Statutory Mechanism Prevails Over Contractual Arbitration Clause In Works Contracts: Supreme Court Quashes Private Arbitration Proceedings

“Once a statutory forum has been created for adjudication of disputes arising out of ‘works contracts’, invocation of arbitration under the Arbitration and Conciliation Act, 1996 is barred even if the agreement contains such a clause” – Supreme Court

Supreme Court of India in Umri Pooph Pratappur (UPP) Tollways Pvt. Ltd. v. M.P. Road Development Corporation & Another (Civil Appeal No. 9920 of 2025) upheld the exclusive jurisdiction of the Madhya Pradesh Arbitration Tribunal under the Madhyastham Adhikaran Adhiniyam, 1983, to adjudicate disputes arising out of "works contracts" with the State or its instrumentalities. The Court dismissed the appellant's plea challenging the High Court’s decision that had quashed arbitral appointments and proceedings initiated under the Arbitration and Conciliation Act, 1996, on the ground that such disputes must be resolved exclusively under the 1983 Act.

“Doctrine of Election Bars Forum Shopping; Private Arbitration Proceedings Non Est in Law”

The dispute arose from a Concession Agreement dated 05.01.2012 between UPP Tollways Pvt. Ltd. (Appellant) and Madhya Pradesh Road Development Corporation Ltd. (MPRDC) (Respondent No. 1), for development of a road project on BOT (Toll + Annuity) basis in Madhya Pradesh. The appellant alleged that it incurred additional costs due to breach of obligations by MPRDC and raised claims totalling ₹280.15 crores.

Initial attempts at conciliation failed. The appellant then filed Reference Case No. 61 of 2018 before the M.P. Arbitration Tribunal under the 1983 Act. However, before any final adjudication, the appellant withdrew the reference without seeking liberty and subsequently invoked Clause 44.3.1 of the Concession Agreement to initiate arbitration under the Arbitration and Conciliation Act, 1996, via ICADR.

MPRDC challenged this action before the High Court of Madhya Pradesh, which quashed the ICADR proceedings. Aggrieved, the appellant approached the Supreme Court.

Maintainability of Writ Petition Against Private Entity

The appellant contended that MPRDC, being a State-owned entity, could not maintain a writ petition against a private party (UPP Tollways). However, the Supreme Court held:

“The writ petition was not for enforcement of a private contractual obligation, but to challenge the invocation of arbitration despite a statutory bar. Hence, it involved a public law element and was maintainable.”

Citing Binny Ltd. v. Sadasivan and Federal Bank Ltd. v. Sagar Thomas, the Court held that writs may lie against private parties if a public duty or statutory function is involved.

Exclusive Jurisdiction of Statutory Tribunal under 1983 Act

The Court held that the 1983 Act was a special law, and its Section 7 mandates that "either party shall refer the dispute to the Tribunal irrespective of whether the agreement contains an arbitration clause or not."

Relying on Viva Highways Ltd v. MPRDC (affirmed by the Supreme Court in 2018), the Court emphasized:

“Where an agreement qualifies as a ‘works contract’, and the dispute involves ascertained or ascertainable monetary claims, the 1983 Act exclusively governs dispute resolution.”

Thus, Clause 44.3.1 of the Concession Agreement—though contractually permitting arbitration under the 1996 Act—stood overridden by the statutory bar under Section 20 of the 1983 Act.

Ascertainability of Claims and Tribunal’s Jurisdiction

The appellant argued that its claims were not "ascertained" and thus outside the Tribunal’s jurisdiction. The Court disagreed:

“Claims amounting to ₹280.1566 crores were clearly quantified. Even if some were ascertainable during proceedings, they fall within the Tribunal’s jurisdiction under Section 2(1)(d).”

Quoting from Gangotri Enterprises Ltd v. MPRDC, the Court clarified: “‘Ascertained money’ includes the amount which may be ascertained during the proceedings on the basis of claims/counter-claims of the parties.”

Parallel Proceedings and Doctrine of Election

The appellant first approached the Tribunal in 2018, then withdrew the reference and started private arbitration. The Court held this conduct to be forum shopping:

“A party cannot pursue inconsistent remedies under different legal regimes for the same cause of action. The appellant is estopped under the doctrine of election.”

The appellant’s failure to obtain liberty while withdrawing the earlier reference invited Rule 53(3)(b) of the M.P. Arbitration Tribunal Regulations, 1985, which bars re-agitating the same claim elsewhere.

Statutory Framework Overrides Contractual Arbitration Clause

The Supreme Court reiterated that contractual clauses cannot override statutory provisions enacted in public interest.

Quoting Booz Allen and Hamilton Inc v. SBI Home Finance Ltd, the Court held: “Where the legislature has created a statutory forum for adjudication, arbitration is excluded either expressly or by necessary implication.”

Clause 44.3.1, which provided for ICADR arbitration, was declared inoperative in the context of the 1983 Act.

Limitation Bar and Revival Permitted in Interest of Justice

The Court noted that the appellant’s claims arose between 2013-2015, and invoking arbitration in 2022-2025 rendered them prima facie time-barred under Section 43 of the 1996 Act and Section 7B of the 1983 Act.

Nevertheless, in the interest of justice, and based on concession by MPRDC’s counsel, the Court permitted: “The appellant may seek revival of Reference Petition No. 61 of 2018 before the Madhya Pradesh Arbitration Tribunal. The Tribunal shall decide the restoration application within 2 weeks and dispose of the reference within 4 months thereafter.”

Supreme Court Reaffirms Primacy of Statutory Forum in Works Contract Disputes

In this landmark decision, the Supreme Court reaffirmed that when a statutory arbitration tribunal exists under a special law for resolving works contract disputes involving the State, any contractual arbitration clause under the general law (1996 Act) becomes ineffective.

The ruling strengthens public accountability, ensures avoidance of forum shopping, and preserves the exclusive dispute resolution scheme laid down by the legislature through the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983.

Date of Decision: July 30, 2025