Case: Mp Rural Road Dev. Authority  Vs. M/S. L.G. Chaudhary Engineers And Cont

GANGULY, J. 1. Leave granted. 2. The question which falls for consideration in this appeal is whether the provision of Madhya Pradesh Madhyasthan Adhikaran Adhiniyam, 1983 (hereinafter, `M.P. Act) which statutorily provides for the parties to the Works Contract to refer all disputes to the Arbitration Tribunal constituted under Section 7 of the Act will continue to operate in view of the provisions of Arbitration and Conciliation Act, 1996 (hereinafter `A.C. Act 1996) which is a Central Act, subsequently enacted. 3. The facts leading to the aforesaid controversy be noted first. 4. The appellant-Madhya Pradesh Rural Road Development Authority and Anr., impugning the judgment of the High Court dated 8.9.2010 in this appeal, entered into a `Works Contract with the respondent for construction and maintenance of Rural Road Package No.1958, District Jhabua. 5. Clause 24 of the Contract contains the `Dispute Redress Mechanism and Clause 24.1 of the same provides as under: 24.1 If any dispute or difference of any kind what-so-ever shall arise in connection with or arising out of this Contract or the execution of work of maintenance of the Works thereunder, whether before its commencement or during the progress of Works or after the termination, abandonment or breach of the Contract, it shall, in the first instance, be referred for settlement to competent authority, described along with their powers in the Contract Data, above the rank of the Engineer. The competent authority shall, within a period of forty five days after being requested in writing by the Contractor to do so, convey his decision to the Contractor. Such decision in respect of every matter so referred shall, subject to review as hereinafter provided, be final and binding upon the Contract. In case the Works is already in progress, the Contractor shall proceed with the execution of the Works, including maintenance thereof, pending receipt of the decision of the competent authority as aforesaid, with all due diligence. 6. Under the `M.P. Act dispute has statutorily been defined under Section 2(d): 2(d) dispute means claim of ascertained money valued at Rupees 50,000 or more relating to any difference arising out of the execution or non-execution of a works contract or part thereof 7. Works Contract has also been defined under Section 2(i) of the M.P. Act: 2(i) works contract means an agreement in writing for the execution of any work relating to construction, repair or maintenance of any building or superstructure, dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory, workshop, powerhouse, transformers or such other works of the State Government or Public Undertaking as the State Government may, by notification, specify in this behalf at any of its stages, entered into by the State Government or by an official of the State Government or Public Undertaking or its official for and on behalf of such Public Undertaking and includes an agreement for the supply of goods or material and all other matters relating to the execution of any of the said works 8. Reference to Tribunal is statutorily provided under Section 7 of the M.P. Act: 7. Reference to Tribunal - (1) 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 Tribunal. (2) Such reference shall be drawn up in such form as may be prescribed and shall be supported by an affidavit verifying the averments. (3) The reference shall be accompanied by such fee as may be prescribed. (4) Every reference shall be accompanied by such documents or other evidence and by such other fees for service or execution of processes as may be prescribed. (5) On receipt of the reference under sub-section (1), if the Tribunal is satisfied that the reference is a fit case for adjudication, it may admit the reference but where the Tribunal is not so satisfied it may summarily reject the reference after recording reasons therefore. 9. From a perusal of Section 7, it is clear that the nature of the dispute between the parties in the instant case is covered by the definition under Section 2(d) read with Section 2(1). As such under Section 7 such a dispute has to be statutorily referred to Tribunal set up under the M.P. Act. 10. The case of the appellant is that in view of several breaches in Works Contract by the respondent, the appellant terminated the Works Contract and encashed the bank guarantee furnished by the respondent on 25.6.2008. 11. Thereafter, on 29.8.2008, the respondent submitted a representation to the appellant against the encashment of bank guarantee. Prior to that on 5.8.2008, respondent filed a Writ Petition No. 4491/2008 challenging the encashment of bank guarantee and the writ petition was disposed of with a direction that the bank guarantee may not be encashed till the disposal of the representation. Thereafter, on 4.6.2009 the representation of the respondent was rejected after giving the appellant a personal hearing. 