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1992 DIGILAW 460 (DEL)

PEOPLE CO OPERATIVELABOUR AND CONSTRUCTIONSOCIETY LIMITED v. UNION OF INDIA

1992-09-17

C.L.CHAUDHRY

body1992
CHAUDHRY ( 1 ) THIS is a petition under Section 20 of the Arbitration Act seeking direction to the respondents to file the arbitration agreement and for reference of the additional disputes to the arbitration for adjudication. It is alleged that the petitioner entered into a contract for the work of "formation of designed Section of Ghazipur Drain and Desilting of cunnette from R. D. O. to R. D. 6180m". The work was awarded on 20-3-1982 and the date of starting the work was to be recokned from the 7th day from the date of award, i. e. , from 27-3-1982 as per terns of the agreement. In terms of the agreement the work was to be completed within 4 months, i. e. , by 26-7-1982, but it was actually completed on 6-7-1982. According to the petitioner they performed the contract to the entire satisfaction of the department but at the time of making payment, the department did not make the payment as per the work executed by them. Disputes arose between the parties. The petitioner invoked the arbitration clause. But the arbitrator was not appointed by the Appointing Authority. Thereafter the petitioner filed a petition under Section 20 of the Arbitration Act in this Court (being Suit No. 369/l983 ). In that petition, the petitioner raised 7 dispute claims which were required to be referred for arbitration. In the petition a note was also appended which reads as under :- note : The claimants reserved their right to file, add subtract, amend alter any claim (s) which comes to light on going through the records of the department during the course of hearings. The petition was allowed by order dated 25-11-1983 and direction was given to the Chief Engineer, Irrigation and Floods, delhi Administration, Delhi to appoint an arbitrator within one month from that date. It is further alleged that a note was appendent because the respondents were not showing their records to the petitioner and there was very likelihood that there was increase or decrease in the amount. The petitioner did not want to create multiplicity of proceedings and wrote to the Appointing authority for reference of additional disputes which the petitioner came to know in going through the records later on, to the same arbitrator before whom the disputes were pending for adjudication. The petitioner did not want to create multiplicity of proceedings and wrote to the Appointing authority for reference of additional disputes which the petitioner came to know in going through the records later on, to the same arbitrator before whom the disputes were pending for adjudication. The Appointing Authority did not accede to the request of the petitioner and as such the present petition has been filed. ( 2 ) THE additional disputes which are required to be referred to the arbitrator are as under :- (I) Claim No. 2 already stands REFERRED TO the learned arbitrator but the amount shown is mentioned as rs. 4,63,582. 75 which in fact on going through the record comes to the tune of Rs. 5,47,916. 16. As such reference to the learned arbitrator is required to be made of the said increased amount of rs. 5,47,916. 16; (ii) Another claim which is required to be REFERRED TO the learned Arbitrator is Rs. 2,95,918. 28 on account of executing the work under foul conditions. The claimants petitioners are entitled to the said amount as they had worked under the foul conditions and the schedule (Delhi Schedule of Rates) specifically mentions of 25 % extra to be paid in case the work is executed under foul conditions. (iii) Insertion of the note which has been omitted by the appointing Authority in the appointment letter, i. e. , "note : The claimants reserve their right to file, add subtract, amend alter any clalm (s) which come to the light on going through the records of the department during the course of hearings" may also be mentioned in the letter of reference when made with regard to the said disputes. ( 3 ) IN these premises it is claimed that the additional disputes may be REFERRED TO the sole arbitrator before whom the diputes are pending. ( 4 ) THE petition is contested on behalf of the Union of India on various grounds inter alia that the petitioner failed to complete the work and the respondents were obliged to rescind the agreement on 30-4-1983. No amount was due to the petitioner. The petitioner had abandoned the work incomplete and is not entitled to take advantage of its own wrong. The note relied upon by the petitioner society is irrelevant. Only a claim can be preferred to arbitration and not a note . No amount was due to the petitioner. The petitioner had abandoned the work incomplete and is not entitled to take advantage of its own wrong. The note relied upon by the petitioner society is irrelevant. Only a claim can be preferred to arbitration and not a note . The additional claims as are now being raised were not only never raised by the petitioner society either during the course of execution of the work or at any later stage prior to the reference by the learned arbitrator. The claims are absolutely barred. The petitioner is not entity to raise any demand after the expiry of 90 days and are deemed to have waived these claims. ( 5 ) REJOINDER was filed in which the contentions raised by the respondent were repudiated and the pleas made in the petition were reiterated. ( 6 ) ON the pleadings of the parties the following issues were framed :- (1) Whether the additional disputes mentioned in the petition are referable to arbitration ? (2) Relief. ( 7 ) I have heard the learned counsel for the parties and have given by thoughtful consideration to the matter involved. ( 8 ) AT the outset it may be stated that Mr. Lakhanpal did not press the additional claims mentioned in paras 9 (i) and 9 (in ). The contention of Mr. Lakhanpal is that the additional claims raised in para No. 9 (ii) of the petition can be referred for arbitration and there is no legal bar to