1. ' This is a petition under section 11 of the Arbitration Act, whereby the petitioners seek the removal of the sole arbitrator, Mr. Justice (Retired) A. S. Faruqui (a retired Judge of the erstwhile High Court of West Pakistan, Karachi Bench). The brief facts leading to the filing of the above petition are that respondent No. 1 had obtained a loss, of profit policy from the petitioners. On account of the heavy rain in the yea: 1973, respondent No, l's factory was flooded on 7th July, 1973 resulting in the closure of the factory and reduction in production for some period, and, therefore, respondent No. 1 lodged a claim with the petitioners for the reduction in the turn-over due to the accumulation of the rain water for the following two periods -
(a) from 7th July 1973 to 29th July 1973 when the factory allegedly remained closed,
(b) from 7th July, 1973 to 31st December 1973 on account of alleged reduction in production.
2. ' As there was no settlement of respondent No, l's above claim, they invoked the arbitration clause and suggested the name of Mr. Justice (Retired) A. S. Faruqui as the learned arbitrator to which the petitioners consented to. After that the parties and their learned counsel appeared before the learned arbitrator on 17th Febuary 1977, when respondent No. 1 were given time to file their claim.
3. Thereafter, the matter proceeded before the learned arbitrator, till the time of the filing of the present petition for the removal of the learned arbitrator as according to the petitioners he has misconducted the proceedings or misconducted himself and that he is biased. In support of the above contentions the petitioners have relied upon the following orders passed by the learned arbitrators and the incident allegedly took place during the proceedings :
(i) On 15th June 1978 the petitioners filed an application under Order XI, rule 14, C. P. C. For direction to respondent No. 1 to produce for inspection of the documents mentioned therein. The above application was allowed by the consent of the learned counsel for respondent No. 1 by an order dated 21st June 1978.
4. However, on the next date of hearing i. e. 27th August 1978 the learned arbitrator at the oral objection of the learned counsel for respondent No. 1 modified the above order which, according to the petitioners has caused serious prejudice to them.
(ii) That during the cross-examination of respondent No, l's witness Mohammad Mahtab Khan (an internal auditor of the said respondent) on 25th February 1979 the learned arbitrator ordered the production of the following documents :- "(i) Income-tax returns and assessm ent orders for the years 1972-73, 1973-74.
(ii) Import files of August, September and October 1973.
(iii) Balance-sheets for 1970-71 to 1974-75.
(iv) Extract from the stock. Register showing imported stock as on 7th July 1973.
(v) Extracts from the sales registers showing quantity-wise sales figures of radios from 1970-71 to 1974-75.
(vi) Local Purchase Register."
5. ' However, on the next date i. e. On 22nd April I 979 respondent No. 1 filed objections to the production of some of the above documents. In pursuance of the above objections, the learned arbitrator by his order dated 3rd May 1979 exempted respondent No. 1 from production of the income-tax returns and assessm ent orders and the balance-sheets etc. Pertaining to the year 1974-75 by observing that in terms of the policy the figures for the year 1974-7D were not relevant which, according to the petitioners, has caused serious prejudice to them and amounts to pre- determination of an issue.
(iii) That during the course of the proceedings on 3rd May, 1979, it has been alleged that the Advocate for the petitioners complained to the learned arbitrator that respondent No. 1 by objecting to the production of the account books, statements etc. (which according to the petitioners have a bearing on the matter) wanted to procure some how or the other an award in their favour and that the acceptance of those objections would help respondent No. 1 in their aforesaid objective. It has been further alleged that during the discussion which followed, the learned arbitrator remarked "Aisa hee hoga", which according to the petitioners in the context mean that respondent No, I would have an award in spite of withholding of the account books, documents etc.
(iv) That the accountant appointed for submission of the report in terms of the insurance policy prepared the report without providing an opportunity to the petitioners in spite of an express order of the learned arbitrator dated 25th June, 1977 that the parties would be free to represent their point of view before the Chartered Accountant on a day to be fixed by him and that the petitioners' objections to the above report though filed on 15th June 1978 before the learned arbitrator remained undisposed of."
