judgement:
N: Criminal Appeal No. 603 of 1989.
From the Judgment and Order dated 8.6.1989 of the Bombay High Court in Crl.
Application No. 995 of 1989.
B .R. Handa and A.M. Khanwilkar for the Appellant.
Ram Jethmalani, P.K. Dey, Ms. Rani Jethmalani (N.P.) and D.M. Nargolkar for the Respondents.
The Judgment of the Court was delivered by 317 ABMADI, J.
Special leave granted.
Heard counsel on both sides.
The facts leading to this appeal are as under: On May 30, 1988, the respondent, a retired Naval Officer of the rank of Captain was apprehended at the Bombay Inter national Airport (Sahar Airport) when he was about to take the Air India Flight from Bombay to New York.
On search of his luggage certain highly sensitive documents marked se cret/confidential were found.
A complaint was lodged against him for the breach of the provisions of the Official Secrets Act, 1923 and the .
Soon after his arrest he filed an application dated 22nd September, 1988 for bail.
That application was rejected by the High Court on 29th September, 1988.
Thereafter, he filed a writ petition challenging the validity of Sections 3 and 5 of the Official Secrets Act, 1923 but that writ petition was dismissed by a Division Bench of the Bombay High Court on 8th December, 1988.
In the meantime, he had preferred an application dated 21st November, 1988 for transfer of his case to another learned Judge and for grant of bail.
While granting the prayer for transfer the Division Bench refused to enlarge the respondent on bail by its order dated 19th December, 1988.
Soon thereafter on 18th January, 1989, the respondent filed the third application for bail which too was rejected by Suresh, J. Having thus failed to secure enlargement on bail the respondent approached the learned Sessions Judge, Bombay for a direction to the jail authorities that he be produced before the Head of the Orthopaedic Department of J .J.
Hospital as he had some spinal pain.
The respondent also moved a separate application for being admitted to the Naval Hospital.
The learned Sessions Judge acceded to his request and got him examined by Dr. Dongaonkar who submitted his report on 3rd February, 1989.
On 10th February 1989, the respondent moved another application complaining of viola tion of Court 's order and for enlargement on bail.
This was followed by yet another application for bail dated 16th February, 1989 and in the alternative for a direction to admit him to a suitable hospital where he may be served meals cooked at his home.
On the said application certain directions were given and the respondent was shifted to the general ward of G.T. Hospital, Bombay.
The Trial Court flamed charges against the respondent on 27th February, 1989.
On 24th April, 1989, the respondent filed yet another application for grant of bail on medical grounds and in the alternative for being admitted to a hospital or any other place where he can conveniently receive instructions in yogic exercises.
All his pending applications made for bail etc. were rejected by Puranik, J. by a common order dated 6th June, 1989, except Criminal Application No. 995 of 1989 preferred in April, 1989 318 for enlargement on bail on medical grounds.
Possibly the fact that he had referred this application was not brought to the notice of Puranik, J. Two days after the rejection of the group of bail applications by Puranik, J., application No. 995 of 1989 was disposed of by Suresh, J., who directed that he be enlarged on bail for a period of two months on his furnishing security in the sum of Rs. 10,000 with one surety on the terms and conditions catalogued at (a) to (g) of the order.
The learned Judge felt that by permitting him to be kept in virtual house arrest the State 's grievance that he meets visitors including mediamen and gives inter views at the G.T. Hospital open ward will not survive.
He was also of the view that having regard to his spinal disor der it was necessary that he had proper facilities for yogic exercises under expert guidance.
It is this order of the learned Judge that is assailed before us by the State of Maharashtra.
When this matter came up for admission before Shetty, J., during vacation, the learned Judge, after taking note of the fact that respondent was suffering from disc prolapse for which he was treated by Dr. Dongaonkar and had shown considerable improvement and after evaluating the opinion of Dr. Khadilkar who had certified that the respondent was fit to attend court, observed as under: "Having regard to the nature of the offences charged, the sickness or disability complained of, the nature of the treatment required, the certificates given by the Doctors, I am of the opinion that the bail order made by the High Court appears to be a bit out of the ordinary.
" The learned vacation Judge then directed notice to issue and stayed the operation of the High Court 's Judgment of 8th June, 1989.
While doing so, he observed that the respondent should be given necessary treatment of Yogic exercises in the Jail.
Therefore, since the passing of this order on 15th June, 1989, the operation of the High Court 's order enlarg ing the respondent on bail and placing him in virtual house arrest on the terms and conditions set out in the court 's order, is stayed.
