MIANGUL HASSAN AURANGZEB, J. Through the instant appeal, the appellant, Oil and Gas Development Company Limited, impugns the judgment and decree dated 29.01.2013 passed by the Court of the learned Civil Judge, Islamabad, dismissing the application filed under Section 14 of the Arbitration Act, 1940 ("the 1940 Act") by the appellant praying for the arbitration award dated 15.02.2007 to be made a rule of Court.
2. The record shows that on 30.06.2003, an agreement was entered into between the appellant and respondent No.1, whereby the former agreed to sell to the latter 8 Million Standard Cubic Feet per Minute ("MMSCFM") of low pressure / flared gas for a period of three years. Clause 7.3 of the said agreement provided inter alia that by the 7th of each month, the seller shall prepare and deliver an invoice to the buyer for payment showing the volume of gas delivered in the previous month, the amount due an4 other necessary details, whereas clause 7.4 provided that the payment for gas was to be made by the buyer to the seller within seven days from the date of the receipt of invoice.
Delay in the payment of invoices was to result in the accrual of a late payment surcharge at the rate of 18% per annum.
3. Clause 12.1 of the said agreement provided for differences and disputes between the parties to be settled amicably between the parties, failing which they were to be referred to arbitration by the Managing Director of the appellant who could either personally enter upon reference or nominate another person to arbitrate on his behalf.
4. Apparently, the appellant had raised invoices for the months of July, September, October, and November, 2004 for a cumulative amount of Rs.3,034,187/- along with the late payment surcharge and electricity charge of Rs.503,470/- and Rs.4,070/-, respectively. Failure on the part of respondent No.1 to pay the said amount caused the appellant to invoke the arbitration clause in the agreement. Mr. Aftab Ahmed was nominated as the sole arbitrator by the Managing Director of the appellant. On 15.02.2007, the award was rendered under which respondent No.1 was obligated to pay Rs.3,541,726/- to the appellant. Perusal of the said award shows that respondent No.1 had not participated in the arbitration proceedings.
5. On 30.04.2007, the appellant filed an application under Section 14 of the 1940 Act before the Court of the learned Civil Judge, Islamabad praying for the award dated 15.02.2007 to be made a rule of Court. It was not until 18.12.2012 that the respondents filed an application under Section 30 of the 1940 Act praying for the setting aside of the award. The petitioner had asserted that these objections had been filed with substantial delay and therefore were liable to be discarded. Article 158 of the First Schedule to the Limitation Act, 1908 provides a limitation period of thirty days from the date of the service of the notice of filing of the award for filing an application to set aside the award. Be that as it may, one of the objections to the award taken in the said application was that the award had not been filed in the Court by the arbitrator.
6. Vide judgment dated 29.01.2013, the learned Civil Court dismissed the appellant's application under Section 14 of the 1940 Act. After making reference to the case of National Logistic Cell v.
Hakas (Pvt.) Limited (2010 YLR 1448), the learned Civil Court held that the "award which is not filed by the arbitrator but is filed by the petitioner along with the application under Section 14 of the Arbitration Act, 1940 is without any legal effect because the party has no express or [implied] authority to file the same in the Court." Furthermore, the learned Civil Court also held that the mere fact that objections to the award had not been filed under Section 30 of the 1940 Act did not prevent the Court to look into the legality of the award. In the judgment dated 29.01.2013, the learned Civil Court termed the award dated 15.02.2007 as "irregular" but did not give any reason for holding so. The said judgment has been assailed by the appellant in the instant appeal.
7. Learned counsel for the appellant, after narrating the facts leading to the filing of the instant appeal, submitted that by virtue of the impugned judgment dated 29.01.2013, the respondents have gotten away with not paying the appellant's dues which by now are far in excess of Rs.3,54I,726/-; that respondent No. 1 had expressly agreed in clause 12 of the agreement dated 30.06.2003 for the nominee of the Managing Director of the appellant to he appointed as the arbitrator that the arbitrator had issued notices to the respondents who had appeared before the arbitrator, but since they had tried to prolong the arbitration they had been proceeded against ex-pane; and that the learned Civil Court instead of dismissing the appellant's application under Section 14 of the 1940 Act ought to have required the arbitrator to file the award along with all the depositions in the Court. Learned counsel for the appellant prayed for the appeal to be allowed and for the impugned judgment and decree dated 29.01.2013 to be set-aside.
8. The instant appeal was filed on 03.06.2013. Efforts to serve the respondents were not successful.
As per the office report. respondent No.1, who was the sole proprietor of respondent No.2, had passed away. After the list of respondent No.1's legal heirs was brought on record through an application (CM No.635/2021), the office was directed to issue notices to them. Vide order dated 28.11.2022, this Court also issued notice to Mr. Muhammad Aamir Mughal, Advocate who had represented respondent No.2 in the proceedings before the learned Civil Court. Despite all this, no one appeared for any of the respondents. Therefore, vide order dated 08.12.2022, this Court directed notices to be issued to the respondents through publication in the Daily Jang at the appellant's expense. Despite the publication, no one tendered appearance for the respondents, and therefore they were proceeded against ex-parte vide order dated 13.11.2023.
