Madhya Pradesh High Court
M/S Essel Infra Projects Ltd. vs The State Of Madhya Pradesh on 31 January, 2017
Author: A. K. Joshi
Bench: A. K. Joshi
1 A.C No.27/2013
HIGH COURT OF MADHYA PRADESH AT JABALPUR
ARBITRATION CASE NO.27/2013
APPLICANT : M/S ESSEL INFRA PROJECTS LIMITED
Vs.
RESPONDENTS : STATE OF M.P.
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For the petitioner : Shri Naman Nagrath, learned
Senior Counsel with Shri Jubin
Prasad, Advocate.
For the respondents : Shri Pratyush Tripathi with Shri
Dhruv Verma, Advocates.
Present : Hon'ble Shri Justice R.S. Jha &
Hon'ble Shri Justice A. K. Joshi.
ORDER
(31/01/2017) Per R. S. Jha, J:-
This arbitration case has been placed before us (Division Bench) on account of the order passed by the learned Single Judge on 20.7.2016 referring the matter to a Larger Bench.
2. Before we proceed any further in the matter, it is relevant to take note of the brief facts of the case. As stated before us, the parties have entered into an agreement for construction and development of land aggregating 69.91 Hectares allotted to the Department of Sports and Youth Welfare by the Revenue Department, Government of Madhya Pradesh. The agreement between the parties is in two parts. The sports 2 A.C No.27/2013 infrastructure required to be constructed is on built and and transfer basis, whereas the other part of the agreement relating to construction of real estate infrastructure is on the basis of built, own, operate and transfer basis. Admittedly, the agreement between the parties was terminated by the State pursuant to which the applicants, before this Court, have filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act of 1996") for appointment of an arbitrator for adjudication and resolving the dispute between the parties. The present arbitration case has been filed by the applicants for that purpose.
3. During the course of hearing of the matter before the learned Single Judge, the respondents have raised an objection as to the maintainability of the application under Section 11(6) of the Act of 1996, on the ground that the provisions of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (hereinafter referred to as the "the Adhiniyam of 1983") are applicable to the dispute between the parties and therefore, the matter has to be referred to the Madhya Pradesh Arbitration Tribunal for adjudication in terms of the provisions of the Adhiniyam of 1983, and therefore, the present 3 A.C No.27/2013 application, filed by the applicants under Section 11(6) of the Act of 1996, is not maintainable and deserves to be dismissed.
4. It is also not in dispute that during the hearing before the learned Single Judge, the parties had cited the Single Bench decisions of this Court rendered in the case of Jabalpur Corridor India Pvt. Ltd. Vs. Madhya Pradesh Road Development Corporation, 2014 (2) M.P.L.J. 276 and Mrs. Kamini Malhotra Vs. State of Madhya Pradesh, AIR 2003 MP 13. The learned Single Judge was of the view that there is a conflict between the aforesaid two decisions and, has therefore, ordered that the matter be placed before the Hon'ble Chief Justice for reference to a Larger Bench, pursuant to which the matter has been placed before us.
5. Before this Court, both the parties have fairly stated that two Division Bench decisions of this Court rendered subsequent to the decision in the case of Jabalpur Corridor (supra) were not brought to the notice of the learned Single Judge. It is stated that had the subsequent Division Bench decisions been brought to the notice of the learned Single Judge, perhaps the reference would not have been made. The two Division Bench 4 A.C No.27/2013 decisions that have been placed before us are the decision in the case of Ashoka Infraways Ltd. and another Vs. State of Madhya Pradesh and another, 2016 (2) MPLJ 685 and State of Madhya Pradesh and another Vs. M/s K.T. Construction (I) Ltd. and another, A.A. No.5/2009 decided on 27.4.2016. It is stated that in the aforesaid two Division Bench decisions the judgment in the case of Jabalpur Corridor (supra) has been affirmed, confirmed and applied and in such circumstances, as the decision in the case of Jabalpur Corridor (supra) has been applied and affirmed in the aforesaid two Division Bench decisions, the question of there being any conflict between Jabalpur Corridor (supra) and Mrs. Kamini Malhotra (supra) does not arise as the decision of the Division Bench in the aforesaid two cases would prevail over the Single Bench decisions and are also binding upon the Single Bench in the present case.