The learned counsel for the State of Maharashtra con tended that the learned Judge in the High Court while pass ing the impugned order of 8th June, 1989 ought to have realised that only two days before his colleague Puranik, J. had rejected all the pending bail applications (except Criminal Application No. 995/89) preferred at intervals by the respondent.
In Criminal Application No. 375/89 one of the prayers 319 made in paragraph 7(e) was as under: "That the applicant may, pending his illness be ordered and directed to be placed under house arrest and/or be released on bail on such terms and conditions as may be Puranik, J. considered this request of the respondent in paragraph 24 of his order of 6th June, 1989 and rejected the same.
Despite the rejection of the said application No. 375 of 1989 along with a group of applications seeking enlarge ment on bail and other directions, Suresh, J. granted almost the same request only two days later while disposing of the application No. 995/89.
That is what Shetty, J. described as 'a bit out of the ordinary ' when the matter came up for hearing before this Court on 4th August, 1989 a communica tion received from the respondent requesting that he be brought to Delhi by plane to enable him to argue the matter in person was placed before the Court.
This Court while rejecting his request for being brought by plane from Bombay to Delhi observed that he may inform the Court if he desired legal aid.
At the next hearing instead of informing the Court whether he desired legal aid, he repeated his request for personal appearance through his son which was rejected.
However, the Supreme Court Legal Aid Committee was requested to appoint an Advocate to appear and argue the case on his behalf.
The matter was listed for hearing on 8th September, 1989.
When the matter was called on for hearing, Mr. Jethmala ni, learned counsel for the respondent made a fervent plea that having regard to the age and the condition of the respondent, this Court should recall its earlier order staying the operation of the impugned order and should refuse to exercise its jurisdiction under Article 136 of the Constitution of India.
The submission of Mr. Jethmalani was that ordinarily bail should be granted to under trials and this Court should refrain from exercising jurisdiction under Article 136 to cancel bail granted by the High Court.
He made an endeavour to satisfy us that even on merits this was a fit case for grant of bail notwithstanding the fact that several bail applications, made by the respondent one after another.
were .rejected by the High Court.
We cannot accede to the submissions of Mr. Jethmalani.
It is evident from the facts stated above that after the respondent 's successive applications for bail were spurned, he requested for being admitted to the hospital on medical grounds, that is, on the 320 ground that he was suffering from spinal disorder.
He was first admitted to the J.J. Hospital and was later shifted to G.T. Hospital open ward on his request.
After improvement to the extent of 70% and above was reported by Dr. Dongaonkar who treated him and on Dr. Khadilkar declaring him fit to attend the court, he contended that he had consulted a yoga instructor who advised him a course in yogic exercises to get rid of his spinal disorder.
In the meantime he had filed a number of applications for being released on bail.
This batch of applications were put up before Puranik, J. for disposal.
The attention of Puranik, J. was not drawn to the pendency of one such application No. 995/89 till he disposed of the batch of such bail applications on 6th June 1989.
Even if the said application was filed after the hearing started before Puranik, J., the learned Judge could have been told about its pendency before he rendered his decision on 6th June, 1989.
This conduct of the respondent has given rise to the argument that the respondent desired to keep the question regarding his enlargement on bail alive.
We have pointed out that in one of the applications No. 375/89 he had sought precisely the same relief which came to be grant ed by the impugned order.
The question then is whether there was justification for releasing the respondent on bail to facilitate yogic exercises under expert guidance at his residence, albeit under conditions of surveillance, even though Puranik, J. had rejected a more or less similar prayer only two days before? Should this Court refuse to exercise jurisdiction under Article 136 of the Constitution even if it is satisfied that the jurisdiction was wrongly exercised? Liberty occupies a place of pride in our socio political order.
And who knew the value of liberty more than the rounding fathers of our Constitution whose liberty was curtailed time and again under Draconian laws by the coloni al rulers.
That is why they provided in Article 21 of the Constitution that no person shall be deprived of his person al liberty except according to procedure established by law.
It follows therefore that the personal liberty of an indi vidual can be curbed by procedure established by law.
The Code of Criminal Procedure, 1973, is one such procedural law.
That law permits curtailment of liberty of anti social and anti national elements.
Article 22 casts certain obliga tions on the authorities in the event of arrest of an indi vidual accused of the commission of a crime against society or the Nation.
In cases of under trials charged with the commission of an offence or offences the court is generally called upon to decide whether to release him on bail or to commit him to jail.
