vil Appeal Nos
4209 10 of 1989
From the Judgment and Order dated 1041987 of the Kerala High Court in MFA No 291 and 304 of 1982
KN Bhat and Mukul Mudgal for the Appellant
MM Abdul Khader and TT Kunhikanan for the Respond ents
The Judgment of the Court was delivered by RAY J
Special leave granted
These appeals on special leave have been filed by the con tractor 401 KV George against the judgment and order passed on 10th April 1987 by the Kerala High Court in MFA No 291 and 304 of 1982 whereby the High Court set aside the judgment of the Sub Court Trivandrum in OP Arb No 296 of 1981 as also the award of the Arbitrator in AC 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 OP Arb No 81 of 1981 in accordance 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 con tract with the respondents on April 22 1978 in connection with the construction of an embankment across Musaliyar Padom between Chaniage 25735 M to 2827 M of EB Main canal of Kallada Irrigation Project
The work was required to be completed by 30th March 1980 ie 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 the appellant filed a claim being arbitration case No 132 of 1980 before the named Arbitrator ie the Chief Engineer Arbitration Vellayambalam Tri vandrum claiming enhancement of rates in respect of the earth work involved in the contract interest on delayed payments and costs
The second respondent the Superintend ing Engineer KIP Circle Karnataka filed a defence statement stating inter alia in para 21 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 variations before quoting rates
As per agreement the rates once agreed will not be enhanced
The department is not bound to pay the claimant a revision of schedule
In para 2m it has also been pleaded that as per agreement the contractor is 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 quite meagre when compared to the total volume of the work
The extra and excess items were covered by supplemen tal agreement
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 claimant is not entitled to attributed delay on this account
A counterclaim was filed by the Superintending Engineer KIP Circle Kottarakkara the respondent No 2 wherein a claim of a sum of Rs2884000 was made
The Arbitrator by his order dated January 22 1981 made the 402 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 em bankment with earth from barrow area
Claim No 1 was thus allowed
Claim Nos 2 and 3 regarding interest were disal lowed
As regards counter claim Nos 1 and 2 it was ordered that those issues will be considered separately and so no award was made
The appellant thereafter filed OP Arb No 81 of 1981 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 the parties by order dated August 18 1981 remitted the reference to the Arbitra tor for fresh consideration on the ground that the Arbitra tor did not consider the counter claims made by the respond ents
The appellant thereafter filed IA No 378081 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 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 re spondent made an award on October 29 1981 whereby he or dered 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 rates as per original and sup plemental agreement for all items of work carried out by the appellant except on items covered by Award No 132 of 1980 dated 2211981
Claim Nos 3 and 5 were rejected
As regards claim No 4 an increase of 20 per cent in the agreed rates for these items was allowed
Claim No 11 regarding interest was disallowed
It was also stated in the award inter alia that the claimant shall be entitled to the refund of the security amount as well as refund of the retention amounts the claimant shall be entitled to his final bill in terms of the Award the counter claim for recovery of costs of rearrangement of work and also the counter claims filed by the respondent dated April 8 1981 were declined
The appellant filed OP Arb No 296 of 1981 for making the second award a rule of the court
A statement of defence was filed by the respondents whereinit has been stated inter alia in para 6 that The claims made in this petition under paras 6ii iii iv v vi vii and viii are barred by resjudicata and constructive resjudicata
No work was done by the claimant after termination of the contract on June 24 1980
403 The claim petition in Arbitration case No 13280 was filed by the claimant before the Hon ble Arbitrator on 271980
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 resjudica ta
He had not raised these claims before Chief Engineer next Superior Authority and also before the Hon ble Arbitrator in his petition dated 27101980
Hence it is prayed that the above claims may not be taken up for arbitration and they may be rejected
 It has also been stated in sub para iv of para 6 that iv As above
Also there had been no error in the rates
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 agree ment
 The Sub Judge by order dated March 18 1982 made the award a rule of the court dismissing the plea of res judica ta raised by the respondents in OP 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 Ernakulam which held that the Arbitrator could not review its order on the facts of the present case and so allowed FMA No 291 and 1982
The High Court also allowed FMA No 304 of 1982 holding that principles of constructive res judicata would apply to the arbitration case
Feeling aggrieved by the aforesaid judgment and order passed in FMA Nos 291 and 304 of 1982 the appellant contractor has preferred the instant appeals on special leave
Mr Bhatt 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 Proce dure 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 enor apparent on the face of the record or for any other sufficient reason
