[Cites 29, Cited by 0]
Madhya Pradesh High Court
M/S Maverick Developer And Colonizers ... vs Project Officer on 20 January, 2026
1
AC Nos.111/2019 and 112/2019
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK JAIN
ARBITRATION CASE No. 111 of 2019
M/S MAVERICK DEVELOPER AND COLONIZERS PVT. LTD.
Versus
PROJECT OFFICER
WITH
ARBITRATION CASE No. 112 of 2019
M/S MAVERICK DEVELOPER AND COLONIZERS PVT. LTD.
Versus
PROJECT OFFICER
Appearance:
Shri Shekhar Sharma - Sr. Advocate with Shri Dhruv Sharma -
Advocate for the petitioner.
Shri Mihir Agarwal - Advocate for the respondent.
ORDER
(Reserved on 03.12.2025)
(Pronounced on 20.01.2026)
Since both these petitions are on common legal issues and involve
similar facts, therefore they are being decided by this common order. For
the sake of convenience the facts are being taken from AC No.111/2019.
2. The present petition has been filed under Section 11(6) of Arbitration
and Conciliation Act, 1996 (for short 'Act of 1996'), wrongly captioned in
the application as under Section 11(5), for appointment of arbitrator on
account of disputes rising between the parties in relation to agreement for
construction of RCC overhead tanks and other ancillary works for water
supply distribution network project floated by Bhopal Municipal
Corporation.
3. The sole question that arises for consideration in the present case is
that whether an arbitrator under Act of 1996 can be appointed in the present
case or not, or whether the arbitration will be conducted as per the statutory
provisions contained in MP Madhyastham Adhikaran Adhiniyam,1983 (for
short 'Adhiniyam 1983') which provides for a separate procedure for
arbitration and M.P. Arbitration Tribunal has been constituted by the State
Government under the said Adhiniyam 1983 and the parties have to
approach the said statutory Tribunal, or the petitioner can maintain the
present application under section 11(6) of Act 1996 for getting an arbitrator
appointed under Act of 1996.
4. The legal question is that whether the Act of 1996 would prevail
over Adhiniyam, 1983, has been subject matter of determination by the
Hon'ble Supreme Court from time to time and initially in the case of VA
Tech Escher Wyass Flovel Ltd. v. M.P. SEB, (2011) 13 SCC 261 the
issue was decided in favour of Act of 1996. However, later on the in case
of M.P. Rural Road Development Authority v. L.G. Chaudhary
Engineers & Contractors, (2012) 3 SCC 495 it was decided by the
Hon'ble Supreme Court that all disputes in relation to works contract have
to be statutorily referred to the Tribunal set up under 1983 Act. However,
there was partly dissenting opinion between the Hon'ble Judges
constituting the Bench that whether disputes pertaining to termination,
cancellation or repudiation of works contract would still be maintainable
before the Tribunal under the Adhiniyam, 1983 and the matter was referred
to Larger Bench of the Hon'ble Apex Court.
5. Thereafter the Larger Bench in the case of M.P. Rural Road
Development Authority v. L.G. Chaudhary Engineers and
Contractors, (2018) 10 SCC 826 has emphatically overruled the judgment
in the case of V.A. Tech (Supra) and it has been conclusively held that in
view of Section 2 (d) of the Adhiniyam, 1983, the State Act will cover a
dispute even after termination of the works contract. It was held that the
State Act cannot be said to be impliedly repealed by the Act of 1996. The
Larger Bench in L.G. Choudhary Engineers (supra) held as under:-
"4. When the matter was considered by a Bench of this Court on
24-1-2012 (order in M.P. Rural Road Development
Authority v. L.G. Chaudhary Engineers and Contractors [M.P.
