Delhi Development Authority & Ors. v. M/S. Alkarma

B.N Kirpal, J. (Oral):— The two questions which arise for consideration in this First Appeal are — (1) Whether the Engineer-Member of the appellant No. 1 can be directed to appoint an arbitrator and to refer to him the dispute between the parties, and (2) whether the provisions of Order II Rule 2 of the Code of Civil Procedure are applicable to arbitration proceedings.

2. Briefly stated, the facts of the case are that an agreement had been entered into between the parties, whereby the respondent had to execute some work. The said agreement contained an arbitration clause, namely, Clause 25 which reads as under:—

“Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality or 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 or relating to the contract, design drawings, specifications, estimates, instruction, orders or these conditions or otherwise concerning the works, or the execution or failure to execute the same shall be referred to the sole arbitration of the person appointed by the Engineer Member, Delhi Development Authority at the time of disputes. It will be no objection to any such appointment that the arbitrator so appointed is a Delhi Development Authority employee, that he had to deal with the matters to which the contract relates and that in the course of his duties as Delhi Development Authority employee he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Engineer Member, Delhi, Delhi Development Authority as aforesaid, at the time of such transfer, vacation of office or inability to act shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Engineer Member, Delhi Development Authority as aforesaid should act as arbitrator and, if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute is Rs. 50,000 (Rupees fifty thousand) and above, the arbitrator will give reasons for the award.

Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such disputes.”

3. The respondent invoked the arbitration clause when some disputes had arisen between the parties. The said disputes were referred to arbitration and an award was made. We are not concerned with that award in this case.

4. After the work had been completed, the appellant prepared the final bill on 15th July, 1978 and the same was finalised. As the respondent was not satisfied, he requested for the appointment of an arbitrator on 14th July, 1978. On this request being received, the Engineer Member of the D.D.A, who was the Competent Authority, appointed Shri G. Subramanyam, Superintending Engineer, to be the sole-arbitrator. His appointment was made on 20th March, 1979.

5. According to the terms of clause 25 of the arbitration agreement, the disputes which were referred to Shri Subramanyam were those which were specifically mentioned by the respondent in its letter dated 14th July, 1978. It appears that during the pendency of the arbitration proceedings, the respondent wrote a letter dated 3rd October, 1979 to the Engineer Member requesting that some more disputes be referred to arbitration. It was submitted by the respondent that through oversight the respondent had not asked for reference of 7 items of disputes earlier. When no reply was received the respondent reiterated its request vide its letter dated 2nd April, 1980.

6. Before any reply could be received by the respondent, on the request so made, the arbitrator on 20th May, 1980, made and published his award.

7. After the award had been made, the respondent made another request for referring the said items of disputes to arbitration, vide its letter dated 19th July, 1980. When no reply was received to the said letter, the respondent on 25th August, 1980 filed an application under section 20 of the Arbitration Act, being Suit No. 396-A of 1980. The prayer of the respondent in the said application was that the appellants herein should be directed to file the original arbitration agreement and the Engineer Member should be directed to make appointment of an arbitrator in terms of clause 25 of the agreement.

8. The said application was seriously opposed by the appellants herein. Two main contentions which were raised were that under the arbitration agreement the appointment of an arbitrator was to be made by the Engineer Member and, therefore, the application under section 20 was not maintainable, as the Court had no jurisdiction to direct the appointment of an arbitrator. The second submission which was made was that in view of the fact that disputes had already been referred to Shri Subramanyam, the principles analogous to provisions of Order II Rule 2 were applicable and the respondent herein could not ask for reference of those disputes which it could have raised earlier.

9. The learned single Judge by his judgment dated 8th April, 1981 decided both the points in favour of the respondent herein. The learned single Judge held that in view of the provisions of section 20 (4) of the Arbitration Act, the Courts do have the power and jurisdiction to direct the Engineer Member to appoint an arbitrator and to refer the disputes to him in terms of clause 25 of the agreement. While differing with the decision of the Calcutta High Court, the learned single Judge came to the conclusion that the provisions of Order II Rule 2 and/or the principles analogous thereto were not applicable to arbitration proceedings. The learned Judge accordingly allowed the application under section 20 of the Act and directed the Engineer Member to appoint an arbitrator within one month of the said decision and further directed him to refer the disputes set out in the annexure to the letter dated 3rd October, 1979 to the arbitrator.

