w w w . L a w y e r S e r v i c e s . i n



Joint Venture of Envio Pure Aqua Systems (P) Ltd. v/s Municipal Corporation, Gwalior & Others


Company & Directors' Information:- B B VENTURE PRIVATE LIMITED [Active] CIN = U52209CT2008PTC020645

Company & Directors' Information:- AQUA PURE (INDIA) PRIVATE LIMITED. [Active] CIN = U41000DL1998PTC093270

Company & Directors' Information:- AQUA SYSTEMS PVT LTD [Active] CIN = U24101PB1991PTC035719

Company & Directors' Information:- K K ENVIO PRIVATE LIMITED [Strike Off] CIN = U31909GJ2005PTC046032

Company & Directors' Information:- V-AQUA INDIA PRIVATE LIMITED [Active] CIN = U74900TZ2013PTC027719

Company & Directors' Information:- S A R VENTURE PRIVATE LIMITED [Active] CIN = U70102DL2015PTC275704

Company & Directors' Information:- AQUA INDIA PRIVATE LIMITED [Active] CIN = U26914CH2012PTC034150

Company & Directors' Information:- B G AQUA PRIVATE LIMITED [Active] CIN = U15543MH2006PTC166105

Company & Directors' Information:- K & K AQUA SYSTEMS PRIVATE LIMITED [Strike Off] CIN = U24294TN1996PTC036222

Company & Directors' Information:- AQUA SYSTEMS (INDIA) PVT. LTD. [Strike Off] CIN = U99999PY1990PTC000681

Company & Directors' Information:- T T AQUA PRIVATE LIMITED [Strike Off] CIN = U05004OR1995PTC004118

Company & Directors' Information:- S P AQUA PRIVATE LIMITED [Strike Off] CIN = U15543PN2013PTC147824

Company & Directors' Information:- 2 PURE PRIVATE LIMITED [Active] CIN = U74999HP2016PTC006322

Company & Directors' Information:- T AND G PURE AQUA PRIVATE LIMITED [Active] CIN = U29197CH2004PTC027704

Company & Directors' Information:- K B AQUA PURE PRIVATE LIMITED [Active] CIN = U29198DL1999PTC100235

Company & Directors' Information:- 1 TO Z AQUA PRIVATE LIMITED [Strike Off] CIN = U41000KA2015PTC082901

Company & Directors' Information:- K S PURE INDIA PRIVATE LIMITED [Active] CIN = U15490DL2020PTC368440

Company & Directors' Information:- PURE SYSTEMS PVT LTD [Strike Off] CIN = U29304GJ1988PTC011173

Company & Directors' Information:- N J VENTURE PRIVATE LIMITED [Strike Off] CIN = U70101MH2008PTC186387

    Arbitration Appeal No. 11 of 2012

    Decided On, 04 December 2012

    At, High Court of Madhya Pradesh

    By, THE HONOURABLE MR. JUSTICE J.K. MAHESHWARI & THE HONOURABLE MR. JUSTICE G.D. SAXENA

    For the Appellant: Prashant Sharma , Advocate. For the Respondent: R1 Deepak Khot, R2 J.D. Suryavanshi and Kunal Suryavanshi, Advocates.



Judgment Text

J. K. Maheshwari, J. –

1. This appeal under section 37 of the Arbitration and Conciliation Act, 1996 has been filed assailing the order dated 4-9-2012 passed in Arbitration Case No. 29/2012, by the 7th Additional District Judge, Gwalior rejecting the application under Order 39, Rules 1 and 2 read with section 151 of Civil Procedure Code and section 9 of the Arbitration and Conciliation Act, 1996 seeking direction to restrain the respondent No. 1 Bank from encashment of the bank guarantee in favour of respondent No. 1 during the pendency of the proceedings before the Madhya Pradesh Arbitration Tribunal.

