MIANGUL HASSAN AURANGZEB, J. Through the instant appeal under section 39 of the Arbitration Act, 1940 ("the 1940 Act") the appellant, National Highway Authority, impugns the order dated 18.05.2019 passed by the Court of the learned Senior Civil Judge, Islamabad whereby the respondent's application under section 20 of the 1940 Act was allowed, and the matter in dispute between the parties was referred to arbitration. Furthermore, the parties were directed to submit the names of the arbitrators.
2. Learned counsel for the appellant submitted that the essential prerequisite for the reference of the matters in dispute to arbitration had not been fulfilled in the case at hand; that the arbitration clause in the contract, between the parties required the disputes to be referred in the first instance to the Engineer; and that the respondent, without referring the disputes to the Engineer, filed an application under section 20 of the 1940 Act praying for the matters in dispute between the parties to be referred to arbitration.
3. Furthermore, it was contended that since the respondent had initiated arbitration proceedings without the intervention of the Court by proceeding under Chapter II of the 1940 Act, it could not have resorted to arbitration with the intervention of the Court by filing an application under section 20 of the said Act. Learned counsel for the appellant prayed for the appeal to be allowed and for the impugned order dated 18.05.2019 to be set aside.
4. On the other hand, learned counsel for the respondent submitted that the respondent could not have referred the disputes to the Engineer due to the fact that the Engineer had been disengaged by the appellant; that at no material stage had the respondent resorted to arbitration without the intervention of the Court; that the conditions for filing an application under section 20 of the 1940 Act and for a reference to arbitration had been fulfilled in the case at hand; that the appellant has adopted an unreasonable posture by resisting the adjudication of the respondent's claims in accordance with the dispute resolution mechanism enshrined in the contract; and that during the pendency of the instant appeal, the arbitration has commenced but due to an injunctive order passed by this Court, the award has, till date, not been rendered. Learned counsel for the respondent prayed for the appeal to be dismissed.
5. I have heard the contentions of the learned counsel for the contesting parties and have perused the record with their able assistance.
6. The record shows that on 11.09.2012, the appellant and the respondent entered into a contract for the construction of Deharr Road from Khad Factory to Pull Khadal, Multan (Km. 0+000 to Km.
5+600) - Package-I ("the Contract"). The documents which were to comprise part and parcel of the Contract are listed in clause 2 of the Contract. These documents include the General Conditions of Contract - Part-I ("G-CoC"). Clause 67 of the G-CoC provides a mechanism for the settlement of disputes arising from and related to the Contract. In terms of clause 67.1, the disputes in the first instance have to be referred by either the employer or the contractor to the Engineer. In the event the Engineer does not decide the dispute within the stipulated period of 84 days or the dispute is decided against one of the parties, the aggrieved party can give a notice to the other party of its intention to commence arbitration. It is not disputed that the arbitration is to be conducted in accordance with the provisions of the 1940 Act.
7. On 05.07.2018, the respondent filed an application under section 20 of the 1940 Act praying for the matters in dispute between the parties to be referred to arbitration. The contractual dispute agitated by the respondent is set out in sufficient detail in paragraphs 5 to 7 and 11 of the said application. In the reply to the said application, the appellant took an objection to the effect that the respondent should have approached the Engineer as per clause 53 of the G-CoC for the determination of its claims and in the event the Engineer took a decision against the respondent, it could have then again approached the Engineer under clause 67.1 of the G-CoC.
8. Whether the respondent was disentitled from invoking the provisions of clause 67 of the G-CoC without having submitted its claims before the Engineer as per clause 53 of the G-CoC is to be determined by the arbitrator. However, the question whether the respondent had fulfilled the essential pre-condition of first referring its disputes to the Engineer as per clause 67.1 of the G-CoC is to be determined by the Court. Where a party does not satisfy the condition precedent provided in the arbitration clause of first approaching the forum prescribed therein before filing an application under section 20, such an application would be pre-premature and not maintainable.
Reference in this regard may be made to the law laid down in the cases of Board of Intermediate and Secondary Education v. Fine Start and Company (1993 SCMR 530), Hanover Contractors v.