10. Being aggrieved with the decision of the learned single Judge, the appellants have filed the present appeal.

11. A regards the first question concerning the competency of the court to entertain an application under section 20 of the Act, Shri Sistani fairly concedes that a Full Bench decision of this Court in Suit No. 625-A of 1982 titled as Shri V. P. Mittal v. Union of India and others (1), decided on 28th May, 1984, covers the point in issue against the appellants. In the said decision the Full Bench of this Court held that, while considering an arbitration clause similar to clause 25 which has been quoted above, the Court has the jurisdiction to direct the Competent Authority to appoint an arbitrator in accordance with the arbitration clause.

12. Shri Sistani, however, vehemently contended that the observation of the learned single Judge to the effect that the principles analogous to Order II Rule 2 were not applicable is not correct.

13. There is no dispute that the provisions of Order II Rule 2 in terms do not apply because the Code of Civil Procedure is not applicable to the arbitration proceedings. The Calcutta High Court, in the case of Jiwanani Engineering. Works Pvt. Ltd. v. Union of India, AIR 1978 Calcutta 228 (2), had an occasion to deal with such a question. In that case certain disputes had been referred to arbitration, but prior to the making of the award the claimant sought to raise some more disputes/issues. When the authority concerned declined to refer the additional disputes, the claimant moved an application under section 20 of the Act. The learned single Judge of the Calcutta High Court came to the conclusion that the principles of Order II Rule 2 were applicable and the disputes which were later sought to be raised should not be referred. As we read this decision, it appears to us that what weighed with the Hon'ble Judge was the following principle enunciated by him viz., “The umpire in this case can give such relief as the Court of law can give and if the Court of law is prohibited by Order II of the Code to entertain the disputes now sought to be raised I see no reason why the umpire should not be”.

14. We are in full agreement with the aforesaid principle. The administration of justice would require that there should not be multiplicity of proceedings and the parties should not be permitted to raise disputes over and over again once the disputes have been settled either by a pronouncement by a court of competent jurisdiction or by an award by an arbitrator. We, however, do notice that the Calcutta High Court did not consider the applicability of principles of Order 6 Rule 17 of the Code of Civil Procedure. Once the suit, which is filed, has been decided, the provisions of Order II Rule 2 become applicable. After the trial of the suit if any claim, which could have been made, has not been made, then it is deemed that the same has been relinquished and a fresh suit in respect to the said claim cannot be filed. During the pendency of the suit, however, the plaintiff has a right to apply for amendment of the plaint under Order 6 Rule 17 in order to enlarge the scope of the suit and, if he so desires, raise additional pleas praying for a larger relief than what he had prayed for originally. We are of the opinion that just as a court while exercising its power under Order 6 Rule 17, has the jurisdiction to allow amendment, in the arbitration proceedings as well the same principles should ho invoked. It is true that if an award has been made then the principles -analogous to Order II Rule 2 would apply and after the making of the award a claimant cannot seek to raise a dispute which he ought to or could have raised earlier. This being so, it would indeed be unfair and unjust not to invoke the principles of Order 6 Rule 17 during the pendency of the arbitration proceedings.

15. 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 item 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 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, special 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 October, 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.

16. To put it differently, just as the principles analogous to Order II Rule 2 are applicable to the arbitration proceedings, similarly, principles analogous to Order 6 Rule 17 would also be applicable. We are unable to agree with the learned single Judge that in no ease would the provisions of Order II 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 II Rule 2, which according to learned single Judge are draconian in nature, would never be applicable. In our opinion, the provisions of Order II 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 he/it 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 disputes to arbitration.

17. For the aforesaid reasons the appeal is dismissed. Interim orders are vacated. The Engineer Member is directed to appoint an arbitrator within two months and refer the disputes set out in the Annexure to the letter dated 3-10-1979 to the arbitrator. In view of the peculiar circumstances of the case, the parties are left to bear their own costs.

Appeal dismissed.