2. The facts in brief are that the respondent No. 1 Corporation has invited the tender with respect to laying down the sewer line, which was accepted on 12-12-2010 and the contract was signed after the requisite security deposit. The work order was issued on 23-2-2011. As the work could not be performed within the specified time, as alleged on account of the encroachment over the land, however, it was rescinded vide order dated 31-5-2012. As per order dated 30-7-2012 the earnest money, security deposit, performance bank guarantee and amount unpaid for the work done had been forfeited, blacklisting the petitioner company. The order of blacklisting was challenged before the High Court in the writ petition, which was set aside and the appellant was directed to take the recourse of law as per Arbitration clause for remaining disputes. The appellant filed an application under section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as `Arbitration Act, 1996') read with Order 39, Rules 1 and 2 of the Code of Civil Procedure. Seeking relief to not to encash the bank guarantee in favour of respondent No. 1, which is rejected by the order impugned, however, this appeal has been filed.

3. The respondent No. 1 has filed the reply to the said application, interalia contending that the application is not maintainable because the dispute has not been filed, though as per the order of this Court passed on 23-8-2012 in Writ Petition No. 5748/2012 it was directed that as per Clause 86.4 of the agreement the parties may take recourse by way of Arbitration in appropriate forum. It is further said that when the work was not performed by the appellant within time, intimation in this regard were given, even then the work was not completed by him. However, in terms of Clause 82.1 of the agreement the order rescinding the contract has rightly been passed on 31-5-2012. After passing the order of forfeiting the security, bank guarantee the Mayor-in-Council has further granted permission to issue a fresh contract and an intimation to that effect was given to the appellant. In the said sequel of fact the application is not maintainable and on merit also appellant is not entitled to get any relief.

4. Learned trial Court after referring various provisions of the agreement and further referring various judgments held that as per the agreement clause 86.4 the appellant is having a right to file a reference before Madhya Pradesh Arbitration Tribunal and the jurisdiction to entertain the application to grant interim relief is not with the trial Court. It is further held that the provision of section 9 of the Arbitration Act, 1996 is having no application in the present case accordingly the application was rejected.

5. Shri Prashant Sharma, learned counsel appearing on behalf of the appellant referring Clause 86.4 of the agreement has urged that the contractor is having the right to proceed for Arbitration and the reference is to be made to the Arbitration Tribunal. Merely having the said clause in the agreement, it would not debar the appellant to take the recourse of section 9 of the Arbitration Act, 1996 in Civil Court seeking interim direction. However, the trial Court has committed grave error while rejecting the application, on the ground of jurisdiction to entertain it under section 9 of the Arbitration Act, 1996.

6. Per contra Shri Deepak Khot, learned counsel appearing on behalf of the respondent No. 1 Corporation contends that as per the provisions of Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (hereinafter referred to as `the Adhiniyam, 1983'), which is a special enactment in which the reference may be made for a dispute to the Arbitration Tribunal in terms of Clause 86.4 of the agreement after termination of the contract. As per said clause, appellant himself has agreed to take recourse under the Adhiniyam 1983. As per section 2(4) of the Arbitration Act, 1996 if the provisions of special enactment are inconsistent with the Arbitration Act then the special enactment shall prevail over. Under the Adhiniyam of 1983 as per section 17-A proviso there to Tribunal is not having jurisdiction to grant any interim relief with respect to the dispute pending before them. In such circumstances under the special enactment interim protection cannot be directed. However, only to take the benefit of interim protection the appellant cannot, invoke the powers under section 9 of the Arbitration Act, 1996. In such circumstances the trial Court has rightly rejected the application by the order impugned on the ground of jurisdiction to maintain it.

