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Seth Kerorimall Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectContract;Arbitration
CourtKolkata High Court
Decided On
Case NumberSuit No. 241 of 1963
Judge
Reported inAIR1964Cal545
ActsCode of Civil Procedure (CPC) , 1908 - Section 11 - Order 2, Rule 2
AppellantSeth Kerorimall
RespondentUnion of India (Uoi)
Appellant AdvocateDebi De, Adv.
Respondent AdvocateBhabra, Adv.
DispositionPetition dismissed
Cases ReferredPushraj Puranmal v. Clive Mills Co. Ltd.
Excerpt:
- .....1. this is an application challenging the existence of an arbitration agreement in respect to the dispute raised by the respondent. there is an alternate prayer for revocation of submission.2. the petitioner is a contractor who executed certain construction works for south eastern railway. the terras o contract are usual and are evidenced by an agreement numbered 129/con/ s. e. rule (sic)/56. the work was completed on july 31, 1958. as usual, in the case of such contracts, there were running bills followed by a final bill. the various items in the final bill of the contractor having been disputed, the contractor by his letter dated november 20, 1961, invoked the arbitration clause in the agreement and requested the general manager to appoint an arbitrator to adjudicate the contractor's.....
Judgment:
ORDER

P.C. Mallick, J.

1. This is an application challenging the existence of an arbitration agreement in respect to the dispute raised by the respondent. There is an alternate prayer for revocation of submission.

2. The petitioner is a contractor who executed certain construction works for South Eastern Railway. The terras o contract are usual and are evidenced by an agreement numbered 129/Con/ S. E. Rule (sic)/56. The work was completed on July 31, 1958. As usual, in the case of such contracts, there were running bills followed by a Final Bill. The various items in the final bill of the contractor having been disputed, the contractor by his letter dated November 20, 1961, invoked the arbitration clause in the agreement and requested the General Manager to appoint an arbitrator to adjudicate the contractor's claim fully set out in the said letter. The total claim of the contractor amounts to Rs. 3,66,642/-. This consists of claim for works done, refund of deposit amounting to Rs. 24,000/- and liquidated loss for withholding payment for more than four years assessed at Rs. 2 lakhs. Pursuant to this request the General Manager appointed Shrj U. G. K. Rao, Chief Engineer, D. B. K. Railway as arbitrator on or about November 25, 1961. In the state of facts filed by the contractor before the arbitrator, the claims as made in the contractor's letter were stated with reasons therefor. In the counter state offsets filed by the respondent each and every claim 50 made was disputed. It appears that during the arbitration proceedings the respondent purported to make a counter claim against the contractor for Rs. 56,761/-, on the basis that the contractor was wrongly paid the said sum for 'spreading work' to which, he was not entitled under the contract. This claim was admittedly not made in the counter state of facts filed by the respondent. The arbitrator did not allow the respondent to put forward this counter claim, on the ground that the General Manager did not refer this dispute to him. In consequence he was not competent to adjudicate this dispute. Ultimately the arbitrator gave an award in favour of the contractor for Rs. 105,257-55 nP.

3. On June 18, 1962, the Chief Engineer,South Eastern Railway requested the General Manager to appoint an arbitrator to adjudicate the claimof the Railway Administration for the said sumof Rs. 56,761/-. The letter concludes with thefollowing observation :

'During the last hearing of the above arbitration, the fact that the Railway has a claim against the contractor under the instant contract was brought to the notice of the Sole Arbitrator, Shri U. G. K. Rao, who decided that he could not entertain the said claim of the Railway Administration as it was not included in the instant reference to him. It is therefore, requested that the Railway's claim for Rs. 56,761/- as stated above be referred to the Sole Arbitrator for decision.'

Thereupon, the General Manager appointed the same arbitrator, namely Shri U. G. K. Rao, Chief Engineer, D. B. K. Railway Project, as the sole arbitrator to adjudicate the claim of over-payment. In the statement of claim filed by the Union of India, the case made will appear from paragraphs 7 to 11 as set out hereunder:

'7. It is submitted that the payment for spreading as a separate item of work as paid in this case is not payable for the reasons explained hereunder.

