' NAIMUDDIN, J.--This appeal, by leave. Is from the order dated 15-10-1988 passed by the Lahore High Court Lahore, in FAO No, 199 of 1988, in the following circumstances:
2. The respondent No,1 through Mr. John A. Whyte filed an application under section 20 of the Arbitration Act in the Court of the Senior Civil Judge, Lahore against the appellant joining respondent No,2 as a party and claiming that on 1-10-1982, the appellant and respondent No,1 entered into an agreement of engineering service which contained an arbitration clause to settle all disputes and differences. The appellant resisted the application on several grounds, namely;
(i) that there is no legal agreement between the parties, as such the question of any agreement based thereon does not arise;
(ii) that Mr. John. A. Whyte is not a national of Pakistan or a Director or even a shareholder of the respondent company or legally authorized to enter into an agreement with the appellant;
(iii) that F.J. Whyte Group (Pakistan) Ltd., respondent No,1 is an alleged company on paper only with no depth of share capital or technical know-how or is in no way legally connected with F.J. Whyte (International), London, U.K.
' On merits, the appellant stated in the written statement that the alleged services rendered by the respondent company were not required under the so-called agreement nor had the quantum thereof been honestly ascertained by the respondent No,1.
3. In the replication, the respondent No,1 stated that Mr. John A.Wpyte, at all material times, was legally authorised to enter into any agreement with the appellant and that they had not suppressed, concealed or misrepresented any material or other facts from the appellant. It was further stated in the replication as follows:-- "Defendant No,1 (appellant) was desirous to build a multistoreyed building and required the services of a consultant to undertake the planning and detailed supervision of the said project.
Pursuant to this after careful scrutiny and lengthy negotiations an agreement dated 1st October, 1982 was entered into, under seal, between the plaintiff and the defendant No,1 (appellant), copy whereof has already been attached as Annex: 'A'.
' In compliance with the said contract the plaintiff submitted the architectural design which was accepted by defendant No,1 (appellant). The rough-cost estimate as discussed and accepted by the defendant No,1 (appellant) was to the tune of Rs, sixty millions. The plaintiff thereafter continued to work in accordance with the contract and expended a great deal of time, effort and money, till the defendant No,1 (appellant) obviously desiring to back out of their responsibilities and obligations under the contract, started raising frivolous and unfounded objections and then finally, illegally and unilaterally terminated the said contract."
"Due to the above mentioned illegal termination of the contract, the plaintiff suffered heavy loss and damage and, therefore, in compliance with the terms and conditions of the contract and in order to settle their grievance, the plaintiffs referred the case to defendant No,2, asking them to act as arbitrator. But since defendant No,1 (appellant) has not replied to any correspondence and has failed to act in terms of agreement and the law, the plaintiff filed an application in this Hon'ble Court under section 20 of the Arbitration Act, 1940 praying that the agreement be filed in the Court and that the dispute be referred to defendant No,2 or to any arbitrator to be appointed by Court for an award."
4. The learned trial Court by the order dated 31-7-1988 allowed the application directing the appellant to file the agreement and since a copy had already been filed, it also directed that the dispute be referred to respondent No,2 with further directions which need not be mentioned here. In doing so the learned trial Court observed that the appellant had admitted the execution of the agreement and if the respondent No,1 had suppressed the fact at the time of entering into the agreement or if the appellant had terminated the contract, these questions were to be tried by the arbitrator, who is the sole judge of law and facts and held that there are mainly two ingredients for the grant of an application under section 20 of the Arbitration Act, which arc that there should be an agreement and a dispute. Reliance was placed by the learned trial Court on Manzoor Construction Co. Ltd. v. University of Engineering & Technology, Taxila (1984 CLC 3347) and Chandmiill Goneshmull v. Nippon Munkwa Kabushiki Kaisha (AIR 1921 Cal. 342).
5. Feeling aggrieved by the order, the appellant preferred an appeal in the Lahore High Court, which was dismissed in limine by a learned Judge who, after quoting the arbitration clause, observed that "it means that the question of validity of the agreement can be decided by the arbitrators. The appellant's grievance seems to be misconceived."
6. Leave was granted to consider the main point whether there was a valid agreement existing between the parties and that the nature of the dispute between them was such which could not be decided by the arbitrator but only by the Court of law and if the Court were to arrive at the conclusion that there existed a valid agreement between the parties only then in the case of a dispute the matter could be referred to the arbitrator under the arbitration clause I contained in the agreement.