12. In the pending dispute, the respondent submitted additional claim on 24.2.2010 and requested the appellant to appoint an Arbitrator for adjudicating the dispute between the parties. On 24.4.2010, the appellant replied that Clause 25 of the Works Contract specifically provides for adjudication of disputes by the Arbitral Tribunal under the M.P. Act. 13. Then on 24.6.2010 respondent filed an application under Section 11 of A.C. Act 1996 for appointment of an Arbitrator before the High Court. On 8.9.2010, High Court allowed the application of the respondent and appointed an Arbitrator by placing reliance on a decision of this Court in Va Tech Escher Wyass Flovel Ltd. Vs. MPSE Board & another - Civil Appeal No. 3746 and 3747 of 2005. 14. In the case of Va Tech (supra), this Court after referring to both the M.P. Act and the A.C. Act 1996, held that the M.P. Act applies only where there is no arbitration clause and this Court further held that the M.P. Act stands impliedly repealed by the A.C. Act 1996 where there is an arbitration clause. 15. Facts in connection with the Va Tech (supra) were that Va Tech was awarded a works contract by the M.P. State Electricity Board and there was an arbitration clause in the agreement. 16. Va Tech filed an application under Section 9 of the A.C. Act 1996 which was rejected by the learned Additional District Judge and that order was also upheld by the High Court. 17. Then Va Tech filed a special leave petition before this Court. This Court noting the provision of Section 7 of the M.P. Act came to the aforesaid finding and ultimately held that the judgment of the High Court in Va Tech cannot be sustained and opined that application under Section 9 of A.C. Act 1996 is maintainable. The exact reasoning recorded by this Court in Va Tech is as follows: In our opinion, the 1983 Act and the 1996 Act can be harmonised by holding that the 1983 Act only applies where there is no arbitration clause but it stands impliedly repealed by the 1996 Act where there is an arbitration clause. We hold accordingly. Hence, the impugned judgment cannot be sustained and we hold that the application under Section 9 of the 1996 Act was maintainable. 18. Mr. K.K. Venugopal, learned senior counsel appearing for the appellant submitted that the Division Bench of this Court, while coming to the aforesaid finding, has not noticed the relevant provision of the M.P. Act as well as the relevant provisions of A.C. Act 1996 and as such the same judgment was rendered `per incuriam. 19. Learned senior counsel further submitted that another Division Bench of this Court in a case in which the Presiding Judge was common with the Bench which rendered the Va Tech (supra) ruling almost in a situation identical with Va Tech issued notice and stayed the arbitration proceedings. 20. In another case a Division Bench of this Court presided over by the same learned Judge who gave the Va Tech ruling passed the following order: This petition has been filed against the judgment and order dated 11th March, 2011 passed by the High Court of Madhya Pradesh at Gwalior Bench in Arbitration Case No.4 of 2010. Learned counsel for the petitioner has relied on a decision of this Court in Civil Appeal No. 3746 of 2005 decided on 14th January, 2010. We are of the opinion that the aforesaid decision is distinguishable because in the present case the arbitration clause itself mentions that the arbitration will be by the Madhya Pradesh Arbitration Tribunal. Hence, in this case arbitration has to be done by the Tribunal. The Special leave petition is dismissed. 21. Relying on these two subsequent orders in the instant case and in Ravikant Bansal vs. M.P. Rural Road Development Authority and Anr. - SLP(C) No.18867 of 2011, Mr. Venugopal, the learned senior counsel submitted that subsequent Division Bench presided over by the same learned Judge who gave the Va Tech ruling has not followed the ratio in the case of Va Tech. 22. The learned counsel said so to justify his contention that the decision in Va Tech (supra) was rendered per incuriam. 23. If this Court looks at Section 2(4) of A.C. Act 1996, it will appear that Part-I of A.C. Act 1996, which is from Section 2 to Section 43, shall, except sub-section 1 of Sections 40, 41 and 43, apply to every arbitration under any other enactment for the time being in force where the arbitration was pursuant to an arbitration agreement except insofar as the provisions of this Part i.e. Part-I are inconsistent with the other enactment or with any other rule made thereunder. 24. Similar provision relating to statutory arbitration was also there in Section 46 of Arbitration Act, 1940. Section 46 is set out below: 46. Application of Act to statutory arbitration - The provisions of this Act, except sub-section (1) of Sec. 6 and Secs. 7, 12, 36 and 37, shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as this Act is inconsistent with that other enactment or with any rules made thereunder. 25. If this Court compares the provisions of the M.P. Act with A.C. Act 1996 then the Court finds that the provisions of M.P. Act are inconsistent with the provisions of A.C. Act 1996. The M.P. Act is a special law providing for statutory arbitration in the State of Madhya Pradesh even in the absence of arbitration agreement. Under the provisions of A.C. Act 1996 in the absence of an arbitration agreement, arbitration is not possible. There is also difference in the formation of arbitration tribunal as is clear from Section 2(1)(d) of A.C. Act 1996. Again under A.C. Act 1996, arbitral tribunal is defined under Section 2(1)(d) as a sole arbitrator or a panel of arbitrators. But under M.P. Act such a tribunal is created under Sections 3 and 4 of the Act. And under the M.P. Act dispute has a special meaning as defined under Section 2(1)(d) of the Act whereas dispute has not been defined under the A.C. Act 1996. 