Malik MUHAMMAD URFAN vs NORTHWEST FRONTIER. PROVINCE HTROUGH

1. ' NASIM HASAN SHAH, J.-This appeal, by leave of this Court, is directed against the judgment dated 22-12-1977 passed by a Division Bench of the Peshawar High Court, Peshawar in Writ Petition No, 407 of 1977.

2. ' The facts briefly stated are as follows :- ' The appellant, Malik Muhammad Urfan, bad, on 2-12-1955, applied to the Department of Mineral 'Concession, Government of Pakistan, for the grant of a mining lease of soapstone over an area of 122 acres in the revenue estate of Khanda Khuh, Tehsil and District Abottabad. No action appears to have been taken on this application for a fairly long time and, during this period, on the 15th August, 1967, the appellant entered into a partnership with Messrs Abdur Rehman son of Ghulam Qadir Khan, Abdur Rehman Khan son of Mir Hussain Khan and Taj Muhammad Khan son of Sher Ahmad Khan, respondents Nos, 3 to 5 respectively, whereby it was, inter alia, agreed between them that in the event of the mining lease being granted (for which the appellant had already applied) the names of the said three respondents shall be included therein and the lease would be in the name of the firm. It, however, appears that before the mining lease was actually granted, Taj Muhammad Khan, respondent No, 5 herein, appeared before the Department and made a statement that the partners bad no objection to the grant of the lease in the name of the appellant alone.

3. Consequently, on the 14th November, 1967, the Directorate of Industries, Commerce and Mineral Development, Government of N.-W. F. P. (respondent No, 2 herein) granted a lease in the name of the appellant alone covering the said area of 122 acres for a period of five years, expiring on 13th November, 1972. In the meanwhile, the partnership entered into between the appellant and respondents Nos, 3 to 5 on 15-8-1967 was registered with the Registrar of Firms under the name and style of "Malik Muhammad Urfan and Partners" on 16-3-1969. It further appears that after the allotment of the lease, the respondents Nos, 3 to 5 in their capacity as second party of the partnership undertook the development of the Mines and spent a substantial amount on the mining operations, installations of machinery etc. ' In the meanwhile, on 25-3-1968, an additional area of 4.19 acres was also leased in the name of Malik Muhammad Urfan, appellant in exclusion of the original area, for period of five years which was to expire on 24-3-1973. A prospecting licence of a further area of 34.19 acres was granted on 27-9-1972 for a period of one year, but this time in the name of the firm "Malik Muhammad Urfan and Partners". The parties, in this manner, obtained in all an area of about 161 acres on lease.

4. ' Some disputes having arisen between the two sets of partners i, e. Malik Muhammad Urfan (appellant) on the one side and respondents Nos, 3 to 5 on the other, the appellant instituted a civil suit in the Court of the Senior Civil Judge, Abbottabad on 27-9-1972 seeking declaration to the effect that he was the sole lessee of the leased area of Khanda Khuh etc. With a further prayer for the grant of a perpetual injunction against respondents Nos, 3 to 5 to restrain them from extracting soapstone from the said area. In the same suit, dissolution of partnerhip and rendition of accounts was also sought. This suit appears to be still pending. Herein, the Director of Industries etc. (respondent No, 2) was also impleaded as a defendant.

5. ' The parties having fallen out and the lease period being about to expire Malik Muhammad Urfan (appellant) submitted, on 26-10-1972, in his own name, an application for the renewal of the said leases of 122 acres and 4.19 acres respectively. However, raj Muhammad Khan, respondent No, 5, one of the partners of the Firm (Malik Muhammad Urfan and Partners) had, in the meanwhile, submitted an application on 14-4-1972 for the transfer of the two leases from the name of the appellant to the name of the partnership firm (Muhammad Urfan and Partners) and these were, accordingly, assigned in the name of the firm on 3-5-1972. The appellant, on coming to know of this fact, objected to this assignment, whereupon the issue was referred for its advice to the Law Department of the N.-W. F. P. Government. On the advice of the Law Department, the respondent No, 2 (Director of Industries, Commerce and Mineral Development, N.-W. F. P., Peshawar) withdrew the order of assigning of the two leases in the name of the Firm on 9-11-1974. Both the leases having, in the meanwhile, expired, the respondent No, 2 issued two letters on 10-11-1974 asking the Deputy Commissioner, Abbottabad, to take over possession of the areas of 122 acres and 4.19 acres, on the ground that the mining leases granted to the parties for 5 years were no longer valid.

6. On 8-3-1975, the Mines Committee of the N.-W. F. P. Government decided to divide the lease area, earlier given to the parties, into two equal units of 80.55 acres each and to give the same on lease afresh. Consequently, on 12-3-1975, the respondent No, 2 informed the appellant on the one band and respondents Nos, 3 to 5 on the other that it had been decided to grant them separate mining leases for five years each covering an area of 80.55 acres, as per sketch attached and both of them were advised to make formal applications for the purpose. Respondents Nos, Ito 5 had, by then, formed a new firm by the name of Messrs Tanawal Mining Corporation (respondent No, 6 herein). Therefore, in response to the letter of the department dated 12-3-1975, the said firm applied on the 15th of March, 1975, for the grant of the lease in the name of the Firm and, accordingly, a lease covering an area of 80.55 acres was granted in the name of the Firm on the 29th March, 1975, followed by an allotment letter dated 12-4-1975. The appellant had also submitted an application on the 27th March, 1975, to the Department and he was also granted lease covering the area of 80.55 acres. However, in the same application, the appellant reserved his right to challenge the decision in regard to the grant of the lease of the remaining area on the ground that he alone was entitled to the renewal of the two leases, covering 122 acres and 4.19 acres of the land. It appears that the area of 80.55 acres which was granted on lease to Messrs Tanawal Mining Corporation (respondent No, 6) also included the last-mentioned area of 4.19 acres, which is the developed and most valuable area and, in fact, constitutes the real bone of contention between the parties.

7. ' True to his threat, the appellant filed a writ petition on 1-4-1975 before the Peshawar High. Court (W. P. No, 235 of 1975) for a declaration to the effect that he should be granted the mining lease of the entire area of 161 acres and no part of this area could be given to any body else on the ground that he was entitled to a renewal of the leases granted on 14th November, 1967, 25th March, 1968 and the prospecting licence granted on 27th September, 1972. He further prayed that respondent No, 2 be restrained from dividing that area and granting a lease of a part of it to respondents Nos, 3 to 5.

8. ' The High Court called for the comments of the Department on the said writ petition. Herein, the Department, inter alla, took up the position that the appellant could only be renewed the leases if he had applied for their renewal within one year before the expiry of the lease period (as laid down in clause 58 of the Second Schedule, Part VIII of the Pakistan Mining Concession Rules, 1960), which he had failed to do ; the leases having expired it was in the discretion of the licensing authority, after the expiry of the lease period to grant the same area or part of it to any other party. However, in the same comments it was also, towards the end, stated that in case of a dispute between the lessor (Department) and the lessee (appellant) the same could be resolved by invoking rule 77 of the Pakistan Mining Concession Rules, 1960 read with paragraph 79 of the Second Schedule, Part II (Standard Form of Mining Lease) under which a dispute could be resolved through arbitration.

9. ' The High Court, after pesusing the comments, dismissed the writ petition by its judgment dated 28-5-1975. With regard to the question of renewal of the leases, it was observed that- "the case of respondent is that in violation of rule 58 (ibid), petitioner did not apply for the renewal of his lease within a year before the expiry of the lease period and this position has be-a accepted by the learned counsel. In this view, therefore, respondent/Government seems to have been justified not to renew in favour of the petitioner the lease for the entire area."

10. ' As regards the submission made in the end by the Department in its comments, the Court observed - "Even other wile rule 77 would come in the way of the petitioner. The language of this rule is all pervading and it would, therefore, include the referring of any dispute regarding a lease or licence to two arbitrators whose decision shall be final. The grievance of petitioner is obviously in regard to the lease of a part of the area and thus the dispute raised by him would be covered by this rule."

11. ' Taking a cue from the above observations of the Court, Malik Muhammad Urfan (appellant) approached the Minister for Industries, through a letter dated 2-8-1975 for appointing his arbitrator and on being allowed to do so nominated S. Usman Ali Shah, Advocate, as his arbitrator on 25-11- 1975.

12. ' On 13-2-1976, respondent No, 2 addressed a letter to respondent No, 6 on the subject of the application of Malik Muhammad Urfan (appellant herein) for arbitration stating that- "it has been decided to refer the case regarding dispute over the soapstone Mining area near Khanda Khu, Illaqa Sherwan, Tehsil Abbottabad for arbitration.

13. ' You are advised to communicate the name and address of any person who shall act as arbitrator at your end to this Directorate at an early date."

