Section 20 Arbitration Act 1940

Section 20 : Application to file in Court arbitration agreement

2016 MLD 1157 LAHORE-HIGH-COURT-LAHORE

HASSAN BAKHSH VS SULTAN

Ss. 19,20 & 21—-Parties to suit may apply for order of reference—Appointment of arbitrator—Order of reference—Arbitration is a bilateral arrangement for investigation and determination of a dispute or disputes between parties by one or more persons chosen by them, while avoiding the ordinary procedure for resolution of dispute—Arbitral tribunal derives jurisdiction either from arbitration agreement or reference transmitted to him with consent of litigating parties—Proceedings before arbitral tribunal are although not to be regulated in accordance with general principles provided under C.P.C., but such tribunal cannot be absolved from its liability to decide dispute in a just and fair manner.

2016 MLD 1077 LAHORE-HIGH-COURT-LAHORE

COCA COLA BEVERAGES PAKISTAN LIMITED VS ECHO WEST INTERNATIONAL (PVT.) LTD.

Ss.20 & 33—Arbitration through court—Proceedings as civil suit—Scope—Although proceedings under provisions of Ss. 20 & 33 of Arbitration Act, 1940, are not suit in stricto sensu, yet the proceedings are to be treated as a civil suit—Though said proceedings are not full-fledged civil suit in stricto sensu, but these are legal proceedings with limited scope—Application under S. 20 of Arbitration Act, 1940, is treated as a suit and order directing filing of agreement and making reference to arbitration being final in circumstances amounts to a decree.

2016 CLCN 136 LAHORE-HIGH-COURT-LAHORE

JAMES CONSTRUCTION CO. (PVT.) LIMITED VS PROVINCE OF THE PUNJAB through Secretary Communication and Works

Ss. 34, 31(2), 32 & 20—Civil Procedure Code (V of 1908), O. VII, R. 11 & O. II, R. 2—Contract for construction of overhead bridge—Arbitration clause in the agreement—Commencement of legal proceedings by one of the parties during execution of work—Stay of proceedings—Scope—Suit was dismissed under Ss. 31(2) & 32 of Arbitration Act, 1940 read with O. VII, R. 11 & O. II, R. 2, C.P.C.—Validity—When any party to an arbitration agreement had commenced any legal proceedings against other party of such agreement then other party, should, before taking any other step in the same, approach the judicial authority/court for stay of proceedings—Arbitration agreement existed between the parties and as per the clause of agreement, in case of dispute the same was to be referred to the arbitration—Defendants in their application under Ss. 31(2) & 32 of Arbitration Act, 1940 did not refer to the arbitration clause of the agreement nor invoked S. 34 of the said Act—Trial Court not only ignored the arbitration clause but also S. 34 of the Arbitration Act, 1940 which required that in case of arbitration agreement proceedings of suit should be stayed and that too if application was made before taking any other step in the same—Application was moved, in the present case, after filing of written statement and framing of issues which could not be allowed even to stay the proceedings of the suit—Trial Court rejected the plaint which order could not be passed, in circumstances—Effect of arbitration clause in the agreement was that if a civil suit was filed the same would be stayed but plaint could not be rejected—Impugned order was also liable to be set aside as application was filed after taking steps in the suit—Section 34 of Arbitration Act, 1940 required that application for stay of proceedings should be moved before taking any other step—Suit could not be stayed even in presence of the arbitration clause in the agreement between the parties as application for the same was filed after filing of written statement and framing of issues—Impugned order was set aside and suit would be deemed to be pending before the Trial Court which should be decided in accordance with law—Appeal was accepted in circumstances.

2016 MLD 1037 KARACHI-HIGH-COURT-SINDH

KARACHI FISHERIES HARBOUR AUTHORITY VS HUSSAIN (PVT.) LTD.

Ss. 20 & 41—Arbitration agreement—Arbitrator, appointment of—Final disposal or hearing of main suit when same was not fixed for the purpose—Effect—Trial Court decided main petition filed under S. 20 of Arbitration Act, 1940 while hearing application moved under S. 41 of Arbitration Act, 1940—Validity—Matter was only fixed on the day for hearing of an application filed under S. 20 of Arbitration Act, 1940 and not for final hearing or disposal of the entire suit or main application—Trial Court while allowing the application had issued direction to the applicant-appellant to file agreement in the court and dispute had been referred for arbitration by the same Arbitrator who had earlier decided the issue between the same parties—When a matter was listed for hearing of an application and not for final disposal or hearing of the main suit, court should not decide the entire suit on merits and could only decide the said application except with the consent of the parties—While hearing miscellaneous application the matter could not have been referred for arbitration as same would amount to finally deciding the main application/suit—Matter was remanded to the Trial Court to decide the main application afresh after providing reasonable opportunity to both the parties within a specified period—Appeal was allowed in circumstances.

2016 YLRN 196 KARACHI-HIGH-COURT-SINDH

Syed MUZAFFAR HUSSAIN SHAH VS KARACHI ELECTRIC SUPPLY COMPANY LIMITED (KESC)

Ss. 14, 17, 20, 30 & 37—Limitation Act (IX of 1908), S. 3—Award by arbitrator— Objections— Time barred claim— Limitation— Award announced by sole arbitrator was submitted before Court for making same as rule of the Court—Sole arbitrator instead of appreciating material placed before him in respect of claim, only decided issue of limitation—Plea raised by plaintiff was that matter be remanded to arbitrator for decision afresh—Validity—Held; it was incumbent upon plaintiff to refer the matter for arbitration or approach sole arbitrator as soon as dispute had arisen between parties—Plaintiff, in alternative, could have approached the Court under S.20 of Arbitration Act, 1940 for appointment of arbitrator—Limitation period in any case was three years and same would not start only from the date when arbitrator was approached by any of the parties—Provisions of Limitation Act, 1908 were applicable to arbitration proceedings as provided under S.37 of Arbitration Act, 1940—Once law had provided a specific period of limitation, then same could not be enlarged in the manner as contended by plaintiff—Claim of plaintiff before High Court for referring matter to arbitrator as well as before defendant Authority was time barred and there could not be any exception to the same—High Court declined to interfere with award announced by sole arbitrator and objections were dismissed—Award was made rule of the Court in circumstances.

2016 CLC 1772 ISLAMABAD

BNP (PVT.) LIMITED VS COLLIER INTERNATIONAL PAKISTAN (PVT.) LIMITED

Ss. 34, 8 & 20—Suit for recovery of money and damages—Stay of proceedings—Effect—Arbitration clause in agreement for resolution of dispute—Defendant on the first available opportunity filed application to stay the proceedings and to refer the matter to arbitrator—Trial Court allowed the application filed by defendant and stayed the proceedings in suit for recovery of damages—Plea raised by plaintiff was that application was filed by defendant after many adjournments– Validity—Once the Court would stay proceedings in suit, the parties were left whether to institute arbitration proceedings with intervention of Court (under S.20 of Arbitration Act, 1940), or without intervention of Court (under Chap.II of Arbitration Act, 1940)—Where parties to the suit, who were also parties to arbitration agreement executed prior to institution of suit, jointly applied for matters in dispute between such parties to be referred to arbitration, the Court could treat such application as an application under S.20 of Arbitration Act, 1940, and could refer the disputes to arbitration—Adjournment granted in routine by Trial Court was not inductive of defendant’s conduct to abdicate his claim to have disputes raised in the suit to be decided in accordance with arbitration clause in the agreement—Single adjournment granted by Court in routine, requiring defendant to file a power of attorney and written statement could not be termed as ‘a step in the proceedings’—Date on which the order was passed was the first date on which representative of defendant had tendered appearance in Court—Conduct of the defendant, in order to be termed as ‘a step in the proceedings’ must be such as would manifestly have displayed an unequivocal intention to proceed with the suit and gave up the right to have the matter disposed of by arbitration—Trial Court not only stayed proceedings in civil suit but had also directed plaintiff to invoke arbitration clause in agreement for resolution of dispute—Trial Court could not have given such direction and it was against the law—High Court partially set aside the order passed by Trial Court only to the extent of direction given to plaintiff to invoke arbitration clause—Appeal was allowed accordingly.

2015 PLD 154 SUPREME-COURT

INDUSTRIAL FABRICATION COMPANY through M.D. VS MANAGING DIRECTOR, PAK AMERICAN FERTILIZER LIMITED

20—Application to file arbitration agreement in court—Pre-requisite—“Existing dispute”—Full and final settlement between parties—“Sufficient cause” for declining to direct filing of arbitration agreement— Where a claim was raised and finally settled through accord and satisfaction by payment or adjustment, there would be no “existing dispute” requiring resolution through arbitration—Where the original contract was substituted through novation, lawful rescission or alteration the arbitration clause therein may also perish thereby precluding a reference to the arbitrators—Factum of such final settlement may be disputed—Settlement being a sub-specie of contract, its validity may be contested on the ground of having been obtained through exercise of undue influence or coercion, or on any other ground available under the law—Acceptance of the settlement may be equivocal or “without prejudice” or substantial questions as to its true import meaning or effect may be raised by the opposite side—In such eventualities, a dispute arising from the contract would exist requiring adjudication by the forum chosen by the parties i.e. arbitrators and appropriate orders in such behalf may be passed under S.20 of the Arbitration Act, 1940, provided such dispute had been raised and was before the court seized of an application under S.20 of the said Act.

