REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 974 OF 2012 (Arising out of SLP(C) No.907/2011)

M.P.Rural Road Development Authority & Anr. ...Appellant(s)

- Versus -

M/s. L.G. Chaudhary Engineers & Cont.     ...Respondent(s)

J U D G M E N T

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  

1

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:

2

“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”

3

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

(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 therefor.”

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.

5

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.

6

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.

7

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.”

8

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  

9

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.

10

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  

11

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  

12

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  

13

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.”

14

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  Chairman’s  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  

15

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  16

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.  

17

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  18

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.   

19

35. Lord  Viscount  Simon  in  the  House  of  Lords  

expressed  His  Lordship’s  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  

20

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  

21

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.  

22

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:

23

“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  24

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  25

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.  

48. Therefore, appeal is allowed and the judgment of the  

High Court which is based on the reasoning of  Va  Tech  (supra) is set aside.  This Court holds the  decision in Va Tech (supra) has been rendered in per  incuriam. In that view of the matter the arbitration  

proceeding may proceed under M.P. Act of 1983 and  

not under A.C. Act 1996.  

49. There will be no order as to costs.

.......................J. (ASOK KUMAR GANGULY)

New Delhi 26

January 24, 2012

27

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.974 OF 2012 (Arising out of SLP(C) No.907/2011)

M.P.Rural Road Development  Authority & Anr. ...Appellant(s)

- Versus -

M/s. L.G. Chaudhary Engineers & Cont.     ...Respondent(s)

J U D G E M E N T

Gyan Sudha Misra, J.

Leave granted.

2. While  concurring and endorsing the reasonings assigned in  

the judgement  of  learned Justice  Ganguly,  I  propose to  add and thus  

partly  dissent  on  certain  aspects  involved  in  the  instant  appeal  which  

would have a bearing on the relief granted to the respondent by the High  

Court which appointed an arbitrator under the Arbitration and Conciliation  

Act, 1996 for adjudication of the dispute in regard to cancellation of the  

works contract between the contesting parties therein.

28

3. In  this  context,   Section  7  of  the  Madhya  Pradesh  

Madhyasthan Adhikaran Adhiniyam, 1983 (hereinafter referred to as the  

‘M.P. Arbitration Tribunal Act, 1983’) needs to be reiterated which itself  

lays down as follows:  

“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.”

4. On  perusal  of  the  aforesaid  provision  enumerated  under  

Section 7, it is explicitly clear that the matter in the event of  existence of a  

dispute between the parties in certain categories of cases where the State  

of Madhya Pradesh is a contracting party, the dispute  shall be referred  in  

writing  to  the  tribunal  irrespective  of  the  fact  whether  the  agreement  

contains an arbitration clause or not.   From this provision  it  is clearly  

apparent  that  reference  of  any  dispute  to  the  tribunal  postulates   an  

existence of a works contract and the definition of  ‘works contract’ under  

Section 2 (i)  of the  M.P. Arbitration Tribunal Act, 1983, it has clearly and  

unequivocally been specified as to  what is a ‘works contract’ in relation  to  

which the dispute is required to be  referred in writing to the tribunal.  We  

may  therefore  meticulously  recollect  the  definition  of  ‘works  contract’  

which lays down as follows:-  

“works contract”   means  an agreement   in  writing   for  the  execution  of   any  work  relating  to  construction,  repair  or  

29

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.”

