Summary: What happens when a contract says “arbitration”, but the law says “tribunal”? The Gujarat High Court, on an issue of disputes arising from public works, gave precedence to the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 (“Gujarat Public Works Tribunal Act”)over the Arbitration and Conciliation Act, 1996 (“1996 Act”). This decision concerning the infrastructure sector, specifically public works contractors, clarifies that irrespective of a contractual obligation clause, state legislation shall prevail over the provisions of the contract, hence making dispute planning, and risk assessment critical for contractors as well as government bodies.
INTRODUCTION & FACTUAL CONTEXT
Adjudication of complex works contract disputes has long posed challenges for public sector entities and courts particularly owing to the technical expertise such disputes demand. To address these concerns, the State of Gujarat enacted the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 (“Gujarat Public Works Tribunal Act”), establishing a specialised forum for disputes arising from the execution of works contracts relating to the construction, repair, or maintenance of buildings, dams, canals, roads, bridges, and such other works as the State may notify. The critical question, however, persisted whether the Gujarat Public Works Tribunal Act would still prevail where a contract contains a private arbitration clause governed by the Arbitration and Conciliation Act, 1996 (“1996 Act”)?
This question came squarely before the Hon’ble Gujarat High Court in GPC Infrastructure Limited v. Gandhinagar Municipal Corporation,[1]where the Court dismissed a batch of petitions filed under Section 11(6) of the 1996 Act seeking the appointment of arbitrators in multiple disputes arising from works contracts between construction companies and municipal corporations across Gujarat. In the lead matter, the Respondent had issued a public tender for the development of an Integrated Group Housing Facility, and disputes subsequently arose regarding the applicability of the permissible Floor Space Index to the freehold land in question. The Petitioners invoked notice of arbitration under Section 21 of the 1996 Act and sought the appointment of arbitrators under Section 11(6). The Respondent opposed these petitions for the appointment of arbitrators under the 1996 Act, contending that by way of the notifications dated December 16, 2024 (“December Notification”), and May 14, 2025 (“May Notification”), the disputes be referred to the Tribunal under the Gujarat Public Works Tribunal Act.
Consequently, the Court framed the following two issues: (i) whether the December and May notifications applied retrospectively; and (ii) if they did not, whether the Petitioners’ prior invocation under Section 21 of the 1996 Act would take the disputes outside the purview of the Gujarat Public Works Tribunal Act.
Contentions before the Court
The Petitioners primarily contended that the December Notification, which sought to bring ‘Municipal Corporations’ within the ambit of the Gujarat Public Works Tribunal Act, was prospective in effect and could not operate retrospectively after the invocation of arbitration and in the absence of express statutory authority. They also contended that the Respondent’s objection to the petitions was a clear afterthought, considering they raised it despite full knowledge of the private arbitration clause in the Concession Agreement. The Respondent, however, stood firm on the legislative intent of the Gujarat Public Works Tribunal Act, which ensured that all works contract disputes are to be adjudicated by the Gujarat Public Works Contracts Disputes Arbitration Tribunal.
Findings OF THE COURT
Prospective Operation of Notifications
The Gujarat High Court traced the lineage of the notification requirement through the decision in Om Construction Company v. Ahmedabad Municipal Corporation,[2] wherein the Supreme Court had held that a Municipal Corporation could assume the character of a “public undertaking” only upon the publication of a notification in the Official Gazette, and confirmed that in the absence of such notification, the Ahmedabad Municipal Corporation could not be termed a public undertaking at that time.
Considering the aforesaid reliance, the Court analysed the two notifications in question and held that the notifications neither carried express or implied retrospective effect. The Court relied on Gujarat Housing Board v. Arvind C. Patel[3] and undertook a plain and literal interpretation of the December Notification stating that ‘Municipal Corporations’ as a class of local authorities did not fall within the purview of “public undertaking” as defined in the Gujarat Public Works Tribunal Act. The Court clarified that this notification only specified ‘Municipalities’ as defined under Section 2(14) of the Gujarat Municipalities Act, 1963, and Section 2(34B) of the Gujarat Provincial Municipal Corporations Act, 1949, conspicuously omitting any reference to Municipal Corporations.