7. After hearing learned counsel appearing on behalf of the parties and on perusal of the record it is apparent that Clause 86 of the agreement enables the parties to resolve their dispute taking recourse of Arbitration before M. P. Arbitration Tribunal at Bhopal. The aforesaid clause is in two parts, first part consists of the Arbitration during continuation of the contract agreement and the relevant Clauses are 86.1 to 86.3 and the later part enables to the recourse after termination of the contract agreement which includes Clause 86.4 of the agreement. In the present case the contract agreement has been rescinded. However, Clause 86.4 having its application, which is reproduced as thus :

"86.4. The Contractor shall have the right to proceed.for Arbitration which shall be referred to Arbitration under Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 under M. P. Arbitration Tribunal at Bhopal "

Bare reading of the aforesaid, it is apparent that after termination of the contract, the contractor have right to proceed for arbitration which shall be referred under the Adhiniyam of 1983 to the Madhya Pradesh Arbitration Tribunal at Bhopal. The aforesaid bi-parte agreement has been signed by the appellant, however, applicability of the Adhiniyam of 1983 in the matter of Arbitration by a reference to the Tribunal is agreed by the parties.

8. Section 2(1) of the Adhiniyam, 1983 defines the `works contract' which is reproduced as under :-

"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 any official of the State Government or Public Undertaking or its official for and on behalf of such 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."

As per section 2(1)(d) the `dispute' has been defined, which is reproduced as under :-

"dispute " means claim of ascertained money valued at र50,000 or more relating to any difference arising out of the execution or non- execution of a works contract or part thereof."

Bare reading of the aforesaid, it is apparent that on execution of the agreement in writing regarding any of the work so specified by the State Government or Public Undertaking the State Government by notification specified in this behalf at any stage for supply of goods or material and all other matters relating to execution of the said work may be decided by the Tribunal. In the present case the value of the contract is more than र50,000/- with respect to non execution of the work within the tipulated time, however, contract was rescinded. As per section 7 of the Adhiniyam, 1983 it is apparent that either party to a works contract may refer in writing the dispute to the Tribunal irrespective of the fact whether the agreement contains an arbitration clause or not for a works contract. In such circumstances as per Clause 86.4 of the agreement even after termination of the contract agreement the parties having a right to take recourse by making reference to the Arbitration Tribunal, Bhopal under the Adhiniyam, 1983.

9. In the context of the aforesaid statutory provisions in various judgments of this Court the aforementioned relevant provisions have been duly considered, which is required to be taken note of. In the Full Bench decision of this Court in the case of Administrator, Municipal Corporation, Durg and others v. M/s Jainco Designers and Executors, Durg, 1991 MPLJ (F.B.) 352 : AIR 1991 MP 233 it is held that any dispute between the Administrator of the Corporation and the Contractor in execution of the work would cover up the Corporation (Public Undertaking) as per section 2(g) of the Act. The Division Bench of this Court in the case of MPS Spedra Engineering Corporation, Engineers and Contractors Bhopal v. State of M. P., AIR 1988 MP 111 held that the provisions of the Adhiniyam, 1983 would be applicable even in existence of Arbitration Act, 1940. In such circumstances in a case where the contract has bean executed by the appellant with the Corporation applicability of the Adhiniyam, 1983 in the matter of works contract entered with contractor cannot be doubted. In the present case the contract has been entered into with the Municipal Corporation, Gwalior and petitioner and as per the terms of the agreement the dispute may be decided by the Tribunal as per the Adhiniyam, 1983. However, the parties can take recourse in furtherance of the terms of the agreement under the Adhiniyam, 1983.

10. As per section 17-A of the Adhiniyam, 1983 the Tribunal is conferred with the inherent power. The aforesaid provision is relevant for the purpose of the present case, however, it is reproduced as under :

"17-A. Inherent powers. - Nothing in this Act shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders may be necessary, for the ends of justice or to prevent abuse of the process of the Tribunal :

Provided that no interim order by way of injunction, stay or attachment before award shall be granted:

Provided further that the Tribunal shall have no power to review the award including the interim award.

Bare reading of the aforesaid, it is apparent that as per the first proviso no interim order by way of injunction, stay or attachment before award shall be passed by the Tribunal.