This decision has 'to be made, mainly in non bailable cases, having regard to the nature of the crime, the circumstances in which it was committed, the 321 background of the accused, the possibility of his jumping bail, the impact that his release may make on the prosecu tion witnesses, its impact on society and the possibility of retribution, etc.
In the present case the successive bail applications preferred by the respondent were rejected on merits having regard to the gravity of the offence alleged to have committed.
One such application No. 36 of 1989 was rejected by Suresh, J. himself.
Undeterred the respondent went on preferring successive applications for bail.
All such pending bail applications were rejected by Puranik, J. by a common order on 6th June, 1989.
Unfortunately, Puranik, J. was not aware of the pendency of yet another bail appli cation No. 995/89 otherwise he would have disposed it of by the very same common Order.
Before the ink was dry on Pura nik, J. 's order, it was upturned by the impugned order.
It is not as if the court passing the impugned order was not aware of the decision of Puranik, J., in fact there is a reference to the same in the impugned order.
Could this be done in the absence of new facts and changed circumstances? What is important to realise is that in Criminal Application No. 375 of 1989, the respondent had made an indentical request as is obvious from one of the prayers (extracted earlier) made therein.
Once that application was rejected there was no question of granting a similar prayer.
That is virtually overruling the earlier decision without there being a change in the fact situation.
And, when we speak of change, we mean a substantial one which has a direct impact on the earlier decision and not merely cosmetic changes which are of little or no consequence.
Between the two orders there was a gap of only two days and it is nobody 's case that during these two days drastic changes had taken place necessitating the release of the respondent on bail.
Judicial discipline, propriety and comity demanded that the impugned order should not have been passed reversing all earlier orders including the one rendered by Puranik, J. only a couple of days before, in the absence of any substan tial change in the fact situation.
In such cases it is necessary to act with restraint and circumspection so that the process of the Court is not abused by a litigant and an impression does not gain ground that the litigant has either successfully avoided one Judge or selected another to secure an order which had hitherto eluded him.
In such a situation the proper course, we think, is to direct that the matter be placed before the same learned Judge who disposed of the earlier applications.
Such a practice or convention would prevent abuse of the process of court inasmuch as it will prevent an impression being created that a litigant is avoiding or selecting a court to secure an order to his liking.
Such a practice would also discourage the filing of successive bail applications without change of circum stances.
Such a practice if adopted would be condusive to judicial discipline and would also 322 save the Court 's time as a Judge familiar with the facts would be able to dispose of the subsequent application with despatch.
It will also result in consistency.
In this view that we take we are fortified by the observations of this Court in paragraph 5 of the judgment in Shahzad Hasan Khan vs Ishtiaq Hasan Khan, [1987] 2 SCC 684.
For the above reasons we are of the view that there was no justification for passing the impugned order in the absence of a substan tial change in the fact situation.
That is what prompted Shetty, J. to describe the impugned order as 'a bit out of the ordinary '.
Judicial restraint demands that we say no more.
It is true that ordinarily this Court does not interfere with an order granting bail but in the facts of this case we feel judicial discipline will be sacrificed at the altar of judicial discretion if we refuse to exercise our jurisdic tion under Article 136 of the Constitution.
In the result we allow this appeal and set aside the impugned order dated 8th June, 1989 granting bail to the respondent accused.
R.S.S. Appeal allowed.

summary:
The respondent, a retired Naval Officer, was apprehended at the Bombay International Airport when he was about to take a flight to New York.
On search of his luggage certain highly sensitive documents were found, and he was arrested for breach of the provisions of the Official Secrets Act, 1923 and the .
The respondent filed a number of applications for being released on bail inter alia on medical grounds.
This batch of applications were rejected by Puranik, J.
The attention of Puranik, J. was, however, not drawn to the pendency of one more such application, in which the respondent had prayed for grant of bail to facilitate yogic exercises under expert guidance at his residence.
The respondent had sought precisely the same relief in an earlier application which had been rejected by Puranik, J. Two days after the rejec tion of the group of bail applications by Puranik, J., the pending application was disposed of by Suresh J., who di rected that the respondent be enlarged on bail, on certain conditions which amounted to virtual house arrest.
Before this Court the appellant State has assailed the propriety of the order granting bail passed by Suresh, J. just two days after Puranik, J. had rejected the batch of bail applications.
On the other hand, it was contended on behalf of the respondent that this Court should refrain from exercising jurisdiction under Article 136 to cancel bail granted by the High Court.
Allowing the appeal, this Court, HELD: (1) It is true that ordinarily this Court does not interfere with an order granting bail, but in the facts of this case the Court feels that judicial discipline will be sacrificed at the alter of judicial discretion if the Court refused to exercise its jurisdiction under Article 136 of the Constitution.
