1. ' This suit is for confirmation of the award, dated 5-4-1982. It was originally filed in Court on 17-1-1981 and was registered as Suit No,41 of 1981, but by order, dated 9-3-1982 it was remitted to the arbitrators for recording their reasons and after reasons were recorded by the arbitrators it has now been registered as Suit No,149/82. This order, will, therefore, govern the disposal of suit No,41 of 1981 and 149/82.
2. ' The confirmation of award is opposed by the defendant who has filed objection to it under section 30 of the Arbitration Act and has also challenged it by way of an application under section 33 of the Act. In order to understand the controversy fully it is necessary to mention here in some details the background of this case and the events which proceeded filing of the present award. On 9-1- 1980 the parties entered into an agreement which provided that plaintiff shall provide raw material for rolling of M.S. Round Bars and angles in the said agreement. The agreement further provided payment of advance sum of Rs, one lac to the defendant by the plaintiff. However, out of the advance of Rs, one lac Rs,40,000 was to be paid initially and balance of Rs,60,000 was to be paid after start of the factory of defendant. The defendant under the agreement was entitled to claim 6% wastage on the Finished materials produced from raw materials. Paragraph 9 of the agreement provided that in the event of any dispute arising out of the agreement between the parties, the same shall be referred to the arbitration of two named arbitrators in the clause. It will be relevant to reproduce here the arbitration clause in the agreement which is subject of controversy before me and will be referred later in this order. It read as follows: "9. That my dispute arising out of this agreement shall be referred to sole arbitration of Mr. Abbas M.N. Rajkotwala and Mr. S.M. Zakria of Muslim Rolling Mills Ltd. and their decision will be final and binding on both the parties".
3. ' It is contended by the defendant that there were some verbal amendments in the agreement referred to above but this fact is not admitted by the plaintiff. On 18-12-1980 plaintiff wrote a letter to the defendant alleging shortage of raw material and failure on the part of defendant to refund the advance of Rs, ten lac. It was also alleged that the defendant in spite of promise had failed to pay back the either by selling his land or from the profit obtained by selling the import permit. it was complained that the factory was closed on Thursday the 11th December, 1980 without prior intimation and the staff of defendant in the factory refused to deliver finished goods lying in the yard of factory which caused embarrassment to plaintiff because of his commitments to buyers besides causing loss or reputation and damages. It was accordingly stated in the letter that all outstanding account with the plaintiff may be settled within one week of the receipt of the letter before December 25, 1980. In the end it was also mentioned in the letter that a copy thereof is being forwarded to the arbitrators to fix a date to deal with the dispute and either find a solution to it or give their final verdict. It appears from the above letter that a copy thereof was endorsed to each one of the two named arbitrators namely Mr. Abbas and Mr. Zakirya of Muslim Rolling Mills, Farid Chambers, Victoria Road, Karachi. It further appears that on the basis of above letter of plaintiff a letter, dated 20-12-1980 was addressed to defendant by some person on behalf of Abbas Rajkotwala (one of the arbitrators) calling upon the defendant to appear in the Office of Mr. Abbas at 4.30 p.m. on Monday the 22nd December, 1980 in the Office of Abbas Rajkotwala in which the plaintiff, defendant and the two arbitrators were present. However, to the nature of this meeting there is dispute between the parties. The defendant contends that this meeting was held with the object of finding of solution of problem between the parties while the plaintiff contends that it was in connection with the arbitration proceedings. The minutes of the meeting held on 22-12-1980 is produced by the arbitrator in Court and it shows that the meeting was adjourned to 27-12-1980, at 4.30 p.m. The diary sheet of the adjourned meeting alleged to have been written on 27th December, 1980, shows that it was again adjourned at the request of defendant and fixed on 7th January, 1981 at 4.30 p.m., it is signed by only S.M. Zakrya one of the arbitratoRs, Neither the plaintiff nor defendant or the other arbitrator Abbas Rajkotwala signed the diary sheet of the meeting, dated 27-12-1981. The meeting fixed on 7-1-1981 did take place and ttre minutes recorded on that date are signed by plaintiff, defendant and one of the arbitrators namely Mr.Zakrya. It was again adjourned to 10-1-1981 at 3.30 p.m. On 10-1-1981 