7. We have heard Mr. K.MA, Samdani Advocate for the appellant and Mr. S.M. Zafar Advocate for the respondents. In order to appreciate the contention for the consideration whereof leave was granted, it is necessary if the relevant arbitration clause is quoted here, which reads as follows:-- "12. Arbitration.--If any dispute, reference or question shall at any time arise between the parties in respect of the interpretation of this Agreement or concerning anything herein contained or as to the rights, liabilities, or duties of the said parties hereunder, the same shall be referred to the arbitration under the auspices of the Lahore Chamber of Commerce and Industry. The decision of the arbitrator/arbitrators appointed as per Arbitration Rules of the Chamber of Commerce and Industry shall be final and binding on the parties and the provisions of the Arbitration Act, 1940.
Shall apply and be deemed to be incorporated in the Agreement. Work under this Agreement shall continue during the arbitration proceedings. The venue of the arbitration shall be at Lahore."
8. From the perusal of the above-quoted arbitration clause it will be seen that it is very broadly worded. It covers any dispute or difference or question B arising between the parties in respect of the interpretation of the agreement or concerning anything contained therein or as to the rights, liabilities or the duties of the parties thereunder.
9. Mr. K.MA. Samdani questioned the validity of the agreement and submitted that it was void ab initio for the reasons that the respondent company was on paper only with no depth of share capital or technical know-how or is in no way legally connected with F.J. Whyte (International)
London, U.K. And that Mr. John A. Whyte is not a national of Pakistan or a Director or even a shereholder of the respondent company or legally authorized to enter into an agreement with the appellant and, therefore, the question could be determined only by the Court and not by the arbitrator. The submission seems to be ill-conceived for the questions whether the respondent company was only on paper with no depth of share capital, if so, what was its effect and whether the respondent company had no technical know-how, if so, what was its effect, were questions which could be raised before and determined by the arbitrator C appointed in accordance with the arbitration clause as they would be covered by the phrase 'any dispute in respect of interpretation of the agreement or concerning anything contained therein'. Similarly, questions whether Mr. John A. Whyte was not a director or a shareholder of the respondent company and what was its effect and whether he was legally authorized to enter into an agreement with the appellant or not, were again matters touching the agreement and could be decided by the arbitrator. Further it was not argued or stated that if Mr. John A. Whyte was not a national of Pakistan, what was its effect and how does it affect the agreement which was between two companies registered under the Companies Act, 1913 in Pakistan.
10. In the case of Manzoor Construction Co. Relied upon by the Civil Judge, the arbitration clause was in the following terms:-- "If any question, difference or objection whatsoever shall arise connected with or arising out of this instrument - - - the rights, duties or liabilities of either party - - - every such matter - - - - including whether contract has been rightly terminated or as regards the rights and obligations of the parties as a result of such termination shall be referred for arbitration to such person as may be appointed in this behalf by the Project Director, University of Engineering and Technology, Lahore and his decision shall be final and binding and where the matter involves a claim for or the payment or recovery or deduction of money, only the amount, if any, awarded in such arbitration shall be recoverable in respect of the matter so referred."
' Dealing with this clause and the dispute raised thereunder the learned Civil Judge observed that after having given the said undertaking and after having withdrawn the earnest money voluntarily as a result of the same, there was no dispute between the parties left to be resolved through arbitration. Considering this reasoning, the High Court held as follows:-- "The claim of the appellant for the work done by it in pursuance of the contract and losses suffered by it due to stoppage of the work and later abandonment of the scheme and the plea of University that appellant was not entitled to any amount of money due to the undertaking given by it is clearly a difference or dispute in respect of rights, duties and liabilities of the parties as a result of termination of the contract and on the face of it falls within the ambit of the said arbitration clause.
It is, therefore, clear that there exists such a dispute between parties to the contract as is covered by the arbitration clause.
