Disputes Arising Out Of 'Work Contract' With MP Govt Instrumentality Shall Be Referred To MP Arbitration Tribunal : Supreme Court

The Supreme Court today (July 30) reiterated that the disputes related to 'work contract' must be adjudicated exclusively by the Madhya Pradesh Arbitration Tribunal under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (“1983 Act”).

Holding thus, the bench comprising Justices JB Pardiwala and R Mahadevan refused to interfere with the Madhya Pradesh High Court's ruling, which set aside the arbitration proceedings initiated by the Appellant, for settlement of the dispute arising out of the 'Work Contract' signed with the Respondent-MPRDC (a state-owned venture).

“we find no infirmity in the reasoning or conclusion of the High Court in quashing the private arbitration proceedings and reaffirming the exclusive jurisdiction of the Madhya Pradesh Arbitration Tribunal established under the 1983 Act to adjudicate disputes arising from works contract involving the State or its instrumentalities.”, the court said.

The Court clarified that regardless of the presence of the arbitration clause in the 'work contract', disputes arising out of the work contract shall be referred to the Madhya Pradesh Arbitration Tribunal, because of the overriding nature of the 1983 Act.

“A reading of sub-sections (3), (4), and (5) of Section 2 of the 1996 Act also illustrates that reference to a special tribunal under a special enactment would survive, irrespective of the existence of a mechanism under the 1996 Act. Further, we do not see any repugnancy between the enactments. Section 20 of the Act, 1983 imposes a bar on the jurisdiction of civil Courts, thereby reinforcing the exclusive and overriding nature of the statutory mechanism established under the 1983 Act.”, the court said.

Background

The Appellant initially filed a case before the MP Arbitration Tribunal seeking a claim of over ₹280 crores for alleged contractual breaches by MPRDC. However, later on, the case was withdrawn without the liberty, and initiated arbitration proceedings under the aegis of the International Centre for Alternative Dispute Resolution (“ICADR”).

Aggrieved by the passing of an order in an arbitration proceeding, the Respondent-MPRDC filed a Writ Petition before the High Court.

The High Court's decision to quash the private arbitration initiated by the Appellant prompted the Appellant to appeal to the Supreme Court.

Decision

Affirming the High Court's stance, the judgment authored by Justice Mahadevan observed that disputes arising from works contracts with state entities must be referred exclusively to the MP Arbitration Tribunal, regardless of any arbitration clause in the agreement.

The Court relied on the MP High Court's Full Bench decision in Viva Highways Ltd. v. MPRDC 2017 SCC OnLine MP 1448 and its ruling in MP Rural Road Development Authority v. L.G. Chaudhary (2018) 10 SCC 826, which held that the 1983 Act overrides the Arbitration and Conciliation Act, 1996 in this context.

In support, the Court also referred to Booz Allen and Hamilton Inc v. SBI Home Finance Ltd, (2011) 5 SCC 532, where it was held that arbitration is not permissible where the legislature has reserved adjudication of disputes to a special forum.

“Given that the present Concession Agreement pertains to the construction of a State Highway situated entirely within the State of Madhya Pradesh and was awarded by Respondent No.1, a State-controlled entity, the agreement clearly qualifies as a “works contract” under section 2(1)(i) of the 1983 Act. Consequently, the dispute arising therefrom falls within the exclusive jurisdiction of the Madhya Pradesh Arbitration Tribunal.”, the court observed.

“In view of the above statutory framework and judicial pronouncements, the Arbitration and Conciliation Act, 1996 stands excluded by operation of law in such matters. The private arbitration proceedings initiated by the appellant are therefore, non est in law, and the proper forum for adjudication is the Madhya Pradesh Arbitration Tribunal established under the 1983 Act.”, the court added.

In terms of the aforesaid, the Court directed the Appellant to file the recall application seeking recall of the withdrawal order and seek restoration of the Reference Petition before the Madhya Pradesh Arbitration Tribunal, which may be directed to be considered in accordance with law.

Cause Title: UMRI POOPH PRATAPPUR (UPP) TOLLWAYS PVT. LTD. VERSUS M.P. ROAD DEVELOPMENT CORPORATION AND ANOTHER

Citation : 2025 LiveLaw (SC) 752

Click here to read/download the judgment

Appearance:

For Petitioner(s) : Mr. Siddharth Dave, Sr. Adv. Ms. Sadapurna Mukherjee, Adv. Mr. Saurabh Kumar, Adv. Manvi Sharma, Adv. Mr. Rajat Mittal, AOR

For Respondent(s) :Mr. Tushar Mehta, Solicitor General Mr. Siddharth Sharma, AOR Mr. Bhuvan Kapoor, Adv. Ms. Rajeshwari Shankar, Adv. Ms. Ishika Chauhan, Adv.