[Cites 11, Cited by 0]
Madhya Pradesh High Court
The State Of Madhya Pradesh vs M/S Mohanlal Heeralal Construction ... on 17 March, 2026
1
AA No. 16 of 2016
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK JAIN
ARBITRATION APPEAL No. 16 of 2016
THE STATE OF MADHYA PRADESH AND OTHERS
Versus
M/S MOHANLAL HEERALAL CONSTRUCTION COMPANY
.........................................................................................................
Appearance:
Shri Mukund Agrawal - Govt. Advocate for the appellant / State.
Shri Ram Chandra Somani - Advocate for the respondent
[CAVEAT].
..........................................................................................................
JUDGMENT
(Reserved on 26.02.2026)
(Pronounced on 17.03.2026)
The present appeal under Section 37 of Arbitration and Conciliation
Act, 1996 ( for short 'Act of 1996') has been filed arising out of the order
passed by the District Judge, Hoshangabad dated 01.12.2015 thereby
rejecting application under Section 34 of Act of 1996 against the award
passed by the sole arbitrator dated 01.11.2014. The arbitrator has given an
award of Rs.51,05,085/- for disputes arising between the parties in
connection to work of completion of incomplete works of railway
overbridge Itarsi, District Hoshangabad.
2. The counsel for the appellant-state has vehemently argued that the
impugned order passed by the District Judge rejecting the application under
Section 34 deserves to be set aside and the award was also liable to be set
aside and the District Court has erred in not setting aside the award for
which sufficient grounds were made out under Section 34 of Act of 1996.
Primarily it is argued that since the matter related to works contract,
therefore, in view of judgement of the Hon'ble Supreme Court in case of
M.P. Rural Road Development Authority v. L.G. Chaudhary Engineers
and Contractors, (2018) 10 SCC 826, the matter was cognizable by MP
Arbitration Tribunal constituted under M.P. Madhyastham Adhikaran
Adhiniyam, 1983 and the sole arbitrator could not have been appointed in
the present case. It is therefore argued that the award has been passed by
the arbitrator who was not having any jurisdiction in the matter.
3. The counsel for the State further argued that the contractor had failed
to approach the Superintending Engineer and the arbitration was
maintainable only after having decision of the Superintending Engineer and
after rejection of the claim by Superintending Engineer appeal ought to
have been filed before the Chief Engineer and therefore arbitration was not
maintainable as per clause 1.17 of the contract agreement. On merits also, it
is argued that no escalation could be awarded by the Tribunal and further
that the claims allowed by the arbitrator are extremely exorbitant and
unsustainable. Therefore, the award is criticized basically on the ground of
jurisdiction, on merits of the claims as well as the party not approaching the
Superintending Engineer.
4. So far as the jurisdiction aspect is concerned, it is not in dispute that
the party had first approached the MP Arbitration Tribunal constituted
under Adhiniyam 1983 and the MP Arbitration Tribunal rejected the
reference petition of the contractor as it did not have jurisdiction in the
matter and therefore, the contractor approached this Court in Arbitration
Case No.70 of 2010 and this Court then appointed a sole arbitrator vide
order dated 18.08.2011.
5. Though it cannot be doubted in view of judgement in the case of
L.G. Chaudhary (Supra) that the matter is cognizable before the M.P.
Arbitration Tribunal, but in this case the arbitrator had been appointed
when the earlier view of the Hon'ble Supreme Court was prevailing in the
case of VA Tech Escher Wyass Flovel Ltd. v. M.P. SEB, (2011) 13 SCC
261. Thereafter, the foresaid judgement was doubted in M.P. Rural Road
Development Authority v. L.G. Chaudhary Engineers & Contractors,
(2012) 3 SCC 495 and on some point there was difference of opinion and
ultimately in the judgement of L.G. Chaudhary (2) rendered in the year
2018 the curtains were drawn and now it is undisputed that matters
concerning works contract awarded by the Engineering Departments of the
State of Madhya Pradesh have to be raised before the MP Arbitration
Tribunal.