2. (a) It has been urged by Mr. Z. U. Ahmed, learned counsel for the petitioners that the accumulative effect of the above orders and the incident is that the learned arbitrator has misconducted the arbitration proceedings or himself and that the petitioners have a reasonable apprehension that the learned arbitrator is biased. It was further urged by Mr. Z. U. Ahmed that the learned arbitrator in spite of the fact that he is party to the above petition as respondent No, 2 has not cared to come forward to refute the alleged remark "aisa hee hoga" referred to here in above, and, therefore, an adverse inference under section 114 (g) is to be drawn against him.
6. ' On the other hand it was urged by Mr. Akhtar Mahmood, learned counsel for respondent No. 1 that the modification of the order dated 21st June 1978 by the order dated 27th August 1978 and that modification of the order dated 25th February 1979 by the order dated 3rd May 1979 do not constitute misconduct on the part of the learned arbitrator or misconducting the proceeding and that the same were passed in consonance with the terms of the reference. It was also urged by him that the learned arbitrator had not made any alleged remark referred to hereinabove, and that in any case the alleged remark does not prove or indicate that the learned arbitrator is biased.
7. He has also contended that the question, as to whether the accountant's report is to be accepted or not is still an open issue before the learned arbitrator and that the petitioners have been given full opportunity to cross-examine the accountant who had prepared the above report.
(8) Reverting to Mr. Z. U. Ahmed's contention that the modifications of the two orders referred to hereinabove, constitute misconduct on the part of the learned arbitrator or misconducting of the proceedings and amount to prejudging of an issue, it may be observed that upon the petitioners' aforesaid application under Order XI, rule 14 and Order XIII, rule 1 and section 151, C. P. C. Dated 15th June 1978, the learned arbitrator passed the following order on 21st June 1978 :- "With regard to the respondent's application under Orders XI and XI V, C. P. C. It is agreed by consent that Mr. Lari or his representative will be given inspection of any such document of the account books as mentioned in the application at the office of the claimant; Rizvi Chamber, Akbar Road,, Karachi, such documents will he made available."
8. ' However, on 27th August 1978, the following order was passed :"Mr. Akhtar Mahmood ' Mr. I. A. Lari.
9. ' Mr. Akhtar Mahmood has argued that the order of 21st June 197.8 is beyond the terms of the policy according to which the term turnover has been defined as the money paid or payable to the insured for goods sold and delivered and the rate of gross profit earned on the turn-over during the financial year immediately before the date of the damage. For that reason the accounts books inspection for the period prior to the previous year immediately before the date of damage is not permissible. Mr. Lari replied that he has asked for the inspection of prior years because the Chartered Accountant appointed by me has in assessing the loss taken into account the accepted increase of gross profit having regard to the increase in the year in question on the basis of the increase in the year prior to that : ' I accordingly review my order of 21st June 197.8 to the extent that Mr. Lari or his representative shall be given inspection of the account books for the year immediately previous to the date of damage.
10. To show that the expected increase cannot be taken into in determining, the loss as contemplated by the policy. Inspection to be given on 14th September 1978 at 10-30 at the office of R. B, Industries in Ravi Chamber at Akhtar Road and on subsequent dates if necessary.
11. ' Hearing on 28th September 1978 at 10-30.
12. (Sd.)
13. A S. Farooqui"
(c) The question for consideration is, as to whether the modification of the said order dated 21st June 1978 by the aforesaid order dated 27th August 1978 constitutes misconducting of the arbitration proceedings or any bias can be attributed because of the passing of the above order. In this regard, it may be mentioned that the arbitration reference is in terms of the insurance policy. In other words, the learned arbitrator has to determine the rights and obligations of the parties on the basis of the terms and conditions contained in the insurance policy in question. The Schedule to the insurance policy, defines the term, "rate of gross profit" in the following words : "the rate of gross profit earned on the turn-over during the financial year immediately before the date of the damage."