5. Thus on a perusal  of the definition of ‘works contract’,  it  is  

manifestly  clear   that  while  the  ‘works  contract’  means  an  agreement  

pertaining  to  matters  relating   to  the  execution  of  any  of   the  work  

enumerated   in  the  definition   of  ‘works  contract’,  the  same does  not  

include  the dispute  pertaining  to  termination, cancellation or repudiation  

of works contract and the entire nature of transaction laid down therein  

relates to disputes which  arise out of  execution of  the nature of  work  

specified  in  the  ‘works  contract’.   However,  the  question  whether  the  

‘works contract’ has been legally repudiated and rightly cancelled or not is  

the question or dispute  pertaining  to termination of works contract has  

not  been   incorporated  even  remotely  within  the  definition  of  ‘works  

contract’.  In view of this, the legal and logical consequence which can be  

reasonably drawn from the definition of  ‘works contract’ would be,  that if   

there is a dispute between the contracting parties  for any reason  relating  

to   works  contract  which  include  execution  of   any  work,  relating  to  

construction,  repair  or  maintenance  of  any  building  or  super-structure,  

30

dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory,   

workshop, power house, transformers or such other works of the State  

Government   or   Public  Undertaking  including  an  agreement   for  the  

supply  of  goods  or  material  and   all    other   matters  relating  to  the  

execution  of any of the said works, the same would fall within the ambit of  

the definition of ‘works contract’   and hence  all  disputes pertaining or  

arising out of  execution  of the works contract will have to be  referred to  

the M.P. State Arbitration Tribunal  as envisaged under Section 7 of the  

Act of 1983.   Hence, in addition to the reasons assigned in the judgment  

and  order  of  learned  Brother  Justice  Ganguly,  disputes  arising  out  of  

execution of works contract has to be referred to the M.P. State Arbitration  

Tribunal and not under the Arbitration and Conciliation Act, 1996.

6. But  in  so  far  as  the  instant  matter  is  concerned,  the  facts  

disclose  that  the  appellant  M.P.  Rural  Road  Development  Authority  

cancelled the  works contract itself  which was  executed in favour of the  

respondent.  In that event, the works contract between the parties was not  

in  existence  at  all  which  would  operate  as  a  statutory  mandate  for  

reference of the dispute to the M.P. State Arbitration Tribunal.    

7. It is no doubt true  that if the matter were before an  Arbitrator  

appointed under the Arbitration and Conciliation Act, 1996 for adjudication  

of   any dispute including  the question regarding  the justification and  

31

legality   as to whether  the cancellation of  works contract  was legal  or  

illegal, then  the said Arbitrator in view of the ratio of the judgment of the  

Supreme Court   in  Maharshi  Dayanand University & Anr. Vs.  Anand  

Co-op L(C) Society, 2007 (5) SCC 295, as also  in view of the persuasive  

reasoning assigned in the judgment and order reported in Heyman & Anr.   

Vs. Darwins, Limited, 1942 (1) All E.R. 337 would have had the jurisdiction  

to  adjudicate  the  dispute   regarding   the  justification   and  legality  of  

cancellation of works contract also.  But the same cannot be  allowed to  

be  raised  under  the  M.P.  Act  of  1983  since  the  definition  of  ‘works  

contract’  unambiguously  lays down in explicit terms  as to what is the  

nature and scope of ‘works contract’ and further enumerates the specific  

nature of disputes arising out of the execution of works contract which  

would come within the definition of a ‘works contract’.    

8. However,  the same does not even vaguely include  the issue  

or dispute arising  out of  cancellation and termination  of contract due to  

which  this question, in my considered opinion, would not fall within the  

jurisdiction of  M.P. State Arbitration Tribunal so as  to be referred for  

adjudication  arising out  of  its  termination.   As already stated,  fall  out  

certainly would be otherwise if the matter were to be adjudicated by an  

Arbitrator appointed under the Arbitration and Conciliation Act, 1996 and  

that would be  in view of the ratio of the decisions of the Supreme Court  

32

referred to hereinbefore which has held it  permissible  for the Arbitrator  

to adjudicate  even the dispute arising out of cancellation or termination of  

an agreement  or contract.  This however, cannot be allowed to broaden  

or expand  the ambit  and scope of the M.P. Act of  1983 where the State  

Legislature   has  passed  a  specific  legislation  in  respect  of  certain  

specified types  of  arbitration determining as to  what  are  the nature  of  

disputes to  be referred to  the M.P.  State  Arbitration Tribunal  and that  

specifically  permits the reference of  dispute arising out  of  execution of  

contract  but clearly leaves out any dispute  arising out of  termination,  

cancellation or repudiation of ‘works  contract’.  In order to clarify the point  

further,  what needs to be   emphasized is that if the nature of dispute  

referred to the  Arbitrator  like  the instant matter, related to a dispute  

pertaining  to construction,  repair,  maintenance of any building  super-

structure, dam or for the reasons stated within the definition of  ‘works  

contract’, the matter may be referred to the M.P. Tribunal  in view of the  

fact that if there  is  a dispute in relation to execution of a works contract,   

then  irrespective  of  the  fact  whether   the  agreement  contains  an  

arbitration clause or not, the dispute is required to be referred to the M.P.  

State Arbitration Tribunal for adjudication.  But when the contract  itself  

has been terminated, cancelled  or repudiated  as it has happened in the  

instant case, then the nature of dispute does not  fall within the definition  

of ‘works contract’ for  the sole reason that it does not include any dispute  

33

pertaining  to  cancellation  of  a  works  contract  implying  that   when  the  

works contract itself  is not in existence by virtue of its cancellation, the  

dispute cannot  be  referred to the M.P. State Arbitration Tribunal but  may  

have to be decided by an Arbitrator appointed under the  Arbitration and  

Conciliation Act, 1996.  