[322C] 316 (2) When the batch of bail applications were put up before Puranik, J., his attention was not drawn to the pendency of one more such application.
Even if the said application was filed after the hearing started before Puranik, J., the learned Judge could have been told about its pendency before he rendered his decision.
This conduct of the respondent has given rise to the argument that the respondent desired to keep the question regarding his en largement on bail alive, [320B C] (3) What is important to realise is that in the hail application before Suresh, J. the respondent made an identi cal request made earlier in an application placed before Puranik, J.
Once that application was rejected there was no question of granting a similar prayer.
That is virtually overuling the earlier decision without there being a change in the fact situation, which would mean a substantial change having a direct impact on the earlier decision and not merely cosmetic changes which are of little or no conse quence.
[321D E] (4) Judicial discipline, propriety and comity demanded that the impugned order should not have been passed revers ing all earlier orders including the one rendered by Pura nik, J., only a couple of days before, in the absence of any substantial change in the fact situation.
[321F] (5) In such a situation the proper course is to direct that the matter be placed before the same learned Judge who disposed of the earlier applications.
Such a practice or convention would prevent an impression being created that a litigant is avoiding or selecting a court to secure an order of his liking.
Shahzad Hasan Khan vs Ishtiaq Hasan Khan, [1987] 2 SCC 684, referred to.


judgement:
vil Appeal Nos.
4209 10 of 1989.
From the Judgment and Order dated 10.4.1987 of the Kerala High Court in M.F.A. No. 291 and 304 of 1982.
K.N. Bhat and Mukul Mudgal for the Appellant.
M.M. Abdul Khader and T.T. 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 K.V. George against the judgment and order passed on 10th April, 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 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 2573.5 M to 2827 M of E.B. Main canal of Kallada Irrigation Project.
The work was required 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 the appellant filed a claim being arbitration case No. 132 of 1980 before the named Arbitrator i.e. 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, K.I.P. Circle, Karnataka filed a defence statement stating 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 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 2(m) 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, K.I.P. Circle, Kottarakkara, 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 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 O.P. (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 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 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 22.1.1981.
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 O.P. (Arb) No. 296 of 1981 for making the second award a rule of the court.
A statement of defence was filed by the respondents wherein,it has been stated inter alia 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 claimant after termination of the contract on June 24, 1980.
403 The claim petition in Arbitration case No. 132/80 was filed by the claimant before the Hon 'ble Arbitrator on 2.7.1980.
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 27.10.1980.
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 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 Ernakulam which held that the Arbitrator could not review its order on the facts of the present case and so allowed F.M.A. No. 291 and 1982.
The High Court also allowed F.M.A. 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 F.M.A. 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 Arbitrator/and 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 F.M.A. 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 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 before this Court that the SubJudge acted legally in directing the Arbitrator to dispose of the arbitra 405 tion case No. 132/80 in the light of the judgment of the Sub Court in O.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 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 2(i) 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 I.A. No. 3780 of 1981 and set ting arise 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 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 O.P. (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 I.A. No. 3780 of 1981 and setting aside the order in O.P. (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 (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 maintainable as under Order 2, Rule 2, C.P.C. 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 U.P. & 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 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.
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.

dataset_name: IN-Abs

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 2573.5 M to 2827 M of E.B. Main conal of Kallada Irrigation Project.
Under the contract agreement, the work was to the completed by March 30, 1980 i.e. 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 26.4.80 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 Rs.28,84,000.
The Arbitrator made the award on 22.1.1981 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 O.P. (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 18.8.81 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 O.P. (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 O.P. (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 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 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 O.P. (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.


judgement:
vil Appeal Nos. 182 1 to 1826 of 1971 etc.
From the Judgment and Order dated 11.8.1971 of the Madras High Court in Writ Petition Nos.
3818, 4019, 4020, 4254, 4566 of 1968 and 82 of 1969.
section Padmanabhan, K.R. Nambiar, A.T.M. Sampath for the Appellants and Appellant in person in C.A. No. 2062 of 1971.
K. Rajendra Chowdhary and V. Krishnamurthy for the Respondent.
The Judgment of the Court was delivered by SHARMA, J.
The question involved in these appeals relates to the vires of the Tamil Nadu Private Educational Institutions (Regulation) Act, 1966, hereinafter referred to as the Act.
The appellants are interested in running educa tional institutions, which are covered by the expression "private educational institution" within the meaning of section 2(f) of the Act.
