In a dispute where the question involved was whether the arbitrability should be under the Arbitration and Conciliation Act, 1996 Act or under the SEZ Act, 2005, the Telangana High Court has held that since Section 42 of the SEZ Act is a statutory provision with a non-obstante clause, it would have an overriding effect over clause 23 of the development agreement.
The clause 23 of the development agreement between the parties provided for dispute resolution, and according to which the disputes were required to be settled by arbitration in accordance with the Arbitration and Conciliation Act, 1996 by an arbitral panel of 3 arbitrators.
The High Court in this regard observed that not only Section 42 has an overriding effect, but even Section 51 of the SEZ Act also makes it clear that provisions of the SEZ Act as a whole shall have effect notwithstanding anything inconsistent contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than the SEZ Act.
It though noted that a view may be taken that the development agreements including clause 23 thereof containing the arbitration clause were voluntarily entered into between the applicants and the first respondent and first respondent by nominating its arbitrator had subjected itself to the said clause, it was of the view that this being a jurisdictional issue, it would render invocation of clause 23 of the development agreement to be of no legal consequence.
Relying upon various precedents involving special legislations conflicting with the general ones, the Court ruled that the dispute resolution provision contained in Section 42 of the SEZ Act would prevail over clause 23 of the development agreement.
The High Court in the case of Ranganath Properties Private Limited v. Phoenix Tech Zone Private Limited [Judgement dated 24 February 2023] also noted that the intention of the developer was always to develop the subject land either into a Special Economic Zone or buildings for IT/ITES office space or residential purposes etc.
