K.V. GEORGEversusSECRETARY TO GOVT., WATER AND POWER DEPARTMENT, TRIVANDRUM & ANR.

A                      K.V. GEORGE
                             v.
           SECRETARY TO GOVT., WATER AND POWER
              DEPARTMENT, TRIVANDRUM & ANR.

                                      .
                             OCTOBER 5, 1989

           [SABYASACHI MUKHARJI AND B.C. RAY, JJ.]

          Arbitration Act 1940-Sections 30, 33 and 41-Arbitrator to
    make award after considering claims and counter claims of the parties-
    Failure to do so is misconduct-Principles of res·judicata applicable to
C   arbitration proceedings.

          The appellant, a contractor had entered into a contract with the
   Respondent on 22nd April 1978 for the construction of an embankment
   across Mnsaliyar Podom between chainage 2573.5 M-to 2827 M of E.B.
D Main conal of Kallada Irrigation Project. Under the contract-agree-
   ment, the work was to the completed by March 30, 1980 i:e. two years
   ftom the date of selection notice which was dated March 30, 1978. The
   appellant having failed to complete the work as per the terms of the
   contract, the Respondent by a notice dated 26.4.80 cancelled the con-
   tract at his riskcand cost. Consequent there-to the appellant filed a
I; claim before the named Arbitrator (Case No. 132 of 1980), claiming
   enhancement of rates in respect of the earth work involved in the con-
   tract. He also claimed interest on delayed payment and costs. The
   respondent resisted the claim and urged that the appellant was not
   entitled to any enhancement, as the appellant should have visualised
   and assessed the position before entering into work contract which was
   to be completed within 2 years. According to respondent the appellant
   had not even completed 35% of the work. Respondent, No. 2, therefore,
   filed a"counter-ciaiin for-Rs~28,84,ooo:

          The Arbitrator made the award on 22.1.1981 in respect of rlaim
    No. I therby directing the Respondents to pay 35 per cent increase in
    the agreed rate for the item of earth work. However claim regarding
G
    interest on delayed payment was disallowed. As regards the counter-
    claim filed by the Respondent, the Arbitrator ordered that those issues
    will be considered separately and thus no award in respect thereof was
    made. The appellant thereupon filed O.P. ·(Arbitrator) 81 of 1981
    before the Sub-Judge Trivandrum for making the award a rule of the
H   Court.

                                      398
          K.V. GEORGE v. SECY. TO. GOVT., WATER DEPTT.              399

      The Responde_nts having raised objection to the making of the
                                                                            A
award a Rule of the Court, the Sub-Judge remitted the reference to the
arbitrator by his order dated 18.8.81 for fresh consideration, as the
arbitrator had failed to consider the couuter-claim made by the respon-
dent. The appellant applied for review of the said order passed by
Sub-Judge. Contemporaneously, the ap_pellant filed another claim_,peti-
tion before the arbitrator (case No. 276of1980) in respect of the wrong-    B
ful termination of the contract and made claim in respect of 13 items.
On 29th October 1981, the arbitrator made an award whereby he
ordered that the re-arrangement of the work should not be at the risk
and cost of the appellants. He also ordered 30% increase in rates for all
items of work carried out by the appellant, except however those items,
which stood covered by his earlier award. Some of the other claims were
also allowed. The appellant tiled O.P. (Arbitrator) 296 of 1981 for
                                                                            c
making the second award a Rule of the Court to which the Respondents
raised objections. The Sub-Judge by his order dated. March 18, 1982
made the award a rule of the Court dismissing_ the plea of_ res-,judicata
raised by the Respondents. The Respondents b~ing dissatisfied wit_h the
order passed by Sub-Judge preferred two appeals before the Kerala           D
High Court. The High Court allowed both the apeals holding that the
Sub-Judge couid not review his order of the facts of the present case.
The High Court also held that principle of constructive res-judicata
would apply to the arbitration case. Accordingly the High Court set
aside the orders of the Sub-Judge as also the award and directed that
the arbitrator shall dispose of the Arbitration case No. 132 of 1980        E
afresh in the light of the Judgment of Sub-Judge in O.P. (Arbitrator)
No. 81 of 1981 and in accordance with Jaw after taking into considera-
tion the claim of the appellant and the counter claim of the Respon-
dents. Hence these appeals by the appellant by Special Le'!ve.

