Madhya Pradesh High Court
Spedra Engineering Corporation ... vs State Of Madhya Pradesh on 22 June, 1987
Equivalent citations: AIR1988MP111, AIR 1988 MADHYA PRADESH 111, (1988) 2 ARBI LR 212, (1988) 19 REPORTS 282, (1988) LABLJ 601
Author: N.D. Ojha
Bench: N.D. Ojha
JUDGMENT C.P. Sen, J.
1. This is a petition under Articles 226 and 227 of the Constitution for striking down of M.P. Madhyastham Adhikaran Adhiniyam, 1983, and for quashing the order dt. 16-8-1985 of the Chief Engineer cancelling the appointment of arbitrator dt. 14-3-1985 for deciding the dispute raised by the petitioner-contractor. This Order will also govern the disposal, of M.P. No. 1922/1985 between the same parties wherein the petitioner has challenged the order dt. 22-6-1985 of the State Government cancelling the appointment of the sole arbitrator to settle the dispute between the parties.
2. The petitioner is a contractor having its registered office at Bhopal. The petitioner's tender for construction of DejlaDawada left Earth Dam in the district of West Nimar, M.P., was accpeted by the State Government and agreement No. 12DL/1983-84 was entered into and the petitioner commenced its work. Clause G.C. 52 of the Agreement provided for settlement of disputes by recourse to arbitration. As per this clause, all the disputes and differences in respect of which the decision has not become final and conclusive shall be referred for arbitration. The Chief Engineer, Narmada Tapti Basin, shall send to the contractor a list of three officers of the rank of Superintending Engineer or higher who have not been connected with the work under the agreement to act as arbitrators. The contractor was then required within 15 days of the receipt of the letter to select and communicate as to who out of the three should the sole arbitrator. Thereafter the dispute has to be referred to the arbitrator so named. On the failure of the Chief Engineer to submit the names of the arbitrators within 30 days, it would be open to the contractor to send a list of three officers who may be appointed as arbitrators and the Chief Engineer may then select any one of the officers so named within 15 days and on his failure to do so it would be open to the contractor to name the sole arbitrator amongst the three names submitted. The arbitration has to be conducted in accordance with the provisions of the Arbitration Act, 1940, or any statutory modification thereof. Performance under the agreement shall continue during arbitration proceedings and payments due to the contractor shall not be withheld. All awards shall be in writing and in case of awards amounting to rupees one lack and above, such awards shall state the reasons for the amount awarded. In the meanwhile. M.P. Madhyastham Adhikaran Adhiniyam, 1983. (hereinafter referred to as the Act I was enacted and it came into force from 1-3-1985. Under Section 7 of the Act, 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 constituted under the Act. Under Section 2(i) 'works contract' means an agreement for the execution of any work relating to construction, repairs or maintenance of - any building or superstructure, dam, weir canal, reservoir, tank, lake, road, well, bridge, culvert, factory, workshop or such other works as may be specified by the notification, entered into by the State Government or by any of its public undertakings. Under Section 19, the High Court has been given power of revision against any award. Under Section 20(1) notwithstanding anything contained in the Arbitration Actor in any agreement or usage to the contrary, no civil court shall have jurisdiction to entertain or decide any dispute of which congnizance can be taken by the Tribunal under this Act. Under Sub-section(2) nothing contained in Sub-section (1) shall apply to any arbitration proceeding either pending before any arbitrator or umpire or before any court or authority under the provisions of Arbitration Act. In exercise of the power conferred by. Section 29 of the Act, the State Government framed M. P. Madhyastham Adhikaran Niyam, 1984, fixing salary and other emoluments of the Chairman and members and the maintenance of record by the Tribunal. The Tribunal, in turn, framed M.P. Madhyastham Adhikaran Regulations, 1985, under Section 10 of the Act laying down the procedure to be followed on a reference being made to it for arbitration of the disputes.
3. It appears that dispute arose between the petitioner and the Department regarding fixation of rate for excavation of disintegrated rock and hard rock and for removal of the same to a depth of 28 meters. The petitioner found difficulties in excavating the cut off trench and claimed special rate for the work. The Department explained that the materal excavated was classified as conglomerate as per Geologist's advice and the petitioner was being paid accordingly. The petitioner vide letter dt. 22-11-1984 called upon the Superintending Engineer who was the final authority under the agreement to settle the claims. By order dt. 27-12-84 the Superintending Engineer rejected the claims preferred by the petitioner. The petitioner thereupon called upon the Chief Engineer to refer the dispute under Clause G.C. 52 to arbitrator. The Chief Engineer then suggested a panel of 3 names on 15-1-1985 and the petitioner gave his preference on 22-1-1985 in favour of Shri K.K. Dhurv, Chief Engineer (Survey & Investigation). By letter dt. 14-3-1985 the Chief Engineer made a reference to the sole arbitrator who then entered into a reference. The petitioner submitted its claim statement and the Department submitted its reply. The arbitrator then fixed 6-8-1985 for hearing. However, the Chief Engineer, Narmada Tapti Basin by letter dt. 16-8-1985 revoked the authority of the arbitrator to arbitrate in the dispute raised by the petitioner.
