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Gujarat Public Works Contract Disputes: Supreme Court Rules on Arbitration Tribunal’s Jurisdiction

The case of State of Gujarat Through Chief Secretary & Anr. vs. Amber Builders pertains to a dispute regarding the jurisdiction of the Gujarat Public Works Contract Disputes Arbitration Tribunal and whether it has the authority to grant interim relief under Section 17 of the Arbitration and Conciliation Act, 1996. The Supreme Court was tasked with determining whether the Tribunal, established under the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992, has jurisdiction to issue interim orders.

Background of the Case

The dispute arose from a works contract awarded to Amber Builders for the strengthening of a section of a national highway in Gujarat. The contract, dated July 31, 2007, included an arbitration clause that mandated dispute resolution through the Gujarat Public Works Contracts Disputes Arbitration Tribunal.

Key facts of the case:

  • The contractor completed the work on April 30, 2008, and the final bill was settled.
  • In 2012, the contractor requested the release of the security deposit.
  • The Gujarat government, in 2014, demanded Rs. 1.09 crore from the contractor, alleging defects in the completed work.
  • The State threatened to recover this amount by withholding payments from other contracts of the contractor.

The contractor challenged this unilateral action before the Gujarat High Court.

Arguments by the Petitioner (State of Gujarat)

The State contended that:

  • The Gujarat Public Works Contract Disputes Arbitration Tribunal is the only forum with jurisdiction to adjudicate such disputes.
  • The contractor should have approached the Tribunal instead of filing a writ petition.
  • As per Clause 43A of the contract, the State had the right to recover any claim from other contracts of the same contractor.

Arguments by the Respondent (Amber Builders)

The contractor argued that:

  • The Tribunal did not have the power to grant interim relief.
  • The State’s action of unilaterally recovering money from other contracts violated principles of natural justice.
  • The Gujarat High Court had consistently ruled against such unilateral recoveries in previous cases.

High Court’s Decision

The Gujarat High Court ruled in favor of the contractor, holding that:

  • The State cannot recover amounts from other contracts without prior adjudication.
  • The contractor must be given an opportunity to contest the claim before any deductions are made.
  • The Tribunal lacks jurisdiction to grant interim relief, and thus, the contractor had no alternative remedy but to approach the High Court.

Supreme Court’s Observations

The Supreme Court analyzed whether the Tribunal has jurisdiction under the Gujarat Act to grant interim measures. It referred to Section 17 of the Arbitration and Conciliation Act, 1996, which allows an arbitral tribunal to issue interim measures similar to those granted by civil courts.

Justice Deepak Gupta observed:

“The Gujarat Act does not expressly exclude the application of Section 17 of the Arbitration and Conciliation Act. Therefore, the Tribunal can exercise its power to grant interim measures.”

The Court also examined previous rulings on similar issues and concluded that the High Court erred in assuming that the Tribunal lacked jurisdiction to grant interim relief.

Final Judgment

The Supreme Court ruled:

  • The Gujarat High Court’s decision was set aside.
  • The Gujarat Public Works Contracts Disputes Arbitration Tribunal has jurisdiction to grant interim relief.
  • The contractor must approach the Tribunal for any grievances.
  • The Tribunal was directed to hear the contractor’s plea within two months and not dismiss it on grounds of limitation.

Implications of the Judgment

This ruling has significant implications:

  • Contractors engaged in public works projects in Gujarat must seek relief through the Tribunal instead of filing writ petitions.
  • The Tribunal has the authority to issue interim relief under Section 17 of the Arbitration and Conciliation Act.
  • Government agencies cannot unilaterally withhold payments from other contracts without adjudication.

Conclusion

The Supreme Court’s ruling reinforces the importance of the Tribunal in resolving public works contract disputes and establishes that interim relief can be sought under its jurisdiction. Contractors must now follow the Tribunal’s procedures for any disputes with the government.


Petitioner Name: State of Gujarat Through Chief Secretary & Anr..
Respondent Name: Amber Builders.
Judgment By: Justice Deepak Gupta, Justice Aniruddha Bose.
Place Of Incident: Gujarat.
Judgment Date: 08-01-2020.

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