1. ' These are objections under section 30 of the Arbitration Act, 1940, to the award dated 30-3-1975, given by Mr. S. A. Nizami, as sole Arbitrator in the dispute between the parties hereto, whereby the Sole Arbitrator has awarded damages to the Federation of Pakistan, plaintiffs in the sum of Rs, 1,41,964.50, and after adjustment of Rs, 15,000 of security deposit, the net amount awarded to the plaintiff is Rs, 1,26,964.50.
2. ' Mr. Ibadat Yar Khan, Advocate for the defendants has raised threefold objections to the award.
3. ' The first objection is that the plaintiffs could not start fresh arbitration proceedings without fresh appointment of an Umpire by the Court on, the death of Mr. Mohammed Akram, who had given an award as an Umpire which was remitted to him for reconsideration by this Court.
4. ' The second objection raised by Mr. Ibadat Yar Khan is that the appointment of Mr. S. A. Nizami as sole arbitrator was invalid on two grounds. Firstly, no notice of the appointment of Mr. S. A. Nizami as sole arbitrator was served on the defendant. Secondly, the defendant had appointed Mr. Habibur Rahman Advocate as their arbitrator within the statutory period and therefore, Mr. S. A.
5. Nizami could not act as the sole arbitrator.
6. ' The third and the last objection is that the award is based on no evidence.
7. ' In order to appreciate these objections it is necessary to give the back- ground of the litigation resulting in the impugned award.
8. ' By a contract No (A/T) No TV-I/Cement/W. Pak./115/55, dated 11-6-1955, the defendants had agreed to supply 12,000 long tons of Portable Cement of Bulgarian origins to the plaintiffs. On defendants' failure to supply the cement a dispute arose and the plaintiffs claimed a sum of Rs, 1,41,964.50 as damages on account of breach of the contract. In accordance with the provisions of clause 21 of Form PS-35 which formed part and parcel of the contract, the plaintiffs on 13-8-1961 nominated Mr. S. A. Nizami as their arbitrator and the defendants on 29-8-1964, nominated Mr. Mirza Akhtar Hussain Advocate as their arbitrator. Both the arbitrators nominated late Mr. Mohammad Akram Advocate as an Umpire. After proceeding with the matter the arbitrators failed to give any award within the statutory period of 4 months. Therefore, late Mr. Mohammad Akram was requested on 23-2-1965, to enter upon the reference and accordingly he entered upon the reference and gave his award on 14-4-1965 whereby the defendants were made liable to pay the plaintiffs a sum of Rs 1,41,964.50.
9. ' This award was filed in this Court on 11-11-1965 and was registered as Suit No, 274 of 1965 but, on objections being filed by the defendants and they succeeding, the award was remitted to the Umpire for his reconsideration. The terms on which the award was remitted for reconsideration are not readily available. However, it is stated at the Bar by Mr. Ibadat Yar Khan Advocate that the reason for remitting the award to late Mr. Mohammad Akram was that the Umpire had not properly recorded the evidence in the case. Thereafter, the late Umpire proceeded with the arbitration. He also made an application to this Court for extention of time for giving the award, which was granted on 20-3-1967, and time was extended. However, before he could reconsider the award, he expired. Therefore, the plaintiffs started fresh arbitration proceedings by appointing again Mr. S. A.
10. Nizami as their arbitrator by the letter dated 18-1-1974, and by the same letter required the defendants to appoint their arbitrator within the statutory time failing which, they informed the defendants that Mr. S. A. Nizami would assume the role of sole arbitrator without reference to them as stated in the counter affidavit.