4. The petitioner's case is (i) that the Act is arbitrary and violative of Article 14 of the Constitution inasmuch as it takes away right of the petitioner to refer its disputes under the agreement to a mutually chosen arbitrator and forces the petitioner to go before the forum constituted by the State Government. The law so made by the State cannot have the effect of abrogating the pre-existing contractual obligations of the State. This is against the concept of arbitration which involves the adjudication of the disputes by an independant forum of the choice of the parties to the dispute, (ii) The provisions of the Act have the effect of taking the said legislation even outside the widest possible connotation of the term arbitration as used in Entry No. 13 of List III of Seventh Schedule of the Constitution (iii) Under the Act, the petitioner's right to approach the civil Court has been violated where he has a right of first appeal on facts and second appeal on question of law or mixed question of law and fact and further remedy of approaching the Supreme Court under Article 136 of the Constitution. whereas the only remedy provided under the Act is by way of revision. Under the Act even if there is no arbitration clause in an agreement, still the con tractor will be forced to approach the Tribunal for arbitration, (iv) The distinction made between the works contracts and other contracts is clearly discriminatory, arbitrary and is viola live of Article 14 of the Constitution, there being no nexus between the basis of the said classification and the object sought to be achieved under the Act. (v) In the present case, the arbitration proceedings commenced as soon as the petitioner on 2-1-1985 called upon the Chief Engineer to refer the dispute, to the arbitrator and, as such, the Tribunal is excluded under Section 20(2) to arbitrate in the dispute.
5. The State in its return submitted that in the present case the arbitration proceedings started when the reference was made by the Chief Engineer to the arbitrator on 14-3-1985 and not earlier, so there was no arbitration pending when the Act came into force on I-3-1985 and, therefore, the Chief Engineer had no jurisdiction to refer the dispute to the arbitrator when the same has to be decided by the Tribunal constituted under the Act. Realising this mistake, the Chief Engineer rightly revoked the order referring the dispute to the arbitrator. Under the Act, there is a provision for statutory arbitration and, as such, the arbitration agreement for referring the dispute to the arbitrator stands superseded. It it the Tribunal constituted under Section 7 which has to decide the dispute and under Section 20 from the date of the constitution of the Tribunal it alone has to decide the dispute and no civil Court shall have jurisdiction to entertain or decide any dispute of which cognizance can be taken by the Tribunal. Since the Act was enacted with the assent of the President of India obtained on 7-10-83 and published in M.P. Gazette on 12-10-83, this Act will supersede the Indian Arbitration Act. 1940, in view of Article 254 of the Constitution so far as Stale of M.P. is concerned. As this is a special enactment in the field, it will prevail and merely because there has been an agreement between the parties, the same cannot override the provisions of the Act. The petitioner can make no complaint based on Article 14 of the Constitution as long the forum created under the Act has to adjudicate all disputes arising out of the works contracts without singling out any particular dispute. In fact. under several agreements with the State or Central Government there is provision for appointment of sole arbitrator who is an officer of the State and no choice is available to the contracting party. The Tribunal constituted under the Act is headed by a sitting or a retired Judge of the High Court and the two members are a senior District Judge and a senior expert on the subject. The Act only provides for the forum for decision in respect of disputes arising out of the works contracts and does not violate any provision, much less Article 14, of the Constitution. The Act has been rightly enacted by the State Legislature under Entry No. 13 List 111 of Seventh Schedule. There is adequate remedy by way of revision against the award that may be passed by the Tribunal on grounds which are available under Section 115 of C.P.C. and also under Section 30 of the Arbitration Act.