2015 PLD 154 SUPREME-COURT

INDUSTRIAL FABRICATION COMPANY through M.D. VS MANAGING DIRECTOR, PAK AMERICAN FERTILIZER LIMITED

20—Application to file arbitration agreement in court—Pre-requisite—“Existing dispute”—Full and final settlement between parties—“Sufficient cause” for declining to direct filing of arbitration agreement —Scope—Agreement between appellant company and respondent-company—Dispute over payment raised by appellant-company—Letter issued by the appellant-company to the respondent-company quantifying the amount due to them as full and final settlement—Payments in terms of the letter received by appellant-company as full and final settlement—Subsequent to receiving such payment appellant-company filed an application in court under S.20 of the Arbitration Act, 1940, alleging therein that the payment due under the contract had not been made by the respondent-company and illegal deductions had been made, and that respondent-company should be directed to file the agreement in the court and an order should be passed, referring the dispute to the arbitrators—Legality—Appellant-company in its letter had quantified the final value of the work under the agreement and a full and final claim including for additional works was made—Settlement offered by the appellant-company was clear and unambiguous, without any reservation and was not “without prejudice”—Authenticity of such settlement offer was acknowledged and admitted—Amount as identified was admittedly paid to and received by the appellant-company, thus, claim raised by the appellant-company was fully and finally settled by the respondent-company leaving no existing dispute—Absence of an “existing dispute” was a “sufficient cause” for the court in terms of S.20(4) of the Arbitration Act, 1940 for declining to direct filing of arbitration agreement—High Court had rightly held that there was no existing dispute between the parties, hence there was sufficient cause for not directing the filing of arbitration agreement—Appeal was dismissed accordingly.

2015 PLD 154 SUPREME-COURT

INDUSTRIAL FABRICATION COMPANY through M.D. VS MANAGING DIRECTOR, PAK AMERICAN FERTILIZER LIMITED

20—Application to file arbitration agreement in court—Pre-requisite—“Existing dispute”—Existing dispute relating to a matter falling within the ambit of the arbitration agreement was a sine qua non for invoking the jurisdiction of the court under S.20 of the Arbitration Act 1940 and the absence thereof would be a “sufficient cause” in terms of S.20(4) of the said Act for declining to direct filing of arbitration agreement.

2015 CLD 1743 QUETTA-HIGH-COURT-BALOCHISTAN

GOVERNMENT OF BALOCHISTAN through Additional Chief Secretary, Planning and Development Department VS ENTERPRISE AND DEVELOPMENT CONSULTING (PVT.) LTD.

20—Agreement between department of Provincial Government and Private Limited Company—Appointment of arbitrator—Arbitration clause in the agreement—Scope—Trial Court appointed arbitrator who filed award which was made rule of court—Trial Court was bound to consider whether arbitration agreement should be filed in the court or not—Arbitrator could be appointed by the court if parties were agreed for the same—Mode, manner and mechanism for selection of arbitrator had to be adhered from the agreement if arbitration clause did not name an arbitrator—Trial Court, in the present case, without considering the dispute between the parties, and arbitration clause of the agreement, had unilaterally appointed arbitrator thus had conducted the proceedings without adhering to the clause of contract/agreement—Trial Court was required to have first determined its competency/jurisdiction over the dispute prior to appointment of arbitrator which had not been done—Award given by the such arbitrator was void ab initio—Parties must stick to the agreement/contract entered into between them in case of arbitration with intervention of court—If arbitration clause had named an arbitrator and had provided for the manner in which the arbitrator was to be chosen and appointed, parties were bound to act accordingly—Primary duty of arbitrator under the deed of reference was to determine whether he had jurisdiction with regard to dispute arising out of an agreement—Trial Court was bound to consider whether arbitrator had exceeded his jurisdiction or he had jurisdiction to adjudicate upon the matter— Trial Court had decided the question of competency of reference as well as appointment of arbitrator without reference to the agreement—Impugned order passed by the Trial Court was set aside and award was rejected—Case was remanded to the Trial Court with the direction to first decide as to whether under the clause of agreement it had jurisdiction to appoint an arbitrator other than provided in the clause of said agreement and then decide the matter within a specific period—Appeal was accepted accordingly.

2015 MLD 635 PESHAWAR-HIGH-COURT

SARHAD HYDEL DEVELOPMENT ORGANIZATION (SHYDO) VS HEAVY MECHANICAL COMPLEX (PVT.) LTD., TAXILA (HMC)

20—Arbitrator, appointment of—Arbitration agreement—Arbitration clause—Scope—Matter in dispute was referred to arbitrator to conduct arbitration and submit award—Validity—When parties had agreed to decide their dispute in a particular manner then they must surrender themselves to the forum voluntary chosen by them—Arbitration agreement was on record wherein it had been provided that parties should resolve their dispute through arbitrator—Trial Court was left with no option but to allow the application to resolve the dispute through arbitration clause—No plausible objection had been raised with regard to the legality of impugned order nor regarding integrity, veracity or competency of the arbitrator appointed by the Trial Court—No final award had been submitted in the court and it would be premature to make any observation with such regard—Appeal was dismissed in circumstances.

2015 YLR 1027 KARACHI-HIGH-COURT-SINDH

PAKISTAN INTERNATIONAL BULK TERMINAL LTD. VS MAQBOOL ASSOCIATES (PVT.) LTD.

O.XXIII, R.3—Arbitration Act (X of 1940), S. 20— Arbitration— Dispute resolution—Role of Court—Compromise between parties—During pendency of proceedings under S. 20 of Arbitration Act, 1940, parties entered in compromise and sought disposal of suit under O.XXIII, R.3, C.P.C.—Validity—Court was only gateway to adjudication of dispute between parties and not adjudicator in its own right—Present was not a regular suit under common law and dispute resolution was not possible by Court of law under S.20 of Arbitration Act, 1940—Court was not empowered to examine and even comment on “dispute/issues” between parties, lest it could prejudice case of either party—Provisions of O. XXIII, R.3, C.P.C. were not applicable to arbitration suit under S. 20 of Arbitration Act, 1940—Court appointed sole arbitrator for resolution of dispute between parties in terms of arbitration agreement—Suit was disposed of accordingly.

2015 PLD 341 KARACHI-HIGH-COURT-SINDH

GENESIS AVIATION SERVICES (PVT.) LTD. VS GULF AIR COMPANY G.S.C.

20—Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2—Arbitration agreement—Interim injunction, grant of— Oral agreement amending written agreement—Scope—Plaintiff was a company appointed in Pakistan as General Sales Agent of defendant Airline—Plaintiff claimed that after expiry of term of agreement, it was extended orally—Validity—Agreement in question was governed by English law and it must be accepted as a matter of law that a written contract could be varied by a subsequent oral agreement even if it contained a provision specifically stating that only written amendments and modifications, signed by parties were permissible—Proof of any such subsequent oral agreement was a matter for the law of Pakistan being the lex fori, and law in Pakistan only allowed for a “distinct subsequent oral agreement” to be adduced in evidence—Material placed on record was insufficient to establish that such an agreement was entered into between the parties and amended agreement by, in effect, omitting or altering relevant clause of agreement in question—Plaintiff was unable to establish a prima facie case and even if such case was made out, plaintiff would still not be entitled to any interim injunctive relief—Agreement in question was one of agency and plaintiff’s case did not come within the scope of law laid down in such regard for such relief by courts of Pakistan—High Court declined to grant interim relief to plaintiff—Application was dismissed in circumstances.

2015 YLR 2116 ISLAMABAD

RAKSHANI BUILDERS (PVT.) LTD. VS CAPITAL DEVELOPMENT AUTHORITY (CDA), ISLAMABAD

20—Application to file Arbitration agreement in court—Arbitrator, appointment of—Scope—Execution of contract between the parties was on record—Dispute existed between the parties—Applicant had sent notice for amicable settlement of the matter and had raised therein its grievance—Applicant was entitled to give notice of arbitration and asked the respondent to nominate the arbitrator—Respondent was directed to file original contract in the court—Both the parties were directed to proceed with appointment of arbitrator within a specified period of time—Application for filing of arbitration agreement in the court was accepted in circumstances.

