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2020 Supreme(Bom) 954
IN THE HIGH COURT OF BOMBAY
Dipankar Datta, G.S. Kulkarni, J.
M/s Mep Rgsl Toll Bridge Pvt Ltd - Appellant
Versus
Maharashtra State Road Development Corporation Ltd - Respondent
Writ Petition No. 1699 of 2019, 2337 of 2019
Decided On : 06-11-2020
Abhishek M Sanghvi, Advocate, Sachin Datta, Advocate, Rajiv Dvivedi, Advocate, Azeem Samual, Advocate, Shyamsundar Solanke, Advocate, Pnp & Associates, Advocate, Milind Sathe, Advocate, Arun Siwach, Advocate, Vinamra Kopariha, Advocate, Prachi Vasudeo, Advocate, Cyril Amarchand Mangaldas, Advocate, Laxmikant Satelkar, Advocate
A State Government's policy of providing for institutional arbitration in contracts entered into by the State Government and its agencies is directory and not mandatory, and does not obligate the State Government or its agencies to agree to arbitration.
Headnote:
The Bombay High Court held that the petitioners, who were beneficiaries of toll contracts awarded by the Maharashtra State Road Development Corporation (MSRDC), could not compel the MSRDC to enter into an arbitration agreement with them, even though the State Government had a policy of providing for institutional arbitration in contracts entered into by the State Government and its agencies. The Court held that the policy was directory and not mandatory, and that the MSRDC was not obligated to agree to arbitration.
Fact of the Case:
The petitioners were beneficiaries of toll contracts awarded by the MSRDC. The contracts had expired, and the MSRDC had raised a demand on the petitioners for revenue sharing. The petitioners invoked the State Government's policy of providing for institutional arbitration in contracts entered into by the State Government and its agencies, and requested the MSRDC to refer the dispute to arbitration. The MSRDC refused, and the petitioners filed writ petitions in the High Court.
Finding of the Court:
The High Court held that the State Government's policy was directory and not mandatory, and that the MSRDC was not obligated to agree to arbitration. The Court also held that the petitioners could not compel the MSRDC to enter into an arbitration agreement, as this would be contrary to the principles of freedom of contract and the requirement of mutual consent for the formation of a valid contract.
Issues: 1. Whether the State Government's policy of providing for institutional arbitration in contracts entered into by the State Government and its agencies was mandatory or directory. 2. Whether the petitioners could compel the MSRDC to enter into an arbitration agreement.
Ratio Decidendi: 1. The State Government's policy of providing for institutional arbitration in contracts entered into by the State Government and its agencies was directory and not mandatory. 2. The petitioners could not compel the MSRDC to enter into an arbitration agreement, as this would be contrary to the principles of freedom of contract and the requirement of mutual consent for the formation of a valid contract.
Final Decision: The High Court dismissed the writ petitions.
JUDGMENT
G.S.Kulkarni, J. - These are two petitions invoking the jurisdiction of this Court under Article 226 of the Constitution of India. The first petition is by M/s.MEP RGSL Toll Bridge Pvt. Ltd. (for short " MEPRGSL "), the second petition is by Raima Toll & Infrastructure Pvt. Ltd. (for short " Raima "). Both the petitioners (collectively referred as " petitioners ") are stated to be 'Special Purpose Vehicles' of one 'MEP Infrastructure Developers Limited'. The petitioners were beneficiaries of 'toll contracts' awarded by respondent no.1-Maharashtra State Road Development Corporation Limited (for short " MSRDC "), which were at different locations and for different periods. The contract period in regard to both these contracts, has long expired. There is no relation between these two contracts, however as the cause of action being common, these petitions are tagged together.
2. On the above prefatory lines, we note that the prayers as made by the petitioners are quite peculiar, which are inter alia of a nature, that the MSRDC, be directed by a writ of this Court, to provide for an 'arbitration' qua these toll collection contracts entered by the MSRDC with the petitioners. There is also a somewhat incongruous prayer in the first petition, namely for a declaration that Clause 36 of the agreement dated 29 January 2014 entered between the MSRDC and the petitioner, is itself in the nature of an arbitration agreement. It would be appropriate to note the prayers in both the petitions which read thus:
In Writ Petition no.1699 of 2019
(a) Issue a writ in the nature of mandamus to Respondent No.1 and 2 to act in consonance with Notification No. Shashan Nirnay 2016/P.K.20/KA-19 dated 13.10.2016 and thereby take necessary steps to provide for a dispute resolution mechanism through Arbitration under the auspices of an Arbitration Institute (such as the Respondent No.5 institute) duly recognized by the Govt. of Maharashtra;
(b) Declare and direct the Clause 36 of the Agreement dated 29/01/2014 between the Petitioner and Respondent No.1 is itself in the nature of arbitration agreement;
In Writ Petition No.2337 of 2019
(A) That this Hon'ble Court be pleased to issue an appropriate writ order and direction directing the Respondent No.1 and 2 follow, observe and obey the policy guidelines as well as directors of the central government as well as the state government (as detailed and annexed in the writ petition) and take a fresh decision on the offer of the petitioner to go for an arbitration for redressal of the grievances.
(B) That this Hon'ble Court be pleased to issue an appropriate writ order and directions directing the Respondent No.1 and 2 to follow the same procedure of alternative dispute redressal that they have adopted in Clause No.63 (Vol-III) of the Project Implementation & Securitization of toll at Five Mumbai Entry Points along with maintenance of flyover & Allied Structure.
3. The factual conspectus in the first petition filed by MEPRGSL, would briefly be thus:
Respondent no.1-MSRDC is a corporation established and fully owned by the Government of Maharashtra. It was incorporated as a limited company under the Companies Act,1956 on 2 August 1996. Some of the major functions of the MSRDC are to promote and operate road projects, to plan, investigate, design, construct and manage, identified road projects and their area development, to invite tenders, bids, offers and enter into contracts for the purposes of all the activities of the corporation, to undertake schemes or works, either jointly with other corporate bodies or institutions, or with Government or local authorities, or on agency basis, to undertake any other project and other activities entrusted by the State Government.
4. The State Government is impleaded as respondent no.3, as it is the petitioners case that the State Government by its notification dated 13 October 2016 has inter alia provided for an "Institutional Arbitration Policy", as a preferred mode of dis