the meeting was held and proceedings recorded on that date are signed by both the parties and the two arbitratoRs, However, no further date in this regard was fixed by the arbitratoRs, It may be mentioned here that while the proceedings as aforesaid were going on before the two arbitrators, the plaintiff instituted suit No,1291/80 in this Court on 29-12-1980 which an application under section 20 of the Arbitration Act and prayed that the defendant be directed to file the arbitration agreement in Court and the arbitrators be appointed in accordance with the clause contained in the agreement between the parties. In the said suit on 11-1-1981 the learned counsel appearing for plaintiff made a statement in Court that the matter between the parties is likely to be settled and requested for adjournment up to 18-1-1981. However, in the meantime the award, dated 13-1-1981 was given by the arbitrators which was filed in Court on 17-1-1981 and was registered as suit No,41 of 1981. In spite of filing the award in Court by the arbitrators the parties in suit No, 1291/80 continue to appear in the case and obtained adjournment until 16th May, 1981. The defendant filed his objections to the application under section 20 of the Arbitration Act in suit No,1291/80 on 27-1-1981 to which cross objections were filed by the plaintiff on 17-3-1981. In the cross-objections filed by the plaintiff in suit No,1291/80 it was disclosed that the arbitrators have already given their award in the case and therefore when suit No,1291/80 came up before me for hearing on 14-5-1981 it was dismissed as withdrawn. The defendant who in the meanwhile became aware of the filing of an award in Court, filed an application under section 33 of the Arbitration Act in suit No,41/81, on 27-1- 1981 and also filed objections to the award under section 30 of the Act on 18-2-1981. In the meantime Arbitration Act, 1940, was amended in March, 1981 by Ordinance XV of 1981 and section 26-A was added after section 26 which provided that the arbitrator or the umpire should record reasons in support of every award delivered by them. The plaintiff accordingly filed an application in Suit No,41 of 1981 on 27-7-1981 for remitting the award to the arbitrators to state their reasons in support of the award, dated 13-1-1981 which was a non-speaking award. Before plaintiff could file the above application in suit No,41 of 1981, the defendant presented an application under section 5, 11 and 12 of the Arbitration Act on 19-4-1981 which was registered as J.M. No,25 of 1981. The defendant prayed in the above application for revocation of the authority of arbitratoRs, Meanwhile a learned Single Judge of this Court before whom suit No,41 of 1981 came up for hearing allowed the applications of plaintiff for remittance of the award to arbitrators for recording their reasons on 9- 3-1982 and at the same time directed that a copy of his order may also be placed on the file of J.M.
4. No,25 of 1981. Subsequently the same learned Judge dismissed J.M.No,25/81 as infructuous on the basis of statement of learned counsel for the defendant by order, dated 3-3-1982. The award which was remitted back to arbitrators for giving their reasons was sent back by the arbitrators to the Court with their reasons on 5-44982 and was registered as suit No,149 of 1981. The defendant filed objections to the award in suit No,149 of 1981 under section 30 of the Act besides challenging its validity under section 33 of the Act. I may mention here that the defendant had applied for examination of number of witnesses in -the case in support of their allegations of bias against the arbitrators but their learned counsel gave up this application after 1 expressed my willingness to summon the two arbitrators as Court witnesses in the case. The two arbitrators were accordingly examined as Court witness and were cross-examined both by the plaintiff and the defendant. The defendant has challenged the award on the following grounds:
(i) That there was no valid and legal reference of the dispute to the arbitrators and as such the award is wholly without jurisdiction.
(ii) That the alleged reference to arbitrators, if any was unilateral and by only one party and was therefore, invalid.
(iii) That there was no existing dispute between the parties on the date, the arbitrators allegedly entered upon the reference and therefore the award is invalid.
(iv) That no particulars of dispute were ever communicated or supplied to defendant and as such the proceedings before the arbitrators if any were opposed to principles of natural justice.
(v) That proceedings before M/s. Abbas N.Rajkotwala and M.S. Zakrya were in the nature of conciliation proceedings and, therefore, no award could be given by them.
(vi) That the arbitrators acted in unjust and partial manner in the proceedings which vitiated the award, if any.