6. In M.P. No. 1922/85 the petitioner's tender for construction of Left Earthen Dam of Kolar Project, Group I, from R.D.O. to 645-M in district Sehore was accepted and an agreement was executed. The agreement provided an arbitration Clause 4.3.29.2, that in case of any dispute the same shall be referred to an arbitrator to be chosen by the contractor out of the three names to be submitted by the State Government. The petitioner submitted its claims to the Superintending Engineer on 22-7-1983 and the same were rejected on 23-7-1984. The petitioner then called upon the Superintending Engineer to refer the dispute to the arbitrator on 24-7-1984. The Superintending Engineer on 29-11-84 asked the petitioner to give its consent in favour of one out of the panel of 3 names sent. On 1-12: 1984 the petitioner gave its consent in favour of Shri B.V. Subbarao, ratired Chief Engineer, The Government then on 5-4-1985 referred the dispute to the sole arbitrator. Thereafter the arbitrator entered into reference but his appointment was cancelled by the State Government on 22-6-1985. According to the petitioner, the authority of the arbitrator could only be revoked Under Section 5 of the Arbitration Act. 1940. and not otherwise. Since arbitration proceedings were pending when the Act came into force, on 1-3-1983, the proceedings are saved in view of 6,20(21. The petition is being opposed by the State saying I have no arbitration proceedings were pending on 1-3-85 inasmuch as the reference was made to the arbitrator only on 3-4-85 i.e. after the Act came into force. Therefore, the order of reference was without jurisdiction because the dispute has to be decided by the Tribunal constituted under the Act and by none else. Though the letter making reference to the arbitrator is dt. 23-1-85, but actually it was issued on 5-4-1983.
7. Shri Venugopal elaborating his arguments contended that the enactment is antithesis of arbitration. Under the Act, a Tribunal of its own choice has been constituted by the State and it is misnomer to call it as an arbitration tribunal by merely using catch-phrases. An arbitration is brought into being by agreement between the parties to exclude normal forum and to settle the dispute by a chosen forum and arbitration cannot be forced on a party. The appointment of the members of the Tribunal solely vests in the State which is itself a party to the dispute which means the State has a power to suspend of remove any member and it cannot be a judge of its own cause. It is not permissible under the Constitution to permit a sitting Judge to act as Chairman of the Tribunal. There is enormous choice available to the State to pick and choose persons as Chairman and members. There is relationship of master and servant created and the members of the Tribunal are wholly subservient to the State and there is no judicial independence. This Act cannot be enacted under Entry No. 13 of List III of Seventh Schedule of the Constitution because it goes against the basic principles of arbitration. The word 'shall' in Section 7 has to be read as 'may' otherwise the provision will be meaningless because this will affect the right of the parties wishing not to sue or proceed in the matter. The Bench constituted under Section 9 may not include a Judge and may consist of executive officers only. The Tribunal has no inherent jurisdiction under the Act, Under Section 16 it is up to the Tribunal to give reasons or not while giving award, while under the agreement reasons have to be given for the award. Scope of revision is very much limited and mistakes of facts cannot be gone into. Wrong or right decision is not open to challenge. In any case, here the arbitration proceedings commenced when the petitioner called upon the Chief Engineer to refer the dispute to the arbitrator on 2-1-1985 under Section 37(3) of the Arbitration Act, There is no provision in the Act excluding the jurisdiction of the arbitrator. Under Article 372 of the Constitution, all existing laws are to continue unless altered or repealed. Since Arbitration Act has not been repealed by express provision in the Act, it will prevail. It not being a law relating to arbitration, the Arbitration Act will continue to prevail in the State.
8. According to Shri Rajendra Tiwari, Deputy Advocate General for the State, the Act has been enacted to provide for the establishment of a tribunal to arbitrate in disputes to which the State Government or a Public Undertaking owned or controlled by the State Government is a party and for matters incidental thereto or connected therewith. The enactment only provides for a forum which has to arbitrate or decide the dispute between the parties. Thus statutory 'arbitration has been provided, only forum of arbitrators changed, all the ingredients of arbitration are present except that even in spite of or in the absence of arbitration agreement there can be reference to the arbitration tribunal. Under Section 20 of the Act, notwithstanding anything contained in the Arbitration Act or in any agreement, no Court shall have jurisdiction to entertain or decide any dispute of which cognizance can be taken by the Tribunal under the Act. Arbitration commences when reference is made to the arbitrator. Here the reference was made on 14-3-1985 when the Act had already come into force. As such, the Chief Engineer had no jurisdiction to refer the dispute to the arbitrator when the same has to be adjudicated by the Tribunal constituted under the Act. So no arbitration was pending when the Act came into force and Section 20(2) is not attracted. There is a reasonable classification of works contract which can be distinguished from other types of contracts and there is no discrimination in making the Act applicable only to works contract. Since the reference was not validly made, the Chief Engineer rightly cancelled the same. There are enough safeguards provided under the Act and the anxiety has been to appoint a high power tribunal which can act with impartiality and decide the disputes without delay. There is no unfettered power given to the State Government to appoint and extend the terms of the members nor there is any power in the State Govt. to regulate, the proceedings of the Tribunal. Under Section 11, the Tribunal has to regulate its own procedure which has to be just and fair. The Tribunal has been vested with certain powers of a Court under Civil P.C. under Section 12. Though no reason need be given by the Tribunal for its award but under Section 16(5) the award shall spell out clearly the relief granted, the party in whose favour and against whom relief has been granted and as to who has to pay costs and interest. The award has the force of a decree and can be executed by the civil court. The Act is infra vires of the Constitution and there is no merit in the petition which deserves to be dismissed with costs.