6. However, during the course of arguments, it transpires that between the same parties, who were involved in Division Bench decision rendered in the case of Ashoka Infraways Ltd. (supra), previously W.P. No.1122/2015 had been filed challenging an order passed by the District Judge, Dewas on an application 5 A.C No.27/2013 under Section 9 of the Arbitration and Conciliation Act, 1996, which was initially dismissed as not maintainable, but was later on again taken up in a review petition i.e. R.P No.191/2015 and the Division Bench, taking into consideration the submissions of the parties, passed an order on 31.7.2015 holding that the contract between the parties i.e. Ashoka Infraways Ltd. and another and the State of Madhya Pradesh and another, was in the nature of a works contract and therefore, the provisions of the Adhiniyam of 1983 would apply. The review petition was dismissed by the Division Bench after recording a finding to that effect in its order dated 31.7.2015 passed in Review Petition No.191/2015. It is pointed out that this order in the writ petition as well as in the review petition was taken up before the Supreme Court in SLP (Civil) No.22890-22891 of 2015, and the Supreme Court disposed of the Special Leave Petition by quoting the finding recorded by the Division Bench of this Court to the effect that the dispute between the parties pertains to a works contract and shall be referred to the M.P. Arbitration Tribunal under the provisions of the Madhya Pradesh Mathyastham Adhikaran Adhiniyam, 1983 and thereafter, taking note of the fact that an Arbitration Appeal under Section 37 of the Arbitration 6 A.C No.27/2013 and Conciliation Act, 1996 was pending before this Court, disposed of the Special Leave Petition by observing that the aforesaid observations regarding the contract being a works contract would not come in the way of the petitioners Ashoka Infraways Ltd. and another in prosecuting the appeal under Section 37 of the Arbitration and Conciliation Act, 1996 that was pending before this Court.
7. It is pointed out that subsequently another I.A. was filed in the said SLP, which was again disposed of on 2.9.2015 observing that the learned Single Judge of the High Court of Madhya Pradesh shall consider the application under Section 11(6) of the Act of 1996 on its own merits, without being influenced by the earlier orders passed by the High Court on 9.7.2015 and 31.7.2015, i.e. the orders passed in the writ petition and the review petition. It is also pointed out that subsequent to the aforesaid proceedings before the Supreme Court, the matter has been considered and decided by the Division Bench of this Court in the case of Ashoka Infraways Ltd. (supra), wherein it has been held that the agreement between the parties was a concession agreement and not a works contract, relying 7 A.C No.27/2013 on the decision rendered in the case of Jabalpur Corridor (supra).
8. It is, however, undisputed and pertinent to note that the order passed by the Division Bench in Writ Petition No.1122/2015 dated 9.7.2015 and the order passed in Review Petition No.191/2015 dated 31.7.2015 have not been set aside by the Supreme Court though it has observed that the High Court should proceed to decide the matter between the parties ignoring the same. This fact assumes importance for the purpose of this reference as though the Supreme Court has directed the High Court to decide the appeal under section 37 of the Act of 1996, by ignoring the finding recorded in W.P No.1122/2015 and R.P No.191/2015, this direction is confined to the parties in dispute and, therefore, the order passed by the Division Bench in W.P No.1122/2015 and R.P No.191/2015 may still be used by some other parties to contend that the agreement of that kind is a works contract. It is also an undisputed fact that while the Division Bench in W.P. No.1122/2015 and R.P No.191/2015 has held the agreement between the parties therein i.e. Ashoka Infraways Ltd. and another Vs. State of Madhya Pradesh and another, to be a works contract, the Division Bench in the case of Ashoka 8 A.C No.27/2013 Infraways Ltd. (supra) between the same parties has held the same agreement to be a concession agreement and not a works contract. It is, therefore, apparent that two divergent views have been taken in the aforesaid two Division Bench decisions and the effect and impact thereof can only be reconciled by a Larger Bench.
9. At the same time, the learned counsel for the respondent has pointed out that the same learned Single Judge who had decided the matter in the case of Jabalpur Corridor (supra) in a subsequent decision rendered in the case of M/s Landlord Infrastructure Vs. Engineer-in-Chief, A.C. No.12/2014 decided on 21.4.2015, has himself diluted the finding recorded by him in Jabalpur Corridor (supra) by making the following observations:-
"9. .....Alternatively, it was held that even if the contract in question is considered to be a work contract, then also, in view of the decision laid down by the Supreme Court in the case of A.P.S.Kushwaha (SSI Unit) vs. The Municipal Corporation, Gwalior and others, 2011 (13) SCC 258, the dispute has to be resolved as per the provisions of 1996 Act. However, in the case of Jabalpur Corridor (supra), it has not been noticed that the decision in the case of A.P.S. Kushwaha (supra) is based on the view taken in VA Tech Escher Wyass 9 A.C No.27/2013 Flowel Ltd., vs. M.P.S.E.B, 2011 (13) SCC 261, which was held to be per incurium in L.G. Choudhary's case, and the submission pertaining to works contract has been dealt with by way of alternative submission only. Therefore, the decision in the case of Jabalpur Corridor (supra) is of no assistance to the petitioner in the facts of the case, as admittedly, in the instant case, the agreement in question is a works contract."