5. ' I will take up objections No,1 to 3 and 5 urged by the learned counsel for the defendant together as they all relate to the validity of award. The main contention of learned counsel for the defendant is that the proceedings commenced before Abbas N.Rajkotwala and M.S.Zakrya was in the nature of conciliation proceedings initiated with the object of bringing about a settlement between the parties. It is also contended that the reference to arbitrators of the dispute was invalid as it was unilaterally made by the plaintiff and in any case the arbitrators never entered upon the reference legally as on the date they allegedly took up the reference there was no existing dispute between the parties. The contention raised by the learned counsel are not without substance. It is an admitted position that the arbitrators took cognizance of the dispute on the basis of letter of plaintiff, dated 18-12-1984. It is also an admitted position that apart from the letter, A dated 18-12- 1980 the plaintiff did not prefer any specific claim before the arbitratoRs, The plaintiff's letter referred to above reads as under:- "Managing Director, Union Steel Ltd., West Wharf Road, Karachi.
6. ' Dear Sir, ' Please refer to the contract, dated 9th January, 1980 entered into by you on behalf of Union Steel and Mr. [Ismail A. Ansari, you have not abide by ally of the terms of contract and I shall be grateful if you will please consider the following complaints which I have with you.
1. That as per clause I, of the contract I had to pay a sum of Rs,1,00,000 (Rs,one lac only) as advance which were supposed to be refunded 4 monthly installments, whereas the same has exceeded 10,00,000 (Rupees ten sacs only) by way of cash payment and shortage of raw material. Inspire of repeated queries you have failed to provide a cogent reason for this shortage or to make up for it by yourself.
2. That you have been promising every now and then to pay all my dues back either by selling your lands or from the profit obtained by selling the import permit, but you have failed to do SO
3. That without any reasons given to me you stopped the factory on Thursday Dec. II, 1980, before proceeding to your lands and thus put me in a fix because of my prior commitments to the clients in the market.
4. That you instructed your staff that finished rolled material lying in the yard should not be delivered to me or taken out of the gates for delivery to the buyers who have already made the payments for the goods thus spoiling my reputation in the market and causing grievous damage to me as well as to the name of Union Steel. The loss of market confidence caused by this act is bound to reflection in future sales and profits.
7. ' In view of the circumstances mentioned above I hereby request you formally to settle all outstanding accounts within one week e.g. before December 25, 1980.
8. ' Meanwhile through a copy of this letter I am informing the Arbitrators requesting them to fix a date to deal with the dispute between us and either find a solution or give their final verdict.
9. ' It shall be pertinent at this stage to draw your attention to clause 9, of our contract according to which the decision of the Arbitrators is binding on both of us and enforceable by the Court of law".
10. ' From reading of the above letter it is clear that the complaint of plaintiff related to the sum of Rs, ten lac received by the defendant as advance which was in excess of Rs, one lack mentioned in the agreement, dated 9th January, 1980. It is also alleged in the letter that the defendant had promised to repay the above amount by selling his land from the profit received by him by selling the import permit but he failed to do so and that the defendant without prior intimation to the plaintiff closed his factory on 11th December, 1980 and instructed his staff to withhold delivery of finished rolled material lying in the factory which caused great embarrassment to the plaintiff because of his commitments to various buyers, besides causing loss of reputation and damages. The defendant was therefore, called upon in the said letter to settle the outstanding account with the plaintiff before 25th December, 1980. It was further mentioned in the letter that a copy of this letter was being sent to the arbitrators with the request to fix a date with the object of finding a solution or give their final verdict. It is on the basis of this letter of plaintiff that on 20th December, 1980, a letter was addressed on behalf of Abbas Rajkotwala to the defendant asking the defendant to call at his office: on 4.30 p.m. the Monday the 24th December, 1980 to enable him to resolve the dispute. It is not disputed that the letter, dated 2001 December, 1980 was addressed only to defendant and was issued on behalf of one of the arbitrators (Abbas Rajkotwala) only and is signed by some one on his behalf. It is however, not in dispute that the meeting proposed in this letter on 22nd December, 1980 did take place in which the plaintiff, the defendant and the two arbitrators took part. The case of the plaintiff is that this meeting and all subsequent meetings were only in the nature of conciliation proceedings whereas the plaintiff and the arbitrators contend that these were arbitration proceedings. The meeting proposed on 27th December, 1980, however was not held and according to the diary of the arbitrators, dated 27-12-1980 it was adjourned to 7th January, 1981 at 4.30 p.m. The contention of the defendant is that no invites were written on that date and that the minutes produced in Court were written subsequently. This allegation made by the defendant is, however, not very material as it is admitted that on 7th January, 1981, to which date the meeting was adjourned on 27-12-1980, did take place in which the plaintiff, the defendant and the two arbitrators were present. There are however, several other significant facts in this case which lend support to the contention of defendant that proceeding which was going on before Abbas N.
