Gujarat High Court Dismisses Contractors’ Petitions, Upholds Jurisdiction of State Tribunal Over Public Works Contract Disputes Involving Municipal Corporations
Safiya Malik
The High Court of Gujarat Single Bench of Justice D.N. Ray dismissed a batch of petitions filed by private contractors, including GPC Infrastructure Ltd., challenging the referral of their public works contract disputes with municipal corporations to the statutory tribunal. The Court held that, in view of the state government notifications of 16 December 2024 and 14 May 2025, such disputes fall within the jurisdiction of the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act 1992, which establishes a dedicated tribunal for works contract disputes involving the State or public undertakings. The Court determined that the notifications operate prospectively but affirmed the statutory tribunal’s primacy for adjudicating these disputes.
The petitions were filed by GPC Infrastructure Ltd. and others, seeking appointment of arbitrators under Section 11(6) of the Arbitration and Conciliation Act, 1996, against the Gandhinagar Municipal Corporation and other municipal authorities. The central dispute concerned the development of housing and commercial facilities under a public-private partnership model initiated in 2015. The original concessionaire executed the project by constructing dwelling units and shops, later transferring part of the project land (Parcel B) to the petitioner. Disputes subsequently arose over the applicability of Floor Space Index (FSI), costs of additional construction, and levy of betterment charges.
The petitioner invoked Clause 11 of the Concession Agreement dated June 11, 2015, issuing a notice under Section 21 of the Arbitration and Conciliation Act, 1996, in November 2024, seeking arbitration. The respondent contended that pursuant to notifications issued by the State Government in December 2024 and May 2025, municipal corporations were included within the definition of “public undertaking” under Section 2(1)(i)(iii) of the 1992 Act, mandating reference of disputes to the Tribunal.
The petitioners, represented by senior advocates, argued that the notifications could not have retrospective effect, as disputes had arisen and arbitration had been invoked prior to their issuance. It was further contended that contractual rights under the 2015 agreement could not be overridden by subordinate legislation. They stated that the Tribunal Act lacked provisions granting retrospective effect to such notifications.
On behalf of the respondents, the Government Pleader submitted that the Arbitration Tribunal Act, 1992, being a special statute, overrides the general provisions of the Arbitration Act, 1996, and by operation of Section 21, all arbitration proceedings stand transferred to the Tribunal once the authority qualifies as a public undertaking.
The Court recorded that “although, even if the word used is ‘Arbitrate’, the proceedings under the Arbitration Tribunal Act, 1992 are nothing akin to ‘Arbitration’ within the meaning of the Arbitration Act, 1996.” The Court noted the extensive powers of the Tribunal, including review and revision, and clarified that the Tribunal is not a permanent arbitral institution.
Referring to the functioning of the Tribunal, the Court stated that petitioners had described it as “one of the most misused piece of State legislation, inasmuch as, after coming into force of the Arbitration Act, 1996, the Arbitration Tribunal Act is redundant as it is an archaic piece of legislation which has no place in civilised society.” The Court, however, recorded that it lacked competence to adjudicate on the validity of the Act itself.
On the issue of applicability of the notifications, the Court held: “In such view of the matter, the Notification dated 16.12.2024 and 14.05.2025 must be held to be prospective and cannot be said to be having retrospective operation.” It relied on the Supreme Court’s decision in Om Construction Company v. Ahmedabad Municipal Corporation (2009) 2 SCC 486, which held that a municipal corporation assumes the character of a public undertaking only upon publication of notification.
The Court further recorded that the first notification dated December 16, 2024, did not expressly cover municipal corporations. It stated: “The plain and literal interpretation of the Notification does not bring Municipal Corporations as a class of local authorities within the purview of ‘public undertaking’… this position changed with the notification dated 14.05.2025, from which point of time, the ‘Corporation’ came to be added.”
Nevertheless, the Court clarified the impact of Section 21 of the 1992 Act: “By the brutal mandate of Section 21, since the disputes are live, the same shall stand transferred to the Tribunal. Therefore, even though, at the time of invocation or even the time of filing these petitions, the petitioners’ right to arbitrate the disputes under the Arbitration Act had crystalized, the same, upon the operation of the Arbitration Tribunal Act, 1992 on and from 14.05.2025, in respect of AMC, will extinguish.”
The Court dismissed reliance on the Supreme Court’s decision in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) (2024 INSC 857), stating: “As I have already held that the Tribunal is not an Arbitral Tribunal, therefore, the decision of CORE-II does not apply to the facts of the present case.”
Concluding its judgment, the Court held: “It is thus clear that on and from the moment that the Act becomes applicable to the disputes forming the subject matter of these petitions, that is, from 14.05.2025, the said disputes cease to be arbitrable. Therefore, these petitions must necessarily fail.”
“The petitioners are at liberty to approach the Tribunal with a reference under Section 8 of the Arbitration Tribunal Act, 1992 within a period of eight (8) weeks from the uploading of this judgment and order.”
“The time spent by the petitioners from the date of invocation of respective disputes till the uploading of a copy of this judgment and order shall be excluded for the purposes of calculating the period of limitation within the meaning of Section 16 of the Arbitration Tribunal Act, 1992.” The connected civil applications were disposed of accordingly.
Advocates Representing the Parties
For the Petitioners: Mr. Unmesh Shukla, Senior Advocate for Mr. Shashvata Shukla; Mr. Manish R. Bhatt, Senior Advocate for Mr. Munjaal Bhatt and Mr. Mayur Kishanchandani; Mr. Aspi M. Kapadia, Senior Advocate.
For the Respondents: Mr. G.H. Virk, Government Pleader with Mr. Shyamal K. Bhimani, Mr. Prashanth S. Undurti, Mr. Simranjit H. Virk, and Ms. Ruchi Rampuria, Advocates; Mr. K.V. Gadhia, Government Pleader; Mr. Chinmay M. Gandhi and Ms. Nikita C. Gandhi, Advocates.
Case Title: GPC Infrastructure Ltd. v. Gandhinagar Municipal Corporation
Case Number: C/ARBI.P/198/2024 and connected matters
Bench: Justice D.N. Ray
