As the country is witnessing a debate on the crucial issue of federalism in the wake of Centre intending to enact certain laws on the subjects essentially falling in the “state list”, a two-judge bench of the Supreme Court has expressed divergent views on entirely a converse situation where states try to pass a law contrary to a central legislation.
The question of conflict between the laws passed by Parliament and the state Assemblies arose from Madhya Pradesh’s 1983 law for setting up of “Arbitration Tribunals” in the state for resolving the disputes arising from the contracts awarded by the state government to private parties for infrastructure projects.
Justice A.K. Ganguly in his judgment ruled that there was no “conflict” between the MP Madhyasthan Adhikaran Adhiniyam, 1983 and Arbitration and Conciliation Act, 1996, a Central legislation, which provides for resolution of contacts between the dispute parties through arbitration.
The dispute in the MP case arose form the termination of a road building contract by the MP Rural Road Development Authority with private construction company LGC Engineers.
While Justice Ganguly said that the MP law was passed for specific purposes to decide certain disputes arising out of specific contract signed by the state, Justice Gyan Sudha Misra disagreed with this preposition of law and ruled that if a case was referred to the arbitration under the Arbitration and Conciliation Act, passed by Parliament, then the state law would have no application.
Justice Ganguly also said “the structure of the tribunal under the MP Act is also different from the structure of arbitration tribunal under the central law… and therefore, it should operate in the state of MP in respect of certain specific types of arbitrations which covered under the Act passed by the state.” But Justice Misra held that once the contract has been terminated, it would not be covered under the MP Act as the purpose of the state law was to resolve a dispute before termination not after the termination.
In view of the disagreement between the two judges, they in a joint order referred the case to the Chief Justice of India S H Kapadia, with the recommendation that it be placed before a larger bench in view of the “divergence of views” expressed in their separate judgments by them on the crucial question whether the MP law was in conflict with the central law.