1. ' KHILJI ARIF HUSSAIN, J.---By this application under section 5 of Arbitration Act, 1.940 applicants prayed as under:-- ' "It is, therefore, most humbly and respectfully prayed that this Honourable Court may graciously be pleased to grant leave to revoke the authority of appointing learned arbitrator by this Honourable Court and to recall the order dated 10-8-2006 . "
2. ' Brief facts for the purpose of deciding the listed application are that M/s Associates (Pvt.) Ltd.
3. Company tiled suit for declaration and permanent injunction seeking declaration that the project, namely, Cliftonia is lawfully to be completed and sold by the plaintiff only without intervention or interference and disturbance of defendants and that defendants Nos.1 and 2 have no right to interfere or obstruct in the peaceful possession entitlement thereafter of the plaintiff and defendant No,3 is lawfully bound to hand-over original document for further sale etc. In respect of property in question. The plaintiff had filed suit against applicants Nos.1 and 2 and one Syed Akbar Jamal. The suit was registered as Civil Suit No,1182 of 2004. Various applications were filed by the parties during pendency of the suit. On 10-8-2006 when four different applications were listed for hearing by consent of the learned counsel for the plaintiff in Suit No,1182 of 2004 and Suit No,1340 of 2004. Advocate for the defendants Nos.1 and 2 (applicants in this matter) and Advocate for the intervenor, a learned Single Judge appointed Mr. Justice (R) Shabbir Ahmed as sole arbitrator to decide the disputes between the parties including the issues raised in the aforesaid two suits.
4. Learned Judge further allowed parties to raise further additional claims against each other before the learned arbitrator and Nazir was appointed receiver to take over the charge of the project.
5. The defendants/applicants filed listed application under section 5 of the Arbitration Act for revocation of the authority of the appointed Sole Arbitrator Heard Mr. Ahmed Hassan Rana learned Advocate for the applicants/ defendants and Mr. Omair Nisar for respondent/plaintiff.
6. Mr. Ahmed Hassan Rana learned Advocate for the applicants/defendants vehemently argued that since there was no agreement of arbitration between the parties the appointment of the arbitrator is illegal, unlawful, and same is liable to be revoked. Learned Advocate for the applicants/ defendants stated that Civil Suit'No,1182 of 2004 was filed by M/s S.S. Associates (Pvt.) Ltd. Through its Chief Executive Mrs. Farhat Paracha whereas Agreement dated 22-1-2003 filed as Annexure-D with the memo. Of plaint was executed between M/s S.S. Associates a partnership firm and Saifullah A. Paracha and contended that the said agreement did not contain any arbitration clause and further a limited company is distinct legal entity than a partnership firm and accordingly reference of dispute without arbitration agreement the parties and appointment of arbitrator was illegal and authority of arbitrator has to be revoked. Mr. Ahmed Hassan Rana further argued that there was no privity of contract between the defendants and the plaintiff company and dispute between them cannot be referred for arbitration. Learned Advocate in support of his contentions heavily relied upon definition of 'Arbitration Agreement' given in section 2 of the Arbitration Act and relied upon the cases of Messrs AJ-Bag Corporation v. Pakistan through the Secretary, Ministry of Defence, Islamabad and 3 others 1973 SCM R 98, Noor Sahib Khan and 3 others v. Mir Jananson and 6 others 1989 CLC 1666, Military Estate Officer P.A. INC. Houston, U.S.A. And another v. Federation of Pakistan and 2 others PLD 1979 Kar.453, Zahoor Ahmed v. Muhammad Akram and others 1988 CLC 722, Madura Mills Co., Ltd. v. N.M.S. Krishana Ayyar AIR 1973 Madras 405, Waverly Jute Mills v.
7. Raymaon and Co. AIR 1963 SC 90, Messrs Haji Muhammad Sharif Atta Muhammad v. Messrs Khoja Mithabhai Nathoo and others PLD 1960 (W.P.) Kar. 10, Dilip Construction Co. v. Hindustan Steel Ltd.
8. AIR 1973 Madhya Pardesh 261, Hiralal Pannalall v. Dalhousie Jute Co. Ltd. AIR 1978 Calcutta 119, Chandmull Goneshmull v. Nippon Munkwa Kabushiki Kaisha AIR 1921 Cal.
9. 342.