Rural Road Development Authority v. L.G. Chaudhary
Engineers and Contractors, (2012) 3 SCC 495 : (2012) 2 SCC
(Civ) 210] ), this Court held that the judgment in VA Tech
Escher Wyass Flovel Ltd. [VA Tech Escher Wyass Flovel
Ltd. v. M.P. SEB, (2011) 13 SCC 261 : (2012) 3 SCC (Civ) 468]
was per incuriam insofar as it held that the M.P. Act stands
impliedly repealed by the Central Act. While Hon'ble Ganguly,
J., held that the State Act will cover a dispute even after
termination of the "works contract", Hon'ble Gyan Sudha
Mishra, J. took a different view as follows : (M.P. Rural Road
Development case [M.P. Rural Road
Development Authority v. L.G. Chaudhary Engineers and
Contractors, (2012) 3 SCC 495 : (2012) 2 SCC (Civ) 210] , SCC
p. 511, para 51)
"51. It is no doubt true that if the matter were before an
arbitrator appointed under the Arbitration and
Conciliation Act, 1996 for adjudication of any dispute
including the question regarding the justification and
legality as to whether the cancellation of works contract
was legal or illegal, then the said arbitrator in view of the
ratio of the judgment of the Supreme Court in Maharshi
Dayanand University v. Anand Coop. L/C Society
Ltd. [Maharshi Dayanand University v. Anand Coop. L/C
Society Ltd., (2007) 5 SCC 295] , as also in view of the
persuasive reasoning assigned in the judgment and order
in Heyman v. Darwins Ltd. [Heyman v. Darwins Ltd., 1942
AC 356 : (1942) 1 All ER 337 (HL)] would have had the
jurisdiction to adjudicate the dispute regarding the
justification and legality of cancellation of works contract
also. But the same cannot be allowed to be raised under the
M.P. Act of 1983 since the definition of "works contract"
unambiguously lays down in explicit terms as to what is the
nature and scope of "works contract" and further
enumerates the specific nature of disputes arising out of the
execution of works contract which would come within the
definition of a "works contract". However, the same does
not even vaguely include the issue or dispute arising out of
cancellation and termination of contract due to which this
question, in my considered opinion, would not fall within
the jurisdiction of the M.P. State Arbitration Tribunal so as
to be referred for adjudication arising out of its
termination."
5. We find from the definition under Section 2(d) of the
Arbitration and Conciliation Act, 1996 that even after a contract
is terminated, the subject-matter of dispute is covered by the said
definition. The said provision has not been even referred to in the
judgment rendered by Hon'ble Gyan Sudha Mishra, J.
6. In view of the above, we are of the opinion that the view
expressed by Hon'ble Ganguly, J. is the correct interpretation
and not the contra view of Hon'ble Gyan Sudha Mishra, J.
Reference stands answered accordingly."
6. The counsel for the petitioner did not dispute the aforesaid legal
position at all, but submitted that though the contract in question falls
within the definition of works contract being a contract relating to
construction of overhead tanks and other ancillary works for water supply
system and also that the dispute in the present case is covered within the
definition of Section 2(d) of Adhiniyam, 1983, but submits that the
respondent is not such an institution the disputes relating to which can be
referred to the Tribunal under Adhiniyam, 1983. It is stated that this is
because the disputes relating to works contracts of State Government or
Public undertakings or notified Corporations of the State Government are
referrable to the statutory Tribunal under State Act, which are covered
within purview of Section 2 (i) of Adhiniyam 1983 and public undertaking
is defined under section 2(g) of Adhiniyam, 1983. The Municipal
Corporation Bhopal being a Municipal Corporation constituted under Part-
IX-A of the Constitution of India and as per Article 243Q of the
Constitution of India the Municipal Corporation being an institution of
local self-government under Article 243 P(e) of the Constitution, therefore
it being a separate statutory entity, would not fall within the purview of
'Corporation or other statutory body by whatever name called, wholly or
substantially owned or controlled by the State Government'. It is argued
that the Municipal Corporation is not a Corporation or a Statutory body
wholly or substantially owned or controlled by the State Government and
since Article 243 P(e) readwith Article 243Q vests local self-government in
the Municipality constituted under Part IX-A of the Constitution of India,
therefore the Municipal Corporation is not an entity substantially owned or
controlled by the State Government and therefore would not fall within the
purview of 'public undertaking'.
7. Per contra, the petition is vehemently opposed by counsel for the
respondents and it is contended that the Municipal Corporation would
indeed fall within the purview of 'public undertaking'.