2015 MLD 1821 ISLAMABAD

OIL AND GAS DEVELOPMENT COMPANY LTD. VS AGHA MUHAMMAD AND BROTHERS

20—Limitation Act (IX of 1908), Art. 181—Arbitration agreement—Arbitrator, appointment of—Referring question of limitation to the arbitrator—Scope—Jurisdiction of arbitrator—Sufficient cause—Determination of—Trial Court referred the question of limitation for determination to the arbitrator—Validity—Right to apply under S. 20 of Arbitration Act, 1940 would accrue when a difference or dispute had arisen between the parties—Question of limitation was to be decided by the Trial Court before granting the application under S. 20 of Arbitration Act, 1940—Leaving the question to be determined by the arbitrator was neither envisaged under S. 20 of Arbitration Act, 1940 nor could the court delegate its power to the arbitrator under S. 20 of Arbitration Act, 1940—If Trial Court had come to the conclusion that application under S. 20 of Arbitration Act, 1940 was barred by time then such application could not be granted nor could the matter be referred to the arbitrator—Trial Court before passing the impugned order was required to decide whether application under S. 20 of Arbitration Act, 1940 had been filed within time stipulated under Art. 181 of Limitation Act, 1908—Question whether the claim made by either party was barred by time or not or whether it was barred by any contractual term would fall within the scope of jurisdiction of arbitrator—Application filed under S. 20 of Arbitration Act, 1940 whether in time or not had to be decided by the court itself before allowing the said application—Jurisdiction of arbitrator was circumscribed by the arbitration agreement—Question whether application under S. 20 of Arbitration Act, 1940 was to be allowed or not was a statutory obligation of court and same could not be delegated to the arbitrator—Trial Court was required to determine the point of time at which the right to apply under S. 20 of Arbitration Act, 1940 had accrued—Trial Court was bound to determine as to when the differences had arisen between the parties i.e. when they did not agree on any particular question covered by the arbitration agreement—Trial Court while passing the impugned order had not taken into consideration the expression “sufficient cause” used in S.20 of Arbitration Act, 1940—Trial Court was bound to order that the arbitration agreement be filed and then to refer the matter to the arbitrator if sufficient cause could not be shown for not filing the said agreement and making a reference to the arbitrator—Court had to be satisfied that ‘sufficient cause’ could not be shown before deciding the application and making an order of reference to the arbitrator—Question whether application under S. 20 of Arbitration Act, 1940 was not within time was a ‘sufficient cause’ and same had to be decided by the court and not the arbitrator—Allowing application under S.20 of Arbitration Act, 1940 and referring the question as to whether it was filed within the prescribed time would tantamount to delegate to the arbitrator the authority to decide whether ‘sufficient cause’ existed or not—Whether ‘sufficient cause’ existed or not was within the exclusive domain of the court and a determination with such regard thereto was a pre-condition for making a reference to the arbitrator—Question whether claim was made in time would fall within the domain of arbitrator—Trial Court had failed to advert to the question as to whether ‘sufficient cause’ had been raised by the petitioner for refusing to make a reference to the arbitrator—Impugned order was set aside—Application filed under S. 20 of Arbitration Act, 1940 would be deemed to be pending before the Trial Court—Question whether application under S. 20 of Arbitration Act, 1940 was filed within time should be determined and decided in view of facts and circumstances of the case—Appeal was accepted.

2015 MLD 1615 ISLAMABAD

OMV MAURICE ENERGY LIMITED VS OCEAN PAKISTAN LIMITED

O.XXXIX, Rr.1 & 2—Arbitration Act (X of 1940), Ss.4 & 20—Arbitration—Application for grant of temporary injunction—Element of irreparable loss in fiscal matters—Principles—Plaintiff, a petroleum company, being successor of previous company, filed application, along with suit, for grant of temporary injunction claiming that applicant being operator had issued cash calls to defendants for payment of their share of costs and expenses regarding exploration and development as approved under Joint Operation Agreement, which the defendants had failed to pay, and sought deposit of shares of defendants in escrow account, to be set up by order of court, till final adjudication of the suit—Contention raised by plaintiff was that due to default on part of defendants in paying cash calls, he had right to make deductions from petroleum sale proceeds—Plea taken by defendants was that present application was not maintainable as the matter was already pending adjudication before Trial Court—Validity—Under Joint Operation Agreement, only operator or non-operator parties to the agreement were entitled to make deduction from petroleum sale proceeds to make good expenses incurred due to default in cash calls—Present application could not be allowed before decision as to legal status of plaintiff as successor of previous company, being de jure operator and majority working interest owner—Element of irreparable loss for grant of temporary injunction was not available to plaintiff, as matter involved was of fiscal nature—Application was dismissed in circumstance.

2015 CLC 1504 ISLAMABAD

OMV ENERGY VS OCEAN PAKISTAN

VII, R. 11—Arbitration Act (X of 1940), S.20—Rejection of arbitration petition—Respondent filed application for rejection of arbitration petition under O.VII, R.11, C.P.C. on ground that petition was not maintainable as plaintiff had no locus standi to file the application—Respondent contended that S.20 of Arbitration Act, 1940 applied to only those persons who were parties to arbitration agreement and a difference amongst them had arisen, while such position was not present in the case; that plaintiff was wrongly assuming himself to be party, and that unless legal status of plaintiff was decided, arbitration petition could not be allowed to proceed under doctrine of privity—Plaintiff took plea that respondent had not agitated the said grounds in his reply to arbitration petition—Validity—Dispute as to legal status of petitioner, which was pending before another court, had not been decided yet, and the same could not be considered as adverse element to rights of petitioner—Scope of jurisdiction under O.VII, R.11, C.P.C. was limited to pleadings and documents annexed in therewith—Objection raised in the present application had not been taken in reply to main petition—Disputes beyond pleadings could not be employed to reject arbitration petition under O.VII, R.11, C.P.C., specifically where case was at final stage and disputed question of facts with regard to validity of arbitration agreement fell within jurisdiction of arbitrator—Application was dismissed in circumstances.

2015 CLC 734 ISLAMABAD

C.D.A. VS R.M. GULISTAN ENGINEERS AND CONTRACTORS (PVT.) LTD.

3—Arbitration Act (X of 1940), Ss. 8 & 20—Law Reforms Ordinance (XII of 1972), S. 3—Intra-court appeal—Abatement of proceedings before arbitrator—Scope—Sole arbitrator was appointed with the consent of both the parties—Capital Development Authority (Abatement of Arbitration Proceedings) Act, 1975 was applicable to the contracts/arbitration proceedings entered into by Capital Development Authority prior to the passing of the Act—Abatement of proceedings before arbitrators under S. 3 of Capital Development Authority (Abatement of Arbitration Proceedings) Act, 1975 would pertain to the contracts and proceedings entered into prior to the passing of the Act—Such prohibition or abatement was with regard to the contracts entered in the past and not for future contracts or arbitration proceedings—Capital Development Authority (Abatement of Arbitration Proceedings) Act, 1975 had no applicability to the agreements executed after the passing of the Act—Intra-court appeal was dismissed in circumstances.

2014 PLD 494 SUPREME-COURT

LAHORE DEVELOPMENT AUTHORITY VS ALICON LIMITED, LAHORE

20—Arbitration award—Wrongful rescission of contract—Claim for escalation—Claim for loss of profit—Contract was wrongfully rescinded by the appellant—Award by arbitrator stated that contractor was deprived of the profits which could have been earned by it due to execution of balance or remaining work; that contractor was entitled to 6% profit for the balance work as compensation (contractor had claimed 15% profit); that contractor was also entitled to escalation due to increase in prices of materials—Contention of appellant that contractor had only completed 33% of the contract, therefore, he was not entitled to escalation; that no basis had been given in the award for loss of profit and contractor had only given an estimate which was wrongly allowed in the award—Validity—Arbitrator in his award pointed out that only condition was that in case of increase in prices of material the contractor could get escalation, and such finding of the arbitrator had not been rebutted before the court nor any evidence had been shown to the effect that escalation was only allowable if the whole contract had been executed—Arbitrator was justified in awarding 6% of the claim of the profit against 15% and had rightly awarded compensation for escalation—Appeal was dismissed accordingly.

2014 PLD 424 LAHORE-HIGH-COURT-LAHORE

FAUJI FOUNDATION through General Manager (Engineering) VS CHANAN DIN AND SONS

Ss. 14, 20 & 30—Non-completion of work by respondent within agreed time—Award of fresh contract by applicant to a third party for completing remaining work—Respondent’s notice to appellant claiming Rs.1,13,78,207—Reference of dispute between parties to Arbitrator in terms of arbitration clause in contract—Submission of claim by respondent for Rs.2,24,18,619 instead of Rs.1,13,78,207—Award by Arbitrator for differential amount of Rs.4.9 million made rule of court by Trial Court—Validity—According to terms of contract, respondent’s claim had to be confined to amount for which he had issued notice to applicant—Neither court nor Arbitrator was competent to enlarge scope of contract or application made under S.20 of Arbitration Act, 1940—Award for differential amount between respondent’s contract and such third party’s contract was beyond jurisdiction of Arbitraor—Arbitrator’s function was not to be influenced by his imagination and opinion, rather he was obliged to apply agreed clauses of contract between parties—High Court set aside impugned judgment and remanded case to Trial Court for its decision afresh in terms of reference.

2014 CLD 1439 KARACHI-HIGH-COURT-SINDH

GLOBAL ENERGY AND COMMODITY EXCHANGE GROUP ITALY SPA (GECX GROUP) VS TRADING CORPORATION OF PAKISTAN

20—Dispute pertaining to performance of contract—Arbitration proceedings— Application to restrain encashment of bank guarantee executed by appellant in favour of the respondent— Scope—Contention of the appellant was that respondent should be restrained from encashing the bank guarantee till conclusion of arbitration proceedings between the parties—Held, that encashment of bank guarantee was to be restrained only if a prima facie case was made when there was material available on record to show that the person in whose favour the performance bond was executed, had also committed default in performance of the contract—When such a prima facie case was made out then the court could restrain the encashment of a bank guarantee—In the present case, however, time for performance of the contract by the appellant was extended many times, but the appellant failed to discharge its contractual commitment, and only after getting extension of contract, when the contract was still not performed by the appellant, the bank guarantee was sought to be encashed—No justification therefore, existed to restrain the respondent from encashing the bank guarantee—Appeal was dismissed.

2014 CLD 773 KARACHI-HIGH-COURT-SINDH

PAKISTAN INTERNATIONAL BULK TERMINAL LTD. VS MAQBOOL ASSOCIATES (PVT.) LTD.

