The parties to this case entered into a Clearing Contract dated 1-8-1972 on teams and conditions reduced into a written contract of the same date.
As to the duration of the contract it was stipulated that it "shall remain in force till 31-7-73 unless extended by mutual consent." According to the arrangement the respondent had agreed to carry out the clearing work at the rate specified in the contract. This dispute in this case refers to the demurrage charges which were paid by the petitioners on account of alleged negligence on the part of the respondent to clear the consignments of the petitioners within time. The contract provided as to the payment of demurrage at para. No. 12 in the following terms :- "12. Demurrage.-(a) It has been argued that no demurrage charges will be claimed by Party No. II, for delay in completion of Customs and K. P. T. Formalities in case complete and correct advance shipping documents are furnished to Party No. II before 5 working days of the carrier's arrival, except Force Majeure. Under no circumstances Party No. II, shall ever claim demurrage charges from Party No. 1 (K. S. And E. W.) due to non-availability of Railway Wagons.
(b) If the demurrage is incurred owing .To Party No. 1's failure to give to Party No. II, complete and correct documents 5 working days prior to carrier's arrival, it will be charged as an actual expense and a detailed diary in duplicate supported with relevant demurrage voucher of K. P. T. Must accompany the bill showing as to why demurrage was incurred, the payment of which will be made within 15 days on receipt of the bill.
(c) In case of dispute arising between Party No. I and Party No. II, on demurrage bills, the matter will be referred to an Arbitrator who will be appointed by mutual consent." The case of the petitioners is that the respondent without reasonable cause grossly delayed the clearance of consignments for which reminders and warnings were sent from time to time. It is also alleged that meetings were arranged between the representatives of the two sides in April and May 1973, besides exchange of correspondence on the subject. Eventually, on the persistent failure of the respondent to clear the consignments the petitioners transferred' most of the outstanding consignments from the respondent to other clearing agents through whom the consignments were cleared. After that in September 1974 the petitioners finalized the account of the respondents with effect from 30-9-1974 which showed a debit balance of Rs. 4,27,565. By notice dated 30-12-76 the peti--tioners demanded the aforesaid amount from the respondent and suggested the name of an Arbitrator in accordance with clause 12 of the Contract, but the respondent repudiated their liability and refused to go to arbitration. According to the petitioners, their claim relates to 24 items of demurrage paid by the petitioners, due to the negligence and default of the respondent.
2. Upon the aforesaid allegations the petitioners brought the present application under section 8 of the Arbitration Act on 18-8-1977 seeking appointment of an Arbitrator to decide the dispute between the parties.
3. On the facts the respondent does not deny the existence of the Clearing Contract entered into between the parties, but denies the allegation of negligence on his part to clear the consignments entrusted to him diligently. He alleges that the breach was committed on the part of the petitioners is not supplying the documents in respect of certain consignments in time and also in failing to make advance to meet the expenses involved as per terms of the contract. According to the respondent, therefore, the demurrage was incurred on account of the petitioners' own default and failure to perform their part of the contract. These facts were brought to the notice of the petitioners in the meetings held between them. Thus in substance the case of the respondent is that the delay occurred on account of the conduct of the petitioners themselves. In support of his case the respondent has produced the correspondence between the parties. It was also contended by the respon--dent that the consignments were transferred to the other clearing agent in violation of the contract. As to the notice served by the petitioners for reference of the matter to arbitration, the contention of the respondent is that the claim being false and baseless, the respondent denied it in his reply.
4. From the aforesaid narration of the pleadings of the parties it will be clear that there is no disputes about the existence of the arbitration agree--ment and there was no controversy that but for the legal objections which I will presently deal with, the dispute between the parties would be covered by the arbitration clause. The learned counsel for the respondent, however, raised two legal objections against the main application. He contended that the application is not maintainable as it is barred by limitation under Article 181 of the Limitation Act and, the claim sought to be referred to arbitration is also barred under Article 90 of the Limitation Act. On the other hand, it was argued on behalf of the petitioners that the Limitation Act is only applicable to proceedings before the Arbitrator and not before the Court. To be more specific the contention of the learned counsel for the petitioners was that Article 181 is not attracted to section 8 of the Arbitra--tion Act as the language of the Article seems to confine this residual provision to applications under the Code of Civil Procedure. It was alternatively argued that even if Article 181 is applied, the right to apply accrued to the petitioners when notice was served by them on the respondent for concurrence in the appointment of the Arbitrator.