26. It is clear from its long title that the M.P. Act provides for the establishment of a tribunal to arbitrate in disputes to which the State Government or a public undertaking [wholly or substantially owned or controlled by the State Government], is a party, and for matters incidental thereto or connected therewith. The structure of the tribunal under the M.P. Act is also different from the structure of a tribunal under the A.C. Act 1996. It is clear from Section 4 of the M.P. Act that the composition of tribunal and their qualification is statutorily provided which is set out below: 4. Chairman and Members of Tribunal and their qualifications.-(1) Subject to sub- section (2) and (3), the State Government may appoint a chairman and as many members to the Tribunal as it may consider necessary. (1-a) The State Government may, in consultation with the Chairman, designate one of the Judicial Members as the Vice-Chairman who in the event of occurrence of any vacancy in the office of the Chairman by reason of his death, resignation, leave or otherwise, shall during such vacancy, discharge the functions of the Chairman. (2) No person shall be appointed as Chairman of the Tribunal, unless he is or has been a Judge of a High Court. (3) No person shall be qualified for appointment as a member of the Tribunal, unless- (i) he is or has been a District Judge of not less than seven years standing: or (ii) he is or has been a Revenue Commissioner or has held a post equivalent to the rank of Revenue Commissioner for a total period of not less than five years, or (iii)he is or has been:- (a) Chief Engineer in the service of the State Government in Public Works, Irrigation or Public Health Engineering Department; or (b) a Chief Engineer in the service of the Madhya Pradesh Electricity Board; or (c) a Senior Deputy Accountant General of the Office of the Accountant General, Madhya Pradesh, for a period of not less than five years. Provided that in the case of clause (iii), in exceptional circumstances, the State Government may, relax the prescribed minimum period of five years to three years. 27. The term of office and salaries and allowances are also statutorily provided under Sections 5 and 6 of the M.P. Act. Section 8 provides for the procedure to be followed by the tribunal on receipt of reference and Section 9 provides for the Constitution of Benches and Chairmans power of distribution of business. Under Section 16(2) of the M.P. Act there is a time limit for giving the Award which is absent in A.C. Act 1996. Section 17-A of the M.P. Act confers inherent power on the Arbitral tribunal to make orders as may be necessary for the ends of justice or to prevent abuse of the process of the tribunal. Section 17-B also provides for power conferred on the tribunal for correction of clerical or arithmetical mistakes. No such power is given to an arbitral tribunal under A.C. Act 1996. Section 19 of the M.P. Act gives High Court the suo motu power of revision. The High Court has also been given the power of revision to be exercised on an application made by an aggrieved party within three months of the award. While doing so, the High Court is to act like a revisional court under Section 115 of the CPC. 28. It is clear from the aforesaid enumeration of the statutory provision that under the M.P. Act the parties autonomy in the choice of arbitral tribunal is not there. 29. In State of Madhya Pradesh and another vs. Anshuman Shukla - (2008) 7 SCC 487 , this Court while referring to the M.P. Act and dealing with the nature of the arbitral tribunal constituted under the said Act held that the said Act is a special Act and provides for compulsory arbitration. It provides for a reference and the tribunal has been given the power of rejecting the reference at the threshold. It also held that the M.P. Act provides for a special limitation and fixes a time limit for passing an award. It has also been held that Section 14 of the M.P. Act provides that the award can be challenged under special circumstances and Section 17 provides for finality of the award, notwithstanding anything to the contrary contained in any other law relating to arbitration. All these features of the Act were pointed by this Court in Anshuman Shukla (supra) to show that there is inconsistency between the provisions of A.C. Act 1996 and those of the M.P. Act. In para 28 of the judgment, this Court while referring to the provisions of M.P. Act held: The provisions of the Act referred to hereinbefore clearly postulate that the State of Madhya Pradesh has created a separate forum for the purpose of determination of disputes arising inter alia out of the works contract. The Tribunal is not one which can be said to be a domestic tribunal. The Members of the Tribunal are not nominated by the parties. The disputants do not have any control over their appointment. The Tribunal may reject a reference at the threshold. It has the power to summon records. It has the power to record evidence. Its functions are not limited to one Bench. The Chairman of the