' This is an application under sections 32 and 33 of the Arbitration Act, whereby the appointment of Zahid Husain as the Sole Arbitrator by the defendant No, 1 as well as the Arbitration Agreement is challenged.
2. The brief facts of the case are that the plaintiff, which is a statutory corporation established under the Port Qasim Act, 1973, entered into a written Agreement on 22nd April, 1975, whereby the defendant No, 1 undertook to construct office building. The aforesaid agreement contained an arbitration clause, which reads as follows :- "If any dispute or difference of any kind whatsoever shall arise between the Employer or the Engineer and the Contractor in connection with or arising out of the Contract of the carrying out of the works (whether during the progress of the works or after their completion and whether before or after the termination abondoned or breach of the contract) it shall in the first place be referred to and settled by the Engineer who within a period of 90 days after being requested by either party to do so shall give written notice of his decision.To the Employer and the Contractor. Save as hereinafter provided such decision in respect of every matter so referred shall be final and binding upon the Employer and the contractor and no claim to arbitration has been communicated to him by either the Employer or the contractor within a period of 90 days from receipt of such notice the said decision shall remain final and binding upon the Employer and the Contractor. If the Engineer shall fail to give notice of his decision as aforesaid within a period of 90 days after being requested as aforesaid or if either the Employer or the contractor be dissatisfied with any such decision then and in any such case either the Employer or the Contractor may within 90 days after receiving notice of such decision or within 90 days after the expiration of the first named period of 90 days (as the case may be) require that the matter in dispute be referred to arbitration as hereinafter provided. All disputes or differences in respect of which the decision (if any) of the Engineer has not become final and binding as aforesaid shall be finally settled in accordance with Arbitration Act by one or. More arbitrators, appointed in accordance with the said Act. The said Arbitrators shall have full power to open up review and revise any decision opinion direction, certificate or valuation of the Engineer and neither party shall be limited in the proceedings before such arbitrator to the evidence or arguments out before the Engineer for the purpose of obtaining his said decision. No decision given by the Engineer in accordance with the foregoing provisions shall disqualify him from being called as a witness and giving evidence before the arbitrators on any matter whatsoever relevant to the dispute or difference referred to the arbitrators as aforesaid. The arbitrators shall not enter on the reference until after the completion of the works unless with the written consent of the Employer and the Contractor. The Contractor shall not stop the work during the pendency of the arbitration proceedings but he shall continue to execute the work with full speed. However, the. Engineer shall have the power to ask the Contractor in writing to stop the work in full or in part if he considers this necessary."
' Disputes arose between the parties whereupon the contractor on 28th October, 1975 made certain claims against the plaintiff. The plaintiffs in their reply dated 15th November, 1975 denied the claims made by the defendant No, 1 and it was pointed out that despite extension of time granted, the defendant No, 1 was very much behind the Schedule. He was directed to speed up the progress of their work in all respects before the period of extension of time expired. The defendant No, 1, however, vide a letter dated 10th June, 1976 made a claim of Rs, 4,36,110 from the plaintiffs and asked them to ensure early settlement of the same. Failing which, he warned, that he shall be constrained to proceed further, in accordance with the clauses of the agreement. Correspondence followed between the parties and on 24th February, 1977 the defendant No, 1 wrote to the Chief Engineer/Project Director of the plaintiff's authority to take immediate decision on their claims under the provisions of clause 65 of the General Conditions of the Agreement. In the same letter the defendant No, 1 stated that he was entitled for compensation on account of escalation as per decision of the Federal Government and that this item should also be taken into consideration while deciding his claim. This letter was followed by the letter dated 25th May, 1977 addressed to the Chief Engineer/Project Director in which it was pointed out that the defendant No, 1 had already submitted his claim, but no decision had been taken by him and as such the defendant No, 1 sought appointment of Arbitrator out of the Superintendent Engineers whose names were given in the aforementioned letter dated 25th May, 1977.
3. As the plaintiffs took no action on the above request of the defendant No, 1, the latter filed an application under section 20 of the Arbitration Act in this Court, which was registered as Suit No, 395 of 1977. In that suit/application the Project Director/Chief Engineer of the plaintiff's authority alone was joined as a defendant. The said Chief Engineer, in his objections filed in the Court, took the plea that the case which was filed against him and not against the Authority was not maintainable as he was not a party to the contract and thus no cause of action had arisen against him. The case came up for hearing before the Court on 7th February, 1978, when an application was filed for withdrawal of the said suit on the ground that in the disputes. Each party had been allowed to nominate an Arbitrator and as such the contractor (now defendant No, 1) had nominated Zahid Hussain, Superintendent Engineer Quaid-eAzam Memorial Funds Committee, Karachi on their behalf as an arbitrator and accordingly it was prayed that the Court may allow them to withdraw the suit with permission to file a fresh suit. This application was allowed and the suit was accordingly disposed.