20—Civil Procedure Code (V of 1908), O. XXIII, R.3—Arbitration— Dispute resolution— Role of court—Compromise between parties—During pendency of proceedings under S.20 of Arbitration Act, 1940, parties entered in compromise and sought disposal of suit under O. XXIII, R. 3, C.P.C.—Validity—Court was only gateway to adjudication of dispute between parties and not adjudicator in its own right—Present was not a regular suit under common law and dispute resolution was not possible by court of law under S.20 of Arbitration Act, 1940—Court was not empowered to examine and even comment on “dispute/issues” between parties, lest it could prejudice case of either party—Provisions of O.XXII, R. 3, C.P.C. were not applicable to arbitration suit under S.20 of Arbitration Act, 1940—Court appointed sole arbitrator for resolution of dispute between parties in terms of arbitration agreement—Suit was disposed of accordingly.

2014 MLD 1482 KARACHI-HIGH-COURT-SINDH

MULTIX INTERNATIONAL CORPORATION VS KARACHI METROPOLITAN CORPORATION

Ss. 34 & 20—Civil Procedure Code (V of 1908), S. 151—Specific Relief Act (I of 1877), S. 42—Suit for declaration—Arbitration agreement—Arbitration clause—Stay of proceedings—Scope—Defendants did not make application for stay of suit in the first instance but they filed memo of appearance and statement along with para-wise comments copy of which was supplied to the plaintiff—Present application under S. 34 of Arbitration Act, 1940 had been filed at a belated stage—Section 20 of Arbitration Act, 1940 was not applicable as suit had already been filed—Application filed under Ss.20 & 34 of Arbitration Act, 1940 read with S. 151, C.P.C. was dismissed in circumstances.

2013 CLD 2167 LAHORE-HIGH-COURT-LAHORE

FAUJI FOUNDATION through General Manager (Engineering) VS CHANAN DIN AND SONS through Attorney

Ss. 14, 20 & 30—Non-completion of work by respondent within agreed time—Award of fresh contract by applicant to a third party for completing remaining work— Respondent’s notice to appellant claiming Rs.1,13,78,207—Reference of dispute between parties to Arbitrator in terms of arbitration clause in contract—Submission of claim by respondent for Rs.2,24,18,619 instead of Rs.1,13,78,207—Award by Arbitrator for differential amount of Rs.4.9 million made rule of court by Trial Court—Validity—According to terms of contract, respondent’s claim had to be confined to amount for which he had issued notice to applicant—Neither court nor Arbitrator was competent to enlarge scope of contract or application made under S.20 of Arbitration Act, 1940—Award for differential amount between respondent’s contract and such third party’s contract was beyond jurisdiction of Arbitrator—Arbitrator’s function was not to be influenced by his imagination and opinion, rather he was obliged to apply agreed clauses of contract between parties—High Court set aside impugned judgment and remanded case to Trial Court for its decision afresh in terms of reference.

2013 CLD 451 LAHORE-HIGH-COURT-LAHORE

CITY SCHOOLS (PVT.) LIMITED VS AZMAT NAWAZ

Ss. 34, 8 & 20—Civil Procedure Code (V of 1908), O.VII, R.11 & S.11—Stay of legal proceedings in presence of an arbitration agreement—Appointment of arbitrator by the court—Suit for recovery—Application of the defendant under S.34 of the Arbitration Act, 1940 for stay of proceedings in presence of an arbitration agreement was allowed by Trial Court—Res judicata, principle of—Applicability—Scope—Defendant, thereafter, filed an application under S.8 read with S.20, Arbitration Act, 1940 for appointment of arbitrator by the court, in response to which the plaintiff-company filed application under O.VII, Rule 11, C.P.C. for rejection of said application filed by defendant—Contention of plaintiff-company was that defendant had earlier filed an application for appointment of arbitrator, upon which no findings were given by Trial Court, therefore, subsequent application was not maintainable under the principle of res judicata in accordance with S.11, C.P.C.— Validity— In order to apply the bar of res judicata, it was imperative for the court to first determine as to whether the issue in question was raised, determined and decided in the former proceedings between the parties—Perusal of order of Trial Court made it clear that only proceedings of the suit for recovery lodged by the plaintiff-company were stayed and no order with regard to appointment of arbitrator was made—Since no findings were recorded by the Trial Court on said specific dimension of the matter, therefore, the invocation of the doctrine of res judicata was out of place in the present case—Plaintiff-company’s application under O.VII, R.11, C.P.C. was rightly dismissed by courts below—Revision was dismissed, in circumstances.

2013 CLD 1451 KARACHI-HIGH-COURT-SINDH

SADAT BUSINESS GROUP LTD. VS FEDERATION OF PAKISTAN through Secretary

20— Appointment of arbitrator— Contract, termination of—Effect—Plaintiff invoked arbitration clause in contract between parties and sought resolving of dispute by appointment of arbitrator—Plea raised by defendant was that by termination of contract, arbitration clause did not survive— Validity—Termination/cancellation could occur due to breach in contractual obligations by any of the parties to contract which in fact could lead towards a dispute and in order to resolve dispute between parties and even for determination of their rights and liabilities and even a wrongful termination could also be made subject matter of arbitration proceedings otherwise the whole purpose and scheme of incorporation arbitration clause in contract would become redundant and superfluous and it was very easy for any party to terminate and or frustrate contact out rightly in order to avoid arbitration proceedings and claims if any—Cancellation of contract or invoking arbitration proceedings both were two distinct situations, termination clause could not be given overriding effect on arbitration proceedings or provision made for arbitration in contract—Despite cancellation/termination of contract provision of arbitration survived and agreement for arbitration contained in contract was a separate part of contract—High Court appointed arbitrator to resolve and arbitrate dispute between parties—Suit was disposed of accordingly.

2013 CLD 1110 KARACHI-HIGH-COURT-SINDH

CRESCENT STEEL AND ALLIED PRODUCTS LIMITED VS SUI NORTHERN GAS PIPELINE LIMITED

20—Civil Procedure Code (V of 1908), O. XXXIX, Rr.1 & 2—Arbitration agreement with intervention of court—Dispute between parties regarding non-performance of contract—Application for restraining first defendant from encashing performance guarantee and also second defendant from making payment thereunder to first defendant till decision of such dispute by arbitrator—Applicant’s plea was that quantum of liquidated damages, if any, required decision on basis of evidence; and that question yet requiring decision was as to whether or not first defendant was entitled to such damages—Validity—Plaintiff as tentative measure had submitted such guarantee equivalent to quantum of such damages claimed by first defendant—Determination of quantum of such damages and fulfilment of conditions for encashment of such guarantee being a dispute between parties would be decided by arbitrators to be appointed in terms of arbitration agreement—First defendant had yet to prove losses suffered by him in order to become entitled to such damages, thus, he could not be allowed to encash such guarantee before conclusion of arbitration proceedings—High Court accepted such application of plaintiff in circumstances.

2013 CLD 1110 KARACHI-HIGH-COURT-SINDH

CRESCENT STEEL AND ALLIED PRODUCTS LIMITED VS SUI NORTHERN GAS PIPELINE LIMITED

20—Appreciation for filing of arbitration agreement in court—Duty of court—Court in such case would have to examine existence or non-existence of arbitration agreement and dispute(s) between the parties—Denial of assertions made by either side would prove existence of dispute—Arbitrator appointed by parties would be only an independent and impartial forum in case of such agreement—Principles.

2013 CLD 681 KARACHI-HIGH-COURT-SINDH

GLOBAL ENERGY & COMMODITY EXCHANGE GROUP ITALY SPA (GECX GROUP) VS TRADING CORPORATION OF PAKISTAN

20–Application to file arbitration agreement in court and for the appointment of arbitrator—Existence of a dispute between the parties, determination of—Scope—“Dispute” meaning of-Existence of a difference or dispute was an essential condition that constituted a cause of action for an application under S.20 of the Arbitration Act, 1940-Dispute implied an assertion of a right by one party and repudiation thereof by another—Scope and power conferred on the court under S.20 of the Arbitration Act, 1940 was merely limited to determination of the factual of a real dispute and no more; and it was not for the court to go into questions pertaining to the disputes raised or to suggest the manner of decision thereof, which would amount to usurping of the jurisdiction of the arbitrator-If the court passed an order or reference of the matter to arbitrators, it amounted tai acceptance of application and no formal order of filing arbitration agreement was necessary for the court and while passing such an order it would be deemed to have taken the agreement on the file.

2013 CLD 681 KARACHI-HIGH-COURT-SINDH

GLOBAL ENERGY & COMMODITY EXCHANGE GROUP ITALY SPA (GECX GROUP) VS TRADING CORPORATION OF PAKISTAN

20—Dispute between buyer and supplier in relation to terms and conditions of the Letter of Credit which the supplier termed as unworkable—Supplier (Plaintiff) filed application under S.20 of the Arbitration Act, 1940 to file arbitration agreement in court and sought direction to refer the matter to arbitration—Buyer (defendant) opposed application to refer the matter to arbitration on the ground that the supplier (plaintiff) had committed default of its contractual obligations and there was no dispute, therefore, there was no need to refer the matter to arbitration-Validity-Allegations and counter allegations levelled by parties against each other as to which party committed default and became instrumental in breach of contractual obligations; required evidence—In the present case, there existed certain differences between the parties relating to the terms and conditions of the Letter of Credit and the modalities of shipment and such differences were required to be resolved through arbitration and in presence of an arbitration clause in the agreement, it would be just and proper to appoint arbitrator to the dispute—high Court allowed application under S.20 of the Arbitration Act, 1940 and directed the parties to nominate arbitrators in order to resolve the dispute in accordance with the arbitration clause of the contract between the parties.