10. ' In reply Mr. Omair Nisar, learned Advocate for the respondent argued that the plaintiff limited company is M/s S.S. (Pvt.) Limited successor-in-interest of the partnership firm and agreement between the parties was executed prior to incorporation of plaintiff company. In support of his contention he relied upon the definition of 'first party' given in the agreement which provided that the expression 'first party' shall unless exclude or repugnant to the context mean and include his heirs, successors, executors, legal representatives, successors-in-interest and assignees. Learned counsel relied upon section 40 of the Contract Act which provided that in the absence of any intention of the parties to any contract that promise contained in the contract shall be performed by promisor himself the promisor or his representative may employ a competent person to perform it. Learned Advocate further argued that an application under section 5 of the Arbitration Act is not maintainable and plaintiff ought to have filed an application under section 33 of the Arbitration Act. In support of his contention he relied upon Abdur Rahman Khan and others v.
11. Deputy Commissioner, Jessore and others PLD 1968 Dacca 367, Bhuwalka Bros. Ltd. v. Fatehchand Murlidhar AIR 1952 Cal.
12. 294.
13. ' I have taken into consideration respective arguments advanced by the learned counsel for the parties and perused the record. From the memo. Of plaint in Suit No,1182 of 2004 and Suit No,1340 of 2004 it appears that earlier suit was filed by M/s S.S. Associates. (Pvt.) Ltd. Seeking declaration that they have to complete the project without intervention or interference from the defendants whereas Suit No,1340. Of 2004 was filed by Sher Afzal Khan in which applicants were arrayed as defendants Nos.2 and 3 along with other defendants including Mrs. Farhat Paracha who is one of the directors of M/s S.S. (Pvt.) Associates Ltd. The plaintiff in Suit No,1340 of 2004 sought declaration that he is entitled to run affairs, administration and financial control, execution and completion of the project selling and recoveries of the balance amount from the allottees. The plaintiff in the said suit further sought rendition of partnership accounts of the dissolved partnership from defendant Nos.1 to 3. It will be useful to mention here that Partnership Agreement dated i-10-1995 between applicants and Sher Afzal Khan who was plaintiff in Suit No,1340 of 2004 contained Arbitration clause which is as under:-- ' "That all the disputes and questions in connection with partnership of the said project or this deed arising between the partners whether during the partnership or after the partnership/completion of the said project, shall be referred for decision to the arbitration of two arbitrators one to be appointed by each party and in case their default, by the parties."
14. ' Before giving any finding I would like to discuss the case-law relied upon by the parties in support of their respective contentions and to see whether they have any bearing on the issue in the matter.
15. ' In the case of M.P.A. INC. Houston, USA and another v. Federation of Pakistan and 2 others PLD 1979 Kar.453, learned Judge dismissed the application under section 20 of the Arbitration Act as there was no arbitration agreement between the parties to govern the disputes.
16. ' Brief facts of the case of Noor Sahib Khan and 3 others v. Mir Jananson and 6 others 1989 CLC 1666, are that:-- ' "..The defendants instead of producing proper evidence in support of their plea of adverse possession but at trial impliedly abandoned the plea of adverse possession taken by them in their written statement and advanced a totally different plea viz. That they were owners of land since the time of their forefathers and that land had also been declared as their property by virtue of an award returned by the arbitrators, learned Judge held that the appeal being inconsistent cannot be pressed into service simultaneously and further held that it is an essential ingredient under agreement to arbitrate should be contained in a written document agreed by parties to the submission of by their agent or agents duly authorized in this behalf and since it is not at all established that the plaintiffs/ respondents had agreed to submit their disputes to the arbitration, the so-called arbitration award in this case , therefore without any arbitration agreement in writing between the parties will carry no weight and would have to be ignored altogether. The principles laid down in the said matter is not applicable to the facts of this case."
17. ' In the case of M/s Aj-Bag Corporation v. Pakistan through the Secretary, Ministry of Defence, Islamabad and 3 others, 1973 SCM R 98, the Honourable Supreme Court upheld the order of Honourable High Court Sindh and Balochistan whereby the Court had revoked the authority of an arbitrator, who was appointed under an arbitration clause on the ground that the dispute involved in the case was the concern of Pakistan State, which was neither a party in the case before the Honourable Court nor before the arbitrator.
18. ' In the case of Messrs of Haji Muhammad Sharif-Atta Muhammad v. Messrs Khoja Mithabhai Nathoo.And others, PLD 1960 (W.P.) Kar. 10, an application under sections 5 and 33 of the Arbitration Act, 1940 was filed for getting revocation to the submissions of the disputes to arbitrators and the arbitration clause of the agreement on the ground that no dispute exists between the parties to the contract as the claim made by the respondents has become barred by time. Considering these facts the Honourable Single Judge held that if there is no real difference or dispute between the parties the provision of the arbitration clause will be inapplicable the apply to disputes or differences.