5. The question whether Article 181 is confined in its application to applications under the Code of Civil Procedure for which no other provision was made in the Schedule stands concluded by the judgment of the Supreme Court in M. Imam-ud-Din v. Thal Development Authority (PLD 1972 SC 123) in which their Lordships considered the applicability of Article 181 to an application under section 20 of the Arbitration Act. It was held that after the incorporation of Articles 158 and 178 in the First Schedule to the Limitation Act, it is no longer possible to say that Articles contained in the Third Division of the First Schedule to the Limitation Act apply only to applications under the Code of Civil Procedure. Their Lordships expressed the view that Article 181, which is in the nature of a residuary Article, must necessarily be extended to all kinds of applications for which no specific period of limitation has been provided for either in the First Schedule to the Limitation Act or in any other statute. This is a fairly general and specific statement of the law which does not admit of any doubt that Article 181 would be attracted to section 8 of the Arbitration Act for which no specific period of limitation has been provided. As to the first objection raised on behalf of the respondent, I am, therefore, clear in my mind that the present application is governed by the three years' limitation period provided for under Article 181. However, the important question to consider is as to when this period started to run. On this point it was argued on behalf of the respondent, relying on the observation in the aforesaid decision of the Supreme Court that the date of commencement of the limitation period is the date when the differences arose between the parties and therefore the material date for determination is as to when differences lead arisen. According to the respondent the differences between the parties arose during the currency of the contract in the year 1973 and this application having been filed in 1977 was clearly barred by limitation. Learned counsel for the respondent referred to the following passage in the case of M. Imam--uddin referred to above :--- -- "A comparison of the provisions of sections 8 and 20 of the Arbitration Act itself will show that where the parties have entered into an agree--ment to refer their disputes to arbitration, they may either adopt the procedure laid down in section 8 or, alternatively, adopt the procedure laid down in section 20. Under section 8, a written notice has first to be given and the Court can be approached only after the expiry of 15 clear days from the service of a notice to concur, in the appointment or appointments of Arbitrators or in supplying the vacancy. Under section 20, on the other hand, no such notice is necessary, and when--ever a difference or dispute arises to which the arbitration agreement applies, any of the parties to the agreement may, instead of proceeding under section 8 of Chapter II of the Arbitration Act of 1940, straightaway apply to the Court having jurisdiction in the matter to which the agreement relates, for having the agreement filed in Court. The point of time at which the right to apply under section 20 accrues is, therefore, the point of time at which "a difference has arisen" and the difference arises when one party does not agree with the other on any particular question covered by the arbitration agreement. In the present case, the differences arose when the authority refused to pay the bill of the Contractor in full, and therefore, the respective dates of the last payments made under the two contracts determined the terminus a quo of the period of limita--tion."
Counsel contended that on the same reasoning the terminus a quo for an application under section 8 will also be fixed with reference to the date when difference arise between the parties as the same expression has been used in both sections. Now the commencement of the limitation is dependent upon the time, in terms of the Third Column of Article 181 "when the right to apply accrues". It, therefore. Follows that in each case the question would be when the right to apply to the Court for remedy accrued. In the case of section 20 as lucidly explained (if I might say so with respect) in the cited passage the right to apply accrues when a difference has arisen. A party will have right to go to Court as soon as a difference arises between to be parties for relief under section 20. However, a close comparison of the language of sections 20 and 8 would clearly reveal that a party seeking relief under section 8 has no right to go to Court straightaway as soon as differences have arisen between the parties. At this stage it will be advantageous to set out the provisions of section 8 which are in following terms "8. Power of Court to appoint arbitrator or umpire.-(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
(6) 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 a written notice to concur in the appointment or appointments 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 oppor--tunity 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."
A plain reading of the section would show that in clause (a) of subsec--tion (1) the expression "after differences have arisen" has been used not in connection with the making of the application to the Court for which pro--vision has been made in subsection (2), but in connection with the condition prescribed in subsection (1) for service of notice to the other parties for co concurrence in the appointment of an arbitrator. The effect as a whole of the expression is that notice to other parties for concurring in the appointment can be given only when all the parties do not concur in the appointment after differences have arisen. The right to apply under section 8 clearly arises upon the failure of the other parties to appoint the arbitrator within 15 clear days after the service of such notice. It is, therefore, clear to me that the effect of the language employed as to the time when the right to apply accrues in the two sections is materially different. In my humble opinion this dis--tinction has been clearly mentioned in the cited passage in the Supreme Court judgment.
The commencement of the period of limitation for an application under section 8 cannot, therefore, be related to the point of time when differences arise between the parties. This view was held by a Division Bench of the Lahore High Court in the case of West Pakistan, WAPDA v. Omar Sons Ltd. (PLD 1970 Lab. 398) where it was held that the date when the "right to apply" for the arbitrator's appointment accrues will have to be determined with reference to the date on which the 15 days of notice expired and not at any time before that date. In the present case the notice for appointment of arbitrator was dated 30-12-76 and consequently I hold that the present application was well within time.
6. The second objection raised on behalf of the respondent was that the claim itself being barred by limitation, the dispute cannot be held to be a genuine dispute to be referred to arbitration. As already pointed out the learned counsel for the respondent invoked Article 90 of the Limitation Act in support of his contention that the claim of the petitioners has become barred by limitation. This Article provides for suits by a principle against his agent for neglect or misconduct and the period of limitation prescribed is three years commencing from the date when the neglect or misconduct becomes known to the plaintiff. It was argued on behalf of the respondent that admittedly the alleged neglect on the part of the respondent came to the knowledge of the petitioners in the year 1973 as is clear from Annexure "I" attached with the application which is a letter dated 7-9-74 in which the petitioners bad preferred the specific claim for payment against the respondent. Along with the letter the petitioners had enclosed the list of consignments which they got cleared through another clearing agent and which mentions the dates of payments made by the petitioners towards demurrage. Counsel stated that these payments were made in 1973. However, the perusal of this statement show that at least in three cases the consignments were cleared in February, March and May 1974. It was contended that the period of limitation will have to be computed from the date of payment and, therefore, the present application was barred by limitation. On the other hand, it was contended on behalf of the petitioners that the claim of the petitioners arises out of breach of contract on the part of the respondent from an independent contract and therefore.
Article 90 of the Limitation Act is not applicable which is a residuary Article with regard to actions between principal and agent, and should be applied only if no, other Article can possibly be regarded as applicable to the facts of the case. The question as to which Article is attracted in the present case is a mixed question of law and fact and cannot be determined without an enquiry into facts. Since the arbitrator is the sole Judge of fact and law in regard to matters which are within the arbitration clause, it will be improper to decide this question in these pro--ceedings. I, therefore, agree with the learned counsel for the petitioners that this question has to be left to the arbitrator for determination upon the evidence produced by the parties. Both objections are, therefore, without substance.
7. In the result, I grant this application and order that an arbitrator shall be appointed in terms of the arbitration clause. The case shall now come up in Court for the parties to agree to the appointment of the arbitrator and if they failed to do so, further orders shall be passed for appointing an arbitrator.