In the instant case the first award 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 consideration afresh
It has been held by the High Court that the refusal to consider the counter claims had rendered the prior 404 award liable to be set aside for mis conduct of the Arbitra tor 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 consid eration of a counter claim and it cannot be treated as mis conduct of the Arbitratorand the proceedings for nonconsid eration 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 dealing with the counter claims did not have the effect of mitigating the mis conduct of the Arbitrator or of condoning 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 second award made by him
It has also been submitted by the learned counsel for the appellant that the principles of res judicata and con structive res judicata are not applicable to the award made in Arbitration case No 291 of 1981 in as much as the dis putes 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 Superintend ing 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 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 construc tive res judicata
The judgment and order of the High Court in allowing FMA No 304 of 1982 setting aside the award made in Arbitration case No 296 of 1981 is unwarranted 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 stipulated period in accordance with the terms of the contract
The judgment and order of the High Court in allow ing the FMA 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 before this Court that the SubJudge acted legally in directing the Arbitrator to dispose of the arbitra 405 tion case No 13280 in the light of the judgment of the Sub Court in OP 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 the Code of Civil Procedure
The High Court it has been submitted was right in holding that the order of review was unwarranted and in setting aside the same and directing the Arbitrator to dispose of the reference in accordance with law 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 provides that the provisions of the Code of Civil Procedure shall apply to arbitration proceedings the principles of res judicata or of constructive res judicata will apply to arbitration proceeding
The appellantcontractor 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 certain other claims in Arbitration Case No 276 of 1980 is barred by the principles of constructive res judica ta in as much as on the termination 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 Arbi trator is therefore hit by the principles of constructive res judicata and the High Court rightly allowed the 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 refer ence of all the issues he should be deemed to have surren dered those issues and he is debarred from raising those issues in a subsequent claim petition made before the Arbi traror
In this connection he has cited the ruling in Muhammad Hafiz and Anr
vs Mirza Muhammad Zakaria and Ors AIR 1922 PC 23
The learned counsel drew our attention to para 2i of the objections filed by the respondents in Arbitration Case No 132 of 1980 wherein it has been stated that   
As per agreement the rates 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 enti tled to an increase in 406 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 respond ents that the Arbitrator has mis conducted himself and the proceedings by not deciding the counter claim filed by the Government while considering the claim filed by the appel lant and making a award
The High Court has rightly held that the Arbitrator mis conducted himself and the proceed ings 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 order of review made in IA No 3780 of 1981 and set ting arise the order made in OP 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 re spondents filed the 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 award
It is not disputed that the Arbitrator did not at all consider the counter claims 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 sus tainable in law and the Arbitrator has mis conducted himself and in the proceedings by making such an award
It is the duty of the Arbitrator while considering the claims of the appellant 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 January 22 1981 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 mis conducted himself and the proceedings in making such an award and in setting aside the same and directing 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 Trial Court is also bad in as much as there was no mistake or error 407 apparent on the face of the order dated August 18 1981 made in OP Arb
 No 81 of 1981 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 application for review being IA No 3780 of 1981 and setting aside the order in OP Arb 81 of 1981 dated August 18 1981 is therefore bad and unsustainable
With regard to the submission that the issues that have been raised in the second claim petition before the Arbitra tor is barred under the provisions of Order 2 Rule 2 of the Code of Civil Procedure it is convenient to refer to a passage in Mulla s Code of Civil Procedure Volume II Fourteenth Edition at page 894  
This rule does not require that when several causes of action arise from one trans action 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 ac tion the plaintiff cannot split the cause of action into parts so as to bring separate suits in respect of those parts
 It is pertinent to refer in this connection to the decision in Muhammad Hafiz and Anr
vs Mirza Muhammad Zaka riya 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 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 Plain tiff more than 3 years after ie 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 maintainable as under Order 2 Rule 2 CPC he 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 the 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 balance by independent proceedings
