' This judgment shall dispose of also Civil Revision Nos. 617-D of 1989, 618-D of 1989 and 619-D of 1989 as they all arise from the same judgment and decree dated 21-2-1989 of the learned Additional District Judge, Sargodha, whereby he accepted the appeals of the respondents- plaintiffs, set aside the decrees of the trial Court and remanded the case.
2. There were four separate suits besides some criminal cases pending between the parties. With a view to get them decided apparently by a referee and be bound by his decision, they made the following joint statement on 12-12-1987 before the trial Court:-- {{URDU TEXT}}
3. The referee submitted his longish report dated 3-5-1988. It did not suit the interest of the respondents-plaintiffs and they made an application dated 29-5-1988 before the trial Court for revocation of the referee's authority and annulment of the decision made by him. Their plea was that he acted beyond the reference inasmuch as he instead of making a statement under Article 33 of the 'Qanun-e-Shahadat, 1984, held a detailed inquiry, examined evidence and made a local inspection, whereby he acted more as an arbitrator than a referee. The petitioners-defendants contested the application urging that despite his having made the inquiry, the referee's report was a statement quite squarely covered by Article 33 ibid; and that the same being an admission made by both the parties, they were bound by it.
4. The trial Court dismissed the application treating the report based upon the parties' consent and passed decrees in all the cases in accordance therewith. The respondents-plaintiffs preferred appeals, which, of course, were accepted taking a view that the so-called referee was indeed an arbitrator; that his report was an award and that the same was to be dealt with in accordance with the provisions of the Arbitration Act. The cases were remanded for taking proceedings on these lines.
5. The petitioners-defendants aggrieved by the impugned order preferred the present revisions.
6. The distinction between a "referee" and an "arbitrator" has become too well known especially because it came up for discussion in many cases some of which really turned out to be classic examples. The most illuminative were Mst. Akbari Begum v. Rahmat Hussain and others AIR 1933 All.
861 and Ch. Muhammad Saleem v. Muhammad Akram and others PLD 1971 SC 516 which indeed were cited here along with a Division Bench case reported in Muhammad Hanif Khan and another v. Ghulam Farid and others PLD 1988 Lah. 250 wherein the test laid down was that:--
(i) the apparent nomenclature either of the "referee or "arbitrator" was not itself decisive to determine the true character of the third person chosen for making the decision;
(ii) what mattered comparatively more was the real intention of the parties to be gathered from the relevant statement(s) and the attendant circumstances of the case;
(iii) the precise procedure adopted to settle the dispute would be of great significance, in that ordinarily holding an inquiry, making a local inspection, examining witnesses, browsing record etc. Etc. Would suggest that the proceedings were of the nature of arbitration;
(iv) though Article 33 of the Qanun-e-Shahadat Order, 1984, impinged upon a straight statement of such a person primarily based upon his personal knowledge, yet in cases it would include even a report resting on deductions made from the circumstances of the case; and
(v) it was not always necessary that the referee might make statement on the basis of his personal knowledge.
7. It would be interesting to apply this test to the case in hand. The joint statement of the parties disclosed that they were heavily locked in civil as well as criminal cases and that they referred all of them to the referee agreeing to be bound by his decision. The first thing to be kept in mind was that the statement was made in pending cases, and if the intention was to appoint an arbitrator, the provisions of Chapter IV of the Arbitration Act, 1940, would ipso facto apply. Section 21 thereof makes it obligatory that where parties to a suit agree to refer the matter in difference to arbitration, they have to "apply in writing" to the Court. Such a written application was mandatory as held in Messrs S.M. Qasim & Co. v. Messrs Sh. Azimuddin PLD 1962 (W.P.) Lahore 95. Section 23 of the said Act contemplates yet another condition in this behalf. The Court on receiving such application shall refer the matter in difference" and "shall---specify such time--for making of the award". The reason to insist for written application to be made to the Court was to remove all doubts in asking the Court to stop proceedings and wait till the "matter in difference" was decided by the arbitrator.