8. Heard the counsel for the parties.
9. For appreciating the controversy arising between the parties, the
relevant provisions of the Adhiniyam 1983 are required to be considered
that is Section 2(g) and 2 (i), which are as under:-
"[(g) "public undertaking" means a Government Company
within the meaning of clause (45) of Section 2 of the
Companies Act, 2013 (No. 18 of 2013) and includes a
corporation or other statutory body by whatever name
called in each case, wholly or substantially owned or
controlled by the State Government.
(i) "works-contract" means an agreement in writing or a
letter of intent or work order issued for the execution of any
work relating to construction, repair or maintenance of any
build-ing or superstructure, dam, weir, canal, reservoir,
tank, lake, road, well, bridge, culvert, factory, work-shop,
power-house, transformer or such other works of the State
Govern-ment or public undertakings or of the Corporations
of the State as the State Government may, by notification,
specify in this behalf at any of its stages, entered into by the
State Government or by any official of the State Government
or by public undertakings or Corporation or by any official
of the State Government for and on behalf of such
Corporation or public undertakings and includes an
agreement for supply of goods or material and all other
matters relating to execu-tion of any of the said works and
also includes the services so hired for carrying out the
aforesaid works and shall also include all concession
agreement, so entered into by the. State Government or
public undertakings or Corporation, wherein a State
support is involved or not:]."
10. By referring to Article 243 Q and 243 P(e) of the Constitution of
India it was vehemently argued before this Court that a Municipality being
an institution of local self-government, it is not a Corporation "owned or
controlled" by the State Government and therefore, it does not fall within
the definition of Public Undertaking under Section 2(g) Adhiniyam, 1983.
The learned counsel for the petitioner has heavily stressed on Article 243P
(e) and 243-Q to contend that the Municipality does not function as
servient to the State Government and it is not a Corporation owned or
controlled by the State Government and it is an autonomous entity deriving
its existence and autonomy from Part IX-A of the Constitution of India and
declared as such by virtue of Article 243 P(e) and 243 Q of the Constitution
of India. The relevant provisions which have been heavily relied by the
counsel for petitioner are as under:-
243P. Definitions. In this Part, unless the context
otherwise requires,-
(a) "Committee" means a Committee constituted under
article 2435;
(b) "district" means a district in a State;
(c) "Metropolitan area" means an area having a population
of ten lakhs or more, comprised in one or more districts and
consisting of two or more Municipalities or Panchayats or
other contiguous areas, specified by the Governor by public
notification to be a Metropolitan area for the purposes of
this Part;
(d) "Municipal area" means the territorial area of a
Municipality as is notified by the Governor;
(e) "Municipality" means an institution of self-
government constituted under article 243Q;
(f) "Panchayat" means a Panchayat constituted under
article 243B;
(g) "population" means the population as ascertained at the
last preceding census of which the relevant figures have
been published.
243Q. Constitution of Municipalities. (1) There shall be
constituted in every State,-
(a) a Nagar Panchayat (by whatever name called) for a
transitional area, that is to say, an area in transition from a
rural area to an urban area;
(b) a Municipal Council for a smaller urban area; and
(c) a Municipal Corporation for a larger urban area, in
accordance with the provisions of this Part:
Provided that a Municipality under this clause may not be
constituted in such urban area or part thereof as the
Governor may, having regard to the size of the area and the
municipal services being provided or proposed to be
provided by an industrial establishment in that area and
such other factors as he may deem fit, by public notification,
specify to be an industrial township.
(2) In this article, "a transitional area", "a smaller urban
area" or "a larger urban area" means such area as the
Governor may, having regard to the population of the area,
the density of the population therein, the revenue generated
for local administration, the percentage of employment in
non-agricultural activities, the economic importance or
such other factors as he may deem fit, specify by public
notification for the purposes of this Part.
11. Previously a Coordinate Bench of this Court has already decided the
issue in the favour of applicability and jurisdiction of the Tribunal
constituted under State Act/Adhiniyam of 1983 for Municipalities. The
matter has been decided in case of Indian Construction Co. (Guj.) Ltd. Vs.