9. M.P. Madhyastham Adhikaran Adhiniyam,' 1983, has been enacted to provide for the establishment of a Tribunal to arbitrate in disputes to which the State Government or a public undertaking owned or controlled by the State Government is a party. 'Dispute' has been defined under Section 2(d) meaning any diffenence relating to any claim valued at Rs. 50,000/- or more, arising out of the execution or non-execution of a works contract or part thereof. Section 2 (1) defines 'works contract' which has been quoted earlier. Under Section 2(2) words and expressions used but not defined in this Act but defined in the Arbitration Act shall have the meanings assigned to them in that Act. The State Government has to constitute an Arbitration Tribunal under Section 3 for resolving all such disputes and differences pertaining to works contracts. Under Section 4, the State Government has to appoint a Chairman and as many members to the Tribunal as it may consider necessary. No person shall be appointed as Chairman unless he is or has been a Judge of a High Court. No person shall be qualified for appointment as a member 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 of equivalent rank for not less than 5 years, or (iii) he is or has been a Chief Engineer in the service of the State Government for a period not less than .S years. Section 5 fixes the tenure of the Chairman and members for a period o!"3 years but under Sub-section (3) the State Government may in its discreation extend the period for a further term not exceeding 3 years having regard to (he number of cases pending. The Chairman and the members shall be paid such salaries, allowances and other perquisites as may be prescribed under the rules, as per Section 6 Under Section 7(1) either party to a workscontract shall irrespective of the fact whether the agreement contains an arbitration clause or not, refer in writing the dispute to the Tribunal. Section 9 empowers the Chairman to constitute one or more Benches of one or more uneven number of members as he thinks fit., Under Section 10 the Tribunal may make regulations for transaction of business before it. Section 11 empowers the Tribunal to regulate it shown procedure us it may think just and fair. Unite/ Section 12 the Tribunal shall have the same powers us are vested in a Court under the Civil P.C. The Tribunal is required to give a ward under Section 16. Finality is attached to the award under Section 17 which can be executed as a decree by civil Court under Section 18. Revision is provided against the award to the High Court under Section 19 on grounds similar to those provided under Section 115.C.P.C.and those contained in Section 30 of the Arbitration Act. Under Section 20. notwithstanding anything contained in the Arbitration Act. no civil Court shall have jurisdiction to entertain or decide any dispute of which cognizance can he taken by the Tribunal. However, under Sub-section" 2 nun in any in Sub-section(l) shall apply to any arbitration proceedings either pending before any arbitrator or umpire or before any Court or authority. The Chairman and members are public servants Under Section 22. Section 24 provides that the proceedings before the Tribunal shall be deemed to be judicial proceedings for the purposes of any offence affecting administration of justiee. Records and documents forming part of such records shall he open to inspection of all parties or their agents under Section 27. Under Section 28 the State Government has power to direct the Tribunal to maintain records, registers etc. and to furnish information and statistics. Under Section 29 the State Government has framed M.P. Madhyastham Adhikaran Niyam, 1984, prescribing the salary and other service conditions of the Chairman and members of the Tribunal. The Tribunal in exercise of powers under Section 10 has framed M.P. Madhyastham Regulations 1985 regulating the procedure to be followed by it. From the narration of the provisions of the Act and the rules hereinabove, it is clear that the Act has been enacted to provide for arbitration of disputes relating to any claim valued at Rs. 50,000/- or more arising out of works contract with the Government or any public undertaking owned or controlled by it. Therefore, the claims below Rs. 50,000/-are not to be referred to the Tribunal for adjudication.