11. ' It is the case of the defendants that they appointed Mr. Habibur Rahman Advocate as their arbitrator within the statutory period of 15 days, by their letter dated 24-3-1974 (Exh. 3/1) addressed to Arbitration Section Department of I. P. S., Government of Pakistan, Karachi although they did so under protest. This letter is available on the record of the Sole Arbitrator which has been filed alongwith the award in this Court. Thereafter, the defendants wrote another letter dated 7-3-1974 (Exh. 3/3) to the Sole Arbitrator in reply to his letter dated 27-2-1974, informing him that they had already appointed Mr. Habibur Rahman, Advocate as their arbitrator and further informing him that they had informed the Government of Pakistan, as per their letter dated 24-1-1974, about the appointment and enclosed therewith a copy of this letter and that the arbitrator appointed by them would be present on 19 3-1974 a date fixed by Mr. S.A. Nizami for proceeding with the arbitration. The receipt of the letter dated 7-3-1974 is not denied by Mr. Abdul .Majid Khan Advocate for the plaintiffs for the same is available in the documents filed by the arbitrator alongwith the award. He, however, contends that the copy of the letter dated 24-1-1974 which is available on record of the sole arbitrator was sent alongwith the letter dated 7-3-1974. However, defendants in support of their claim that they had sent the letter dated 24-1-1974 to the plaintiffs, examined their partner namely, Mohammed Farooq in this Court who produced a copy of the letter dated 24-1- 1974 (Exh. 3/1) and the original certificate of posting dated 24-1-1974 (Exh. 3/2) under the cover of which (Exh. 3/1) was sent. Mr, Abdul Majid Khan had cross-examined this witness and in cross- examination it was further brought out that the witness had shown the postal certificate produced- in this Court to the arbitrator in support of the claim of the defendants that they had appointed Mr. Habibur Rahman Advocate as their arbitrator. Moreover, Mr. Habibur Rahman Advocate had also addressed a letter dated 7-3-1974 (Exh. 3/4) enclosing therewith a copy of the letter dated 24-1- 1974 informing him of his appointment as arbitrator and suggesting him to meet on 14-3-1974 or even earlier. I may mention that Mr. S. A. Nizami had fixed the first hearing for 19-3-1974.
12. ' Having, stated the relevant facts, I would now take up the first objection. It is an admitted position that the case was remitted to the umpire and he died before reconsidering the award. It is contended by Mr. Lbadat Yar Khan, that the Government in the circumstances could not have resorted to fresh arbitration proceedings, but should have approached this Court for appointment of an Umpire by way of substitution as the Court had remitted the award for reconsideration of the deceased umpire. It cannot be disputed that the award was remitted to the Umpire for a reconsideration under section 16 of the Arbitration Act, 1940. The terms, on which it was remitted are not readily available. However, it is no body's case that .The extended time within which the Umpire had to submit his decision to the Court had expired and therefore the award remitted to him had become void as provided in subsection (3) of section 16 of the Arbitration Act. Therefore, .So long as the award had not become void, or it had not been set aside by the Court, it remained in the field and in such circumstances the Government or for that matter any party to the award could not .Have started fresh arbitration proceedings. I may he point out in 1881 All. W N 25 (as stated by Shaukat Mahmood in his book entitled 'The Law of Arbitration', Second Edition, page 117.) It was held where after the remittal, the arbitrators on reconsideration come to the same conclusion as their previous one, the award does not become void. It therefore, follows that unless the Umpire had reconsidered the award and had come to a different decision or had allowed the time to expire, the award had not become void.
13. ' Now, I would take up another contention in relation to the first objection. It is contended that the Government should have required the arbitrators in accordance with the provisions of section 8 (2) to appoint an Umpire in substitution of the Umpire who was dead, and on their failure to appoint fresh umpire within the statutory period of 15 days, the Plaintiffs should have approached this Court under section 8 (2) for appointment of an umpire. Mr. Abdul Majid Khan Advocate on the other hand contended that the provisions of clause (b) of section 8 (1) of the Arbitration Act, 1940 would not be attracted to the facts of the present case for they apply only in relation to arbitration where both the arbitrators are appointed by consent of the parties. He further submitted that in this case the Umpire was appointed by the two arbitrators under rule 2 of the First Schedule to the Arbitration Act, 1940, which provides that if the reference is to an even number of arbitrators the arbitrators shall appoint an Umpire not later than one month from the last date of their respective appointment. He, therefore, submitted that if the appointed Umpire neglects or refuses to act dies or becomes incapable of acting, the only course left open to the parties was to start fresh arbitration proceedings by appointing new arbitrators and accordingly this course was followed.
