The enforcement of demands against contractors must undergo arbitration when such a clause exists in the contract, upheld by relevant legislation.

1. This order shall also govern the disposal of M. P. No. 3516 of 1987 (Ramratan Gupta v. State of Madhya Pradesh and four others); M. P. No. 964 of 1988 (M/s. Super Construction Company, Durg v. The State of Madhya Pradesh and four others) and M. P. No. 966 of 1988 (Ramratan Gupta v. State of Madhya Pradesh and four others).

2. The petitioners in all these petitions are contractors. They undertook to execute certain work / contracts for the State of Madhya Pradesh in Irrigation Department and executed standard form of contract document. The works were taken up pursuant to the contracts and each of the petitioners was subjected to certain demands. Not only this, the demands so raised were sought to be collected and recovered through the Collector as arrears of land revenue. The petitioners' contention is that they have been always protesting against the demands, and had been requesting the department to refer the dispute to Arbitrator as envisaged by the terms of the contract even prior to coming into force of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam , 1983. Even thereafter request was made to the department to refer the dispute to the Arbitration Tribunal appointed under the said Act. It appears from Ann.P / 17 that the petitioners were given to understand that if they withdrew their demands for reference to Arbitration, they shall be given due opportunity of personal hearing to contract the claim. That, however, was not done and the alleged dues are sought to be recovered by coercive process as land revenue. The petitioners allege that they have committed no breach of any term of the contract agreement and also deny the quantum of damages arbitrarily assessed by the department. The contention is that the demands cannot be made and the alleged due cannot be recovered unless there is a proper adjudication of the issue after due notice to the petitioners / contractors. There appears that after the establishment of the Arbitration Tribunal under the M.P. Madhyastham Adhikaran Adhiniyam, 1983, the dispute should be referred to the Arbitration Tribunal for its decision and the recovery proceedings initiated should be either quashed or kept in abeyance pending adjudication of an award by the Arbitration Tribunal.

3. As against the petitioners' claim the respondents' contention is that the authorities have passed final order in presence of the petitioners' attorney and a final decision has been taken by the concerned Superintending Engineer. That being so, it is now for the petitioners to invoke the arbitration clause in the contract / agreement and avail of the reference to the Arbitration Tribunal appointed under the M. P. Madhyastham Adhikaran Adhiniyam.

4. What is clear from the respective version of the parties and can now be taken as undisputed circumstance is that the department is accusing the petitioners of the breach of the contract and claims certain amount from them as damages and penalty. The petitioners contest this claims by the department and instead allege that it is the department which is liable for breach and thus completely deny their liability. It is also not in dispute that the contract - agreement contains an arbitration clause permitting reference of the dispute to the Arbitrator. The only question is as to who should approach the Arbitrator.

5. The dispute in all these cases existed from before the M.P. Madhyastham Adhikaran Adhiniyam, 1983 come into force. The petitioners did not invoke the arbitration clause in the contract agreement. No application was made to the Court for appointment of Arbitrator in terms of the agreement and for a reference of the dispute to him. As alleged by the petitioners, they were persuaded to withdraw their demand for a