The main challenge is directed against sections 2(c), 3(a), 3(b), 6, 7 read with sections 15, 22 and 28.
The High Court struck down section 28 and upheld the other sections.
That part of the judgment where section 28 374 has been declared to be invalid has not been impugned by the respondent State.
The provisions of the Act which are relevant for appreciating the ground urged by the appellants are as follows.
Section 3 mandatorily requires a private education al institution to obtain the permission of the competent authority for the purpose of running it.
The Manager of such an institution has to, as required by section 4, make an applica tion for permission in the prescribed form accompanied by a fee.
Section 6 lays down the power of the competent authori ty to deal with such an application in the following terms: "6.
Grant of permission.
On receipt of an application under Section 4 the compe tent authority may grant or refuse to grant the permission after taking into considera tion, the particulars contained in such appli cation: Provided that the permission shall not be refused under this Section unless the applicant has been given an opportunity of making his representation: Provided further that in case of refusal of permission the applicant shall be entitled to refund to one half of the amount of the fee accompanying the application.
The competent authority is empowered under section 7 to cancel the permission in certain circumstances.
One of the condi tions for exercise of power is contravention of any direc tion issued by the competent authority under section 15.
The power to exempt any institution from the provisions of the Act is vested in the State Government under section 22, which is quoted below: "22.
Power to exempt Notwithstand ing anything contained in this Act, the Gov ernment may, subject to which conditions as they deem fit, by notification exempt any private educational institution or class of private educational institutions from all or any of the provisions of this Act or from any rule made under this Act.
" Section 28, which has been declared invalid by the High Court, states that if any difficulty arises in giving effect to the provisions of this Act, the Government may "do any thing which appears to them to be necessary for the purposes of removing the difficulty.
" 375 3.
The Act is impugned on the ground that it does not lay down any guide line for the exercise of the power by the delegated authority, as a result of which the authority is in a position to act according to his whims.
The Act having failed to indicate the conditions for exercise of power, the decision of the competent authority is bound to be discrimi natory and arbitrary.
It has also been argued that the restrictions put by the Act on the appellants, who are running tutorial institutions are unreasonable and cannot be justified under sub clause (g) of Article 19(1) of the Constitution.
The learned counsel appearing for the respondent has attempted to defend the Act on the ground that sufficient guidance is available to the authority concerned from sub section (2)(c) of section 4 which enumerates the particulars required to be supplied in the application for permission.
They are 10 in number and are mentioned below: "4. Application for permission.
(1) . . . . (2) Every such application shall (a) . . . . . (c) contain the following particulars, namely: (i) the name of the private educa tional institution and the name and address of the manager; (ii) the certificate, degree or diploma for which such private educational institution prepares, trains or guides or proposes to prepare, train or guide its stu dents or the certificate, degree or diploma which it grants or confers or proposes to grant or confer; (iii) the amenities available or proposed to be made available to students; (iv) the names of the members of the teaching staff and the educational qualifica tions of each such member; 376 (v) the equipment, laboratory, library and other facilities for instructions; (vi) the number of students in the private educational institution and the groups into which they are divided; (vii) the scales of fees payable by the stu dents; (viii) the sources of income to ensure the financial stability of the private educational institution; (ix) the situation and the descrip tion of the buildings in which such private educational institution is being run or is proposed to be prescribed; (x) such other particulars as may be pre scribed.
The point dealing with legislative delegation has been considered in numerous cases of this Court, and it is not necessary to discuss this aspect at length.
It is well established that determination of legislative policy and formulation of rule of conduct are essential legislative functions which cannot be delegated.
What is permissible is to leave to the delegated authority the task of implementing the object of the Act after the legislature lays down ade quate guide lines for the exercise of power.
When examined in this light the impugned provisions miserably fail to come to the required standard.
The purpose of the Act is said to regulate the pri vate educational institutions but does not give any idea as to the manner in which the control over the institutions can be exercised.
The Preamble which describes the Act "for regulation" is not helpful at all.
Learned counsel for the State said that the Object and the Reasons for the Act are to eradicate corrupt practices in private educational insti tutions.
The expression "private educational institution" has been defined as meaning any college, school or other institution "established and run with the object of prepar ing, training or guiding its students for any certificate, degree or diploma", and it can, therefore, be readily in ferred that the purpose of the Act is to see that such institutions do not exploit the students; and while they impart training and guidance to the students of a standard which may effectively improve their knowledge so as to do well at the examination, they do not charge exhorbitantly for their services.
But the question is as to how this objective can be achieved.
