In a landmark ruling, the Supreme Court has held that a contractual arbitration clause cannot override a statutory obligation to arbitrate under a special enactment. The decision came in the case of Umri Pooph Pratappur Tollways Private Limited v. MP Road Development Corporation and Another, where the Court emphasized that parties cannot simultaneously or sequentially invoke multiple arbitration forums for the same dispute.
The judgment, delivered by Justices JB Pardiwala and R Mahadevan, reaffirmed the doctrines of election and estoppel, warning against forum shopping and attempts to circumvent statutory procedures.
Background
The case involved a concession agreement between Umri Pooph Pratappur Tollways Pvt Ltd and MP Road Development Corporation. In 2018, the appellant-initiated proceedings before the Madhya Pradesh Arbitration Tribunal a statutory forum constituted under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983.
However, while the statutory reference was still pending, the appellant withdrew it (without seeking liberty to refile) and initiated private arbitration of the agreement, invoking the Arbitration and Conciliation Act, 1996 and the ICADR rules.
The Court held that this conduct amounted to forum shopping and was legally impermissible. “A party cannot pursue two mutually inconsistent remedies under different legal regimes arising from the same cause of action,” the Court observed.
Key Findings
The Court ruled that once a party opts for the statutory forum and withdraws the case without liberty to revive it, Rule 53(3)(b) bars refiling the same claims before any other forum.
∙Clause 44.3.1 of the Concession Agreement, which allowed for private arbitration, was declared inoperative insofar as it attempted to override the statutory process under the 1983 Act.
∙The Court clarified that statutory arbitration obligations prevail over contractual clauses, especially when public interest and legislative intent are involved.