14. ' In response to the said letter, respondent No, 6 communicated the name and address of his arbitrator, namely, Mr. Muhammad Ayub Khan Tanoli, Advocate, Abbottabad. However, on an objection raised by the appellant to the effect that there was no provision for the appointment of a third arbitrator, respondent No, 2 by his letter dated 29-3-1976 addressed to respondents Nos, 3 to 6 withdrew his earlier letter dated 13-2-1976 observing that "this was being done as there is no provision for third arbirator under the rules". He, however, went on to add that the respondents may represent their case before the arbitrators in the meetings whenever convened for the purpose.

15. The respondents strongly protested against this decision. They pointed out that in the first place there was no question of arbitration as both parties "had been allotted 1/2 share of the portion of the disputed area. And if there is something to be referred for arbitration, then our one arbitrator should also be appointed otherwise the proceedings of the arbitrators will be illegal and against the principles of justice".

16. ' The above request of respondent No, 6 was rejected by respondent No, 1, vide letter dated 10-4- 1976, on the ground that "under the rule only two arbitrators can be appointed, therefore, you should properly represent your case through Government arbitrator".

17. ' In these circumstances, the arbitration proceedings were conducted by two arbitrators, one appointed by the appellant and the other by the Government and ultimately, on the 10th January, 1977, the said two arbitrators gave a unanimous award holding that the appellant was entitled to the renewal of the two leases issued on 14-11-1 67 and 25-3-1963 in his name and that the department was not justified to refuse the renewal of the said leases in his favour. Neither party was held entitled to the renewal of the prospecting licence issued on 27th September, 1972.

18. ' It may be mentioned that the arbitrators, while delivering the award had stated that-. "this case relates to a dispute between the Government of North-West Frontier Province on the one hand and Malik Muhammad Urfan son of Sher Zaman Khan on the other, about renewal of Mining lease licences of soapstone located near village Khanda Khu, Tehsil Mansehra, District Hazara. 1 he dispute has been referred to us for arbitration in pursuance of rule 77 of the Pakistan Mining Concession Rules, 1960."

19. (Underlining is ours)

20. ' However, while implementing the Award, the respondent No, 2, in its letter dated 22-6-1977, addressed to both the parties, observed :- "The Peshawar High Court, Peshawar, vide Order No, 235 of 1975, dated 28-5-1975 appointed a council of arbitrators in the case regarding the mining leases and prospecting licence cited in the subject. The council have submitted their award. The following decisions are, therefore, notified in accordance with the arbitration award."

21. ' These included the cancellation of the lease granted to respondent No, 6 and renewal of the leases to the appellant. Aggrieved by the decisions of the arbitrators, as notified by the Government on 22-6-1977, respondent No, 6 challenged the same by filing a Writ Petition (W. P. No, 407 of 1977) before the Peshawar High Court, Peshawar.

22. ' The contentions raised by respondent No, 6 before the High Court were that the impugned order dated 22-6-1977 passed by the respondent/Government was based entirely upon the Award given by the arbitrators, but the said award was illegal and a nullity and could not, therefore, form a valid basis for a decision. In this connection, it was submitted firstly, that the respondent herein was not a party to the dispute referred to the arbitration and referred to the following parts of the award :- "The Department was not justified to refuse to grant the renewal of lease in respect of two areas comprising of 122 acres and 4.19 acres when Malik Muhammad Urfan applied to the department for such renewals. We, therefore, hold that Malik Muhammad Urfan is entitled to the renewal of these leases in his name."

23. Again, he pointed out that in the award it was stated that :- "The case relates to a dispute between the Government of N.-W. F. P., on the one hand and Malik Muhammad Urfan son of Sher Zaman Khan on the other, about renewal of Mining Lease/Licences of soapstone located near village Khanda Khu, Tehsil Mansehra, District Hazara. The dispute has been referred to us for arbitration in pursuance of rule 77 of the Pakistan Mining Concession Rules, 1960."

24. ' These recitals from the award, according to respondent No, 6 (herein), showed that he was neither considered a party nor was a party to the dispute which was referred to arbitration and in relation to which the award was to be given. The dispute, which the arbitrators were called upon to decide, was the dispute between the Government on the one hand and Malik Muhammad Urfan (appellant herein) on the other, and not between any other party (like respondent No, 6) who had no dispute with the Government over any matter, nor indeed was made a party to the arbitration. Another contention raised on behalf of respondent No, 6 herein before the learned Judges of the High Court and noticed by them in their judgment was that the dispute regarding the renewal of a lease was not at all referable to arbitration under rule 77 of the Pakistan Mining Con- (Here in italics) ' cession Rules, whereunder disputes concerning (I) the right of the licensee to a prospecting licence or mining lease, or (2) the cancellation of licence or lease or any violation of the understanding given in accordance with sub- . Rule (6) of rule 9, or any breach of the provisions thereof, shall be determined by the two arbitrators. As the matter of renewal of the lease or refusal to renew the lease was not a matter which could be considered as a dispute for reference to arbitration within the meaning of rule 77, the award of the arbitrators to the effect that respondents I and 2 were not justified in refusing to renew the lease of Malik Muhammad Urfan (appellant herein) was not lawful. -The impugned order of the Government dated 22-6-1977 not being an independent decision but simply being based on the award, which itself was not valid, was, therefore, not legally sustainable.

25. ' The appellant herein (and respondent No, 3 before the High Court in the said writ petition) does not appear to have challenged before the High Court the correctness and validity of the above contentions, namely, that the lease of 80.55 acres granted to respondent No, 6 on 29-3-1975 could not be cancelled while considering the dispute between him and the Government in regard to the question whether the leases granted to him in 1967 and 1968 should have been renewed or the contention that a dispute regarding the question of renewal or refusal to renew a lease cannot be referred to the arbitration under rule 7.7 of the Mining Rules, but appears to have justified the cancellation of the lease granted to respondent No, 6 on 29-3-1975 on the ground that the lease granted to respondent No, 6 (herein) could be cancelled because the latter had committed a default in the payment of rent, royalties etc. ' The respondent No, 6 herein met this plea by submitting that the Government had not justified its order of cancellation on this ground, but based it simply on the award. Moreover, the appellant herein (Malik Muhammad Urfan) was competent to refer to arbitration only his own dispute and not a dispute between a third party and the Government and that in any case, the issue of payment or non-payment of royalty etc. Was not referable to the arbitration under rule 77 of the Mining Rules.

26. ' The learned Judges of the High Court upheld the contentions raised on behalf of respondent No, 6 and were pleased to accept the writ petition filed by him (vide their judgment dated 22-12-1977). In the course of their judgment, the learned Judges observed that the application of Malik Muhammad Urfan (appellant herein) for renewal of the leases in question in his name was time- barred under rule 58 of the Mining Rules, as these applications were not submitted less than '12 months previous to the expiry of period of the said leases. They went on to add that :- "Rule 77 of the Pakistan Mining Concessions Rules provides that any question or dispose regarding the licence or lease and . Any matter or thing connected therewith shall be referred to the Central Government in the appropriate Ministry whose decision shall be final. It also provides that any dispute concerning (1) the right of the licensee to a prospecting licence or mining lease, or (2) the cancellation of licence or lease for any violation of the understanding given in accordance with.

27. Sub-rule (6) of rule 9, or any breach of the. Provisions thereof, shall be determined by two arbitrators, one to be nominated by the Central Government and the other by the licensee or lessee and in the case of disagreement between the arbitrators, by. a Judge of the Supreme Court of Pakistan to be appointed by the arbitrators in writing and the decision of such arbitrators or such Judge as umpire as the case may be shall be final."

28. ' The conclusion reached by the learned Judges was that the dispute, which could be referred to the arbitration under rule 77 was the dispute connected with the lease which expired on 14-11-1972.

29. Since rule 58 did not confer any right on a lessee to get renewal of the lease which is discretionary with the Government, the matter of renewal of the lease or refusal to lease was not a matter which could be considered as a dispute for the purpose of a reference to arbitration within the meaning of rule 77, and "the award of the arbitrators that respondents 1 and 2 were not justified to refuse to renew the lease of Malik Muhammad Urfan was thus, reduced to a nullity", according to the learned Judges.

30. ' The learned Judges further fount that respondent NO. 2 was under the impression that the High Court had given directions for reference to arbitration about the mining leases over 122 acres and 4.19 acres for soapstone and prospecting licence over 34.91 acres and that the arbitrators had been appointed by the High Court which was not the case.

31. ' The learned Judges also appear to have held that there was no dispute before the arbitrators about the grant or mining lease for soapstone over 80.55 acres of land, situated in village Khanda Khuh, Tehsil and District Abbottabad to respondent No, 6, which was granted to the firm vide 'After dated 29-3-1975. The lease of the respondent had been cancelled as a result of the award given in favour of Malik Muhammad Urfan (appellant) on the ground that he was entitled to the renewal of the lease of the entire area, although the question of renewal of the old licensee being no longer alive issue was not referable to the arbitration and, therefore, the arbitrators had no jurisdiction to entertain such a dispute, as their, jurisdiction was limited to what could be lawfully referred to them.