Section 6 which empowers the competent 377 authority to grant or refuse to grant the permission for establishing and running an institution does not give any idea as to the conditions which it has to fulfil before it can apply for permission under the Act, nor are the tests indicated for refusing permission or cancelling under section 7 of an already granted permission.
The authority concerned has been left with unrestricted and unguided discretion which renders the provisions unfair and discriminatory.
It was argued on behalf of the State that since an application for permission has to supply the particulars as detailed in section 4(2)(c) (quoted above in paragraph 4), the Act must be deemed to have given adequate guide lines.
Special emphasis was given by the learned counsel on sub clauses (iii), (iv) and (v) of section 4(2)(c), which ask for information about the amenities for the students the equip ments, laboratory, library and other facilities for instruc tion and, the names of the teachers with their qualifica tions.
It may be noted that the Act, beyond requiring the applicant to make a factual statement about these matters, does not direct the institution to make provisions for them (or for any or some of them) as condition for grant of permission.
The maintenance of any particular standard of these heads are not in contemplation at all, although cer tain other aspects, not so important, have been dealt with differently in several other sections including section 4, 5, 9, 10 and 11.
Section 4(2)(b) mandatorily requires the appli cant to pay the "prescribed" fee; section 5 gives precise direc tion regarding the name by which the institution is to be called; and section 9 about the certificates to be issued by it; and section 11 makes it obligatory to maintain accounts in the "prescribed" manner.
But, there is no indication, whatsoev er, about the legislative policy or the accepted rule of conduct on the vital issue about the maintenance of academic standard of the institution and the other requirements relating to the building, library and necessary amenities for the students, as the Act is absolutely silent about the criteria to be adopted by the prescribed authority for granting or refusing permission.
The rules which were made under section 27 in 1968 and called the Tamil Nadu Private Educa tional Institutions (Regulation) Rules, 1968, are not called upon to lay down any norm on these issues and naturally do not make any reference to these aspects.
The result is that the power to grant or refuse permission is to be exercised according to the whims of the authority and it may differ from person to person holding the office.
The danger of arbitrariness is enhanced by the unrestricted and unguided discretion vested in the State Government in the choice of "competent authority" defined in section (2)(c) in the following words: 378 "(c) "competent authority" means any person, officer or other authority authorised by the Government, by notification, to perform the functions of the competent authority under this Act for such area or in relation to such class of private educational institutions, as may be specified in the notification;" The only safeguard given to the applicant institution is to be found in the first proviso to section 6 which says that the permission shall not be refused unless the applicant has been given an opportunity of making his representation, but that does not by itself protect the applicant from discrimi natory treatment.
So far section 7 dealing with power to cancel the permission granted earlier is concerned, no objection can be taken to the first part of the section, whereunder the permission may be cancelled in case of fraud, misrepre sentation, suppression of material particulars or contraven tion of any provision of the Act or the Rules.
But the other ground on which the authority can exercise its power being contravention "of any direction issued by the competent authority under this Act" again suffers from the vice of arbitrariness.
Section 15, the relevant section in this regard, states that "the competent authority may, from time to time issue such directions regarding the management of a private educational institution as it may think fit" (empha sis added).
The section is too wide in terms without indi cating the nature of such direction or the extent within which the authority should confine itself while exercising the power.
Similar is the situation in the matter of exemp tion from the Act.
The power to grant exemption is contained in section 22, quoted in paragraph 2 above.
The provisions of the Act indicate that the State Government has been vested with unrestricted discretion in the matter of the choice of the competent authority under section 2(2)(c) as also in picking and choosing the institutions for exemption from the Act under section 22.
Such an unguided power bestowed on the State Government was struck down as offend ing Article 14 in the case of the State of West Bengal vs Anwar Ali Sarkar; , A similar situation arose in Kunnathat Thathunni Moopil Nair vs The State of Kerala and Another, ; , where, under section 4 of the Travancore Kochin Land Tax Act, 1955, all lands were sub jected to the burden of a tax and section 7 gave power to the Government to grant exemption from the operation of the Act.
The section was declared ultra vires on the ground that it gave uncanalised, unlimited and arbitrary power, as the Act did not lay down any principle or policy for the guidance of exercise of the discretion in respect of the selection contemplated by section 7. 379 9.
Similar is the position under sections 6 and 7 of the present Act.
The learned counsel for the respondent State contended that by reference in section 4 to the particulars to be supplied.
in the application for permission, it can be easily imagined that the competent authority has to take into account all that may be validly relevant for the grant or refusal of permission.
We are afraid, the section cannot be saved by recourse to this argument in absence of any helpful guidance from the Act.