2013 CLD 636 KARACHI-HIGH-COURT-SINDH

A.J. CORPORATION VS FAUJI FERTILIZER BIN QASIM LIMITED

20—Application to file arbitration agreement in court—Scope—Reference of dispute to arbitration—Conditions—Existing dispute was an essential condition for reference to an arbitration—Assertion of a claim by one party and repudiation thereof by the other party would constitute a dispute to warrant recourse to S.20 of the Arbitration Act, 1940—Before referring a matter to arbitration, three conditions were necessary, namely, existence of an arbitration agreement; existence of a dispute under the agreement, and proceedings under Chapter II of the Arbitration Act, 1940 not having been commenced.

2013 PLD 406 KARACHI-HIGH-COURT-SINDH

Haji NAIMATULLAH VS FEDERATION OF PAKISTAN through Secretary Ministry of Defence

20—Appointment of arbitrator by the court—Appointment of Arbitrator by an interested party—Scope—Application under S.20 for appointment of arbitrator by the court—Dispute between two parties to a contract—Plaintiff sought appointment of the arbitrator by the court, whereas contention of the defendants was that the mode and forum of appointment of arbitrator was provided by the arbitration clause in the contract between the parties—Contention of the plaintiff was that the arbitration clause of the contract provided that in case of a dispute, the sole arbitrator was to be appointment by the Secretary, Ministry of Law Justice and Human Rights of the Federal Government, and since said Ministry had subsequently been reconstituted and further that since the Federal Government was itself a party to the contract, therefore, it could not be a judge in its own cause, hence the mode of appointment provided by the contract was invalid, and same should be instead appointed by the court—Validity—Contention that the Federal Government being a party to the contract could not be judge in its own cause, was not tenable, as the known interest of an arbitrator did not in any way invalidate the appointment of such an arbitrator, and it was only in case where such an interest was concealed or came into existence after the appointment, that the appointment was rendered invalid or liable to be revoked—Plaintiff was fully aware of the fact at the time of entering into the contract, that in case of a dispute, the same would have to be referred to the Federal Government for appointment of an arbitrator, therefore, plaintiff was now estopped from objecting to the appointment being made by the Federal Government—When the plaintiff agreed to submit to an arbitration by an arbitrator chosen by the Ministry of Law Justice and Human Rights Division, then the Rules of Business of said Ministry stood incorporated into the contract—Real intention of the parties was to refer the dispute to some senior and responsible officer of the Federal Government for appointment of an arbitrator and it certainly was not the intention of the parties to keep objecting whenever the composition or structure of the Ministry changed—Intention, object, and purpose of the parties had not been defeated and could still be achieved despite the Ministry being reconstituted—High Court observed that the plaintiff may apply to the Secretary of the present Ministry of Law Justice and Parliamentary Affairs for appointment of an arbitrator within fifteen days, and in case an arbitrator was not appointed within fifteen days from the date of plaintiff’s application, or if said arbitrator did not proceed to arbitrate in accordance with law, only then the plaintiff would be at liberty to invoke S.20 of the Arbitration Act, 1940—Application was disposed of accordingly.

2013 PLD 290 KARACHI-HIGH-COURT-SINDH

ARABIAN SEA ENTERPRISES LIMITED VS ABID AMIN BHATTI

73—Civil Procedure Code (V of 1908), S.9—Arbitration Act (X of 1940), Ss.20 & 34—Suit for recovery of damages for breach of contract—Agreement containing arbitration clause—Jurisdiction of civil court to entertain such suit—Scope—Assertions made in plaint would be deemed and accepted as correct for assumption of jurisdiction by civil court—Mere presence of arbitration clause would not bar jurisdiction of civil court, when subject matter in dispute fell and cause of action had arisen within its jurisdiction, particularly when defendant had failed and/or avoided to appear and file application under S.34 of Arbitration Act, 1940 for staying proceedings in suit—Illustration.

2013 MLD 1499 KARACHI-HIGH-COURT-SINDH

CRESCENT STEEL AND ALLIED PRODUCTS LIMITED VS SUI NORTHERN GAS PIPELINE LIMITED

20—Application for filing of arbitration agreement in court—Duty of court—Court in such case would have to examine existence or non-existence of arbitration agreement and dispute(s) between the parties—Denial of assertions made by either side would prove existence of dispute—Arbitrator appointed by parties would be only an independent and impartial forum in case of such agreement—Principles.

2013 MLD 1499 KARACHI-HIGH-COURT-SINDH

CRESCENT STEEL AND ALLIED PRODUCTS LIMITED VS SUI NORTHERN GAS PIPELINE LIMITED

20—Civil Procedure Code (V of 1908), O. XXXIX, Rr.1 & 2—Arbitration agreement with intervention of court—Dispute between parties regarding non-performance of contract—Application for restraining first defendant from encashing performance guarantee and also second defendant from making payment thereunder to first defendant till decision of such dispute by arbitrator—Applicant’s plea was that quantum of liquidated damages, if any, required decision on basis of evidence; and that question yet requiring decision was as to whether or not first defendant was entitled to such damages—Validity—Plaintiff as tentative measure had submitted such guarantee equivalent to quantum of such damages claimed by first defendant—Determination of quantum of such damages and fulfilment of conditions for encashment of such guarantee being a dispute between parties would be decided by arbitrators to be appointed in terms of arbitration agreement—First defendant had yet to prove losses suffered by him in order to become entitled to such damages, thus, he could not be allowed to encash such guarantee before conclusion of arbitration proceedings—High Court accepted such application of plaintiff in circumstances.

2012 SCMR 962 SUPREME-COURT

NATIONAL GASES LTD. VS BOC PAKISTAN LTD.

20—Constitution of Pakistan, Art. 185(3)—Supplier (respondent) entered into agreement with the appellants (petitioners) to supply the same with its product along with some equipment—Said agreement provided that equipment supplied would remain property of supplier at all times; that agreement would be terminated in case appellants failed to make payment when due or where a material breach committed by appellants was not rectified within thirty days of supplier’s written notice; that upon termination of agreement supplier would be entitled to recover possession of its equipment, and that the dispute will be resolved through arbitration in accordance with the Arbitration Act, 1940—Appellants failed to make payment of some supplies and supplier filed applications before the High Court under S.20 of Arbitration Act, 1940, along with interim applications for return of equipment supplied to the parties—Interim applications for return of equipment were allowed by the High Court and appeal filed thereagainst by the appellants were dismissed—Contention of appellants was that application under S.20 of Arbitration Act, 1940, was not maintainable, therefore any interim order could not be justifiably passed, and that the agreements with the supplier were for ten (10) years, therefore, same could not have been terminated by the supplier—Validity—Appellants had admitted that application under S.20 of Arbitration Act, 1940, was pending in the High Court—Question as to whether the agreement could have been terminated or not concerned merits of the case, and in the present petition Supreme Court was only concerned with the recovery of the equipment by the supplier—Supplier was entitled to recover the equipment on termination of the agreement and it was an admitted fact that agreement was terminated by the supplier—No illegality or perversity was found in the impugned order nor same called for any interference—Supreme Court dismissed petitions for leave to appeal, in circumstances.

2012 CLD 458 LAHORE-HIGH-COURT-LAHORE

MUHAMMAD NADEEM VS ADDITIONAL DISTRICT JUDGE, BHAKKAR

Ss. 20, 30, 34 & 39—Contract Act (IX of 1872), S.73—Specific Relief Act (I of 1877), Ss. 42 & 54—Constitution of Pakistan, Art.199—Constitutional petition—Suit for declaration and permanent injunction—Arbitration proceedings— Award, objection to— Damages—Entitlement—Plaintiff who was distributor of defendant company his distributorship having been terminated by defendant, he filed suit for declaration and permanent injunction—Defendant, during pendency of suit, filed an application under S.34 of the Arbitration Act, 1940 for settlement of dispute through arbitration as provided in one of the clauses of the agreement—With consent of the parties, Trial Court referred the matter to arbitrator—Both the parties made a joint statement before the arbitrator that they would abide by the award made by the arbitrator—After hearing the parties, the arbitrator held the plaintiff entitled to get amount Rs.16,49,033 as damages—No objection was raised by defendant before the arbitrator with regard to scope of reference or upon the jurisdiction of the arbitrator—Parties raised no objection on the credibility or jurisdiction of the arbitrator—When arbitrator award was made and announced, the defendant company, seeing the award unfavourable to it, took certain objections with regard to scope of reference for determination of the dispute—Validity—Defendant at that stage could not be allowed to point out any lacuna, whatsoever in the order of reference or the jurisdiction of the arbitrator—When the plaintiff submitted his claim for damages before the arbitrator who also framed issues on that point, ample opportunity was available to the defendant to take objections that neither scope of reference nor agreement allowed the award of damages, but defendant completely failed to do so—Under S.73 of the Contract Act, 1872, damages could be claimed even if there was no clause in the agreement—Award of the arbitrator was in accordance with law and same could not be set aside—Courts below were not justified in law while setting aside the award—Constitutional petition filed by the plaintiff was allowed as prayed for and impugned judgments passed by courts below were set aside, in circumstances.

