SPB IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 334 OF 2007 ARBITRATION PETITION NO. 334 OF 2007 ARBITRATION PETITION NO. 334 OF 2007 Vilas Shrikant Kharshikar .. Petitioner. V/s. The NKGSB Co -operative Bank Ltd., .. Respondent. --- Mr.K.M.Jawle i/by Anil Raghunath Dhuri for the Petitioner. Mr. N.N. Bhadrashete for the Respondents. --- CORAM : D.G.KARNIK,J. CORAM : D.G.KARNIK,J. CORAM : D.G.KARNIK,J. DATE : 24TH JUNE 2008 DATE : 24TH JUNE 2008 DATE : 24TH JUNE 2008 ORAL ORDER ORAL ORDER ORAL ORDER : . Heard. 2. By this petition, the petitioner challenges the Award dated 20th of October, 2006 passed by the learned Arbitrator under section 84 of the Multi-State Co-operative Societies Act, 2002. 3. Facts, stated in brief, are that the respondent is a co-operative bank having its operations in two or more states is governed by the provisions of the Multi-State Co-operative Societies Act, 2002. On 11th of June, 1996, the respondent bank advanced a loan of Rs.5.80 lakhs to one Dr. Sadhana Shreerang Purandare - 2 - (for short ‘the principal debtor’). The petitioner having offered to stand as a surety, executed a deed of guarantee in favour of the petitioner. On principal debtor’s failure to repay the loan, the respondents raised a dispute under section 91 of the Maharashtra Co-operative Societies Act, 1961 against the principal debtor and the petitioner. By an order dated 25th of November, 2002 , the learned Judge of the Co-operative Court held that he had no jurisdiction to entertain and try the dispute as the respondent bank was not governed by the Maharashtra Co-operative Societies Act, 1961 and that it was governed by the provisions of Multi-State Co-operative Societies Act, 2002. The decision of the co-operative court was challenged by the respondents before the Co-operative Appellate Tribunal by filing Appeal No. 42/2003. However, that appeal was withdrawn and the decision of the Co-operative Court became final. 4. The respondent thereafter moved the Central Registrar requesting him to make a reference made under section 84 of the Multi-State Co-operative Societies Act, 2002. The Central Registrar referred the dispute arising out of the nonpayment of the loan by the principal debtor and the petitoner as a guarantor to arbitration which was to be conducted in accordance with the Arbitration and Conciliation Act, 1996 (for short "the Arbitration Act"). - 3 - 5. It appears that on 5th of December, 2005 the respondent bank applied to the arbitral tribunal for withdrawal of the dispute. There is some controversy between the parties as to whether the application was for withdrawal simpliciter or for withdrawal with permission to file fresh arbitration proceedings on the same cause. This controversy would be dealt with little later. Suffice it to say that the arbitration proceedings were withdrawn. Thereafter, the respondent again moved the Central Registrar for reference of the very same dispute to the arbitration and the Central Registrar again referred the very same dispute for arbitration. The learned arbitrator decided the second reference by his order/ award dated 20th of October, 2006/ 2nd of December, 2006. That award is impugned in this petition. 6. Learned counsel for the petitioner submitted that the respondent having withdrawn the first reference without permission to sue on the same cause, the Central Registrar was not competent to refer the very same dispute to arbitration for the second time and the learned arbitrator had no jurisdiction to again entertain the very same cause. Learned counsel for the respondent did not dispute that the first dispute or the first reference to the arbitration was withdrawn. - 4 - However, he submitted that the first reference was withdrawn with liberty to file a fresh reference on teh same cause. No material was produced before the learned arbitrator to show that the first reference was withdrawn with liberty to file fresh proceedings on teh same cause. Learned Arbitrator has also not held that the first arbitration was withdrawn with liberty to file fresh proceedings. The contention about the non-maintainability of the second reference was dealt with by the learned arbitrator in the following words : "ii. The contention of maintainability is raised by the Opponents on the ground that proceedings for the same cause of action are already pending before other Courts i.e. before the Maharashtra State Co-operative Appellate Court, Mumbai and also before this Authority. After careful study of records and proceedings it is observed that the Disputant Bank appears to have filed application dated 03.01.2006 before the Hon’ble Maharashtra State Co-operative Appellate Court, Mumbai in appeal No. 41/2003 for withdrawal of the said appeal and accordingly by Order of the same date the appeal is allowed to be withdrawn therefore, it cannot be said that it is pending. Similarly the Disputant Bank had earlier filed case No.198 - 5 - of 2005 against these Opponents for the same cause of action before this Authority however on the first returnable date i.e. 05.12.2005 Bank has filed application for withdrawal of the said dispute which is granted by this Authority and the case so filed is allowed to be withdrawn therefore the contention of the Opponents that proceedings for the same cause of action are already pending in various courts can not be said to be proved." 7. From the said finding, it is clear that the learned Arbitrator has not held that the first arbitration was withdrawn after obtaining permission of the learned Arbitrator to file a second reference. In fact it was also not contended by the respondent that the first arbitration was withdrawn with liberty to file fresh proceedings on the same cause. 