2023 Y L R 527
[Balochistan]
Before Gul Hassan Tareen, J
PROJECT DIRECTOR UNIVERSITY OF LORALAI and another ---Petitioners
Versus
ZARIF KHAN HUSSAINZAI AND BROTHERS through Managing Director ---
Respondent
Civil Revision No. 215 of 2022, decided on 15th August, 2022.
(a) Arbitration Act (X of 1940) ---
----Ss. 20, 5 & 12--- Application to file in court arbitration agreement ---Authority of
appointed arbitrator or umpire irrevocable except by leave of court ---Power of court where
arbitrator is removed or his authority revoked---Scope ---Court shall make an order of
reference to the arbitrator, named by the parties either in the arbitration agreement or in an
arbitration clause of a contract ---Until the authority of an appointed arbitrator has not been
revoked w ith leave of the Court under S. 5 of the Arbitration Act, 1940, and/or where an
appointed arbitrator has not been removed by the Court under S. 12(2) of the Arbitration Act, 1940, a duly named arbitrator cannot be substituted by the Court in proceedings under S. 20
of the Arbitration Act, 1940.
Dar Okaz Printing and Publishing Limited Liability Company v. Printing Corporation
of Pakistan Private Limited PLD 2003 SC 808; Mst. Surriya Rehman through Attorney v. Siemens Pakistan Engineering Company Ltd. PLD 2011 Kar. 571 and Pakistan Trading
Company v. M.M. Isphani, Ltd. and another PLD 1960 Dacca 81 rel.
(b) Arbitration Act (X of 1940)---
----Ss. 20, 5 & 12--- Application to file in court arbitration agreement ---Authority of
appointed arbitrator or umpire irr evocable except by leave of court ---Power of court where
arbitrator is removed or his authority revoked--- Scope ---Unless an arbitrator is not removed
by the Court on the application of any party to a reference, a Court cannot remove or substitute an appointed arbitrator.
(c) Arbitration Act (X of 1940)---
----Ss. 8 & 12--- Power of court to appoint arbitrator or umpire ---Power of court where
arbitrator is removed or his authority revoked--- Scope ---Unless an arbitrator fails to use all
reasonable dispatch in entering on and proceeding with the reference and making an award,
an appointed arbitrator cannot be removed or substituted--- Likewise an arbitrator may be
substituted and Court may appoint a new arbitrator where an appointed arbitrator neglects or
refuse to act or is incapable of acting or dies ---New arbitrator can be appointed by the Court
on the application of a party made under subsection (2) of S. 8 & S. 12 of the Arbitration Act, 1940.
Saad Salahuddin Kakar for Petitioners.
Qari Rehmatullah for Re spondent.
Date of hearing: 12th August, 2022.
JUDGMENT
GUL HASSAN TAREEN J. ---This Civil Revision Petition under section 115, the
Civil Procedure Code, 1908 ("the Code") is directed from the order dated 19th April, 2022 ("impugned order") passed by Additional District Judge, Loralai ("appellate Court"), whereby an appeal preferred by the respondent under section 39, the Arbitration Act, 1940 ("the Act") was allowed.
2. Brief facts of the case are that the respondent made an application under section 20 of
the Act, before the Court of Senior Civil Judge, Loralai ("the trial Court"). The application carried the following prayer:
"It is therefore, respectfully prayed that this Hon'ble Court may graciously be pleased to allow the applicant to file contra ct agreement Package- II dated 22nd February,
2016 comprised of construction of roads, culverts, water supply system, sewerage, storm water, drainage system and external electrification and contract agreement dated 28th June, 2016 comprised of construction of Boys Hostel, Girls Hostel,
Bachelor's Staff Hostel, 400 SFT Flats (2 block of 8 Flats each), Dean Office, Electric Room, Gate -02, Bus Stop, Vice Chancellor House, 2200 SFT SD Houses, 1800 SFT
Flats (G -11-16), Commissary Shops, Generator Room, Informa -tion Center, main
library and First Aid Center with further prayer to proceed with the matter in accor -
dance with provisions contained in section 20 of the Arbitration Act, 1940, in the interest of justice, equity and fairplay. "
3. On registration of such a ppli-cation, the trial Court summoned the petitioners, who
filed their common counter affidavit. After hearing parties, the trial Court vide order dated 30th November, 2021 allowed the application of the respondent and directed to file original agreements dated 22nd February, 2016 and 28th June, 2016 in the Court within seven days
and matter was referred to sole arbitrator i.e. Vice Chancellor, University of Loralai ("arbitrator").
