News Detail

<p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">In a significant judgment, Madhya Pradesh high court (MPHC) has provided relief to a foreign investor ruling that Arbitration and Conciliation Act -1996 will apply to infrastructure development contracts awarded in the state.&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">Jabalpur bench of Justice Alok Aradhe directed that disputes between parties have to be resolved under the provisions of the Act instead of Madhyastam Adhikaran Act 1983, which is currently applied by the state government.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The order assumes significance for investment sector as the HC disapproving of the state&#39;s changing stand, granted relief to foreign investor Jabalpur Corridor India, a special purpose vehicle (SPV) of a Malaysian company with which the state government is fighting a legal battle since 2007.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The firm entered into a contract with the state government for construction and maintenance of Sagar-Damoh-Jabalpur Road on BOT basis.&nbsp;</span></span></span></p> <p style="text-align:justify"><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">Petitioner&#39;s counsel and senior advocate Vivek Thanka explained that the state has been entering into contracts with investors at the time of luring investment into the state by promising an independent Arbitral mechanism as per the 1996 Act.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Citing the present case, he pointed out that state officials had been using Adhikaran Act 1983 for years as a shield. The 1996 Act provides a more-or-less standardized format for arbitration, which is at par with India&#39;s global obligations under mechanisms like the UNCITRAL, the commission that formulates and regulates international trade in cooperation with the World Trade Organization (WTO).&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">However, the 1983 Act is a state enactment, which is limited in application in matters of work contracts. Government or judicial officers decide disputes and therefore scuttles freedom to choose from independent and mutually agreeable technical and subject experts as arbitrators to decide the dispute.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">In BJP ruled Gujarat, where it is reported that investors have shown great confidence, the Narendra Modi government has promulgated an Act called &quot;Gujarat Infrastructure Development Act 1999&quot; and enacted another Act called &quot;Gujarat Public Works Contract Disputes Arbitration Tribunal Act 1992&quot;. However, keeping in view requirement of keeping confidence of investors&#39; intact the dispute resolution clause in these cases is under the 1996 Act.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The genesis of the case lies in a dispute between applications of the 1996 Parliamentary Act, vis-a-vis the 1983 State Act.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Official sources pointed out that taking note of the importance of structured investments; the state government and Department for International Development UK conducted a detailed study and published a final report - Policy frame work and Institutional Road Map for PPP in Madhya Pradesh in May 2011. The report noted in clear terms that the 1996 Act is the preferred mode of dispute resolution to inspire confidence in the investors. On the same lines, was the conclusion of the 9th meeting of State Level Empowered Committee for PPP Projects in Madhya Pradesh which was held in October 2011.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Besides, they pointed out the centre is in the process of legislating a separate law for PPP projects which has been finalized by the planning commission in October this year.&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">While one investor has won before the high court, several other investors are also fighting the state authorities on this dispute resolution clause. The state government is contemplating to challenge the high court order, official sources said.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Source-On Request</span></span></span></p>