10. First of all it has to be considered whether the Act is arbitrary and discriminatory in nature and violated Article 14 of the Constitution because it is applicable only to the claims of Rs. 50,000/- or more arising out of works contracts and not in respect of other contracts entered with the Government. It is settled law that the presumption is always in favour of constitutionality of an enactment since it must be assumed that the legislature understands and correctly appreciates the needs of its people, that is laws are directed to problems, made manifest by experience and its discriminations are based on adequate grounds. A Legislation has not to be struck down as discriminatory if any state of facts may reasonably be conceived to justify it. Burden of showing that a classification rests upon arbitrary and not reasonable basis, is upon the person who impeaches the law as violative of the guarantee of equal protection. The allegation must be clear, specific and unambiguous and must give particulars. The Supreme Court in Motidas v. S.P. Sahi, AIR 1959 SC 942 has held as under :-
"It is now well settled that while Article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation, and in order to pass the test of permissible classification two conditions must be fulfilled, namely (1) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (2) that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases such as, geographical, or according to objects or occupations and the like."
Here the Act classifies works contract from other contracts and provides for arbitration by a statutory tribunal of the dispute arising out of such contracts. Evidently, there is a reasonable classification with the object to ensure speedy and impartial trial by an independent Tribunal. There is no question of any discrimination simply because other types of contracts which are clearly distinguishable and could be separately classified do not come within the purview of this enactment. Mostly in the works contracts with the Government or its undertaking, invariably there is a provision for arbitration by an arbitrator to be appointed by the Government with an option given to the contractor to select one out of the list of arbitrators submitted who are mostly Engineers working or retired from the State Government service.
11. It is true that the Supreme Court in State of West Bengal v. Anwar AM. AIR 1952 SC 75 held that West Bengal Special Courts Act. 1950, was enacted to provide for speedy trial of certain offences but the procedure laid down therein is less advantageous to the accused than the ordinary procedure and this fact must in all cases be the root cause of discrimination which may result by the application of the Act. The necessity of a speedy trial it too vague, uncertain and elusive criterion to form the basis of a valid and reasonable classification. It is no classification at all in the real sense of the term as it is not based on any characteristics which are peculiar to persons or to cases which are to be subject to the special peocedure prescribed by the Act. Explaining and distinguishing this case, the Supreme Court in In Re Special Courts Bill, 1978. AIR 1979 SC 478 held that the classification provided for by the Special Courts Bill is valid and no objection can be taken against it. II was made applicable to offences alleged to have been committed during the period of emergency in order that such offences be judicially determined with utmost dispatch for proper functioning of the parliamentary democracy. It was also held that the persons who are singled out by the Bill for trial before Special Courts possess common characteristics and those who fall outside that group do not possess them. The object of the Bill is to ensure a speedy trial of the offences and offenders who constitute a single and special class. In Anwar Ali's case the section which was under challenge was held to be partially void in so far as it empowered the Government to direct cases as distinguished from classes of cases to be tried by special Courts. The Supreme Court in Kewal Singh v. Lajwanti, AIR 1980 SC161 held that the Legislature has not violated Article 14 by incorporating Section 25B, Delhi Rent Control Act, 1958, providing for summary disposal of casesfiled by the landlord to evict tenants on the grounds of his bona fide need in order to get quick and expeditious relief. Such needy landlords are separate class by themselves and there is a reasonable classification. Again the Supreme Court in Air India v. Nergesh Meerza, AIR 1981 SC 1829 held that even if there be one class of service having saveral categories with different attributes and incidents, such a category becomes a separate class by itself and no difference or discrimination between such category and the general members of the other class would amount to any discrimination or to denial of equality of opportunity. Further in R.K. Garg v. Union of India (AIR 1981 SC 2138) at page 2139 of the same Volume, it has been reiterated that Article 14 does not forbid reasonable classification of persons, objects and transactions by the legislature for the purpose of attaining specific ends, but the classification must not be arbitrary, artificial or evasive. Again in Ravi Dutt Sharma v. Ratan Lal Bhargava. AIR 1984 SC 967 the Supreme Court while interpreting Section 25 A to C of Delhi Rent Control Act. 1958, held that it was open to the Legislature, to pick out one class of landlords out of the several covered by Section 14(1)(e) of the Rent Act so long as they formed a class by themselves and the legislature was free to provide the benefit of a special procedure to them in the matter of eviction of their tenants as long as the legislation had an object to achieve and the special procedure had a reasonable nexus with such object to be secured. The works contracts are a separate class by themselves from other contracts and there can be special enactment for deciding disputes arising out of such contracts and object is to get such disputes settled by arbitration by an independent statutory tribunal.