The position in this case cannot be said to be on a better footing than that of the Gold (Control) Act, 1968, which was challenged in Harakchand Ratanchand Ranthia and Others vs Union of India and Other, ; As is indicated by the judgment, the Gold (Control) Act had to be passed as gold was finding its way into the country through illegal channels, affecting the national economy and hampering the country 's economic sta bility and progress, and the Customs department was found unable to effectively combat the smuggling.
Section 27(6)(a) of the said Act stated that in the matter of issue or renew al of licences the "Administrator shall have regard to the number of dealers existing in the region in which the appli cant intends to carry on business as a dealer".
The expres sion "region" was not defined in the Act and section 27(6)(b) required the Administrator to have regard to "the anticipat ed demand, as estimated by him, of ornaments in the region".
The argument in support of the validity of the Act was that these provisions provided adequate guidance to the Adminis trator, which this Court rejected, holding that the expres sion "anticipated demand" was vague and not capable of objective assessment and, therefore, was found to lead to a great deal of uncertainty.
The other provisions mentioning "suitability of the applicant" in section 27(6)(e) and "public interest" in section 27(6)(g) were also held to have failed in laying down any objective standard or norm so as to save the Act.
The provisions of the act, with which we are dealing in the present cases, are far less helpful for the purpose of upholding its validity.
For the reasons mentioned above, the impugned sec tions of the Act must be held to be invalid.
These provi sions are inextricably bound up with the other parts of the Act so as to form part of a single scheme, and it is not possible to sever the other parts of the Act and save them.
In the result, the entire Act is declared ultra vires.
The appeal is accordingly allowed, but, in the circumstances, without costs.
G.N. Appeal allowed.

summary:
The appellants are interested in running educational institutions which are covered by the expression "private educational institution" within the meaning of Section 2(f) of the Tamil Nadu Private Educational Institutions (Regula tion) Act, 1966.
The vires of the Act especially sections 2(c), 3(a), 3(b), 6, 7, read with sections 15, 22 and 28, was challenged before the High Court, by way of a writ petition.
The High Court struck down section 28 and upheld the other sections.
This appeal by certificate is against the High Court 's judgment upholding the validity of the said sections.
As regards the striking down of section 28, it has not been impugned by the respondent State.
The appellants contended that the Act does not lay down any guideline for the exercise of power by the delegated authority and so the decision of the competent authority is bound to be discriminatory and arbitrary.
It was also con tended that the Act imposed unreasonable restrictions on the appellants in the running of tutorial institutions, and such regulations were violative of Article 29(1)(g) of the Con stitution of India.
On behalf of the respondent, it was stated that suffi cient guidance is available to the authority concerned, by virtue of subsection (2)(c) of Section 4 and hence the appellants ' contentions were not justified.
372 Allowing the appeal, HELD: 1.1.
It is well established that determination of legislative policy and formulation of rule of conduct are essential legislative functions which cannot be delegated.
What is permissible is to leave to the delegated authority the task of implementing the object of the Act after the legislature lays down adequate guidelines for the exercise of power.
Examined in this light, the impugned provisions of the Tamil Nadu Private Educational Institutions (Regulation) Act, 1966 miserably fail to come to the required standard.
These sections are held to be invalid.
They are inextricably bound up with the other parts of the Act so as to form part of a single scheme, and it is not possible to sever the other parts of the Act and save them.
Hence, the entire Act is declared ultra vires.
[376D E; 379G] 1.2.
There is no indication, whatsoever, about the legislative policy or the accepted rule of conduct on the vital issue about the maintenance of academic standard of the institution and the other requirements relating to the building, library and necessary amenities for the students, as the Act is absolutely silent about the criteria to be adopted by the prescribed authority for granting or refusing permission.
Even the rules which were made under Section 27 in 1968 and called the Tamil Nadu Private Educational Insti tutions (Regulation) Rules, 1968, are not called upon to lay down any norm on these issues and naturally do not make any reference to these aspects.
The result is that the power to grant or refuse permission is to be exercised according to the whims of the authority and it may differ from person to person holding the office.
The danger of arbitrariness is enhanced by the unrestricted and unguided discretion vested in the State Government under Section 2(c) of the Act in the choice of competent authority.
[377E G] 2.1.
Section 6 which empowers the competent authority to grant or refuse to grant permission for establishing and running an institution does not give any idea as to the conditions which it has to fulfil before it can apply for permission under the Act, nor are the tests indicated for refusing permission or cancelling under Section 7 of an already granted permission.
[376H; 377A] 2.2.