it. In support of hiscontention mr. Lakhanpal relied upon a judgement of this court in Delhi development Authority Vs. M/s. Alkarma; (AIR 1985 Delhi 132) (1 ). In this case the question which arose for determination before the Court was wheher the provisions of Order 2 Rule 2 cpc were applicable to arbitration proceedings. It was held as under :- "the jurisdiction of the arbitrator is dependent upon the terms of reference. If, supposing, what was referred for adjudication to the arbitrator were all the disputes between the parties but the claimant originally sought relief only with respect to 10 items, it could certainly ask the arbitrator to permit him to raise 5 more claims provided, of course, that the arbitration proceedings had not concluded. The arbitrator would have the jurisdiction and the power to entertain more claims during the pendency of the proceedings. The arbitrator would have the jurisdiction and the power to entertain more claims during the pendency of the proceedings. The power to be exercised by the arbitrator would be similar to the power given to a civil court by the provisions of Order 6 Rule 17. The difficulty, however, arises where there is no such general reference but, as in the present case, specific disputes have been REFERRED TO arbitration. We feel that because the arbitrator would obviously have no jurisdiction to entertain more disputes, it cannot be said that the claimant has no remedy open to him. If by. mistake, as in this case, or otherwise, the claimant has omitted to raise some disputes but the arbitration proceedings have not yet concluded, then by invoking the principles analogous to Order 6 Rule 17 the claimant can ask the Engineer Member to refer the additional disputes to arbitration. It has been conceded, and we think rightly so, by Mr. Sistani that the Engineer Member could, when a request was made by the respondent on 3rd Oct. , 1979, refer the additional disputes to that very arbitrator, namely, Shri G. Subramanyam. If the Engineer member could refer the said disputes to the arbitrator, we see no reason why the court, while exercising its power under Section 20 of the Act, cannot direct the said disputes to be REFERRED TO arbitration. To put it differently, just as the principles analogous to Order 2 Rule 2 are applicable to the arbitration proceedings, similarly, principles analogous to Order 6 Rules 17 would also be applicable. We are unable to agree with the learned Single Judge that in no case would the provisions of Order 2 rule 2 be applicable. While the learned Single Judge has rightly held that the principles of res judicata apply to arbitration proceedings, but we are unable to agree with him that the provisions of Order 2 rule 2, which according to the learned Single Judge are draconian in nature, would never be applicable. In our opinion, the provisions of Order 2 Rule 2 would apply, as we have already stated hereinabove, if the request for referring more disputes to arbitration is made after the making of the award. Once an award has been made, a party cannot be permitted to raise more disputes which hejit could and ought to have raised earlier. In our opinion, the provisions of Order 2 Rule 2 would apply, as we have already stated hereinabove, if the request for referring more disputes to arbitration is made after the making of the award. Once an award has been made, a party cannot be permitted to raise more disputes which hejit could and ought to have raised earlier. Where, however, an award has not been made, it is open to a claimant to ask for more disputes to be REFERRED TO arbitration provided the arbitration proceedings are not yet over. In such an event, if the authority competent to appoint an arbitrator and to refer the disputes, fails to do so, the Court has the jurisdiction to order the filing of the arbitration agreement and to direct the engineer Member to refer the disptues to arbitration. " ( 9 ) ON the other hand the contention of Mr. Mahajan is that the additional claims cannot be referred for arbitration because the award has already been made on 7-3-1988 in respect of the claims which were REFERRED TO the arbitrator for adjudication. The claimants should have raised these claims in the petition filed in Suit No. 369/1983 because this claim according to the petitioner had arisen and was in existence at that time. The petitioner did not include this claim in the previous suit as such it was deemed to be abandoned. Order 2 Rule 2 of the Code of civil Procedure is applicable to arbitration proceedings. As such the claim cannot be referred now. ( 10 ) IN support of his contention Mr. Mahajan relied upon a recent judgement of the Supreme Court in the case of K. V. George Vs. Secretary to Govt. , Water and Power Department, trivendrum; AIR 1990 SC page 53. In this case the contractor entered into agreement with the State of Kerala tor execution of certain works. Certain disputes arose between the parties out of the execution of that work. The contractor filed claims before the named arbitrator i. e. the Chief Engineer claiming enhancement of the work awarded under the contract. The State filed a defence statement and raised certain counter claims. The arbitrator made the award in regard to the claims filed by the contractor directing the State to pay certain amount. The contractor filed claims before the named arbitrator i. e. the Chief Engineer claiming enhancement of the work awarded under the contract. The State filed a defence statement and raised certain counter claims. The arbitrator made the award in regard to the claims filed by the contractor directing the State to pay certain amount. Regarding counter claim of the State it was ordered that this issue would be considered separately and so no award was made. The award was filed in the court for making it a rule of the Court. The Subordinate judge remitted the reference to the arbitrator for fresh consideration on the ground that the arbitrator did not consider the counter claims made by the respondents. The contractor filed another arbitration case before the