No private arbitration: Gujarat HC upholds Tribunal route for contractor disputes with AMC

The HC rejected the petitions filed by the contractors, ruling that they cannot insist on private arbitration but instead, route their petitions to the Public Works Tribunal, in view of notifications issued by the state government in December 2024 and February 2025 whereby the state government declared municipal corporations as public undertakings.

The petitions pertained to disputes with claims of contractors running into hundreds of crores against the Ahmedabad Municipal Corporation. While the petitions, filed by contractors, sought the appointment of private arbitrators — mostly retired judges — to decide their payment disputes with municipal bodies, the government pleader .

Government pleader GH Virk argued that the 1992 Gujarat Public Works Contract Disputes Arbitration Tribunal Act was always meant to cover such works contracts in view of the government’s December 2024 notification bringing municipalities and corporations under the scope of the legislation.

Considering the arguments of the government pleader, the court observed that ad hoc arbitration is not meant for public undertakings owing to delays and long-drawn disputes.

The order states, “More than three decades after the Arbitration Tribunal Act, 1992, it appears to me that the recent ruling of the five Judge Bench of the Hon’ble Supreme Court of India (in a precedent) has once again reinforced the thought process behind public undertakings that adhoc arbitration is not for them… in the absence of institutionalized arbitration, have moved away from ad hoc arbitration, back into the Tribunal regime.”

In the order, Justice Ray also stated that he had come across “vast delays both in delivering award as well as decades spent in the Section 34 (of Arbitration Act, 1996) court” while being part of a division bench having roster over appeals from commercial courts and noted the plea of the petitioners about “the sheer farcical nature of the proceedings before the Tribunal and the mind numbing pendency…”

The government pleader has ensured the court that he will “personally look into these issues and ensure sufficient competent personnel and administrative requirements which would enable the Tribunal to deal with large volumes of technical adjudication of the disputes pertaining to works contract so that the state government is not branded as an unfair employer, which simply does not want to pay its contractors,” the court noted in the order.

Dismissing the petitions, the court granted liberty to the petitioners to approach the Tribunal under the Arbitration Tribunal Act, 1992, within eight weeks from uploading the judgment and order. The court also granted that if the petitioners approach the Tribunal within the period, the period “from the date of the invocation of the respective disputes till the uploading of the order of this judgment shall be excluded for the purpose of calculating the period of limitation” within the Arbitration Tribunal Act.

The ruling means that contractors engaged in road and municipal infrastructure projects will now have to petition the Tribunal at Apna Bazaar in Ahmedabad’s Bhadra area for claims while the state and municipal corporations will have disputes consolidated before a single forum. The impact is expected to be far-reaching, as nearly all works contract disputes involving municipalities and local bodies across Gujarat will now bypass private arbitration.