      Dismissing the appeals, this Court,                                   F

     HELD: It is the duty of the Arbitrator while considering the
claims of the appellants to consider also the counter claims made on
behalf of the Respondents and to make'the award after considering both
the claims and counter claims. This has not been done and the
Arbitrator did not at all consider the counter-claims of the respondents    G
in making the award. As such the first award dated 22.1.81 made by the
Arbitrator in Arbitration Case No. 132 of 1980 is wholly illegal and
unwarranted and the High Court was right in holding that the
Arbitrator misconducted himself and in the proceedings by making
such an award, and in setting, aside the same and directing the
Arbitrator to dispose of the reference in accordance with law C<!n-
         400         SUPREME COURT REPORTS                [1989] Supp. 1 S.C.R.

         sidering the clahn of the contractor and the counter clahn of the
  ~      respondent. i406F-G]

               i lie order allowing the application for review hy the Trial Court
         is also had inasmuch as there was no mistake or error apparent on the
         face of the order dated August 18, 1981 made O.P. (Arbitrator) No. 81
  JR     of 1981 nor any sufficient reason has been "1ade out for review of the
         said order.' [4o6ii; 407A]

           In the instant case, the contract was ternlinated by the Respon-
    dents on April 26, 1980 and as such all the issues arose out of the
    termination of the contract and they could have been raised in the first
  C clahn petition filed before the arbitrator by the appellant. This having
    not been done, the second clahn petition before the arbitrator raising
    tile remaining disputes is cleariyiiarred. [4011!; 408..\f             . .
              Section 41 of the Arbitration Act provides that the provisions of
         the Code of Civil Procedure will apply to the Arbitration procetidings.
  ID     The provisions of res-judicate are based on the principle that there shall
         be no multiplicity of proceedings and there shall be fmality of
         proceedings. [4o8B J

          Muhammad Hafiz & Anr. v. Mirza Muhammad Zakaria & Ors.,
     AIR ,1922 (P~) 23; Daryao & Ors._ v. The State of U._P. & Ors., [1?62] 1
   E SCR 5]4_'!t_582_·8~; Satish Kumar & Ors. v. Surinder Kumar & Ors.,
         AIR 'l970 SC 833, ,,;ferr~   to.
              CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
         4209-10 of 1989.

  F           From the Judgment and Order dated 10.4.1987 of the Kerala
         High CourtinM.F.A. No. 291and304of1982.

               K.N. Bhat and Mukul Mudgal for the Appellant.

               M.M. Abdul Khader and T.T .. Kunhikanan for the Res-
 Gl pondents.
               The Judgment of the Court was delivered by

               RAY, J. Special leave granted.

_Ji:!'         These appeals on special leave have been filed by the contractor,_
•             K.V. GEORGE v. St.CY. TO. GOVT., WATER DEPTT. [RAY, l.] 401

    '    K.V. George against the judgment and order passed on 10th April,
                                                                                    A
         1987 by the Kerala High Court in M.F.A. No. 291 and 304 of 1982
         whereby the High Court set aside the judgment of the Sub"Court,
         Trivandrum in O.P. (Arb.) No. 296 of 1981 as also the award of the
         Arbitrator in A.C. No. 276 of 1980 and directed that the Arbitrator
         will dispose of the Arbitration case No. 132 of 1980 in the light of the
         judgment of the Sub-Court in O.P. (Arb.) No. 81 of 1981 in accor-          B
         dance with law considering the claim of the contractor-appellant and
         the counter-claim of the respondents. ·