32. ' The learned Judges also appear to have accepted the plea of respondent No, 6 that the decision of respondents Nos, 1 and 2 notified on 22-12-1967, was based on the award, which was not valid and that it was not an independent decision' and being founded on an invalid foundation was, therefore, not sustainable. Furthermore, respondent No, 6 was not heard or granted any reasonable opportunity to show cause as to why- the lease granted to him on 29-3-1975 should not be cancelled.

33. ' As a result of these findings, the directions contained in the letter of the Government dated 2.-6- 1977 that the mining lease granted to the respondent No, 6 vide letter dated 29-3-1975 should be cancelled, were set aside and the consequential directions that the same be restored to Malik Muhammad Urfan appellant, was held to be ineffective. As against their rights. It was also directed that the possession of the area, if it had already gone out of their hand should be restored in their favour. Hence this appeal by Malik Muhammad Urfan before this Court.

34. ' Sardar Muhammad Iqbal, learned counsel for the appellant, in the course of a very learned address which he was good enough to supplement by a note in writing submitted that he accepted the position that the order of the Government dated. 22-6-1977 was based on the award of the arbitrators dated 10-1-1977 ; but contended that the constitutional jurisdiction of the High Court could not have been invoked by the respondent No, 6 in order to challenge the validity of the award since this was possible only under the provisions of the Arbitration. Act. Hence the High Court erred in entertaining the challenge to the validity of the award in its constitutional jurisdiction and were not justified in law in proceeding to set it aside. It was further contended that the argument of the respondent that a dispute with regard to the question that the matter regarding the renewal of a lease was not covered by the arbitration clause, and, therefore, no reference could be made to the arbitrators for determining such a dispute, was not correct. Moreover, respondent No: 6 could not even otherwise question the validity of the reference to arbitration since it claimed under the Government and was bound by the award as much as its principal, namely, the Government. It was also contended that the argument this the two leases earlier granted in favour of the appellant could not be renewed . Under rule 58, as no application was filed within the prescribed time for renewal and, therefore, there was no question of any reference to arbitration, hence the award was a nullity, was not correct. In fact, the grant of the lease to respondent No, .6 on 29-3- 1975 of 80.55 acres was void ab initio.

35. ' As regards the submission of the respondents that the Government had not heard them before notifying the award the correct position was that irrespective of the fact that the letter dated 22-6- 1977 of the Government was liable to be set aside for any reason whatsoever the award could stand independently per its own force.

36. ' In support of the contention that the jurisdiction of the High Court could not be invoked for setting aside the award, the learned counsel submitted that no party can resort to the constitutional jurisdiction of the High Court in order to question the existence of the validity or effect of an arbitration agreement or an award unless the award is given in a statutory arbitration. In all other cases, the aggrieved party must invoke the jurisdiction of the Court under the Arbitration Act. This is so even if the statute while providing for arbitration itself lays down any condition necessary to be fulfilled before resort can be had to the arbitration clause but makes no further provision as to how the arbitration is to take place, and how the award is to be executed or challenged. Thus, even to challenge the validity of the reference to arbitration on the ground that a prerequisite had not been complied with and there was no question of arbitration and the award was invalid resort to the provisions of the Arbitration Act was necessary. However, it only in those cases where a statute which makes definite provisions as to how arbitration is to take place ; how the award is to be executed ; how it is to be challenged and what would the consequences of failure to challenge the same under that statute or not to comply with or execute the same will be and those provisions are inconsistent with certain provisions of the Arbitration Act, then section 46 of the Arbit- ration Act, itself excludes application of the Act to such an arbitration. Moreover, in such a case, the statute itself provides for a complete code so far as arbitration in the matters relating thereto are concerned. If the statutory provisions are not adhered to and the statute provides for no remedy, or it is not efficacious or effective, resort can certainly be had to the constitutional jurisdiction of the High Court and a writ petition will be competent. In support of these submissions attention was invited to Balreddy v. Jt. Registrar (1), Ali Babb. v. Ali Kablr (2), District Co-operative Federation v.

37. Registrar, Cooperative Societies (3); Engineering Mazdoor Subha v. Hind Cycles Ltd. (1); Bahadur Singh v. District Judge, Rampur (2); Gujranwala Central Cooperative Bank Ltd. v.

38. Muhammad Feroze (3) and Babu Muhammad Refiq v. Registrar, Co-operative Societies (4).

39. ' However, according to Sardar Muhammad Iqbal, the present case was not one of the last mentioned type. There was no provision in the Regulation of Mines and Oil-Fields Development (Government Control) Act, 1948 which was inconsistent with any provision of the Arbitration Act ; rather no provision at all in this respect was made by the 1948 Act. So for as the Pakistan Mining Concession Rules, 1960, are concerned, the only rule relevant providing for arbitration was rule 77.

40. There was no other rule providing for machinery under which. Arbitration was to take place, or the award was to be executed. Furthermore, paragraph 79 of the Second Schedule, Part 11, which has been enacted, in exercise of the powers under section 2 (2) of the Act and rule 24 of the rules, pertains to arbitration and is laid down :- "It is further mutually agreed that such arbitration. Shall be a condition precedent to the commencement of any action at law and that the provisions of the Arbitration Act, 1940, and of the rules thereunder and any statutory modification thereof shall be deemed to apply and be incorporated in this lease."

41. ' By virtue of paragraph 79 ibid the Arbitration Act and the first Schedule thereof, have to be read as a part of the lease itself. This appears to have been done to remove all doubts. Otherwise, also by section 45 of the Arbitration Act, the provisions of the said Act have been made binding on the Government. And section 46 makes applicable the provisions of the Arbitration Act to every arbitration under any other enactment for the time being in force, as if the arbitration was pursuant to an arbitration agreement and as if that other enactment was an arbitration agreement, except in so far as the Arbitration Act is inconsistent with that other enactment or with any rules made thereunder.

42. ' The learned counsel submitted that if sections 45 and 46 of the Arbitration Act were read together with Rule 77 of 1960 Rules and paragraph 79 of the Second Schedule, Part II of the said rules, the following position emerged

(a) Rule 77 of the 1960 rules and paragraph 79 of the Second Schedule, Part II, are deemed to be an "arbitration agreement".

(b) The Arbitration Act and its Schedule have to be read as an integral part of the lease/arbitration agreement.

43. (c)The provisions of the arbitration Act are as much binding on the Government as on any other individual.

(d) The arbitration shall be a condition precedent to the commencement of any action at law by any of the parties to the lease/arbitration agreement.

44. ' Thus, respondents Nos, 3 to 6 could challenge the validity of the reference to arbitration or the resultant award only by resorting to the provisions of the Arbitration Act, as they were claiming under the Government/Department' which was a party to the arbitration agreement. According to subsection (2) of section 31 of the Arbitration Act, it is provided that :- "all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court, in which the award under the agreement has been, or may be, filed, and by no other Court."

45. Thus, the question whether or not rule 77 of the 1960 Rules, read with paragraph 79 of the Second Schedule, Part II, constitutes a valid arbitration agreement or whether the reference was competent or not could very well be canvassed by means of an application under subsection (2) of section 31 of the Act. Again, according to section 33 of the Act : - "any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavit."

46. ' This provision, according to the learned counsel, covers persons such as respondents Nos, 3 to 6, who were claiming under the parties to the arbitration agreement. Section 32 then ousts the jurisdiction of the civil Courts also inasmuch as it is provided therein :- "Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act."

47. ' The second part of the section is a complete embargo as to the setting aside, or affecting the arbitration agreement or an award, in any other manner except as provided in the Arbitration Act itself. Thus, the Arbitration Act provided for an efficacious remedy to respondents Nos, 3 to 6 if they intended to challenge the existence, effect or validity either of the lease/arbitration agreement or the Award.

48. ' In support of these submissions, the learned counsel relied on Deokinandan v. Basantlal (1), Govindlal v. Manekchowk Spinning & Weaving Mills Co. (2), Maung Poit v. Ma Mu Li (3) at 461, Rashid Jamshed Sons & Co. v. Moolchand Jethajee (4), Lutufullah v. Muhammad Sidik (5), Bojranglal Laduram v. Ganesh Commercial Co. (6), Seethamma v. Annapurnamma (7), East India Film Studios v. P. K. Mukherjee (8), Suyeed Ullah Khan v. Civil Judge, Sultanpura and others (9), Shiva Jute Baling Limited v. Hindley & Co. Ltd. (10), Messrs D. Gobindram v. Messrs Shamji K. & Co. (11), Heyman v.