14. ' The above modification of the order prima facie seems to be in consonance with the above clause of the Schedule to the insurance policy. I am unable to agree with the learned counsel for the petitioners that the modification of the order dated 21st June, 1978 by the aforesaid order dated 27th August 1978 constitutes misconduct on the part of the learned arbitrator or misconducting of the proceedings or any bias can be inferred because of the passing of inter alia section 13 of the Arbitration Act is entitled to regulate the conduct of the proceedings and, therefore, an order restricting the inspection of certain documents/account books prima facie in terms of the insurance policy, in my view is within the power of the learned arbitrator.
(d) It was urged by Mr. Akhtar Mahmood that the petitioners did not object to the aforesaid review order, dated 27th August, 1978, before the learned arbitrator and that on the other hand, it was acted upon by the parties inasmuch as in pursuance of the above order the petitioners inspected the documents and cross-examined the Accountant, who prepared the report and also respondent No, l's witness Mehtab Khan, an internal auditor and that the above objection has been raised for the first time in the present petition after the expiry of about 10 months and, therefore, it constitutes waiver and acquiescence on the part of the petitioners.
15. ' Whereas it was urged by Mr. Z. U. Ahmed that the fact that the petitioners did not lodge any protest or did not file any application for removal of the learned arbitrator soon after the passing of the aforesaid order indicates the petitioners' bona fide, and, that in any case there is no waiver or acquiescence on the part of the petitioners. In support of his above contention Mr. Ahmed has referred to the case of Muhammad Moin Khan v. Chief Settlement Commissioner, etc. (1) the case of Haji Anwar and another v. Haji Jamil Ahmed and 2 others (2) and the case of Mst. Bachi Bai v.
16. Ghulam Abbas (3).
(i) In 1961 SC it was held that waiver of right can be effective only if there is consciousness of right at the time of waiver.
(ii) Whereas in 1971 SCMR it was held that to constitute waiver some positive act indicating an intention to give up right consciously must be shown.
(iii) In 1972 Karachi it was held that whilst waiver is different from estoppel, delay sometimes is treated as evidence of waiver in these cases where waiver has ripened into estoppel and that waiver means implied agreement, and, therefore, delay by itself cannot amount to waiver.
(e) It will suffice to observe that in the instant case since I am not inclined to agree with the contention of the learned counsel for the petitioners that the above modification constitutes misconduct on the part of the learned arbitrator or misconducting of the proceedings or any bias can be attributed, it is not necessary to examine the effect of the fact that the petitioners have for the first time raised the objection to the aforesaid modification order, dated 27th August, 1978, after the expiry of about 10 months.
3. (a) It may be pertinent to mention that the diary sheet, dated 25th February, 1979. Does not indicate what documents were ordered on 25th February, 1979, by the learned arbitrator during cross-examination of respondent No, l's witness, Mehtab Khan, to be produced by respondent No. 1.
17. However, respondent No, l's application, dated 22nd April, 1979, (Annexure Y-2 to the countcraffidavit) contains the list of the documents which were ordered to be produced.
18. ' In addition to the above documents, the witness was also directed to produce the following documents,-
(1) balance-sheets 1970-71 and 1974-75.
(2) list of entire material stock as on 7th July, 1973.
(3) quantity-wise sales figures of radios from 1970-71 to 1974-75
(4) Local purchase registers.
19. ' The learned arbitrator upon the respondent No, l's application, dated 22nd April, 1979, to which the petitioners had filed objections dated 3rd {{FOOT NOTE}}
(1) PLD 1961 SC 436 (2) 1971 SCM R 806 (3) PLD 1972 Kar. 278 {{FOOT NOTE}} ' May, 1979 (Exh. 3) passed the following order on 3rd May, 1979 : 3rd May, 1979.
20. "ORDER ' The claimant filed an application objecting to production of certain documents and the respondents have filed their reply to it. I order as follows :-
(1) Since the Income-tax Returns and assessment orders are not being produced, the witness's statement in the examination-in-chief relating to income tax orders and assessment shall be disregarded,
(2) The Balance Sheets for the years 1971 to 1974, i.e. 1st April, 1971 to 31st March, 1974 shall be made available to Mr. Lari for inspection. The photostat copies asked for are not to be given. Mr. Lari had said that figures of 1974-75 are relevant because it is his contention that the reduction in the sales was not due to insufficiency of commodity. However, having regard to the terms of the policy, indemnity period would be on the outside twelve months from the date of damage, and 1974-75, therefore, does not come within that period.
