MUHAMMAD ZAHOORUL HAO, J.--This is a High Court Appeal against the judgment of the learned Single Judge of this High Court made on 28 August, 1974, whereby the application of the present respondents under section 8(2) of the Arbitration Act, 1940 was allowed and Mr. Syed A.I Raza, a senior Advocate of this Court was appointed as the third arbitrator in place of Abdullah Jan Muhammad.
2. The relevant facts giving rise -to this High Court Appeal are that the respondents and the appellant were the partners in the firm M/s. Khan and Company. They had referred their disputes to joint arbitration of three arbitrators, namely, Abdullah Jan Muhammad, M.H. Shaukat Kazmi and Mr. M. Yousuf Zai by an agreement of reference dated 28th May, 1970 of which most important clause for the purpose of the Appeal is the following:--
8. "The said disputes and any other dispute raised by consent of both' parties are hereby referred to the "Joint arbitration" of M/s: Abdullah son of Jan Muhammad,
2. M.H. Shaukat Kazmi and 3. M.
Yousuf Zai and their award will be final and binding on all the parties hereto."
3. The three arbitrators made an award, which was subject-matter in Suit No.604 of 1970. The award was challenged on the ground that the reference itself was illegal as respondents had appointed two arbitrators, while appellant's nominee was only one, namely Abdullah Jan Muhammad. It was also alleged that arbitrators have misconducted in the proceedings and that they had left several points of reference undetermined.
4. On 6-10-1972 by agreement of parties the award was remitted to the arbitrators to decide the disputes, which had been left by them undetermined namely disputes 2, 3, 4, 6 and 7 in theth arbitration reference. It may be noted here that the award made by the arbitrators had been partly acted upon the parties.
5. On 25th January, 1973, Abdullah Jan Muhammad, who was the arbitrator appointed by the appellant intimated by a letter to the appellant and the other arbitrators that he was withdrawing from arbitration proceedings and requested the appellant to appoint another arbitrator.
6. On 31-1-1973, the appellant informed the two other arbitrators and the respondents that he will notify the name of a new arbitrator on his behalf within a week and in the meantime the Court be moved for extension of time for making the award as time was expiring on 6-2-1973. A consent application was filed by the parties before the Court under Section 28 of Arbitration Act, 1940, seeking four months extension to enable arbitrators to make the award. This application was signed by the appellant. The Court extended the time as prayed.
7. The appellant failed to appoint his arbitrator and the respondents, therefore sent him a letter on 28-2-1973 to name his arbitrator within 15 days failing which they will move the High Court to appoint a new arbitrator. The appellant replied to the respondents and took-up the position-that the agreement of arbitration was itself invalid as two arbitrators had been appointed by the respondents and only one arbitrator by the appellant, and in any case the joint arbitration had come to an end on the refusal of Abdullah Jan Muhammad to act as co-arbitrator and that the agreement of reference did not contemplate filling of vacancy in such a situation.
8. Thereupon, the respondents made an application under section 8(2) of Arbitration Act before the High Court asking for appointment of an arbitrator in place of Abdullah Jan Muhammad, who had refused to act as arbitrator. Before the learned Single Judge a point was taken by the appellant that substitution was not contemplated by the agreement of reference as the reference was to named arbitrators only. The learned Single Judge after taking into consideration the various facts namely (a) that there was no stipulation in the agreement of reference that vacancy in arbitrator was not to be filled in, (b) the letter of appellant, dated 31-1-1973 to arbitrator and respondents informing them that he will notify the name of new arbitrator on his, behalf and thirdly the consent application made under section 28 of Arbitration Act, 1940 for seeking extension of time which was signed by the appellant and where the facts had been stated that the appellant notified the opponents that he will appoint another arbitrator in place of previous arbitrator Abdullah Jan Muhammad, the Court came to the conclusion that the conduct of the appellant unmistakably did not indicate an intention that substitution of arbitrator was not contemplated by the parties.
9. We have not been shown any reason by Mr. Shaikh Haider, the learned counsel for the appellant that the above finding of facts was not justified under the circumstances of the case.
10. However, Mr. Shaikh Haider had made a strong submission that the case of substitution of arbitrator was not covered by the provisions of either section 8 or 9 of the Arbitration Act, 1940, and therefore the order of the learned Single Judge-in filling the vacancy was unwarranted in law. His submission is that section 8 of the Arbitration Act, 1940 postulates the filling of the vacancy of an arbitrator or umpire only in case the arbitrators arc to be appointed by the consent of all parties and not any case where one party appoints its own arbitrator and other party appoints their own arbitrator.
11. Before proceeding to examine this submission we may note here that Mr. Iqbal Kari, the learned counsel for the respondents did not place any reliance upon section 9 of the Arbitration Act, 1949, which provides for appointment of a new arbitrator by a party to the reference itself if the other party fails to appoint its arbitrator. We would, therefore, not consider section 9 of the Arbitration Act, 1940.