9. Ex-parte arguments of the learned counsel for the appellant were heard on 15.01.2024 and the record was perused with his able assistance. The facts leading to 'the filing of the instant appeal have been set out in sufficient detail in paragraphs 2 to 6 above and need not be recapitulated.
10. Although the award was declared by the learned Civil Court to be "irregular," but from the operative part of the judgment dated 29.01.2013, the ground on which such a declaration was made could not be discerned. All that was stated was that the Court was competent to look into the legality of the award rendered by the arbitrator irrespective of whether objections to the award had been tiled or not. From the said judgment it could not be gathered as to which of the grounds taken by the respondents in their application under Section 30 of the 1940 Act prevailed with the learned Civil Court for holding that the award was "irregular."
11. As mentioned above, The primary ground on which the learned Civil Court dismissed the appellant's application under Section 14 of the 1940 Act was that the award had not been filed in the Court by the arbitrator. If the learned Civil Court's view was that the manner in which the award was filed in the Court (i.e. by the party and not by the arbitrator) was irregular, this would not ipso facto render the very award irregular. The fact that the award had not been filed in the Court by the arbitrator but by the petitioner is the only ground discerned from the judgment dated 29.01.2013 for the learned Civil Court to have dismissed the appellant's application under Section 14 of the 1940 Act.
12. Section 14(1) of the 1940 Act provides that when the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award. Section 14(1) makes it necessary for the arbitrator(s) to sign the award and to give a written notice of the making thereof to the parties. In the case at hand, the arbitrator had given a copy of the award to the appellant who had filed it in the Court with a prayer to make the award a rule of Court, or in other words for the decree to be passed in terms of the award.
13. Section 14(2) of the 1940 Act reads thus:- "The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the Court and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it, together with any depositions and documents which may have been taken and proved before them, to be filed in Court, and the Court shall thereupon give notice to the parties of the filing of the award."
(Emphasis added)
14. By dismissing the appellant's application under Section 14 of the 1940 Act, the learned Civil Court appears to have proceeded on the assumption that unless an award is filed in the Court by the arbitrator, an application under Section 14 filed by a party in whose favour the award is rendered would not be competent. There is no legal basis for such a view given the mandate in Section 14(2).
Under the scheme of the 1940 Act, an award itself cannot be enforced. The parties must obtain a stamp of approval of the Court by securing a decree in terms of the award. An award entitles the beneficiary to file an application under Section 17 of the 1940 Act for a decree to be passed in terms of the award so that such decree can be enforced. Before an application under Section 17 is filed, the award is to be filed in the Court. It is in cases where the arbitrator does not provide the parties with copies of the award that a party can file an application under Section 14(2) for seeking a direction of the Court to the arbitrator to file the award in the Court. In the case of Puppalla Ramulu v. NagIdi Appalaswami (AIR 1957 Andhra Paradesh 11), it has been held that Section 14(2) applies only to a case where the help of the Court is sought for getting the award filed in the Court by calling upon the arbitrator to do so. Where, however, the arbitrator does not give notice in writing to the parties of making and signing the award but also provides them with copies of the award, there is no impediment before a party in filing such an award before the Court in order to have it enforced. Where the arbitrator gives copies of the award to the parties, they would be deemed to have an implied authority of the arbitrator to file it in the Court. Even where the award is filed in the Court by a party, the Court can nevertheless require the arbitrator to cause the award or a signed copy of it together with any deposition and documents to be filed in the Court. Where the award is filed by a party along with an application under Section 14 of the 1940 Act, the Court cannot simply dismiss such an application on the ground that the award was not filed by the arbitrator. As mentioned above, where an award is filed by a party the Court, in order to satisfy itself that such award is indeed the award that was rendered by the arbitrator, can require the arbitrator to file the same in the Court. But without doing so it cannot dismiss the application under Section 14 of the 1940 Act as was done by the learned Civil Court in this case. By 'dismissing the appellant's application under Section 14 of the 1940 Act without requiring the arbitrator to file the award in the Court, the learned Civil Court, in my view, committed a jurisdictional irregularity.
15. Section 44(a) of the 1940 Act empowers the High Court to make rules consistent with the provisions of the said Act as to the filing of awards and all proceedings consequent thereon or incidental thereto. Under the powers conferred by Section 44, the Hon'ble Lahore High Court made "Rules under the Arbitration Act, 1940" which were published through notification No.45-B/X.W.-5, dated 09.03.1945. Rule 10(a) of the said Rules reads thus:- "The arbitrator or umpire or of the parties to the arbitration may cause the award or a signed copy thereof to be filed in Court in the manner prescribed in rule No.3."