12. The next question to be considered is whether this is not an enactment under Entry No. 13 of List III of 7th Schedule of the Constitution under the heading "arbitration'. The learned counsel contended that arbitration postulates (1) an agrement between the parties to have the dispute decided otherwise than by the normal forum of civil Court and (ii) an arbitrator of the choice of the parties to adjudicate the dispute. No doubt, these are the essential attributes of arbitration entered into between the parties under Arbitration Act. Russel on Arbitration. 19th Edition, at page (sic) of Chapter 1 has commented that the essence of the sort of arbitration with which this book is concerned, is that some dispute is referred by the parties for settlement to a tribunal of their own choosing instead of to a Court. However, at page 2 it has been further observed that the rules governing arbitrations by consent are to a greater or lesser extent applicable also to many a statutory tribunal. In so far as these rules are not so applicable, however, such tribunals are outside the scope of this book. At page 10 of Chapter II it has further been observed that a statute may provide that disputes of a particular class shall be determined by arbitration of a particular sort and where such a provision applies, the arbitral tribunal laid down by the statute has the exclusive jurisdiction over such disputes. Part I of the Arbitration Act applies to arbitrations under other statutes, unless excluded by other statute concerned. Where not excluded, the Act applies to statutory arbitrations as if the arbitration were pursuant to arbitration agreement and as if that other Act were an arbitration agreement. The chapter enumerates constitution of statutory tribunals under several enactments. Evidently Arbitration Act, 1940, deals with arbitration under an agreement. Besides such arbitrations, there may be statutory arbitrations in accordance with provisions of certain Act. The provisions of the Arbitration Act, except with few exceptions, will apply even to those arbitrations unless they are inconsistent with the provisions of those Acts. This is made clear by Section 46 of Arbitration Act that except certain provisions of this Act, the other provisions shall apply to every arbitration under any other enactment as if the arbitration was 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 the other enactment or with any other rules made thereunder. The Supreme Court in Hanskumar v. Union of India, AIR 1958 SC 947 has held that the position in law is the same when the reference to arbitration is made not under agreement of parties but under provisions of a statute. The result of those provisions again is to withdraw the dispute from the jurisdiction of the ordinary Courts and to refer it for the decision of a private tribunal. That decision is an award, and stands on the same fooling as an award made on reference under agreement of parties. So there can be statutory arbitration even in the absence of agreement between the parties to refer their dispute to an arbitrator. Therefore, it cannot be said that the present enactment is an antithesis of arbitration because it provides for arbitration even in the absence of any agreement between the parties to refer their dispute to the arbitrator. It is also not a misnomer to call the tribunal canstituted under the Act as an Arbitration Tribunal as it has all the requisties to arbitrate in the dispute between the contractor and the State except that there is no agreement to refer the dispute to the Tribunal for arbitration that is by the statute. Clearly, therefore, this is an enactment under Entry No. 13 of List III of Seventh Schedule of the Constitution under heading 'Arbitration'. This being a special enactment providing for statutory arbitration arising out of disputes concerning works contracts with the State Government or its undertaking it will prevail over Arbitration Act in the State of M.P. in view of Article 254(2) of the Constitution in so far as there is repugnancy between the two enactments.
13. However, the learned counsel further contended that the word 'shall' should be read as 'may' in Section 7(1) of the Act otherwise this will affect the rights of a party who decides not to refer the dispute to the Tribunal, yet will be forced to refer the same if the word 'shaft' is given its natural meaning which will be meaningless. We are unable to agree with this contention. Under this provision, either party to a works contract has been given a right irrespective of the fact whether the agreement contains an arbitration clause or not to refer the dispute to the Tribunal. There is no question of party referring the dispute when the party itself does not raise any dispute, yet the other party i.e. the Government can still raise the dispute regarding some other matter and refer the same to the Tribunal for adjudication. If the word 'shall' is not given its natural meaning, the purpose of the Act will be frustrated inasmuch as the discretion will be with the parties to refer or not to refer the dispute to the Tribunal. It is true that under Section 17 of the Act there is finality to the award and under, Section 18 it has a force of decree but this is subject to the High Court's power of revision under Section 19 on any of the grounds enumerated in Section 115, CPC and Section 30 of the Arbitration Act. Section 20 bars jurisdiction of civil Court to entertain or decide any dispute of which cognizance can be taken by the Tribunal under the Act. Admittedly, no appeal is provided and the grievance is that under the Arbitration Act the a ward can be challenged before the civil Court under Section 30 and appeal lies against the judgment of the civil Court under Section 39 and in some cases there may be second appeal also but under the present Act there is no appeal and only a revision is provided which is not an adequate remedy. Besides, the Tribunal is not bound to disclose reasons while in the agreement between the parties reasons have to be given by the arbitrator if the award exceeds rupees one lac. It is true that the jurisdiction of the civil court has been excluded against the a ward or the proceedings of the Tribunal under Section 20 of the Act but there is re vision provided under Section 19 on grounds akin to Section 115, C.P.C. and Section 30 of the Arbitration Act. Even under the Arbitration Act, no reasons need be given by the arbitrator and there isnothing unusual in not requiring the Tribunal to give reasons. The Supreme Court in Khyerbari Tea Co. v. State of Assam, AIR 1964 SC 925 has held that what Section 34(2)(a) of Assam Taxation (on Goods Carried by Road or on Inland Waterways) Act, 61 prohibits is merely a suit or the other proceedings in any court. It does not prohibit the remedy of an appeal or revision specifically provided under the Act.