4. The respondent preferred an appeal against the order of the trial Court. After hearing
parties, the appellate Court was pleased to accept the appeal and the sole arbitrator, Vice Chancellor, University of Loralai, was substituted by Technical Advisor C&W Department, Government of Balochistan. Aggrieved form such order (substitu tion of arbitrator), the
petitioners have filed the instant revision petition.
5. Counsel for the petitioners Mr. Saad Salahuddin Kakar, Advocate argued that since
Clause 67.3 of the tender document/ contract agreement provides that in case of differences,
the reference shall be to a sole arbitrator i.e. Vice Chancellor, University of Loralai,
therefore, the order of the appellate Court substituting the arbitrator is illegal and finally requested for setting aside of it.
6. In rebuttal, Qari Rehmatullah Advocate, representing the respondent, argued that the
appellate Court has rightly substituted the sole arbitrator because the sole arbitrator, Vice Chancellor, University of Loralai, is bias against the respondent. He submits that this Court vide order dated 6th May, 2020, passed in Constitution Petition No. 322/2020, directed the
respondent to complete the contract work on or before 31st August, 2020, whereas Vice Chancellor, University of Loralai, has terminated his contract on 6th March, 2020, which proves the biasness of the petitioners and the arbitrator. He also submits that he wrote letters
to the university administration for appointment of an impartial arbitrator but all in vain. He further submits that the respondent was also constructing residence of the arbitrator, therefore, his personal interest is involved in the case and any decision by him as arbitrator would not be fair and impartial. Concluding his arguments, he relied upon judgment reported as Perma Construction (Pvt.) Ltd. v. Oberoi Textile s Ltd. 2002 YLR 2687.
7. Arguments heard. Record perused.
8. For resolving the real matter in controversy between the parties, the relevant
provisions in the Act is section 20 sub- section (4), which reads:
"20. Application to file in Court arbitration agreement.-
(1) --------------
(2) --------------
(3) --------------
(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. (emphasis supplied)
(5) --------------."
9. The perusal of subsection (4) of section 20, of the Act transpires that the Court shall
make an order of reference to the arbitrator, named by the parties either in the arbitration agreement or in an arbitration clause of a contract. Until the authority of an appointed arbitrator has not been revoked with leave of the Court under section 5 of the Act and or where an appointed arbitrator has not been removed by the Court under section 12(2) of the Act, a duly named arbitrator cannot be substituted by the Court in proceeding under section 20 of the Act. The Vice Chancellor, University of Loralai, was appointed as an arbitrator with the consent of both parties, therefore, pre -empting in advance, an adverse decision
against the respondent is not well founded. Mere appointment of the Vice Chancellor, University of Loralai, as ar bitrator would make no difference. In this respect I may place
reliance on the case Dar Okaz Printing and Publishing Limited Liability Company v. Printing
Corporation of Pakistan Private Limited PLD 2003 SC 808. The relevant portion reads:
"----In our vie w the terms employed in the arbitration clause expressly reflect mutual
intention of the parties to resolve all disputes concerning the implementation and execution of the contract through the nominated arbitrator jointly agreed upon without any duress or coercion. At any rate mere fact that the chosen arbitrator happens to be
the Chief Executive of the respondent -Corporation would not render it illegal and
against public policy.--- "
I may place also reliance on the case of Mst. Surriya Rehman through Attorney v.
Siemens Pakistan Engineering Company Ltd. (PLD 2011 Karachi 571). The relevant portion reads:
"8. Insofar as the objection taken by learned counsel for the plaintiff that since the arbitration is to be before the managing director of the defendant No.1, the result is a
forgone conclusion, I am not at all satisfied that there is any substance to this objection. In fact, what the plaintiff claims is that the arbitrator (i.e., the managing director) will be biased against the plaintiff, or at least biased in favour of the
defendant No.1. However, as pointed out by learned counsel for the defendant No.1, it
is well settled that the mere fact that an officer or director of one party has been chosen as the arbitrator is no ground in and of itself not to r efer the parties to
arbitration. Secondly, the arbitrator selected in the present case is by designation and not by name, i.e., is the holder for the time being of the office of managing director. The question of bias, if any, would arise in respect of the acts or omission of an
individual, and allegations of bias cannot be made against an office as such. Nothing
has been brought on the record that would establish that there would be a bias against the plaintiff and/or in favour of the defendant No. 1 in any manner."