11. Section 9 of the Arbitration Act, 1996 offers the recourse to the party `before' or `during arbitral proceeding' or `at any time after making the arbitral award' in the nature as specified in Clause 2(a), (b), (c), (d) and (e) thereof is permissible. Thus, it is clear that during arbitral proceedings if applicability of "Arbitration Act 1996" is there recourse of section 9 is permissible. But simultaneously. Sub-sections (2), (3) and (4) of section 2 of Arbitration Act is relevant which reads as under :-

"(2) This Part shall apply where the place of arbitration is in India.

(3) This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration.

(4) This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to any arbitration agreement and as if that other enactment were an arbitration agreement, except insofar as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder."

Bare reading of the aforesaid, it is apparent that Part-I of the Arbitration Act, 1996 consists from section 2 to section 43 and shall apply to every arbitration under any other enactment for the time being in force with the exceptions that the provisions of the other enactment applicable in terms of the agreement should not be inconsistent with the first part of the Arbitration Act, 1996. Thus .on having inconsistency of the provisions of the other enactment with the first part of the Arbitration Act, 1996 the recourse specified in the said part is not permissible. Section 9 of the Arbitration Act, 1996 falls within the first part of the. said Act, therefore, the applicability of such part in a case where the arbitration agreement describes the arbitration under the Adhiniyam, 1983 is not permissible. The guidance may be taken from the judgment of Punjab State Electricity Board, Mahilpur v. M/s Guru Nanak Cold Storage and Ice Factory, Mahilpur and another, AIR 1996 SC 2684. In the said judgment in the context of the other enactments where the inconsistency was there Hon'ble the Apex Court has observed as under-

"12. Sections 6(1), 7, 12, 36 and 37 have been expressly excluded from the operation of statutory arbitration. The rest of the provisions perforce would get attracted. But the provisions of the appropriate statute or rules should necessarily be consistent with the provisions of the Arbitration Act. In that event, despite absence of an arbitration agreement, rest of the provisions of Arbitration act would apply (as if there was an arbitration agreement between parties) and the dispute becomes arbitrable under the Arbitration. Act, as if there was an arbitration agreement between the parties. If there is any inconsistency, then the provisions of the Arbitration Act do not get attracted. Section 33 expressly gives power to the Civil Court to decide the existence or validity of the arbitration agreement or the award as such. If this question was to arise, necessarily the Civil Court would be devoid of jurisdiction to decide the dispute on merits but only in the forum of arbitration. The existence and validity of the arbitration agreement should be decided by the Civil Court. Arbitrator cannot clothe himself with jurisdiction to conclusively decide it by himself as a jurisdictional issue. It is for the Court to decide it. The dispute on merits should be resolved by the arbitrator and, the legality of the award would be subject to decision by the Court under.section 33."

In the present case after termination of the contract prior to making a reference to the Tribunal, appellant has filed an application under section 9 of the Arbitration Act, 1996 read with Order 39, Rules 1 and 2 of the Code of Civil Procedure. In view of the foregoing, to maintain the application under section 9 of the Arbitration Act, 1996 read with Order 39, Rules 1 and 2 and to look into the finding so recorded by the learned trial Court is to be examined that in the matter of grant of injunction whether there is any inconsistency to the provisions of the,Adhiniyam, 1983.