14. ' Therefore, the question that arise for consideration is that when the two arbitrators fail to appoint an Umpire as required by and under the provisions of rule 2 of the First Schedule to the Arbitration Act, 1940 or, when the appointed Umpire neglects or refuses to act, or dies or becomes incapable of acting as such, and it is not intended by the arbitration agreement not to supply the vacancy, what course should be followed. At this stage it will be convenient to reproduce the provisions of section 8 of the Arbitration Act, 1940 in full "8.- (1) In any of the following cases-
(a) Where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not after differences have arisen, concur in the appointment or appointments ; or
(b) if any appointed arbitrator or umpire neglects or refuses to act or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy. Should not be supplied, and the parties or the arbitrators ; as the case may be, do not supply the vacancy, or
(c) where the parties or the arbitrators are required to appoint an Umpire and do not appoint him ; any party may serve the other parties or the arbitrators, as the case may be, with, written notice to concur in the appointment or appoints or in supplying the vacancy.
(2) If the appointment is not made within fifteen clear days after the service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties."
15. ' From the above-quoted provisions it will be seen that if the arbitrators fail to appoint an Umpire, though required by any party, the party after taking the necessary steps provided in subsection (1) can apply to the Court, and the Court after complying with the provisions of subsection (2) can appoint an Umpire. Similarly, if the Umpire dies and the arbitration agreement does not show it was intended that the vacancy should not be supplied and the arbitrators do not supply the vacancy, the Court on the application of the party who served the notice after complying with the provisions of subsection (2) can appoint an Umpire.
16. ' However, it was contended by Mr. Abdul Majid Khan, that the provisions of section 8 apply to on arbitration agreement which provides reference to one or more arbitrators to be appointed by the consent of the parties. The contention is untenable for it overlooks the opening words of section 8 of the Arbitration Act, i,e, "In any of the following cases" and further the construction of subsection
(1) which shows that the three clauses contained therein are independent of each other and provide for three different cases for they are connected with the word 'or' disjunctively. In the present case in my opinion, only the provisions of clause (b) of sub B section (1) of section 8 are attracted and they are in no way dependent or connected with the provisions of clause (a) of subsection (1) of section 8.
17. ' In support of this contention Mr. Abdul Majid Khan referred to Haroon Oil Mills v. Kohinoor Cotton Ginning Factory . In this case it was observed by Qadeeruddin Ahmad, J (as he then was) as follows : - "Secondly, the words by .Consent of the parties, which occur in section 8 (1) (a) and the words 'notice to concur' which occur after clause (c) of that subsection, unmistakably indicate that the section applies to those arbitration agreements under which arbitrators are appointed by the consent of both the parties. On the other hand, section 9, applies to those of such agreements under which two arbitrators are appointed and one of them is to be appointed by each party. This is clear from the opening part of the section. The facts of the case would thus attract section 9, and not section 8."
18. ' In this case on the negligence of the respondent's arbitrator to attend the arbitration proceedings, the applicant had requested the respondent to appoint another arbitrator in place of his arbitrator within 15 days of the receipt of that intimation and on respondent's failure to appoint a substitute the applicant had appointed his arbitrator as the sole arbitrator. The appointment of the sole arbitrators was challenged. Therefore, in the cited case the question which was under consideration before the learned Judge was whether a substitute could be appointed under section 8 (2) read with section 8 (1) (a) or under section 9 (a) of the Arbitration Act and the above observations were made in relation to that question.
19. ' In support of the view which I have taken, I may, however, refer to a decision of Calcutta High Court in Probodh K. Sarkar v. Union of India . In this case the arbitration clause provided for reference to two arbitrators one to be appointed by each party and in the event of disagreement between them to an Umpire appointed by them which was done. But later on, on disagreement between the arbitrators the matter was referred to the Umpire who, it appears from the decision, had died before giving his award. An application was made for appointment of his substitute which was contested. In this background it was observed by Bachawat, J. In paragraph 14 of the decision which appears at page 386 of the report as follows : "Section 8, Indian Arbitration Act, 1940 empowers the Court to appoint an arbitrator or an Umpire in certain cases so that the arbitration agreement may not become abortive. It provides a machinery for effectively working out and enforcing the arbitration agreement. The Umpire appointed under this section has the like power to act on the reference and to make an award as if he were1 2 appointed by consent of the parties. The Scheme and object of the section shows that the application under the section can be made by persons by and against whom the arbitration agreement is mutually enforceable."
