On 18.2.2003 the respondent filed an application under Section 20 of the Arbitration Act, 1940, against the appellant. It was stated in the application that the parties entered into a contract on 1.2.1996 whereunder the several works mentioned in para-3 of the application were to be executed by the appellant. These works were to be executed in entirety within eight weeks of the first payment to be made to the appellant by the respondent. Such payment in the sum of Rs, 59,00,000/- was made to the appellant on 8.2.1996 and consequently the work was to be completed on 8.4.1996. It was then stated that the work was not completed, yet another payment of Rs, 29,50,000/- was released to the appellant on 29.6.1996. The appellant did supply some equipments mentioned in para-8 of the application long after the stipulated date of completion.
These supplies also did not conform to the specifications agreed between the parties and suffered from several defects detailed in para-9 of the application. The appellant was repeatedly called upon to complete the works and to remove the defects in the work done as the respondent was suffering heavy damages because of the said breach but to no avail. Ultimately, the appellant was called upon to render accounts and to settle the matters pertaining to liquidated damages but nothing happened. It was thus stated that disputes arose between the parties and that the contract contains the arbitration clause. There is then reference to some correspondence between the parties as to the appointment of an arbitrator and that ultimately no consensus could be achieved in the matter. The claims and matters to be referred to the arbitrator were detailed in para-19 of the application. With these averments, a prayer was made that arbitration agreement be got filed in the Court and reference be made to the arbitrator. The appellant filed a reply, raising an objection that the application is barred by time. It was also averred with reference to earlier, correspondence that the claim itself had become barred by time. Prayer was made for dismissal of the application. The learned trial Court heard the parties and vide order dated 17.12.2003 allowed the application inasmuch as Ch. Hassan Nawaz, Director General, Federal Judicial Academy, Islamabad, was appointed as an arbitrator and the matters to be referred to the learned arbitrator were summarized and his fee was fixed and a direction was issued to the arbitrator to publish his award within four months.
2. Mian Gul Hassan Aurangzeb, learned counsel for the appellant, contends that the limitation for the said application was governed by Article 181 of the Schedule to the Limitation Act, 1908 and the disputes having arisen between the parties and the application having been filed more than three years after the said dispute having arisen it was liable to be dismissed under Section 3 of the Limitation Act, 1908. He relies upon the cases of M. Imam-ud-Din Janjua v. The Thal Development Authority through the Chairman, T.D.A, Jauharabad (PLD 1972 SC 123), Muhammad Nazir v. The Secretary, Cooperative Department and another (1989 M LD 1156), Messrs Progressive Engineering Associates v. Pakistan Steel Mills Corporation Ltd. (1997 CLC 236), Azad J & K Government v.
Shaheen Timber Trading Corporation (PLD 1965 Azad J & K 9) and Muhammad Abdul Latif Faruqi v.
Nisar Ahmad and another (PLD 1959 (W.P.) Karachi 465). Mr. Muhammad Bashir Kiani, learned counsel for the respondent, on the other hand, argues that since the appellant itself had indulged in correspondence with the respondent in the matter of appointment of arbitrator and had raised its own claim, it would be estopped from opposing the application filed by the respondent on the said ground. According to' him, there is no concept of repudiation of a contract unilaterally and further that all conditions do exist for a valid reference to an arbitration and that the application was within time. He relies on the case of Lahore Stock Exchange Limited v. Fredrick J. Whyte Group (Pakistan) Ltd. and others (PLD 1990 SC 48).
3. I have examined the trial Court records. I have--al-ready reproduced the material and relevant contents of the pleadings of the parties above. Now the plea taken by the appellant was that the respondent had terminated the said agreement and served the claim upon the appellant on 8.4.1997. The fact that the said letter was addressed was not disputed. The reference was further made to the letters having been produced and relied upon by the respondent itself that the correspondence for arbitration started at a point of time when the limitation had expired and in the said letters as well the appellant had repeatedly asserted that the claim being raised by the respondent is barred by time. Now to my mind the learned trial Court has proceeded in the matter rather in a haphazard manner. Under Section 20(2) of the Arbitration Act, an application filed thereunder is to be registered as a suit between one or more of the parties. A notice is to be served to show-cause as to why the agreement should not be filed and it is upon the failure to show- cause in the manner prescribed that the orders envisaged in sub-section (4) are to be passed whereafter the arbitration is to proceed in accordance with sub-section (5) of Section 20. Now I find that notwithstanding the fact that it was respondent who prayed for the disputes to be referred to arbitration, the learned trial Court has decided the matter with reference to the claim made by the appellant in response to the letters written by the respondent which according to the appellant were written long after the expiry of period of limitation. He has then proceeded to record a finding that the agreement between the parties cannot be considered as terminated and without giving a finding as to whether or not the claim was time barred or that the application was time barred has proceeded to refer the matter to the arbitrator by allowing the application. Now to my mind, it was a substantial question that was to be decided in this case and could have been decided only by the Court both with reference to the application as also the claim to be referred.
This has not been done by the learned trial Court which renders the impugned order violative of the consistent pronouncements of the superior judiciary of the country. Since the matter has not been properly decided, I deem it proper to remand back this case to. the learned trial Court for a decision on the said question. The FAO is accordingly allowed. The impugned order dated 17.12.2003 of the learned trial Court is set aside. The case is remanded back to the learned trial Court who shall frame issues arising out of the said application and its reply particularly pertaining to the objection of limitation to the filing of the application as also to the claim being sought to be referred to arbitration, and then to decide the same.
4. A copy of this judgment alongwith the records be remitted to the learned trial Court immediately where the parties shall appear on 20.4.2004 and the learned trial Court shall proceed further in the matter as stated aboved. No order as to costs.