49. Darwins Ltd. (12),. Ali Aabir v. All Kabir (13), Schinara Mohan v. Chief Commissioner,' Tripura (I), Balkishen v. Panna La! (2), Afaq Ahmad Ansari v. Zamir Hasan Ansari (3), Abdul Karim v. Bashir Ahmad (4), Badri Narayan Agarwala v. Pak. Jute Balers Ltd. (5), Abdul Karim v. Bashir Ahmad (6), Muhammad Amin Muhammad Bashir Ltd. v. Zafar Colton Ginners (7) and Haji Soomar Haji Hajjan.v.

50. Muhammad Amin Muhammad Bashir Ltd. (8).

51. ' Actually, there was not much dispute between the parties with regard to the question that in case there is a dispute between the contestants relating to any matter that has been referred to arbitration, the only remedy open to the parties is under the Arbitration Act and not by invoking the constitutional jurisdiction of the High Court. The stand of the respondents on this question really was that the arbitration, which was conducted in the present case took the character of a statutory arbitration and was not in the nature of an arbitration between the private parties and, in such, a case of writ petition was not only competent, but, in fact, was the only appropriate remedy. Sardar Muhammad lqbal, as regards this aspect of the matter, elaborated his earlier submission that reading the provisions of section 46 of the Arbitration Act, rule 77 of the 1960 Rules and paragraph 79 of Part lI of the Second Schedule only, a private agreement was constituted between the parties and the position of the Government, in view of section 45 of the said Act, was no better than that of a private party to an arbitration agreement ; pursuant to such an agreement, the reference to arbitration made by the parties was a private act of two individuals and that the arbitrators, whether or not they were public functionaries, while dealing with a matter, so referred to them, would not be deemed to be acting in connection with the affairs of the Federation, a Province or a Local authority, but only as private arbit-rators, with the result that the Arbitration Act, 1940, would apply with full force and since it provides an alternate remedy, which is more efficacious complete and adequate, Article 199 of the 1973 Constitution cannot be utilised as a substitute for the normal remedy provided under the Arbitration Act. Consequently, in the circumstances, the writ petition filed by the respondents 3 to 6 was not entertain able.

52. ' As regards the finding of the learned Judges of the High Court in the impugned judgment that the renewal of the lease on 29-3-1975 was not covered by the arbitration clause and on the ground that the matters enumerated in rule 77 of the Mining Rules, 1960, in regard to which a reference to the arbitration was possible did not include the question of the renewal of a lease, it was submitted that even if this was so, the matter was covered by the provisions of paragraph 79 of Part H of the Second Schedule because the expression "any dispute concerning the right. Of the lessee to a mining lease" used in paragraph 79 included the right of a lessee to renewal of a lease. The absence of the word "renewal" did not imply that the same was not covered by it, because the terms "lessee" and "mining lease" when read together in the context in which they were used made it clear that renewal of a mining lease was implied in the expression "dispute concerning the right of the lease to a mining lease". Attention was invited to Willesford v. Watson (9) and Russel on Arbitration (18th Edition at edge 76) in this connection.

53. ' As regards the suggestion that the provisions of paragraph 79 being inconsistent with the provisions of rule 77 and must, therefore, yield to them in the relevant regard, reference was firstly made to section 2 of the Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948, which lays down that the appropriate Government shall have the power to make rules inter alia providing for the circumstances under which renewal of a lease may be refused or where granted may be revoked. Thus, the renewal of the lease was provided for by the Act itself and rules could provide for the same. So far as paragraph 79 of Part II of the Second Schedule is concerned, it has the same force as rule 77 itself and even if there was no provision for any particular matter in rule 77, the same could lawfully be made in paragraph 79. Under subsection

(2) of section 2 of the 1948 Act, the appropriate Government had the power to provide for the "conditions in accordance with which the grant or renewal of a mining lease may be made and the prescribing forms for the execution or renewal of such lease Rule 24 then lays 'down that "the.... .......... .......Mining lease shall be in the form set out in Part II of the Second Schedule hereto and shall include such additional clauses relating to ancillary matters as the Central Government may deem fit to insert On the basis of these references, the learned counsel argued that the argument that in case of any inconsistency between rule 77 and paragraph 79, the latter must yield to the former was not valid because both rule 77 and paragraph 79 having been framed under a statutory provide could stand per their own force and independent of each other. The reference to arbitration to determine whether or not the appellant was entitled to the renewal of his leases being covered by paragraph 79 was, therefore, competent in law.

54. ' The learned counsel further submitted that respondents 3 to 6 had, in fact, no locus standi to question the validity of the reference to arbitration on the ground that they were claiming under respondents 1 to 2 (Government and the Directorate of Industries). If respondents 1 and 2 could not challenge the validity of reference to arbitration, respondents 3 to 6, who were claiming under them, were equally debarred. From doing so. In support of this submission, it was pointed out that when the appellant filed Writ Petition No, 235 of 1975 to challenge the grant of lease by respondents 1 and 2 in favour of respondent No, 6 (the Firm consisting of respondents 3 to 5 and constituted by them), respondents 1 and 2. Took up a, definite position in the written comments that the writ petition was not maintainable in view of the provisions of rule 77 of the Pakistan Mining Concession Rules, 1960 and paragraph 79 of the Second Schedule, Part II (Staudara Form of Mining Lease). The High Court also, while dismissing the writ petition of the appellant by its order dated 28-5-1975 observed as follows :- "Even otherwise, rule 77 would come in the way of the petitioner: The language of this rule is all- pervading and it would, therefore, include the reference to two arbitrators whose decision shall be final. The grievance of petitioner is obviously in regard to the lease of a part of the area and thus the dispute raised by him would be covered by this rule." #TBS I the appellant and the Government asked respondent No, 6 to nominate their arbitrator, they did so without raising any objection to the competency of the reference. It was only later when on an objection raised by the appellant that only two arbitrators could, under law, be nominated (one by the lessor and the other by the lessee) that the Government withdraw its earlier letter asking the respondents 3 to 6 to nominate their arbitrator, did they start raising objections against the reference to arbitration. Hence, the respondents were precluded from raising any objection to the competence or the validity of reference. Shortly put the submissions of the learned counsel on the point were firstly, that it was on the objection of respondents Nos, 1 and 2 that the appellants' earlier writ petition was dismissed on the ground that he could have resort to the arbitration clause ; secondly, respondents Nos, 1 and 2 had nominated their arbitrator and permitted respondents 3 to 6 participate in the proceedings and present their case before the arbitrators and thirdly, respondents Nos, 3 to 6 did present their case before the arbitrator nominated by respondents Nos, .1 and 2 but intentionally did not participate in the arbitration proceedings, of which they were fully aware. It was, therefore, too late for them to take any valid exception to the reference or the competence of the arbitrators to deal with the subject-matter of reference, either in the High Court, or in this Court.

55. As for the finding of the High Court that the two leases in favour of the appellant could not be renewed as they had already expired on account of the failure of the appellant to submit any application for renewal within the stipulated period and, therefore, there was no question of any reference to arbitration and, consequently, the award was of no legal consequence; it was submitted firstly, that as the appellant had applied for renewal of the two leases before the actual expiry of their terms and there is no penalty clause in para. 58 of the Schedule, which relates to the matter of renewal, the department could take action on the said applications and, secondly, and more importantly that as the writ petition filed by the respondents was not competent for setting aside the award such a question could not be determined by the High Court. Further, since the respondents had not challenged the findings of the arbitrators by the proper procedure they cannot be permitted to do so now in this Court. The arbitrators had clearly held that the refusal to renew the leases was not because the appellant's application was time-barred under para. 58 but the real reason was that the department had illegally made the assignment of the lease from Malik Muhammad Urfan to "Malik Muhammad Urfan & Partners" on 3-5.1972 and in spite of the Law Department's opinion that the assignment order was void and illegal, the said order was not vacated by the department till 9-11-1974.

56. The learned counsel for the appellant further submitted that even after the expiry of the lease period, the appellant continued in possession and had been paying the royalty and other departmental dues. Therefore, he was a tenant holding over and, under the circumstances, is deemed to have held over upon all the terms and conditions of the original lease. Moreover, an arbitration clause does not necessarily become wholly spent up and inoperative upon the expiration of lease or even upon surrender of possession of the land; hence the contention that after the expiry of the lease no reference to arbitration could be made, is not correct. The matter could be referred to arbitration even at that stage and the arbitrators would, accordingly, have jurisdiction in relation to all the matters in dispute. #TBE ' Thus, respondents 1 and 2' were precluded from contending that reference to arbitration was not competent. Similarly, respondents 3 to 6 were also debarred from challenging the reference to the arbitration. Not only because they claimed under the Government, but also because when, after the dismissal of the writ petition, the matter was referred to arbitration at the request of the appellant and the Government asked respondent No, 6 to nominate their arbitrator, they did so without raising any objection to the competency of the reference. It was only later when on an objection raised by the appellant that only two arbitrators could, under law, be nominated (one by the lessor and the other by the lessee) that the Government withdraw its earlier letter asking the respondents 3 to 6 to nominate their arbitrator, did they start raising objections against the reference to arbitration. Hence, the respondents were precluded from raising any objection to the competence or the validity of reference.

