Contractors in dispute with municipalities have to approach Arbitration Tribunal under 1992 law: Gujarat High Court

The Gujarat High Court recently ruled that contract disputes with the municipal bodies will have to be resolved before the tribunal under Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 instead of the procedure provided under Arbitration and Conciliation Act, 1996 [GPC Infrastructure Limited Vs Gandhinagar Municipal Corporation].Justice DN Ray rendered the verdict while dismissing a batch of petitions filed by certain construction companies.The Court took note of the submissions pertaining to "the sheer farcical nature of the proceedings" before the Tribunal "and the mind numbing pendency and ineptitude of the Tribunal as an Institution to even possibly adjudicate these disputes if referred." However, the Court said it cannot redress the grievance of the contractors as the solution lies somewhere else. "The redressal to the deafening anguish of the petitioners unfortunately does not lie with this Court but perhaps with a different Court if not the Legislature or even Parliament.".The Court was dealing with the question pertaining to applicability of the Gujarat Act of 1996 in works contracts - whether the 1996 Act would take the disputes out of the purview of the 1992 Act.The case gained complexity when the Gujarat government in 2024 and 2025 issued notifications designating municipalities and panchayats including corporations as "public undertakings" under the tribunal system. Initially, only municipalities and panchayats were covered but later the 1992 Act was explicitly extended to municipal corporations..The Court held that the Arbitration Tribunal Act, 1992, being a special law, will prevail over the general provisions of the Arbitration Act, 1996.“By virtue of Section 21 of the Arbitration Tribunal Act, 1992, the provisions of the Arbitration and Conciliation Act, 1996 cease to apply, and all arbitration proceedings in relation to such disputes must be transferred to the Tribunal,” the Court said.The Court emphasised that Section 21 operates automatically once jurisdiction is established."Therefore, even though, at the time of invocation or even the time of filing these petitions, the petitioners' right to arbitrate the disputes under the Arbitration Act had crystalized, the same, upon the operation of the Arbitration Tribunal Act, 1992 on and from 14.05.2025, in respect of AMC, will extinguish.".Though the Court agreed that the notifications extending the 1992 law to municipalities was only prospective in nature, it opined that the same was irrelevant in context of present cases as Section 21 mandates transfer of all pending arbitration proceedings once tribunal jurisdiction is established.The Court also said that the contractual arbitration clauses cannot override statutory provisions."Section 21 firmly shuts the barn door on the crystalized rights of the petitioners under the Arbitration Act," the single-judge said..Accordingly, the Court granted the petitioners eight weeks to approach the Tribunal, excluding time spent in current proceedings from limitation calculations..Petitioners were represented by Senior Advocates Manish Bhatt and Unmesh Shukla, Aspi M Kapadia with advocates Munjaal Bhatt, Mayur Kishanchandani and Shashvata Shukla..The respondents were represented by Government Pleader Gursharan H Virk with advocates Shyamal K Bhimani, Prashanth S Undurti, Simranjit H Virk, Ruchi Rampuria, Chinmay M Gandhi, Nikita C Gandhi and KV Gadhia..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.