Walati Ram Gupta vs H.P. State Electricity Board and Another

D.P. Sood, J.—In case different disputes in different applications are found to have arisen from the same cause of action, is it open to a party to raise such different disputes in different applications to court for reference and to have different and successive arbitrations", is the short but nevertheless an interesting question which has fallen for determination of this Court.

The Plaintiff is a Construction Contractor. He was entrusted with the work of construction of the office building (Block-II) Vidyut Bhawan, H.P.S.E.B. Shimla-4 pursuant to an agreement entered into between the parties to the instant lis. The work order was given on September 18, 1982. It is pertinent to detail that the construction work under the agreement was of the value of Rs. 30,54,644/- only. However, during the progress of the work due to some change in the design and inclusion of the substituted items, under the provision of Clause-12 and 12-A of the aforesaid agreement, additional work was assigned to the Plaintiff and thus the total work under the contract executed by the Contractor became of the value of Rs. 64,68,815/- only. The Plaintiff completed the entire work in April, 1985. However, the final bill was paid to him in October, 1987 which he accepted under protest by putting a note on the said bill as:

Payment received under protest on account of deduction of 9.11% on over all and recovery of binding wire, putty and empty cement bags.

Before the final payment so made, the Plaintiff had also moved a similar application u/s 20 of the Arbitration Act for referring the dispute for the appointment of an Arbitrator before the senior Sub Judge, Shimla which was withdrawn and thus followed by an application to the Chairman, H.P.S.E.B. for the said purpose but acted upon by the Chief Engineer concerned pursuant to the arbitration clause who appointed initially Shri R.K. Sharma, Superintending Engineer as an Arbitrator but on having shown his unwillingness to act as such, directed the appointment of Shri O.C. Kaushal, Director (Designs) of the rank of the Superintending Engineer as a sole Arbitrator for settling the dispute in between the parties vide his order dated August 1, 1988. According to the Petitioner, since the final bill did not represent the true and correct payment, the same was accepted by the applicant under protest. The Plaintiff-Petitioner had claimed rights and raised dispute had claimed rights and raised dispute before the Appointing Authority i.e. Chief Engineer concerned by moving an application specifically raising the dispute to the following effect only:

(i) Whether claimant is entitled to recover a sum of Rs. 2,14,000.00 from the Respondent on account of excess deduction of rebate @ 9.11% if so, to what extent?

(ii) Refund of Rs. 80,000/- (Rupees eighty thousands only) security which have been adjusted towards the recovery of rebate by the Respondent-Executive Engineer.

(iii) Interest @ Rs. 18% on the above amounts.

The parties submitted their claims and counter-claims before the Arbitrator. The Plaintiff in his claim sought relief with respect to seven items claiming an amount of Rs. 18,60,421.48 paise where upon the Arbitrator asked the Plaintiff that reference had been made to him with respect to only one item out of the aforesaid seven different claims and consequency he directed the Plaintiff to get his powers enlarged for the purpose of settling the other disputed items. The Appointing Authority appears to have taken no action. Both parties continued participating in the proceedings whereupon the Arbitrator adjudicated upon the aforesaid single item and made his award on May 17, 1989 which was ultimately made a Rule of the Court vide order dated September 13, 1989 of this Court.

On July, 11, 1989 the present application u/s 20 of Arbitration Act, 1940 registered as Civil Suit No. 65 of 1989 was filed by the Plaintiff seeking direction to the Defendants for filing Agreement No. II of 1982-83 and for reference of disputes to arbitration. After narrating the contractual relationship and other averments in the same terms in para 1 to 7, the Plaintiff made the following claims, rights and disputes:

a. Amount due to the Petitioner on Rs. 6,30,771.05 account of items paid at part rates. b. Additional amount due to the Petitioner for additional works got executed under Clause 12-A of the agreement. Rs. 65,721.42 C. Amount wrongfully recovered from final bill on account of binding wire. Rs. 47,466.00 d. Amount wrongfully recovered from final bill on account of empty bags. Rs. 2,132.00 e. Amount claimed by the petition on account of damages. Rs. 5,00,000.00 f. Amount claimed on account of interest. Rs. 4,90,000.00

Both the Defendants admitted the factual position narrated in the plaint but denied the liability with respect to other items ''a to f referred to above by raising various preliminary objections with respect to estoppels, limitations, claim being barred under Order 2 Rule 2 as also on the principle of resjudicata.