' Having come to the conclusion that there was a dispute between the parties which was covered by arbitration clause of the contract, the next question to be seen is as to whether there is sufficient cause within the meaning of subsection (4) of section 20 of the Arbitration Act for not making an order for filing of the agreement and referring the matter to arbitration or in other words in the context of the present case whether said undertaking which is the sheet anchor of the case of the respondent University was such a sufficient cause or debarred the Court from making such an order. I have given my anxious thought to the said question and have come to the conclusion that the said undertaking does not constitute such a sufficient cause as would warrant an order declining to make such a direction. My first reason for coming to that view is that a dispute in an arbitration is in the nature of a cause of action in a civil suit. The question in the civil suit as to whether the plaint of the said suit discloses a cause of action is decided by reference to the averments in the plaint and not on the basis of any plea raised by the opposite party in the written statement. Similar is the position in a dispute which arises between parties regarding a contract containing an arbitration clause and request for resolution of the said dispute through arbitration cannot be refused on the mere ground that the party applying for arbitration had given an undertaking not to make any further claim, inasmuch as, the plea in relation to such an undertaking constitutes only-a defence while the claim for the sums of money due from the other party constitutes an averment in the plaint and the plea that the undertaking given by the appellant that he would not ask for any money for the work done by him was procured through duress and coercion is an averment in the replication of the plaintiff. The Civil Judge could not, therefore, have stopped the matter at the very threshold, burked the enquiry through arbitration and dismissed the application on the ground that there was an undertaking by the appellant on account of which parties had been left with no dispute to be resolved.
' My second reason for coming to the said conclusion is that in claims for arbitration, questions relating to original contract are not within the jurisdiction of the Civil Court but are matters which can be decided by the arbitrator alone, as by virtue of the relevant clause of the contract, they are by mutual concensus, committed to the judgment of the arbitrator. In the case in hand, the alleged undertaking which had been put forward to avoid arbitration pre-supposed an assertion on the part of the appellant-Firm that it had rights against respondent University under the contract and further visualized a relinquishment or waiver of said rights. The said undertaking, therefore, essentially deals with the contract itself. It is clear, therefore, that the question of nature and meaning of the undertaking given is a matter within the exclusive jurisdiction of the arbitrator who is the sole judge of facts of the case. Furthermore, there is a counter-allegation by the appellant- Firm that the submission of the said undertaking by the appellant-Firm was not voluntary but under duress, as it had been obtained in a situation in which only course available to the appellant-Firm was to give the said undertaking. This question was one in regard to the legal effect of said undertaking and relinquishment and waiver of rights under the contract between the parties and on the face of it could not be decided by the Civil Court and was one which could be adjudicated upon by the arbitrator alone. An arbitrator is not only the judge of the facts but also of law applicable and it is he who can go into the legal validity of the said undertaking and the effect it had on the claim of appellant-Firm. For this reason too, the learned Civil Judge had no jurisdiction to hold on the basis of the said undertaking that there was no dispute left between the parties."
11. The phrases 'dispute arising out of and in relation to the contract' came up for consideration before the Supreme Court of India in the case of M/s. Dhanrajamal Gobindram v. M/s. Shamji Kalidas and Co. (AIR 1961 Supreme Court 1285) wherein the Court considered the question whether the dispute as to the legal existence of agreement including the arbitration clause was not a dispute arising out of or in relation to a cotton transaction, and observed as follows:-- "We may dispose of here a supplementary argument that the dispute till now is about the legal existence of the agreement including the arbitration clause, and that this is not a dispute arising out of, or in relation to a cotton transaction. Reference was made to certain observations in Heyman v. Darwins Ltd., 1942 AC 856. In our opinion, the words of the Bye-law "arising out of or in relation to contracts" are sufficiently wide to comprehend matters, which can legitimately arise under S.
20. The argument is that when a party questions the very existence of a contract, no dispute can be said to arise out of it. We think that this is not correct and even if it were, the further words "in relation to" are sufficiently wide to comprehend even such a case. In our opinion, this argument must also fail."
12. Reference may also be made to the case of Renusagar Power Co. Ltd.v. General Electric Company and another (AIR 1985 Supreme Court 1156) decided by the Supreme Court of India, on which reliance was placed by Mr. K.M.A. Samdani, wherein one of the questions considered was whether a given dispute inclusive of the arbitrator's jurisdiction comes within the purview of the arbitration clause and following conclusions were reached in paragraph 25 of the judgment, which read as follows:--
25. Four propositions emerge very clearly from the authorities discussed above :
(1) Whether a given dispute inclusive of the arbitrator's jurisdiction comes within the scope or purview of an arbitration clause or not primarily depends upon the terms of the clause itself; it is a question of what the parties intend to provide and what language they employ.
(2) Expressions such as "arising out of or "in respect of or "in consequence or or "concerning" or "relating to" the contract are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope) of the arbitration agreement.
(3) Ordinarily as a rule an arbitrator cannot clothe himself with power to decide the questions of his own jurisdiction (and it will be for the Court to decide those questions) but there is nothing to prevent the parties from investing him with power to decide those questions, as for instance, by a collateral or separate agreement which will be effective and operative.