(3) As regards information asked at page 4 of the cross-examination, Mr. Muhammad Mehtab Khan is directed to produce that information and keep these relevant files with him for reference if asked from him about it in the cross-examination.
(4) Messrs R. B. Industries will allow inspection of their balance-sheets for the relevant period in their office and provide all facilities on 9th May, 1979 at 3 p.m. Before this, on 8th May, 1979, they will furnish an extract of Trading Account for the relevant periods, i.e. April, 1971 to March, 1974 to Mr. Lari in the afternoon in his office.
(5) For further cross-examination of Mr. Muhammad Mehtab Khan on 21st May, 1970 at 9-30 a.m.
21. Arbitrator."
(b) It may be observed that the learned arbitrator by the aforesaid order ordered that since the income-tax returns and assessm ent orders were not produced, respondent No, l's witness's statement in the examination-in-chief relating to the income-tax. Orders and assessment orders shall be disregarded. Whereas he maintained the order of the production of the balance-sheets for the years 1971 to 1974 but excluded for the year 1974-75 and also maintained the order for the production of the other documents and information referred to hereinabove.
22. ' It was urged by Mr. Ahmed learned counsel for the petitioners that the learned arbitrator by exempting respondent No, I from production of the income-tax returns and assessment orders has caused serious prejudice to the petitioners and that the learned arbitraror's aforesaid order that the statement of the respondent No, l's witness about the above documents would be excluded from consideration in fact favoured respondent No. 1 and not to the petitioners. In my view the learned arbitrator was competent in law to pass the aforesaid order, dated 3rd May. 1979, and, therefore, it cannot be urged that he has misconducted himself or the proceedings nor any bias can be inferred from the above order. It cannot be overlooked that respondent No. 1 are the claimant before the learned arbitrator and, therefore, the burden of proof is . On them. It is open to the petitioners to urge before the learned arbitrator at the stage of arguments, the effect of non- production of the above documents. The order of the learned arbitrator that respondent No, l's witness's statement relating to the income-tax return, and the assessment orders would be ignored in view of their unwillingness to produce the same cannot he termed as an illegal or unjust order. Furthermore, the exclusion of the balance-sheet for the year 1974-75 seems to be in consonance with the terms of the insurance policy in view of the definition the term of 'the rate of gross profit earned' given in the Schedule to the insurance policy, quoted by me hereinabove.
4. (a) Reverting to the alleged remark of the learned arbitrator "Aisa Hee Hoga" it may be observed that, it was urged by Mr. Z. U. Ahmed that in support of the above allegation the petitioners in addition to the affidavit of the Chief Manager of the petitioners has filed the affidavits of the two senior Advocates, namely, Messrs Imtiaz Lari and .S. M. Kazmi, and whereas in rebuttal to the above affidavits, the respondent No. 1 have filed an affidavit of Mr. Akhtar Zahir Rizvi, a junior Advocate having about 2 years' practice, who also happened to be related to the directors of respondent No.
1. It was further urged by him that because of the failure on the part of the learned arbitrator to deny the above allegation, an adverse inference under section 114 (g) of the Evidence Act to be drawn against the learned arbitrator. In support of his latter contention he has referred to the case of Bishandas v. Gurbakhsh and another (1) and Surat Cotton Spinning & Weaving Mills Ltd. v.
23. Secretary of State (2). Without going into the question as to whether in fact the learned arbitrator made the above remark, it may be observed that even if it is to be assumed on the basis of the aforesaid two affidavits of the advocates that in fact the learned arbitrator passed the above remark, in my view, the alleged remark does not prove any bias or pre-determined mind on the part of the learned arbitrator. The above remark is to be considered in context what was complained of by the learned counsel for the petitioners. In this regard it may be pertinent to reproduce herein below para. 16 of the above petition, which narrates the circumstances under which the alleged remark was made by the learned arbitrator. Para. 16 of the petition reads as follows :- "That during the course of proceedings on 3rd May, 1979, the Advo cate for the petitioners complained that the respondent No. 1 b objecting to the production of account books, statements, etc. Whic from the point of view of the petitioners have a bearing on the matter in issue, wanted to procure some how or the other an Award in his favour and the acceptance of those objections would onl help respondent No. 1 in its objective. During the discussions whic followed the respondent No, 2 remarked "Aisa Hee Hoga" whic in the context meant that respondent No. 1 would get the Awar in spite of withholding his account books, documents etc."