8. Item A. 40 i.e., the appropriate item for spreading charges is a specifically separate item meant to cover cases where levelling of earth, moorum, cinder etc. is involved in Station, platforms or football grounds. If the rate against item A. 40 (3/12/- per cent cft. ) is compared with the rate against item R/3 (-/6/- per cent cft.) it is obvious that the work contemplated against this item is more or less similar to spreading moorum etc. as a topping on road. The work involved in this case namely forming a bank from the original grounds to the formation, is quite different from that contemplated in the work of spreading earth.

9. The contractor has been paid the appropriate lead charges which includes the cost of leading into truck/tram on one end and unloading the same at the other end and also stacking after unloading. It is, therefore, obvious that as the contractor could take the material directly into the truck/trams and also take them to the exact site where it was required to be delivered there was no additional operation of spreading as envisaged in this item A. 40. The amount of effort required for dressing the banks was more or less the same as would be required for stacking the earth, cost of which is already included in the lead rates.

10. The claimant, therefore, submits that an amount of Rs. 56,761/- calculated at 350% above tender percentage on item 6 of bill No.--C. C. 8 and Final dated 4.2.61 (Converted to O/A bill) was overpaid to the Opposite party through inadvertence and the claimant is entitled to the refund of the said sum of Rs. 56,761/-.

11. The claimant, therefore, prays for an award of Rs. 56,761/- as per paragraph 10 above and also cost and further relief.'

In the counter state of facts filed, the case of the contractor has been made out in paragraphs 2 and 3 which read as follows :

'2. The opposite party contends :--

(a) That the General Manager has no power under Clause 34 of the General conditions to make successive nominations of arbitrators in respect of different disputes under the same contract -- all in existence at the tune of the first nomination of proceedings.

(b) That the nomination of an arbitrator in this case is without jurisdiction, incompetent and illegal,

(c) That the proceedings are illegal ab initio and the opposite party does not/submit to the jurisdiction, if any, of the arbitrator,

3. Without prejudice to the contentions aforesaid, the opposite party further contends :

(a) That the claim herein is barred under the principles of res judicata.

(b) That the claim had been made in the said earlier proceedings and rejected,

(c) That the amendment of the Union of India's defence to the opposite party's claims in the previous proceedings was not allowed by the said learned arbitrator.

(d) That the claim herein cannot be permitted to be raised at all.'

4. The present Notice has been taken out by the contractor on July 26, 1963 challenging the reference.

5. That the claim for refund of the amount overpaid on account of a particular work is a dispute and that such a dispute is covered by the arbitration clause in the contract has not been as indeed it cannot be disputed. The contractor's case is that the subject-matter of the previous arbi-tration proceeding was the claim of the contractor for works done in respect to the same contract. The claim was disputed. The dispute now raised could have been raised in the first proceedings. In fact, it was raised, but rejected and disallowed by the arbitrator. In law, a second reference of the same dispute is not permissible. If I can hold on the facts, of the instant case, that the instant claim for over-payment was the subject matter in the first arbitration proceeding and the claim was disallowed in the award made, then this contention of the contractor must be upheld and there would be a declaration that the arbitration clause is no longer effective to adjudicate the claim for refund made by the Government. I am, however, satisfied that there has been no such adjudication of the claim for refund. In the counter state of facts filed by the Government in answer to the contractor's claim as made in the state of facts in the first proceeding, this claim for refund was not specifically taken. When, therefore, the point was sought to be raised by the Government, the arbitrator disallowed the contention, not on the ground that the claim was unsubstantial but on the ground; that the dispute did not come within the ambit of the reference made to him and, therefore, he had no jurisdiction to adjudicate the dispute. If the arbitrator, in determining his own jurisdiction considers a particular dispute sought to be raised by one party to be not within the reference, then it cannot be said that the arbitrator adjudicated the dispute. If there has been no such adjudication of the dispute, I cannot hold that the subsequent reference of the dispute is bad and not permissible I am unable to hold, in the facts of the instant case, that there has been a decision already by the arbitrator of the claim for over-payment now sought to be referred. The reference cannot be held to be illegal on the ground of res judicata or principles analogous thereto.

