KOTHARI and ASSOCIATES v. STATE — 1984 DIGILAW 101 (GUJ)

R. A. MEHTA, J. ( 1 ) R. A. MEHTA J. This Revision Application arises from dismissal of an application for referring the dispute to arbitration. The dispute is refused to be referred on the ground that it is barred by the provisions of O. 2 R. 2 C. P. C. Therefore the question is whether the provisions or principles of O. 2 R. 2 C. P. C apply to an application under the Arbitration Act. ( 2 ) THE petitioner is a Construction contractor for certain work at Ukai dam. The work order was given on 17/01/1973 and the work was to be completed within 18 months i. e. before 16/07/1974. However the work was completed on 30/09/1975 and this excess period of 14 months was alleged to be due to delay on the part of the opponent government. The petitioner claimed that the government had extended the time to the detriment of the petitioner. It appears that the final bill was paid on 22/05/1979 and the security deposit was returned on 23rd August 1979. On 7/10/1980 the petitioner addressed a letter making further request and ultimately filed Civil Misc. Application No. 112 of 1981 on 27/03/1981 The petitioner submitted that the work had been completed by the applicant in all aspects and the final bill had been prepared and paid to the applicant on 22-5-1979. However according to the petitioner since the final bill did not represent the true and correct payments the same was accepted by the applicant under protest. The applicant also stated that during the progress of the work certain claims rights and disputes arising out of the contract had been put up from time to time. The plaintiff-petitioner has claimed rights and raised disputes and item No. 1 was as follows:"compensation due to extension of time limit amounting to Rs. 9. 80 lakhs". This dispute along with other disputes was referred to the arbitration by an order dt. 5/10/1981. ( 3 ) ON 14/06/1982 the present Civil Misc. Application No. 196 of 1982 was filed for referring other disputes to arbitration. After narrating the contractual relationship and other averments in the same terms in paras 1 to 3 the petitioner made the following claims rights and disputes: (i) On account of overhead due to prolonging of work amounting to Rs. 3 41 805. 6 ps. Application No. 196 of 1982 was filed for referring other disputes to arbitration. After narrating the contractual relationship and other averments in the same terms in paras 1 to 3 the petitioner made the following claims rights and disputes: (i) On account of overhead due to prolonging of work amounting to Rs. 3 41 805. 6 ps. plus 18% interest p. a. from the date of completion of the work till its payment. (ii) On account of dewatering amounting to Rs. 2 59 200 plus 18 interest p. a. from the date of completion of the work till its payment. (iii) On account of penalty recoveries and cube testing charges amounting to Rs. 14 698. 2 ps. plus 18% interest p. a. from the date of completion of the work till its payment. (iv) On account of overstay of capital and machinery amounting to Rs. 1 71 825 plus 18% interest p. a. from the date of completion of the work till its payment. (v) On account of delay in releasing security deposit and final bill amounting to Rs. 69 959. 1 ps. The learned trial Judge has rejected the application by his order dt. 11/11/1982 on the ground that the claim was barred under the provisions of O 2 R. 2 C. P. C. It was argued on behalf of the Government in the trial court that the applicant had filed previous Civil Misc Appln. No. 112 of 1981 wherein he omitted to claim in respect of the present claim and therefore he is precluded from making the same claim by way of a subsequent application. On behalf of the applicant it was argued that since this was an application under the Arbitration Act and since it was not a suit the provisions of O. 2 R. 2 C. P. C. are not attracted. The trial court observed that there can produce one or more awards in the case of the execution of the work done after making a reference about the previous items of the work already executed. The trial court observed that there can produce one or more awards in the case of the execution of the work done after making a reference about the previous items of the work already executed. Relying on the judgment in the case of Munshi Ram v. Banwarilal AIR 1962 S. C. 903 the learned trial Judge held that C. P. C. is applicable to proceedings in court under the Arbitration Act and on the analogy of said decision the learned trial Judge held that the provisions of O. 2 R. 2 C. P. C would be attracted in the instant case and as the applicant failed to raise the same disputes in his previous application the same are barred under O. 2 R. 2 of C. P. C. ( 4 ) THE learned counsel for the petitioner has challenged this conclusion and submitted that provisions of Order 2 Rule 2 would apply only to a suit and the application under the Arbitration Act is not a suit and therefore that section has no application as a legal provision or even as a principle. Order 2 Rule 2 C. P. C. reads as under:"2 Every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action; but a