(b) In my view the complaint of the learned counsel for the petitioner referred to hereinabove in quoted para. 16 was uncalled for inasmuch as it contained innuendo to the effect that the learned arbitrator wa: susceptible to pass an unfair award. If the alleged remark is to be judge( {{FOOT NOTE}}
(1) AIR 1934 Lah. 63 (2) AIR 1937 P C 152 {{FOOT NOTE}} in that context, it loses its significance. It may be pertinent to mention that I cannot overlook the fact that the learned arbitrator is a retired Judge of the erstwhile High Court of West Pakistan, Karachi Bench, whose honesty and integrity, were known to the litigant public as well as to the members of the Bar. Mr. Z. U. Ahmed did not dispute about the learned sole arbitrator's honesty and integrity. In my view a casual remark of the nature in question at the spur of the moment will not prevent the passing of a fair word by the learned arbitrator.
(c) I am also not impressed by the learned counsel for the petitioners' contention that as the learned arbitrator though a party to the above petition has not come forward to deny the above alleged remark, an adverse inference is to be drawn against him under section 114 (g) of the Evidence Act. In my view the cases relied upon by him, referred to hereinabove, have no application to the instant case. In 1934 Lahore, it was held that failure of a party to come forward to give evidence on merits within his knowledge ought to be weighty for the value of the case put forward on his behalf, whereas in the Privy Council case it was held that withholding of evidence of an important witness would justify the Court to draw adverse inference under section 114 (g) of the Evidence Act.
24. ' In the instant case the matter is still sub judice before the ,learned arbitrator and, therefore, in my view the ,learned arbitrator acted properly by not involving himself into any controversy with a party to the proceedings on the question of the passing of an alleged remark which, I have held does not prove either bias or predetermined mind on the part of the learned arbitrator. It is true that in certain cases an arbitrator may have to come forward to deny the allegations made against him but the instant case is not of that nature. Furthermore, it cannot be overlooked that there is a distinction between a case in which arbitration proceedings have not been concluded and a case in which an award has already been given. In the latter case an arbitrator is in a better position to deny any false allegation against him but during the pendency of arbitration proceedings, it is not desirable that an arbitrator should become a party to a controversy, which may have no.Effect on the result of the arbitration proceedings.
(5) Reverting to Mr. Z. U. Ahmed's contention that the accountant has submitted his report without giving an opportunity to the petitioners and that the learned arbitrator has not yet decided the petitioners' objection to the said report, it may be observed that the question, as to whether the aforesaid report is in accordance with the terms of the insurance policy di can be relied upon are still open questions and, therefore, any observation or discussion thereupon by me may prejudice the parties. It is needless to say that it is open to the petitioners to urge any point on the merit of the above report before the learned arbitrator.
(6) (a) With reference to Mr. Z. U. Ahmed's contention that the accumulative effect of the above two orders and of the said incident, is to create a reasonable apprehension in the mind of the petitioners that the learned arbitrator is biased. It may be observed that Mr. Ahmed has referred to the case of Mohammad Ismail Choudhry v. Abdul Khaleque Sowdagar (1), the case of Syed Ikhlaque Hussain v. Pakistan (2), the case of Mohammad {{FOOT NOTE}}
(1) PLD 1960 SC 301 (2) PLD 1969 SC 20j {{FOOT NOTE}} ' Nawaz v. Ghulam Kadir and 3 others (1), the case of Brooke Bond (Pak.) Ltd. v. Conciliator Appointed by the Government of Sind and 6 others (2), the case of Khwaja Ghulam Rasool Lone v.
25. Azad Jammu & Kashmir Government (3) and the case of Aboobakar Latif v. Reception Committee of the 48th Indian National Congress and another (4).