same arbitrator in respect of the wrongful termination of the contract and also raised certain items of claims therein. The arbitrator also decided 13 items of the claims submitted subsequently before him. The award was filed in court which was made rule of the court, dismissing the plea of res judicata raised by the State. State filed an appeal before the High Court which held that the principle of constructive res judicata would apply to the arbitration case. Feeling aggrieved by the aforesaid judgement of the High Court, the contractor preferred the appeal on Special Leave to the Supreme court. On behalf of the contractor it was contended before the supreme Court that the principles of res judicata and constructive res judicata were not applicable to the second award. The order of the High Court setting aside the award was unwarranted and was not sustainable. It was also contended that the claim made in the second claim petition before the Arbitrator was not barred under Order 2 Rule 2 of the Code of Civil Procedure in as much as the dispute raised in the second claim were not ripe for referring as the appellant had to wait till the end of the stipulated period in accordance with the terms of the contract. On the other hand the contention on behalf of the State before the supreme Court was that in view of the provisions of Section 41 of the Arbitration Act, which specifically provides (hat the provisions of the Code of Civil Procedure shall apply to the arbitration proceedings, the principles of res judicata 01 of constructive res judicata would apply to arbitration proceedings. The appellant contractor having not raised all his claims in his first claim petition made to the arbitrator for decision and award baying been made thereon, the second claim petition before the arbitrator making certain other claims was barred by the principles of constructive res judicata in as much as on the termination of the contract the contractor could have raised all his disputes arising out of the contract at that time. But the appellant chose to take only some of the issues arising from the said breach of contract before the Arbitrator. The second claim petition raising some issues before the Arbitrator was therefore hit by the principles of res judicata and the High Court rightly allowed the appeal, setting aside the award. It was also contenced that the provisions of Order 2 P. . ule 2 of the Code of Civil Procedure apply to the arbitration case and the appellant having not sought reference of all the issues, he should be deemed to have surrendered those issues and he is rebarred from raising those issue in a subsequent claim petition made before the arbitrator. The Supreme Court upheld the contention of the State and held as under :- "in the instant case, the contract was terminated by the respondents on April 26. 1980 and as such ail the issues arose out of the termination of the contract and they could have been raised in the first claim petition filed before the Arbitrator by the appellant, this having not been done the second claim petition before the arbitrator raising the remaining disputes is clearly barred. "it was further held by the Supreme Court as under :- "considering the above observations of this court in the case of Satish Kumar Vs. "it was further held by the Supreme Court as under :- "considering the above observations of this court in the case of Satish Kumar Vs. Suiinder Kumar, AIR 1970 SC 833 , we hold that the principles of res judicata or for that matter the principles of constructives res judicata apply to arbitration proceedings and as such the award made in the second, arbitration proceedings being arbitiation case No. 276 of 1980 cannot be sustained and is therefore set aside. The high Court has rightly allowed the F. M. A. No. 304 of 1982 holding that the appellant contractor was precluded from seeking the second reference. " ( 11 ) I have given my froughtful consideration to the entire matter. In my opinion the contention of Mr Mahajan is well founded and shall prevail. The Suppreme Court has categorically held in the case of K. V. George (Supra) that all disputes claims which are available to a party should be raised at the first instance and if any such claim 01 dispute is not so raised, then raising of the remaining disputes subsequently, is clearly barred under the provisions of Order 2 Rule 2 CPC In view of this, the petitioner cannot derive any assistance from the case of m/s. Alkarma (Supra ). This is not the case of the petitioner that the dispute which is sought to be referred now had not arisen when Suit No. 369/1983 was filed in this court. Section 41 of the Arbitration Act provides that the provisions of Code of Civil procedure shall apply to all proceedings before the Court under the Arbitration Act. The petitioner should have included this dispute also in the previous suit i. e. Suit No. 369 1983. This was not done. It necessarily follows that this dispute claim shall be deemed to have been abandoned. As such the present suit is clearly barred under Order 2 Rule 2 CPC. The petitioner cannot now ask for the second reference in respect of the dispute which was available to him and was not included in the previous suit. It was also contended by Mr. Lakhanpal that in the previous suit the reference was in respect of the specific disputes and not a general reference. In my opinion, it would not make any difference. It was also contended by Mr. Lakhanpal that in the previous suit the reference was in respect of the specific disputes and not a general reference. In my opinion, it would not make any difference. Even otherwise the award in respect of the claims which were referred for arbitration in the previous suit, was made on 7-3-1988 and as such the present suit is barred under the principles of constructive res judicata. ( 12 ) IN view of my above discussion it necessarily follows that the suit is without merit and deserves dismissal. Accordingly the suit is dismissed. However, in the circumstances of the case, the parties are left to bear their own costs.