plaintiff may relinquish any portion of his claim in order to bring the suit within the jurisdiction of any Court. Relinquishment of part of claim: (2) Where a plaintiff omits to sue in respect of or intentionally relinquishes any portion of his claim he shall not afterwards sue in respect of the portion so omitted or relinquished. Omission to sue one of several reliefs: (3) A person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs; but if he omits except with the leave of the Court to such reliefs he shall not afterwards sue for any relief so omitted. Explanation: For the purposes of this rule all obligation and a collateral security for its performance and successive claims arising under the same obligation shall be deemed respectively to constitute but one cause of action. Illustration: a lets a house to B at a yearly rent of Rs. 1200. The rent for the whole of the years 1905 1906 and 1907 is due and unpaid. Illustration: a lets a house to B at a yearly rent of Rs. 1200. The rent for the whole of the years 1905 1906 and 1907 is due and unpaid. A sues B ill 1908 only for the rent due for 1906 A shall not afterwards sue B for the rent due for 1905 or 1907". Rule 3 enables a plaintiff to unite in the same suit several causes of action against the defendant. ( 5 ) THE learned counsel for the petitioner has argued that Order 2 applies to suits only as the title shows Frame of Suit and the reference is to the plaintiff defendant and cause of action whereas an application under the Arbitration Act is an application and not a suit and therefore even if C. P. C. applies it would apply only to suits and it cannot apply to an application under the Arbitration Act. ( 6 ) IN this connection the learned counsel for the petitioner has relied on the decisions of the High Courts of Sind Calcutta and Delhi In the case of Firm of R. B. Brijlal v. Firm of Allah Ditta AIR 1925 Sind 242 following the judgment in the case of Bal Mukund Ruia v. Gopiram Bhotica (1921)24 C. W. N. 775 (AIR 1924 C21. 808) it was held that Order 2 Rule 2 C. P. C. refers to suits and bars the second suit in respect of a claim omitted or intentionally relinquished in the first suit. In the facts of the case before the High Court of Sind at the time of the submission to arbitration the only dispute between the parties then raised was in respect of the non-delivery of 10 tons of March shipment and this the plaintiffs sought to refer under the submission clause. The plaintiffs could not ask the arbitrator to include in his award the sum then in dispute and if the arbitrator had included this sum in his award it would have been attacked as being outside the scope of his authority. The Sind High Court also observed that in the present case the plaintiffs are in effect suing not on the first contract of 1/12/1923 but the three subsequent contracts made by them for sale of sugar and each contract was a separate transaction. The Sind High Court also observed that in the present case the plaintiffs are in effect suing not on the first contract of 1/12/1923 but the three subsequent contracts made by them for sale of sugar and each contract was a separate transaction. Therefore in that case there was no doubt that Order 2 Rule 2 C. P. C. was not attracted at all. But it is true that the High Court had also held that Order 2 Rule 2 would not apply to a claim before the Arbitrator. ( 7 ) THE judgment in the case of Bal Mukund Ruia (supra) has been referred to and followed in the case of Seth Kerorimall v. Union of India AIR 1964 Cal 545 . The learned Judge of the Calcutta High Court held that the same dispute once referred and embodied in an award cannot be the subject matter of a fresh reference and to that extent the rule of res judicata applies to arbitration proceeding. But he further held that there is no authority for the proposition that disputes which could have been raised but were not raised previously could not be raised on the principle of constructive res judicata. He further proceeded to observe that there is authority for the proposition that the principle of Order 2 Rule 2 is not applicable to arbitration proceedings. It is not necessary for me in the instant case to consider to what extent the rule of constructive res judicata is applicable to arbitration proceeding because I hold on fact that the instant dispute was expressly left out of consideration in the previously arbitration proceeding on the ground that the arbitrator lacked jurisdiction to entertain the dispute. (para 9 of the judgment ). Following observations of Rankin J. from Balmukunds case are quoted:"or. II R. 2 is a special provision doubtless of the completest wisdom but unknown to the common law one moreover which attaches an indiscriminate and indeed incalculable penalty to a condition difficult to define. There is I think a cardinal error involved in any attempt to appeal even to the principle on which the Rule is founded for the jurisdiction of an arbitrator depends not upon the existence of a claim or the accrual of the cause of action but upon existence of a dispute". There is I think a cardinal error involved in any attempt to appeal even to the