' MUHAMMAD ATHER SAEED, J.---This Civil Appeal has been filed against the judgment of the learned Peshawar High Court, Peshawar dated 9-1-2014 whereby the R.F.A. No,120-P of 2012 filed by the present respondent against the judgment and decree of the trial Court dated 23-1-2012 passed by Civil Judge XXIX, Peshawar whereby the award furnished by the arbitrators was made the rule of the Court, was allowed and the judgment and decree of the trial Court were set aside..
2. Brief facts of the case are that the appellant and the respondent had entered into an agreement for the construction of road from Mian Khan Sangao of District Mardan to Kingar Gali of District Bunner on the basis of the funds provided by ADB Loan No,2103 PAK. This contract was entered into after the respondent had invited tenders for the construction of the above road. The appellant participated in the tender and after having been adjudged as lowest bidder was awarded the contract which was agreed upon to be completed within 18 months commencing from .1-1-2009 and ending on 30-6-2011. However, as per the appellant the project area came under the militant's terrorist activities and the manpower of the appellant was kidnapped and the machinery was impounded by the militants and therefore the appellant was forced to stop the work from April 2009 almost for a period of 78 days. The appellant filed claim of costs during the idle period including the ransom amount paid for getting kidnapped manpower released. The respondent did not agree to the appellant's claim and consequently the Dispute Adjudication Board [DAB) was constituted comprising of the following members:-
(1) Mr. Muhammad Yaqoob Khan, Member Technical, Chief Minster's Inspection Team, Government of Khyber Pakhtunkhwa, Peshawar (As Chairman DAB)
(2) Mr. Muhammad Musaib Qureshi, Additional Registrar, Engineering Council, Islamabad. (As Member DAB)
(3) Mr. Javed Ahmad Turk, Superintending Engineer, C&W Circle, Abbottabad. (As Member DAB)
' However, according to the present appellant, two members of the DAB acted as Arbitrators and announced the award on 28-7-2011. The Arbitrator Muhammad Musaib Qureshi iled the award in the Court under section 14(2) of the Arbitration Act 1940 on 24-9-2011. The respondent filed objections against the award but the trial Court vide judgment dated 23-1-2012 made the award the rule of the Court and passed the decree in line with the issue wise decision of the Arbitrator in favor of the present appellant and against the present respondent. The present respondent being aggrieved by the judgment of the trial Court filed RFA before the learned Peshawar High Court which was decided by the impugned judgment whereby the judgment of the trial Court was set aside. Hence this civil appeal.
3. We have heard Mr. Arshad Ali Syed, learned Advocate Supreme Court for the appellant and Mr. Zahid Yousaf Qureshi, learned Additional Advocate General KPK.
4. The learned Advocate Supreme Court for the appellant argued that the award had been made and finalized by the Arbitrators after a detailed hearing of the claims of the appellant in which the present respondent participated and was based on correct appreciation of facts and the Arbitration Committee had proper authority and jurisdiction to hear and finalize the award in the above case. He submitted that the trial Court while making the award the rule of the -Court had passed a well reasoned judgment and had rejected the objections filed by the respondent for the reason that they were filed late but had still decided the case on the basis of the merits of the case.
In an answer to a query of the Court as to how the two alleged arbitrators had become an arbitration council in absence of third member Mr. Muhammad Yaqoob Khan who had also been appointed as Chairman of the DAB. He drew our attention to letter No,10917-20/RDSP dated 24-3- 2011 whereby the Project Director Foreign Aided Project had informed all the members who had been appointed as Members of the DAB that although the competent authority had not agreed with the constitution of the DAB but had agreed to proceed with the claim of the contractor as per Arbitration Act through agreed approved members and had requested them to proceed with the claim of the appellant as per Arbitration Act 1940 as amended up to-date. He submitted that on the basis of this letter the members of the DAB had been appointed as an Arbitration Council with the approval of both the parties and therefore had proper jurisdiction and authority to hear and conduct arbitration proceedings and after the conclusion of the hearing to pass the award. He submitted that the Arbitrators had acted in accordance with the law and after having carefully considered the facts of the case and evidence produced by the parties before them finalized the award and the trial Court had correctly made the award the rule of the. Court. He submitted that the learned High Court fell in error when it held that the majority decision of the duly constituted DAB was illegal as both the members of the DAB had mis-conducted themselves without following the procedure enumerated in various sub-clauses of clause 20 of the contract and had exercised the jurisdiction not vested in them. He therefore prayed that the impugned judgment having been passed on incorrect appraisal of the evidence be set-aside and the judgment of the trial Court may be restored.
