1. These are the objections to the award dated 9-9-1978 given by an umpire. The facts leading to the filing of the above objections are that the defendants purchased 300 bales of cotton from the plaintiffs. According to the plaintiffs the defendants had paid certain amount, leaving a balance of Rs. 65,612.78 i.e. Rs. 33,058/76 being the balance of the price and Rs. 32,554.02 being the amount of interest on the price. It ,has been averred that as the defendants had failed and neglected to pay the above amount, the plaintiffs appointed their arbitrator, Mr. Nasirul Hassan and called upon the defendants to nominate their arbitrator in terms of bye-law 39 of the Karachi Cotton Association and that as the defendants had failed to appoint their arbitrator, the plaintiffs appointed Mr. Shah Shamimul Haq as an arbitrator on behalf of the defendants. There is no indication as to how the matter was referred to the umpire. However, in the body of the award it has been stated by the umpire that as the two arbitrators failed to come to a decision, they referred the matter to the umpire named above.
2. 2(a). Mr. Kamal Mansoor Alam, learned counsel for the defendants has urged the following points in support of the above objections.
(i) That there was no arbitration agreement between the parties and, therefore, reference to the arbitration and the impugned award in consequence thereof, was illegal, void and of no legal effect.
(ii) That as there is no indication from the record as to whether factual--ly the two arbitrators had entered upon the reference and that there was any disagreement between them, the umpire could not have entered upon the reference.
(iii) That the umpire has not recorded any evidence and has not followed the basic ingredients/principles of a quasi-judicial proceeding.
(iv) That the award is collusive, and
(v) That the umpire has misconducted himself inasmuch as he awarded 14 % interest from the date of the award of Rs. 32,554.02 on the amount of interest.
(b) Whereas it has been urged by Mr. Samiuddin the following points
(i) That the objections have been filed beyond the limitation period, and, therefore, the same are liable to be dismissed.
(ii) That the objections have not been filed under section 33 of the Arbitration Act and, therefore, they are not competent.
3. On merits his submissions were :-
(iii) That the plaintiffs and the defendants were admittedly the members of the Karachi Cotton Association, and, therefore, by virtue of their membership, they are amenable to the bye-laws of the Association including relating to the arbitration.
(iv) That in any case the sold note in respect of the transaction in question expressly provided that the transaction was subject to the bye-laws of Karachi Cotton Association and, therefore, the reference was valid.
(v) That even otherwise, the broker had an implied power to make the contract in question subject to the bye-laws of the Karachi Cotton Association including subject to arbitration in terms of the above bye---laws.
(vi) That since the defendants have not raised any plea in their objec--tions that the entering upon the reference by the umpire was irregular, they cannot be permitted to raise the above plea.
(vii) That the defendants having failed to send any reply to the notices sent by the plaintiffs, by the umpire, and by the Karachi Cotton Association, are estopped from challenging the sold note or the arbitration proceeding in pursuance thereof.
4. 3(a). Before dealing with the contentions of the learned counsel for the parties on merits, it will be necessary to examine, as to whether the present objections were filed within time. It may be observed that the above case had come up for hearing before me inter alia on 17-12-1979 for considering as to whether the objections were filed within the limitation period, for reason that whereas in the notice of the filing of the award served on the defendants, the recipient of the notice had mentioned 16-6-1979, as the date of the receipt, whereas-the bailiff on the back of the very notice had mentioned in his report that he had served the copy of the notice on 16-7-1979. In order to resolve the above controversy prior on 17-12-1979. I had recorded the statements of Subhani bailiff Exh. 3, the statements of Ahmedgul, Wasim Hamza and Mr. Anwar Choudhry Exhs. 4, 5 and 6 respectively. However, on 17-12-1979 when T was dictating the order some how it was believed by the learned counsel for the parties as well as by the Court that 5-8-1979 i.e. The date on which the above objections were presented was the first day of the re-opening of the Court after the long summer vacation and, therefore, the entire period of vacation was to be excluded. However, today Mr. Samiuddin submitted that his above impression was wrong as subsequently he verified from the Court record that the Court was re-opened on 4-8-1979 and not on 5-8-1979 as it was thought.