57. ' Shortly put the submissions of the learned counsel on the point were firstly, that it was on the objection of respondents Nos, 1 and 2 that the appellants' earlier writ petition was dismissed on the ground that he could have resort to the arbitration clause ; secondly, respondents Nos, 1 and 2 had nominated their arbitrator and permitted respondents 3 to 6 participate in the proceedings and present their case before the arbitrators and thirdly, respondents Nos, 3 to 6 did present their case before the arbitrator nominated by respondents Nos, .1 and 2 but intentionally did not participate in the arbitration proceedings, of which they were fully aware. It was, therefore, too late for them to take any valid exception to the reference or the competence of the arbitrators to deal with the subject-matter of reference, either in the High Court, or in this Court.

58. ' As for the finding of the High Court that the two leases in favour of the appellant could not be renewed as they had already expired on account of the failure of the appellant to submit any application for renewal within the stipulated period and, therefore, there was no question of any reference to arbitration and, consequently, the award was of no legal consequence; it was submitted firstly, that as the appellant had applied for renewal of the two leases before the actual expiry of their terms and there is no penalty clause in para. 58 of the Schedule, which relates to the matter of renewal, the department could take action on the said applications and, secondly, and more importantly that as the writ petition filed by the respondents was not competent for setting aside the award such a question could not be determined by the High Court. Further, since the respondents had not challenged the findings of the arbitrators by the proper procedure they cannot be permitted to do so now in this Court. The arbitrators had clearly held that the refusal to renew the leases was not because the appellant's application was time-barred under para. 58 but the real reason was that the department had illegally made the assignment of the lease from Malik Muhammad Urfan to "Malik Muhammad Urfan & Partners" on 3-5.1972 and in spite of the Law Department's opinion that the assignment order was void and illegal, the said order was not vacated by the department till 9-11-1974.

59. ' The learned counsel for the appellant further submitted that even after the expiry of the lease period, the appellant continued in possession and had been paying the royalty and other departmental dues. Therefore, he was a tenant holding over and, under the circumstances, is deemed to have held over upon all the terms and conditions of the original lease. Moreover, an arbitration clause does not necessarily become wholly spent up and inoperative upon the expiration of lease or even upon surrender of possession of the land; hence the contention that after the expiry of the lease no reference to arbitration could be made, is not correct. The matter could be referred to arbitration even at that stage and the arbitrators would, accordingly, have jurisdiction in relation to all the matters in dispute.

60. ' Sardar Muhammad Iqbal also contended that the grant of lease of 80.55 acres to respondent No, 6 on 29-3-1975 was ab initio void. In this connection, it was pointed out that the applications of the appellant for renewal of the two leases were already pending when on 29-3-1975 the department without affording any opportunity to the appellent of being heard leased out an area of 80.55 acres to respondent No,

6. This act of the Department/Government was illegal and without lawful authority. Reliance, in this connection, was placed on Rab Nawaz Qureshi:v. Government. Of West Pakistan etc. (1).

61. ' Coming finally to the legal status of the Government's letter dated say-22.6-1977, it was submitted that undoubtedly the Department was not right in ing that the Peshawar High Court had appointed a Council of Arbitrators and the true factual position was that one of the arbitrators was nominated by the Government and the other by the appellant and that the High Court had merely observed, while dismissing the earlier writ petition of the appellant, that the proper remedy for the parties was to have recourse to arbitration; but this factual mistake was not of much significance, so far as the merits of the case were concerned. A perusal of the letter of the Government dated 22-6-1977 made it clear that the Department had only notified and given effect to the decisions as contained in the Award and had not itself, in any way, determined the inter se rights of the parties. The rights of the parties were determined by the award itself. There was, furthermore, no ground for not giving effect to the award. The respondents had full knowledge of the proceedings before the arbitrators and had placed their case before them, though they elected not to appear formally before them.

62. There was, thus, no denial of justice to them and, in any case, they themselves were to blame for not availing of the opportunity to place their case before the arbitrators formally. In this connection, reliance was placed on Ram Narayan v. Dinapore Cantt.. Board (2) and Nana Ofori Alta II v. Nana Abu Bonsra (3). Hence the respondents could not have any legitimate complaint against the decision of the arbitrators. As the letter of the Government dated the 22nd June, 1977 had no independent status of its own but merely notified the decisions of the arbitrators to the parties concerned, there was no valid ground either, on which it could be challenged. It was further submitted that the award could independently stand per its own force irrespective of the fact whether the letter dated 22nd June, 1977, of the Government was liable to be set aside for any reason. In this connection, the case Shree Meenakshi Mills v. Patel Bros. (4) was referred to and it was submitted that irrespective of the fact whether letter dated 22-6-1977 of the Government was liable to be set aside for any reason whatever, the award could independently stand per its own force.

63. ' Mr. S. M. Zafar, with his usual clarity and lucidity, submitted in reply that the award given in a proceeding which was between,the Government of the N.-W. F. P. And the appellant, to which the respondent No, 6 was neither a party nor ever consented could not take away the right conferred on the respondent by the grant of the lease in his favour on the 29th March, 1975. In this connection, he submitted that the appellant Malik Muhammad Urfan had submitted an application for renewal of his lease on 26-10-1972 which was not in terms of paragraph 58 of the Schedule. On 10-11-1974 and 11-11-1974, the Department informed the lessees that the two leases had expired and a direction was also issued to them for handing over possession ' to the Deputy Commissioner, Hazara, who was asked to get the possession of the premises.

64. Thereafter, on 8-3-1975, a high powered Mine Committee of the N.-W. F. P. Government, treating the leased area to be free, decided to divide the earlier leased area of 161 acres into two equal units of 80.55 acres each and decided to give them on lease afresh. On 12-3-1975, the department advised the appellant and the respondent No, 6 (Tanawal Mining Corporation) to apply for the lease of the said two units. The answering respondent applied, accordingly, on 15-3-1975, while the appellant applied on 27-3-1975. The allotment of one units of 80.55 acres was made to the respondent on 29-4-1975 and the other lot to the appellant on 13-8.1975 and the parties took possession of their respective leased areas. The learned counsel argued that the respondent, by virtue of the allotment of 29th March, 1975 and on account of the execution of the -lease deed and the delivery of possession got a valuable right in the properly, namely, the right to hold the lease area and to.

65. Work the mine in accordance with the statutory rules. Thereafter, he spent a huge amount in working the mine. This right could not be nullified in a proceeding to which respondent No, 6 had neither consented to nor was a party.

66. ' Elaborating his contention that the award was not binding on the respondent, Mr. S. M. Zafar pointed out that the allotment was made in favour of the respondent on 29-3-1975 and he took possession of the mining lease. The appellant tiled Writ Petition No, 235 of 1975 on 1-4-1975, which was dismissed in limine on 28-5-1975 inter a/ia on the ground that the lease had already expired and that there was no right of renewal, but on account of the observation that under rule 77 of the Mining Rules, 1960, an arbitration proceeding was possible, the appellant for the first time wrote a letter on 2.8-1975 to the relevant Minister seeking arbitration upon which on 25-11-1975 he was allowed to appoint an arbitrator and the reference commenced. The award was finally given on 10- 1-1977. The respondent was not a party to the proceedings before the arbitrators nor did he consent to the authority of the two arbitrators. In fact, he objected to the proceedings vide letter dated 5-4-1976. As for the plea that by virtue of paragraph 7 of the Schedule to the Arbitration Act, the award is binding on the respondent No, 6 who would fall within the phrase "person claiming under the party" because he claimed under the Government of N.-W. F. P., which was a party to the arbitration proceedings, therefore, the award was binding upon him, it is submitted that the award would have been binding upon the respondent only if he had acquired any right from the Provincial Government subsequent to the reference of the dispute to the arbitration. In the present case, the respondent acquired title on 29th of March, 1975 much before the reference to the arbitration which took place on 25th November, 1975. The right created in favour of the respondent could not be decided in an arbitration proceeding undertaken subsequently in his absence. In this connection, it was also pointed out that after the issuance of the allotment order and the execution of the lease in favour of the respondent, the possession of the lease was also taken and, therefore, the locus penitential of withdrawing this order did not exist in favour of the Government. As such at no point of time the respondent could be treated as claiming under the Government. Once the allotment was made and the lease executed, the respondent obtained an independent right to a mine which came to vest in him by the operation of law and by the exercise of statutory and executive function thereunder. Such a right is not under the Government but can be considered independent of it and, therefore, the award between the Government and the appellant would not adversely touch the rights of the respondent.

67. ' In support of the first part of the submission reliance was placed on Fazal Dad and others v.

68. Ahmad All and others (I) wherein it was observed that "to make a person a privy he must have acquired an interest in the subject-matter of action by inheritance, succession or purchase subsequently to the action " (underlining is ours). The right to the lease having been acquired by the respondent No, 6 before the commencement of the arbitration proceedings, he cannot be treated as a privy and, therefore, will not be covered by the phrase "person claiming under the party".