                  The appellant who is a contractor entered into a contract with
           the respondents on April 22, 1978 in connection with the construction
           of an embankment across Musaliyar Padom between Cbaniage 2573.5
           M to 2827 M of E.B. Main canal of Kallada Irrigation Project. The        c
           work was require'd to be completed by 30th March, 1980 i.e. two years
           from the date of selection notice which was dated 30th March, 1978.
           As the appellant failed to complete the Work as per the terms of the
           contract, the respondents sent a notice dated April 26, 1980 to the
           appellant cancelling the contract at his risk and cost. On July 2, 1980 D
           the appellant filed a claim being arbitration case No. 132 of 1980
           before the named Arbitrator i.e. the Chief Engineer (Arbitration),
           Vellayambalam, Trivandrum claiming enhancement of rates in respect
           of the earth work involved in the contract, interest on delayed_ pay-
           ments and costs. The second respondent, the Superintending
           Engineer, K.I.P. Circle, Karnataka filed a defence statement stating E
           inter alia in para 2( 1) that the time of completion of the work was fixed
           as 24 months from the date of handing over site to the contractor and
           he could have anticipated all such veriations before quoting rates. As
           per agreement the rates once agreed will µot be enhanced. The depart-
                                         1
           ment is not bound to pay the iclaimant a, revision of schedule. In para
           2(m) it bas also been pleaded that as peir agreement the contractor is f
           bound to carry out additional and extra items of works that arise
           during execution. The additional and extra items of works done by the
           contractor are guite meagre when compared to the total volume ·()f the
           work. The extra and excess items were covered by supplemental agree-
           ment. The contractor was not able to complete even 35% of the total
           work within the time of completion of the work and as such the clai- G
           mant is not entitled to attributed delay on this account. A counter-
        . claim was filed by the Superintending Engineer, K.I.P. Circle, Kot-
           tarakkara, the respondent No. 2 wherein a claim of a sum of
         · Rs.28,84,000 was made.

               The Arbitrator by his order dated January 22~ 1981 made the          H
    402         SUPREME COURT REPORTS               [1989] Supp. 1 S.C.R.

    award in regard to claim No. 1 directing the respondents to pay 35%
    increase in the agreed rate for the item of Earth work excavating and
    filling for forming the compacted embankillent with earth from barrow
    area. Claim No. 1 was thus allowed. Claim Nos. 2 and 3\regarding
    interest were disallowed. As regards counter-claim Nos. 1and2, it was
    ordered that those issues will be considered separately and so no
B   award was made.

         The appellant thereafter filed O.P. (Arb.) No. 81of1981 in'the
   court of Sub-Judge, Trivandrum under section 14 ·of the Arbitration
   Act for making the award a rule of the court. On objections being
   raised by the respondents, the Court of the Sub-Judge after hearing
c the   parties by order dated August 18, 1981 remitted the reference to
   the Arbitrator for fresh consideration on the ground that the
   Arbitrator did not consider the counter claims made by the respon-
   dents. The appellant thereafter filed I.A. No. 3780/81 in the court of
   Sub-Judge praying that the order dated August 18, 1981 may be
   reviewed. In the. meantime, the appellant filed another arbitration
I) case No. 276 of 1980 before the same Arbitrator in respect of the
   wrongful termination of the contract and also raised 13 items of claims
   therein. The Arbitrator after going through the objections of the
   respondent made an award on October 29, 1981 whereby he ordered
   that the re-arrangement of the work should not be at the risk and cost
   of the appellant. As regards claim No. 2, he ordered 30% increase in
E rates (as per original and supplemental agreement) for all items of
   work carried out by the appellant except on items covered by Award
   No. 132 of 1980 dated 22.1.1981. Claim Nos. 3 and 5 were rejected. As
   regards claim No. 4 an increase of 20 per cent iu the agreed rates for
   these.. items was allowed. Claim No. 11 regarding interest was dis-
   allowed. It was also stated in the award inter a/ia that the claimant shall
F be entitled to the refund of the security amount as well as refund of the
   retention amounts, the claimant shall be entitkd to his final bill in
   terms of the Award, the counter claim for recovery of costs of re-
   arrangement of work and also the counter claims filed by the respon-
   dent dated April 8, 1981 were declined. The appellant filed O.P. (Arb)
   No. 296 of 1981 for making the second award a rule of the court. A
G statement of defence was filed by the respondents wherein it has been .
    stated inter a/ia in para 6 that:

