In a landmark decision, the Supreme Court of India has recently ordered on a legal dispute between a privately owned tollway corporation and a state run road development corporation. The case being of construction project nature focuses on one of the most fundamental clash of law where Arbitration and Conciliation Act of 1996 and the Madhya Pradesh Madhyastham Adhikaran Adhiniyam of 1983 go dramatically against each other. The ruling by the court elucidates on the law which should be prioritized when the issue concerns such an agreement as a government works contract. This paper will discuss the facts of the case, the main issues of the case law and the judgment made by the court in easy English.
History of the Conflict
It is a matter between the Umri Pooph Pratappur (UPP) Tollways Pvt. Ltd., the appellant and the M.P. Road Development Corporation, the respondent. In 2012, the two parties entered into a Concession Agreement on a Madhya Pradesh road development project. With an evaluation of more than Rs. 73 crore, the project should have been carried out in a durational span of 24 months.
The project was however delayed and ended up with cost overruns. The appellant was UPP Tollways that argued that the acts of the corporation like hiring a new engineer that dismissed old designs that were set forth on earlier required them to deconstruct and re-work much of the job. This raised the cost of the project to approximately 100 crore.
UPP Tollways initially had to voluntarily present the dispute before the Madhya Pradesh Arbitration Tribunal, in the year 2018, when their demands to be compensated could not be settled amicably. At a later date they abandoned this case and started another arbitration procedure with a third party the International Centre for Alternative Dispute Resolution (ICADR) belonging to their contractual provisions. This action was criticized by M.P. Road Development Corporation and this was subsequently overturned in the High Court which subsequently set aside the proceedings of the private arbitration. This made UPP Tollways move to the Supreme Court.
The Matter of Jurisdiction
The main question that the Supreme Court was to answer was on what was the right place to decide the conflict. UPP Tollways said that arbitration clause in their Concession Agreement entitled them to have their claims adjudicated by a commercial tribunal using the Arbitration and Conciliation Act, 1996 (the 1996 Act). They also stated that their money allegations could not be “ascertained” (established officially), which they mentioned meant that Madhya Pradesh Arbitration Tribunal could not manage the case.
The corporation, however, contended that given that the Concession Agreement was a “works contract” (one with a state owned entity), any dispute thereon had to be adjudicated by the Madhya Pradesh Arbitration Tribunal as provided under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (the 1983 Act). They argued that the 1983 Act was a special law which outweighed the general legation of the 1996 Act to make the state tribunal be the only and exclusive forum where such dispute could be heard. The corporation also held that UPP Tollways attempted to evade the state tribunal since the claims they had were aged and probable statute barred in accordance with the 1983 Act.
The Law According to the Court
The question of the Supreme Court started with whether it was correct of the High Court to entertain the writ petition by the state corporation against a privately owned business. The court held that, since the conflict was over a project of public interest, the building of a state highway and the challenge was to a legal procedure, the case involved a “public law element”. Thus writ petition was not bad or unsustainable.
Secondly, the court turned to the clash of the two laws. It looked at the stipulations of the 1983 Act. According to the court it had been established that this law is specially made with the purpose to establish a special court to handle matters on “works contract” in which the state or its institutions are involved. There is a critical section known as Section 7 that explicitly directs either partner to resort to this tribunal through the dispute despite the agreement they have having an arbitration clause. The court also indicated the clear intention as expressed in Section 20 of the 1983 Act that stands to exclude any disputes that can be handled by the tribunal only to be heard by the civil courts.
As a special law enacted with a particular purpose in mind, 1983 Act, according to the Supreme Court, would override the general provisions of the 1996 Act. It declined to agree that the claims were not discoverable saying that the definition of dispute encompassing both ascertainable and ascertainable money contained in the 1983 Act. This implies that the tribunal might decide on a case where the actual amount of money to be paid was still being computed.
Final Verdict
The court confirmed the finding of the High Court that the arbitration proceedings commenced by UPP Tollways under the 1996 Act was not correct in the first place. The court once again affirmed that the tribunal arbitration of Madhya Pradesh was the only as well as binding resource to settle this conflict.
It enhances the legal doctrine that a special law made to deal with a particular kind of controversy has to be applied instead of the normal contractual terms and any other universal statues. It means that government contracts are managed within the statutory process, which is targeting these contracts thus leading to clarity and consistency of dispute resolution. The ruling made by the court is a very good reminder to the companies that engage in contracts with government bodies on the necessity to get to know the laws that may be applicable in their cases, that have potential to override the provisions of the contract. It gives a conclusive answer to the question of hierarchy of laws in such a legal-battle.
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