o 1 of 1989
IN Civil Appeal No 3334 of 1982
From the Judgment and Order dated 1691982 of the Calcutta High Court in Appeal No nil
Kapil Sibal RF Nariman and Vineet Kumar for the Petition er
Dr Shankar Ghose HN Salve G Joshi AK Sil Ms Urmil Narang NP CS Vaidyanathan Vivek Gambhir NP and Praveen Kumar for the Respondents
The following Order of the Court was delivered by MISRA J
This civil appeal by special leave is at the instance of a builder who had entered into a contract with the Board of Governors of the La Martiniere School at Cal cutta in respect of certain immovable property of the School to be taken by the builder on permanent lease
Christopher Martin Desgranges Martin left behind a will which stipulated the setting up of a school for the benefit of the city of Calcutta and upon his death the will was probated and the executors 447 set up the school
The Board of Governors of the School hereinafter Board  among others has the reverend Bishop of the city of Calcutta as its Chairman and a retired Major General of the Indian Army as a member
The Old Mar tinians Association hereinafter Association  being a body of the old students of the School resisted the request of the School before the High Court when it applied for accept ance of the agreement of lease of 1981
A learned Single Judge while agreeing on principle to accord sanction asked for further details
The Division Bench made certain direc tions in an appeal taken to it by the builder and the inter im directions form the basis of subject matter of this appeal
During the pendency of the appeal in this Court the builder and the School entered into a fresh agreement on 1291986 to which the Association is also a party
Under the agreement more favourable terms for the School were stipulated such as 1 annual payment of ground rent of Rs22000 during the period of lease 2 as against a one time payment of Rs31 lakhs in the 1981 agreement a recur ring annual payment of about Rs50 lakhs and 3 built in area of 60000 square feet to enable extension of the School and earning of rental income
Apart from these it is stated that under the 1981 agreement the School had entered into arrangements with prospective lessees and had received a substantial sum of money by way of advance from them in respect of approximately 53000 square feet to be construct ed
The builder under the 1986 agreement took the responsi bility of dealing with the prospective lessees either by refunding the money or providing leasehold area from out of its share
It is not disputed that a total area of about 180000 square feet would be available as a result of the construc tion agreed to be raised by the builder under the 1986 agreement
Parties decided to file an application for com promise before this Court in the pending appeal and the petition was duly drawn up on 1291986
It was signed on behalf of the Board by the Chairman and Major General BM Bhattacharya  Anjan Dey in his personal capacity and as President of the Association and the builder
Mr Anjan Dey s signature in his personal capacity was duly attested by Mr PL Agarwal his Advocate and his signature as President of the Association was duly witnessed by Mr Bhankar Kar Secretary of the Association
This application was however not presented in this Court until some time in May 1989 for difficulties which have been attempted to be explained by the School
After this application was made the Association represented by Mr Amit Bikram Roy resisted it
Rejoinders have been filed on behalf 448 of the School and the builder to the objection
The original compromise petition has been produced
The builder has also placed on record the proceedings of the Board of the Associ ation dated 11th September 1986 a day before the compro mise was signed
The resolution of the Association s Board reads thus RESOLVED that in view of finalisation of pending case at Supreme Court of India regard ing dispute arising out of Property Develop ment at La Martinique for Boys Calcutta as petitioned by DeveloperContractor Damodar Ropeways  Construction Co Pvt Ltd with one of the parties being Mr Anjan Dey and Old Martinians Association Mr Anjan Dey be and is hereby authorised to act on behalf of the Association for the compromise solution as drawn up by the Association s Solicitors Ms Khaitan  Co and as already approved by all parties concerned subject to permission by the Hon ble Supreme Court
 The proceedings were signed by Mr Shankar Kar General Secretary Ms Joyita Sen Treasurer Messrs Amit Bikram Roy Vice President Ashoke Paul Anjan Dey President and Ms Raktima Dutt
Objection of the Association to the petition of compro mise is mainly on two grounds 1 lapse of three years between the date of signature of the petition by the parties and its filing and 2 want of authority of Mr Anjan Dey to enter into the compromise
The delay in filing the compromise petition in Court has been attempted to be explained on behalf of the School and the builder
If the compromise is genuine and lawful the delay in presentation in Court could at the most if at all be in the realm of equity and would not be otherwise materi al
The resolution of the Board of the Association of 11th September 1986 extracted above is a complete answer to the second ground as it clarifies the position that all parties had agreed to the compromise and it was intended to be presented before this Court for permission to enter into compromise
Mr Anjan Dey had been authorised to associate himself for the purpose
It is not the contention of the Association that the whole or any part of the agreement is unlawful nor is it the contention of any of the parties that the petition has not been signed by him or them
The compromise is therefore in accordance with the provisions of Order XXIII rule 3 of he Code of Civil Procedure and can be acted upon
449 Before the compromise is accepted it is for the Court to be satisfied that the terms are in the interests of the Trust
Dr Ghosh for the Association strenuously contended that the property was very valuable even as vacant site in view of the recent escalation of price of land in Calcutta and if a genuine attempt is made there was possibility of a higher offer being made and the interest of the School should therefore not be sacrificed by allowing it to enter into the compromise
When we suggested to Dr Ghosh that the Association could provide a guarantee to accept and work out the ten as in the compromise in the event of the response to the advertisement not being as favourable he was not willing to do so
We do not think that it is in the interest of the School to reject the agreement on the representation of Dr Ghosh that there was scope of receiving better offers if advertisement was made