6. However, in the present case, the contractor initially approached the
said Tribunal as far back as in the year 2004 and then the Tribunal rejected
the reference proceedings on the ground of maintainability. Such issue has
been considered by the Hon'ble Apex Court in the case of Modern
Builders v. State of M.P., (2024) 10 SCC 637 and it has been held that in
such cases it would be unjust to set aside the award because the arbitrator
had been appointed much prior to the judgement in the case of L.G.
Chaudhary (Supra). The Hon'ble Supreme Court held as under:-
7. The order dated 22-7-2011 passed by the High Court on the said petition
shows that the respondents' opposition was only on the merits of the claim.
The objection based on the applicability of the 1983 Act was not raised. The
respondents did not challenge the order of appointment of the arbitrator
passed by the High Court under Section 11(6) of the Arbitration Act. Even
before the learned arbitrator, Section 16(1) of the Arbitration Act was not
invoked to raise the jurisdiction issue. However, in the written statement
filed before the arbitrator, the contention regarding the applicability of the
1983 Act was raised.
xx xx xx
9. As noted earlier, in the facts of the case, before taking recourse to the
Arbitration Act, the appellant had taken recourse to Section 7 of the 1983
Act. The order of the Arbitration Tribunal, holding that the Arbitration Act
will apply, led the appellant to file a petition under Section 11(6) of the
Arbitration Act, which was not objected to on the grounds of the
applicability of the 1983 Act. The objection of the State Government was
confined to the merits of the claim. The award is only in the sum of Rs
6,52,235 with interest. The award was made on 25-4-2014. Therefore, in the
facts of the case, it will be unjust to set aside the award only on the ground
of the failure of the appellant to take recourse to the 1983 Act. In fact, the
appellant had taken recourse to the 1983 Act before seeking the appointment
of an arbitrator.
7. So far as the other objection regarding dispute not having been raised
before the Superintending Engineer and arbitration proceedings instituted
without prior adjudication of the Superintending Engineer is concerned, it
was contended by the applicant before the arbitrator that he had submitted
claim before the Superintending Engineer but no decision was taken by the
Superintending Engineer. The contractor had specifically contended that he
had approached the Superintending Engineer and this has not been disputed
by the Department. It was contended by the contractor in para-11 of his
reply before the District Judge in proceedings under section 34 that he has
submitted his claim on 20.11.2003 to the Superintending Engineer, Office
of Chief Engineer, Capital Zone Bhopal because there was no
Superintending Engineer, Hoshangabad circle between the period 1.7.1999
to 30.6.2006. This assertion could not be demolished by the learned counsel
for the State which is duly established from record and therefore, this Court
is of the opinion that the contractor had indeed approached the
Superintending Engineer prior to instituting the arbitration proceedings.
8. Furthermore, since in the present case arbitration had been instituted
prior to the amendment in the Act of 1996 carried out in the year 2015,
therefore, at that time the referral court while exercising jurisdiction under
Section 11(6) had some wider jurisdiction which has been restricted now
by the amendment of the year 2015.
9. If the dispute was non-arbitrable and appointment of arbitrator was
being sought under unamended Act, therefore objection to that effect ought
to have been raised before the referral Court by the State because reference
took place prior to the amendment
10. So far as merits of various claims are concerned, it is undisputed that
the jurisdiction of the appellate Court under Section 37 is not wider than
the jurisdiction as contained in Section 34 of Act of 1996. This Court would
not go into the merits of the case and not undertake accounting exercise
which the arbitrator had to undertake on merits of the claim. No
fundamental flaw in the quantification exercise carried out by the arbitrator
could be pointed out by the learned counsel for the State before this Court.
11. In view of the aforesaid, this Court is of the opinion that no
interference needs to be caused in the impugned order passed by the
District Court under section 34 of Act of 1996.
12. Consequently, the appeal fails and is dismissed.
(VIVEK JAIN)
nks JUDGE
