1. ' This order will dispose of J. M. 32/79 and J. M. 37/79. J. M. 32/79 has been filed by Shaikh Sultan Trust against Messrs Cotton Trading Corporation under section 8 of the Arbitration Act while J. M. 37 of 1979, has been filed by Messrs Cotton Trading Corporation of Pakistan against Shaikh Sultan Trust. For the sake of convenience, hereafter, I will describe the applicant in J. M. 32/79 who is respondent in J. M. 37/79 as the Trust, and the applicant in J. M. 37/79 who is respondent in J. M.
2. 32/79 as C. T. C. In this order.
3. ' J. M. 32/79, has been filed by the Trust for appointment of arbitrator in terms of arbitration clause contained in the document described as agreement of lease dated 1-8-76, executed between the Trust and C T. C.
4. ' The execution of this document is not in dispute. The relevant clause in the agreement is clause
(viii) under the heading 'Joint Covenants'. It will be advantageous to reproduce here the disputed clause in order to understand the controversy between the parties:- "(viii) Wherever any difference arises between the Lessors and the Lessee touching the true interest or construction or the incidents or consequence of these presents or touching anything then or thereafter done, any claim or account or any breach or alleged breach of any terms and conditions and covenants such matters shall be referred to the sole arbitration as mutually agreed under the Arbitration Act, 1940, whose decision shall be final and binding on the parties. The cost of such reference and award shall be in the discretion of the arbitrator who may determine the amount thereof and direct the same by whom and to whom and in what manner the same shall be borne and paid."
5. ' In J. M. 37/79 filed by C.T.C. Under section 33 of the Arbitration Act the clause produced above is challenged as not binding and consequently a declaration is sought that there is no valid arbitration agreement between the parties and as such no steps can be taken by the Trust under the aforesaid arbitration clause.
6. ' I may here briefly state some of the facts relevant for determination of the points arising in these two applications. The Trust had leased out office space in their multi-storeyed building known as Shaikh Sultan Trust Building under an agreement. Photostat whereof have been produced by both the parties. C.T.C. Has filed a photostat of the copy of the documents as Annexure 'A' along with its application in J. M. 37/79. The trust has also produced photostat of the original in J. M. No, 32/79 which is also marked as Annexure 'A'. This document is executed on a stamp paper of Rs,
5. It is an admitted position between the parties that the premises which were let out by the Trust to C. T. C.
7. Has since been vacated and the dispute now pertains only with regard to the alleged arrears of rent and accumulated charges for electricity. By a notice dated 16-9-1978, the Trust called upon C.T.C. To pay a sum of Rs, 6,12,162.52 towards the alleged arrears of rent and electricity charges.
8. Photostat of this notice is produced as Annexure 13' in J. M. 37/79. In reply on 7-10-1978, the C. T. C.
9. Denied the claim of Trust and demanded a sum of Rs, 1,19,070 on account of fitting and fixtures provided in the demised premises. The reply is produced as Annexure 'C' in J. M. 37-79 by the C. T.
10. C. After this, on 22-5-1979, by a letter the trust called upon the C. T. C. To agree to the appointment of Mr. Justice (Retd.) Noorul Arfin as the sole arbitrator to determine the dispute arising between the parties. This request made by the Trust to the C. T. C. To concur to the appointment of the sole arbitrator in the dispute was turned down by C. T. C. By letter dated 28th of May 1979. The appointment of arbitrator was objected on the ground that the document containing the clause of arbitration is a lease which required compulsory registration and since the document is not registered in accordance with the law, no resort can be had to the arbitration proceedings. In J. M.
11. No, 37/79 filed by C. T. C. The objection to the arbitration agreement is stated in paragraph 16 of the application as follows :- ''16. That the respondents' action in invoking the arbitration clause and appointing the arbitrator is illegal, baseless and unwarranted and of no effect on various grounds, inter alia, as under :-
(a) That no amount by way of rent or otherwise is due and payable- by the petitioners to the respondents; (b)that the said indenture of lease where under the said premises were demised is inadmissible and unenforceable against the petitioners ;
(c) that under the provisions of section 107 of the Transfer of Property Act, 1882, a lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument, the alleged indenture of lease is of no effect and cannot be enforced against the petitioners for any purposes whatsoever including that for arbitration; (d)that the alleged indenture of lease, though in law required to be registered, was not so registered in accordance with the law. Therefor:, under the provisions of section 49 of the Registration Act, 1908, the alleged indenture of lease did not operate to create, declare, assign, li - nit or extinguish whether in present or in future, any right, title or interest, whether vested or contingent, or confer any power to adopt. Thus the respondents are not entitled to claim either any sum of money or invoke any arbitration proceedings under the alleged unregistered indenture of lease or otherwise;
(e) that invoking the said illegal and invalid arbitration clause and appointing the arbitrator thereunder by the respondents has no basis in law or on facts;
(f) that without prejudice, the dispute, if any, which in any event is denied, could be referred for arbitration during the currency of the said lease, which was frustrated earlier and, in any event, expired on dates when the said premises were vacated by the petitioners. After vacation of the said premises, no dispute/claim can be referred by the respondents for the arbitration."
12. ' I have heard Mr. Habibur Rehman Advocate for the Trust and Mr. Tahir Hussain Advocate for C. T. C.
