Gujarat High Court Upholds Jurisdiction Of State Tribunal For Public Works Contract Disputes Involving Municipal Corporation

The Gujarat High Court dismissed a batch of petitions filed by private contractors involved in public works contract disputes with municipal corporations, in view of a state government notification providing for routing such disputes to be adjudicated by tribunal under the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act 1992. For context the 1992 Act provides for the constitution of a Tribunal to arbitrate in disputes arising from works contracts to which the State Government or a public undertaking is a party and to provide for matters connected therewith.The court held that the proceedings of the tribunal under the 1992 is not akin to Arbitration proceedings, but are infact judicial proceedings. It further said that in view of the state government's notification all the works contracts involved in the matter would be covered by the 1992 Act and hence are to be adjudicated by the Tribunal under the act.BackgroundThe court was hearing a batch of pleas, including one (R/ARBI.P/ 60 /2025) where a dispute arose between Zaisha Infrastructure involved in construction business and the Rajkot Municipal Corporation with respect to a works contract, wherein the contractor sought reference of disputes to arbitration. Clause 11 provided for resolution of disputes by a Sole Arbitrator–the Municipal Commissioner of respondent. However the petitioner objected to unilateral appointment of an arbitrator by the respondent.Subsequently the Corporation disputed the private party's claims and contended that, in light of Notification dated 16.12.2024, municipalities and municipal corporations fall within the ambit of “public undertakings"; hence disputes are required to be referred to the Gujarat Public Works Contracts Disputes Arbitration Tribunal. Subsequently another notification dated 14.05.2025 was published which also included Corporation. The notifications were issued in respect of definition of public undertaking under Section 2(1)(i)(iii) of 1992 Act as per which public undertaking are such class of local authorities as the State Government may, by notification in the Official Gazette, specify. The Municipal Corporations contended that the moment the Corporation stands covered within the meaning of “public undertaking” after the notification was issued, Section 21 of 1992 Act will kick in and the Arbitration and Conciliation Act 1996 will cease to apply from that moment onwards and “all arbitration proceedings in relation to such disputes before an arbitrator, umpire, court or authority shall stand transfer to the Tribunal”. (The municipal corporations involved in the batch matter includes Rajkot, Gandhinagar and Ahmedabad Municipal Corporations.)Justice DN Ray referred to definition of works contract under the 1992 Act and said that the State Government by Notification has the power to specify such other works of the State Government to be including within the meaning of works contract, apart from those which are specifically stated in Section 2(1)(k).For context, as per the definition a "Works contract" means a contract made by the State Government or the public undertaking with any other person for the execution of any of its works relating to construction, repairs or maintenance of any building or superstructure, dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory or work shop or of such other work of the State Government or, as the case may be, of the public undertaking, "as the State Government may, by notification in the Official Gazette specify".Noting that the definition is inclusive the court said:"It is thus clear that the definition of “works contract” is inclusive and expansive in nature and despite no specific Notifications, the disputes in question would be covered within the meaning of Section 2(1)(k) of the Arbitration Tribunal Act, 1992 particularly because the phrase “all other such works of the State Government or, as the case may be, of the public undertaking,” would include within its reach every conceivable concessionaire and/or agreement which form the subject matter of these petitions. Therefore, the subject matter of the agreement in respect of which the petitioners have preferred these petitions would be clearly covered within the meaning of “works contract” under section 2(1)(k)...""It is thus clear that on and from the moment that the Act becomes applicable to the disputes forming the subject matter of these petitions, that is, from 14.05.2025, the said disputes cease to be arbitrable. Therefore, these petitions must necessarily fail," the court added.Institutional arbitration has advantages but vast delays in delivering awardsJustice Ray however observed that in his experience being part of a Division Bench having roster over Appeals from Commercial Courts' decisions under Section 34 of the 1996 Act, he had "come across vast delays both in delivering the award as well as decades spent in the Section 34 Court".With respect to institutional...

Gujarat High Court Upholds Jurisdiction Of State Tribunal For Public Works Contract Disputes Involving Municipal Corporation

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Gujarat High Court Upholds Jurisdiction Of State Tribunal For Public Works Contract Disputes Involving Municipal Corporation

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