69. ' In short, according to Mr. S. M. Zafar, in case of an arbitration proceedings the lis commences from the dale of the reference and consistent with the principle of res judicata it can bind only the parties to the reference or the privies who acquire a right subsequent to the reference. In support of these submissions Mr. S. M. Zafar relied upon paragraph 47, page 878 of Volume 3, of the American Jurisprudence under the Heading of "Effect (of awards) on Rights of Others not Parties to Agreement"

70. "The rule appears to be that third persons not parties to arbitration agreement or to a principal contract containing an arbitration clause, or claiming under or through such parties, but who may have an independent interest in the subject-matter of the arbitration by reason of law or by virtue of an independent agreement with one of the parties, are not bound by the arbitration agreement or by the award in the absence of waiver or ratification, and their rights and liabilities are to be determined independently thereof."

71. ' The respondent No, 6 got an independent interest in the lease by virtue of an independent decision of the Department. The respondent cannot, therefore, be treated as a party or privy.

72. ' Mr. S. M. Zafar also argued that when on 29-3-1975 the lease was granted to Tanawal Mining Coiporation (respondent No, 6) there did not exist any lease in favour of Muhammad Urfan, appellant, with the result that the department took possession of the lease area and granted fresh leases of one new area to the appellant and the other to the respondent No,

6. Once these events and legal steps had been completed any reference to arbitration could not effect the legal consequence and the rights created in favour of the respondents.

73. ' Mr. S. M. Zafar, further submitted that the right acquired by the respondent was not through any of the legal processes, such as inheritance succession but was a right acquired on account of the performance of a statutory function which is governed by various rules and the law. One of the principles applicable to the exercise of this statutory function is that the Government cannot withdraw an order after it has been conveyed and acted upon. In the present case, a valid lease was created in favour of the respondent and in pursuance thereof the respondent took possession and invested labour and money in the operation of the lease and the Government cannot withdraw this order unilaterally in a proceeding in which the respondent was not made a party.

74. ' Dealing with the argument that an arbitration clause will bind a valid assignee of a contract, it was submitted that this principle would be applicable in cases where during the continuance of the contract assignment was made in favour of another party. In this connection, rule 13 of the Mining Rules was referred to which contained a provision for the assignment of the lease. {{FOOTNOTE}}

(1) PLD 1960 Lah. 106 (Here in italics)

75. ' It is pointed out that during the continuance of the lease of the appellant, the assignment was approved in favour of Muhammad Urfan and Partners on 26-4-1972 and 3-5-1972 (which was withdrawn on 9-11-1974). If this assignment had continued and a question had arisen whether Muhammad Urfan and Partners would be bound by the arbitration clauses, the principles enunciated that the assignee was bound by the arbitration clause would have applied.

76. ' But in the present case there is no assignment of the lease in favour of the respondent. There is a new lease given to the respondent and, therefore, to bind the respondent to the arbitration clause or to the award given thereunder does not arise. The contention in other words is that when the whole contract is assigned to somebody then he is bound by the arbitration clause and would be a direct party to the arbitration proceedings and, accordingly, also bound by the' award.

77. ' Mr. S. M. Zafar, also contended that the right of renewal is not a dispute that could be referred under the Arbitration Clause. In this connection, it is submitted that the learned counsel for the appellant, Sardar Muhammad Iqbal, before this Court had submitted that the reference was made under rule 77 and paragraph 79 of the Schedule (although the appellant had not executed a formal lease wherein the terms of paragraph 79 might have been incorporated and furthermore, that paragraph 79 was not relied upon before the High Court). So far as rule 77 of the Mining Rules was concerned, the provision relating to the reference of a dispute to two arbitrators did not envisage a dispute pertaining to the renewal of the lease or licence. Thus, a dispute relating to the renewal of a lease was not at all referable for arbitration to the two arbitrators. This position was also not seriously controverted by Sa:dar Muhammad Iqbal, learned counsel for the appellant, who, in his address, had consistently relied upon paragraph 79 of the Schedule and urged that its provisions would cover the case as the said paragraph 79 provided :- "any dispute concerning the right of the lessee to mining lease can be referred to the two arbitrators."

78. ' And had submitted that since the right of the lessee to a mining lease includes the right to its renewal, this paragraph can be invoked to refer a matter to two arbitrators.

79. ' So far as paragraph 79 of the Schedule, on which Sardar Muhammad Iqbal relied upon, the right of the lessee to the lease mentioned therein, according to Mr. S. M. Zafar, pertains to his rights given in Part 11 of the Schedule (or the lease-deed), namely, paragraphs 1 to 7 thereof, such as the liberty to work, right to appropriate water, surface land, erect house, dig gravel and enclose fence etc. These are his rights to the mining lease and if any dispute arises about them they can be referred to the two arbitrators. This interpretation, according to the counsel, will also be consistent with the words which follow the phrase "dispute concerning the right of the lessee to the mining lease", being relied upon, namely, "or cancellation of this deed". If renewal was intended to be included, there was no difficulty to use the word "renewal" alopgwith the word "cancellation". It is, therefore, according to Mr. S. M. Zafar, clear that the dispute regarding renewal could not have been referred to the two arbitrators even under paragraph 79 of the Schedule..

80. ' Thus, in the present case, a dispute, which could not be referred to arbitration, has been so referred and a decision has been given even without impleading the respondent, who had acquired a vested right much prior to the reference itself.

81. ' The learned counsel also contended that apart from the fact that no objection was taken before the High Court to respondent No, 6 questioning the legality of the award under its constitutional jurisdiction, there was no bar to the award proceedings being challenged in writ jurisdiction. The reason was that these proceedings amounted to a statutory arbitration and were not merely in the nature of a private arbitration between two parties. Learned counsel submitted that even if it was assumed that the dispute relating to renewal of the leases could be referred to the two arbitrators, the reference to arbitration was being claimed on account of the provisions of rule 77 of the Mining Rules and the parties were bound to refer their dispute to the two arbitrators because of the compulsion of that rule. Even the lease is to be executed containing a reference to arbitration, because the rule makes it incumbent to do so. Thus, a reference to the two arbitrators in pursuance of rule 77 and paragraph 79 of the lease is a reference to the two persons to whom, by statute, the parties must resort. In this connection, attention is invited to R. v. Disputes Committee of the National Joint Council for the Craft of Dental Technicians and others (1).

82. ' Explaining the difference between private arbitration and a statutory arbitration, Mr. S. M. Zafar submitted that in the case of a private arbitration it is optional for the parties to go to the Court or to refer their dispute to arbitration, either to one or two or three or more arbitrators. But in a statutory arbitration, the parties cannot go to the Court and are required to have their dispute decided through arbitration only and the option to have one or any number of arbitrators is taken away and parties are restricted to resort to a particular manner of arbitration. According, the arbitration proceeding!' held in pursuance of rule 77 or paragraph 79 of the Schedule to the Mining Rules, 1960, would fall within the definition of a statutory arbitration.

83. ' Elaborating his submission further, it was painted out that the Mines and Mineral Development are regulated by the Regulation of Mines and Oil-Fields and Mineral Development (Government Control) Act, 1948 (XXIV of 1948). Section 2 provides for the framing rules including the rules for the grant of renewal and the other conditions of the lease. Section 4 gives these rules a legal status of being equal to an enactment, by declaring that any rule made under this Act shall have effect notwithstanding anything inconsistent therewith contained in any enactment. The Pakistan Mining Concession Rules of 1960 were promulgated in pursuance of these provisions and in rule 77 thereof some disputes are made referable to the Government for decision, while certain other disputes are to be determined by two arbitrators, one to be nominated by the Government and other by the lessee and that in the case of disagreement between the arbitrators by a Judge of the Supreme Court, who shall act as an umpire.

84. ' Thus, rule 77 provides for a different procedure for arbitration than is ordinarily allowed by the Arbitration Act inasmuch as it compels the parties to resort to arbitration and defines the type of the dispute that can be referred to arbitration as well as indicates how the arbitrators have to be appointed and what their number will be. A reference under this rule (rule 77) has all the trappings of a statutory arbitration. The inclusion of a similar clause in paragraph 79 of the lease deed is merely a compliance of rule 77 and does not change the nature of arbitration. {{FOOTNOTE}}

(1) (1953) 1 A E R. 327 ' The contention, therefore, is that the arbitration proceedings before the two arbitrators was in the nature of a statutory arbitration and the two arbitrators were performing a function conferred on them by statutory rules which had effect, notwithstanding its inconsistency with any other law (including the Arbitration Act). The functions they perform are not on account of an agreement between the parties but primarily and essentially because of the statutory compulsion which .Compels the parties to resort to arbitration for the decision of the specified disputes. The arbitrators are, therefore, performing a statutory function and a writ will issue to correct any error committed by them if they violate the rule or Act in excess of the limits permitted by the rule.

