LexSTATE OF MAHARASHTRA AND ANR. versus M/S. NATIONAL CONSTRUCTION CO., BOMBAY AND ANR.
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.(/ • STATE OF MAHARASHTRA AND ANR. v. MIS. NATIONAL CONSTRUCTION CO., BOMBAY AND ANR. JANUARY 9, 1996 [A.M. AHMADI, CJ. AND S.C. SEN, J.] Code ~f Civil Procedure, 1908 : Section 11-Principle of res judicata--Applies only if the matter di- rectly and substantially in issue in former suit has been heard arul finally decided--Principle is inapplicable if former suit is dismissed merely on a technical ground without adjudication. Rule 2--0rder 2-Test for applicability--Suit--Dismissal of-Second suit based on distinct cause of action--Held not barred. Contract-Bank guarante~bligation of bank to honour. In a contract between the appellant-State and the Respondent- Company, the second respondent, the Central Bank of India, executed a performance guarantee. Under the terms of the guarantee, the Bank was A B c D jointly and severally liable with the contractor for. the latter's default in E performance. As the contractor abandoned the work, the appellants employed other agencies for completing the work and in that process they claimed to have incurred expenses totalling Rs. 1,44,18,970.24. Conse- quently, the appellants filed a Short Cause Suit only against the Bank in the Bombay High Court praying for the recovery of Rs. 14,12,836, which was the amount stipulated in performance guarantee with interest. The F High Court dismissed the suit for non-joinder of parties, holding that the contractor was a necessary party for deciding the issue of default and the bank's consequent liability. In appeal against this order, the appellants impleaded the contractor as a party, yet the appeal was dismissed. Thereafter the appellants filed a Special Civil suit against both the G contractor and the bank claiming Rs. 1,13,27,298.16 with interest from i the contractor by way of damages for breach of contract. This was inclusive of Rs. 14, 12,836 under the bank guarantee. The Civil Judge dismissed the suit holding that as the cause of action was identical to the one in the former suit, it was barred by res judicata, under section 11 as H 293 294 SUPREME COURT REPORTS [1996] l S.C.R. A also Order 2 Rule 2 of the Civil Procedure Code, 1908. The appellants preferred appeal against this order contending that the two suits were based on separate causes of action and the dismissal of the former on a technical ground could not act as a bar against the latter. A Division Bench of the High Court dismissed the appeal. Against the decision of B the High Court, the appellants preferred appeal before this Court. Allowing the appeal, this Court HELD : 1. Section 11 of the Code of Civil Procedure, 1908 deals with the doctrine of res judicata and provides that any matter which might or c ought to have been made a ground for defence or attack in the former suit shall be deemed to have been a matter directly and substantially in issue in such suit. The important words are "has been heard and finally decided". The bar applies only if the matter directly and substantially in issue in the former suit has been heard and finally decided by a Court · competent to try such suit. It means that on the matter or issue in question D there has been an application of the judicial mind and a final adjudication made. If the former suit is dismissed without any adjudication on the matter in issue merely on a technical ground of non-joinder, that cannot operate as res judicata. [297-D; F-G] E 2. The High Court failed to take note of the fact that the appellate court did not consider the merits of the case but confirmed the dismissal of the suit by the lower court on a technical ground. Therefore, the dismissal of the Short Cause suit and the subsequent appeal could not have operated as a bar to special civil suit. The plea based on the principle of ra judicata fails. [297-H, 298-A; F] F Sheodhan Singh v. Daryao Kuanwar,AlR (1966) SC 1332=[1966] 3 SCR 300 and Inacio Martins v. Narayan Hari Naik, [1993] 3 SCC 123, relied on. 3. Both the principle of res judicata and Rule 2 of Order 2 are based on the rule of law that a man shall not be twice vexed for one and the same G cause. The cause of action for a suit comprises of all those facts which the plaintiff must aver and, if traversed, prove to support his right to the judgment. [299-C; El Mohd. Khalil Khan v. Mahbub Ali Khan, AIR (1949) PC 78; Kewal Singh v. Lajwanti, AIR (1980) SC 161 = [1980] 1 SCC 290 and Inacio H Martins v. Narayan Hari Naik
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