(4) If, however, the arbitration clause, so widely worded as to include within its scope questions of its existence, validity and effect (scope), is contained in the underlying commercial contract then decided cases have made a distinction between questions as to the existence and/or validity of the agreement on the one hand and its effect (scope) on the other and have held that in the case of former those questions cannot be decided by the arbitrator, as by sheer logic the arbitration clause must fall along with underlying commercial contract which is either non-existent or illegal while in the case of the latter it will ordinarily be for the arbitrator to decide the effect or scope of the arbitration agreemnet, i.e, to decide the issue of arbitability of the claims preferred before him."
13. Reference may also be made to the dictum of Viscount Simon L.C. In Heyman v. Darwins Ltd. (H.L.
(E) 1942 AC 350 at page 360 of the report, which is as follows:-- "The answer to the question whether a dispute falls within an arbitration clause in a contract must depend on (a) what is the dispute and (b) what disputes the arbitration clause covers. To take (b) first, the language of the arbitration clause in this agreement is as broad as can well be imagined.
It embraces any dispute between the parties "in respect of the agreement, or in respect of any provision in the agreement, or in respect of anything arising out of it. If the parties are at one on the point that they did enter into a binding agreement in terms which are not in dispute, and the difference that has arisen between them is as to their respective rights under the admitted agreement in the events that have happened for example, whether the agreement has been broken by either of them, or as to the damage resulting from such breach, or whether the breach by one of them goes to the root of the contract and entitles the other party to claim to be discharged from further performance, or whether events supervening since the agreement was made have brought the contract to an end so that neither party is required to perform further in all such cases it seems to me that the difference is within such an arbitration clause as this. In view, however, of phrases to be found in the report of some earlier decisions, the availability of the arbitration clause when "frustration" is alleged to have occurred will require closer consideration."
' The above observation will in my view apply to the question whether an agreement has been obtained by suppression of material facts as impliedly pleaded. In the present case the appellant admitted the execution of the agreement, but impliedly pleaded that the same was obtained by misrepresentation. Mr. K.M.A. Samdani however, relied on Waverly Jute Mills Co. Ltd. And others v.
Raymon and Co. (India) Pvt. Ltd. (AIR 1963 Supreme Court 90) wherein it was laid down that if a contract is illegal and void, an arbitration clause which is one of the terms thereof, must also perish along with it and a dispute relating to the validity of a contract is in such cases for the Court and not for the arbitrators to decide. This case has no application to the facts of the case under consideration as the agreement herein cannot be prima facie said to be illegal and is not hit by the provisions of section 23 of the Contract Act.
14. It was however submitted by Mr. K.MA. Samdani that the agreement was void ab initio because it was based on misrepresentation of facts mentioned hereinbefore. The submission is not well- founded for firstly, when consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. In such a case if the party thinks fit, he may insist that the contract shall be performed and that he shall be put in the position in which he would have been if the misrepresentation made had been true. I say so on the authority of section 19 of the Contract Act, which reads as follows:-- "19. Viodability of agreements without free consent.- - When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
' A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed and that he shall be put in the position in which he would have been if the representations made had been true.
' Exception.--If such consent was caused by misrepresentation, or by silence, fraudulent within the meaning of Section 17, the contract nevertheless is not voidable, if-the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
' Explanation.--A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable."
' Secondly, the question whether the facts pleaded constitute any misrepresentation and have any bearing have yet to be determined by the arbitrator in view of the arbitration clause which is of wide amplitude.
15. Dealing with the question of repudiation of the agreement by one party, Viscount Simon L.C., observed in Heyman's case (supra):-- " The first head of claim in the writ appears to be advanced on the view that an agreement is automatically terminated if one party "repudiates" it. That is not so. "I have never been able to understand," said Scrutton L.J. In Golding v. London & Edinburgh Insurance Co., Ld. (1932) 43 L1. L.
Rep. 487, 488), "what effect the repudiation of one party has "unless the other party accepts the repudiation". If one party so acts or so expresses himself, as to show that he does not mean to accept and discharge the obligations of a contract any further, the other party has an option as to the attitude he may take up. He may, notwithstanding the so-called repudiation, insist on holding his co-contractor to the bargain and continue to tender due performance on his part. In that event, the co-contractor has the opportunity of withdrawing from his false position, and even if he does not, may escape ultimate liability because of some supervening event not due to his own fault which excuses or puts an end to further performance: a classic example of this is to be found in Avery v. Bowden ((1855) 5 E. & B. 714). Alternatively, the other party may rescind the contract, or (as it is sometimes expressed) "accept the repudiation," by so acting as to make plain that in view of the wrongful action of the party who has repudiated, he claims to treat the contract as at an end, in which case he can sue at once for damages."