5. I accordingly sent for the relevant notification. It may be observed that from the Notification No. 8308 Gaz/XVII-13 dated 7-4-1979, it is evident that the Court was re-opened on 4-8-79 and not on 5-8-1979. In this view of the matter, it will be necessary to go into the question of limitation.
(b) Subhani, bailiff Exh. 3, has deposed that though in his report he had mentioned the date of the delivery of the notice as 16-7-1979, but factually he had delivered on 16-6-1979 i.e. on the date mentioned by the recipient of the notice Exh. 5/l. However, in the cross-examination by the learned counsel for the defendants, he has admitted the fact that he was on leave for 3 weeks from 10-6- 1979 onwards, but at the same time he has stated that he was attending the outstanding work during his above leave period. The defendants have examined Ahmed Gul Exh. 4, Wasim Hamza Exh.
5. Ahmed Gul has deposed that he is a Chowkidar in the defendants' mill and that he received the Court notice in the end of July 1979 which he found lying on the ground in front of the time office of the mill at the gate and that he gave the same to the .Seth after 2/3 days when he visited the mill. He has also identified the notice in question i.e. Exh. 5/1, by saying that this is the notice which he had received. In the cross-examina--petition, the above witness has stated that he could recollect the 7th Month for the reason that the month of Ramazan had commenced in that month.
6. Whereas Wasim Hamza has deposed that Ahmed Gul Chowkidar had given the notice in question Exh. 5/1 in the month of July 1979 and that after 2/3 days he gave the same to his Advocate. He has further deposed that he cannot identify the signature on Exh. 5/2 as there was no person having the said signature in his employment. Mr. Anwar Choudhry Exh. 6 is the Court clerk of the learned Advocate for the ,plaintiffs, who has deposed that on 17-6-1979 he enquired from the bailiff, as to whether notice was served on the defendants and that thereupon, he was informed by him that it was served on 16-6-1979. In the cross-examination to Mr. Kamal Mansoor Alam, he has deposed that on 17-6-1979 the High Court was closed but the holidays were intended for the Judges and not for the staff and that he found the bailiff in the office. He has further deposed that it was not correct to suggest that the bailiff was on leave on 17-6-1979 and that factually he met him between 11/12 noon. In reply to the Court questions, he has stated that he was attached to Mr. Samiuddin for the last few years and that he had done some course in the Labour Training Centre. He has further stated that he does not maintain any diary for the miscellaneous work and, therefore, he did not enter in his diary about -collecting of certified copies from the District Court and that he had made an entry in respect of the inquiry in question from the bailiff: He. Has produced Exh. 6/1 being the alleged page of the diary containing the entry to the effect that he was to make inquiry from the bailiff in respect of the service of the notice in the suit in question.