                "The claims made in this petition under paras 6(ii), (iii),
                (iv), (v), (vi) (vii) and (viii) are barred by resjudicata and
                constructive resjudicata. No work was done by the clai-
                mant after termination o~ t\Je contract on June 24, 1980.
            K.V. GEORGE v. SECY. TO. GOVT., WATER DEPTT. (RAY, J.] 403

                   The claim petition _in Arbitration case No. 132/80 was filed
                   by the claimant.before the Hon'ble Arbitrator on 2. (.1980.     A
                   It was open to him to· raise these claims,in that"Arbitration
                   petition. Having not done.this raising of these claims now
                   which are all bogus and imaginary is barred by constructive
                   resjudicata. He had not raised these claims before Chief
                   Engineer (next Superior Authority) and also before the          B
                   Hon'ble Arbitrator in his petition dated 27.10,1980. Hence
                   it is prayed that the above claims may not be taken up for
                   arbitration and they may be rejected."

       It h11s also been stated in sub-para (iv) of para 6 that:

                   "(iv) As above. Also there had been no error i)l the rates.     c
                   The claimant. was paid at his agreed rates, and he had
                   received it and also no dispute lies on it. Claim may be
                   rejected. Work done was recorded as per item No. 7 of
                   Appl. of agreement and was paid as per agreement."
                                                                                D
             The Sub-Judge by order dated March 18, 1982 made the award a
        rule of the court dismissing the plea of res-judicata raised by the
        respondents in O.P. (Arb.} No. 296 of 1981. The respondents filed two
       appeals being FMA Nos. 291 of 304 of 1982 before the High Court of
       Kerala at Emakulam which held that the Arbitrator could not review
       its order on the facts of the present case and so allowed F.M.A. No. E
       291 and 1982 . The High Court also allowed F.M.A. No. 304 of 1982
       holding that princieles of constructive res-judicata would apply to the
       arbitration case:~eeling agrieved by the aforesaid judgment and order
       passed in F.M.A. Nos. 291 and 304 of 1982, the appellant-contractor
.,..   has preferred the instant appeals on special leave.
                                                                                F
             Mr .. Bliatt, learned counsel appearing on behalf of the appellant
       has submitted in the first place that the High Court was wrong in
       reversing the judgment and order of the trial court without considering
       the provisions of Section 114 as well as Order 47, Rule 1 of the Code of
       Civil Procedure in as much as Order 47, Rule 1 clearly provides that
       review of an order may be made either on account of some mistake or G
       error apparent on the face of the record, or for any· other sufficient
       reason. lntne ms-tan! case, the first awafci was set aside by the Trial
       Court on the ground that the counter claim filed on behalf of the .
       respondents was not considered by the Arbitrator and so it remitted
       the same for consi(leration afresh. It has been held by the High Court
       that the refusal to consider the counter claims had rendered the prior H
    404         SUPREME COURT REPORTS               [1989] Supp. 1 S.C.R ..

A   award liable to be set aside for mis-conduct of the Arbitrator and the
    proceedings. It has been urged by the learned counsel that the counter
    claim has been fully considered in the second award made by the
    Arbitrator and as such the first award cannot be set aside on the
    ground of non-consideration of a counter claim and it cannot be
    treated as mis-conduct of the Arbitrator and the proceedings for non-
    consideration of the counter claim in' the first award. It has been
    further contended in this connection that the finding of the High Court
    to the effect that the subsequent award passed by the Arbitrator deal-
    ing with the counter claims did not have the effect of mitigating the
    mis-conduct of the Arbitrator or of cond9ning the error.on the face of
    the award, is also not sustainable in as such as the counter claim filed
    by the respondents was duly considered by the Arbitrator in the
c   second award made by him.