12. Mr. Iqbal Kaii had placed his reliance upon section 8(1) (B) read with section 8(2) of the Arbitration Act for the purpose of defending this appeal.
13. We would, therefore, reproduce the whole section 8 of the Arbitration Act, 1940 hereunder.
8.Power of Court to appoint arbitrator or umpire.--(1) In any of the following cases:-- (a)where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments; or (b)if any appointed arbitrator neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy; or
(c) where the parties or the arbitrators arc required to appoint an umpire and do not appoint him; any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacany.
(2)If the appointment is, not made within fifteen clear days after the service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case maybe, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties,'
14. We pointed out to Mr. Iqbal Kazi that section 8(1) (a) of the Arbitration Act, 1940 is only applicable in case of initial appointment of arbitrators and it is only section 8(1) (b) of the Arbitration Act, 1940, which stipulates the situation of an arbitrator neglecting or refusing two act, which could alone be relevant. The learned counsel agreed that it was so and, he, therefore, could not rely upon section 8(1) (a) of the Arbitration Act, 1940. This was the correct thing to do as is obvious that the said subsection 8(1) (a) of Arbitration Act, 1940 is applicable in respect of initial appointment of arbitrators and not in respect of their refusal to act.
15. The controversy is, therefore, limited to the applicability or otherwise of section 8(1)(b) read with subsection (2), of Arbitration Act, 1940, in the particular circumstances of this case. Mr. Shaikh Haider has submitted that section 8(1) (b) of Arbitration Act should be read with the operative part of subsection (1) and the same reads as under: 8(1)
(a)
(b)
(c) "any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments in supplying the vacancy;'
16. The submission of the learned counsel is that the above subsection (1) read as a whole makes it quite clear that the situation contemplated is such where the arbitrators had been appointed by all parties collectively by consent as otherwise the expression "notice to concur" in the operative part of this subsection would be of no consequence. He also relied upon the last part of subsection (2) of the said section 8, where it is provided that the arbitrator appointed by the Court shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all the parties.
17. The learned counsel for the appellant relied upon PLD 1967 Kar. 175 (181), where it was held that the words "by consent of the parties" which occur in section 8(1) (a) of Arbitration Act, 1940 and the words "notice to concur" which occur after clause "C" of that subsection unmistakably indicate that the section applies to those arbitration agreements under which arbitrators arc appointed by consent of all the parties, while section 9 applies where two arbitrators are appointed by each party. Mr. Shaikh Haider further relied upon PLD 1971 Lah. 693 (696), where it was held as under:-- "A perusal of section 8 will show that it applies to such cases where the arbitrator or arbitrators are to be appointed by consent of all parties and not to those where each party is to appoint his own arbitrator. Clause (a) of subsection (1) of section 8, deals with cases of omission to make initial appointments, whereas clause (b) covers cases where appointed arbitrator neglects or refuses to act or is incapable of acting or dies. But the common feature of both these subclauses is that the nature of the agreement should be such where the concerned arbitrator or arbitrators are to be appointed with consent of all parties. This is more clear from subsection (2), where it is written that, "---------.The Court may,---------------.Appoint an arbitrator or arbitrators---------.As the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties." This shows that in cases where any arbitrator was to be appointed by the parties collectively, then on their failure to do so, when Court itself makes an appointment, it is to be considered that the appointee has been appointed by consent of all parties."
18. It is thus clear that the view of the decided cases in Pakistan in respect of section 8(1) (b) is that the same is applicable only to a situation, where the IC arbitrator or arbitrators are appointed by the consent of all parties and not where the arbitrators are to be appointed by the parties separately.
19. The learned Single Judge had observed that such question did not strictly arise in the case before him as the three arbitrators were the joint arbitrators of all the parties and he had further observed that mere fact that two of them were nominated by the respondents and the third by the appellant was not, strictly speaking, relevant.
20. With great respect we do not agree with that reasoning. We are of the view that the mere recital in the agreement of reference that the arbitrators were joint arbitrators does not change the factum of their being really the nominees of U the parties. The reality cannot be ignored and the real intention of the parties has to be seen and that has to be given effect.
21. Moreover, the learned Single Judge placed reliance upon the word "or" occurring between clauses (a) and (b) of section 8(1), but this word "or" merely shows that there are three cases postulated under subsection 8(1) of Arbitration Act and they can be dealt with disjunctively on the basis of the word "or"' appearing between them. But the real important words are "notice to concur" appearing at the end of subsection (1) of section 8 which are applicable to any one of the cases in clause (a), (b) & (c) of section 8(1) of Arbitration Act, 1940, and hence any emphasis on the word 'or" cannot lead to a correct interpretation; in respect of section 8 of Arbitration Act on the point whether the arbitrators visualised in this section are appointed by consent of all parties or merely by consent of each party. The learned Single Judge had also relied upon section 10'of the Act for the proposition that the same clearly refers to three or more arbitrators separately appointed by each party to the dispute and if the power conferred on Court to fill in a vacancy under section 8(1)
(b) is not available in such a situation reference to arbitration would he at the mercy of anyone of the party in dispute, who could procure non-cooperation of the arbitrator appointed by him.