The learned Counsel for the Plaintiff has urged that provisions of Order 2, Rule or that of resjudicata or of estoppels would apply only to a suit and as the application under the Arbitration Act registered as a suit, is, in fact, not a suit, therefore, the above said rules have no application as a legal provision or even as a principle. Further he submitted that the suit is not barred by limitation.

Before considering the contentions raised by rival parties in the instant lis, it would be pertinent to detail the Arbitration clause continued in Clause-25 of the Agreement which reads as under:

Except where otherwise provided in the contract all question and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as tot he quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever, in any way arising out of are relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer (P) H.P.S.E.B., Shimla. It will be no objection to any such appointment that the arbitrator so appointed is a Government servant that he had to deal with the matter to which the contract relates and that in the course of his duties as Government servant he had expressed views on all or any of the matters in disputes of difference. The arbitrator up to whom the matter is originally referred being transferred or vacating his office of being unable to act for any reason the Chief Engineer, Himachal Pradesh, State Electricity Board at the time of such transfer vacation of office or inability to act, shall appoint another person to act as arbitrator in -v accordance with the terms of the contract. Such person shall be entitled to proceed with reference from the stage at which it was left by his predecessor. It is also a term of this of this contract that no person other than a person appointed by Chief Engineer, H.P.S.E.B. should act as arbitrator at all.

Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitrator proceeding under this clause.

In view of the aforesaid, on behalf of the Plaintiff, it is urged that during the pendency of the earlier reference before the Arbitrator the Plaintiff had moved the Appointing Authority for enlargement of the powers of the Arbitrator with respect to other items on the very first date when this fact was brought to the Plaintiff, notice by the arbitrator; Authority as per Clause-25 referred-to-above, that remaining disputes so raised were not referred to the Arbitrator or his powers were not enhanced; and in the circumstances, in any event the claim sought to be referred to arbitration though belated is not barred by limitation u/s 20 of the Arbitration Act, 1940. It is a matter which is to be decided by the Arbitrator and not by this Court at this stage. It would be better in case this question of limitation is dealt with in the first instance. There is a good deal of substance in this contention in my considered opinion.

The Supreme Court has observed in the case of Wazir Chand v. Union of India AIR 1967 S.C 996 that in an application u/s 20 of the Arbitration Act, the Court was not concerned with the question whether the claim sought to be referred to arbitration was barred by limitation or not. That was a matter within the jurisdiction of the Arbitrator to decide. The same view stands reiterated by the Supreme Court in the case of Mohd. Usman Military Contractor, Jhansi Vs. Union of India (UOI), Ministry of Defence, At this stage, it would also be pertinent to observe that the Supreme Court in its decision in the case of The Kerala State Electricity Board, Trivandrum Vs. T.P. Kunhaliumma, did not approve of the views of its own Court in the cases mentioned before that an application u/s 20 would not be governed by the limitation prescribed by the Limitation Act. But the Supreme Court was there dealing with the question whether in any application under any Act other than CPC Code, Article 137 of the Limitation Act, would be applicable or not. The Supreme Court was not dealing in the last mentioned case with the question whether the claim was barred by limitation or not before the Arbitrator, is a relevant consideration for refusing an application u/s 20 of the Arbitration Act, 1940. In the aforesaid view of the matter it must be held whether a claim bared by limitation or not before the Arbitrator, is not a relevant consideration for and order u/s 20 of the Arbitration Act, 1940 Thus, this contention raised on behalf of the Defendants, therefore is rejected.

The other contention is whether the claim sought to be raised at this time could be allowed. This proposition involves two different considerations. First, whether this present claim had been, in fact, raised before or was part of the previous claim and secondly, whether, if it was not part of the previous claim it could be referred afresh. In ether words the question to be determined is whether Order 2, Rule 2 of the CPC or that of principle of constructive resjudicata u/s 11 is attracted in the instant case or whether the Plaintiff can be deemed to have been estopped from raising the instant dispute in the instant lis.