Indore Municipal Corporation and Ors., 2019 (1) MPLJ 206. The
Coordinate Bench has held that Municipal Corporation is a public
undertaking and by going through the provisions of M.P. Municipal
Corporation Act, 1956 has held that Municipal Corporation is substantially
controlled by the State Government and therefore it is a public undertaking
under section 2(g) the Adhiniyam, 1983. The Coordinate Bench held as
under:-
"17. To examine the issue if Indore Municipal Corporation is
substantially controlled by the State Government, the provisions
of Municipal Corporation Act, 1956 (for short "theAct") need to
be looked into.
18 . The respondent-Municipal Corporation Indore has been
constituted under the provisions of the Act. Chapter 36 of the Act
deals with the control of the State Government on the Municipal
Corporation. Section 417 of Chapter 36 empowers the State
Government to require the Commissioner to furnish the return or
to call for and examine the record of any case pending before or
disposed of by the Commissioner, the Corporation or the Mayor-
in-Council. Section 417-A empowers the Government to depute
officers to make enquiry into the affairs of the Corporation or
inspection or examination of any department, office, service,
work or thing under the control of any Corporation authority
and to report to it the result of such enquiry, inspection or
examination. Section 418 gives power to the State Government to
require Municipal Authority to take action. Section 418-A gives
power to the State Government to issue directions to the
Municipal Corporation for implementation of welfare measure.
Under section 419 the Government is empowered to appoint a
person if the Corporation fails to take action within stipulated
period on the order issued under section 418 or directions issued
under section 418-A. If the Government feels that any officer or
servant of the Corporation is negligent in the discharge of his
duty, it can require the Corporation to suspend, fine or otherwise
punish him under section 420. Section 421empowers the
Government to suspend any resolution or order of the
Corporation ands ection 422 empowers the State Government to
dissolve the Corporation on certain contingencies. Under section
423 on dissolution of the Corporation, the administrator can be
appointed by the Government. Section 425 empowers the
Government to enforce its order if the Corporation makes default
in carrying out them. In terms of section 425-A authorized
officials of the State Government are entitled to attend any
meeting of the Corporation or Mayor-in-Council and address it
on any matter concerning the work o fhis department. Section
426 empowers the Government to make rules authorizing
inspection by servants of the Government, of Institution and
works which are under the management and control of the
Corporation and regulating such inspection. Section426-A
authorises the Government to remove any difficulty which arises
in giving effect to the provisions of the Act.
19 . The aforesaid provisions make it clear that the Municipal
Corporation is substantially controlled by the State Government,
therefore, it is a public undertaking under section 2(1)(g) of the
Madhyastham Act.
20. The record further reveals that in the matters relating to
Works Contract with the Municipal Corporation, other
aggrieved parties are approaching the Madhyastham Tribunal
and such references are being entertained and adjudicated by the
Tribunal. Along with the additional reply one such award passed
by the Madhyastham Tribunal has been placed on record.
21. Having regard to the aforesaid analysis, I am of the opinion
that the Municipal Corporation, Indore being substantially
controlled by the State Government, is a Public Undertaking
within the meaning of section 2(1)(i) of the Madhyastham Act
and since undisputedly the agreement was for execution of Works
Contract, therefore, the applicant has a remedy to approach the
statutory Arbitration Tribunal constituted under the
Madhyastham Act and the present application under section
11(6) of the Arbitration and Conciliation Act, 1996 is not
maintainable, which is accordingly rejected."
12. The counsel for the petitioner had tried to distinguish the aforesaid
judgment of the Coordinate Bench on the ground that the Coordinate Bench
has not considered Articles 243-P and 243-Q of the Constitution of India
and therefore, the judgement of the Coordinate Bench is per incurium
inasmuch as the autonomy given to the Municipalities under Part IX-A of
the Constitution of India has not been taken up for consideration by the
Coordinate Bench and without considering the effect of Constitutional
provisions, the Coordinate Bench has held that the Municipalities are
public undertakings under Section 2(g) of Adhiniyam, 1983 which should
not be followed by this Court because owing to failure to consider the
relevant constitutional provisions, the aforesaid judgment deserves to be
declared per incuriam by this Court and is not a binding precedent.