"But, even so, I do not see how this claim however expressed, together with the other claims in the writ, can be regarded otherwise than as involving a dispute "in respect of the "agreement" and in respect of something arising out of it. The fallacy of the other view arises from supposing that, if the respondents have so acted as to refuse further performance of the agreement, this amounts to saying that they deny that the agreement ever existed. If the respondents were denying that the contract had ever bound them at all, such an attitude would disentitle them from relying on the arbitration clause which it contains, but that is not the position they take up. They admit the contract, and deny that they have repudiated it. Whether they have, or have not, is one of the disputes arising out of the agreement. Even if the arbitrator finds that they have, and that on the appellants' acceptance of the repudiation the contract is at an end, that finding does not oust the arbitrator's jurisdiction. "The proposition, " said Lord Finlay in Sanderson & Son v. Armour & Co. Ltd.
(1922 S.C. (H.L.) 117, 121) "that the mere allegation by one party of repudiation of "the contract by the other deprives the latter of the right to "take advantage of an arbitration clause is unreasonable in "itself, and there is no authority to support it." Moreover, the damages due from the respondents for this breach of the obligations of the agreement, as well as damages for any other breaches of it, are also disputed matters arising "in respect of the agreement."
' And finally concluded at page 366 of the report as follows:-- ' Ordinarily speaking, there seems no reason at all why a widely drawn arbitration clause should not embrace a dispute whether a party is discharged from future performance by frustration, whether the time for performance has already arrived or not."
16. It will be of advantage if I refer to a passage from Halsbury's Laws of England, 4th Edition, para 553, which reads as follows:-- Frustration or repudiation.-- The fact that a contract is frustrated or repudiated does not of itself determine every possible operation of an arbitration clause referring to arbitration disputes arising out of the contract. It does not matter whether the arbitration clause is an ordinary clause or a Scott v Avery clause. Where a party does not agree that there has been frustration, a difference on this issue is within an appropriate arbitration clause...""
17. Mr.S.M. Zafar Advocate for the respondents also referred to a passage from Chitty on Contracts, 24th Edition Page 873, which reads as follows:-- "Scope of the arbitration agreement.- - An unqualified arbitration clause referring to differences arising "in respect of or "with regard to" or "under" a contract covers a dispute as to whether a breach of contract by one party has operated to discharge the other. For a repudiation by one party, even when accepted by the other, does not entirely abrogate the contract. It survives for the purpose of measuring the claims arising out of the breach. Accordingly, a party declining to perform may still rely on an arbitration clause in the contract. So can a party who has committed a fundamental breach of the contract. The question whether a contract has been frustrated is also within the scope of such a clause, no matter whether the contract is purely executory or has been partly executed ... . ' But disputes as to whether the contract was ever entered into at all, or whether it is void, or illegal, are not within the scope of an arbitration clause contained therein, for if the contract is not binding on the parties, neither is the arbitration clause. If the question is whether the making of the contract was induced by fraudulent misrepresentation, the issue of whether or not the dispute is within the scope of the arbitration clause depends on the construction of the clause 11
18. Lastly, it was argued by Mr. K.MA. Samdani that respondent No, 1 had not specified the dispute in the application. He had made only vague reference as to the existence of the dispute. Therefore, it is necessary to refer to the averments made in the aplication. In para 1 of the application, the respondent No,1 had referred to the arbitration agreement viz. Clause 12 annexing thereto a copy of the agreement and stating that thereby the parties agreed that differences arising thereunder shall be referred to arbitration under the auspices of the respondent No,2. He further stated "that such differences have arisen and are still subsisting between the two parties to the agreement". It was open to the appellant to ask for further and better particulars of the dispute. Nonetheless the respondent No,1 stated the same in the replication which have been quoted in extenso hereinbefore. Therefore, the appellant as well as the Court knew what was the dispute between the parties and what was the claim of the respondent No,1 which was required to be determined by the arbitrator.
19. In view of the wide scope of arbitration agreement, I am of the view that the questions raised by the appellant fall within its scope and the arbitrator can decide the same after considering their relevancy. Accordingly the orders of the Civil Judge and the High Court passed on appeal confirming the order of the Civil Judge do not call for any interference by this Court.
20. I would, therefore, dismiss the appeal with costs.