Judgment:
1. The Plaintiff has sued for recovery of Rs.8,03,77,289/- from the Defendants jointly or severally along with the interest and costs from the date of the filing of the suit till the date of realisation as would be awarded by this Court.
2. The Plaintiff has averred that it was awarded contracts worth Rs.2.14 Crores by Defendant No.1 for construction of PVC Duct System for cables for telephones in Bombay area. The Plaintiff has made various allegations of how Defendants 2, 3 and 4 who are the officers of Defendant No.1 sought to be corrupted and, since the Plaintiff did not surrender to their demands, made baseless claims against the Plaintiff.
3. The Plaintiff has averred that 3 bank guarantees were given by the Plaintiff through Oriental Bank of Commerce and Federal Bank Ltd., towards the contracts of the Plaintiff. The guarantees expired. Thereafter they were wrongfully got extended by the Defendants and encashed. The Plaintiff has also averred that payments were withheld and the claims of the Plaintiff were adjudicated up to 21st June 1994.
4. The monetary claim of the Plaintiff has been enumerated in Exhibit-X to the plaint which is for the amounts paid on the bank guarantee and interest thereon, legal expenses, medical expenses due to shock, opportunity costs, Court fees, typing expenses, legal fees claimed under one of the contracts stated to be got frustrated by the Defendants, interest thereon, damages for non-payment and delayed payments, non-payment of dues and material advance and interest thereon, payment for work done, but not paid, payments for extra work and interest thereon, payment for other extra work and interest thereon, damages upon collusion, damages upon false notices, damages upon termination, costs of threats, damages for loss of reputation due to defamatory statements, loss of mental health and payments due from Defendant No.3 and interest thereon. The aforesaid enumerated items total up to the claim in the suit of Rs.8.03 Crores.
5. The defendants have claimed that the agreement between the parties was referable to arbitration and have been actually referred to arbitration so that the suit is not maintainable. The Defendants have set out the various Awards in the arbitration proceedings. The Defendants have set out 4 separate claims raised by the Plaintiff under the 4 separate agreements between the parties for which 4 separate awards came to be passed. The Defendants, therefore, claim that the suit is not maintainable. This claim is based upon the principle of res judicata.
6. On merits the Defendants have claimed that the Plaintiff was liable to extend the bank guarantees and upon default of the Plaintiff the bank guarantees were rightly enforced. The Defendants have also claimed that the Plaintiff did not complete the work under the contracts and therefore the Defendants legally terminated the contracts. The Defendants have further claimed that the parties entered into a compromise agreement on 11th November 1993 and that thereafter the Arbitrators were appointed for the disputes that arose upon the Plaintiff challenging the compromise agreement. The Defendants have disputed the Plaintiff's work under the contract and justified the enforcement of the bank guarantees. Based upon the pleadings between the parties Justice A.S. Oka framed the issues, as per the draft tendered by the Plaintiff's Advocate on 14th January 2011 as follows:
ISSUES
“1 Whether Defendants deliberately, maliciously and wrongfully denied appointment of arbitrator for disputes with Plaintiff under the terms and conditions of contract.
2 Whether Defendants deliberately, maliciously, and wrongfully forced costly and time consuming litigation on the Plaintiff with regard to appointment of arbitrator as per terms of contract.
3 Whether Defendants deliberately, maliciously and wrongfully denied/delayed payment of even award amounts to the Plaintiff.
4 Whether eight bank guarantees totaling about 16,77,421.00 issued by bank Oriental Bank of Commerce already expired in 1994 since they had not been duly extended/renewed in 1994 were got extended by Defendants from Oriental Bank of Commerce under pressure without the concurrence, consent, and knowledge of Plaintiff.
5 Whether Defendants got the guarantees extended fraudulently when the guarantees had already expired even otherwise in terms of the conditions in the guarantee.
6 Whether the extension letters of guarantees were got issued by Defendants actually in 1995 but they were back dated with various dates in October, December 1994.
7 Whether the extension letters issued by the bank falsely stated in the text of the extension letters that the extension letter was issued at the request of the constituent when actually there was no such request made by the plaintiff.
8 Whether the Defendants obtained the amount of guarantees without the concurrence, consent and knowledge of the plaintiff by concealing this fact of payment from the plaintiff.
9 Whether the extension of guarantees was obtained by Defendants without the concurrence, consent and knowledge of the plaintiff with the ulterior motive of causing deliberately wrongful loss to the plaintiff.