There are conflicting views taken by different High Courts with respect to the applicability of the aforesaid principles. In case of Seth Kerorimall Vs. Union of India (UOI), it has been held that the same dispute once referred and embodied in an award could not be subject matter of a fresh reference and to that extent rule of resjudicata applied to arbitration proceedings. The learned Judge, however, further held that there was no authority for the proposition that the disputes which could have been raised but were not raised previously could not be raised on the principle of constructive resjudicata. If, however, the Arbitrator in determining his own jurisdiction considered a particular dispute sought to be raised by one party to be not within the reference and therefore, he (the Arbitrator) had no jurisdiction to decide it, then it could not be said that the Arbitrator had adjudicated the dispute. If there had been no such adjudication of the dispute, it could not be held that the subsequent reference to the dispute was bad and was not permissible. The above said rule has been reiterated in the case of Jiwnani Engineering Works Pvt. Ltd. Vs. Union of India (UOI), .

In the case of Aikarma, New Delhi v. Delhi Development Authority, New Delhi AIR 1981 Delhi 230 the learned Judge of the Delhi High Court has also taken a similar view following the case of Kirori Mai AIR 1964 CA 1545 of Calcutta High Court. While following the judgment of Mallick J. in the case of Karori Mai, the learned Judge of Delhi High Court has dissented from the later judgment of the Calcutta High Court by Sabyasachi Mukliarji J. (as he then was) in the case of Jiwnani Engineering Works Pvt. Ltd. Vs. Union of India (UOI), The learned Judge of the Delhi High Court observed:

A learned Judge of the Culcutta High Court (Sabyasachi Mukharji J.) held that though O.II, R. 2 does not in terms apply to proceedings under the Act is no reason why the Principle thereof should not be applied to arbitration proceedings in appropriate case. With respect to the learned Judge I feel bound to differ on the applicability of O. II, R. 2 to arbitration proceedings. The reason is that the arbitrator is not a Court. Order II, 2 applies to proceedings before the arbitrator. It is a penal provision. It is draconian in nature. To apply Order II, R. 2 to arbitrations will not only be illegal but also unjust. I do not deny that the principle of res-judicata applies to arbitration. The doctrine is founded in public policy and applies equally to suits and awards.

It is not possible for me to agree with the view of the Delhi High Court. I am inclined to agree with the view taken by the Calcutta High Court in Jiwnani Engineering Works (Supra). The learned Judge of the Delhi High Court has held that principles of resjudicata apply to arbitration because that doctrine is founded in public policy and applies equally to suits and awards. Order 2, Rule 2 is an analogous principle founded on public policy. The learned Judge of the Delhi High Court has observed that such provision of Order 2 Rule 2 is penal and to apply the same to arbitration it would be illegal and unjust. I am, with respect, unable to agree with any of these objectives. If rule of resjudicata is founded on rational and just public policy, it would equally apply to the extension of the same principle.

Summing up Order 2, Rule 2, of the Code of Civil Procedure, refers to suits and bars the Second suit in respect of a claim omitted or intentionally relinquished in the first suit. The close perusal of this order shows that the principle behind it is salutary. The principle is to prevent multiplicity of proceedings. Order 2, Rule 2 of the Code deals with the vice of splitting a cause of action. The purpose of arbitration proceedings is speedy disposal of disputes by a person of the choice of parties. In fact the aforesaid provision of Order 2, Rule 2 is a rule of complete test wisdom. If it were to attach any indiscriminate and indeed incalculable penalty condition difficult to define, it would not be rule of complete test wisdom. As stated above, the rule is merely to the effect that a person shall include whole of his claim in respect to the same cause of action and omission to sue or intentional relinquishment of either claim thereto or any portion there of would be barred. Thus, in that view of the matter and the object underlying the arbitration proceedings, for the purpose of Order 2, and for the principle of constructive resjudicata and other instances based on sound public policy, ought to apply naturally to arbitration proceedings. No doubt, the claim before the arbitrator is not termed as a suit nor it is decided by a Court. However, pursuant to the consent of the parties the dispute for its adjudication instead of being referred to a Civil Court is referred to a separate forum of Arbitrator Rule Order 2, Rule 2 is analogous principle founded on rational and just public policy. Same analogy applies to the rule of resjudicata.