2012 MLD 95 LAHORE-HIGH-COURT-LAHORE

ALLIED BANK LTD. VS SECURITY ORGANIZATION SYSTEM PAKISTAN (PVT.) LTD.

S.20—Civil Procedure Code (V of 1908), S. 20(c)—Reference to arbitration—Territorial jurisdiction—Determination—Plaintiff filed application under S.20 of Arbitration Act, 1940, before court at place “M”—Defendant assailed the application on the ground that such application could only be filed at place “K”—Validity—Provision of S.20(c), C.P.C. provided that civil courts within whose territorial jurisdiction the cause of action wholly or partly had arisen could exercise jurisdiction in the matter—Agreement between the parties was executed at place “M” and plaintiff was to render services all over Pakistan including place “M”—Part of cause of action having arisen at place “M”, civil courts at place “M” were vested with territorial jurisdiction to adjudicate upon the matter—High Court declined to interfere in the order passed by Lower Appellate Court—Revision was dismissed in circumstances.

2012 CLC 441 LAHORE-HIGH-COURT-LAHORE

MUHAMMAD NADEEM VS ADDITIONAL DISTRICT JUDGE, BHAKKAR

Ss. 42 & 54—Arbitration Act (X of 1940), Ss.20, 30, 34 & 39—-Contract Act (IX of 1872), S.73—Constitution of Pakistan, Art.199—Constitutional petition— Suit for declaration and permanent injunction— Arbitration proceedings— Award, objection to— Damages—Entitlement —Plaintiff who was distributor of defendant-company, his distributorship having been terminated by defendant, he filed suit for declaration and permanent injunction—Defendant, during pendency of suit, filed an application under S.34 of the Arbitration Act, 1940 for settlement of dispute through arbitration as provided in one of the clauses of the agreement—With consent of the parties, Trial Court referred the matter to arbitrator—Both the parties made a joint statement before the arbitrator that they would abide by the award made by the arbitrator—After hearing the parties, the arbitrator held the plaintiff entitled to get amount of Rs.16,49,033 as damages—No objection was raised by defendant before the arbitrator with regard to scope of reference or upon the jurisdiction of the arbitrator—Parties raised no objection on the credibility or jurisdiction of the arbitrator—When arbitrator award was made and announced, the defendant-company, seeing the award unfavourable to it, took certain objections with regard to scope of reference for determination of the dispute—Validity—Defendant, at that stage could not be allowed to point out any lacuna, whatsoever in the order of reference or the jurisdiction of the arbitrator—When the plaintiff submitted his claim for damages before the arbitrator who also framed issues on that point, ample opportunity was available to the defendant to take objections that neither scope of reference nor agreement allowed the award of damages, but defendant completely failed to do so—Under S.73 of the Contract Act, 1872, damages could be claimed even if there was no clause in the agreement—Award of the arbitrator was in accordance with law and same could not be set aside—Courts below were not justified in law while setting aside the award—Constitutional petition filed by the plaintiff was allowed and impugned judgments passed by courts below were set aside, in circumstances.

2012 PLD 21 ISLAMABAD

OMV MAURICE ENERGY LIMITED VS OCEAN PAKISTAN LIMITED

Ss. 20 & 4—Application for filing arbitration agreement in court and referring the matter to arbitration—Petroleum Concession Agreement and Petroleum Farm out Agreement—Petitioners, on the basis of a Petroleum Concession Agreement signed between the -Government and the respondents, had entered into a Farmout Agreement with the respondents to carry out petroleum ‘exploration operations—Deed of Assignment for the exploration work was signed between the parties on the basis of said Farmout Agreement—Under said Farmout Agreement and the Deed of Assignment, the majority 75% shares of the operation were transferred to the plaintiffs while the remainder minority shares were retained by the respondents and the Government—Dispute between the parties arose relating to default in payment and non participation in work by the respondents after exploration work had started on the basis of the Farmout Agree”) ent—Contention of the petitioners was that the forum for settlement of such dispute under the Farmout Agreement was arbitration, and that the respondents did not want to initiate arbitration—Contention of the respondents was that the transfer of shares of the operations to the petitioners was illegal which had been challenged in a constitutional petition, and the defendants had initiated a civil suit regarding the demand for payment, and the right of the petitioners to ‘carry out exploration work and in presence of said constitutional petition and civil suit, the matter could not be referred to arbitration and that the Farmout Agreement was superseded by the Deed of Assignment—Validity—Deed of Assignment itself was issued on the basis of the Farmout Agreement, and it could not be said that the Deed of Assignment had overruled the Farmout Agreement–Respondents, on the basis of Farmout Agreement had agreed to transfer 75% of the working interest to the plaintiff, and approval for the said transfer was given by the President of Pakistan by virtue of the Deed of Assignment—Farmout Agreement as well as the Deed of Assignment determined the rights and liabilities of the parties—Contention of the respondents that under Deed of Assignment disputes could only be settled through arbitration in accordance with the Petroleum Concession Agreement and not the Farmout Agreement was misleading as the Petroleum Concession Agreement provided for settlement of disputes between the Government and the parties—In the present case, the dispute was between the parties only (petitioner and respondents), who had the working interest in the exploration and production of petroleum products—High Court accepted, the application of the petitioner for referring the matter to arbitration, with the direction to the parties to nominate the arbitrators, and in case of dispute between the parties, an Umpire would be appointed by the arbitrators, with the consent of the parties, whose decision shall be final and binding upon the parties—Basic dispute between the parties was regarding payment required to be made by the respondents however, the respondents could raise any other issue before the arbitrator.

2012 CLD 619 ISLAMABAD

OMV MAURICE ENERGY LIMITED VS OCEAN PAKISTAN LIMITED

Ss. 20 & 4—Application for filing arbitration agreement in court and referring the matter to arbitration—Petroleum Concession Agreement and Petroleum Farmout Agreement—Petitioners, on the basis of a Petroleum Concession Agreement signed between the Government and the respondents, had entered into a Farmout Agreement with the respondents to carry out petroleum exploration operations—Deed of Assignment for the exploration work was signed between the parties on the basis of said Farmout Agreement—Under said Farmout Agreement and the Deed of Assignment , the majority 75% shares of the operation were transferred to the plaintiffs while the remainder minority shares were retained by the respondents and the Government—Dispute between the parties arose relating to default in payment and non-participation in work by the respondents after exploration work had started on the basis of the Farmout Agreement—Contention of the petitioners was that the forum for settlement of such dispute under the Farmout Agreement was arbitration, and that the respondents did not want to initiate arbitration—Contention of the respondents was that the transfer of shares of the operations to the petitioners was illegal which had been challenged in a constitutional petition, and the defendants had initiated a civil suit regarding the demand for payment, and the right of the petitioners to carry out exploration work and in presence of said constitutional petition and civil suit, the matter could not be referred to arbitration and that the Farmout Agreement was superseded by the Deed of Assignment—Validity—Deed of Assignment itself was issued on the basis of the Farmout Agreement, and it could not be said that the Deed of Assignment had overruled the Farmout Agreement—Respondents, on the basis of Farmout Agreement had agreed to transfer 75% of the working interest to the plaintiff, and approval for the said transfer was given by the President of Pakistan by virtue of the Deed of Assignment—Farmout Agreement as well as the Deed of Assignment determined the rights and liabilities of the parties—Contention of the respondents that under Deed of Assignment disputes could only be settled through arbitration in accordance with the Petroleum Concession Agreement and not the Farmout Agreement was misleading as the Petroleum Concession Agreement provided for settlement of disputes between the Government and the parties—In the present case, the dispute was between the parties only (petitioner and respondents), who had the working interest in the exploration and production of petroleum products—High Court accepted the application of the petitioner for referring the matter to arbitration, with the direction to the parties to nominate the arbitrators, and in case of dispute between the parties, an Umpire would be appointed by the arbitrators, with the consent of the parties, whose decision shall be final and binding upon the parties—Basic dispute between the parties was regarding payment required to be made by the respondents however, the respondents could raise any other issue before the arbitrator.

2011 PLD 605 KARACHI-HIGH-COURT-SINDH

MUHAMMAD ATHER HAFEEZ KHAN VS SSANGYONG & USMANI JV

XXXVIII, R. 5—Arbitration Act (X of 1940), Ss.20, 42 & Second Sched.–Arbitration proceedings, pendency of—Defendant (foreign company) engaged in construction project in Pakistan—Contract for providing consultancy services by plaintiff to assist defendant to obtain tax benefits or reduce its tax burden on its business activities—Non payment to plaintiff agreed percentage of tax benefits obtained by defendant—Application for attachment before judgment amount retained by project owner from running bills of defendant—Validity—Money retained by project owner from running bills of defendant till fulfilment of contractual task would be a debt owed to defendant—Retention money, in absence of any term to the contrary in contract, would be regarded as property belonging to defendant-contractor within meaning of O.XXXVIII, C.P.C.—Plaintiff apprehended that if defendant received amount from its project owner, then same would be remitted abroad making him unable to execute in Pakistan any decree made in his favour against defendant—In order to make applicable O.XXXVIII, R.5(1)(b), C.P.C. plaintiff had to show that defendant had necessary intent to remove his property from jurisdiction of court—Plaintiff had not shown that such remittance, even if made, would be with necessary “intent” to defeat or obstruct decree expected to be obtained by him—Such application was dismissed in circumstances.

2011 CLD 1625 KARACHI-HIGH-COURT-SINDH

CONTINENTAL CABLE (PVT.) LTD. VS CHINA HARBOR ENGINEERING CO. LTD.