13. The learned counsel for C. T. C. Has objected to the appointment of arbitrator and reference of dispute in accordance with the arbitration clause on the grounds that the document, namely the agreement of lease dated (Exh. IA') is hit by section 107 of the Transfer of Property Act being a lease of immovable property from year to year which required compulsory registration. It is also contended that the document being one which required compulsory registration under the provisions of Registration Act is inadmissible in evidence under section 49 of the Registration Act. In addition to the above objections Mr. Tahir Hussain, learned counsel for C. T. C. Raised a further plea that arbitration agreement between the parties is also inadmissible for want of proper stamp.
14. Section 107 of the Transfer of Property Act is in the following terms :- "107. Leases how made.-A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument.
15. ' All other leases of immovable property may be made either by a registered instrument, or by oral agreement accompanied by delivery of possession.
16. ' Where a lease of immovable property is made by a registered instrument, such instrument, or, where there are more instruments than one each such instrument shall be executed by both the lessor and the lessee : ' Provided that the Provincial Government may, from time to time, by notification in the official Gazette, direct that leases of unmovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession."
17. ' Similarly section 49 of the Registration Act is to the following effect "49. Effect of non-registration of documents required to be registered :- No document required to be registered under this Act or under any earlier law providing for or relating to registration of document shall- (a)operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, to or in immovable property, or (b)confer any power to adopt, unless it has been registered."
18. ' On the basis of these provisions of law it is contended by the learned counsel for C. T. C. That the document namely the agreement of lease being void under the provisions of section 107 of Transfer of Property Act and also being inadmissible under section 49 of the Registration Act, the Court is neither entitled to take it into consideration nor can the Court look into this document for any purpose whatsoever, including the purpose of finding out if there was or not an agreement between the parties to refer the dispute arising between them to an arbitrator. The argument of the learned counsel is very much far-fetched and has not impressed me. In' my view the cumulative effect of the two sections reproduced above is that a lease of immovable property for a period of one year or in excess of one year can only be effected by a registered document and if such document is not registered then it cannot operate to create, declare, assign limit, or extinguish, whether in present or in future any right, title or interest whether vested or contingent to or in immovable property.
19. ' The question before me is whether by invoking the arbitration clause retained in the agreement, the party is seeking to enforce any right, title or interest in immovable property or that it is being referred only for a collateral purpose only. If it does not amount to enforcement of any right, title and 'interest in the immovable property, the purpose, in my view is collateral and the bar contained in section 49 of the Registration Act will not come into operation. It cannot be disputed that under section 49 of the Registration Act, as it stands today, the Court can admit an unregistered document in evidence for collateral purposes, even if the document required compulsory registration under the provisions of the Registration Act. The only effect will be that in spite of admission of the document into evidence it will not operate to. "create declare, assign, limit or extinguish, any right, title or interest in any immovable property. If any authority it needed for this proposition, reference may be made to the case of Rehman Cotton Factory v. Nichimen & Co. Ltd.
(1) and Moose. M. Yaqoob and others (2).
20. I am accordingly of the view that even if the argument of the learned counsel for C. T. C. Is accepted that the document was a lease and not an agreement of lease. Which required compulsory registration land, therefore, could not operate to declare, create or extinguish any right, title or interest in the immovable property ; even then, it can be admitted in evidence for the purposes of finding out if the parties had agreed to refer the dispute to arbitration, as in my view such a course will amount to considering the {{FOOT NOTE}}
(1) PLD 1976 SC 781 (2) PLD 1976 Kar. 376 {{FOOT NOTE}} ' document only for a collateral purpose which is permissible under the law. This course can also be justified on the ground that arbitration agreement is severable and an independent agreement which can be separated from the main agreement, if any objection exists to the admissibility of the document in which the arbitration clause is contained.
21. Coming to the next objection of the learned counsel that the arbitration agreement being unstrapped is inadmissible in evidence and, therefore, cannot be looked into, I may only say that the learned counsel conceded during the course of argument, that an arbitration agreement like any other agreement is required to be made on Rs, 5 stamp paper. The photostat of the document produced in J. M. 32/79 containing the arbitration clause is on a stamp paper of the value of Rs, 5.
22. This is not disputed by the learned counsel for C. T. C. I accordingly hold that the document is not inadmissible in evidence on account of being insufficiently stamped.
23. ' Coming now to the merits of dispute I find that in the light of the correspondence exchanged between the parties there is no doubt in my mind that substantial dispute has arisen between the Trust and C. T. C. Which falls within the scope of arbitration clause reproduced in the earlier part of the judgment. I would, therefore, hold that a dispute in terms of clause 8 of the agreement has arisen between the parties which can be referred to the arbitration. The arbitration clause provides that in the event of such a dispute, the matter is to be referred to a sole arbitrator mutually agreed between the parties. It is not denied that the Trust had called upon C. T. C. By notice dated 22-5- 1979, to concur to the appointment of Mr. Justice (Retd.) Noorul Arfin as the sole arbitrator in the case, but this was not acceded to by the defendant.
24. ' The result is that the J. M. 32/79 under section 8 of the Arbitration Act filed by the Trust is allowed and J. M. 37/79 filed by C. T. C. Under section 33 of the Arbitration Act is rejected. The costs of these proceedings will, however, abide by the result of the arbitration proceedings. In terms of subsection
(2) of section 8 of the Arbitration Act, the arbitrator is to be appointed by the Court, however, as the arbitration clause provides for appointment of an agreed sole arbitrator in the dispute, I allow a further opportunity to the parties to submit the name of an agreed arbitrator in the matter within one week from today. If the parties fail::d to submit the name of an agreed sole arbitrator, within this time, the case may be fixed immediately in Court after expiry of the above period for appointment of the sole arbitrator by the Court.