(c) The basic question which requires consideration is, as to whether the notice Exh. 5/1 was delivered to the defendants on 16-6-1979 or it was delivered on 16-7-1979. It may again be observed that in Exh. 5/2 which is the Court copy containing the receipt of the recipient, 16-6-1979 has been mentioned as the date- of the receipt of the above notice by the recipient. Whereas in the bailiff's report (which was prepared by him on 4-8-1979) on the back side of this notice, he had mentioned 16-7-1979 as the date of the delivery of the above notice. Subhani bailiff in his state-- ment, as pointed out by me earlier, has stated that factually he had delivered the notice on 16-6- 1979 and not on 16-7-1979 and that it was a mistake. It has been urged by Mr. Kamal Mansoor Alam that admittedly the bailiff was on leave for 3 weeks with effect from 10th June 1979 and, therefore, it was not possible for the bailiff to deliver the notice in question on 16-6-1979. He has also relied upon the testimony of Mr. Anwar Choudhry and of Mr. Wasim Hamza in support of his contention that the notice was delivered sometime in the month of July 1979. It is true that Ahmed Gul Chowkidar has stated that he had received the notice in the end of July 1979, whereas Mr. Wasim Hamza has deposed that he had received the notice from the Chowkidar in the month of July 1979, but no document has been produced to substantiate the above statements. It may be observed that Wasim Hamza, has stated that Exh. 5/2 does not contain the signature of any of his employees. But at the same time he has admitted the receipt of the notice Exh. 5/1. In my view it is not unusal for a bailiff to effect service of the notice/summon even when be is on leave in order to clear the pending work. In the presence of 16-6-1979 on Exh. 5/2, I cannot accept the contrary oral testimony of Ahmed Gul and Wasim Hamza. It may be pertinent to mention that I was also not impressed by the statement of Mr. Anwar Choudhry, as it does not inspire any confidence. But the fact remains that Exh. 5/2 contains the signature of the recipient and also the date of the receipt as 16-6-1979. In my view the defendants having admitted the receipt of the notice Exh. 5/1, the burden of proof was on them to prove that the Court copy of the above notice Exh. 5/2 does not contain correct date of the receipt in spite of the fact that the recipient had put (below his signature) 16-6- 1979. In this view of the matter I am of the view that the objections were barred by limitation being filed beyond limitation period after the service of the notice of the filing of the award.
7. 4(a). Reverting to the learned counsel for the defendant's contention that there was no arbitration agreement, it may be observed it is true that there is no written formal arbitration agreement between the parties of the above suit. However, the learned counsel for the plaintiffs has urged two points in this regard, namely, that because of the fact that the plaintiffs and the defendants were the members of the Karachi Cotton Association at the material time, they were amenable to the bye-laws of the aforesaid Association including bye-laws relating to arbitration and, secondly that in any case the sold note contains an express provision that the transac--petition was subject to the bye-laws of the Karachi Cotton Association and, therefore, there was an arbitration agreement between the parties.
(b) In support of his above first contention Mr. Samiuddin has referred to the case of Gordhandas Pursottan Sonawala v. Natvarlal Chandulal & Co. (1), the case of Messrs Pratapral Manmohandas v. Messrs Sheo Narayan Balal & Co. (2), the case of Messrs Hafiz Abdul Aziz Cotton Ginning Factory v. Messrs Haji A.I Muhammad Abdullah & Co. And another . (3). In the first case it was held by Shah, J. That applications in writing submitted by persons, who become members at different times of an associa--petition, under which they agree to be bound by the articles of association and bye-laws and in which there is a provision of compulsory submission of the present and future disputes between members inter se constitute an arbitration agreement within section 2(a) of the Arbitration Act. Whereas in the aforesaid second Bombay case the parties were members of Bombay Bullion Association. Bye-laws 38 of the aforesaid association provided compulsory arbitration in respect of the matters/disputes mentioned therein, it has been held that the above bye-law constitutes an arbitration agreement within the ambit of section 2(a) of the Arbitration Act. Reverting to above Karachi case of 1966, it may be observed that Qadeeruddfn, J. (as his Lordship then was) was pleased to hold that the words "written agreement" in section 2(a) of the Arbitration Act, 1940 mean any writing, whether it be correspondence directly embodying the agreement to refer differences to arbitration or an application for membership of an organisation necessarily implying such an agreement'.
(1) AIR 1952 Born. 349 (2) AIR 1956 Bom. 97
(3) PLD 1966 Kar. 197 It is by now a well-settled law that in order to constitute an arbitration agreement within the meaning of section 2(a) of the Act, it is not in--cumbent that there should be a formal written agreement duly signed by the parties. An arbitration agreement within the ambit of the above section can be inferred inter alia from the correspondence between the parties, from the standard terms of contract adopted by a Government department or Corporation on the basis of which a tendered submits his tender and from. (he bye-laws or articles of association of an association or institution which provides compulsory arbitration, of which the parties tothe dispute are members.