Tribunal can refer the disputes to another Bench. Its decision is final. It can award costs. It can award interests. The finality of the decision is fortified by a legal fiction created by making an award a decree of a civil court. It is executable as a decree of a civil court. The award of the Arbitral Tribunal is not subject to the provisions of the Arbitration Act, 1940 and the Arbitration and Conciliation Act, 1996. The provisions of the said Acts have no application. (para 28, page 497 of the report) 30. It is clear, therefore, that in view of the aforesaid finding of a co-ordinate Bench of this Court on the distinct feature of an arbitral tribunal under the said M.P. Act the provisions of M.P. Act are saved under Section 2(4) of A.C. Act 1996. This Court while rendering the decision in Va Tech (supra) has not either noticed the previous decision of a co-ordinate Bench of this Court in Anshuman Shukla (supra) or the provisions of Section 2(4) of A.C. Act 1996. Therefore, we are constrained to hold that the decision of this Court in Va Tech (supra) was rendered per incuriam. 31. This was the only point argued before us by the learned counsel for the appellant. 32. The principle of per incuriam has been very succinctly formulated by the Court of Appeal in Young vs. Bristol Aeroplane Company, Limited reported in 1944 (1) K.B. 718. 33. Lord Greene, Master of Rolls formulated the principles on the basis of which a decision can be said to have been rendered `per incuriam. The principles are: Where the court has construed a statute or a rule having the force of a statute its decision stands on the same footing as any other decision on a question of law, but where the court is satisfied that an earlier decision was given in ignorance of the terms of a statute or a rule having the force of a statute the position is very different. It cannot, in our opinion, be right to say that in such a case the court is entitled to disregard the statutory provision and is bound to follow a decision of its own given when that provision was not present to its mind. Cases of this description are examples of decisions given per incuriam. (Page 729) 34. The decision in Young (supra) was subsequently approved by the House of Lords in Young vs. Bristol Aeroplane Company, Limited reported in 1946 Appeal Cases 163 at page 169 of the report. 35. Lord Viscount Simon in the House of Lords expressed His Lordships agreement with the views expressed by the Lord Greene, the Master of Rolls in the Court of Appeal on the principle of per incuriam (see the speech of Lord Viscount Simon at page 169 of the report). 36. Those principles have been followed by the Constitution Bench of this Court in The Bengal Immunity Company Limited vs. The State of Bihar and others reported in 1955 (2) SCR 603 [See the discussion in pages 622 and 623 of the report]. 37. The same principle has been reiterated by Lord Evershed, Master of Rolls, in Morelle Ld. vs. Wakeling & another [(1955) 2 QB 379 at page 406]. The principle has been stated as followed: ...As a general rule the only cases in which decisions should be held to have been given per incuriam are those of decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court concerned; so that in such cases some part of the decision or some step in the reasoning on which it is based is found, on that account, to be demonstrably wrong....... (page 406) 38. In the case of State of U.P. and another vs. Synthetics and Chemicals Ltd. and another reported in (1991) 4 SCC 139 , this Court held the doctrine of `per incuriam in practice means `per ignoratium and noted that English Courts have developed this principle in relaxation of the rule of stare decisis and referred to the decision in the case of Bristol Aeroplane Co. Ltd. (supra). The learned Judges also made it clear that the same principle has been approved and adopted by this Court while interpreting Article 141 of the Constitution (see para 41). 39. In the case of Municipal Corporation of Delhi vs. Gurnam Kaur reported in (1989) 1 SCC 101 , a three- Judge Bench of this Court explained this principle of per incuriam very elaborately in paragraph 11 at page 110 of the report and in explaining the principle of per incuriam the learned Judges held: ......A decision should be treated as given per incuriam when it is given in ignorance of the terms of a statute or of a rule having the force of a statute....... 40. In paragraph 12 the learned Judges observed as follows: ......One of the chief reasons for the doctrine of precedent is that a matter that has once been fully argued and decided should not be allowed to be reopened. The weight accorded to dicta varies with the type of dictum. Mere casual expressions carry no weight at all. Not every passing expression of a judge, however eminent, can be treated as an ex cathedra statement, having the weight of authority. 41. Following the aforesaid principles, this Court is constrained to hold that the decision in Va Tech (supra), having been rendered in per incuriam, cannot be accepted as a precedent to decide the controversy in this case. 42. In reply the learned counsel for the respondent only submitted that the M.P. Act is repugnant to A.C. Act 1996 since the same is a later Act made by Parliament. The learned counsel referred to the provisions of Article 254 of the Constitution. The learned counsel also urged that in view of the provision of Section 85 of A.C. Act 1996, the M.P. Act stands impliedly repealed. 