10 Decree for the claim of Rs.70,000/- personally due from Defendant 3 with further interest from the date of filing of suit till realization as employee of Defendant 1 and subordinate of Defendant 2.
11 Decree for the other items of claims in schedule Exhibit-X in the plaint with interest due from the date of the suit till realization.
12 What relief is due to the plaintiff and its directors to compensate for the various types of losses and damages to the plaintiff and pain and suffering caused to the directors by deliberate, malicious and fraudulent acts of Defendants to first deny legitimate dues on contract, encash bank guarantees as officials of a government organization, and deny/delay payments of award amounts, and force frivolous, groundless and vexatious litigation.”
7. The first two issues relate to the appointment of Arbitrator under the terms of the contract. Issue No.3 deals with the execution of the amounts awarded by the Arbitrators. Issue Nos. 4 to 9 relate to the execution, extension and enforcement of the 3 bank guarantees. Issue Nos. 10 to 12 relate to the decree to be passed and the reliefs to be granted to the Plaintiff.
8. The Plaintiff examined one of its officers and has been cross examined. The Defendant No.1 has examined one of its officers and has been cross examined.
9. The address of the Counsel on behalf of the Plaintiff came to be heard in respect of the aforesaid claim. The Plaintiff’s Counsel led me through the detailed and verbose correspondence annexed to the plaint and the claim amounts under a statement of claim Exhibit-X to the plaint.
10. No evidence has been led to prove any of the aforesaid enumerated items of claim. Counsel on behalf of the Defendants' addressed the Court upon the 4 awards passed in the 4 contracts admittedly entered into between the parties. She took me through the awards which have been relied upon by the Defendants in the written statement and produced in evidence. It came to be seen that the items claimed by the Plaintiff for the monetary relief sought were or would have been the claims made by the Plaintiff in the arbitration proceedings under which awards have come to be admittedly passed. Consequently, the case of the Defendants that the suit is not maintainable assumes tremendous importance.
11. The draft issues tendered by the Plaintiff’s Counsel and accepted by the Court and framed on 14th January 2011 show the most important issue not having been framed. That is the issue with regard to the bar contained in Section 11 of the CPC which is the principle of res-judicata upon the seminal defence of the Defendants relating to the non-maintainability of the suit. Consequently, under the provisions of Order 14 Rule 5 of the CPC an additional issue is required to be framed upon the pleadings as also upon the contents of documents produced by the parties as per Order 14 Rule 3(c ) of the CPC. It would be material to set out the aforesaid provisions:
“Order 14 Rule 3. Materials from which issues may be framed . – The Court may frame the issues from all or any of the following materials: –
(a) .....
(b) ....
(c) the contents of documents produced by either party.
Order 14 Rule 5. Power to amend and strike out issues. –
(1) The Court may at any time before passing a decree amend the issues or frame additional issues on such terms as it thinks fit, and all such amendments or additional issues as may be necessary for determining the matters in controversy between the parties shall be so made or framed.
(2) The Court may also, at any time before passing a decree, strike out any issues that appear to it to be wrongly framed or introduced.”
12. Consequently, the additional issue is framed as follows:
Whether the claim in the suit is barred by res-judicata under the provisions of Section 11 of the CPC and whether the suit is, therefore, maintainable. This issue relates to the bar created by the law under Section 11 of the CPC and must be tried as a preliminary issue, the oral evidence having been led on all the above issues, notwithstanding.
The additional issue with regard to the maintainability of the suit upon the bar by resjudicata.
The parties entered into 4 separate contracts. The parties had disputes. The Plaintiff applied for appointment of Arbitrator. The Defendants initially did not appoint any arbitrator. Thereafter Arbitrators have been appointed in respect of each of the 4 contracts. 4 awards have been passed. These are awards dated 18th July 1994, 12th May 1995, 22nd February 2000 and 23rd February 2000.
13. It would be material to consider the contents of the awards. The award dated 18th July 1994 is in respect of the construction of duct for BMC road improvement in west area and Vile Parle – Marol duct.
14. 4 claims were in the award dated 18th July 1994 in respect of the first contract between the parties. They related to the compensation for loss and damages due to delayed payments as also for materials advance bills for scheduled items of work and compensation for loss and damages thereof, for wrongful deductions made and compensation due to loss of damages thereon and for extra items not paid and compensation for loss and damages thereof. Each of these 4 items also included interest. The total amount claimed is Rs.60,18,655/-. The Arbitraor has ruled on all the 4 heads of claims. The Arbitrator has allowed only the compensation for loss and damages due to delayed payments in a sum of Rs.78000/-. The other 3 claims have been found not to be justified. The Arbitrator has finally awarded Rs.83,000/- to the Plaintiff as the claimant being the amount of Rs.78000/- for compensation under claim and Rs.5000/- by way of costs. This is upon the first contract between the parties.
