prevail over the A&C Act, which is a Central Act, in terms of Section 2(4) of the said Act.

Thus, in view of the alternative and overriding remedy available under the Adhinyam, 1983, the court cannot appoint an Arbitrator under Section 11 of the A&C Act, the High Court said.

The applicant, Meinhardt Singapore Pte. Ltd, executed a contract agreement with the respondent, Bhopal Municipal Corporation, for providing project, management and consultancy services for development of low-cost housing, to the latter. After certain disputes arose between the parties, the applicant invoked the arbitration clause contained in the agreement and filed an application under Section 11 of the A&C Act before the Madhya Pradesh High Court seeking appointment of Arbitrator.

Disputing the maintainability of the application, the respondent-corporation submitted before the court that the contract awarded to the applicant was a ‘Works Contract’, as defined under Section 2 (i) of Madhya Pradesh Madhyastam Adhikaran Adhiniyam, 1983. It added that the Contract was awarded by the Municipal Corporation, Bhopal which is a Public Undertaking as defined under Section 2 (g) of the Adhiniyam.

Since the contract was a ‘Works Contract’, any dispute relating to the said contract could only be agitated in accordance with the provisions contained in the Adhiniyam, 1983, the corporation argued.

The court referred to the definition of ‘Works Contract’ contained in the Adhiniyam, 1983. It reckoned that in 2017, w.e.f. 17.01.2017, the said definition of Works Contract was substituted by the Madhya Pradesh Act No.7 of 2017.

The court observed that in view of the substituted definition, services hired for carrying out the works including all concession agreements entered by the State Government or Public Undertaking, would also fall under the ambit of ‘Works Contract’. Therefore, the agreement like the present one where the applicant was extending services as a consultant, would also fall under the definition of ‘Works Contract’, the court concluded.

While further noting that Bhopal Municipal Corporation is a Public Undertaking as per Section 2 (g) of the Adhiniyam, 1983, the bench said, “Since Bhopal Municipal Corporation is a Public Undertaking and services rendered by the applicant falls under the Works Contract as defined in the Adhiniyam, 1983, therefore, remedy lies with the applicant to make reference under Section 7 of (to) the Madhyasthan Tribunal.”

Section 7 of the Adhiniyam, 1983, provides that either party to a works contract shall irrespective of the fact whether the agreement contains an arbitration clause or not, refer in writing the dispute to the ‘Madhyasthan Tribunal’, i.e., the M.P. Arbitration Tribunal, under the Adhiniyam.

The bench referred to the Supreme Court’s decision in MP Rural Road Development Authority (2018), where the top court had restored the proceedings which were pending before the M.P. Arbitration Tribunal under the Adhiniyam, 1983. While upholding the arbitral reference under the State law, i.e., the Adhiniyam, 1983, the Apex Court had ruled that the said State law will prevail in terms of Section 2(4) of the A&C Act, which is a Central Act. Thus, the A&C Act would not be applicable, the Supreme Court had said.

The High Court thus concluded, “Since question of forum goes to the root of the matter and therefore, appropriate remedy available to the applicant is to make reference to the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 and not the appointment of Arbitrator as per Section 11 of Act, 1996. This Court cannot appoint an Arbitrator when the alternative and overriding remedy is available under the Adhinyam, 1983.”

The court thus dismissed the application.

Case Title: Meinhardt Singapore Pte. Ltd vs Bhopal Municipal Corporation (BMC)

Dated: 22.06.2023

Counsel for the Applicant: Mr. Sandeep S. Tiwari

Counsel for the Respondent: Mr. Sanjay K. Agrawal

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