2016 (2) TMI 1386 - HC - Indian Laws

Dismissal of arbitration application under section 9 overturned as toll collection dispute not covered by state law

Ashoka Infraways Ltd. and Ors. Versus State of M.P. and Ors.

The MP HC set aside the dismissal of an application under section 9 of the Arbitration and Conciliation Act, 1996. The court held that the dispute ... Works contract or concession agreement - Dismissal of application under section 9 of the Arbitration and Conciliation Act, 1996 - dispute was covered under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 Act or not - right to collect the toll and the other revenue from the vehicles and users during the Concession Period - HELD THAT:- Considering Clause 26 of the impugned agreement which pertains to settlement of disputes and is of crucial importance to the substantive question raised in the petition as well as appeal, it categorically states that if the dispute regarding the breach or termination thereof exists between the parties and cannot be settled within 30 days, the dispute is referred to arbitration under the provisions of Arbitration and Conciliation Act, 1996 and that the arbitration panel decision shall be final and binding on the parties. However, the provision has been invoked by the petitioners-appellants stating that in section (d) of section 2 of Madhya Pradesh Madhyastham Adhikaran Adhiniyam 1983 is involved then the matter shall be regulated by the Act of 1983 and the Arbitration Tribunal shall be constituted under section 3 of the said Act and it is this point which is a crucial important in the present petition. In the matter of SPEDRA ENGINEERING CORPORATION ENGINEERS AND CONTRACTORS, BHOPAL VERSUS STATE OF MADHYA PRADESH [1987 (6) TMI 398 - MADHYA PRADESH HIGH COURT] the Court has held that the M.P. Madhyastham Adhikaran Adhiniyam, 1983 was a special enactment providing for statutory arbitration arising out of disputes in respect of works contracts. The present is not a works contract as already held above and both the decisions are, therefore, not applicable to the dispute at hand. Similarly considering the fact that the factual matrix pertains to non-extension of the additional period conceded and not being granted which led to the filing of the application under section 9, then there are no hesitation in holding that although the work pertains to construction of Road Dewas Bypass road starting from 159/4 of Bhopal - Ujjain Road (SH-18) and joining Km. 577/6 of Agra-Bombay Road (NH-3) intersecting NH-3 in Km. 567/8 and SH-18 in Km. 151/8 (total length of 19.8 Kms.), yet the dispute pertains to the concession or concessional period given in terms of the concession right or concession area during the contract period. The impugned order dated 16-2-2015 passed by the 1st Additional District Judge, Dewas in Arbitration Case No. 1/2015 is hereby set aside. The petitioner is granted liberty to move appropriate application under the provision of Arbitration and Conciliation Act, 1996 before the lower Court. Petition allowed. Issues Involved:1. Whether the contract in dispute is a 'works contract' or a 'concession agreement'.2. Whether the provisions of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 apply or the provisions under section 9 of the Arbitration and Conciliation Act, 1996 apply.Issue-wise Detailed Analysis:1. Nature of the Contract: Works Contract vs. Concession AgreementThe primary issue was to determine whether the contract in question was a 'works contract' or a 'concession agreement'. The appellants argued that the agreement was a concession agreement, allowing them to collect tolls for a specified period as compensation for their investment and efforts in the project. They pointed out that the agreement included provisions typical of concession agreements, such as the right to collect tolls, maintain the facility, and transfer it back to the government after the concession period. The court noted that the agreement involved elements such as the creation of an escrow account, tripartite security arrangements, and the recovery of investment through toll collection, which aligned with the characteristics of a concession agreement. The court relied on the precedent set in Jabalpur Corridor (India) Pvt. Ltd. v. M.P. Road Development Corporation Ltd., which distinguished between a works contract and a concession agreement based on similar criteria. Consequently, the court concluded that the contract was indeed a concession agreement.2. Applicable Legal Framework: 1983 Act vs. 1996 ActThe second issue was whether the dispute should be governed by the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 or the Arbitration and Conciliation Act, 1996. The respondents contended that the dispute fell under the purview of the 1983 Act, which deals with works contracts, and thus the application under section 9 of the 1996 Act was not applicable. They argued that the contract was a works contract, and disputes should be referred to the M.P. Arbitration Tribunal as per the 1983 Act. However, the court found that the contract was a concession agreement, and the provisions of the 1996 Act were applicable. The court emphasized that the agreement explicitly referred to arbitration under the 1996 Act in case of disputes. The court also noted that the 1996 Act expressly saves the provisions of the 1983 Adhiniyam in certain respects, but this did not apply in the current context as the contract was not a works contract. The court set aside the order of the 1st Additional District Judge, Dewas, which had dismissed the application under section 9 of the 1996 Act, and allowed the appellants to pursue their claims under the 1996 Act.In conclusion, the court determined that the contract was a concession agreement and that the provisions of the Arbitration and Conciliation Act, 1996 were applicable, allowing the appellants to seek remedies under this Act. The appeal was allowed, and the impugned order was set aside, granting liberty to the appellants to move an appropriate application under the 1996 Act.