         It has also been submitted by the learned counsel for the appel-
   lant that the principles of res-judicata and constructive res-judicata are
   not applicable to the award made in Arbitration case No. 291of1981
[} in as much as the disputes that were raised were not ripe for being
   referred to Arbitration in view of the terms of the contract that the
   contractor had to raise the dispute before the Superintending Engineer
   and thereafter before the Chief Engineer and had to wait till the end of
   the stipulated period. It has been further submitted that since the
   period was not over, the claims that have been raised subsequently in
H the second claim petition before the Arbitrator could not be raised in
   the first claim petition before the Arbitrator and as such the second·
   award made by the arbitrator cannot be said to have been barred by
   res-judicata as provided in Section 11 of the Code of Civil Procedure or
   by the rules of constructive res-judicata. The judgment and order of
   the High Court in allowing F:M.A. No. 304 of 1982 setting aside the
 F award made in Arbitration case No. 296 of 1981 is unwarrnated and as
   such it is not sustainable. It has also been contended that the claim
   made in the second claim petition before the Arbitrator is not barred
    by order 2, rule 2 of the Code of Civil Procedure in as much as the
   disputes raised in the second claim petition before the Arbitrator were
    not ripe for reference as the appellant had to wait till the end of the
q stipulated period in accordance with the terms of the contract. The
    judgment and order of the High Court in allowing the F.M.A. No. 304
    of 1982 is not legal and valid and is liable to be set aside.

       Mr. Abdul Khadir, learned counsel appearing on behalf of the
  respondents on the other hand urged befote this Court that the Sub-
H Judge acted fogally in directing the Arbitrator to dispose of the arbitra-
       K.V. GEORGE v. SECY. TO. GOVT., WATERDEP'IT ..[RAY, LI. 405

   !Ion case No. 132/80 in the light of the judgment of the Sub-Court in A
   0 ..P. (Arb.) No. 81 of 1981 and in setting aside the order of review
   because no case for review nor any sufficient cause has been made out
   for exercising the power of review under Section 114 read with Order
   47, Rule 1 of.(he
                /,
                      Code of Civil Procedure. The High Court, it has been
   submitted/was right in holding thaf the order of review was unwar-
   ranted and in setting aside the same and directing the Arbitrator to B
   dispose of the reference in accordance 'with Jaw considering the claim
   of the contractor-appellant and the counter claim of the respondents.
   It has been further submitted by Mr. Abdul Khadir that in view of the
   provisions of Section 41 of the Arbitration Act which specifically pro-
   vides that the provisions of the Code of Ch;il Procedure shall apply to
   arbitration proceedings, the principles of res-judicata or of construe-
 .tive res-judicata will apply to arbitration proceeding. The appellant- C
 . contractor having not raised all his claims in his first claim petition
   made to the Arbitrator for decision and award having been made
   thereon·, the second claim petition before the Arbitrator making cer-
   tain other claims in Arbitration Case No. 276 of 1980 is barred by the
   principles of constructive res-judicata in as much as on the termination D
   of the contract by order dated April 26, 1980 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 is therefore, hit by the princi-
  ples of constructive res-judicata and the High Court rightly allowed the E
   appeal setting aside the award made in Arbitration Case No. 276 of
   1980. It has also been submitted that the provisions of Order 2, Rule 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 debarred from
  raising those issues in a subsequent claim petition made before the F
  Arbitraror. In this connection, he has cited the ruling in Muhammad
, Hafiz and Anr. v. Mirza Muhammad Zakaria and Ors., AIR ·l922 (_PC)
  23. The learned counsel drew our attention to para 2(i) of the objec-
  tions filed by the respondents in Arbitration Case No. 132 of 1980
  wherein it has been stated that:
                                                '".
                                                                              G
               " ........ As per agreement thlfrates once agreed will not
               be enhanced. The department is not bound to pay the
               claimant a revision of schedule."

       It has been further submitted by the learned counsel on behalf of
 the respondents that the appellant was not entitled to an increase in H
    406         SUPREME COURT REPORTS               [1989] Supp. 1 S.C.R.

    the rates as he claimed increase with the agreement and the claim that
    has been made is untenable.

