Gujarat High Court Upholds Jurisdiction Of State Tribunal For Public Works Contract Disputes Involving Municipal Corporation

The Gujarat High Court dismissed a batch of petitions filed by private contractors involved in public works contract disputes with municipal corporations, in view of a state government notification providing for routing such disputes to be adjudicated by tribunal under the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act 1992. 

For context the 1992 Act provides for the constitution of a Tribunal to arbitrate in disputes arising from works contracts to which the State Government or a public undertaking is a party and to provide for matters connected therewith.

The court held that the proceedings of the tribunal under the 1992 is not akin to Arbitration proceedings, but are infact judicial proceedings. It further said that in view of the state government's notification all the works contracts involved in the matter would be covered by the 1992 Act and hence are to be adjudicated by the Tribunal under the act.

Background

The court was hearing a batch of pleas, including one (R/ARBI.P/ 60 /2025) where a dispute arose between Zaisha Infrastructure involved in construction business and the Rajkot Municipal Corporation with respect to a works contract, wherein the contractor sought reference of disputes to arbitration. Clause 11 provided for resolution of disputes by a Sole Arbitrator–the Municipal Commissioner of respondent. However the petitioner objected to unilateral appointment of an arbitrator by the respondent.

Subsequently the Corporation disputed the private party's claims and contended that, in light of Notification dated 16.12.2024, municipalities and municipal corporations fall within the ambit of “public undertakings"; hence disputes are required to be referred to the Gujarat Public Works Contracts Disputes Arbitration Tribunal. Subsequently another notification dated 14.05.2025 was published which also included Corporation.

The notifications were issued in respect of definition of public undertaking under Section 2(1)(i)(iii) of 1992 Act as per which public undertaking are such class of local authorities as the State Government may, by notification in the Official Gazette, specify.

The Municipal Corporations contended that the moment the Corporation stands covered within the meaning of “public undertaking” after the notification was issued, Section 21 of 1992 Act will kick in and the Arbitration and Conciliation Act 1996 will cease to apply from that moment onwards and “all arbitration proceedings in relation to such disputes before an arbitrator, umpire, court or authority shall stand transfer to the Tribunal”. (The municipal corporations involved in the batch matter includes Rajkot, Gandhinagar and Ahmedabad Municipal Corporations.)

Justice DN Ray referred to definition of works contract under the 1992 Act and said that the State Government by Notification has the power to specify such other works of the State Government to be including within the meaning of works contract, apart from those which are specifically stated in Section 2(1)(k).

For context, as per the definition a "Works contract" means a contract made by the State Government or the public undertaking with any other person for the execution of any of its works relating to construction, repairs or maintenance of any building or superstructure, dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory or work shop or of such other work of the State Government or, as the case may be, of the public undertaking, "as the State Government may, by notification in the Official Gazette specify".

Noting that the definition is inclusive the court said:

"It is thus clear that the definition of “works contract” is inclusive and expansive in nature and despite no specific Notifications, the disputes in question would be covered within the meaning of Section 2(1)(k) of the Arbitration Tribunal Act, 1992 particularly because the phrase “all other such works of the State Government or, as the case may be, of the public undertaking,” would include within its reach every conceivable concessionaire and/or agreement which form the subject matter of these petitions. Therefore, the subject matter of the agreement in respect of which the petitioners have preferred these petitions would be clearly covered within the meaning of “works contract” under section 2(1)(k)..."

"It is thus clear that on and from the moment that the Act becomes applicable to the disputes forming the subject matter of these petitions, that is, from 14.05.2025, the said disputes cease to be arbitrable. Therefore, these petitions must necessarily fail," the court added.

Institutional arbitration has advantages but vast delays in delivering awards

Justice Ray however observed that in his experience being part of a Division Bench having roster over Appeals from Commercial Courts' decisions under Section 34 of the 1996 Act, he had "come across vast delays both in delivering the award as well as decades spent in the Section 34 Court".