19. ' In the case of Madura Mills Co. Ltd. v. N.M.S. Krishna Ayyar, AIR 1937 Madras 405, it was held that if the matter in dispute is not within the jurisdiction of the arbitrator then proper remedy to all the parties to the submission is to apply to the Court for revocation.
20. ' In the case of Dilip Construction Co. v. Hindustan Steel Ltd. AIR 1973 Madhya Pradesh, 261, it was held that "the existence of difference Or dispute is an essential condition for the arbitrator's jurisdiction to act under an arbitration clause in an agreement."
21. ' I have discussed the case-law relied upon by the learned Advocates for the parties and same have no bearing in the controversy involved in the matter.
22. ' Suit No,1182 of 2004 was filed by S.S. Associates (Pvt.) Ltd. Seeking declaration in respect of a project to be completed whereas Suit No,1340 of 2004 was filed by Sher Afzal Khan against applicants/defendants along with three other persons seeking declaration that he is entitled to run affairs and administration of the project and for rendition of the partnership accounts of the dissolved partnership firm from defendants Nos.1 to 3 i.e, applicants and one Mr. Farooq Danawala.
23. It would be useful to mention here that agreement dated 22-1-2003 filed as Annexure-D in Suit No,1182 of 2004 upon which Mr. Ahmed Hassan Rana relied was executed by Farooq Danawala as attorney of one Faisal Ghaffar.
24. ' The question which requires consideration is whether the matter in dispute was lawfully referred to the learned Sole Arbitrator or not. On 10-8-2006 following order was passed in Suit No,1182 of 2004 and Suit No,1340 of 2004:-- ' "Mr. Nisar a Mujahid, Advocate for plaintiff in suit No,1182 of 2004.
25. ' Mr. Shoib Ali Khan, Advocate for the plaintiff in Suit. No,1340 of 2004.
26. ' Mr. Khawaja Naveed Ahmed, Advocate for defendants Nos.1 and 2, Naveed Ishtiaq and Faisal Ghaffar respectively.
27. ' Mr. Sardar Muhammad Yousuf, Advocate for Intervenor.
28. ' Mr. Zaheeruddin, Nazir of the Court.
29. ' By consent of the learned counsel following order is passed:-- ' Mr. Justice (R.) Shabbir Ahmed is appointed as sole arbitrator, to decide the dispute between the parties including. The issues raised in the aforesaid suits. It will be open to the parties to raise further additional claims against each other before the learned arbitrator. The learned arbitrator may fix the fee himself to be equally shared by Naveed Ishtiaq, Mrs. Farhat Paracha and Sher Afzal Khan. The parties shall pay the fee of .Arbitrator well in advance to the learned arbitrator.
30. ' Mr. Nisar A. Mujahid, Advocate, states that the project is being managed by his client. The Nazir present in Court is appointed Receiver and shall take over the charge of the project from today and the entire transaction of the project would be carried out by the client of Mr. Nisar A. Mujahid through Nazir which shall include payment of amount by the allottees, amount to be spent on the project and or any other transaction. The party in possession of the project is however restrained from handing over possession of any flat either to any allottees and or to any person during the pendency of the arbitration proceedings.
31. ' One of the allottees of the flat in the project, namely, Mrs. Razia Mir, has made an application for joining her as party, inter alia, on the ground that since the project which is subject-matter of these proceedings is run by different management and she wants to protect her interest in flat in regard to payment of the instalments. Let. Mst. Razia Mir starts depositing instalments in respect of her flat with the Nazir of this Court.
32. ' I am informed that there are two other allottees have filed suits bearing Nos.1279 of 2005 and 376 of 2006 pending before the IX Senior Civil Judge, Karachi East and IV Senior Civil Judge, Karachi South respectively. The issues raised in those suits shall also be referred to the learned arbitrator for his decision by way of award.
33. ' The Nazir shall supervise the project and shall exercise all the powers of Receivers provided under the law. Tentatively, Nazir's fee is fixed at Rs,50,000 to be equally shared by Naveed Ishtiaq, Mrs. Farhat Paracha and Sher Afzal Khan. This arrangement would continue till the award is given by the learned arbitrator.