13. Upon considering the aforesaid assertions of the counsel for
petitioner, it is seen that though as per Article 243-P(e), Municipality is an
institution of self-government constituted under Article 243Q, but the said
Part IX-A nowhere vests any status to the Municipalities which brings them
out of control of the State Government concerned. The self-government as
prescribed in Article 243-P(e) has to be understood in the manner of self-
government of the Municipal area or the local area for which the
Municipality is functioning. It cannot be construed to be a self-government
institution vis-à-vis the State Government and to bring it out of financial
and supervisory control of the State Government. Such a status is not
contemplated by the Constitution of India which would catapult the
Municipalities to the status of quasi-states under the Constitution of India,
that is nowhere contemplated in the Constitution and the interpretation
which is being suggested to this Court by counsel for the petitioner would
indeed catapult the Municipalities to the status of quasi-states under the
Constitution.
14. As per Articles 243-P to 243-ZG of the Constitution of India which
constitute Part-IX A of the Constitution of India, powers have been given
to the Legislature of the State concerned to frame laws in the matter of
constitution of municipalities, composition of municipalities, composition
of wards, reservation of seats, duration of municipalities, powers,
authorities and responsibilities of municipalities, power to impose taxes,
funds, finance, audit, election and all other matters containing
municipalities for which the legislature of the State concerned would make
the laws.
15. The State Government of Madhya Pradesh indeed enacted M.P.
Municipal Corporation Act 1956 which provides for all such matters which
have been laid down in the Constitution of India for the State Legislature to
enact and provide.
16. As per Section 4, Provisional Commissioner shall be appointed by
the State Government. As per Section 5(1), the State Government can
appoint an administrator. As per Section 9(1)(c), Eldermen are to be
appointed by the Government. As per Section 10(1) the State Government
shall determine by notification, the number and extent of wards in
municipal area. As per Section 14(2), State Government will frame rules
for preparation of electoral rolls. As per Section 17(3) the State
Government has the power to decide whether vacancy has occurred in the
Municipal Corporation. As per Section 17-A power to disqualify ex-Mayor
and Speaker etc. rests with the Government. As per Section 19- B removal
of Mayor or Speaker or Chairman of Committee can be ordered by the
State Government. As per Section 25(2)(a) the Mayor is prohibited to work
in contravention of any order of the State Government. The honorarium or
allowances of the Mayor, Councillors, Speakers etc. shall be determined by
the State Government. In case the Office of Mayor is declared vacant under
the Act, then the Councillor nominated by the Government under Section
21(2) shall perform the duties of the Mayor. The State Government has the
power to prescribe the functions and powers of wards committees and the
procedure for conduct of their business as per Section 48A(7).
17. Not only this, but in the matter of Municipal Officers and servants,
Municipal Commissioner is appointed by the State Government under
Section 54(1). He receives a salary as shall be determined by the State
Government from time to time and the Government grants leave of absence
to the Commissioner in consultation with the Municipality. The rules are to
be made by the State Government for service conditions of Municipal
servants as per Section 58(1). Major penalties cannot be imposed on the
employees without previous sanction of the State Government as per
Section 60(6). The State Government has the power to declare state of
emergency in the municipal area as per Section 65.
18. As per Section 68 which relates to functions of municipal authorities
and powers of said authorities, the State Government is having power to
entrust functions to the Corporation. The Municipality is vested with the
Municipal property transferred to it by the Government and the
Corporation can rescind or vary the by-laws for management of such lands
only with the previous approval of the State Government. The Government
is having power to resume any immovable property transferred to the
Corporation without payment of compensation and this power is given to
the Government by Section 84.
19. So far as municipal funds are concerned, the Corporation receives
funds from the State Government. As per Section 98, the State Government
has power to direct that budget of the Corporation shall be subject to
sanction of the Government in case the financial condition of corporation is
such that it is desirable to have such control over the Corporation. The
Corporation cannot raise any loan without sanction of the Government as
per Section 102. The Corporation cannot issue debentures without previous
sanction of the Government as provided under Section 105. The
establishment and maintenance of sinking funds under Section 114 is also
to be made with permission of the Government. As per Section 122, the
Government can attach the municipal fund. The Government has the power
to prescribe the manner of receipt and expenditure of Corporation as per
Section 125 and such accounts have to be transmitted to the government as
per Section 126. Annual administration report and accounts have to be
forwarded to the Government as per Section 127. An audit has to be
conducted by Auditor appointed by the Government in terms of Section
129. The State Government also has a power to prescribe the manner of
social audit as per Section 130-A.
