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HIGH COURT OF CALCUTTA
P. C. Mallick
SETH KERORIMALL - Appellant
Versus
UNION OF INDIA - Respondent
Suit 241 Of 1963
Decided On : MARCH 06, 1964
ARBITRATION - REFERENCE - SUCCESSIVE REFERENCES - DISPUTE NOT RAISED IN PREVIOUS REFERENCE - WHETHER BAR TO SUBSEQUENT REFERENCE - PRINCIPLES OF RES JUDICATA AND CONSTRUCTIVE RES JUDICATA - APPLICABILITY TO ARBITRATION PROCEEDINGS.
Fact of the Case:
The petitioner, a contractor, executed certain construction works for South Eastern Railway. After completion of the work, a dispute arose regarding the final bill submitted by the contractor. The contractor invoked the arbitration clause in the agreement and requested the General Manager to appoint an arbitrator to adjudicate the claim. The General Manager appointed an arbitrator, who gave an award in favor of the contractor. Subsequently, the Union Government, on behalf of the Railway Administration, made a counterclaim against the contractor for overpayment of a particular work. The contractor challenged the reference on the ground that the dispute was already adjudicated in the previous arbitration proceeding and that the arbitration clause was no longer effective.
Finding of the Court:
The court held that the claim for refund of the amount overpaid on account of a particular work was a dispute covered by the arbitration clause in the contract. However, the court found that the claim for refund was not specifically taken in the counter state of facts filed by the Government in the previous arbitration proceeding. Therefore, when the Government sought to raise the point, the arbitrator disallowed the contention 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.
Issues: 1. Whether the claim for refund of overpayment was a dispute covered by the arbitration clause in the contract? 2. Whether the claim for refund was adjudicated in the previous arbitration proceeding? 3. Whether the principles of res judicata and constructive res judicata are applicable to arbitration proceedings?
Ratio Decidendi: 1. The court held that the claim for refund of overpayment was a dispute covered by the arbitration clause in the contract. The court relied on the decision in Chandmull v. Donald Campbell and Co., where the House of Lords held that there may be as many awards as there are disputes arising out of the same contract. 2. The court found that the claim for refund was not specifically taken in the counter state of facts filed by the Government in the previous arbitration proceeding. Therefore, the court held that the claim was not adjudicated in the previous arbitration proceeding. 3. The court held that the principles of res judicata and constructive res judicata are not applicable to arbitration proceedings to the extent that they would bar a subsequent reference of a dispute that was not raised in a previous arbitration proceeding.
Final Decision: The court dismissed the contractor's petition challenging the reference. The court held that the dispute was not adjudicated in the previous arbitration proceeding and that the principles of res judicata and constructive res judicata did not bar the subsequent reference.
( 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 Mana ger to appoint an arbitrator to adjudicate the claim of the Railway Administration for the said sum of Rs. 56,761/ -. The letter concludes with the following 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
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