This position changed only with the subsequent May Notification, which amended the December Notification to supplement the term “Corporation”. The Court clarified that prior to this May Notification, the Respondent was not covered within the meaning of “public undertaking” under the Gujarat Public Works Tribunal Act. Having settled the question of the applicability of both notifications, the Court then turned to whether the subsequent applicability of the Gujarat Public Works Tribunal Act could override rights and proceedings already crystallised under the 1996 Act.
Supremacy of the Gujarat Public Works Tribunal Act over Crystallised Rights
The question of supremacy between the 1996 Act and the Gujarat Public Works Tribunal Act, turned on Section 2(4) of the 1996 Act, which stated that the 1996 Act shall apply to every arbitration except where its provisions are inconsistent with another enactment. Attention was drawn to Section 8 of the Gujarat Public Works Tribunal Act, which states that any dispute arising between parties to a works contract shall be referred to the Tribunal, irrespective of whether the contract contains an arbitration clause. The Court found this to be plainly inconsistent with Section 11 of the 1996 Act.
The Court further noted that while the notifications were prospective and could not extinguish accrued rights, Section 21 of the Gujarat Public Works Tribunal Act imposed a different consequence. Section 21 of the Gujarat Public Works Tribunal Act, in so far as it is inconsistent with the provisions of the 1996 Act, ceases to apply to any dispute arising from a works contract and all arbitration proceedings stand transferred to the Tribunal. Characterising Section 21 as carrying a “brutal mandate”, the Court held that its operation was automatic once the Gujarat Public Works Tribunal Act became applicable to any dispute. The provision’s effect was twofold: first, the provisions of the 1996 Act ceased to apply to such dispute; and second, all pending arbitration proceedings stood transferred to the Tribunal. Consequently, even if a party’s right to arbitration under the 1996 Act was crystallised, the same stood extinguished once the Gujarat Public Works Tribunal Act took effect on vide its circular dated May 14, 2025, “firmly shutting the barn door” on such rights.
CONCLUSION
This position is consistent with the well-settled Doctrine of Statutory Exclusion and the well-established pillar of Indian statutory interpretation of generalia specialibus non derogant, under which courts have consistently held that procedures mandated by special statutes apply to the exclusion of the 1996 Act and that parties cannot circumvent statutory tribunals by invoking parallel private arbitration thereunder. Hence, the Gujarat Public Works Tribunal Act is directed towards a specific category of disputes, parties, and a specific forum, whereas the 1996 Act is a general code for all disputes parties agree to arbitrate. In an event where the two operate in conflict, the special law prevails.
Accordingly, the Gujarat High Court dismissed the petitions and held that from May 14, 2025, the Gujarat Public Works Tribunal Act governs the disputes in question, rendering them non-arbitrable under the 1996 Act. The Court held that Section 21 operates in rem, such that once the Gujarat Public Works Tribunal Act becomes applicable, all pending arbitration proceedings stand transferred to the Tribunal regardless of when the invocation notices were issued. This reading draws from R.M. Dasa v. Gujarat Water Supply and Sewerage Board[4] and finds further support from the Supreme Court’s decision in Umri Pooph Pratapur (UPP) Tollways Pvt. Ltd. v. M.P. Road Development Corporation,[5] which held that disputes arising from works contracts with State instrumentalities must be exclusively adjudicated by such statutory tribunals, rendering private arbitration initiated in derogation non est in law.
[1] Arbitration Petition No. 198 of 2024.
[2] (2009) 2 SCC 486.
[3] 2000 SCC OnLine Guj 305.
[4] AIR 2009 Gujarat 130
[5] 2025 SCC OnLine SC 1569