11. Rajkotwala and M.S. Zakrya was in the nature of conciliation proceedings and not the arbitration proceedings. It is an admitted position that on 29-12-1980 the plaintiff filed an application in this Court under section 20 of the Arbitration Act for appointment of arbitrators in the dispute in accordance with the agreement, dated 9-1-1980. In his application under section 20 of the Arbitration Act the plaintiff has relied on two certificates, dated 24th December, 1980 issued by the defendant. The case of defendant with regard to three documents is that plaintiff along with one of the arbitrators S. M. Zakrya called at his mill premises on 24-12-1980 and after inspection of the account books obtained two certificates from him relating to the stock of the finished goods with the defendant and the raw material so far received by the defendant from the plaintiff. The plaintiff's case on the other hand is that these certificates were obtained in course of arbitration proceedings as the arbitrator decided that one of them should go and inspect the record of defendant. There is however, nothing on record to show that any such course was authorized during the' course of arbitration proceedings. In fact S.M. Zakrya, who according to the defendant had accompanied the plaintiff to the office of Defendant in his cross-examination firstly denied that these certificates, dated 24-12-1980 were issued in his presence at the premises of the defendant but later when he was confronted with the diary sheet of the proceedings, dated 7-1- 1981, stated that the two certificates were issued in his presence at the mill of defendant where he was called by the defendant. This statement of S.M. Zakrya belies the assertion of plaintiff that the arbitrators had decided that one of them should go and inspect the account of defendant. In fact, such a case was never put to the arbitrators by the plaintiff when they appeared in Court as witnesses, although plaintiff had notice of the case set up by the defendant in this regard as in paragraph 18 of his application under section 33 of the Arbitration Act the defendant had categorically stated that on 24-12-1980 S.M. Zakrya with Usman of the plaintiff visited the factory of the defendant and inspected the account book and in reply thereto the plaintiff stated in his objection as follows: "25. As regards para. 18, the arbitrators among themselves proceeded to decide the method of inspection of account books and the same were looked into by them".
12. ' Apart from it the main contention raised in the application under section 20 of the Arbitration Act, filed by the plaintiff, was that as a result of supplementary agreement between the parties, the plaintiff and the defendant were entitled to join utilization of the import licences issued to the defendant and on an interlocutory application of plaintiff in this behalf the Court restrained the defendant from transferring the import licences to any other person except with the leave of the court. The two arbitrators when asked by the defendant's counsel in cross-examination that the main dispute between the parties related to utilization of Import Licences issued to defendant, they categorically stated that no such dispute was raised before them by the plaintiff. On 11-11-1980 when the application under section 20 of Arbitration Act came up for hearing in Court the learned counsel for the plaintiff made a statement that the matter was likely to be .settled between the parties amicably and obtained adjournment upto 18-1-1981. It is not without significance that on 11- 1-1981 writ. n the learned counsel for the plaintiff made the above statement in Court the parties had appeared before S.M. Zakrya and Abbas Rajkotwala on 7-1-1981 and 10-1-1981 and some proceedings had taken place before them and no further date was fixed. Neither the arbitrators were informed by the plaintiff about the pending application under section 20 of the Arbitration Act, nor the Court was informed on 11-1-1981 that the dispute between the parties is already before the arbitrators who had entered upon it. The two arbitrators gave their award on 13-1-1981 but the parties continued to appear in suit No,1291/80 until May, 1981. In fact the defendant submitted his objections to the application under section 20 of the Arbitration Act and alleged suppression of facts on the part of the plaintiff and further stated that the wastage claimed by the plaintiff was not correct as during the course of proceedings for a compromise between the parties which took place through efforts of Mr. M.S. Zakrya and Abbas N. Rajkotwala the applicant had agreed to enhance percentage of wastage of the basis of actual wastage. The learned counsel for the plaintiff is unable to explain the filing and continuation of proceedings under section 20 of the Arbitration Act in these circumstances by the plaintiff.He only stated that the plaintiff was apprehending removal of stock of finished goods and raw material by the defendant and, therefore, he had to file the application under section 20 of the Arbitration Act. I am unable to accept the contention of the learned counsel for the plaintiff. The fact that the plaintiff instituted an application under section 20 of the Arbitration Act for reference of the dispute between the parties to the arbitrators on 29th December, 1980 suggested that no arbitration proceedings were pending on that date. Further, the fact that on 11th January, 1981 the learned counsel for the plaintiff made a statement in court that the dispute is likely to be settled between the parties and the parties continued to appear in the case until May, 1981 in spite of the fact that they were also appearing simultaneously before the two arbitrators support the contention of the learned counsel for the defendant that the proceedings before S.M. Zakrya and Abbas N.Rajkotwala were not arbitration proceedings but were conciliation proceedings initiated with the object of finding a settlement between two parties.