The application, the order of the Court, the matter in difference and lastly specifying the time for making of the award---were all indispensable steps to be taken in the context. Admittedly here no such formal application was made, nor did the Court hitherto seized of the lis comply with the dictates of section 23 ibid. The purport for which these prerequisites were prescribed was defeated, resulting in the consequential confusion as to whether the statement actually intended a reference to an arbitrator or some other mode for deciding the case. The absence of such an application strengthens the impression that arbitration was not intended. Messrs S.M. Qasim & Company's case being an eloquent authority on the point substantiates this plea.
8. The second ingredient was to see what subject-matter was sought to be decided. It is axiomatic that only the matters of civil nature could be referred to an arbitrator. Banerjee's Law of Arbitration, 3rd Edn., page 19; and Wharton's Law Lexicon, 12th Ed. Page 65 may be referred to. All the more to hold so when the reference relates to a matter sub judice before a Civil Court. Correspondingly a referee may not be made to decide a criminal case. But a perusal of parties' joint statement would unmincingly reveal that they included even the criminal cases for decision by the referee. If he were an arbitrator, as claimed, he was legally precluded to arbitrate at least upon these cases.
Consequently his character a fortiori was essentially other than of an arbitrator.
9. The third point hotly debated between the parties was the procedure adopted by the referee in this case. His report at page 46 of this file, in para. 3 thereof reads:-- {{URDU TEXT}} ' Suggesting obviously that he heard the parties, made a local inspection, held an inquiry from the people around and assessed the evidence to make certain conclusions. Contrarily it was not a straight statement based upon his own knowledge. I had sitting as a Single Judge considered this aspect in Rehmat etc. v. Residents of Deh etc. 1988 CLC 1922 where somehow I could not be persuaded to agree to the view that such acts on the part of the referee would necessarily make him an arbitrator. It was thought that any mode may be adopted for a compromise or adjustment of a suit and that the decision based thereupon squarely fell under Order 23 Rule 3 C.P.C. Ordinarily.
I am supposed to be bound by my own decision as held in PLD 1959 SC (Pak.) 9, but the respondents relied heavily on the Division Bench authority reported in Muhammad Hanif Khan's case which incidentally adopted the opposite view. I have no option but to follow the D.B. Decision, but that decision itself, and more than it the Supreme Court in Ch. Muhammad Saleem's case permitted to scan the whole case in order to determine the true intent of the parties in resorting to this mode of settlement of their dispute. As explained above, it was a case where by having ignored the statutory provisions of Chapter IV of the Arbitration Act, 1940 and included even the criminal cases in the reference, arbitration was not permissible. The corollary was that the so- called arbitrator was in fact a mediator as visualised in the Supreme Court dictum referred to above.
10. There was ample authority to agree to the contention that a referee may not make a statement from his own knowledge. In the D.B. Case of Muhammad Hanif Khan, in para. 13 of the judgment it was made clear that a written statement submitted by a referee could be given the status of a statement under Article 33 of the Qanun-e-Shahadat, 1984 and that it was not necessary that a referee thereunder must act on his personal knowledge. Even the Supreme Court in Ch. Muhammad Saleem's case held that the mere fact that the referee adopted the procedure of taking one of the parties aside and speaking to him in private, would not turn him into an arbitrator.
The principle deducible from these cases was that a referee's statement, not necessarily based upon his personal knowledge, and instead in sagacity derived from the statements of the parties or so, would nonetheless be covered by Article 33 of the Qanun-e-Shahadat and binding upon the Parties. If not a referee in true sense, nor an arbitrator as contemplated by Chapter IV of the Arbitration Act, such a person would be accredited the status of a mediator whose conduct was fettered by no law and the compromise or adjustment arranged by him would not be denuded of the parties' consent. They shall nevertheless be bound by his decision.
11. Looking from this aspect, the impugned judgment could not be sustained, in that it regarded the third person an arbitrator. The revision petitions are accepted, the judgments and decrees are set aside and those of the trial Court are restored. Parties shall bear their own costs.