State of Gujarat (Chief Secretary) & Another v. Amber Builders

Civil Appeal No. 8307 of 2019

(@Special Leave Petition (Civil) No. 36095 of 2016)

Facts of the case

In this case, the respondent i.e., the contractor was given a job to strengthen a part of the national highway by the Gujarat state government. It was undisputed that it was a “works contract” between the State and Amber builders. The respondent finished the work and he was paid accordingly. However, the road got damaged, and he was called again for the repair of the said road. He claimed the damage was due to heavy rainfall and the repair was concluded. The state issued a notice upon the respondent to pay a sum for not doing the repair work, and it further withheld the security deposits and bills or remaining work. This notice was challenged by the respondent filing a writ petition in the Gujarat High court stating that the state cannot withhold the payable amount to the respondent for other contracts until their liability is defined by the court. The state countered saying there was a contract and the work done by the respondent was defective under it, they had gotten other contracts done from a different party. The Gujarat high court relied on another judgment and held in the favor of the respondent stating that “without crystallization of the potential recovery amount, the employer or the contractor cannot unilaterally recover the said amounts from the ongoing contract work of the same contractor in connection with another contract. It was further directed that the State could not recover the amounts sought to be recovered from the payments due and payable to the contractor in other contracts.” The judgment was challenged by the state before the Supreme Court.

Issue:

Whether on the procedural ground, the Gujarat High court lacked the jurisdiction to hear such a matter, and it should be referred to the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act (the tribunal) to grant interim relief or not?

Judgment

The Hon’ble court held that the tribunal has the jurisdiction to make interim orders concerning Section 17 of the Arbitration and Conciliation Act, 1996. The tribunal was established under section 3 of the Gujarat Act to exclusively deal with disputes of “work contract” entered by the state government with any other person that is defined under Section 2(k) of the Gujarat Act. The bench observed, “On a conjoint reading of the acts together, we are of the view that insofar as the powers vested in the Arbitral Tribunal under section 17 of Arbitration Act are concerned, such powers can be exercised by the tribunal constituted under the Gujarat Act because there is no inconsistency in these two acts as far as the grant of interim relief is concerned. This power is already vested in the tribunal under the Gujarat Act and section 17 of the act compliments these powers and therefore it cannot be said that provisions of section 17 is inconsistent with the Gujarat Act.” Thus, the contractor should have gone to the tribunal for a specific remedy and not the Gujarat High Court. The court granted liberty to the respondent to approach the tribunal for relief on merits.

Regarding the withholding of payments by the state, till the amount is crystallized or quantified by the court, the court gave its decision in favor of the respondent. The ruling of the high court on this matter is overruled by the Hon’ble Court in another decision.

Conclusion

The court in its judgment cleared out ambiguity regarding the tribunal’s power to grant interim relief. Due to the discrepancy, the parties failed to notice there is no limitation on the tribunal expressed in the statute that is terminating it from giving interim relief. As mentioned in the statute, the tribunal is competent to resolve “works contract” disputes and it will be efficient than approaching the court. The arbitration between the parties to seek relief is far more convenient than approaching the high court.

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