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In its order, the Arbitration Tribunal had ruled that since the contract included an arbitration clause, the Arbitration and Conciliation Act, 1996 would apply as the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 would only apply if no arbitration clause existed
The Supreme Court recently set aside a Madhya Pradesh High Court order that allowed an appeal against a district court's decision. The district court had dismissed a plea challenging the appointment of an arbitrator in a dispute over building a minor bridge on the ground that the provisions of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 were applicable in the case.
A bench of Justices Abhay S Oka and Augustine George Masih noted appellant M/s Modern Builders before taking recourse to the Arbitration Act, had taken recourse to Section 7 of the 1983 Act.
The court said the order of the Arbitration Tribunal, holding that the Arbitration Act will apply, led the appellant to file a petition under Section 11(6) of the Arbitration Act, which was not objected to on the grounds of the applicability of the 1983 Act. The objection of the State government was confined to the merits of the claim.
"Therefore, in the facts of the case, it will be unjust to set aside the award only on the ground of the failure of the appellant to take recourse to the 1983 Act," the bench said.
In fact, the court said, the appellant had taken recourse to the 1983 Act before seeking the appointment of an Arbitrator. In this case, as can be seen from the impugned judgment, the award has been set aside only on the ground that the appellant ought to have invoked the provisions of the 1983 Act, it noted.
"Even assuming that the observations in paragraph 17 of the decision in the case of Madhya Pradesh Rural Road Development Authority (2018) are not applicable, this is a fit case to exercise jurisdiction under Article 142 of the Constitution of India to ensure that complete justice is done," the bench said.
Therefore, by setting aside the impugned judgment, the appeal under Section 37 of the Arbitration Act will have to be restored with a request to the High Court to decide the same on merits, the court ordered.
The bench thus restored the Arbitration appeal to the file of the high court.
"All the issues on the merits of the restored appeal under Section 37 of the Arbitration Act are kept open. However, the award should not be set aside on the grounds of the applicability of the 1983 Act," the bench ordered.
The appellant was appointed as a contractor to construct a minor bridge, having been granted the contract by the Madhya Pradesh government.
The second respondent, Executive Engineer, National Highway Division Sagar, Madhya Pradesh, rescinded the contract by the letter of November 9, 2001. Clause 29 in the work order incorporated an arbitration clause. The appellant requested for constitution of an Arbitral Board. The said request was rejected.
Even the subsequent representation was rejected. Therefore, the appellant applied for a reference to the Madhya Pradesh Arbitration Tribunal, Bhopal in accordance with Section 7 of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983.
By the order of April 19, 2010, the Arbitration Tribunal concluded that as there was an arbitration clause in the contract, the provisions of the Arbitration and Conciliation Act, 1996 would apply. The Tribunal held that only when there is no arbitration clause, the provisions of the 1983 Act would apply.
In view of this order, the appellant filed a petition under Section 11(6) of the Arbitration Act before the High Court of Madhya Pradesh at Jabalpur. The petition was allowed, and a retired District Judge was appointed as the Arbitrator. An award was made on April 25, 2014 by the Arbitrator. The award was in the sum of Rs 6,52,235 with interest.
The respondents, aggrieved by the said award, preferred a petition under Section 34 of the Arbitration Act before the court of District Judge, Jabalpur, which dismissed the said petition.
The respondents filed an appeal under Section 37 of the Arbitration Act before the high court for challenging the order of the district court. By the impugned judgment, the high court proceeded to set aside the award only on the ground that as held by the top court in the case of Madhya Pradesh Rural Road Development Authority & Anr, the provisions of the 1983 Act were applicable.
Case Title: M/s Modern Builders Vs State of Madhya Pradesh & Anr
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