4. On 15th December, 1977 the defendant No, I addressed a letter to Mr. Zahid Husain informing him that disputes had arisen between him and the plaintiff Authority out of the works of construction of site office and he had nominated him as an arbitrator on his behalf for settlement of the disputes.
A copy of this letter was addressed to the Chief Engineer/Project Director of the plaintiffs for information and "similar action and within the period specified in the Arbitration Act". A separate letter was also written to the plaintiffs on 22nd February, 1978 by the defendant No, 1 which is reproduced hereunder :- "In continuation of our earlier notice dated 15th December, 1977 we hereby serve this notice to the effect that we have already nominated Mr. Zahid Husain Superintending Engineer, Quaid-eAzam Memorial Fund Karachi 5, as our Arbitrator to settle the dispute arising out of the above contract.
' Please note that in case you fail to nominate an Arbitrator within 15 days of the receipt of this notice the learned arbitrator shall proceed with the case as sole arbitrator.
' Copy of the statement of our claim has already been forwarded along with our earlier letter dated 13th December, 1977."
5. In response to the aforesaid notice dated 22nd February, 1978 by the defendant No, 1 calling upon the plaintiffs to appoint their arbitrator, the plaintiffs sent a reply vide their letter dated 6th March, 1978, which is reproduced in extenso hereunder :- ' Port Muhammad Bin Qasim Authority. Tel. 419071-75, Cable "PORTQATY" P.
0. Port Qasim, Karachi-48 P B Q A/X E M (I. S.) 1/9/78 No Date : 6th March, 1978 ' M/S Nadeem Brothers, ' A-351, Block D, North Nazimabad, Karachi.
' Subject : Appointment of Arbitrator in respect of Construction of Site Office of PIPRI.
' Ref : Your letter dated 22nd February, 1978.
' It is to inform you that Professor A. Q. Alvi of N. E. D. Engineering University has been requested to act as Arbitrator on behalf of Authority in the above matter. Yours faithfully, Sd/- (I. A. Turk) Director (I. S.)
' Subsequently on 2nd April, 1978 the defendant No, 1 wrote to the plaintiffs that they had nominated Professor A. Q. Alvi of N. E. D. Engineering University as Arbitrator from their side but when the defendant No, 1 approached him for purposes of fixing the date, the said gentleman informed that neither he had received any request from the plaintiffs about his nomination as an arbitrator nor he had accepted any such nomination. In the circumstances the defendant No, 1 wrote to the plaintiffs that he was left with no alternative but to request his Arbitrator to proceed with the case in the capacity of Sole Arbitrator under the provisions of the Arbitration Act. A copy of this letter was also addressed to Zahid Husain the Arbitrator nominated by the defendant No, 1.
6. On 30th April, 1978 Mr. Zahid Hussain issued a notice to the parties informing them that in view of the circumstances leading to his appointment as the Sole Arbitrator under the Arbitration Act the parties should appear before him either in person or through their authorised representatives along with their claims on 7th May, 1978. The parties appeared before the Arbitrator. The plaintiffs however, raised number of objections. They also challenged the jurisdiction of Mr. Zahid Husain to act as an arbitrator or as the sole arbitrator.
7. The arbitrator thereupon made an application under section 13-B of the Arbitration Act, in this Court which was registered as J. M. No, 27 of 1978. By that application the arbitrator sought opinion of the Court on the following two questions :-
(1) Whether the appointment of the applicant as sole arbitrator is according to the law and the applicant has the authority to proceed with the matter.
(2) Whether the respondent can nominate their own arbitrator at the present stage with the consent of Messrs Nadeem Brothers, the claimants.
' The above application was heard and decided by order passed on 15th March, 1979. The learned Single Judge while disposing of the said application held as follows :- "I am, therefore, of the view that the first question cannot be answered under section 13 (b) of the Arbitration Act, 1940. 1 may state Mr. S. A. Mannan Advocate who appeared for the applicant stated that the applicant does not seek the opinion of the Court on the first question.
' The second question that whether the respondent can nominate their own arbitrator at the present stage with the consent of the claimants is again not a question which is involved in the case before the applicant for answer to the same cannot form part or added to the !Sward and therefore it does not fall within the purview of clause (b) of section 13 of the Arbitration Act, 1940.
Moreover, it is a hypothetical question for Mr. Qamar Abbas stated at the Bar that the respondents were not willing to appoint any person as arbitrator on their behalf and in such circumstances the question of claimants' consenting to any such appointment does not arise.
' I, therefore, dismiss the application leaving the parties to bear their own costs of these proceedings."