(c) It will be, therefore, necessary to ascertain as to whether bye-laws of the Karachi Cotton Association provide any compulsory arbitration by virtue of the fact !Hat the parties to a dispute.
8. Happened to be the members of the said Association. Mr. Sami, learned counsel for the plaintiff has referred to Bye-law 13(a) of the said Association in support of his above contention. It will be advantageous to reproduce hereinbelow the above bye-law, which reads as follows :- "(13) Where there has been a compromise between members of any such obligation as aforesaid, each of them shall, in. The course of next two working days, report the compromise to the Board. If a member omits to do so, he shall be liable to be dealt with under the provisions of Bye-Laws 16 to 28 inclusive. Anything short of a cash settlement shall be held to be a compromise for purposes of this Bye-Law.
(a) Every contract which shall be made subject to the Bye-Laws of the Association, whether. It be entered into by two members or by a member and a non-member or by two non-members, shall be deemed to provide as one of the terms thereof that any difference of any nature whatsoever arising out of such contract shall be referred to arbitration in accordance with the Bye-Laws of the Association and that holding of such an arbitration and the obtaining of an award thereunder shall be a condition precedent to the right of any party to such contract to commence legal proceedings against the other party in respect of any such difference as aforesaid, and that neither party under such contract shall ' have any right of action against the other touching upon or arising out of such contract, except, to enforce the award in such arbitrations.
(b) Non-members requesting for arbitration in case of Factory Selection Contracts under Bye-Law No. 39-II shall have to pay to the Karachi Cotton Association Ltd., a fee of Rs. 100 for every 100 bales or part thereof subject to a minimum of Rs. 200. No such request for arbitration will be entertained by the Association unless the prescribed fee is sent along with the letter or request for arbitration.
9. This fee will be in addition to the fees payable to the arbitrators and/or the umpire for work done by them."
10. A plain reading of the above bye-law indicates that even between the two members of the Association the arbitration under the Karachi Cotton Association bye-laws can be pressed into service only if the contract is made subject to the bye-laws of the Association. There is no compulsory arbitration between the two members of the Association simpliciter because of their memberships. The above bye-law even contemplates arbitration between non-members.
11. 5(a). The foregoing conclusion necessitates the examination of Mr. Samiuddin's contention that the sold note in question constitutes an arbitration agreement as it expressly provided that the transaction mentioned therein was subject to bye-laws of the Association. In support of his above contention, he has referred to the case of Ram Narain Gunga Bissen v. Liladhur Lowjee 1 L R 33 Cal.
12. 1237(relevant passage at page 1240), wherein it has been held that a bought and sold note signed by the broker constitutes a valid arbitration agreement. In the instant case the sold note which is on the record was signed by Messrs Malik & Co. Cotton Brokers. It is addressed to the plaintiffs and not to the defendants, though the name of the defendants has been shown as the purchaser. It is the case of the defendants that this sold note was never received by the defendants. Be that as it may, the question which requires consideration is, as to whether the above-sold note constitutes an arbitration agreement in terms of section 2(a) of the Act. A sold note signed by a broker on behalf of a vendor and a purchaser containing that the transaction is subject to bye-laws of the Association, in my view may constitutes an arbitration agreement within the ambit of the above section, provided it is proved that B the broker concerned acted as an agent for the vendor as well as for the purchaser. The sold note in question does not indicate that it was signed by the broker on behalf of the purchaser as well.
(b) It is an admitted position that the umpire has not examined the broker in question nor there is any other document on the record of the arbitration proceedings to indicate that the broker was authorised to sign on behalf of the vendor as well as by the purchaser. It has been urged by Mr. Samiuddin that as the defendants did not send any reply in response to the plaintiff's notices, of the umpire's notices and of the Karachi Cotton Association's letters, it should be presumed that the defend--ants had accepted the correctness of the sold note. His further submission was that the defendants are estopped from taking any such- plea. In my view merely the fact that the defendants did not send any reply to the aforesaid notices/letters would not prove the fact that the broker in question was authorised to sign on behalf of the purchaser as well. In my view the question as to whether the broker in question was authorised to sign on behalf of the defendants was a question of fact, which could have been proved by some evidence, which is wanting in the instant ease.