          It has been lastly submitted on behalf of the respondents that the
    Arbitrator has mis-conducted himself and the proceedings by not,
    deciding the counter claim filed by the Government while considering
B   the claim filed by the appellant and making a award. The High Court
    has rightly held that the Arbitrator mis-conducted himself and the
    proceedings and allowed the appeal, setting aside the second award
    made by the Arbitrator in Arbitration Case No. 276 of 1980.

           The first question that falls for consideration in this case is
     whether the finding of the High Court setting aside the ordr of review
c made in I.A. No. 3780 of 1981 and setting aise the order made in O.P.
     (Arb.) No. 81 of 1981 dated August 18, 1981 whereby the case was
     remanded to the Arbitrator is sustainable or not. Admittedly, the
     appellant filed a claim petition being Arbitration Case No. 132 of 1980
     making certain claims before the Arbitrator. The respondents filed the
0 counter claims. The Arbitrator without considering the counter claims
     kept the counter claims for subsequent consideration and made an
     award. The Trial Court set aside the award and remitted the same to
     the Arbitrator for making a fresh award considering the claims and
     counter-claims filed by the parties. On an application for review, the
     Trial Court set aside' the order and passed a decree in terms of the       •
lj: award. It is not disputed that the Arbitrator did not at all consider the
     countetclaims and kept the same for consideration subsequently while
     making award in respect of the claims filed by the appellant.
     Undoubtedly, this award made by the Arbitrator is not sustainable in
     law and the Arbitrator has mis-conducted himself and in the proceed-
     ings by making such an award. It is the duty of the Arbitrator while
It considering the claims of the appellant to consider also the counter
     claims made on behalf.q_f the respondents and to make the award after
     considering both the daims and counter claims. This has not been
     done and the Arbitrator did not at all consider the counter claims of
     the respondents in making the award. As such the first award dated
     January 22, 1981 made by th.e Arbitrator in Arbitration Case No. 132
~· of 1980 is wholly illegal and unwarranted and the High Court was right
     in holding that the Arbitrator mis-conducted himself and the proceed-
     ings in making such an award and in setting aside the same and direct-
     ing the Arbitrator to dispose of the reference in accordance with law
     considering the claim of the contractor and the counter claim of the
     respondents. The order allowing the application for review by the
 Iii Ttial Court is also bad in as much as there was no mistake or error
         K.V. GEORGE v. SECY. TO. GOVT., WATllR DEPTT. (RAY, J.] 407

     apparent on the face of the order dated August 18, 1981 made in O.P. A
    .(Arb.) No. 81of1981 nor any sufficient reason has been made out for
     review of the said order. The order dated August 18, 1981 is legal and
     valid order and the order dated March 18, 1982 allowing the.applica-
     tion for review being I.A. No. 3780 of 1981 and setting asie the order
     in O.P. (Arb.) 81of1981 dated August 18, 1981 is, therefore, bad and
     unsustainable.                                                         B

          With regard to the submission that the issues that have been
    raised in the second claim petition before the Arbitrator is barred
    under the provisions of Order 2, Rule 2 of the Code of Civil Proce-
    dure, it is convenient to refer to a passage in Mu/la's Code of Civil
    Procedure (Volume II, Fourteenth Edition) at page 894:·
                                                                                  c
                " .... This r.ule does not require that when several causes
                of action arise from one transaction, the plaintiff should
                sue for all of them in one suit. What the rule lays down is
                that where there is one entire cause of action, the plaintiff
                cannot split the cause of action into parts so as to bring D
                separate suits in respect of those parts."