S.20—Contract Act (IX of 1872), S.126—Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2—Application for filing in court arbitration agreement and referring matter to an arbitrator—Construction contract—Bank Guarantee for mobilization advance—Plaintiff’s application to restrain defendant from encashing such guarantee till disposal of matter by Arbitrator—Validity—Plaintiff had not denied receipt of such advance at time of commencement of work at site—Such advance being for mobilization of work would be returnable either at time of termination of contract or after completion of entire work in terms of contract—High Court dismissed such application in circumstances.

2011 CLD 1625 KARACHI-HIGH-COURT-SINDH

CONTINENTAL CABLE (PVT.) LTD. VS CHINA HARBOR ENGINEERING CO. LTD.

S.20—Contract Act (IX of 1872), S.126—Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2—Application for filing in court arbitration agreement and referring matter to an arbitrator—Construction contract—Application by plaintiff to restrain defendant from encashing performance Bank Guarantee till disposal of matter by arbitrator—Validity—Dispute regarding completion of work still existed between parties, which would require thrashing by way of evidence before Arbitrator—Plaintiff had completed substantial work under contract, thus encashment of such guarantee at present stage would be detrimental to its interest— High Court retrained defendant from encashing such guarantee till disposal of suit before Arbitrator.

2011 YLR 2876 KARACHI-HIGH-COURT-SINDH

CONTINENTAL CABLE (PVT.) LTD. VS CHINA HARBOR ENGINEERING CO. LTD.

S.20—Contract Act (IX of 1872), S.126—Civil Procedure Code (V of 1908), O. XXXIX, Rr.1 & 2—Application for filing in court arbitration agreement and referring matter to an arbitrator–Construction contract—Application by plaintiff to restrain defendant from encashing performance Bank Guarantee till disposal of matter by arbitrator—Validity—Dispute regarding completion of work still existed between parties, which would require thrashing by way of evidence before Arbitrator—Plaintiff had completed substantial work under contract, thus, encashment of such guarantee at present stage would be detrimental to its interest—High Court retrained defendant from encashing such guarantee till disposal of suit before Arbitrator.

2011 YLR 2876 KARACHI-HIGH-COURT-SINDH

CONTINENTAL CABLE (PVT.) LTD. VS CHINA HARBOR ENGINEERING CO. LTD.

2011 YLR 317 KARACHI-HIGH-COURT-SINDH

MUHAMMAD ATHER HAFEEZ KHAN VS SSANGYONG AND USMANI JV

S.20—Arbitrator, appointment of—Plaintiff sought appointment of arbitrator as there was arbitration clause available in the agreement between parties—Validity—Parties were ad idem with reference to essential terms of contract with regard to referring dispute/disputes, which might not be resolved mutually, to arbitration—High Court directed the parties to submit names of their chosen arbitrators so that the matter could be referred to any one of them—High Court directed the defendant to file its claim before arbitrator—Suit was disposed of accordingly.

2011 CLC 323 KARACHI-HIGH-COURT-SINDH

ARABTEC PAKISTAN (PVT.) LTD. VS ENSHAANLC DEVELOPMENTS (PVT.) LTD.

Ss. 20 & 41—Civil Procedure Code (V of 1908), O. XXXIX, Rr. 1 & 2—Arbitration agreement, filing of—Dispute between parties relating to construction contract—Application by plaintiff to restrain defendant from encashing Bank Guarantee—Plaintiff’s plea that such guarantee was conditional upon default of contractual obligations by plaintiff; that defendant had stopped construction for redesigning project, thus. plaintiff stood released from performance and that what was owed to plaintiff by defendant was more than total value of such Guarantee—Validity—Question involved was as to whether any payment was due to plaintiff or whether defendant had paid to plaintiff more than what was due—Such question could successfully be decided by Arbitrator appointed by court with consent of both parties—High Court accepted such application by observing that such Guarantee would remain intact till making of award by Arbitrator.

2010 SCMR 524 SUPREME-COURT

STANDARD CONSTRUCTION COMPANY (PVT.) LIMITED VS PAKISTAN through Secretary M/o Communications

Ss. 20 & 41—Arbitration—Referring dispute to arbitrator—Stay of encashing of bank guarantees—Dispute between the parties was with regard to encashing of three bank guarantees provided by appellant to respondent authorities—High Court while referring matter to arbitrator, had gone deep and discussed minutely various clauses, terms and conditions of agreement and other relevant documents and their effect for arriving at its conclusion—Appellant sought stay against encashing of three bank guarantees—Validity—After referring dispute to arbitrator it was not appropriate and was uncalled for High Court to discuss the agreement as such findings of High Court would influence proceedings before Arbitrator—Supreme Court, while disproving such observations of High Court, declined to either affirm or not affirm findings of High Court with comments on merits of the case—Without interpreting terms of agreement, definite conclusion would not be possible as to whether conditions as required for encashing of bank guarantees had been fulfilled or not and by not doing so Supreme Court left it to arbitrator to deal with question of encashment of two guarantees relating to Toll collection according to law while making an award—Supreme Court partly allowed the appeal by holding that authorities were entitled to encashment of pre-bid bank guarantee and restrained them from encashment of other two bank guarantees till the finding given by arbitrator in that respect—Appeal was allowed.

2010 CLD 196 SUPREME-COURT

STANDARD CONSTRUCTION COMPANY (PVT.) LTD. VS PAKISTAN through Secretary, M/O Communications

Ss.20 & 41—Arbitration—Referring dispute to arbitrator —Stay of encashing of bank guarantees—Dispute between the parties was with regard to encashing of three bank guarantees provided by appellant to respondent authorities–High Court while referring matter to arbitrator, had gone deep and discussed minutely various clauses, terms and conditions of agreement and other relevant documents and their effect for arriving at its conclusion—Appellant sought stay against encahhing of three bank guarantees–Validity—After referring dispute to arbitrator it was not appropriate and uncalled for High Court to discuss the agreement as such findings of High Court would influence proceedings before Arbitrator–Supreme Court, while disproving such observations of High Court, declined to either affirm or not affirm findings of High Court with comments on merits of the case—Without interpreting terms of agreement, definite conclusion would not be possible as to whether conditions as required for encashing of bank guarantees had been fulfilled or not and by not doing so Supreme Court left it to arbitrator to deal with question of encashment of two guarantees relating to Toll collection according to law while making an award–Supreme Court partly allowed the appeal by holding that authorities were entitled to encashment of pre-bid bank guarantee and restrained them from encashment of other two bank guarantees till the finding given by arbitrator in that respect—Appeal was allowed.

2010 PLD 34 PESHAWAR-HIGH-COURT

PAKISTAN TELEVISION CORPQRATION LIMITED VS INTERCONSTRUCT (PVT.) LIMITED through Managing Director, Peshawar

Ss. 14(2), 20, 33 & 39—Making award rule of the court—Principles—Objection petition filed by the appellant was turned down mainly on the ground of limitation and non-compliance of S.33 of Arbitration Act, 1940—Record had revealed that no directions under S.33 of Arbitration Act, 1940 regarding deposit of amount or furnishing of security, were given to the appellant as the amount was lying with the bank—Further award itself was not evaluated by the court and the court also failed to discuss the findings reached at in the award by the arbitrator—Tentative, shallow and cursory glance of assaying the award was not permissible under the law—Court had to minutely discuss each and every aspect embodied in the award, whether evidence so recorded by the arbitrator had properly been appreciated and discussed by him in accordance with law; whether the award was ‘ in accordance with the terms of reference or not etc.—Court was not supposed to put stamp of verification by simply making the same rule of the court—Court had to evaluate the evidence recorded by the arbitrator, it had to consider the findings arrived at by the arbitrator and was not supposed to act mechanically just like a forwarding agency—While evaluating an award the role of a court should be of an active dissenter rather than passive consenter—Trial Court, in the present case, had failed to exercise its jurisdiction in accordance with law—Judgment and decree of the Trial Court were set aside by High Court with the observations that the objections of the appellant would be deemed to be pending before the Trial Court and the court would be required to decide the same on merits and also pass an appropriate order.

2010 YLR 913 PESHAWAR-HIGH-COURT

Pir MUHAMMAD SABIR SHAH VS Mst. HASINA BEGUM

Ss. 17 & 20—Constitution of Pakistan (1973), Art.199—Constitutional petition—Making award rule of the court—Application for—Application was dismissed by the Court—Validity—Two contradictory stands had been taken, one was that the award in question was torn and the other was that it was misplaced—No clear cut stand as to the fact that any award was given by the arbitrators was available—Existence of award being doubtful, the court could not act upon the same—No illegality, misreading or miscarriage of justice was found in the impugned order, judgment and decree—Constitutional petition filed against said judgment and decree and impugned order, was dismissed, in circumstances.

2010 CLC 1014 PESHAWAR-HIGH-COURT

Haji ABDUL RASHID ARIF VS AZIZ REHMAN

Ss. 13, 14, 20 & 21—Application for making award as rule of Court—Procedure—Duty of Court—Said application was concurrently dismissed by the trial Court and Appellate Court—Award in question was given by the arbitrators without intervention of the Court and was based on mutual consent and agreement of the parties and was acted upon—Under S.14(2) of the Arbitration Act, 1940, after announcement of award, it was the arbitrator who had to file the award in the Court either at the request of a party or on the direction of the Court—Court, for the purpose of making the award rule of the Court, was not required to act mechanically as if it had to affix its stamp of approval on the award without determining its legality, maintainability and the question of its executability—Party could not file an award in the Court to make the same rule of the Court specially when the award prior to getting the authentication and sanction of the Court, was acted upon between the parties; in such a state of affairs, it would become useless to ask for its making of rule of the Court—Two Courts below after proper appreciation of evidence on the record had rightly dismissed application of the petitioner—Counsel for the petitioner was unable to point out any illegality or irregularity in the exercise of jurisdiction by the two Courts below—Petition was dismissed.