With respect to institutional arbitration the court said that it within its defined procedures and its propensity to adhere to timelines could have been a more effective choice for public undertakings, particularly in high-stake arbitration involving three Arbitrators.

"The administrative wings of the Institutional Arbitration effectively sets down the calendar and selects suitable Arbitrators and further provides facilities to the Arbitral Tribunal which have the effect of nudging the Arbitral Tribunal to strict adherence to its calendar...These obvious advantages of Institutional Arbitration over adhoc arbitration are well acknowledged globally, whether in the context of International arbitration or domestic. The High Court as an institution has set up the Arbitration Centre and is continuously working to have a state of the art Institutional Arbitration facility," it said. 

State's counsel says will look into issues of pendency

The court however noted that the petitioners had repeatedly stressed on the sheer farcical nature of the proceedings before the Tribunal and the mind numbing pendency and ineptitude of the Tribunal as an Institution to even possibly adjudicate these disputes if referred. 

"Mr. Virk, wearing a different hat, in his capacity as Government Pleader of the State had ensured this Court that he will personally look into these issues and ensure sufficient competent personnel and administrative requirements which would enable the Tribunal to deal with large volumes of technical adjudication of the disputes pertaining to works contracts so that the State Government is not branded as an unfair employer which simply does not want to pay its contractors. This Court will hold Mr. Virk to his word," the court said.

The court said that in the background of the working of the 1996 Act, the very purpose of enacting the Arbitration Tribunal Act 1992, in "hindsight seems to be retrograde, if not redundant".It however said that the redressal of "the deafening anguish of the petitioners" unfortunately does not lie with this court but perhaps with a different Court if not the Legislature or even Parliament.

The court passed the order in a batch of petitions pertaining to the applicability of the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 which contemplates reference of disputes arising between parties to a works contract to the Tribunal established thereunder, despite the invocation of the respective arbitration clauses under section 21 of the Arbitration and Conciliation Act 1996.

Tribunal under 1992 Act conducts judicial proceedings

Referring to the provisions of the 1992 Act the court observed that ostensibly, the Act was to “Arbitrate” the disputes arising between contractors of “works contracts” concerning the State Government or a “public undertaking” as defined in Section 2(1)(i) of the Arbitration Tribunal Act, 1992.

However even if the word used is “Arbitrate”, the proceedings under the Arbitration Tribunal Act, 1992 are nothing akin to “Arbitration” within the meaning of the Arbitration Act, 1996 or its predecessor, the Arbitration Act 1940, it said. 

The court said that under Section 11 of the 1992 Act  Tribunal has power to review its own award;  under Section 14, all the proceedings before the Tribunal are deemed to be judicial proceedings within the meaning of Sections 193, 219 and 228 of the Indian Penal Code.

The court further noted that under Section 21 of the 1992 Act the provisions of the Arbitration Act (1996) shall in so far as they are inconsistent with the provisions of the 1992 Act cease to apply to any dispute arising from a works contract and all arbitration proceedings in relation to such dispute pending before any arbitrator, umpire, Court or other authorities shall stand transferred to the Tribunal. 

"From the above, it is clear that the Tribunal is certainly not a permanent arbitral institution within the meaning Section 2 (1) (a) of the Arbitration Act, 1996," the court said

The court dismissed the petitions granting liberty to the petitioners to approach the Tribunal with a reference under Section 8 of the State Arbitration Tribunal Act 1992 within 8 weeks. 

Case title: GPC INFRASTRUCTURE LTD. v/s GANDHINAGAR MUNICIPAL CORPORATION and Batch 

Counsel for petitioners: Senior advocate Unmesh Shukla for advocate Shashvata Shukla, Senior advocate Manish Bhatt for advocate Munjaal Bhatt and advocate Mayur Kishanchandani 

Counsel for respondents: Government Pleader GH Virk, GP KV Gadhia, advocates Shyamal Bhimani, Prashanth Undruti, Simranjit H Virk, Ruchi Rampuria, Chinmay M Gandhi, Nikita C Gandhi. 

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