9. Hence,   the  nature  of  the  dispute  which  falls  within  the  

definition of  ‘works contract’  under Section 2(i)  of the M.P. Act, 1983  

and one of the contracting parties to the agreement is the State of M.P.,  

then irrespective of an arbitration agreement the dispute will have to be  

referred to the  Tribunal in terms of  Section 7 of the Act of 1983.  But if   

the works contract itself has been repudiated  and hence not in existence  

at all by virtue  of its cancellation/termination,  then in my considered view,  

the dispute will  have to be  referred to an independent arbitrator to be  

appointed under the Arbitration and Conciliation Act, 1996 since the M.P.  

Act 1983 envisages reference of a dispute to the State Tribunal only in  

respect of certain specified types of arbitration enumerated under Section  

2 (i) of the M.P. Act, 1983.   

10. As a consequence and fall  out  of the aforesaid discussion,  

the impugned order of the High Court by which  the dispute  relating  to  

termination   of  works  contract  by  the  M.P.  Rural  Road  Development  

Authority itself was referred to an independent arbitrator  appointed by the  

34

High Court under the Arbitration and Conciliation Act, 1996 needs to be  

sustained  and there is no need for  a de novo  reference of the dispute to  

the M.P. State Arbitration Tribunal.   In the alternative, the consequence  

would have been otherwise and the matter could have been  referred to  

the State Arbitration Tribunal  if the dispute between the parties  related to  

any dispute  emerging  out of execution of works contract which could fall  

within the definition of ‘works contract’ given out  within the definition of  

‘works contract’ under Section 2(i) of the M.P. Act of 1983.   In order to  

avoid any ambiguity, it is reiterated  that in view  of cancellation of the  

works  contract  itself    which  is  the  position  in  the  instant  case,  the  

proceedings before the Arbitrator  appointed by the High Court cannot be  

treated as non-est  so as to refer the same once again to the tribunal for  

adjudication as the dispute does not emerge or pertain to execution of  

works contract but  relates to non-existence of works contract by virtue  of  

its cancellation.   

11. Thus the sum and substance of what I wish to emphasize is  

that the question as to whether the dispute would  be  referred to the M.P.  

Tribunal   in  terms  of  Section  7  of  the  M.P.  Act  of  1983   or  to  an  

independent arbitrator under the Arbitration and Conciliation Act, 1996 will  

depend upon the factum whether the works contract is existing between  

the parties or not  out of which the dispute has arisen.  In case, the works  

35

contract  itself  has been repudiated/cancelled,  then,  in  view of  its  non-

existence, Section 7 of the M.P. Act pertaining to reference of dispute to  

tribunal would not come into play at all  by virtue   of the fact that the  

dispute relating  to execution of works contract alone can be referred to  

the tribunal in view of the specific nature of works contract enumerated  

within the definition of works contract under the Act of 1983.    However,  

when the works contract itself becomes non-existent as a consequence of  

its cancellation,  the matter  will  have to be referred  to an independent  

arbitrator under the Arbitration and Conciliation Act, 1996 and not to M.P.  

State Arbitration Tribunal.  

12. Thus, while holding that the M.P. Act 1983 should operate in  

the State of M.P. in respect of certain specified types of arbitration, the  

appointment  of  an independent  arbitrator  by the High Court  under  the  

Arbitration and Conciliation Act,  1996 needs to be sustained since the  

works contract itself is not in existence by virtue of its cancellation and  

hence this part of the dispute could not have been referred to the M.P.  

State Tribunal.   

13. Consequently, the instant appeal stands partly allowed.  There  

will be no order as to costs.

36

………………………………..J.                                                      (Gyan Sudha Misra)

New Delhi, January  24, 2012.

37

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 974 OF 2012 (Arising out of SLP(C) No.907/2011)

M.P.Rural Road Development Authority & Anr.   ...Appellant(s)

- Versus -

M/s.  L.G.  Chaudhary  Engineers  &  Cont.  ...Respondent(s)

ORDER

In view of some divergence of views expressed in  

the  two  judgments  delivered  today  by  us,  the  

matter may be placed before Hon'ble the Chief  

Justice of India for constituting a larger Bench  

to resolve the divergence.

.............................J. (ASOK KUMAR GANGULY)            

.............................J.   (GYAN SUDHA MISRA)              

NEW DELHI,

24-01-2012

38