Pakistan Defence Officers Housing Society (2002 CLC 1880), Sanad Associates v. General Manager Telephone and Telegraph (1989 CLC 386), Ayaz Builders v. Board of Trustees of the Karachi Port Trust and another (2008 CLC 726), WAPDA v. S. H. Haq Noor & Co. (2008 MLD 1606), Pak. U.K. Association (Pvt.) Ltd. v. The Hashemite Kingdom of Jordan (2017 CLC 599) and Smith v.
Martin ([1925] 1 K.B. 745).
9. In the case at hand, it is not disputed that the Engineer had been disengaged by the employer/appellant by the time the respondent filed the application under section 20 of the 1940 Act. The question that crops up in the mind is that if the argument of the learned counsel for the appellant that the respondent should have first agitated its disputes before the Engineer before filing the said application is to be accepted, how could the disputes be referred to an Engineer whose services had been disengaged by the appellant and was therefore under no obligation to give a determination on the respondent's claims and/or disputes? In the case of Pak. U.K.
Association (Pvt.) Ltd. v. The Hashemite Kingdom of Jordan (2017 CLC 599), this Court had the occasion to hold as follows:- "24. The Court cannot rewrite the agreement between the parties or to exempt a party from complying with its contractual obligation of referring the disputes to the Engineer under clause 67.1 of the Contract before initiating arbitration under clause 673 of the Contract. It is in situations where a reference to the Engineer cannot be made because he has resigned or refuses to entertain the dispute or has been disengaged by the employer, can the disputes be referred to arbitration without a reference to the Engineer."
10. In view of the law laid down in the case of Pak. U.K. Association (Pvt.) Ltd. v. The Hashemite Kingdom of Jordan (supra), I am of the view that the respondent's application under section 20 of the 1940 Act could not be defeated on the ground that the respondent had not referred its disputes to the Engineer, whose services already stood disengaged by the appellant.
11. The appellant has placed reliance on letter dated 25.07.2017 from the respondent to the Engineer whereby the former had sought the settlement of its claim for Rs.419,486,911/- through arbitration in terms of clause 67.3 of the G-CoC. The respondent had also proposed the name of its arbitrator. As per the said letter, the respondent had sought the resolution of its dispute sixteen times in writing.
The said letter was also copied to the appellant. The appellant brought nothing on the record to show that the said letter was responded to either by the Engineer or the appellant. It would therefore be safe to conclude that arbitration without the intervention of the Court had not commenced.
12. Section, 20(1) of the 1940 Act reads thus:- "Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or age of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court."
13. The conditions prescribed in section 20(1) of the 1940 Act for filing an application for a reference of a dispute to arbitration have been held to be cumulative and not mutually exclusive. In the case of Ravu Venkata Surya Rao v. Ravu Venkata Rao (AIR 1963 Andhra Pradesh 286), it was held as follows:- "The words "instead of proceeding under Chapter II" used in Section 20 mean and necessarily imply that the application to the Court for filing the award is only an alternative step and not a simultaneous or a supplemental step. Chapter II contains provisions regarding appointment of arbitrators and umpires, their removal, their powers, their award and how it can be modified, corrected by the Court etc.... The words "instead of proceeding under Chapter II" further clarify the stage at which this provision is available. If that stage is passed and the proceedings are started under Chapter II, the provisions of section 20 will not be available, Judged thus, section 20 clearly bars the application made by the respondents."
14. In the case at hand, arbitration without the intervention of the Court had not commenced at any material stage. The appellant is being most unreasonable in seeking to relegate the respondent to a stage in the year 2017 when it had requested the Engineer for the initiation of the arbitration proceedings and received no response from either the Engineer or the appellant. An application under section 20 of the 1940 Act can be filed by a party who may have tried to institute arbitration proceedings without the intervention of the Court i.e., under Chapter II but where such arbitration had not commenced and the arbitrator had not entered upon reference.
15. Since I find the grounds taken by the appellant, who resist the very initiation of the arbitration proceedings, to be frivolous, the instant appeal is dismissed with costs.