43. The said argument cannot be accepted. The provision for repeal under Section 85 of A.C. Act 1996 does not show that there is any express repeal of the M.P. Act. Apart from that the provision of Section 2(4) of A.C. Act clearly militates against the aforesaid submissions. 44. The argument of repugnancy is also not tenable. Entry 13 of the Concurrent List in the VIIth Schedule of the Constitution runs as follows: 13. Civil procedure, including all matters included in the Code of Civil Procedure at the commencement of this Constitution, limitation and arbitration. 45. In view of the aforesaid Entry, the State Government is competent to enact laws in relation to arbitration. The M.P. Act of 1983 was made when the previous Arbitration Act of 1940 was in the field. That Act of 1940 was a Central Law. Both the Acts operated in view of Section 46 of 1940 Act. 46. The M.P. Act 1983 was reserved for the assent of the President and admittedly received the same on 17.10.1983 which was published in the Madhya Pradesh Gazette Extraordinary dated 12.10.1983. Therefore, the requirement of Article 254(2) of the Constitution was satisfied. Thus, M.P. Act of 1983 prevails in the State of Madhya Pradesh. Thereafter, A.C. Act 1996 was enacted by Parliament repealing the earlier laws of arbitration of 1940. It has also been noted that A.C. Act 1996 saves the provisions of M.P. Act 1983 under sub-sections 2(4) and 2(5) thereof. Therefore, there cannot be any repugnancy. (See the judgment of this Court in T. Barai vs. Henry Ah Hoe and another reported in AIR 1983 SC 150 ). In this connection the observations made by the Constitution Bench of this Court in the case of M. Karunanidhi vs. Union of India and another reported in (1979) 3 SCC 431 are very pertinent and the following observations are excerpted: .....It is, therefore, clear that in view of this clear intention of the legislature there can be no room for any argument that the State Act was in any way repugnant to the Central Acts. We have already pointed out from the decisions of the Federal Court and this Court that one of the important tests to find out as to whether or not there is repugnancy is to ascertain the intention of the legislature regarding the fact that the dominant legislature allowed the subordinate legislature to operate in the same field pari passu the State Act. (para 37, page 450) 47. It is clear from the aforesaid observation 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. Therefore, there is no substance in the argument of repugnancy and is accordingly rejected.

Decision reasoning: 1[ds]41. Following the aforesaid principles, this Court is constrained to hold that the decision in Va Tech (supra), having been rendered in per incuriam, cannot be accepted as a precedent to decide the controversy in this case42. In reply the learned counsel for the respondent only submitted that the M.P. Act is repugnant to A.C. Act 1996 since the same is a later Act made by Parliament. The learned counsel referred to the provisions of Article 254 of the Constitution. The learned counsel also urged that in view of the provision of Section 85 of A.C. Act 1996, the M.P. Act stands impliedly repealed43. The said argument cannot be accepted. The provision for repeal under Section 85 of A.C. Act 1996 does not show that there is any express repeal of the M.P. Act. Apart from that the provision of Section 2(4) of A.C. Act clearly militates against the aforesaid submissions46. The M.P. Act 1983 was reserved for the assent of the President and admittedly received the same on 17.10.1983 which was published in the Madhya Pradesh Gazette Extraordinary dated 12.10.1983. Therefore, the requirement of Article 254(2) of the Constitution was satisfied. Thus, M.P. Act of 1983 prevails in the State of Madhya Pradesh. Thereafter, A.C. Act 1996 was enacted by Parliament repealing the earlier laws of arbitration of 1940. It has also been noted that A.C. Act 1996 saves the provisions of M.P. Act 1983 under sub-sections 2(4) and 2(5) thereof. Therefore, there cannot be any repugnancy. (See the judgment of this Court in T. Barai vs. Henry Ah Hoe and another reported in AIR 1983 SC 150 ). In this connection the observations made by the Constitution Bench of this Court in the case of M. Karunanidhi vs. Union of India and another reported in (1979) 3 SCC 431 are very pertinent and the following observations are excerpted:is, therefore, clear that in view of this clear intention of the legislature there can be no room for any argument that the State Act was in any way repugnant to the Central Acts. We have already pointed out from the decisions of the Federal Court and this Court that one of the important tests to find out as to whether or not there is repugnancy is to ascertain the intention of the legislature regarding the fact that the dominant legislature allowed the subordinate legislature to operate in the same field pari passu the State Act47. It is clear from the aforesaid observation 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. Therefore, there is no substance in the argument of repugnancy and is accordingly rejected.