34. ' The learned arbitrator may conduct proceedings and give award on the claims of the parties within three months from the date of communication of the order. The entire record of the 'project, which retained by the Nazir shall be handed over by him to the learned arbitrator within one week from today. Similar office shall also send photocopies of the R&P of both Suits No,1182 of 2004 and No,1340 of 2004 to the learned arbitrator for his perusal.
35. ' Both the suits stand disposed of in the above terms along with the listed applications.
36. (Sd.) Judge"
37. ' From bare reading of section 21 of Arbitration Act, 1940 one can see that to refer the matter in a suit pending before the Court, for arbitration following pre-' condition has to be satisfied first:--
(i) That suit must be pending in Court of competent jurisdiction.
(ii) All interested parties agree that any matter in difference between them in suit be referred to arbitration.
(iii) Interested parties should apply in writing to the Court for an order of reference .
38. ' What required by section 21 of the Arbitration Act is thai in a suit pending in a Court of competent jurisdiction, even if there is no arbitration clause/agreement between the parties in dispute, matter can be referred if all the interested parties agreed for reference of any matter in difference between them in the suit but such order can be passed on an application in writing submitted by the interested parties in dispute.
39. In the instant case admittedly no written application has been filed by any party in the matter, further not only difference between the parties in the suit was referred to learned Sole Arbitrator but the.Parties were allowed to place before the learned arbitrator claims which may not be subject- matter of the suit which in my humble opinion is not permissible within the scheme of section 21 of the Arbitration Act. The requirement of written application is apparently become more significant when it is read with definition of arbitration agreement given in section 2-A of the Arbitration Act which provides arbitration agreement means written agreement to submit present and future differences to arbitration.
40. ' Section 21 to section 25 of Arbitration Act provides specific mechanism for an arbitration in a suit.
41. ' To constitute a valid contract between the parties one of the essential conditions is that consensus addendum must exist between the parties, such agreement can be oral or in writing but if law required that a particular agreement is required to be in writing, then even if parties are at ad addendum an oral agreement can not be given effect. An agreement of arbitration is the very foundation on which the jurisdiction of the arbitrator to act rests and where that is not in existence at the time when the arbitrator entered into reference proceedings before the learned arbitrator will be without jurisdiction, even if parties appear before him.
42. ' In a suit pending before a competent Court having jurisdiction, dispute in the suit (underline is mine) can be referred on the written application of the interested parties for arbitration.
43. Golden rules of interpretation is to give the dictionary meaning to the word used in the statute unless same led to absurdity. No word used in a Statute be taken, as surplus and meaning, ought to have been given to it to discover the intention of legislator.
44. ' In the case of Lt. Col. Prithi Pal Singh Bedi v. Union of India and others, AIR 1982 SC 1413 (1419) and The Member-Secretary, Andhra Pradesh, State Board for Prevention and Control of Water Pollution v. Andhra Pradesh Rayons Ltd. And others AIR 1989 SC 611, it was held that there is a presumption that words are used in an Act of Parliament correctly and exactly and not loosely and un-exactly.
45. ' Why the legislator has not laid down that any difference between the parties to a suit can refer to arbitration at the (oral) request of interested parties and specifically speaks that in case any difference between the interested parties can be referred to arbitration if such interested parties apply in writing to the Court for an order of reference. The parties can agree for reference orally or otherwise but a matter in dispute can, be referred only when a written application is filed. Such application in writing can be filed by one party and consented by the other.
46. ' By an arbitration agreement parties, instead of getting dispute decided through Court having jurisdiction to decide, to resolve the same by a person (s) of their choice and perhaps for this reason legislator required that before referring the matter to an arbitrator agreement should be in writing.
47. 'Section 25 of Chapter IV of Arbitration Act provides that provisions of other Chapters so far as they can may be applicable to arbitration proceedings under this Chapter and further provided that Court may in any circumstances under sections 8, 10, 11 and 12 instead of filling up vacancy or making appointment make an order superseding arbitration and proceed with the suit.
48. The learned Sole Arbitrator (for whom I have great regard and respect) was appointed vide order dated 10-8-2006 without any written application as required under section 21 of the Arbitration Act and perhaps attention of the learned Judge was not drawn to section 21 of the Arbitration Act at the time of passing the order.
49. ' For the foregoing reasons, listed J. Misc. Is granted only to the extent that appointment of the Sole Arbitrator without written application being contrary to the provision of section 21 of the Arbitration Act, 1940 is revoked and dispute which was not part of dispute in suit cannot be referred in terms of section 21 of Act, the authority of the arbitrator is recalled.