13. It may .Be observed that the plaintiffs have filed an additional affidavit dated 2-3-1980 without the permission of this Court. Along with it they have enclosed an alleged certificate issued by Messrs Malik & Co. Brokers dated 1-3-1980 stating therein, that they had signed the aforesaid sold note on behalf of the vendor as well as on behalf of the purchaser. In my view the above certificate cannot be taken into consideration for the simple reason that it was not part of the proceeding before the umpire. Even otherwise, mere filing of the above certificate does not prove the contents thereof without examining the author of the certificate.
14. The effect of the lack of proof that the above sold note was signed by broker on behalf of the vendor and the purchaser has been discussed hereinbelow in para 9.
6. Reverting to Mr. Kamal Mansoor Alam's contention that as the umpire had entered upon the reference before the two arbitrators had entered upon the reference and before there was zany disagreement, the award is bad in law, it may be observed that Mr. Saujiuddin, learned counsel for the plaintiff has rightly urged that in the absence of any such plea in the defendant's objections to the award, the defendant, cannot be permitted to urge the above point.
7. It was also urged by Mr. Kamal MansoorJAlam that the award is collusive for the reason ; '-
(i) that the plaintiff had filed photostat copies of the alleged notices sent by the umpire, which could not have been with the plaintiffs ;
(ii) that on the first date of hearing, namely on 30-7-1978 when both the parties did attend the arbitration proceedings the Umpire had adjourned the case to 8-8-1978,jbut whereas on 8-8-1978, when the defendants were not present the umpire proceeded with the matter.
15. Apart from the fact that the above all aged grounds have not been raised by the defendants in their objections, in my view Merely the fact that the plaintiffs have filed photostat copies f the above notices are that the umpire did not adjourn the proceeding on 8-8-1978 in the absence of the defendants would not prove the factum that the award is collusive.
8. It was urged by Mr. Kanrral Mansoor Alam that the claim of the plaintiffs comprised of two items, namely, Rs. 33,0581'76 being the amount of the alleged balance of the price of the Cotton and. Rs. ,32,554.02 being the amount of interest thereon and that t,1ne umpire misconducted himself or the proceeding by granting interest at the; rate of 14 % from the date of the award even on the amount of interest.Whereas Mr. Samiuddin has , referred to the case of Messrs Pervez Industrial Corporation v. Messrs New Lahore Transport Corporation and 3 others PLD 1377 Kar. 37to show that by virtue of by --law No. 162 the empire was competent to grant interests from the date of the award. It will suffice to observe that in the above Karachi case the point in issue was not, as to, whether the arbitrators were competent to grant interest upon interest but the point in issue; was as to whether the Arbitrators could grant interest on the amount found due. It was held that in view of bye-law 162 of the Karachi Cotton Association a arbitrators could award interest from the date of the award on the due amount. A perusal of the aforesaid bye-law 162 indicates that the interest can be awarded on the amount of the price at 9% and not at 14% and not on the amount of alleged interest. It has been consistently held by the Courts that an arbitrator or an umpire is not competent to award interest on the amount of damages. In this regard reference can be made to the case of Messrs Pakistan Builders Co., Karachi v. Pakistan (1) the case of Messrs lbad & Co. v.
16. Province of Sind through Secretary to the Government Communication and Works Department (2), and the case of Messrs A. Z. Company v. Messrs S. Mauls Bakhsh Muhammad Bashir (3).
17. The plaintiffs' claim for the above alleged amount of interest, namely, Rs. 32,554'02, was a claim in the nature of damages, and, therefore, the ratio decidendi of the above-referred cases, can be pressed intoservice and thus the award is bad to the extent of granting of interest upon interest.
