Facts

Umri Pooph Pratappur (UPP) Tollways Pvt. Ltd., a private company, entered into a Concession Agreement with the Madhya Pradesh Road Development Corporation (Respondent No.1) on January 5, 2012. The project involved developing the Umari–Pooph–Pratappur road on a Build, Operate, and Transfer (Toll + Annuity) basis. The total project cost was ₹73.68 crores, with a completion timeline of 24 months from the appointed date.

However, according to the appellant, the project faced delays and disruptions due to breaches of contractual obligations by the state-controlled entity which also led to cost escalation. In response, the company raised 19 claims, which were also submitted before the Secretary, PWD. While a few claims were acknowledged during conciliation, most were rejected, and no payments were made.

With no resolution, the company approached the Madhya Pradesh Arbitration Tribunal by filing a reference case. Thereafter, invoking the relevant clause in the Concession Agreement, it moved to the International Centre for Alternative Dispute Resolution (ICADR) under Arbitration and Conciliation Act 1996. Madhya Pradesh Road Development Corporation raised objections against the proceedings under Section 7 of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983.Neverthless, the ICADR by order appointed arbitrators to adjudicate the matter. The Arbitral Tribunal also issued a notice for a preliminary hearing. Subsequently the appellant filed an application before the Madhya Pradesh Arbitration Tribunal, seeking withdrawal of Reference Case.

At this stage, the Madhya Pradesh Road Development Corporation challenged the proceedings by filing a writ petition before the High Court. The High Court allowed the petition and quashed the orders issued by both ICADR and the Arbitral Tribunal. It is important to note that, during the pendency of the writ petition, the Madhya Pradesh Arbitration Tribunal allowed the appellant’s withdrawal application.

Aggrieved by this outcome, the company filed an appeal before the Hon’ble Supreme Court.

Issues

• Whether a Writ Petition would be maintainable by the State against the private entity, which was assigned a work contract to construct a road in the State of Madhya Pradesh?

• Determining the appropriate forum for the adjudication of disputes arising out of the Concession Agreement dated 05.01.2012 entered into between the appellant and Respondent No.1 (Madhya Pradesh Road Development Corporation)

Observations:

The court observed that the right to access any part of the country, with certain exceptions and restrictions under certain circumstances, is a fundamental right guaranteed under Article 19(1)(g) of the Constitution, and the right to safe, well-maintained, and motorable roads is recognised as a part of the right to life under Article 21 of the Constitution of India, it is the responsibility of the State to develop and maintain the roads directly under its control. The contract for laying of a State Highway/District Road, when assigned by the Corporation owned and run by the government, assumes the character of a public function even if performed by a private party and would satisfy the functionality test to sustain the writ petition. Accordingly, in view of the statutory framework and the nature of relief sought, the writ petition involves a public law element and was thus maintainable before the High Court.

The court finds that present Concession Agreement pertains to the construction of a State Highway situated entirely within the State of Madhya Pradesh and was awarded by Respondent No.1, a State-controlled entity, the agreement clearly qualifies as a “works contract” under section 2(1)(i) of the 1983 Act. The dispute arising therefrom falls within the exclusive jurisdiction of the Madhya Pradesh Arbitration Tribunal. the Arbitration and Conciliation Act, 1996 stands excluded by operation of law in such matters. The private arbitration proceedings initiated by the appellant are therefore, non est in law, and the proper forum for adjudication is the Madhya Pradesh Arbitration Tribunal established under the 1983 Act.

Decision:

The Supreme Court disposed the appeal, directing the appellant to file an application to recall the withdrawal order dated 08.02.2023 and seek restoration of Reference Petition within two weeks from the date of receipt of a copy of the judgment. The apex court has also directed the Madhya Pradesh Arbitration Tribunal to consider the application on its own merits and pass appropriate orders, within a further period of two weeks. The court has also stated that in case the Tribunal allows the restoration, Reference Petition shall be disposed of on merits, in accordance with law, after affording reasonable opportunity of hearing to both parties, preferably within four months from the date of restoration.

Why this case matters:

• • It clarifies the scope of writ jurisdiction in contractual disputes involving public functions
• • It defines the jurisdiction between statutory tribunals and private arbitration
• • This case upholds the legal identity of 'works contracts' in infrastructure development
• • This case protects public interest

Precedents

Federal Bank Ltd. v. Sagar Thomas

In this case the Supreme Court provided a classification of entities against whom a writ petition may be maintainable

Binny Ltd v. Sadasivan

In this case the Supreme Court noted distinction between public and private functions; and also clarified the scope of writ jurisdiction under Article 226 in the context of private contractual disputes involving entities that may be performing public function.

Both these cases have helped the Supreme Court decide the writ filed by Madhya Pradesh Road Development Corporation is maintainable against the Umri Pooph Pratappur (UPP) Tollways Pvt. Ltd.