Arbitration Under Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 Cannot Be Invoked Without Availing Pre-Arbitral Remedy Within Limitation: Madhya Pradesh High Court

The bench of Justices Sheel Nagu and Vinay Saraf held that the pre-arbitral in-house remedy must be invoked within the 30 days from the termination of the works order as provided under the agreement. It held the 3 year limitation period as provided under Section 7 of the Act of 1983 would not be available for reference before the in-house authority.

Facts

A works contract was issued in favour of the petitioner by the respondent. Clause 29 of the works contract provided that the party aggrieved by termination has to make a reference to the Chief Executive Officer of the respondent within 30 days of such termination and only upon the failure of proceedings before the authority, the party can invoke arbitration under Section 7-B(2-A) of the Act.

The respondent terminated the works contract issued in favour of the petitioner on 25.06.2004, leading to a dispute between the parties. However, the petitioner failed to make a reference before the in-house authority within the 30 days period before the in-house authority.

The tribunal dismissed the reference vide the award dated 19.05.2022 on the ground that the mandatory pre-arbitral remedy under Clause 29 of the agreement was not availed. Aggrieved thereby, the petitioner filed a revision before the High Court.

Submissions of the Party

The petitioner made the following submissions:

• That the reference was made beyond the 30 days period, however, the period of limitation under Section 7 of the Act of 1983 is three year which would be available to the petitioner.

Analysis by the Court

The Court observed that Clause 29 of the works contract required the petitioner to challenge termination of the contract within 30 days before the Chief Executive Officer (in-house authority) and only upon failure of proceedings before the in-house authority, the petitioner was entitled to invoke arbitration under Section 7 of the Act.

It observed that the works contract was terminated on 25.06.2004, however, the petitioner invoked the dispute clause on 16.09.2004 which is much beyond the 30 days period provided therein.

The Court relied on the decision of the 5-judge bench of the High Court in Sanjay Dubey Vs. State of M.P. and another, 2012 (4) MPLJ 21 to hold that the Arbitration under Section 7 of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 cannot be invoked without first invoking the pre-arbitral in-house remedy provided under the agreement within the period of 30 days given under the Agreement.

The Court held that the pre-arbitral in-house remedy must be invoked within the 30 days from the termination of the works order as provided under the agreement. It held the 3 year limitation period as provided under Section 7 of the Act of 1983 would not be available for reference before the in-house authority.

Accordingly, the Court upheld the order of the tribunal and dismissed the review petition.

Case Title: Ramesh Kumar v. Madhya Pradesh Rural Road Development Authority, Arbitration Revision No. 47 of 2022

Date: 16.04.2024

Counsel for the Petitioner: RAVINANDAN DWIVEDI – ADVOCATE

Counsel for the Respondent: SHRI VIJAY KUMAR SONI – ADVOCATE

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