18. 9(a). After having held th4t the objections were barred by time, the same are liable to be dismissed. However, in my view section 17 of the Arbitration Act empowers Court either to remit an award or to set aside even in a case where no objections to the award have been filed. It will be advantageous' to reproduce section 17 of the Act, which reads as follows;- "17. Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award."
19. A plain reading of the above-quoted section indicates that a Court is not obliged to make an award a rule of the Court even in a case in which an application for setting aside the award has not been filed within the timeprescribed under' the Limitation Act.' The Court may on sufficient cause either remit the award or set aside the lame. The question, therefore, which arises for consideration is as to whether there is any sufficient cause not to make the instant award 'a rule of the Court. The umpire has filed the present award alongwith ' a partition under282 of the Sind Chief Court Rules (O. S.) read with section 1';d the Arbitration Act in the Form No. 12-B in Appendix A to the aforesaid rules. It may be advantageous to quote aforesaid rule 282 and Form ' 12-B, which read as follows :-- "282,-(1) The arbitrators or umpire shall cause the award of a signed copy of it to be filed in Court by forwarding the same under a sealed cover addressed to the Registrar ; (O. S.) with a petition in Form No. 12-B: in Appendix A requesting the same to, be filed. The . . . Arbitrators or umpire shall also send together with the award or copy the arbitration agreement and the reference, if in their possession, the depositions and documents which may have been taken and proved, the opinion pronounced by .The Court on a special case, submitted bythem, if any and also a copy of the notice given to the parties to--gether with receipts or acknowledgments thereof.
(1) PLD 1961 Kar: 365.(2) PLD' 1980 Kar. 207
(3) PLD 1965 SC 505
(2) If the Court makes an order under section 38 of the Act directing the award to be delivered, it shall further direct that the arbitrator or umpire shall also deliver the documents mentioned in sub- rule (i), if in their possession to the applicant who shall cause the award to be filed in Court by forwarding the same together with the aforesaid documents under a sealed cover to the Registrar (O. S.) with a petition in Form No. 12-B in Appendix A.
(3) When an award made Without intervention of a Court has been so filed, the accompanying petition shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested under the reference as plaintiff or plaintiffs and the remainder as defendant or defendants."
20. FORM 12-B Petition accompanying Award, (Rule 282)
21. (Clause title as in Form No. 12).
22. Pursuant to the provisions of section 14(2) of the Arbitration Act, 1940, and rule 2820) of the Sind Chief Court Rules, and at the request of A. B. We the said XY, who ware appointed arbitrators empire beg to forward herewith the accompanying award together with the documents mentioned below and request that the award be filed in Court.
2. A. B. (or C. D., as the case may be) has made payment to us as under Arbitration fees Rs. ------------------..
23. Arbitration charges Rs------------------..
24. Cost and charges of filing award Rs . . . . . .
3. The Nazir's receipt regarding deposit of Rs. 5 in Court in pursu--ance of the provisions of rule 283
(2) of the said rules is herewith sub- submitted.
25. Dated the 19 , (Sd.) Petitioners Documents accompanying the petition :--
(1) The arbitration agreement dated ..............................
(2) The reference dated ................................................
(3) The depositions of ................................................
(4) The documents proved ..........................................
(5) The opinion pronounced by the Court on a special case submitted, if any.
(6) Copy of notice given to the parties under section 14(l) of the said Act together with receipts or acknowledgments thereof."
(b) A perusal of the above rule and the form indicates that along with the petition for filing of an award, the arbitrator or the umpire is expect to file inter alia the arbitration agreement. In my view if no arbitration agreement has been filed with such petition and the Court comes to the conclusion that no arbitration agreement was filed and/or proved before the arbitrator or umpire, and that the question as to whether there was any arbitration agreement is doubtful, the Court may decline to make the award a rule of the Court. i.e. document marked E-2. It seems that it is a case of no evidence.
26. 2(a) of the Arbitration Act.
27. The objections stand disposed of in the above terms with no order as to costs.
28. M. Y. .H.