10. From a perusal of the aforesaid various decisions of this Court as well as several decisions of the Supreme Court, which have been cited before us namely, Madhya Pradesh Rural Road Development Authority and another Vs. L.G. Choudhary, 2012 (3) SCC 495, State of Madhya Pradesh and another Vs. M/s Lion Engineering Consultants, W.P. No.4559/2014 decided on 25.11.2014, (against which it is informed that an SLP has been filed and there is an interim order directing stay of the order passed in the writ petition) and Ravikant Bansal Vs. Madhya Pradesh Rural Road Development Authority and another (2012) 3 SCC 513 and others, it is apparent that there is serious dispute between the parties in respect of the issue as to whether the agreement between the parties is a concession agreement or a works contract. 10 A.C No.27/2013
11. The learned counsel for the parties submit and we are in agreement with their submission that the decision in this regard would determine the jurisdiction that is to be invoked by the contractors not just in the present cases but in all cases where similar agreements have been executed by the contractors with the State or the other authorities in the State of Madhya Pradesh and therefore, the decision on this issue will have a very wide implication and effect and is, therefore, an issue which needs to be decided by a Larger Bench as it involves a substantial question of law of general importance.
12. The learned counsel for the respondent, in addition, submits that it is settled law that applicability and operation of the Act of 1996, is excluded to the extent the field of Arbitration is covered by the Adhiniyam of 1983 and, therefore, once a dispute and an agreement falls within the statutory framework of the Adhiniyam of 1983, its provisions shall prevail and govern the field irrespective of any contract to the contrary or absence of any contract in that regard in view of the clear stipulation contained in Section 7 of the Adhiniyam of 1983.
13. It is submitted that it also needs to be decided once and for all as to whether providing for a different mode of 11 A.C No.27/2013 payment for the work executed by the contractor by entering into a concession agreement for that purpose or any other agreement for any other incidental or ancillary purpose relating to a works contract would change the nature of the work done by the contractor and would result in excluding the applicability of the statutory provisions of the Adhiniyam of 1983 even when the nature of the work awarded to the contractor remains the same and falls within the four corners of the Act of 1983.
14. The issue as to whether a concession agreement is a separate lease agreement is also a hotly contested issue as it is argued that the right to levy and collect Toll Tax is the sole prerogative and essential function of the State which right cannot be leased out to or conferred by the State upon an individual and the State can at best, only authorize an individual, in certain circumstances, to collect the same on its behalf and, therefore, if the State, for the purpose of making payment to the contractor for the work executed by him merely authorises him to collect and retain the toll tax for a particular period and calls such an agreement a concession agreement, the essential and basic nature of the contract for executing certain works which fall within the statutory framework of 12 A.C No.27/2013 the Adhiniyam of 1983 would not change if such work falls within the statutory framework of the Adhiniyam of 1983 nor would such a concession agreement which only provides for a different mode of payment to the contractor for the work done by him, become a lease agreement as the right to assess, levy and collect toll tax cannot be and has not been leased out as mere authorisation to collect toll tax from individuals residing in a particular area or using a particular facility does not amount to a lease and as there is no reciprocal clause imposing liability upon the contractor to pay any lease rent to the State.
15. It is also argued that once the work undertaken by the contractor falls within the statutory provisions of the Adhiniyam of 1983, merely because the parties enter into any agreement having a different nomenclature which has no statutory sanction, recognition or entity, the statutory provisions of the Adhiniyam of 1983 would not stand excluded, nor can such a method to circumvent or nullify the statutory provisions of the Adhiniyam of 1983 be permitted merely on account of an agreement between the parties.
13 A.C No.27/2013
16. The learned counsel appearing for the parties submit that apart from the above questions that need to be answered, broadly speaking the main issues that are required to be considered are as to whether any agreement by whatever name called (concession agreement, State support agreement, ESCROW agreement, etc.), if it falls within the meaning and definition of works contract as defined under Section 2(i) of the Adhiniyam of 1983, has to be referred for adjudication before the Madhya Pradesh Arbitration Tribunal constituted under Section 3 of the Act of 1983, and whether in view of the statutory provisions of Section 7 of the Adhiniyam of 1983, the matter has to be referred to the Madhya Pradesh Arbitration Tribunal constituted under the Adhiniyam of 1983, even in cases where the parties have incorporated a clause in the agreement regarding resolution of the dispute by some other forum or under the Act of 1996. The other issues which are also of general importance and need to be decided are the correctness of the view taken in the cases of Jabalpur Corridor (supra) and the two conflicting views taken by two different Benches in the case of Ashoka Infraways Ltd. (supra) and the various other decisions of this Court rendered by various Benches on this issue. 14 A.C No.27/2013
17. We are also of the considered opinion that in view of the several issues raised by the parties before this Court, the entire case deserves to be heard and decided by a Larger Bench as confining the adjudication by the Larger Bench to one or two specific questions would not resolve the issue and the confusion in the field would continue to remain in existence.
18. In view of the aforesaid, the present appeal be placed before Hon'ble the Chief Justice for placing or referring the matter to a Larger Bench for decision of the entire case including all issues raised and argued by the parties as it involves a substantial question of law of general importance.
( R. S. JHA ) ( A. K. JOSHI )
JUDGE JUDGE
PP.mms/-