21-A.With great respect we find that it is not so and section 19(1) postulates a situation where the appointment is of two arbitrators by each party and there is a provision for appointment of the third arbitrator by two arbitrators appointed by each party. Such situation has been remedied in that very subsection 19(1) and the other arbitrator has been designated by the statute as an Umpire, of course subsection (2) of section 10 does provide for reference to three arbitrators and the same makes the majority decision binding but the question of supplying the vacancy in respect of those three arbitrators will depend upon the question whether they are appointed separately by each party or by consent of all. If they are appointed by consent of all parties then section 8(1) (b) would be applicable but if those three arbitrators have been appointed by the parties separately then obviously the vacancy occurring in such a case cannot be filled in by resort to section 8(1) (b) of the Arbitration Act, 1940. But even in that case the arbitration would not be at the mercy of anyone of the parties in view of the fact that section 12 of the Arbitration Act allows the Court to appoint a sole arbitrator or arbitrators where the Court revokes the authority of an arbitrator or umpire. And we are clear in our mind that in a case where three parties or two parties have appointed their separate arbitrators numbering in all three or more and any one of them refuses to act then the Court by resorting to the section 12 of the Act can revoke, the authority of the other arbitrators and appoint some other arbitrators or the sole arbitrator for the purpose of deciding the arbitration. Thus arbitration does not remain at the mercy of any party.
22. The learned counsel for the respondent Mr. Iqbal Kazi was not able to show us any decision of a High Court, where a contrary view has been taken from the views above referred and we, therefore, respectfully agree with the same. Mr. Iqbal Kazi, however, submitted that paragraph '8 of the arbitration reference was a case of appointment of all the arbitrators by the consent-of all the parties and not appointment of one arbitrator by one party. Mr. Iqbal Kazi's submission appears to he justified prima facie from the reading of clause 8 of the agreement of reference which we have reproduced earlier but we cannot close our eyes from the fact that admittedly Abdullah Jan Muhammad was the arbitrator appointed by the appellant Abdul Hakeem. That position is clear from first para. Of judgment in Suit No.416 of 1970 of Mr. Justice Noor-ul-Arifin, dated 6-10-1972 where it is mentioned that "Abdullah was the nominee of the defendant Abdul Hakeem Khan and the other two were the nominees of Begun Khanum Jan, Ismail and Abdul Rashid". The same is the position in the judgment before us of August 28, 1974. Moreover, the arbitrator Ahdullah Muhammad had himself written on 25-1-1973 that he was withdrawing from arbitrator proceedings and had requested the appellant to appoint another arbitrator. Then again the appellant had informed two other arbitrators and the respondents off 31-1-1973 that he will notify the name of a new arbitrator on his behalf within a week. Then again the consent application moved under section 28 of the Arbitration Act signed by the appellant as well as the respondents had clearly recited that-the appellant had notified the opponents that he will appoint another arbitrator in place of previous arbitrator Abdullah Jan Muhammad, and since, the respondents were a party to that application, therefore, they cannot now take up the position that arbitrator in place of Abdullah Jan Muhammad was to be appointed by their consent. Finally most important factor in this regard is the letter, dated 28-2-1973 sent by the respondents to the appellant asking him to name his arbitrator within 15 days failing which they will move the High Court to appoint a new arbitrator.
23. Considering all the above circumstances we have no other choice but to hold that Abdullah Jan Muhammad was in fact the arbitrator nominated by then appellant and that his substitute was also to be nominated by the appellant himself and the respondents had nothing to do with that nomination and their consent was not at all necessary for the said appointment.
24. Mr. Iqbal Kazi had submitted that a substitute in place of Abdullah Jan Muhammad could be appointed with their concurrence and since they had asked 'the appellant to appoint an arbitrator in place of Abdullah Jan Muhammad therefore, any appointment in place of Abdullah Jan Muhammad must be deemed to be with their consent since all the arbitrators were appointed with the consent of all the parties and not by one party alone. We are afraid that we cannot accept such an interpretation in the face of the conduct and correspondence of the parties which early shows that Abdullah Jan Muhammad was the nominee of the appellant alone.
25. 1n view of the above discussion we are of the view that the appeal of the appellant in respect of the appointment of an arbitrator in place of Abdullah Jan Muhammad by the Single Judge under section 8(1) (b) of the Arbitration Act should be allowed and the appointment of the arbitrator so appointed is revoked and that the application of the respondents under section 8(2) of Arbitration Act is dismissed.
26. Mr. Sheikh Haider has informed us that one Mr. Sayyed had subsequently been appointed in place of Mr. Syed A.I Raza. Consequently the authority of Mr. Sayyed to act as an arbitrator on behalf of the appellant in respect of his prayer under sections 5 and 12 of the Arbitration Act arising from the same order will be dealt with separately.
27. These are the reasons of the order passed by us on 27-4-1981. This appeal is allowed in terms of the above order.