12. In the facts of the present case, it is apparent that the works contract was granted to the petitioner which could not be satisfactorily completed, however, it was rescinded by the order dated 31-5-2012. Clause 86.4 of the agreement applies after termination of the contract, whereby on having any dispute, the contractor shall have right to proceed for arbitration, referring it to M. P. Arbitration Tribunal as per Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983. The said agreement is the by-party agreement executed by petitioner as well as the Corporation putting their signatures, however, parties are bound by the terms of the said agreement. The Adhiniyam, 1983 is a special enactment and the parties have chosen to take recourse under the said enactment. As per section 17-A of the said Adhiniyam, it is clear that no interim order by way of injunction, stay or attachment before award shall be granted. While under section 9 of the Arbitration Act, 1996, any party before or during arbitral proceedings may apply to the Court seeking an order by way of interim measure. But as per sub-section (4) of section 2 of the Act of 1996 if the previsions of part one of the said Act are inconsistent with the other enactment as specified in the arbitration agreement then the applicability of the Act of 1996 is excluded. Thus, the only recourse permissible to the parties is as per terms of the agreement and to enforce the provisions of the special enactment of 1983 wherein the grant of interim stay prior to passing the award is not permissible. Therefore, on making request by the appellant interim relief cannot be prayed for on an application under section 9 of the Arbitration Act, 1996 and the trial Court has rightly rejected the said application. In this respect judgment of Hon'ble the Apex Court in the case of Madhya Pradesh Rural Road Development Authority and another v. L. G. Choudhary, Engineers and Contractor, (2012) SCC 495 can safely be relied upon wherein the judgment of Va Tech Escher Wyass Floverl Limited v. Madhya Pradesh State Electricity Board and another, (2011) 13 SCC 261 has been found per incurium after detailed discussion, one of the Hon'ble Judges has made disagreement because the contract was not terminated and no specific terms in the agreement to take the recourse under the special enactment was there, however, the reference to the larger bench has been made. But in the present case as per clause 86.4, on termination of contract the applicability of the enactment of 1983 has been agreed. upon by the parties therefore, the disagreement of one of the Hon'ble Judges is of no help to the appellant. Hon'ble Apex Court in the case of Ravikant Bansal v. Madhya Pradesh Rural Road Development Authority and another, (2012) 3 SCC 513 held that if arbitration clause specifies to take recourse before the M.P. Arbitration Tribunal under the Adhiniyam, 1983 then on having a dispute arbitration is to be done by the Tribunal in terms of the agreement. In the said context the deci

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sion of this Court in the case of Municipal Corporation, Gwalior v. M/s A.P.S. Kushwaha, (SSI Unit), 2010(2) MPHT 338 can safely be relied upon whereby the Division Bench of this Court held that in a case of works contract, as per Notification No. 17-E- 85-96-21-B2 dated 4-11-2006 the provisions of the Adhiniyam, 1983 would be applicable to the public undertaking. The Court further observed that on having applicability of the Adhiniyam, 1983 recourse cannot be taken under the provisions of Arbitration Act, 1996 by appointment of sole arbitrators per section 11 and the award passed by the said Arbitrator was found without jurisdiction. 13. in view of the foregoing discussion, we have no scintilla of doubt that as per Clause 86.4 of the agreement, the appellant may take recourse as permissible under the Adhiniyam of 1983 making a reference to the M. P. Arbitration Tribunal, Bhopal. Under section 17-A of the Adhiniyam, 1983 interim injunction, stay or attachment before award has been restricted. In such circumstances, the appellant cannot be permitted to jump upon for taking recourse of section 9 of the Arbitration Act, 1996 or taking order of interim nature from the Civil Court in view of sub-section (4) of section 2 of the Arbitration Act, 1996, on having inconsistency with the provisions of the Adhiniyam, 1983 which has been agreed by the parties by way of an agreement, thus, the recourse specified in part one of the Arbitration Act, 1996 cannot be permitted to be resorted to. 14. In view of the aforesaid discussion, we are of the considered opinion that the trial Court has not committed any error in rejecting the application under section 9 of the Arbitration Act, 1996 by passing the order impugned. Ex consequenti, the appeal preferred by the appellant stands dismissed and the order passed by the learned trial Court rejecting the application under section 9 of the Arbitration Act, 1996 stands upheld for the reasons indicated hereinabove. Parties are directed to bear their own costs. Appeal dismissed.
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