8. Learned counsel for the respondents submitted that section 19 of the Arbitration Act specifically provides that an Arbitral Tribunal is not bound by the Code of the Civil Procedure or the Indian Evidence Act. He further submitted that the principle contained in Order 23 Rule 1 of the Code of Civil Procedure that where the plaintiff abandons any suit or a part of his - 6 - claim or withdraws from a suit or part of a claim without permission of the court, he shall be precluded from instituting any fresh suit in respect of the same subject matter and cannot and does not apply to the arbitration in view of section 19 of the Arbitration Act. He submitted that even after unconditional withdrawal of the first arbitration proceedings, the petitioner would be entitled to file fresh arbitration proceedings on the very same cause because the provisions of the Code of Civil Procedure (for short ‘the Code’) in general and Order 23 Rule 1 in particular do not apply to arbitration. I am unable to agree for the reasons indicated below. 9. It is true that section 19 of the Arbitration Act specifically provides that the arbitral tribunal shall not be bound by the Code. However, there is difference between the Arbitral Tribunal not being bound by the Code and the arbitral tribunal not following the general principles of law merely because that principle is embodied as statutory provisions in the Code. If there is general principles of law which is otherwise applicable it would not cease to apply merely because the same principle have been embodied as statutory provision in the Code. The provisions like those contained in Order 2 Rule 2 of the Code to the effect that a party to the suit shall include the whole of the - 7 - claim which he is entitled to make in respect of the same cause of action, the principles of res-judicata short of technical aspect of section 11 of the Code are universal application and so is the principles contained in Order 23 Rule 1 of the Code. It will be useful to refer to the decision in Daryao vs. State of U.P. (AIR 1961 SC 1457), wherein the Supreme Court has held that the principles of res-judicata will apply even to proceedings under Articles 32 and 226 of the Constitution of India. At page 1462 of the judgment, the Supreme Court has observed : "Now, the rule of res judicata as indicated in S.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 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 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 - 8 - inadmissible even in dealing with fundamental rights in petitions filed under Ar. 32." 10. The principle of resjudicata is based on public policy of law that a litigant should not be vexed with the same dispute more than once or over and over again. Today, millions of matters are pending before the court. It would not be appropriate to permit a litigant to withdraw a suit or proceeding before a court of a judicial tribunal and permit him to raise the same cause again before the same court or tribunal. Because, apart from the time spent by teh parties valuable judicial time would be wasted in hearing the same cause again especially when the litigant himself has withdrawn from the said litigation without leave of the court or tribunal for filing the fresh lis. This principle is also based on public policy. Merely, because this priciple has formed statutory recognition in the Code, it would cease to apply on the specious ground that provisions of Code do not apply to arbitration proceedings. 11. A reference was also made to the decision of the Division Bench of this court in Municipal Corporation of Gr. Mumbai vs. M/s. Pre-Stress Products (I) Ltd. & Anr, (Appeal No. 1458/1999 decided on 28th of - 9 - September, 2007; Coram : D.K.Deshmukh & J.H.Bhatia, JJ.). That case had arisen under the Arbitration Act. The Division Bench has held that the principles contained in Order II Rule 2 of the Code of Civil Procedure would also apply to the arbitration proceedings. In my view, the principle contained in Order 23 Rule 1 of the Code that if a party withdraws a proceeding, he shall not be allowed to file fresh proceeding on cause is of universal application as is the priciple contained in Order 2 Rule 2 of the Code. In the circumstances, the respondents bank was clearly not entitled to file the second arbitration proceedings on the same cause. 12. Learned counsel for the respondent by making an oral request sought to tender a copy of the application made by it before the first arbitral tribunal on 5th of December, 2005 and the order pased thereon. He submitted that the copy clearly shows that the first arbitration proceedings were withdrawn with liberty to file fresh proceedings on the same cause. Learned counsel for the petitioner took strong objection for permitting the production and looking into the copy. He submitted that this application was never tendered before the second arbitral tribunal and it was not part of the record. If the application was not tendered before the arbitral tribunal, no fresh evidence can be - 10 - allowed at this stage merely on the basis of oral request made at the time of the argument. The request of the learned counsel for the respondents to permit production and looking to the contents of the said application dated 5th of December, 2005 and order passed thereon is accordingly rejected. It may also be noted that the petitioner by a written request letter dated 20th of February, 2007 (Exh.‘E’ to the petition) had demanded the copy. By a reply dated 24th of April, 2007 (Exh.‘F’ to the petition) the respondent had specifically declined to give the copy of the application and the order on the ground that "no order was passed". The respondents therefore, cannot be permitted to take the petitioner by surprise specially when the copy of the application was demanded by the petitioner was refused by the respondent. 13. Learned counsel for the respondents lastly submitted that the petitioner has not raised this contention before the learned arbitrator. I am unable to agree. The contention to the maintainability of the petition was raised and has been specifically dealt with by the arbitral tribunal in para no.5(ii) of the Award. There is no merit in this contention also. 14. In the circumstances, the arbitration petition is allowed and the impugned Award is set aside. - 11 - (D.G. KARNIK, J.) .....