20. In the matter of taxation, the Corporation can impose taxes as per
Section 132 subject to any general or special order made by the State
Government. Same is the situation for levy of user charges as per Section
132A which is also subject to any general or special order of the State
Government. As per Section 133-A, the State Government shall pay to the
Corporation from the consolidated fund of the State, a grant-in-aid, equal to
the duty realised under Section 133-A(1) which is for the purpose of raising
funds for the Corporation. The State Government has been given a power
to require Corporation to impose taxes which is as per Section 133-B.
21. The aforesaid provisions that have been quoted above by this Court
are only illustrations and from the entire perusal of the M.P. Municipal
Corporation Act 1956, it is clear that the municipality works under active
control of the State Government and it cannot be disputed that there is
substantial control of the State Government in each sphere of management
and functioning of the Municipal Corporation.
22. The State Government has powers in the matter of requiring works to
be undertaken by the Corporation, town planning schemes to be framed,
grant permission to the Corporation to close the public streets, to frame
rules for grant of permission to lay down railways, transmission, electricity
and telephone poles, etc., permit streets to be opened or broken up, etc.
23. The State Government has the power to decide disputes between
corporation and local authorities as per Section 415 and as per Chapter
XXXVI of the Act of 1956, the Government exercises control over the
Corporation and Government can require returns from the Corporation as
per Section 417. Government can depute Officers to make enquiry,
inspection or examination and submit report to the Government as per
Section 417A. The Government can require an municipal authority to take
action as per Section 418. Government can issue directions for
implementation of welfare schemes, and most importantly as per Section
419, there is a detailed procedure to be taken by the Government when
municipal authority fails to take action. Government can suspend any
resolution or order of the Corporation as per Section 421. As per Section
422 the Government can dissolve the Corporation and appoint a committee
after such resolution by exercising powers under Section 423. The
Government has the powers under Section 425 to get its orders enforced by
the Corporation.
24. In view of the aforesaid detailed provisions most importantly the
provisions of Chapter XXXVI, it is clear that Municipal Corporation works
under substantial control of the State Government and it cannot be inferred
that the Municipal Corporation is a body not substantially controlled by the
State Government. In fact there is substantial control of the State
Government in every manner and every facet of working of the
Corporation. The Constitution of India duly authorizes the State Legislature
to make laws to regulate working of the Corporation and the State
Government has enacted the Act of 1956, which contains detailed
provisions in the manner in which the Municipal Corporation will function
and such provisions give power to the State Government to control each
and every facet of activities of the Municipal Corporation.
25. Therefore, this Court does not find any good ground to take any
different view from the view already taken by the Coordinate Bench in the
case of Indian Construction (Supra). It is held that the Municipal
Corporation is a statutory body substantially controlled by the State
Government. As the necessary data with regard to finances of Municipal
Corporation Bhopal have not been placed for consideration of this Court,
therefore this Court has not given any finding that whether Municipal
Corporation, Bhopal is substantially owned by the State Government or
not. However it is to be noted that Government vests funds so also
properties in the Municipal Corporation which are managed by the
Municipal Corporation. However substantial control of the State
Government in the Municipal Corporation cannot be denied and therefore it
is held that Municipal Corporation is a "public undertaking" under Section
2(g) of the Adhiniyam 1983.
26. After having held so, in view of the judgment of the Hon'ble Apex
Court in the case of L.G. Chaudhary Engineers-II (supra) the provisions
of Act of 1996 would not apply to the contract in question which is a works
contract in terms of Adhiniyam 1983 and therefore, no arbitrator can be
appointed by this Court by exercising powers under section 11(6) of Act of
1996. Resultantly, the petitions for appointment of arbitrator under section
11(6) of Act of 1996 are rejected, leaving it open to the petitioner to
approach the Tribunal under the State Adhiniyam of 1983, subject to law of
Limitation.
27. With the aforesaid liberty, the petitions are dismissed.
(VIVEK JAIN)
nks JUDGE
