Rudresh K. Srivastava
The author is an Assistant Professor at Shambhunath Institute of Law, Prayagraj
Introduction
The tussle between general legislation and special legislation has been one which has been in existence ever since the bifurcation of the legislation itself. The question as to which legislation would override which one is one which can go on to determine the future and rights of not only a single party to a case, but a whole class of parties altogether. The maxim usually goes as “Generalia Specialibus non Derogant” essentially meaning that “General Laws do not prevail over special laws”. Hence, it becomes absolutely essential for both Courts and Lawmakers to aptly clarify which legislation would be the one which would have an overriding effect over the others. What is important to understand is that this tussle of legislation is not just limited to Arbitration, but to other laws as well. Subsequently, this isn’t just limited to laws which have been in force for quite a while, but upon those laws as well which have more recently been legislated. A very relevant example of the same would be Innoventive Industries Ltd. v. ICICI Bank and Anr, wherein it was adjudicated that the Insolvency and Bankruptcy Code would have an overriding effect over any other state law. Similar holdings were also observed in the Sharat Babu Digumarti v. Govt of NCT of Delhi, wherein the Apex Court held that special laws shall prevail over general and prior laws. More recently, the Apex Court came up with similar holdings in Arbitral Matters as well, in the Gujarat State Civil Supplies Corpn. Ltd. v. Mahakali Foods (P) Ltd. case, which is discussed later in this blog.
Perspectives on Overriding the Act
One of the initial disputes which dealt with matters like these was the Gujarat Urja Vikas Nigam v. Essar Power Ltd., wherein the tussle arose between the Arbitration and Conciliation Act, 1996, and the Electricity Act, 2003, for the issue that whether any dispute under the provisions of the said act would be referred directly to arbitration, or whether they have to be resolved under already installed provisions in the Electricity Act. Through Section 158 of the Electricity Act, the Commission established under the Act was empowered to refer any disputes to arbitration and nominate an arbitrator upon application of either party to a dispute. When a dispute arose between Gujarat Urja and Essar Power, the former went to the commission, while the latter went to the Gujarat High Court under Section 11 of the Arbitration and Conciliation Act, 1996. When the High Court made an appointment under the said provisions, Gujarat Urja appealed to the Supreme Court, wherein the Apex Court took the view that since the Electricity Act is a special law, it will override the effects of Section 11 of the Arbitration Act, because of it being a general law. This became one of the very first instances wherein the Court held the Arbitration Act to be general legislation.
A similar dispute also arose in the matter of Chief General Manager MP Power Trading Company Ltd. v. Narmada Equipment Pvt. Ltd., wherein similar to the former case, a dispute arose between the parties involved in the case, and the latter approached the High Court for appointment of an Arbitrator whilst the former opposed the said application stating that under Section 86(1)(f) of the Electricity Act, 2003, the Commission had the jurisdiction to appoint an arbitrator whenever a dispute arose between the parties. When the High Court allowed the said application, the matter was appealed to the Supreme Court, wherein the Apex Court concurred with the judgement of the Court in the Gujarat Urja Vikas Nigam v. Essar Power Ltd case and held that when there are coinciding applications under Section 11 of the Arbitration act, and under the Electricity Act, the provisions of the Electricity Act will always take preference over those of the Arbitration and Conciliation Act. Hence, the application which was allowed by the High Court was disposed of.
What becomes important at this point of time is that it is not merely the Electricity Act under which the Arbitration Act will be overridden, but it is the view of the Court that every other act which prescribes for arbitration under any of its provisions will override the effect of the Arbitration and Conciliation Act, 1996, since it is an accepted legal position that the Arbitration Act, in general, will be considered as a General Legislation on Arbitration, hence every other piece of law would be special legislation when put forth in comparison with the Arbitration and Conciliation Act, 1996.
Another fine example of the same would be the matter of Kohinoor Creations v. Syndicate Bank, wherein the Delhi High Court held that the provisions of The Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDB Act Hereinafter) would override the provisions of the Arbitration and Conciliation Act, 1996, even though the former Act came into force before the latter. The court held that even though an arbitration agreement existed between the parties, Section 34 of the RDB Act would have an overriding effect over the same since it is a special law passed in order to deal with the same.
This matter was also further discussed in the matter of National Highways Authority of India v. Sayedabad Tea Estate, wherein the dispute arose when The National Highways Authority of India Act, 1956 (NHAI) acquired land for the purpose of construction of highways, and the compensation provided to the original owner of the land was not sufficient according to that person, so the person filed an application under Section 3G(5) of the National Highways Authority of India Act, 1956, which empowers the NHAI to appoint an arbitrator in matters relating to the dispute of compensation value. When the government didn’t appoint an arbitrator after this application, the person approached the Calcutta High Court under Section 11 of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator, and in the meantime, the High Court also appointed the arbitrator. When appealed to the Supreme Court, the Apex Court held that since the NHAI Act provides for specific provisions to deal with the appointment of arbitrators for specific matters viz. compensation matters in land acquisition, the provisions of the Arbitration Act would be overridden by the NHAI Act, and the NHAI Act would prevail.
Upon glancing over at the discussion abovementioned, a fact becomes relatively clearer that the Apex Court has time and again considered the Arbitration and Conciliation Act, 1996, to be a General Legislation, and hence, any other piece of legislation which provides specific provisions for the appointment of arbitrators for dispute resolution would be considered as a Special Legislation by the Courts.
Development in the Gujarat State Civil Supplies case
On the 31st of October, 2022, the Supreme Court of India division bench consisting of U. U. Lalit C.J. and Bela M. Trivedi J., speaking through the latter, in the matter of Gujarat State Civil Supplies Corpn. Ltd. v. Mahakali Foods (P) Ltd., held that the Micro, Small and Medium Industries Development Act, 2006 (hereinafter referred to as the ‘MSMED Act’) will always have an overriding effect over the Arbitration and Conciliation Act, 1996, since the former act acts as a special legislation, thereby overpowering the general legislation i.e. the Arbitration Act. The Apex Court in the said judgment verified the Arbitration and Conciliation Act, 1996 and came to a conclusion that the legislative scheme of the act existed to act as a general law on matters pertaining to domestic and international arbitration, as well as for conciliation. It did not provide any form of specific provisions for any special class of disputes, or persons, hence the act cannot be held to be a specific law.
The Court further went on to clarify that when the MSMED Act, 2005 was being legislated, the legislature was very well aware of the existence of the Arbitration and Conciliation Act, 1996, and hence the presumption automatically falls into place that the legislature was well aware of its existence and made the law regardless, thereby ensuring that the new law viz. MSMED Act would act as a special law. The court further went into detail to discuss how specific provisions of the MSMED Act would supersede the Arbitration Act, because the Facilitation Council which is constituted under Section 18 of the MSMED Act has the power to refer matters for Arbitration, and also for Conciliation.
Conclusion
To conclude, a brief overview of the limited cases discussed above provides us with ample evidence to conclude that the Arbitration and Conciliation Act, 1996 has always existed in the eyes of the Legislature as a general legislation, and the reason for the same can be easily verified with the presence of multiple arbitration/dispute resolution clauses in pieces of legislations passed after the legislating of the Arbitration and Conciliation Act, 1996. The maxim “Leges Posteriores Priores Contrarias abrogant” would also apply here, which means “The later laws shall abrogate the earlier contrary laws”. Therefore, it would not be incorrect to conclude that the Arbitration and Conciliation Act, of 1996, being a general law, can be overridden by special legislation passed specifically for a defined purpose.