6. Before I take up the other arguments advanced by Mr. Debi De, learned counsel appearing in support of this application it is convenient to consider some of the authorities that have been placed before me by learned Counsel on either side. The first case cited is the decision of the House of Lords in the case of Chandmull v. Donald Campbell and Co., reported in extenso in 23 Cal WN 707 (FN). In the House of Lords case there were two successive arbitrations in respect to the same contract. The first award determined that the seller was in default and fixed the default price. The amount so found, however, was not directed by the award to be paid by the seller. Thereupon, the matter was again referred by the buyer to arbitration a second time. It was held that the seller having refused to pay damages as determined by the first arbitration, there was a dispute which could be referred under the arbitration clause and this dispute was different from the dispute previously referred. The previous award, therefore, did not operate as a bar to the subsequent reference and the award made thereunder was not invalid in consequence. In the case of Balmukund Rina v. Gopiram Bhotica 24 Cal W. N. 775 : (AIR 1920 Cal 808 (2)) Justice Rankin held that

'there may be as many awards as there are disputes arising out of the same contract. The sub-mission is not exhausted by reason of the morefact that one award final and complete in itself has issued from it.'

Attempt was made by Sir Binod Mitter to apply the principles of Order 2 Rule 2 to arbitration proceeding so as to prevent successive reference in respect to the same contract. The argument was repelled by Rankin J. with the following observation at pp, 781-782 (of Cal WNJ : (at pp. 812-813 of AIR) :

'Order II Rule 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 oven 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. And his right to entertain a second case depends not on the identity of the cause of action, but on the identity of the matters in dispute. Where there has been an award not set aside, everything decided by it will be deemed conclusively to have been disputed. The first award if valid covers the whole of the issues raised and covers nothing else; any issue not raised is, if disputed, another dispute. In the case referred to already the House of Lords applied this principle to affirm the validity of a second award on what was really the same claim. Of such a case it is important to say and I think the House of Lords has implied that the second dispute must arise subseqently to the first. But in other cases such a requirement would be either meaningless or wrong. If a dispute exists now; if neither party treated the issue as in dispute upon the previous-arbitration; if it is not in substance a dispute about the same thing or covered by the first award then the most positive proof that the parties were in difference about it before the first case was launched, will not affect the arbitrator's jurisdiction.'

7. In the case of Conquer v. Boot, (1928) 2 K. B. 336 it was held that claims for damages for the breach of the same contract, cannot be made in successive suits. In this case, the plaintiff instituted a suit against the contractor for breach of contract to complete works in good and workmen-like manner. In the particulars no complaint was made that proper materials were not used for construction. In a subsequent suit the plaintiff claim-ed for further damages for breach of contract. In the second suit the complaint was that proper materials were not used for construction. The Court held that in both the cases the cause of action was the same and the second suit was barred. In the case of H. E. Dan'els Ltd. v. Carmel Exporters and Importers Ltd., (1953) 2 Q. B. 242. The Court was asked to apply the rule in Conquer's case, 1928-2 K. B. 336 in arbitration proceedings. Pilcher, J. at p. 254 was apt to think that on prin-ciple there appears to be a possible distinction between a judgment and award of the arbitrator.

'The principle there appears to me to be a possible distinction^ which may be important on this point between a judgment and the award of an arbitrator. In note (a) at p. 624 of Bullen and Leake, 3rd Edn. it is said : A judgment recovered by the plantiff in an action merges the original cause of action in the higher security and affords a good defence to a second action for the same cause.'

xxxxx

'For the purpose of this judgment I am prepared to assume that if the defendants had taken steps to have the award in the second arbitration stated in the form of a special case raising the point which they now put forward, they might well have been held entitled to succeed under the decision in 1928-2 K. B. 336.