85. Reliance has been placed on Brooke Bond (Pakistan) Ltd. v. Conciliator appointed by the Government of Sind and others (1).

86. ' The learned counsel, in support of these submissions, relied upon the conduct of the appellant in the instant case. He pointed that when respondent No, 6, on being asked to do so, nominated its own arbitrator, the appellant objected to his doing so on the plea that appointment of three arbitrators was not possible in view of the terms of rule 77. Thus, by his own conduct, the appellant admitted that the present arbitration was a statutory arbitration. Otherwise, also because the panics, by law, are compelled to report to arbitration by two arbitrators whose decision effect rights and impose obligations, the said arbitrators can do so only within the limits provided by the statute under which they function. In case of transgression or excess of jurisdiction, the Court shall be entitled to interfere.

87. ' Mr. S. M. Zafar further submitted that, in the circumstances the respondent No, 6 had no other remedy available to him, except to move the High Court in its Constitutional Jurisdiction, inasmuch as the respondent had challenged the final order issued by the department, dated 22nd June, 1977, by which the lease in favour of the respondent was cancelled and that this was challenged on the , ground that the cancellation was in violation of the terms of the lease and without notice to the respondent.

88. ' The appellant, in order to justify the order of cancellation of the lease by the Government/Department bad relied upon the award. The High Court, therefore, was entitled to look into the validity of the award and set it aside so far as it affected the rights of the respondent.

89. Otherwise, also the Government, on the appellant's objection had decided that the respondent was not entitled to an independent arbitration.

90. ' The learned counsel submitted that the impugned order of the Government, dated 22-6-1977 was against the principles of the natural justice in other respects also. He pointed out that after the grant on 29-3-1975 of the mining lease for 80.55 acres and the execution of the lease-deed is favour of the respondent, the Government even if it found itself compelled to respect and follow the decision given in the award, dated 10-1-1977 was bound to give a notice to the respondent before passing its impugned order of 22-6-1977. In case, this was done and the respondent was heard he could urge before it that not only could his interests not be affected, but that the award itself was beyond the ambit of rule 77. In that case, the Government may have decided not to act upon the award and to require the appellant to go to the civil Court for making it a rule of the Court. By not providing this opportunity to the respondent to place its point of view before the Government that it was not bound to act upon the award, the Government was led to the arbitrary and incorrect conclusion that the award having been made {{FOOTNOTE}}

(1) AIR 1955 Hyd. 238

(2) AIR 1964 All. 185

(3) AIR 1966 All. 489

(1) AIR 1964 SC 874

(2) AIR .1975 All. 12

(3) PLD 1969 SC 252

(4) PLJ 1979 Quetta 56

(1) AIR 1941 Cal. 527

(3) A 1 R 1937 Rang. 459

(5) AIR 1946 Sind 117

(7) AIR 1953 Mad. 544

(9) AIR 1959 All. 330

(11) A I It 1961 SC 1285

(2) AIR 1934 -Born. 140

(4) AIR 1945 Mad. 371

(6) AIR 1951 Cal. 78

(8) AIR 1954 Cal. 41

(10) AIR 1959 SC 1357

(12) 1942 A C 356

(13) AIR 1964 All. 185

(1) AIR. 1970 Trip, 94

(2) A I it 1937 Delhi 108

(3) PLD 1935 Sind 282

(4) PLD 1967 Lab. 365

(5) PLD 1970 SC 43 D.I974 SC 61

(7) PLD 1974 Note .4 at p. 30 (8)' 1981 SCMR 129

(9) (1873) L R 8 Ch. 473

(1) PLD 1973 Lah. 153

(2) AIR 1958 Pat. 71

(3) PLD 1958 FC 68

(4) AIR 1944 P C 69

(1) PLD 1977 SC 237 ' by a council of arbitrators appointed by the High Court it was bound to accept it. The learned Judges of the High Court were, therefore, justified in concluding that the absence of a hearing to the respondent given by the Government before passing its order, dated Z2-6.1977 rendered the said order as void on account of non-compliance with the principles of natural justice.

91. This somewhat elaborate recital of the facts of the case as also of the respective contentions urged by the counsel of the parties appeared appropriate in defence to their effort and industry.

92. However, as most of the questions that were raised before us were not agitated and argued before the High Court and the said learned Court was not given any opportunity of dealing with them, it will not, therefore, be necessary to deal with all the points canvassed before us.

93. ' The admitted position is that the order of the Government, dated 22-6-1977 was not its independent decision but was based on the award of the arbitrators made on 10-l-l977 and was made in order to implement it. A reference to the said award shows that the dispute that referred to them for arbitration was in pursuance of rule 77 of the Pakistan Mining Concession Rules, 1960.

94. The said rule is couched in the following terms:- "R.

77. Arbitration.-Any question or dispute regarding the licence or lease, and any matter or thing connected therewith shall be referred to the Central Government in the appropriate Ministry whose decision shall be final provided that any dispute concerning-

(1) the right of the licensee to a prospecting licence or mining lease, or

(2) the cancellation of licence or lease for any violation of the undertaking given in accordance with sub-rule (6) of rule 9 or any breach of the provisions thereof, or

(3) the price of minerals pre-empted by the Central Government, or

(4) the price of plant purchased by the Central Government at the determination of the mining lease or earlier, or

(5) the compensation payable to the lessee for any loss or damage that may be proved to have been sustained by the lessee by reason of the Central Government taking control of works, plant and premises of the lessee, or

(6) the compensation payable to the lessee on the Central Government ' taking over all the rights of the lessee under any mining lease, shall be determined by two arbitrators-one to be nominated by the Central Government and the other by the licensee or lessee ; and in the case of disagreement between the arbitrators, by a Judge of the Supreme Court of Pakistan to be appointed by the arbitrators in writing and the decision of such arbitrators or such Judge as umpire, as the case may be shall be final."

95. ' The High Court, in its impugned judgment, found that a dispute with regard to the renewal of the lease or refusal to renew a lease was not a matter which could be referred to arbitration under rule 77 of the Mining Rules and, therefore, the award made by the arbitrators to the effect that respondents Nos, 1 and 2 were not justified in refusing to renew the lease in favour of the appellant "would be reduced to a nullity".

96. The above finding recorded by the High Court that a dispute concerning the question whether a lease should not be renewed is not referable under rule 77 of the Mining Rules for arbitration before the two arbitrators appears to us to be quite correct. Rule 77, reproduced above, shows that it consists of two parts. Under the first part of the rule, any dispute relating to the licence or lease and any matter connected therewith can be referred to the Government, whose decision shall be final.

97. Thus, under this part of the rule, reference can be made to the Government of all disputes, whose decision shall be final. However, so far as the` disputes which can be determined by the two arbitrators are concerned, they fall in the second category. In this category, disputes of six kinds have been enumerated and in case a disput arises between the lessee, on the one side and the Government on the other and falls in the category of disputes enumerated in this part, only such a dispute shall be determined by two arbitrators ; one to be nominated by the Government and the other by the lessee.

98. ' A perusal of the types of disputes included in this part of the Rules further reveals that it does not envisage a reference of a dispute pertaining to the renewal or refusal to renew the lease or licence to the arbitrators. Thus, the issue relating to the refusal to renew a lease if at all is referable under rule 77 to arbitration will be referable to the Government in the appropriate Ministry, whose decision shall be final. Thus, the fin ling of the High Court that the dispute in the present case relating as it did to a question with regard to the refusal to renew the lease could not be referred for arbitration to the two arbitrators and, therefore, its conclusion that the award reduced itself to a nullity does not appear to be open to objection.

