Statutory Forum for Works Contracts Prevails; Private Arbitration Held Non Est, Reference Restoration Permitted

A bench of Justices J.B. Pardiwala and R. Mahadevan heard an appeal by Umri Pooph Pratappur (UPP) Tollways Pvt. Ltd. challenging the Madhya Pradesh High Court’s quashing of appointments and proceedings initiated by the International Centre for Alternative Dispute Resolution (ICADR). The primary issue concerned whether disputes arising from a concession agreement for construction of a State road fell within the exclusive jurisdiction of the Madhya Pradesh Arbitration Tribunal constituted under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, thereby excluding arbitration under the Arbitration and Conciliation Act, 1996.

The Court affirmed the High Court’s conclusion that the statutory forum was mandatory for disputes arising from a “works contract” involving a State instrumentality and that contractual arbitration under the 1996 Act could not override the special statute. The Court held that the private arbitration proceedings initiated by the appellant were "non est in law" and that the Madhya Pradesh Arbitration Tribunal remained the proper forum. The Court, in its reasoning, 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." The Court also recorded that the appellant’s withdrawal of an earlier reference without leave attracted the bar in Rule 53(3)(b) of the Madhya Pradesh Regulations but, in the interests of justice, permitted an application for recall and restoration.

Background

The dispute arose from a Concession Agreement dated 05.01.2012 between UPP Tollways and the Madhya Pradesh Road Development Corporation (MPRDC) for development of the Umari–Pooph–Pratappur road on a BOT (Toll + Annuity) basis. The project cost escalated from Rs. 73.68 crores to about Rs. 99.80 crores after design rework and delays. The concessionaire claimed multiple heads of loss and damages aggregating to Rs. 280.1566 crores and initially filed Reference Case No.61 of 2018 before the Madhya Pradesh Arbitration Tribunal. While that reference remained pending, the concessionaire issued an arbitration notice under Clause 44.3.1 of the Concession Agreement and approached ICADR, which appointed arbitrators by orders dated 02.06.2022 and the Arbitral Tribunal fixed timelines by order dated 07.06.2022.

MPRDC challenged the ICADR appointments by filing Writ Petition No.14569 of 2022 before the High Court, which allowed the writ on 09.09.2024 and quashed the ICADR and Arbitral Tribunal orders. The High Court held that the Concession Agreement fell within the definition of “works contract” under the 1983 Act and that Section 7 of the Act mandated reference to the State Tribunal irrespective of an arbitration clause. The High Court also relied on established precedent, including Viva Highways and the three-judge authority in L.G. Chaudhary, that the 1983 Act provided the exclusive forum for such disputes.

The Supreme Court noted that the concession agreement concerned a State highway and MPRDC was a State-owned entity; accordingly, the contract qualified as a works contract under Section 2(1)(i) and the dispute as a “dispute” under Section 2(1)(d). The Court observed that parties could not contract out of a statutory mandate and cited the law that adjudication reserved to a statutory forum could not be ousted by private arbitration. The Court quoted Rule 53(3)(b) to record the consequence of withdrawal: "he shall be liable for such costs as the Tribunal may award and shall be precluded from instituting any fresh reference in respect of such subject matter or such part of the claim." While confirming that the private arbitration was non est, the Court directed that the appellant could file an application to recall the withdrawal order dated 08.02.2023 and seek restoration of Reference Petition No.61 of 2018 within two weeks; the Tribunal was directed to consider the application within two weeks and, if restoration was allowed, to dispose the reference on merits preferably within four months. The appeal was disposed of in these terms; there was no order as to costs.

Case No.: CIVIL APPEAL NO. 9920 OF 2025 (Arising out of SLP (C) No. 13415 of 2025) Case Title: Umri Pooph Pratappur (UPP) Tollways Pvt. Ltd. v. M.P. Road Development Corporation and Another Appearances: For the Petitioner(s): Senior Counsel for the appellant (name not specified in the judgment) For the Respondent(s): Solicitor General of India (appearing for Respondent No.1); Counsel for Respondent No.2 (ICADR) not specified in the judgment