          It is pertinent to refer in this connection to the decision in
    Muhammad Hafiz and Anr. v. Mirza Muhammad Zakariya and Ors.,
•   AIR 1922 (PC) 23 wherein a mortgage deed provided that if the
    interest was not paid for six months the creditor should be competent         E
    to realise either. the unpaid amount of the interest due to him or the
    amount of principal and interest, by bringing a suit in court without
    waiting for the expiration of the time fixed, and the Plaintiff, more
    than 3 years after (i.e. time fixed), brought a suit for interest alone and
    got a decree. It was held that. the second suit for principal and arrears
    of interest was not maintainble as under Order 2, Rule 2, C.P.C. he           F
     must be deemed to have relinquished his claim for further relief, he
    having exercised the option of suing for interest alone. It was further
    held that the cause of action referred to in the rule is the case of action
    which gives occasion to, and forms the foundation of, th'e suit, and if
    that cause enables a man to seek for larger and wider relief than that to
    which he limits his claim, he cannot afterwards seek to recover the           G
    balance by independent proceedings.

          In the instant case, the contract was terminated by the respon-
    dents on April 26, 1980 and as such all the issues arised 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. 1::1
    408         SUPREME COURT REPORTS                 [1989] Supp. 1 S.C.R.

A not been done the second claim petition before the Arbitrator raising
  the remaining disputes is clearly barred.

        With regard to the submission as to the applicability of the
  principles of res-judicata as provided in Section 11 of the Code of Civil
  Procedure to arbitration case, it is to be noted that Section 4 t of the
B Arbitration case provides that the provisions of the Code of Civil
  Procedure will apply to the Arbitration proceedings. The provisions of
  res-judicata are based on the principles that there shall be no multipli-
  city of proceedings and there shall be finality of proceedings. This is
  applicable to the arbitration proceedings as well. It is convenient to
  refer to the decision in Daryao and Ors. v. The State of U.P. & Ors.,
C [ 1962] 1 SCR 574 at 582-83 wherein it has been held that the principles
  of res-judicata will apply even to proceedings under Article 32 and 226
  of the Constitution of India. It has been observed that:

                "Now, the rule of res-judicata as indicated in s. 1l of the
                Code of Civil Procedure has no doubt some technical as-
D               pects, for instance the rule of constructive res-judicata may
                he said to be technical; but the basis on which the said rule
                rests is founded on considerations of public policy. It is in
                the interest of the public at large that a finality should
                attach to the binding decisions pronounced by Courts of
                competent jurisdiction, and it is also in the public interest
E               that individuals should not be vexed twice over with the
                same kind of litigation. If these two principles form the
                foundation of the general rule of res-judicata they cannot
                be treated as irrelevant or inadmissible even in dealing with
                fundamental rights in petitions filed under Art. 32."

F        In Satish Kumar and Ors. v. Surinder Kumar and Ors., AIR 1970
    (SC) 833 it has been observed that:

                "The true legal posi!ion in regard to the effect of an award
                is not in dispute. It is well settled that as a general rule, all
                claims which are the subject-matter of a reference to arbit-
G               ration merge in the award which is pronounced in the pro-
                ceedings before the arbitrator and that after an award has
                been pronounced, the rights and liabilities of the parties in
                respect of the said claims can be determined only ·on the
                basis of the said award. After an award is pronounced, no
                action can be started on the original claim which had been
H               the subject-matter of the reference ........... This con-
     K.V. GEORGE v. SECY. TO. GOVT., WATER DEPTI. l~AY, J.J 409

            clusion, according to the learned Judge, is b.ased upon the        A
            elementary principle that, as between the parties and their
            privies, an award is entitled to that respect which is due to
            judgment of a court of last resort. Therefore, if the award
            which has been pronounced between the parties has in fact,
            or can, in law, be deemed to have dealt with the present
            dispute, the second reference would be incompetent. This           B
            position also has not been and .cannot be se•fously
            disputed."

      Considering the above observations of this Court in tl\e'-aforesaid
cases we hold that the principle of res judicata or for tl\at the principles
of constructive res judicata apply to a~bitration proceedings and as           c
such the award made in the second arbitration proceeding being Arbit-
ration 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. No other points have raised before us by the
appellant.                                                                     D

      In the premises aforesaid, we dismiss these appeals with costs
quantified at Rs.5,000 and affirm the judgment and order dated April
10, 1987 made by the High Court.

Y. Lal                                                 Appeals dismissed.      E