principle on which the Rule is founded for the jurisdiction of an arbitrator depends not upon the existence of a claim or the accrual of the cause of action but upon existence of a dispute". ( 8 ) THE petitioner has also relied on the case of S. P. C. Engineering Co. v. Union of India AIR 1966 Cal 259 where it was held that no notice under sec. 80 C. P. C. is required in the case of a proceeding under sec. 20 of Arbitration Act even though such proceedings may be described as a suit and the court declined to non-suit the plaintiff in that case on the ground that notice had not been served in accordance with the provisions of sec. 80. C. P. C. There is no discussion about Order 2 Rule 2 C. P. C. ( 9 ) IN the case of M/s. Alkarma New Delhi v. Delhi Development Authority New Delhi and Anr. AIR 1981 Del 230 the learned Judge of the Delhi High Court has also taken a similar view following the case of Seth Kerorimall of Calcutta High Court. While following the judgment of Mallick J. in the case of Seth Kerorimall the learned Judge of of Delhi High Court has dissented from the latter judgment of the Calcutta High Court by Sabyasachi Mukharji J. (as he then was) in the case of Jiwnani Engineering Works Pvt. Ltd. v. Union of India ( AIR 1978 Cal 228 .) The learned Judge of the Delhi High Court observed:"a learned Judge of the Calcutta High Court (Sabyasachi Mukharji J.) held that though Order 11 Rule 2 does not in terms apply to proceedings under the Act there is no reason why the principle thereof should not be applied to arbitration proceedings in appropriate cases. With respect to the learned Judge I fell bound to differ on the applicability of Order 1 Rule 2 to arbitration proceedings. The reason is that the arbitrator is not a Court. Order II Rule 2 applies to proceedings. before a Court. It cannot apply to proceedings before the arbitrator. It is a penal provision. It is draconian in nature. To apply Order II rule 2 to arbitrations will not only be illegal but also unjust. The reason is that the arbitrator is not a Court. Order II Rule 2 applies to proceedings. before a Court. It cannot apply to proceedings before the arbitrator. It is a penal provision. It is draconian in nature. To apply Order II rule 2 to arbitrations will not only be illegal but also unjust. I do not deny that the principle of res-judicata applies to arbitration. That doctrine is founded in public policy and applies equally to suits and awards". ( 10 ) 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 res judicata apply to arbitration because the doctrine is founded in public policy and appalies 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 arbitrations it would be illegal and unjust. I am with respect unable to agree with any of these adjectives. If rule of res judicata is founded on rational and just public policy it would equally apply to the extension of the same principle. In the case of Balmukund Ruia (supra) Rankin J. had observed that No. 11 R. 2 is a special provision doubtless of the completest wisdom but unknown to the common law one more over which attaches an indiscriminate and indeed incalculable penalty to a condition difficult to define. Although I am unable to agree with the latter part of the above quotation it is clear that the provisions of Order 2 Rule 2 is a rule of completest wisdom. If it were to attach any indiscriminate and indeed incalculable penalty to a condition difficult to define it would not be rule of completest wisdom. 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 in respect of any portion of his claim would be barred. 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 in respect of any portion of his claim would be barred. This is a salutory provision which prevents multiplicity of proceedings and avoids the vice of splitting up the cause of action as observed by the learned Judge in the case of Jiwnani Engineering Works. This principle ought to apply with greater force to the arbitration proceeding which is meant for speedy disposal of disputes and if successive disputes on the same cause of action could be raised that would defeat the very objective of arbitration proceedings. The claim before the arbitrator is clearly in the nature of a suit and instead of a Civil Court adjudicating upon the claim a separate forum of arbitrator adjudicates upon the same claim. Therefore for the purpose of Order 2 Rule 2 and for the principles of constructive res judicata and other principles based on sound public policy ought to apply naturally to arbitration proceedings. I am in respectful and complete agreement with the reasoning and conclusion of the learned Judge in the case of Jiwnani Engineering Works. ( 11 ) THE judgment of the Supreme Court in the case of Munshi Ram v. Banwarilal A. I. R. 1962 SC 903 indirectly lends support to this reasoning. In that case after arbitration award the parties had arrived at a different settlement and the court 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 provisions 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 sec. 41 of the Arbitration Act and also sec. 141 of the Code. ( 12 ) IN view of the aforesaid position I hold that the learned trial Judge was right in holding that Order 2 Rule 2 applies to the proceedings in court under the Arbitration Act. by sec. 41 of the Arbitration Act and also sec. 141 of the Code. ( 12 ) IN view of the aforesaid position I hold that the learned trial Judge was right in holding that Order 2 Rule 2 applies to the proceedings in court under the Arbitration Act. ( 13 ) THEN the question arises whether the claims made by the present applicants are barred in view of the previous claims referred to the arbitrator. The first item in the previous claim was compensation due to extension of time limit amounting to Rs. 9. 