16. Under Rule 10 of the Lahore High Court Rules, the award may be filed by any of the parties to the arbitration. Vide notification dated 28.08.2019 issued by the Islamabad High Court, in exercise of the powers conferred under Article 202 of the Constitution, the Rules and Orders of the Lahore High Court had been adopted. Section 14 of the 1940 Act does not obligate the arbitrator or umpire to provide the parties with signed copies of the award. But it also does not bar the arbitrator or umpire from providing signed copies of the award. Where the arbitrator or umpire provides the parties with signed copies of the award, they or any of them would be well within their rights to file the same in the Court on the basis of Rule 10 ibid. in the case of Syed Ziauddin v. Syed Roze-ud- Din (1999 YLR 978), the Hon'ble High Court of Sindh has held that under the rules framed by the Lahore High Court, an award can be filed in the Court not only by the arbitrator but also by any of the parties to the award. On the basis of Rule 10 ibid and the dictum in the case of Mrs. Keaye Byrne v. M. Obaidullah Khan (PLD 1959 Lahore 146), the Hon'ble Lahore High Court, in the case of Province of the Punjab v. M.A. Rashid Said Alam Khan (PLD 1990 Lahore 25), held that there was nothing wrong with the filing of the award in the Court by the parties. In the case of Ganga Ram v.
Radha Kishen (AIR 1955 Punjab 145), it has been held that "in a case falling under Section 14(2) of the Act the arbitrator is called upon to file the award while in a case falling within Rule 10 the award may be filed by any of the parties to the arbitration."
17. There is nothing in the 1940 Act which prevents an arbitrator, whose fee/dues have been cleared, to provide the parties with signed copies of the award or the original award in duplicate. Where the arbitrator does not provide the parries with such award on the ground that his fees/dues have not been cleared, Section 38(1) of the 1940 Act entitles a party to apply to the Court, which can order the arbitrator to deliver the award to the applicant on payment into Court by the applicant of the fees/dues demanded. Where an award is delivered to the party either by adopting the process envisaged by Section 38(1) or otherwise, the party can file such an award in the Court and the Court shall thereupon give notice to the other party of the filing of the award.
18. As mentioned above, Section 14(2) of the 1940 Act applies to a case where the help of the Court is sought for getting the award filed in the Court by calling upon the arbitrator to file it. Section 14(2) has been variously interpreted as to provide for the arbitrator to file the award in Court either at the request of any party to the arbitration agreement or if so directed by the Court. Where an arbitrator turns down the request of a party to file the award in the Court, such party can apply to the Court under Section 14(2) for a direction for the arbitrator to file the award in the Court. In the case of Jai Kishen v. Ram Lal Gupta (AIR 1944 Lahore 398), Mr. Abdur Rehman, J. expressed an opinion that the 1940 Act was not exhaustive in the sense that an application could be thrown out as incompetent in the absence of a clear provision in the Act.
The mere fact that there is no provision in the 1940 Act under which a party which has been provided with a signed copy of the award can file the award in the Court does not mean that such party cannot file the award in the Court or that the only option before such party is to apply to the Court for a direction to the arbitrator to file the award in the Court. In the case of Radha Kishen v.
Madho Krishna (AIR 1952 Allahabad 856), the arbitrator had given copies of the award to the parties. One of the parties had filed the award in the Court with an application under Section 17 of the 1940 Act praying for the award to be made a rule of Court. The other party had taken an objection to the effect that the award had been filed beyond the time prescribed in Article 178 of the Schedule to the Limitation Act, 1908. It was held that said Article applied to Section 14 and not to Section 17 of the 1940 Act. Furthermore, since there was evidence to show that a copy of the award was given by the arbitrator to the party that had filed the award in the Court, the application under Section 17 was held not to be time barred. The judgment and decree in terms of the award was upheld by the Allahabad High Court.
19. In the case at hand, the appellant had filed a copy of the award in the Court. If the Court had doubts as to the authenticity of such award, it could have directed the arbitrator to file the award along with the relevant documents and depositions in the Court but it could not have dismissed the appellant's application under Section 14 of the 1940 Act. Upon the filing of the award, the Court was to issue notice to the other party as to its filing so as to enable it to file objections to the same.
In the case at hand, the respondents filed objections to the award after they gained knowledge of its filing in the Court by the appellant. In these objections, the respondents deny the factum as to the rendering of the award by the arbitrator on 15.02.2007 but asserted that it was made in violation of the mandatory provisions of the 1940 Act. Had the respondents denied the very existence or authenticity of the award, the learned Civil Court would have been well within its rights to have required the arbitrator to file that award in the Court.
20. In view of the above, the instant appeal is allowed; the impugned judgment and decree dated 29.01.2013 is set-aside; and the matter is remanded to the learned Civil Court for further proceedings on the appellant's application under Section 14 of the 1940 Act praying for the award dated 15.02.2007 to be made a rule of Court. There shall be no order as to costs.