99. However, the objection that was raised on behalf of the appellant and urged with great vehemence was that such a finding could not be given by the High Court inasmuch as any question regarding the effect, validity and existence of an award can only be raised before a civil Court and that too strictly in accordance with the provisions of the Arbitration Act of 1940 and that such a question cannot be raised before the High Court in its constitutional jurisdiction. Sardar Muhammad Iqbal advanced a very seriou argument, as already noticed in the earlier part of this judgment, that the legality and the validity of the award could not be challenged or be set aside by the High Court under Article 199 of the Constitution, but this, if it all, could be done under the provisions of the Arbitration Act of 1940. This contention, no doubt, is correct so far as it goes. But we observe that the objection being pressed before us was not urged by any party before the High Court at any stage. We have examined the written statement filed by the appellant herein (who was respondent No, 3 in the High Court), as well as the parawise comments, submitted by the respondents Nos, 1 and 2 herein and find that this objection was not taken by either of them in their written statements filed by them in response to the writ petition filed by respondent No, 6 (W. P. No, 407/1977) before the High Court. Nor has this point been urged in the oral arguments before the High Court. On the other hand before the High Court the award was sought to be sustained on the reasonin that the Government was justified in cancelling the lease granted on 29-3-1975 to respondent No, 6 on account of non-compliance by him of the terms and conditions, on which it was granted. Thus the High Court was not called upon to consider or adjudicate the question whether the existence, effect and validity of the award could or could not be questioned by it in its constitutional jurisdiction under Article 199 of the Constitution. If this question was raised, the High Court would then have been obliged to examine the further question which was raised by respondent No, 6 hereinbefore us that the arbitration proceedings in this case were, in fact, of the nature of a statutory arbitration and not that of a private arbitration and, accordingly, a writ petition was competent, as held by this Court in Brooke Bond (Pakistan) Ltd. v. Conciliator appointed by the Government of Sind and others (I). The failure to raise this objection resulted in the connected issue, namely, whether the arbitration proceedings in the instant case partook of the nature of a private or a statutory arbitration, also not being considered, discussed and finding thereon recorded by the High Court. The question, therefore, is whether this Court should decide these questions for the first time itself. In this connection we would firstly observe that the finding of the High Court to the effect that a dispute relating to refusal to renew the lease is not referable to the arbitration of two arbitrators under the provisions of rule 77 of the Mining Rules, 1950, is clearly correct. The only fault being found to this finding is that it was not open to the High Court to have given it and that it was only the civil Court who could have done so under the provisions of the Arbitration Act, on being properly moved in this behalf. But since the appellant herein did not object to the High Court examining this point it hardly lies in his mouth to question the decision of the High Court after the findings on this question went against him. The principle enunciated by this Court in the case of Ghulam Mohi-ud Din v. Chief Settlement Commissioner (Pakistan), Lahore and another

(2) would he attracted and precluded such a plea to be raised before us.

100. ' The submission, that in any case the question relating to the refusal to _renew the lease could be referred to the arbitration of two arbitrators under paragraph 79, Part VIII of the Schedule to the Mining Rules, which lays down that :- "R.

79. Arbitration.-If at any time during the continuance of this lease or after the determination thereof any question or dispute shall arise regarding this lease or any matter or thing connected therewith or the powers, duties or liabilities of the lessee hereunder or the amount or payment of any rent or royalty then and in all such cases the matter in difference shall be referred to the Central Government in the appropriate Ministry whose decision will be final provided that any dispute concerning the right of the lessee to mining lease or cancellation of this deed for any violation of the undertaking given in accordance with sub-rule (6) of rule 9 of the Pakistan Mining Concession Rules, 1960, or any breach of its provisions or any dispute connected with the price of the said mineral (sic) by the Central Government or price of plant purchased by the President at the expiration or sooner determination of this lease or compensation payable to the lessee in terms of clause 63 or compensation payable to the lessee on Government taking over all the rights of the lessee under the mining lease shall be determined by two arbitrators, one to be nominated by the President and the other by the lessee, and in case of disagreement between the arbitrators by a Judge of the Supreme Court of Pakistan to be appointed as an umpire by the arbitrators in writing and the decision of such arbitrators or the Judge of the Supreme Court of Pakistan as umpire, as the case may be, shall be final. And it is further mutually agreed that such arbitration shall be a condition precedent to the commencement of any action at Law and that the

(I) p L D 1971 SC 237 (2) PLD 1964 SC 829 ' provisions of the Arbitration Act, 1940 and of the rules thereunder any statutory modification thereof shall be deemed to apply and be incorporated in this lease. The venue of arbitration shall be Karachi." is also of no avail because this paragraph was neither relied upon by the arbitrators nor by the appellant hereinbefore the High Court and, consequently, the High Court did not have any opportunity to examine this question either. 13efore us, as is evident from the resume of the arguments addressed by the learned counsel for the parties noted in the earlier part of the judgment, the parties are seriously at variance on the question whether even paragraph 79 of the Schedule could cover the present case.

101. In the second place we observe that this Court while dealing with the question as to whether it should permit a question of law, not raised in the Courts below, to be raised in this Court for the first time has, in some cases, held that it will not do so. (See for instance Rai Allah Jowa)a etc. v. Akbar Khan and another (1), United Textile Mills Ltd. Faisalabad v. The Pakistan Industrial Credit and Investment Corporation Ltd., and others (2) and Sultan Muhammad Khan and another v. Federal Land Commission and others (3), while in several other cases this Court did allow questions of law to be raised for the first time before it and proceeded to decide them, with a view to doing complete justice in the case. It would thus appear that the question whether in a given case, this Court should allow a question of law to be raised before it for the first time lies in the discretion of the Court. No doubt, this discretion will be exercised with a view to advance the interests of justice and for doing complete justice in the cause. Viewed from this stand-point we consider that this is not a fit case in which we should exercise our discretion in favour of the appellant. In this connection, as already pointed out, a lease of 122 acres was granted to the appellant on 14-11-1967 for a period of five years and another lease of 4.19 acres to him on 25-3-1968 also for a period of five years. In terms of paragraph 58 of the Schedule, the application for renewal had to be made twelve months before the expiry of the said leases, which were due to expire on 13-11-1972 and 24- 3-1973 respectively. As the requisite applications were not filed in terms of the said paragraph but were moved on 26-10.1972, no action to renew these leases was taken and both the leases expired.

102. Thereafter, the Government declared on 10/11-11-1974 that the leases stood determined and directed the delivery of the possession of the leased areas to the Deputy Commissioner, Abbottabad. In the meanwhile, in the first instance, a writ petition was filed by Messrs Malik Muhammad Urfan and Partners and respondents Nos, 3 to 5 (Writ Petition No, 4)7/1974) for a direction to the Government to consider the application for renewal of the leases which had been submitted by the Firm on 13-4-1972. This writ petition was dismissed on 20-11-1974 by a Division Bench of the Peshawar High Court, wherein it was inter alia observed that :- "No rule or law was cited by the counsel for the petitioners to show that ' the respondents were bound to renew the lease in their favour."

103. ' Thereafter, when the Department had decided to pool the entire leased areas and to grant each of the two parties a five years mining lease over 80.55 acres each, another Writ Petition (Writ Petition 235/1975) was filed on 1-4.1975 in the Peshawar High Court. This time by the appellant seeking a direction to respondents 1 and 2 to grant the mining lease of the entire area of 161 {{FOOTNOTE}}

(1) 1981 SC M R 1055 (2) 1983 SCMR 397

(3) 1983 SCMR 797 ' acres in his favour and to restrain the said respondents from dividing the area and granting one part on lease to respondents 3 to 5 and the other to the appellant. A report was called for from the Department in connection with this writ petition and in paragraph 7 of the report, the Government took an unambiguous stand that the appellant having submitted his request for renewal of the leases on 26-10-1972, only one month before the date of the expiry of his first lease, whereas under clause 58 he was required to apply for redewal of the lease one year before the date of entry, he had no right to its renewal. Again in paragraph 8(b) it took the stand that "the mining lease for soapstone granted to the appellant has expired on 13-11-1972".

104. ' The Writ Petition was dismissed on 28.5-1975 by the High Court, observing, inter alia "petitioner did not apply for the renewal of his lease within a year before the expiry of the lease period and this position has been accepted by the learned counsel. In this view, therefore, respondent/Government seems to have been justified not to renew in favoucof the petitioner the lease for the entire area". (underlining* is ours).

105. ' This undisputed position instead of being allowed to settle down, however, was allowed to be diverted to a different and a stormier course by a further, but most unfortunate observation, that a dispute about the cancellation of a lease or licence could be referred to the arbitration of two arbitrators under rule 77 of the Mining Concession Rules of 1960. This observation was not only unfortunate in that it has resulted in the parties to remain locked in litigation for another nine years, but more unfortunate in the sense that it was also entirely erroneous in law.

106. ' On account of the legal position declared by the High Court while dismissing Writ Petition No, 457 of 1974 on 20-11-1974, the Department proceeded to act upon its decision to cancel the leases granted on 14-11-1967 and 25-3-1968 and the prospecting licence granted on 27-9-1972 and to grant fresh leases to both the partid. The Tanawal Mining Corporation (respondent No, 6 herein) was granted a lease of 80.55 acres on 29-3-1975 and-possession was taken by it over the leased area shortly thereafter. Similarly, the other lot was given to the appellant. Thus, a new situation came into existence. The respondent started working over his leased area from early 1975 and has now, we are informed, owing to his satisfactory performance been also granted a renewal of the lease for a fresh period. Thus, in the present circumstances, to allow questions to be agitated, which the appellant failed to agitate in the High Court, the result of which indulgence would be to again unsettle a settled position, does not appear to be at all desirable and would not, in any way, advance the cause of justice. We are, therefore, in these circumstances, not inclined to exercise our discretion in his favour.

107. The upshot is that the impugned judgment of the High Court is not liable to the interfered with. This appeal, accordingly, is dismissed, but the parties are left to bear their own costs.

108. [There in italics] {{URDU TEXT}}

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