13. ' The defendant in his objections to the applications under section 20 of the Arbitration Act filed in Court on 27th January, 1981, took a clear stand with regard to the proceedings which were going on before the arbitratoRs, The two arbitrators who were examined in the case admitted that in the letter, dated 20th December, 1980 wherein the defendant was asked to appear before Abbas N.Rajkotwala, no particulars of the dispute were mentioned and that the plaintiff had not submitted any former claim before them. The two arbitrators also categorically stated that the dispute relating to sharing of import licences by the plaintiff which were issued to the defendant was not at all raised before them. The above facts coupled with the conduct of one of the arbitrators S.M.Zakrya, in calling during the course of proceedings at the office of the defendant, along with the plaintiff in connection with the obtaining of certificates, dated 24-12 1980 clearly indicate that he was not acting in his capacity as an arbitrator in the case. In this connection the letter, dated 18th December, 1980, written by the plaintiff to the defendant, copy whereof was forwarded to the two arbitrators and which is basis of the alleged arbitration proceedings is also very significant. This letter clearly indicates an intention on the part of the plaintiff to arrive at a settlement with the defendant and for that purpose he gave him time up to 25th December, 1980. The plaintiff had requested the two arbitrators to fix a date for finding a solution of the dispute or give their decision.
14. Therefore, on 20-12-1980 when one of the arbitrators called the defendant to appear before him on 22-12-1980 there could not be any question of entering up to the reference by the arbitratoRs, Taking into consideration all these circumstances and the conduct of the arbitrators and the parties in the case I am of the view that the proceedings which took place before the two arbitrators from 22-10-1980 to 10-1-1981 were not arbitration proceedings and therefore the decision given by Abbas N.Rajkotwala and S.M. Zakria is not the award which could be confirmed by the Court. In the case of Muhammad Salim v. Muhammad Akram PLD 1971 SC 516 in somewhat similar circumstances the Supreme Court pointed out the difference between the award and a decision by a person who has been referred to dispute by the parties for bringing out the settlement. I respectfully quote here the following passage from the above case which in my humble opinion is relevant: "From what has been said above it will be manifest that the main question that falls to be decided in this case is as to whether the parties agreed to appoint Maulvi Akhtar Ali as an Arbitrator to adjudicate upon their disputes and whether he made an award.
15. ' In other words, as to what is the true legal character of the document Exh.D/1. The most important characteristic of an award, of course, is that it must emanate from a judicial determination lf a dispute is referred to a person and if that person decides that dispute by holding an enquiry and coming to a decision then undoubtedly what that person decides would constitute an award.
16. ' On the other hand, if a matter is referred to a person and he is not called upon either to hold an enquiry or to give a decision but by the exercise of his sagacity, knowledge or experience to bring about merely an understanding bet been the parties and restoring peace between them then he would only be discharging functions other than those of an arbitrator. But in order to determine this question one must not look merely at the form adopted or the expressions employed but rather at the substance of what the parties to the dispute really intended the person approached in that behalf to do and how that person acted in that particular matter".
17. ' In view of my above conclusion it is not necessary to decide other contentions raised by the defendant. I accordingly refuse confirm the alleged award set aside the same and dismiss suits Nos. 4 of 1981 and 149 of 1982. There will be however, no order as to costs.
18. Award not confirmed.