26. ' On the other hand Mr. Akhtar Mahmood has referred to the case of Khwaja Sayiad Badruddin Hassan v. Mst. Amir Begum and others (5), the case of Safia Bai and another v. Karachi Co- operative Housing Societies Union Ltd. (6) and the case of Messrs Hashim Haji Ahmed v. Trading Corporation of Pakistan (7).
(i) In 1960 SC it was held that clear bias in the Judge in favour of the plaintiff proved from the record vitiated the trial.
(ii) Whereas in 1960 SC, it was held that interest that is required in judicial or quasi-judicial proceeding is sufficient to incapacitate a person from adjudicating upon on the ground of bias or appearance of bias but mere suspicion though not unreasonable is insufficient to render a decision void.
(iii) Reverting to 1973 SC, it may be observed that it was a case of transfer of a criminal case under sections 526 and 145, Cr. P. C., wherein it was held that a party would not be forced to undergo a trial by a Judge or Magistrate whom he reasonably regards as being prejudiced against him and that what is a reasonable apprehension must be decided in each case with reference to the instances and the surrounding circumstances and that the Court must endeavour as far as possible to place itself in the position of an applicant seeking transfer, regarding the state of mind and the degree of intelligence possessed by him.
(iv) Reverting to 1977 SC, it may be observed that while interpreting section 30 of the Arbitration Act, it was observed that the term 'misconduct' in an arbitration case does not necessarily imply any thing in the nature of 'fraud or moral turpitude but it means failure on the part of the arbitrator to perform his essential duty resulting in substantial miscarriage of justice between the parties.
(v) Reverting, to the case of 1971 Azad J & K, it may be stated that the word 'misconduct' used in section 30 of the Arbitration Act was the subject-matter of interpretation, it was held that the word `misconduct' has not been defined in the Act and that the above term has wide connotation and will include inter alia the various acts/omissions mentioned in judgment of the aforesaid case.
(vi) Whereas in AIR 1937 Born., while construing the word `misconduct' it has been held that misconduct in the judicial proceedings means an erroneous breach of duty on the part of an arbitrator however honest which causes miscarriage of justice and that the misconduct is a {{FOOT NOTE}}
(1) PLD 1973 SC 327 (2) PLD 1977 SC 237
(3) PLD 1971 Azad J& K 127 (4) AIR 1937 Born. 410
(5) 13 I C 520 (6) PLD 1967 Kar. 598
(7) PLD 1977 Kar. 480 {{FOOT NOTE}} question of fact in each case and has to be ascertained from the facts of the entire proceeding before the arbitrator.
(vii) Reverting to 13 I C, it was held in the above case that the arbitrator is not bound to the adjective law laid down in the Code of Civil Procedure or the rules relating to evidence etc. The same view was taken in PLD 1967 and 1977 Karachi referred to hereinabove.
(b) It will suffice to observe that the question as to whether a petitioner has made out a case under section 11 for the removal of an arbitrator during the pendency of an arbitration proceeding will have to be deter mined on the basis of the facts of each case. The underlying principle is that if the Court comes to the conclusion that the acts/commissions complained of are of the nature which resulted into miscarriage of justice, it will constitute misconduct on the part of the arbitrator or misconducting of the proceedings rendering him liable to be removed. However, passing of an adverse order to a party, if within the jurisdiction of the arbitrator will neither constitute misconduct on his partner misconducting of the proceedings nor any bias can be inferred from an order. It may be pertinent to observe that a Court or a tribunal is competent to regulate and to control proceedings before it in accordance with law which will naturally involve the determination of the question as to whether inspection of a particular document or its production be permitted.
27. ' In the instant case as I have discussed hereinabove the orders complained of were within the jurisdiction of the learned arbitrator and were prima facie in consonance with the terms of the reference. Furthermore, in my view the petitioners' alleged apprehension on the basis of the passing of the aforesaid orders by the learned arbitrator or because of the aforesaid alleged remark, that the learned arbitrator is biased, is unwarranted and unjustified for the foregoing reasons. In view of the above discussion I do not find any merit, in the above petition and, therefore, the same is dismissed but there will be no order as to costs. The learned arbitrator shall give an award within for months from the date of the recommencing of the arbitration proceedings.