14. The further question is whether by constituting the Tribunal the State has created a forum of its own choice in respect of disputes concerning it and the Tribunal is controlled by the Government and is subservient to it. The Chairman and Members of the Tribunal are appointed by the State Government for a fixed term which can be extended under certain circumstances. The argument is that in view of Section 16 of M. P. General Clauses Act the power of appointment includes power of dismissal also. Salaries, other emoluments and perquisites are also fixed by the Government and the Chairman and the Members of the Tribunal are completely at the mercy of the Government and, therefore, no independence is ensured to the Tribunal. There is no unfettered right to the Government in appointing any person of its choice as Chairman and Members. Chairman has to be a sitting or a retired Judge of the High Court while the Members are to be Senior District Judge. Senior Revenue Commissioner, Chief Engineer putting in 5 years or more of service in such capacity. If a sitting High Court Judge or a sitting District Judge is to be appointed, the consent of the concerned Chief Justice has to be taken and in case of High Court Judge further approval of the President of India has to be obtained. Under the agreement, the arbitrator is required to be selected by the contractor out of the panel of names submitted by the Chief Engineer who are generally sitting or retired Chief Engineers. Certainly the Tribunal headed by a High Court Judge and consisting of a Senior District Judge cannot be less independent and impartial than an arbitrator who is a sitting or retired member of the executive of the Government. So there is no merit in the contention that the Tribunal is wholly subservient to the Government. It is true that under the rules the service conditions and other perquisites have been laid down and their previous service conditions prior to their appointment are preserved. Therefore, the rules do not leave the Chairman and Members completely at the mercy of the Government so far as their service conditions including salary are concerned. The proceedings before the Tribunal are regulated by the Regulations framed by it and not by the Government. Under Section It, the Regulations have to be just and fair and a party shall not be denied its right of being represented by an Advocate or a recognised agent. The Regulations framed by the Tribunal more or less adopt the procedure applicable to suits under C .P.C. except that i t is not necessary to take down and record evidence at length but only a memorandum of the substance of what the witness has deposed. Therefore, the provisions are not arbitrary or discriminatory in nature and the Act is not violative of Article 14 of the Constitution. The case of the Supreme Court in State of Karnataka v. Rameshwara Rice Mills, (1987) 2 JT 578 : (AIR 1987 SC 1359) has no application to the facts of the present case wherein it was held that interest of justice and equity requires that where a party to the contract disputes committing of any breach of conditions, the adjudication should be by an independent person and not by the party to the contract. In that case the damages were to be adjudicated by the officer acting on behalf of the State but the clause in the agreement did not empower the officer to adjudicate as to whether there was any breach committed or not. Here the adjudication is by a statutory tribunal constituted under the Act and not by an officer who is not empowered to decide a particular dispute under an agreement. Recent decision of the Supreme Court in S.P. Sampath Kumar v. Union of India, AIR 1987 SC 386 regarding constitution of the Administrative Tribunals is clearly distinguishable. There the Government was empowered to appoint executive officers as Vice-Chairman of the Tribunals and after they had put in two years' service as Vice-Chairman, the executive officers were entitled to be appointed as Chairman of the Administrative Tribunal there by giving complete administrative control over the Tribunal to the Government through the executive officers. Here, that is not the case. The Tribunal has to be headed by a sitting or a retired Judge of the High Court and by none else. The members are to be senior District Judges or senior executive officers putting 5 years or more service in that capacity.