20. ' Therefore, the case cited by Mr. Abdul Majid Khan, has no application to the facts of the present case and is quite distinguishable.
21. ' Since the course provided by and under the aforesaid provisions was not followed by the Government, they could not start fresh arbitration proceedings and therefore the appointment of Mr. S. A. Nizami as arbitrator or sole arbitrator was invalid.
22. ' Moreover, the appointment of Mr. S. A. Nizami as sole arbitrator is invalid on two more grounds. The Government had appointed him as arbitrator on their behalf by the letter dated 18-1-1974, already referred to above and by the same letter they had informed the defendants that the arbitrator would act as sole asbitrator in case they failed to appoint their arbitrator. According to the plaintiffs since the defendants had failed to appoint their arbitrator within the statutory period Mr. S. A.
23. Nizami acted as sole arbitrator. However, it is contended by Mr. Ibadat Yar Khan that after the expiry of 15 days from the date of service of notice of appointment of Mr. S. A. Nizami as an arbitrator, a second notice for his appointment as sole arbitrator was necessary which admittedly, was not given in this case. He placed much reliance upon a Division Bench decision of this Court in Messrs Moosa Omar & Co. Ltd., Karachi v. Messrs Haji E. Dossa & Sons and another which supports his contention. In this case Mohammad Haleem, J. (now a Judge of the Supreme Court of Paikstan) made the following observations :- "5. The learned counsel for the appellant took exception to the appointment of the sole arbitrator and thus contended that there was a non-compliance of section 9 (b) of the Arbitration Act which vitiated the award. According to him, it was only if the appellant had failed to appoint its arbitrator for 15 clear days after notice in writing to make the appointment that the sole arbitrator could be appointed. In the instant case, it was urged that' in the notice dated 11th November, 1958, calling upon the appellant to appoint its arbitrator, the respondent had also indicated that its arbitrator would act as sole arbitrator in case the appellant failed to appoint its arbitrator. There was thus no fresh appointment of the sole arbitrator in terms of section 9 (b) of the Act. Since this contention turns on the contents of the notice, its relevant portion is reproduced as under "Our clients are prepared to go in for arbitration in their dispute with you and have appointed Mr. Ghulam Hussain, Esmail Dossa of Messrs Kasamali Esmail Karachi, as their arbitrator our clients have further instructed us to give you 15 days notice to appoint your arbitrator under the advice to them, failing which our clients' arbitrator will be sole arbitrator in the dispute and his award will be binding on both the parties, which please note."
24. ' In support of his contention he cited the following cases
(1) Drummond v. Hamer (1942) 1 K B 352.
(2) Messrs S. M. Fazail & Co. v. Messrs Overseas Cotton PLD 1959 Kar.
25. 739.
(3) Marichand v. Lachmandas AIR 1948 E Pb.
26. 11.
(4) Abdul Khalil v. Province of East Pakistan another PLD 1964 Dacca 166.
(5) J. Echholz German Merchant v. Messrs Amarnath Sriram AIR 1935 Lah.
27. 76.
28. ' The Contention of the learned counsel for the appellant does get support from these cases and if it had been merely the consideration of the notice dated 11th November, 1958, alone we would have accepted his contention. We have, however, served that the respondent had again given a notice on 29th November, 1958 in which it had called upon the appellant to appoint its arbitrator within 48 hours, failing which its arbitrator would be asked to proceed as sole arbitrator."3 ' However, Mr. Abdul Majid Khan referred to the application made to the sole arbitrator which finds place at Sr. No, 15 of the documents filed by the arbitrator whereby the Government requested Mr. S. A. Nizami to act as sole arbitrator. But this application cannot be treated a good substitute for the notice of appointment of Mr. Nizami as sole arbitrator for more than one reason. Firstly, the Plaintiffs had to appoint Mr. Nizami as sole arbitrator after the expiry of 15 clear days of the service of the notice which was not done in this case for the plaintiffs by the notice mentioned herein before had informed the defendants that Mr. Nizami would act as a sole arbitrator on the expiry of the aforementioned period and by the application under consideration the plaintiffs only requested him to act as such and not appointed him as such. Secondly, this application cannot be even treated as a notice for it is not even alleged that the plaintiffs had sent a copy thereof to the defendants.