10. Unless an arbitrator is not removed by the Court on the application of any party to a
reference, a Court cannot remove or substitute an appointed arbitrator. If the respondent has some legal grievance against sole arbitrator/ Vice- Chancellor , University of Loralai, he may
approach the Court under section 11 of the Act for removal of such sole arbitrator or may make an application to the Court under section 12(2) of the Act for revocation of the authority of the said arbitrator (that too withi n the four corners of said sections). Since the
respondent has not availed the remedies provided by the mentioned provisions of the Act, therefore, he cannot ask for removal/ substitution of the duly appointed arbitrator in the proceedings initiated under section 20 of the Act. The alleged apprehension of the respondent at this stage is pre -mature. Law provides remedy for setting aside of an award under sections
30 and 33 of the Act, where a party proves that the arbitrator has misconducted legally or moral ly. At this stage one cannot pre -empt that award would be against him.
11. Unless an arbitrator fails to use all reasonable dispatch in entering on and proceeding
with the reference and making an award, an appointed arbitrator cannot be removed or substitu ted. Likewise an arbitrator may be substituted and Court may appoint a new arbitrator
where an appointed arbitrator neglects or refuse to act or is incapable of acting or dies, a new arbitrator can be appointed by the Court on the application of a party ma de under sub- clause
(2) of section 8 and section 12 of the Act. Since none of these circumstances existed, as such,
the substitution of a duly appointed arbitrator by the appellate Court is illegal.
12. Yet this case has a significant aspect as well. The arbitrator was appointed by consent
of the respondent. The respondent himself made an application dated 11th June, 2021 to the arbitrator/Vice Chancellor, University of Loralai. The relevant portion whereof reads as under:
"In view of above, you are reques ted to settle the dispute as sole Arbitrator between
the undersigned firm and the Project Director, University of Loralai, Loralai, with regard dispute regarding "construction of infrastructure at University of Loralai, Package- II & III" within four corner s of Clauses 67.3, 68.1 and 68.2 of the subject
agreement."
13. Since the Vice Chancellor, University of Loralai was appointed as sole arbitrator with
consent of the respondent and the respondent through the referred application made request to him to act as an arbitrator, therefore, now the respondent could not resile from his contractual commitment as well as asking the appointed arbitrator to act in the reference. I have gone through the application under section 20 of the Act made by the respondent. The
application does not contain a statement of biasness of the arbitrator. The contract of the respondent was not terminated by the arbitrator. Hence, the contention of learned counsel for the respondent cannot be accepted on the principle of Estoppel. Respondent himself invoked arbitration clause and made application to the sole arbitrator, therefore, his appeal before the appellate court was also barred by Article 114, the Qanun- e-Shahadat Order, 1984. The
appellate Court while substituting the appointed ar bitrator appears to have overlooked the
arbitration clause of the contract agreement and the said application of the respondent. By
impugned order the appellate Court has exercised jurisdiction which is not vested with it as such the impugned order attract s revisional jurisdiction of this Court. I may place reliance on
the case of Pakistan Trading Company v. M.M. Isphani, Ltd. and another (PLD 1960 Dacca 81). The relevant portion reads:
"---When the petitioner submitted to the arbitration with his eyes wid e open and
knowing full well that defendant No. 1 is a member of the Inner Committee of both the organisations from before, it is not now open to him to say that he has got a reasonable apprehension that he will not get proper and fair trial before the arb itrators
because of the fact that the opposite party is a member of the Inner Committee of both the organizations."
14. The learned trial Court has properly exercised its jurisdiction conferred upon it under
sub-clause (4) of section 20 of the Act, whereas the appellate Court, in sheer disregard of the
provisions of sections 20(4), 5, 11 and 12 of the Act removed/ substituted the appointed arbitrator, as such, committed material illegality and irregularity.
For the foregoing reasons, the impugned order is set aside and the order dated 30th
November, 2021 passed by the trial Court is restored. The costs of the arbitration proceedings shall be decided by the trial Court in view of section 38 of the Act.
Parties shall bear their own costs.
SA/161/Bal.Revision petition allowed.This judgment is reproduced from a publicly available source for informational purposes and does not constitute legal advice. If you believe this listing contains an error,
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