A solemn agreement has been entered  into
The builder has already spent substantial sums of money on the property
The plan has been sanctioned by the Corporation and we are told that under the changed regulations it would be difficult for the School to obtain a fresh sanction
Three years have now been lost on account of the compromise not having been placed before the Court and following the course suggested by Dr Ghosh involves an element of uncertainty to which the School should not be exposed
Under the agreement forming the subject matter of compromise the School would have space available for expan sion in the near future
Keeping these aspects in view we have thought it appropriate that the compromise should be accepted but with certain variations
As we have already stated built in area of 180000 square feet would be available under the agreement and excluding about 50000 square feet of built in area which may be set apart for the purpose of meeting the prospective lessees we express no opinion about the tenability of such claim who had entered into arrangements with the School 130000 square feet would be available
Out of it the School has been given 60000 square feet and the builder is to take 70000 square feet
We suggested to Mr Nariman for the builder that the constructed area of 130000 square feet should be equally divided between the School and the builder and on instructions from his client present in Court Mr Nariman has fairly agreed to do so
Since the annual ground rent had been fixed at Rs22000 three years back we indicated to Mr Nariman that the sum should be escalated and he has agreed to have it enhanced to Rs40000 per year after receiving consent of his client
We are of the view that there should be an escalation clause in regard to the ground rent and once in every ten years escalation of ten per cent in the annual ground rent beginning from 1990 450 should be provided
These three terms in our view suffi ciently protect the interests of the School and the Trust
We accordingly accord permission to the Board of Governors to enter into compromise on behalf of the School
The civil appeal is disposed of and the terms of compromise with the three modifications indicated as to availability of extra area of 5000 square feet to the School escalation of the ground rent to Rs40000 from Rs22000 and provision for automatic escalation of ten per cent once on very ten years shall be incorporated in the decree while the other terms as agreed to by the parties shall also form part of the decree to be drawn up in the appeal
We have not considered it in the interests of the par ties to transmit the matter to the Calcutta High Court as that would protract the matter and the order of the Single Judge might be challenged in appeal and ultimately the dispute may again be brought before this Court
Another round of such litigation would be time consuming and would not at all be in the interest of anyone
TNA Appeal disposed of


Summary:
The appellant a contractor had entered into a contract with the Respondent on 22nd April 1978 for the construction of an embankment across Musaliyar Podom between chainage 25735 M to 2827 M of EB Main conal of Kallada Irrigation Project
Under the contract agreement the work was to the completed by March 30 1980 ie two years From the date of selection notice which was dated March 30 1978
The appel lant having failed to complete the work as per the terms of the contract the Respondent by a notice dated 26480 cancelled the contract at his risk and cost
Consequent there to the appellant filed a claim before the named Arbi trator Case No 132 of 1980 claiming enhancement of rates in respect of the earth work involved in the contract
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 claim for Rs2884000
The Arbitrator made the award on 2211981 in respect of claim No 1 thereby directing the Respondents to pay 35 per cent increase in the agreed rate for the item of earth work
However claim regarding interest on delayed payment was disallowed
As regards the counterclaim filed by the Re spondent the Arbitrator ordered that those issues will be considered separately and thus no award in respect thereof was made
The appellant thereupon filed OP Arbitrator 81 of 1981 before the Sub Judge Trivandrum for making the award a rule of the Court
399 The Respondents having raised objection to the making of the award a Rule of the Court the Sub Judge remitted the reference to the arbitrator by his order dated 18881 for fresh consideration as the arbitrator had failed to consid er the counter claim made by the respondent
The appellant applied for review of the said order passed by Sub Judge
Contemporaneously the appellant filed another claim peti tion before the arbitrator case No 276 of 1980 in respect of the wrongful 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 appel lants
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 filed OP Arbitrator 296 of 1981 for 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 being dissatisfied with the order passed by Sub Judge preferred two appeals before the Kerala High Court
The High Court allowed both the appeals holding that the Sub Judge could 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 shah dispose of the Arbitration case No 132 of 1980 afresh in the light of the Judgment of Sub Judge in OP Arbitrator No 81 of 1981 and in accord ance with law after taking into consideration the claim of the appellant and the counter claim of the Respondents
Hence these appeals by the appellant by Special Leave
Dismissing the appeals this Court 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 in making the award
As such the first award dated 22181 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 con 400 sidering the claim of the contractor and the counter claim of the respondent
406F G The order allowing the application for review by 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 OP Arbitrator No 81 of 1981 nor any suffi cient reason has been made out for review of the said order
406H 407A In the instant case the contract was terminated by the Respondents 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 claim petition fried 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
407H 408A Section 41 of the Arbitration Act provides that the provisions of the Code of Civil Procedure will apply to the Arbitration proceedings
The provisions of res judicate are based on the principle that there shall be no multiplicity of proceedings and there shall be finality of proceedings
408B Muhammad Hafiz  Anr
vs Mirza Muhammad Zakaria  Ors AIR 1922 PC 23 Darvao  Ors
vs The State of U P  Ors  at 582 83 Satish Kumar  Ors
V Surinder Kumar  Ors  referred to