29. ' The second ground of attack to the appointment of Mr. S. A. Nizami as sole arbitrator is that the defendants had nominated Mr. Habibur Rahman as their arbitrator and therefore, Mr. Nizami could not act as sole arbitrator. I have already referred to the letters written by the defendants in this connection namely, Exhs. 3/1, 3/2, 3/3 and 3/4. I am, therefore, satisfied that they had appointed their arbitrator within the statutory period and as such, Mr. S. A. Nizami could not act as sole arbitrator. However, I may note that the submission of Mr. Abdul Majid Khan Advocate was that the letter dated 24-1-1974 (Exh. 3/1) sent to the plaintiff under postal certificate (Exh. 3/2) was not valid as under section 42 of the Arbitration Act, 1940 a party is required to send such a letter by registered post. But this submission is not correct for only notices required under the provisions of the Arbitration Act, 1940 have to be served on the opposite party by registered post if the same are not delivered personally and no other manner is provided for the service thereof. Such notices, are mentioned in sections 8, 9 (b), 14 (1), .35 (1) and 37 (2) of the Arbitration Act. Under the provisions of section 9 (b) of the Arbitration Act a party is required to give notice to the other party, in the absence of any other manner provided by the arbitration agreement or personal service, by registered post requiring him to appoint his arbitrator within fifteen clear days. But a letter containing nomination of an arbitrator by the other party in response to a notice served on him in my opinion, is not such a notice for it contains only information regarding the appointment.
30. Therefore, the submission of Mr. Abdul Majid Khan is not tenable.
31. ' Now remains the last objection that the award is based on no evidence. It is admitted position that the parties had filed copies of certain documents before the sole arbitrator. He has stated in the award that he has given the award after considering the record which includes the memo of claims, the reply and documents relied upon by them. Therefore, it cannot be said that the award is based on no evidence. However, it is common ground that the entire record of the arbitration proceedings and evidence recorded by late Mr. Mohammad Akram remained with him and was not made available to Mr. S. A. Nizami. It is also admitted position that no oral evidence was led by the parties before Mr. S. A. Nizami and only copies of certain documents were filed before him. Mr. Abdul Majid Khan submitted that no request was made for obtaining the record from the plate Umpire.
32. ' However, Mr. Ibadat Yar Khan Advocate referred to the application dated 19-3-1974, which find place at Serial No, 31 of the documents filed by the sole arbitrator alongwith the award, wherein a request was made for calling for the record and original papers which were filed by the defendants before late Mr Mohammed Akram. The matter did not rest there. The request made in the application was repeated by the defendants by another application dated 21-5-1974. However, to meet this point Mr. Abdul Majid Khan relying on the order dated 30-3-1974 of the sole arbitrator which finds place at Sr. No, 37 of the documents filed by the arbitrator, submitted that the objections contained in application dated 19-3-1974 filed by the defendants were overruled by the sole arbitrator. He, however, has failed to point out in this order any observations made by Mr. Nizami in regard to the request made by the defendants for obtaining the record and original papers which were lying with late Mr. Mohammed Akram. Therefore, it is obvious that even if the award is based on some evidence the defendants may have been prejudiced by not obtaining the record and papers which 'were lying with late Mr. Mohammad Akram and in this view of the matter the sole arbitrator did not conduct the proceedings in accordance with the settled norms and in consequence it can be said that he misconducted the arbitration proceedings.
33. ' For the reasons given above, I allow the objections and set aside the award but in the circumstances of the case, leave the parties to bear their own costs. PLD 1967 Kar. 173 AIR 1953 Cal. 385 PLD 1971 Kar. 899