Summary
The Supreme Court upheld appointment of an arbitrator under the 1996 Central Act where the works contract expressly adopted that Act. Reading the Bihar statute’s provisions together, the State Act did not displace that agreed regime. Separately, the Court declared unconstitutional the provision making the State Tribunal Chairman’s and members’ tenure subject to government pleasure: such control by a disputing party undermined quasi-judicial independence and was manifestly arbitrary.
Issues
- Whether the Bihar works-contract arbitration statute excluded the expressly agreed Central Act regime.
- Whether government-pleasure tenure for the State arbitration tribunal was constitutionally valid.
Provisions considered
- Sections 8, 9 and 22, Bihar Public Works Contracts Arbitration Tribunal Act, 2008Read together, the provisions applied the State regime in the absence of an agreement stipulating the Central Act. The parties’ express adoption of the Central Act preserved that regime here. (¶¶ 3, 4, 5)
- Section 4(3)(b), Bihar Public Works Contracts Arbitration Tribunal Act, 2008Government-pleasure tenure permitted a party to the dispute to interfere with tribunal independence. The provision was declared unconstitutional as manifestly arbitrary and contrary to the rule of law. (¶¶ 7, 8)
Held
- The contract expressly required arbitration according to the Arbitration and Conciliation Act, 1996. Under the combined scheme of sections 8, 9 and 22 of the Bihar Act, that agreement meant the State Act did not apply. The challenge to the section 11(6) appointment therefore failed. (¶¶ 2, 3, 4, 5)
- The State remained free to seek a change of arbitrator before the High Court if it could establish a neutrality objection. The dismissal did not itself replace the arbitrator or determine the merits of such an objection. (¶ 6)
- The statutory tribunal performs quasi-judicial functions. Its stipulated tenure could not be terminated at the pleasure of the Government, a party to the disputes it decides. The three-month compensation proviso did not cure the threat to impartiality and independence. Section 4(3)(b) was declared unconstitutional, particularly under Article 14. (¶¶ 7, 8)
Result
Appeals dismissed, with liberty to seek replacement of the arbitrator on a substantiated neutrality objection. Section 4(3)(b) of the Bihar Act declared unconstitutional.