5. The learned Additional Advocate General KPK opposed the arguments of the learned ASC for the appellant and supported the impugned judgment. He submitted that the learned High Court after considering the various clauses of the contract arrived at the conclusion that the Arbitration Council had not been properly constituted in accordance with the clauses of the contract and therefore the two alleged arbitrators have mis-conducted themselves by conducting the arbitration proceedings and passing the award. He further stated that the learned trial Court had rejected his objections without considering whether the award had been passed under proper jurisdiction and authority and made the award rule of the Court. In support of his contentions the learned Addl. A.G. Had relied on the unreported judgment of this Court dated 22-1-2014 in Civil Appeal No,319 of 2014. He therefore prayed that the appeal being meritless may be dismissed.
6. We have examined the case in the light of the arguments of the learned Advocate Supreme Court's and carefully perused the records of the case including the impugned judgment, the judgment of the trial Court, the award and the documents available on record and the judgment relied on by the learned Add. AG. KPK.
7. We have seen that the trial court has decided to make award rule of Court by its judgment dated 23-1-2012 in the following manner:- "Thus, it is concluded that the appreciation of evidence by the Arbitrators in deciding the issues is in line with the law and the principle of justice. So far as the objection of the learned counsel for the respondent/employer that the arbitrators have not concluded the proceedings in Peshawar, is concerned, it is turned down here on the reason that the respondent/employer has never agitated this point any where in the entire proceedings and constantly attended the arbitration proceedings in Islamabad without any objection till the final award is passed. It means that the respondent has waived this right of objection and at such a belated stage, it should not be allowed. Further, I found no illegality in the proceedings or misconduct on the part of the Arbitrators in deciding the issues.
The decision of the Arbitrators on all the issues are logical, convincing, based on cogent evidence and strong reasons."
8. The learned High Court while setting aside the judgment of the trial Court held that the Arbitration Tribunal was not properly constituted and the two members who signed the award were members of the DAB and who illegally and without lawful authority assumed the jurisdiction of the Arbitration Council and bye-passed the duly appointed Chairman of the DAB and thereby passed an award totally in an illegal and unlawful manner, mis-conducted themselves and also acted without jurisdiction. The learned High Court further held that the trial Court assumed jurisdiction and illegally treated the majority decision of duly constituted DAB as an award which could not be treated as an award as both members of the DAB mis-conducted themselves and passed the award without following the procedure prescribed in various sub-clauses of clause 20 and exercised jurisdiction not vested in them.
9. In the light of the above decisions of the two fora below, we have examined the contract between the parties. Clause 20.6 of the contracted is reproduced as under:- "20.6 Arbitration.---Unless settled amicably, any dispute in respect of which the DAB's decision (if any) has not become final and binding shall be finally settled by international arbitration. Unless otherwise agreed by both parties:
(a) the dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce.
(b) the dispute shall be settled by three arbitrators appointed in accordance with these Rules. And
(c) the arbitration shall be conducted in the language for communications defined in Sub-Clause 1.4 (Law and Language)
' The arbitrator(s) shall have full power to open up, review, and revise any certificate, determination, instruction, opinion, or valuation of the Engineer, and any decision of the DAB, relevant to the dispute. Nothing shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrator(s) on any matter whatsoever relevant to the dispute.