2010 PLD 707 LAHORE-HIGH-COURT-LAHORE

MARATHON CONSTRUCTION COMPANY (PVT.) LTD. VS OIL AND GAS DEVELOPMENT COMPANY LTD.

Sched. I, Art.12 [as amended by Punjab Finance Act (XIX of 2004)]—Arbitration Act (X of 1940), Ss.20(4) & 23—Award—Stamp duty—Exemption, benefit of—Every award is subject to payment of stamp duty if it is made on a reference otherwise than by an order of court in the course of a suit—Any award pursuant to a reference made by an order of the court in the course of a suit is exempt from payment of stamp duty—Benefit of exemption from payment of stamp duty is available only when reference is made by an order of Court passed in the course of a suit—Such order can be passed by court under S.23 of Arbitration Act, 1940, during pendency of a suit, if the parties to the suit agree and apply to court for reference of their dispute to arbitration—Besides, an order of reference passed under section 20(4) of Arbitration Act, 1940, is also deemed to have been passed in the course of a suit as application under S.20 of Arbitration Act, 1940, is recognized as a suit.

2010 YLR 3080 LAHORE-HIGH-COURT-LAHORE

HASSAN AUTOMATION through Chief Executive VS WORLD DATACOM (PVT.) LTD. through Chief Executive

Ss. 20 & 40—Application for appointment of arbitrator—Defendant filed petition under S.40 of the Arbitration Act, 1940 for recovery of certain amount on the basis of contract—Both the matters were consolidated—Trial Court rejected defendant’s application for submission of amended list of witnesses–Trial Court, during pendency of the revision by defendant in the court of Additional District Judge made the award Rule of the court, passed decree accordingly and dismissed defendant’s application through a consolidated judgment—Defendant contended that the Trial Court closed his right to produce evidence without any notice and passed impugned judgment without any material evidence on record; that he was not given any notice to join proceedings after the Trial Court had received back record of the case from the revisional Court and that though the case was adjourned for evidence of defendant yet neither any evidence was recorded on the fixed date nor any request was made by defendant for adjournment—Held, Trial Court was not justified in closing the right of defendant to produce evidence–Trial Court decided the case without any material evidence on record—Law favours decisions made on merits without allowing technicalities to thwart the course of justice—Impugned judgment was set aside, case was remanded to the Trial Court to be decided afresh after affording both parties opportunity to produce their evidence.

2010 MLD 800 LAHORE-HIGH-COURT-LAHORE

LAHORE STOCK EXCHANGE LTD. through Managing Director VS HASSAN ASSOCIATES through Managing Partner

Ss.42, 21 & 56(f)—Arbitration Act (X of 1940), S.20—Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2—Suit for declaration—Plaintiff filed a suit for declaration and grant of permanent injunction to restrain defendant from terminating the original arbitration agreement in consequence of a supplementary agreement—Plaintiff also filed an application for temporary injunction which was dismissed by the Trial Court—Appellate Court granted mandatory injunction restraining defendant from the breach of agreement with direction to the Trial Court before whom the appeal under section 20 of Arbitration Act, 1940 was stated to be pending to ensure expeditious conclusion of arbitration proceedings—Validity—Agreement could not be specifically enforced as the entitlement of plaintiffs could be measured in pecuniary terms; furthermore, the agreement pertained to and was dependent upon the professional qualifications of the plaintiffs and ran into minute and numerous details which could not be overseen by any court of law—Grant of injunction was barred by section 56(f) of Specific Relief Act, 1877 in respect of contracts which could not be specifically enforced—Appellate Court arrogated into itself powers which did not vest in it, by issuing directions qua arbitration to the court against the order whereof the appeal had been filed despite the fact that application under S.20 of Arbitration Act, 1940 was not pending in such court—Directions, therefore, were not only illegal but also without jurisdiction—Impugned judgment was set aside by High Court.

2010 MLD 561 KARACHI-HIGH-COURT-SINDH

MEDHI K. LAVJI VS PROVINCE OF SINDH

Art.199—Arbitration Act (X of 1940), S.20—Tenancy agreement regarding State land executed by an incompetent authority containing an arbitration clause—Constitutional petition challenging order of competent authority cancelling such agreement—Maintainability—Competent authority was pot party to such agreement—Such matter could not be referred, to arbitration in circumstances.

2010 YLR 1618 ISLAMABAD

ADAPTIVE SOLUTIONS (PVT.) LTD. VS UTILITY STORES CORPORATION, ISLAMABAD

Ss.12 & 20—De novo arbitration proceedings—Objection application—Arbitrator duly appointed having failed to file the award, applicant submitted an application for revocation of authority of said arbitrator and for appointment of new arbitrator—New arbitrator was appointed for conducting de novo arbitration proceedings on all legal and factual matters pertaining to the agreement—Subsequently applicant submitted an application for taking up the proceedings from the stage where the proceedings were left by the former arbitrator—Applicant had alleged that order passed to the effect that de novo proceeding should be conducted was against the norms of justice, equity and established principles of law and procedure—Applicant had also alleged that order for de novo proceedings was obtained by way of fraud and misÂrepresentation—Said allegation did not find any support from the record as parties as well as their counsel were present before the High Court when order for conducting de novo proceedings by the arbitrator was passed—Order to the effect of recording de novo evidence passed by the arbitrator had never been appealed against by the applicant—Objection raised by the counsel for the applicant to the effect that de novo proceedings could not be ordered by the court, was without any force because the parties themselves had entered into an agreement which was presented before the court and the court had ordered for the same in view of agreement between the parties—No embargo existed in Arbitration Act, 1940 from which it could be inferred that no de novo proceedings could be ordered in a matter under arbitration—Objection application filed by the applicant stood dismissed being devoid of any force.

2010 YLR 1560 ISLAMABAD

MUHAMMAD SULEMAN KHAN VS INTERNATIONAL TABACCO MACHINERY PAKISTAN (PVT.) LTD.

Ss.20 & 34—Filing arbitration agreement in the court—Application for–. Objection to jurisdiction of the court—Applicant had sought direction to the respondents to file relevant sale agreement in terms of S.20(4) of Arbitration Act, 1940 and for appointment of an arbitrator—Defendants in their counter affidavit had raised legal objections to the effect that according to clauses of the agreement, court had no jurisdiction to entertain the arbitration petition—Applicant, a registered partnership concern, having its head office at Karachi, entered into the agreement for purchase of business and assets with defendants—One defendant, a subsidiary company of the other defendant had its registered office at Islamabad—Whole evidence, in circumstances had to come from Islamabad comprising of documents and oral evidence; and taking of such evidence to Dubai would be inconvenient to the parties and also would be expensive—Objection of jurisdiction raised by the respondents, had no force and same was rejected.

2009 SCMR 838 SUPREME-COURT

PARKS PAKISTAN (PVT.) LTD. through Managing Director VS PRIVATIZATION COMMISSIONER, through Secretary

Ss. 2(a), 8 & 20—Application for appointment of arbitrator—Auction of hotel by Privatization Commission—Deposit of first instalment by applicant after acceptance of his bid and issuance of letter of intent in his favour by Commission—Withdrawal of first instalment by applicant for non-extension of liquor permit of hotel by Commission—Applicant’s prayer for referring such dispute to. arbitration on basis of Letter of Intent and Instructions to Bidders—Validity—Instructions to Bidders relating to invitation of bids for purchase of hotel did not find mention of arbitration clause—Commission in its Letter of Intent had not taken responsibility to get the liquor permit of hotel extended from Government—Commission had cancelled applicant’s bid for non-depositing other instalments—No written agreement had been executed after acceptance of applicant’s bid by Commission—Instructions to Bidders were’ mere a notice of tender and could not be termed as an agreement containing arbitration clause—Applicant by withdrawing first instalment had himself rescinded contract—Letter of Intent contained certain conditions to be fulfilled by applicant before execution of final agreement—Commission due to applicant’s failure to fulfil such conditions had cancelled Letter of Intent—Applicant for not challenging Letter of Intent had impliedly admitted cancellation of contract—Application for appointment of arbitrator was dismissed in circumstances.

2009 SCMR 315 SUPREME-COURT

GOVERNMENT OF SINDH through Secretary Education VS DELHI ANGLO ARABIC COLLEGE AND SCHOOLS

Ss. 20 & 34—Sindh Rented Premises Ordinance (XVII of 1979), S.15—Constitution of Pakistan (1973), Art.185(3)—Suit for recovery of rent—Rent deed provided for reference of dispute to arbitration—Defendant admitted his liability and undertook to pay rent but did not object to maintainability of suit and ask Trial Court to stay proceedings in presence of arbitration agreement between parties—Suit decreed by Trial Court upheld in appeal by High Court—Validity—Supreme Court repelled defendant’s objection raised regarding maintainability of suit on such ground and refused leave to appeal in circumstances.

2009 CLD 390 LAHORE-HIGH-COURT-LAHORE