80 lakhs. Thus this claim was made on the basis of one cause of action namely extension of time limit and compensation on that count. In the present application items Nos. 1 and 4 are also based on the very same cause of action and in this cause of action the petitioner was entitled to make and include the present claim in his previous application and if the plaintiff has omitted to sue in respect thereof he cannot afterwards c)aim the same in respect of the same cause of action. ( 14 ) THE learned counsel for the petitioner has sought to draw a distinction between his previous claims due to delay or extension of time and the present claims. It is contended that in the previous claim the compensation for delay and extension of time was based on certain heads and the present claim is based on different heads. It is not posssible to agree with the contention of the petitioner because the cause of action is the same and whatever claims (whole of the claim) in respect of the same cause of action is required to be included in one claim or dispute. 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 arbitrations. If in one arbitration the arbitrator were to hold that the government is not liable to make payment for delay or extension of time that finding would operate as res judicata (regarding the applicability of the principle of res judicata there is unanimity of opinion amongst all the courts ). If in one arbitration the arbitrator were to hold that the government is not liable to make payment for delay or extension of time that finding would operate as res judicata (regarding the applicability of the principle of res judicata there is unanimity of opinion amongst all the courts ). But when arbitrator holds government liable for payment due to delay or extension of time to a certain extent and quantifies the amount it cannot be left open to a party to claim further amount under so-called different heads. The reference was made for compensation due to extension of time and all claims for that purpose are required to be made in that application and the arbitrator has to decide that claim only and it is not open to the party to raise a new claim in respect of the same cause of action which had already arisen when the first application was made. Therefore the learned Judge was right in holding that the present application in respect of items Nos. 1 and 4 is barred on the principle underlying 0 2 R. 2 C. P. C. ( 15 ) HOWEVER it is not possible to uphold the award of the learned trial Judge with respect to items Nos. 2 3 and 5. It is true that these questions and claims could have been made by the applicant at the time of his previous applications and the provisions of 0. 2 R. 3 enable the plaintiff to include and unite in the same claim several causes of action against the same defendant. However this is merele an enabling provision and in respect of different causes of action the person has liberty to unite or not to unite the same in one application and if he thinks not to unite claims in respect of different causes of action the bar of 0. 2 R. 2 would not be attracted. The person is free to restrict his claim in respect of one cause of action in one action and to reserve his right to make a different and separate claim in respect of claims under other causes of action. It is not the omission to sue or claim but it is the right given to a party to make a separate and independent claim in respect of separate and independent causes of action. It is not the omission to sue or claim but it is the right given to a party to make a separate and independent claim in respect of separate and independent causes of action. Therefore the position is that the provisions and principle underlying 0. 2 R. 2 are not attracted to the claims made under items Nos. 2 3 and 5 of the present application and this is required to be referred to the arbitrator and to that extent the order of the learned trial Judge deserves to be quashed and reversed. 16 In the result the Revision Application partly succeeds and the impugned order is partly set aside and partly confirmed. The order refusing to make reference is confirmed in respect of items Nos. 1 and 4 and is set aside in respect of items Nos. 2 3 and 5 and it is directed that Shri G. N. Vaidya retired Superintending Engineer Government of Gujarat is appointed the sole arbitrator to arbitrate upon the disputes narrated at items Nos. 3 and 5. 17 Rule is made absolute to that extent with no order as to costs. Appeal partly allowed .