Besides the judgment of Supreme Court in the case of Munshi Ram v. Banwari Lal AIR 1962 S.C. 930 indirectly lends support to this reasoning. In that case after arbitration award, the parties had arrived at a different settlement and the Curt was asked to pass a decree in terms of the settlement under Order 23, Rule 3 and not in terms of the award and the Court held that the provision of Order 23, Rule 3 would be applicable. The Supreme Court observed that "the power to record such an agreement and to make it a part of the decree, whether by including it in the operative portion or in the schedule to the decree, will follow from the application of the Code of Civil Procedure, by Section 41 of the Arbitration Act and also Section 141 of the Code."

view of the aforesaid position, I hold that provisions of Order 2, Rule 2 as also that of constructive resjudicata are attracted to proceedings before the Arbitrators under the Arbitration Act.

s elementary that the right of a party to a dispute to claim arbitration is routed in the Arbitral ion Agreement, or, as is popularly called, arbitration clause in a contract. The expression "Arbitration Agreement" is defined in Clause (a) of Section 2 of the Act, to mean a written agreement to submit present or future differences to arbitration, whether an Arbitrator is named therein or not. There is also no controversy to the proposition that to make a reference is the sole privilege of the parties including their agents or that of Court. It can be made to an Arbitrator by the parties jointly or by one of them giving notice to the other or on seeking help of the Court, the Court acting on behalf of the party reluctant to make the reference.

Now in the instant case the claimant though had not stated items ''a'' to ''f in the application to the Appointing Authority but he had specifically raised the said disputes before the Arbitrator. It is further to be noted that the Arbitrator had in his order as also the previous award pertaining to the adjudication of the single item, had specifically determined his own jurisdiction and expressed categorically that the aforesaid items ''a'' to ''f had neither been referred to him nor he had any jurisdiction to decide them.

Thus, as earlier stated the question arises whether the claims made by the present Plaintiff are barred in view of the previous claims referred to the Arbitrator but an award having been passed by the later in respect of single item only. The single item in the previous claim was with respect to the recovery of certain amount on account of excess deduction of rebate @ 9.11 %. In other words, this claim was made on the basis of one cause of action namely excess deduction of rebate. In the present suit items ''a'' to ''e'' pertained to different heads than the earlier one. There is also no dispute that additional work during the progress of the work pursuant to Clause 12 and 12-A of the Arbitration Agreement worth about Rs. 35,00,000/- had been given to the Plaintiff due to change in design etc. Also the final bill was accepted by the Plaintiff under protest in relation to different heads. The Plaintiff was entitled to more than one relief in respect of the different cause of action of which had arisen from one transaction. In other words, the instant claims are based on distinct causes of action. It is well settled that if the cause of action in the subsequent suit is different from that in the first suit, the subsequent suit is not barred. It is true that it is not open to a party to raise different disputes in respect of the same cause of action and to have different and successive arbiations but at the same time it has also to be taken into consideration whether the claim had been omitted or intentionally relinquished or the dispute which could have been raised, was not raised. In this suit none of these criteria arise. The Plaintiff had specifically raised the disputes with respect to the aforesaid items but the Arbitrator had confirmed himself only to a single claim and left the items of the disputes now sought to be referred to the arbitration by stating that he had no jurisdiction. To enlarge the powers of the Arbitrator was beyond the control of the Plaintiff. He could have sought the remedy of the Court in this respect. The record shows that he did move the Appointing Authority J to enlarge the ambit of the reference made by him to the Arbitrator but the later did not take any action on a flimsy ground. In action on the part of the said authority culminated into the filing of the instant application u/s 20 of the Arbitration Act which was registered as suit (sic) on July 11, 1989. Thus, in such peculiar circumstances, Order 2, Rule 2 or Section 11 of the CPC are attracted to the facts and circumstances of the instant case.

In the result, the application is allowed. The Chief Engineer (P), H.P., S.E.B., Shimla is directed to refer the disputes as per items ''a'' to T narrated above for the adjudication by appointing an Arbitrator pursuant to Clause-25 of the Arbitration Agreement entered into between the parties. Decree sheet be prepared.

Rule is made absolute to that extent with no order as to costs in the peculiar facts and circumstances of the present case