The only safeguard given to the applicant institu tion is to be found in the first proviso to Section 6 which says that the permission shall not be refused unless the applicant has been given an opportunity of making his repre sentation, but that does not by itself protect the applicant from discriminatory treatment.
So far as Section 7 dealing with 373 power to cancel the permission granted earlier is concerned, no objection can be taken to the first part of the section, whereunder the permission may be cancelled in case of fraud, misrepresentation, suppression of material particulars or contravention of any provision of the Act or the Rules.
But the other ground on which the authority can exercise its power being contravention "of any direction issued by the competent authority under this Act" again suffers from the vice of arbitrariness.
[378B D] 2.3 Section 15 is too wide in terms and does not indi cate the nature of the direction or the extent within which the authority should confine itself while exercising the power.
Similarly under Section 22, the State Government has been vested with unrestricted discretion in picking and choosing the institutions for exemption from the Act.
[378D E] State of West Bengal vs Anwar Ali Sarkar, ; ; Kunnathat Thathunni Moopil Nair vs The State of Kerala and Anr., ; ; Harakchand Ratanchand Banthia and Ors.
vs Union of India & Ors.
, ; , relied on.


judgement:
o. 1 of 1989.
IN Civil Appeal No. 3334 of 1982.
From the Judgment and Order dated 16.9.1982 of the Calcutta High Court in Appeal No. nil.
Kapil Sibal, R.F. Nariman and Vineet Kumar for the Petition er.
Dr. Shankar Ghose, H.N. Salve, G. Joshi, A.K. Sil, Ms. Urmil Narang (N.P.), C.S. Vaidyanathan, Vivek Gambhir (N.P.) 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 12.9.1986 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 Rs.22,000 during the period of lease; (2) as against a one time payment of Rs.31 lakhs in the 1981 agreement, a recur ring annual payment of about Rs.50 lakhs; and (3) built in area of 60,000 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 53,000 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 1,80,000 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 12.9.1986.
It was signed on behalf of the Board by the Chairman and Major General B.M. 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. P.L. 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 Developer/Contractor 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 M/s. 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 1,80,000 square feet would be available under the agreement and excluding about 50,000 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, 1,30,000 square feet would be available.
Out of it the School has been given 60,000 square feet and the builder is to take 70,000 square feet.
We suggested to Mr. Nariman for the builder that the constructed area of 1,30,000 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 Rs.22,000 three years back, we indicated to Mr. Nariman that the sum should be escalated and he has agreed to have it enhanced to Rs.40,000 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 5,000 square feet to the School, escalation of the ground rent to Rs.40,000 from Rs.22,000 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.
T.N.A. Appeal disposed of.

summary:
The Board of Governors of the respondent school entered into a contract for the grant of permanent lease of immova ble property of the school to the petitioner builder.
An association of the old students of the school resisted the agreement before the High Court but a learned Single Judge accorded sanction which was later stayed.
The petitioner preferred an appeal before the Division Bench of the High Court which made certain interim directions while disposing the appeal.
Hence this appeal by the petitioner.
During the pendency of the appeal, the parties entered into a compromise which was signed on behalf of all the parties, but the compromise deed was filed in this Court after a lapse of three years.
The Association of the old students resisted the compromise on the ground: (i) that there was a lapse of three years between the date of signing the compromise and its filing in the court; (ii) the Presi dent of the Old Association of students had no authority to enter the compromise.
Disposing the appeal, this Court; HELD: (1) If the compromise is genuine and lawful, the delay in presentation in court could at the most be in the realm of equity and would not be otherwise material.
In the instant case the resolution of the Board of the Association 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.
The President of the Old Association of Students had been authorised to associate himself for the purpose.
The agreement has been signed by the parties and is not unlawful.
The compromise is, therefore, in accordance with the provisions of Order XXIII, rule 3 of the Code of Civil Procedure and can be acted upon.
[448F H] 446 2.
Before the compromise is accepted it is for the court to be satisfied that the terms are in the interests of the Trust.
[449A] 2.1 In the instant case, under the agreement forming the subject matter of compromise the school would have space available for expansion in the near future.
It is not in the interest of the school to reject the agreement on the ground that there was scope of receiving better offers if adver tisement was made.
[449E C] 2.2 It is appropriate that the compromise should be accepted with certain variations viz. availability of extra area to the school, escalation of the ground rent and provi sion for automatic escalation of ground rent of 10% once in every 10 years.
The permission is accordingly accorded to the Board of Governors to enter into compromise on behalf of the school.
[449E & 449H; 450A B]