These are proceedings on an award given under the Bye-Laws of the Karachi Cotton Association by two' arbitrators, namely, Fazal Karim and Nasirul Hassan on 19th April 1969, by which the arbitrators found that a sum of Rs. 55,900.00 was due 9n favour of the plaintiffs against the defendants on account of the defendants' breach of contracts.
2. The dispute between the parties arises out of three contracts, two dated 27-8-1968 and one dated 5-9-1968, under which the defendants agreed to supply certain quantity of cotton to the plaintiffs. They failed to supply any quantity with the result that the plaintiffs referred the dispute to the arbitration .Of the Karachi Cotton Association under Bye-Law 39-II of the said Association.
Notice of this arbitration was sent to the defendants but they remained absent and instead filed a suit in Multan Court against the plaintiffs, presumably to restrain them from obtaining any award.
But notwithstanding this suit, the arbitrators proceeded with arbitration which resulted in the award which is now before me.
3. Notice of the filing of the award was sent to the defendants and they filed detailed objections thereto. But at the hearing before me. Mr. P. D. Ramchandani confined his arguments only to three objections, namely:-
(i) that under section 35 of the Arbitration Act the filing and pendency of the suit in the Multan Court was a bar to the further continuance of the arbitration proceedings;
(ii) that the contract: to question were not factory selection contracts and, therefore, the disputes between the parties were not referable to arbitration under Bye-Law 39-II ; and
(iii) that there was novation of contract by reason of the parties having entered into a new contract on 11-12-1968, under letter which is Annexure 'D' to the counter-affidavit of the defendants.
4. I have heard the parties, but I find that I cannot accept the propositions put forth by Mr. Ramchandani against the award. As regards his first point section 35 will be a bar only if it is proved that the arbitrators had knowledge of the filing and pendency of the suit. It is no doubt correct that the plaintiffs did have such knowledge. But the section in very clear terms requires that the knowledge must be of the arbitrators and no oaf any party. Mr. Ramchandani is of the view that the plaintiffs must have communicated their knowledge to the arbitrators themselves in the normal course of events. But, at the same time, it is also possible, again in the normal course of events, that the plaintiffs may have concealed the knowledge of the pendency of the suit from the arbitrators themselves. The burden of proving that the arbitrators had such knowledge is on the defendants. Only an affidavit was filed on behalf of the defendants to the effect that the arbitrators must have had this knowledge. But this allegation is denied by the plaintiffs in their affidavit in rejoinder. The defendants have not come in the witness-box themselves, nor they have brought any evidence to show that the arbitrators knew that the suit had been filed at Multan covering the same subject-matter which was in dispute before them. For want of proof I, therefore, reject this contention of Mr. Ramchandani.
5. As regards the second point, r. Ramchandani's con--tention is that the factory selection contract is defined in Bye-Law 2(14) of the Karachi Cotton Association. Under this Bye-Law the definition is that a factory selection contract is one which is described as factory selection contract. This definition itself does not give any assistance. It is doubtful that it is the intention of the Bye-Law that the words "factory selection contract" should be endorsed in the title of the contract. I think the Bye- Laws' intention is to see whether the terms of the contract show if it is a factory selection contract or a contract of any other nature contemplated by the Bye-Laws by the Karachi Cotton Association. Now, the essential ingredient of a factory selection contract is that selection of the cotton is made by the buyer at the seller's factory. This ingredient is present in all the three contracts. I would refer, first, to clause 5 which reads as follows:- "Delivery: From (after first hundred bales) to First Ginning continues till completion. The sellers undertake to strictly observe the delivery time. Delivery turn once given to the Buyers shall not be changed without the prior consent of the Buyers."
The next relevant clause is clause 6. Then there are terms and conditions regulating the contract which are printed on the reverse of the contract. The relevant condition is No. 2 which reads as follows:- "The Buyers have to select Kappas and supervise ginning (which must be free from seeds and cut seeds) and pressing which shall be done at Sellers' risk as is customary. Kappas to be dried and yellow to be picked at Sellers' expenses. If the factory possesses FEC and cotton opener, the Kappas and cotton lint will be passed through them if desired by the, Buyers."
All these terms and conditions of the contract show that the contracts Between the parties were in essential respects factory C, selection contracts, as cotton had to be selected at the seller's factory and weighment had also to be done there. Mr. Ramchandani was of the view that the Form of Factory Selection Contract Itself is prescribed by the Karachi Cotton Association at page 33 of the forms of its Bye-Laws. But Bye-Law 39-II says that factory selection contract may contain such terms and conditions as may be mutually agreed to between the parties. Therefore, the form prescribed by the Karachi Cotton Association does not m carry such sanctity as to preclude the parties from agreeing to terms other those contained in the form. My view is that the essential ingredients of the factory selection contract are present in the contracts between the parties and, therefore, the disputes` were properly referable under Bye-Law 39-II of the Karachi Cotton Association.
6. As regards the plea of novation of contract, I am unable, to agree with Mr. Ramchandani that the letter dated 11-12-1968, Annexure 'D' to the counter-affidavit of the defendants, amounts to novation of the contract. This letter, at the most, can be treated as making amendments in the contracts between the parties. Under section 62 of the Contract Act novation takes place when an entirely new contract is substituted for a previous contract. In the present case I am unable to find that there was a new contract for the previously existing three contracts between the parties. What happened was that there were certain amendments with regard to the place of delivery of the contracted cotton. But this kind of amendment would not result in any substitution of the new contract for the previous three contracts. The basic contracts remained in existence, which was to the effect that the defendants would supply 4000 bales of cotton to the plaintiffs and that the selection of cotton shall be made by the plaintiffs at the defendants' cotton ginning factory.
Accordingly, it cannot be said that any novation in terms of section 62 of the Contract Act resulted by reason of the amendments made to the contracts under letter dated 11-12-1968.
7. No other point was urged against the award. The three objection advanced before me have been answered by me at length. I, therefore, find that the award is in order and, therefore, make it rule of the Court, and further direct that then defendants shall pay costs and interest to the plaintiffs on the amount awarded by the arbitrators.
8. In the result the objections of the defendants are dismissed.
S. A. H.Objections dismissed.