8. After the decision of the application as aforesaid, since the time for making the award had already expired, the defendant No, 1 on 29th April, 1979 filed an application (J. M. No, 23 of 1979) under section 28 of the Arbitration Act for extension of time. This application was heard and disposed of by an order passed on 2nd December, 1979 wherein it was observed that respondent No, 1 (the plaintiffs in the present case) had not filed any objections or counter affidavit to the said application and the only objection raised was that the said application was belated and therefore, the discretion should not be exercised in favour of the applicant and that the appointment of the arbitrator was barred by time as he was not appointed within 90 days of the accrual of cause of action as provided in the arbitration agreement and that provisions of section 9 of the Arbitration Act had not been complied with. It was also submitted that other objections were reserved and would be pressed at appropriate stage.
' The learned Single Judge after discussing the facts and circumstances of the case observed that the application for extension of time for making an award was filed within 1 1/2 months of the dismissal of the application made under section 13-B of the Arbitration Act for seeking the opinion of the Court on the question raised therein and which application was rejected on 15th March.
1979. The learned Court having observed as aforesaid, held as follows :- "The present application was filed within one and half month after the rejection of the application.
The application for opinion of the Court was filed by respondent No, I within a month or so of his entering upon the reference. Therefore, it cannot be said that there was any undue delay on the part of the arbitrator. Since the other objections have not been pressed by Mr. Qamar Islam Abbas Advocate at this stage I grant this application and allow four months further time from the date hereof, to give award."
9. Thereafter the plaintiffs namely the Port Qasim Authority filed the present application under sections 32 and 33 of the Arbitration Act on 24th January, 1980 challenging the authority of the Arbitrator and the present proceedings thus commenced.
10. (i) The learned counsel for the plaintiffs has raised a number of pleas, including the plea (which is pressed as Preliminary Issue) that section 9 of the Arbitration Act was not applicable to the facts of the present case and as such the defendant No, 1 could not have appointed Mr. Zahid Husain as the sole arbitrator.
' As I am of the view that if the case of the plaintiffs succeeds on the ground that section 9 of the Arbitration Act, 1940 could not have been involved by the defendant No, 1, it would not be necessary to go into other controversial question in the present case. I therefore, propose to decide this question in the first instant. '
(ii) The submission of the learned counsel for the plaintiffs is that the arbitration clause which has been reproducsd in extenso above, contemplates that all disputes or differences in respect of which the decision of the Engineer has not become final shall be finally settled in accordance with the Arbitration Act by appointment of one or more arbitrators. The learned counsel submitted that the aforementioned arbitration clause does not cantemplate that the reference shall be made to two arbitrators one to be appointed by each party and in the absence of such an intention the provisions of section 9 of the Arbitration Act would not be attracted so as to enable the defendant No, 1 to appoint the arbitrator nominated by him, to act as the Sole Arbitrator in the reference on account of alleged failure on the part of the plaintiffs to appoint their own arbitrator. There is great force in the above arguments of the learned counsel for the plaintiffs. It would be noted that under the arbitration clause in this case, the reference is agreed to be made and disputes settled, in accordance with the Arbitration Act by appointment of one or more arbitrators. There is nothing in the agreement that there shall be a reference to two ' Arbitrators one to be appointed by each party.
It is settled law that before any of the parties to an arbitration agreement could invoke the provisions of section 9 of the Arbitration Act so as to enable him to appoint the arbitrator nominated by him to act as the Sole Arbitrator, on default of the other party to nominate or appoint his own arbitrator either originally or by substitution the arbitration agreement itself must provide that the reference shall be made to two arbitrators one to be appointed by each party. The "Arbitration clause under consideration however provides reference to one arbitrator or more arbitrators". The procedure prescribed by the Arbitration clause in the present case is totally inconsistent with the provisions of section 9 of Arbitration Act. In the circumstances it was not permissible for the defendant No, 1 to have appointed his own Arbitrator as the Sole Arbitrator in the manner provided by section 9 (b) of the Arbitration Act. If any authority is required reference may be made to the case of Balgamwalla Cotton Ginning and Pressing Factory v. Elite Textile Mills (1) and Mohammad Azam v. N. A. Industries (2).
(iii) The learned counsel for the defendant No, 1 was unable to controvert the proposition of law stated above or to advance any argument to persuade me to differ from the principles laid down by the above-cited authorities of this Court.
11. Accordingly, it is held that Mr. Zahid Husain could not have been appointed by the defendant No, 1 as the Sole Arbitrator and as such he could not have assumed the authority to act as the Sole Arbitrator.
' As the case succeeds on the preliminary issue raised by the counsel for plaintiffs, I do not find it necessary to go into other issues raised on behalf of the plaintiffs. It would be open to the parties to raise the other pleas/issues at the appropriate stage if so advised.
' The application thus stands disposed of subject to the observations made above, but with no order as to costs.
(1) .P .L. D 1968 Kar. 916 (2) PLD 1977 Kar. 21