' Neither Party shall be limited in the proceedings before the arbitrator(s) to the evidence or arguments previously put before the DAB to obtain its decision, or to the reasons for dissatisfaction given in its notice of dissatisfaction. Any decision of the DAB shall be admissible in evidence in the arbitration. Arbitration may be commenced prior to or after completion of the Works. The obligations of the Parties, the Engineer and the DAB shall not be altered by reason of any arbitration being conducted during the progress of the Works."
10. From a perusal of the above clause it is seen that the dispute between the parties had to be finally settled under the Rules of the Arbitration of the International Chamber of Commerce (ICC).
Article 12 of the ICC Arbitration Rules provides that where the parties have decided for there to be three arbitrators, each party may nominate one. The appointment of the third arbitrator i,e, President shall be made by the Court unless an alternative method for appointment is provided for in the agreement between the parties.
11. The position in this case is that the parties under the provisions of clause 20.2 of the contract had appointed the DAB comprising of one Chairman and two members whose names have already been mentioned in the earlier part of this judgment. However, before the DAB could start its assignment, by letter No,10917-20/RDSB dated 24-3-2011, the Project Director Foreign Aided Project had informed the Chairman and the two members of the DAB that although the competent authority had not agreed with the constitution of DAB and informed them to proceed with the claim of the contractor as per Arbitration Act 1940 as amended upto date. Surprisingly on the same date one of the members of the DAB Engineer Muhammad Musaib Qureshi issued a notice to commence arbitration proceedings in Islamabad and enclosed copies of the notice to Engineer Muhammad Yaqoob Chairman of the DAB and Javed Turk Member of the DAB. In this notice he had referred to Engineer Muhammad Yaqoob as Umpire, however, when another notice was issued for meeting of the Arbitration Council on 16-11-2011 at. Islamabad it is noticed that copy of the same was not sent to Engineer Muhammad Yaqoob Khan who for all practical purposes was Chairman/President of the DAB which was later on converted into Arbitration Council to conduct Arbitration proceedings and from then onward it seems that the Chairman/President Engineer Muhammad Yaqoob Khan was not involved in the Arbitration proceedings but the same was conducted by the two members Engineer Muhammad Musaib Qureshi and Engineer Javed Turk. No explanation has been given by these two members as to why Engineer Muhammad Yaqoob Khan was not made a part of the Arbitration council and why the proceedings were held at Islamabad despite the fact that the contract specifically provided that the place of Arbitration shall be Peshawar Pakistan.
12. Although we agree with the learned High Court that the Arbitrators were not formally appointed as per procedure provided in the contract and the ICC Arbitration Rules but by a simple letter the nominated members and the chairman of the DAB were informed that they should act as Arbitration council but we have failed to understand that even if this formation of the Arbitration council is recognized then why Engineer Muhammad Yaqoob Khan who was appointed as Chairman was not included in the arbitration proceedings because according to clause 20.6 of the contract the matter was to be decided by three arbitrators and not by two arbitrators and one Umpire and even Article 12 of the ICC Arbitration Rules specifies that out of three arbitrators one shall be the President of the Arbitration Council, therefore, for all practical purposes Engineer Muhammad Yaqoob Khan should have been a part of the arbitration proceedings and should have been a part of the decision of the award whether he agreed with it or dissented with it. The failure of the two arbitrators who passed the award without including and involving him in the Arbitration proceeding has rendered the award without jurisdiction and the arbitrators are guilty of misconduct.
13. We are also of the view that since the Arbitration proceedings were conducted by only two Arbitrators and not the entire arbitration council despite the fact that the third member/chairman had not recused himself from serving as an arbitrator, therefore, the arbitration council had become coram non judice for passing the award which therefore could not be made the rule of the Court.
14. We, therefore, find ourselves in agreement with the judgment of the learned High Court that the judgment of the trial Court be set-aside but for slightly different reasons as enumerated above.
15. We, therefore, through a short order announced in Court after hearing the learned Advocate Supreme Court had dismissed this appeal and above are the reasons in support of our short order.