15. Now only question that remains to be decided is whether the arbitration proceedings were pending before the arbitrators in these two cases and are, therefore, saved under Section 20(2) of the Act and they have to be heard and decided in accordance with the agreeing under the provisions of the Arbitration Act, The learned counsel for the petitioner contends that the arbitration proceedings were pending since the petitioner had already given a notice to the Chief Engineer prior to the coming into force of the Act for appointment of an arbitrator and, in fact, the Arbitrators had entered into references when the Act came into force. For this purpose reliance is placed on Section 37(3) of the Arbitration Act which provides that an arbitration shall be deemed to have commenced when one party to an arbitration agreement serves on the other party thereto a notice requiring appointment of an arbitrator. Admittedly, in these two cases notices were given prior to the coming into force of the Act, but this provision is for the purpose of computing limitation and not for any other purpose. In fact, the arbitration commences when the reference is made to the arbitrator. Admittedly, in these two cases, references were made after the Act came into force. Section 48 of the Arbitration Act provides that provisions of that Act will not apply to any reference pending on the commencement of the Act. A Division Bench of this Court in Chouthmal v. Ramchandra, AIR. 1955 Nag 126 has held that a reference begins to pend the moment the agreement has been placed in the hands of the chosen arbitrators and they have signified their assent to deal with the matter. Obviously, this was after the present Act came into force. Under Section 7 of the Act the dispute so referred can only be adjudicated by the Tribunal constituted under the Act and not by any other arbitrator or Court as there is a mandate under Section 7 that the dispute has to be referred to the Tribunal for adjudication irrespective of the fact whether the agreement contains an arbitration clause or not. Though there is no non obstante clause in Section 7 but such a clause is there in Sections 11 and 20(1) which says that as from the date of the constitution of the Tribunal and notwithstanding anything contained in the Arbitration Act or any other law or in any agreement, no Civil Court shall have jurisdiction to entertain or decide any dispute of which cognizance can be taken by the Tribunal under this Act. Though there is no exclusion of the jurisdiction of the arbitrator but that is by implication because under Sub-section (2)only arbitration proceedings pending at the commencement of the Act are saved. Section 11 empowers the Tribunal to follow its own procedure notwithstanding anything contained contrary in the Arbitration Act. Reliance is placed on a single Bench decision of this Court in State of M. P. v. M.R. Construction, M. P. No. 57/86 decided on 9-12-86, wherein it has been held that Section 20(2) postulates that pending matters will be governed by the Arbitration Act and the proceedings may be continued, heard and decided in accordance with the agreement or provision of the Arbitration Act as if the Act of 1983 has not come-into force. In that case, Section 20(2) was clearly attracted inasmuch as the arbitration proceedings were pending before the District Judge since 1984 i. e. much before when the Tribunal was constituted with effect from 1-3-1985. In the present case, the proceedings are not saved as there were no arbitrations pending when the Act came into force. As such, the disputes between the parties have to be referred to the Tribunal which alone can adjudicate in the matter. Since the reference was made after the Act came into force, it was without jurisdiction and therefore it was open to the Government to cancel the reference after realising the mistake.
16. There is further submission in the alternative that the Act is not retrospective in operation and it cannot affect the agreements existing before coming into force of the Act. A law is deemed to be prospective unless made retrospective expressly or by necessary implication. The Arbitration Act has not been repealed expressly by the present Act, but if it is assumed that it has been so repealed impliedly, then under Section 10 of M. P. General Clauses Act the remedy available under the repealed enactment is preserved and can be continued. As already mentioned, Section 20(2) of the Act preserves only arbitration proceedings pending before the arbitrator or Court when the present Act came into force and not any arbitration proceedings that can take place in view of the prior agreement executed before the coming into force of the Act. If the arbitration proceedings are not pending, the agreement becomes inoperative so far as arbitration clause is concerned after the present Act came into force. G. P. Singh, J. in his book on Principles of Statutory Interpretation, 3rd Edition at page 348 has observed : "But then there are very often posterior laws which seriously affect the performance of existing contracts and the commonest example is where a contract is frustrated by supervening impossibility brought by subsequent statutes or by governmental steps taken under them (Mugneeram Bangur and Co. (P) Ltd. v. Gurbachan Singh, AIR 1965 SC 1523). A statute which in the words of Cockburn, C J. "engrafts an enactment upon existing contracts" has in effect a retrospective operation (Duke of Devonshire v. Barrow Haematite Steel Co. Ltd. (1877) 2 QBD 286). Byelaws framed under Forward Contract (Regulation) Act. 1952, which deal with forward contracts in cotton and refer to "every contract and "every on call contract" "in so far as cotton is uncalled thereunder", and which required such contracts to be closed out on a day not originally contracted for at a price fixed by law, were held to be retrospective and to affect existing executory contracts made prior to the date of operation of the bye-laws (Indremani (Dr) v. W. R. Natu, AIR 1963 SC 274).
17. With the result, both the petitions fail and they are dismissed with costs. Counsel's fee Rs. l.000/- in each case, if certified.