In the instant case the contract was terminated by the respondents 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 408 not been done the second claim petition before the Arbitra tor 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 41
of the 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 multi plicity of proceedings and there shall be finality of pro ceedings
This is applicable to the arbitration proceedings as well
It is convenient to refer to the decision in Daryao and Ors
vs The State of UP  Ors  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 section 11 of the Code of Civil Procedure has no doubt some technical aspects for instance the rule of constructive res judicata may be said to be technical but the basis on which the said rule rests is rounded 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 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 inad missible even in dealing with fundamental rights in petitions filed under article 32
 In Satish Kumar and Ors
vs Surinder Kumar and Ors AIR 1970 SC 833 it has been ob served that The true legal position 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 arbitration merge in the award which is pronounced in the proceedings 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 the subject matter of the reference   
This con 409 clusion according to the learned Judge is based upon the 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
There fore 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 incom petent
This position also has not been and cannot be seriously disputed
 Considering the above observations of this Court in the aforesaid cases we hold that the principle of res judicata or for that the principles of constructive res judicata apply to arbitration proceedings and as such the award made in the second arbitration proceeding being Arbitration Case No 276 of 1980 cannot be sustained and is therefore set aside
The High Court has rightly allowed the FMA No304 of 1982 holding that the appellant contractor was precluded from seeking the second reference
No other points have raised before us by the appellant
In the premises aforesaid we dismiss these appeals with costs quantified at Rs5000 and affirm the judgment and order dated April 10 1987 made by the High Court
Y Lal Appeals dismissed


Summary:
The grievance of the respondents who have been recruited to Indian Forest Service and the Indian Police Service is that although the Emergency Commissioned Officers  Short Service Commissioned Officers in Short ECOS  SSCOS respec tively have been recruited after the respondents yet their year of appointment has been fixed earlier than the year of allotment of the respondents under rule 32d of the IFS Regulation of Seniority Rules 1968  Clauses c  d of sub rule 3 of Rule 3 of IPS Regulation of Seniority Rules 1954 which is retrospective in operation
The Tribu nal struck down the rules as ultra vies of Articles 14  16 of the Constitution
Both the High Court and the Tribunal have taken the view that although Section 3 of the All India Services Amendment Act 1975 validates the impugned rules purporting to have been made with retrospective effect yet the impugned rules are invalid in as much as they prejudi cially affect the interests of the respondents
While allowing the appeals and disagreeing with High Court and the Tribunal this Court HELD The Tribunal has struck down the impugned rules namely rule 32d of the Indian Forest Service Regulation of Seniority Rules 1968 and clauses c and d of sub rule 3 of Rule 3 of the Indian Police Service Regulation of Seniority Rules 1954 as ultra vires Articles 14 and 16
Office Memorandum dated January 29 1966 provides for the rehabilitation of the ECOS and SSCOs recruited since 276 November 1 1962 after their release from the Armed Forces
The contents of the Memorandum are in the nature of execu tive instructions
277D 282B 286B Although the impugned rules were not in existance in 1966 the executive instructions as contained in the Office Memorandum conferred the same benefit as conferred by the impugned rules
In other words it is apparent that the executive instructions have now been adopted as rules framed under the Act
286E The Released Emergency Commissioned Officers and Short Service Commissioned Officers Reservation of Vacancies Rules 1967 framed by the President of India under the proviso to Article 309 and clause 5 of Article 148 of the Constitution of India contained similar provisions as to the seniority and pay of ECOS  SSCOs
286F No invidious discrimination has been made between the ECOs  SSCOs on the one hand and the respondents on the other both as regard the Indian Forest Service and Indian Police Service as contended
290E As soon as it is found that the ECOs and SSCOs have been classified into a distinct and separate class and that such classification is reasonable no objection can be taken to the year of allotment given to them in accordance with the impugned rules
Disagreeing with the High Court and the Tribunal this Court is of the view that no illegality has been committed by the Government in framing the impugned rules with retrospective effect
Held that the impugned rules are quite legal and valid
290G H 291A It is now a settled principle of law that if the statute under which a rule is flamed does not confer on the authori ty concerned the power to make such a rule with retrospec tive effect the authority will have no power to frame any rule with retrospective effect
280F A Janaradhana vs Union of India   referred to