15. The award dated 12th May 1995 in respect of the second contract for construction of the duct for BMC road improvement in West area. The Plaintiff has made 2 separate claims under that agreement before the Arbitrator. These are the claim for compensation for loss of account of confiscation of materials by BMC and claim for compensation under clauses 69, 42 and other terms of the contracts. The Defendants as the Respondents made several other claims by way of counter claim. The learned Arbitrator found both the Plaintiff’s claims wholly unjustified. The learned Arbitrator found only the first claim of the Defendants partly justified to the extent of Rs.1,31,400/-. The learned Arbitrator passed the final order for Rs.1,40,650/- including costs of the arbitration in favour of the Defendants.
16. With regard to the third agreement which was also referred to Arbitrators, the award dated 22nd February 2000 is passed. The Plaintiff made as may as 28 claims for refund of retention of money, various items of materials and works, encashing 3 bank guarantees. The Defendants counterclaimed. The material aspect of this award relates to the encashment of the bank guarantees. The Plaintiff claims that bank guarantees given were from time to time extended by the Plaintiff. These bank guarantees were extended till a specific date by the Plaintiff. The Defendants got bank guarantees extended in collusion with the bank officer without the knowledge or consent of the Plaintiff. The Defendants claim that the bank guarantees were rightly extended by the Plaintiff and encashed by the Defendants upon defaults committed by the Plaintiff. Claim No.14 in this award relates to the refund of 3 amounts under the 3 bank guarantees aggregating to Rs.3,31,359/-. The Defendants' counter claim is to the extent of Rs.2,40,494/-. The learned Arbitrator considered claim No.14 seeing the admitted amount of the bank guarantee and the admitted encashment to adjust the negative final bill with various deductions. The learned Arbitrator considered the Plaintiff's contention that the final bill amount cannot go into a negative figure as there was no over payment of the claim in the bills paid to him. The learned Arbitrator also considered that the Plaintiff as the claimant accepted Rs.43,121/- and Rs.56,552/- as outstanding amounts of the Defendants against mobilisation of the banks and material advance paid by the Defendants and claimed by them in their counter claim Nos.13 and 14. The learned Arbitrator awarded lumpsum amounts to the Plaintiff considering the Plaintiff's claim Nos. 2 to 25 (which includes claim No.14 with regard to the encashment of the bank guarantees) and counter awarded the final amounts of Rs.1,10,940/- under the award. The learned Arbitrator also awarded Rs.50,000/- by way of damages for causing harassment and making delays in payment, unwarranted deductions and forcing the claimant to take to legal proceedings. The learned Arbitrator further awarded Rs.60,000/- as costs to the Plaintiff.
17. Under the fourth agreement resulting in the award dated 23rd February 2000 the Plaintiff's claim included the claim for refund of Rs.2,86,730/- wrongfully encashed by the Defendants and the performance guarantee, Rs.1,09,692/- as having been claimed under 3 bank guarantees which were under claim Nos.11 and 12 of the Plaintiff. The learned Arbitrator considered the Plaintiff's case that though their performances were not lacking and the work was completed, the bank guarantee was encashed. Learned Arbitrator considered the claims of both the parties with regard to the justification or otherwise of the encashment. He considered the Plaintiff's case that the bank guarantees were wrongly referred as also the Defendants claim of the excess amounts paid. The learned Arbitrator deducted Rs.1,89,452/- from the Plaintiff's claim amount of Rs.2,86,730/- and awarded Rs.97,278/- to the Plaintiff upon the claim of encashment of bank guarantees under claim No.11 of the Plaintiff. The learned Arbitrator has also considered the Paintiff's claim under award No.24 for loss suffered and awarded Rs.1 lakh in that behalf. The learned Arbitrator has further awarded interest upon being satisfied that the claimants were justified in their submission with regard to delayed payments. He has enumerated how the delay was caused. He has also awarded future interest at 15% p.a and has passed separate awards for interest under separate specified claims of the Plaintiff. The learned Arbitrator has rejected the Plaintiff's separate claim for damages for harassment caused to the Plaintiff. He has awarded costs of Rs.14,000/- for the arbitration.
18. Each of the aforesaid awards show that each of the claims of the Plaintiff in the suit have been agitated and adjudicated upon in the arbitration proceedings between the same parties.
