Reference to Arbitral Tribunal governed by special law if contract has no arbitration clause: Supreme Court

The Supreme Court of India recently held that if there is any dispute that arises under the Bihar Public Works Contracts Disputes Arbitration Tribunal Act of 2008 and there is no arbitration clause in the contract, the Arbitration and Conciliation Act of 1996 will not be applicable [Bihar Industrial Area Development Authority & Ors. v Rama Kant Singh]..A Bench of Justices Ajay Rastogi and Abhay S Oka observed that if there is any conflict regarding that provisions of the special law and the Arbitration and Conciliation Act, the latter will prevail. However, if there is no arbitration agreement under the contract, then the 1996 Act will have no application and the special law governing arbitration shall apply.“In view of Section 8 of the 2008 Act, if any of the provisions of the 2008 Act are in conflict with the 1996 Act, the latter shall prevail to the extent of the conflict. In the present case, as there is no arbitration clause in the agreement between the parties, the provisions of the 1996 Act will have no application. Therefore, the reference to the Arbitration Tribunal will be governed by the 2008 Act,” the judgment stated.Moreover, the apex court held that since the special law provides for a specific period of limitation, Article 137 of the schedule in the Limitation Act, 1963 will not apply."As the 2008 Act provides for a specific period of limitation, Article 137 of the schedule in the 1963 Act will not apply", the judgement stated. .The executive engineer of the appellant authority invited tender to carry out drainage work in an industrial area. The bid of the respondent was accepted and an agreement was executed between the parties on December 15, 2007. Later, the appellant issued a notice and terminated the agreement and fortified the security deposit of the respondent in 2010..The Bihar Public Works Contracts Disputes Arbitration Tribunal Act of 2008 had been constituted to resolve the disputes between the parties related to works contract. Section 9 of the 2008 Act provided that in case of no arbitration agreement between the parties, they can still refer the dispute to an arbitration tribunal under the special law. .The respondent accordingly referred the matter to the arbitral tribunal in 2013.The appellant contended before the arbitral tribunal that the respondent did not refer the dispute to the tribunal within one year from the date on which the dispute had arisen as provided under Section 9(1) of the 2008 Act. However, the tribunal held that Article 137 of the Limitation Act, 1963 was applicable. Therefore, the reference made to the arbitral tribunal on March 21, 2013, raising a dispute about the termination order dated June 8, 2010, was not barred by limitation.Further, the tribunal held that the respondent is entitled to ₹22,42,269 towards security deposit and a further amount of ₹6,22,476 and ₹50,000 deducted towards the penalty by the appellant. A simple interest of 10 per cent was also made applicableSubsequently, the appellant filed a revision petition before the Patna High Court but the High Court rejected the same holding that the reference made to tribunal was not barred by limitation. This prompted the appellant to approach the Supreme Court..The apex court noted that Section 22 of the special law starts with a non-obstante clause which provides that notwithstanding anything contained in any other law, rule, order, scheme, or contract, any dispute as defined under section (e) of Section 2 shall be regulated by the provisions of the 2008 Act in the absence of an arbitration clause in the agreementFurther, there is a provision under the special law to condone the delay in referring a dispute to the Arbitration Tribunal.Therefore, the top court held that since the special law provides for a specific period of limitation, Article 137 of the schedule in the Limitation Act, 1963 will not apply..Accordingly, the Court deemed it appropriate to not interfere with the award made by the arbitral tribunal since tribunal did have the power to condone the delay in making references. However, the apex court modified the award of the tribunal with respect to the simple interest. “We direct the appellants to pay only the principal amounts payable as per the award to the respondent within three months from today. On the failure of the appellants to pay the said amounts within three months from today, the appellant shall pay the interest at the rate of 10% per annum on the principal amounts set out in the award with effect from 21st March 2013,” the Court directed..Senior Advocate Rajiv Dutta represented the appellants. Advocate Shivam Singh represented the respondent..[Read Judgment]