If the special case as indicated brought the dispute-within the purview of the previous arbitration, then the arbitrator would have been deemed to have decided the dispute and no second reference would lie.

8. In the case of Pushraj Puranmal v. Clive Mills Co. Ltd. : AIR1960Cal180 , P. B. Mukharji J. made the following observation at p. 183;

'One arbitration agreement therefore can produce one or more awards and the law of arbitration, as I understood it, does not nurse any dogma to say that it can never do so under any circumstances because of some fancied universal doctrine of legal merger of the arbitration agreement in the award. The records of arbitration are replete with numerous instances where under particular arbitration agreements or special rules of arbitration the same arbitration agreement has given rise to interim awards supplemental awards and successive awards. See Russel's Arbitration 16th Edn. pages 230 and 289. Whether in a particular case the arbitration agreement can do so or not will depend primarily on the connotation and denotation of the arbitration agreement itself and secondarily on the nature of the dispute referred and the terms and character of the award thereupon. This is however very far from saying that the same point can be decided over and over again by different awards, which of course, cannot be done',

9. It follows from the authorities noted above 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 judi-cata applies to arbitration proceeding. There is no authority for the proposition that disputes which could have been raised but were not raised previous-ly, could not be raised on the principle of constructive res judicata. There is authority for the proposition that the principles of Or. II r. 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 previous arbitration proceeding on the ground that the arbitrator lacked jurisdiction to entertain the dispute.

10. Let me now refer to the argument pi Mr. De. It is contended that after the completion of the contract, when the final bill was submitted by the contractor, the Union Government have no power to make successive reference. The argument is that disputes having arisen under the contract, the Union Government has no power to pick and choose some disputes leaving others to be referred later. In making this argument Mr. De makes an assumption. The assumption is that the disputes which were the subject matter of the previous reference were disputes referred by the Government. But this assumption is not warranted. It is true that under the arbitration clause when a dispute is raised by either party, the arbitrator is to be appointed by the General Manager to whom the disputes are to be referred. That is all the General Manager has done. But this is not the same thing as saying that the Government has referred the dispute. The first reference was at the instance of the Contractor and the instant reference is the only reference made by the Union Government. It is further to be noted that the Government was compelled to make this reference because the dispute when raised in the previous proceeding was not taken cognisance of by the Arbitrator on the ground that it was not within the order of reference. Further it is not the law that all disputes in relation to one contract must be disposed of in one reference. Failure to raise any such dispute in one reference, does not debar a party from raising other disputes to be adjusted in a subsequent reference. Principles to Or. II r. 2 do not apply to arbitration proceedings.

11. It is contended by Mr. De that dispute made in this reference was implicit in the previous dispute. The claim of the contractor was with respect to 'earth work' and the dispute now raised by the Government also relates to the 'earth work'. The instant dispute no doubt relates to the 'earth work' but the dispute raised now is different from the dispute raised by the contractor in the previous arbitration. It is contended that the dispute raised in the reference might not have been raised- in the previous arbitration. Counter state of facts filed by the Union Government shows that the dispute was not raised. But the dispute could have been raised and should have been raised. Failure to raise it in the previous proceeding is fatal because in previous arbitration there is a final adjudication of the contractor's claim and whatever claim the Government had against the contractor should have been made therein. I am unable to uphold this contention of Mr. De. The decisions noted before negative this contention. To bar a subsequent reference, it must be shown that the disputes sought to be referred were actually referred and decided in the previous proceeding. If not actually referred, there would be no bar to a subsequent reference. The instant dispute was expressly left out in the previous reference. Neither the principles of Or. II r. 2 nor the rules of constructive res judicata. I apprehend can be invoked to bar the present reference. No case is made out for revocation of submission. Nor has any argument been advanced by Mr. De in support of the case for revocation.

12. In the result, the petitioner is not entitled to any of the declarations and order claimed in the petition, which is dismissed with costs. Certified for two Counsel.


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