19. It is upon these awards that the claim of the maintenance of the suit made by the Defendants herein would be required to be adjudicated. It would have to be seen whether the Plaintiff's claim will fall within Section 11 of the CPC, the relevant part of which run thus:
“11. Res judicata: – No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court.
Explanation IV. – Any matter which might and ought to have been made ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit.
Explanation VIII. – An issue heard and finally decided by a Court of limited jurisdiction, competent to decide such issue, shall operate as res judicata in a subsequent suit, notwithstanding that such Court of limited jurisdiction was not competent to try such subsequent suit or the suit in which such issue has been subsequently raised.”
1. Issues in the suit as well as the specified claims of the Plaintiff in Exhibit-X to the plaint have indeed been tried in the arbitration where the same matters were directly and substantially in issue between the parties litigating under the same title, being the 4 agreements between the parties in the competent forum, being the arbitration as agreed upon by the parties. The claim of the Plaintiff as well as the Defendants have been adjudicated upon by forum competent to decide such issues. These claims were finally decided by the Arbitrators. The suit upon the same claims being the amounts paid upon encashment of bank guarantees and interest thereon, opportunity costs and interest thereupon claimed under the specified agreement between the parties, claim for delayed payments, claim for material advance, claim for physical work and extra work done have all been adjudicated upon.
2. The other claims being for cost of medical care, legal expenses, legal fees, Court fees, typing work, damages due to collusion, damages upon false notice, damages upon notice of termination, damages for threats of notice issued, damages for defamation, loss of mental health, payments due from Defendant No.3 etc., are the items which, if not made ought to have been made and are, therefore, deemed to have been directly and substantially issued in the arbitration under explanation 4 of Section 11 cited above.
3. The issue with regard to the maintainability of the suit, is, therefore, answered in the affirmative to hold that the suit is not maintainable as it is barred by the law of res-judicata under Section 11 of the CPC.
4. The other issues framed by Justice Oka on 14th January 2011 may be answered as follows:
5. Issue Nos. 1 and 2: The Plaintiff claims that the Defendants wrongfully denied the appointment of Arbitrator and forced costly litigation upon the Plaintiff. The parties have, in fact, referred their dispute to arbitration. 4 arbitrations have been culminated in the 4 awards for the 4 contracts between the parties. If the appointment of Arbitrator is not made expeditiously that claim of the Plaintiff could have been taken up in the arbitration itself. Since the denial of appointment of Arbitrator could have been only prior to the Arbitrator having been appointed so that the Plaintiff could have made the claim with regard to the denial or the delay in the appointment of Arbitrator himself amongst the various claims made by the Plaintiff in each of the arbitrations. The claim in this regard is, therefore, barred under explanation 4 to Section 11 of the CPC. It ought to have been made a ground of attack or claim in the arbitration and is, therefore, deemed to have been the matter directly or substantially in issue in such arbitration. The issue Nos. 1 and 2, therefore, do not require to be answered.
6. Issue No.3: The claim in respect of denial or delayed payments have been made by the Plaintiff as aforesaid in the above arbitration they have been adjudicated upon and an awards in that regard have been passed. Issue No.3 is, therefore, not required to be answered.
7. Issue Nos. 4 to 9: These issues relate to the enforcement, extention and encashment of the bank guarantees. The claims in respect of the bank guarantees under the respective contracts have been made in the arbitration which culminated in awards dated 22nd February, 2000 and 23rd February 2000. They are, therefore, agitated and adjudicated upon. The aforesaid issues, therefore, do not require to be answered.
8. Issue Nos.10, 11 and 12: These issues relate to the final decree to be passed in terms of the amounts claimed from Defendant No.3 personally included in Exhibit-X to the plaint as also the other claims in the schedule Exhibit-X to the claim. They further relate to the compensation for the delay in payment of the awards and for forcing upon the Plaintiff frivolous, groundless and vexatious litigation. None of the reliefs would be required to be granted to the Plaintiff as reliefs have already been granted under the aforesaid awards which are to be executed by the Plaintiff.
9. Hence, the following order.
1. The suit is dismissed with costs of Rs.1 lakh.
2. The Plaintiff's suit is frivolous. The Defendants did not take up the material issue of the bar under the principles of Res judicata to have the plaint itself rejected and needlessly defended the suit in the trial.
3. Hence the Plaintiff shall pay costs of this suit in a sum of Rs. 1 lakh to the High Court Legal Services Authority.