1. The plaintiff seeks directions to the defendant, under suction 20 of the Arbitration Act, 1940 to file arbitration agreement dated 24-6-1981 in Court and to refer the matter to the arbitrator for resolving various disputes between the parties.
2. The defendant had invited tenders for construction of its office buildings at Abbasi Shaheed Road, Karachi. The plaintiff participated in the tender and was awarded the contract under defendant's letter dated 24-6-1981.
2. The work was to be executed in two phases within specified time frames of 24 and 18 months, respectively. However, the work could not be completed as scheduled and accordingly time for completion of the work was extended in respect of both the phases. The case of the plaintiff is that it suffered losses because of the escalation in overall cost of construction. Apart from the claim on the basis of escalation, the plaintiff has also raised claim on account of overhead expenses incurred due to elongation of completion periods from 7-7-1983 to 30-5-1984 and 7-i1-1986 to 30- 4-1989 and tangible loss of profit for the first and second phases respectively. The plaintiff called upon the defendant to make the losses good but the defendant refused to entertain the claims raised by the plaintiff.
3. The plaintiff, therefore, invoking Article 18.4 of the arbitration clause of the contract, requested for appointment of an arbitrator for settlement of the dispute between the parties. The defendant took up the stand that no dispute existed between the parties, and therefore, the appointment of arbitrator was out of question. , The plaintiff, therefore, has filed this suit under section 20 of the Arbitration Act, 1940 seeking directions to the defendant to file arbitration agreement dated 24-6-1981 for referring the matter to arbitrator for resolving the disputes that have arisen between the parties.
3. I have heard the learned counsel for the parties Mr.Munawar Ghani for the plaintiff and Mr.Imtiaz Lari for the defendant.
4. The learned counsel for the plaintiff has relied upon Article 18.4 of the contract which reads as under:-- "18.4. Any matter required to be referred to arbitration shall, subject to section 18.3 hereof, and in accordance with and subject to the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof for the time being in force be referred unless the parties concur in the appointment of a single arbitrator or two arbitrators (one to be appointed by each party to the dispute or difference) who shall by. Instrument in writing appoint an umpire immediately after they are themselves appointed. The parties shall be deemed to have failed to concur in appointing a single arbitrator if such an arbitrator shall not have been appointed within fourteen clear days after the service by either party on the other of a notice requesting him to concur in the appointment of such an arbitrator. Ifeither party shall refuse or neglect to appoint as arbitrator for fourteen clear days after the other party appointed his arbitrator has served the party making default with notice to make the appointment the party who has appointed the arbitrator shall lie entitled to appoint that arbitrator to act as sole arbitrator in the reference."
5. It is further contended by him that the defendant is a statutory corporation and is bound by the general directions contained in official Memo. No.F-3(9)-R-12/75, dated 30-9-1975, issued by the Government of Pakistan which provides for grant of escalation in respect of all the contracts entered into after 30-6-1973.
6. The learned counsel for the defendant has opposed the appointment of the arbitrator on the following grounds:-- (i)No dispute exists between the parties to be referred to the arbitration as the claim sought to. Be referred to arbitration is based on escalation which has been specifically excluded by the terms of the contract and the said Memo. Cannot override the contract. He has relied on clause 7(a) of the contract which reads as under:-- .
7. "No claim for escalation or compensation due to rise in the cost of prices of any type of material and labour will be accepted by the owners."
8. (ii)That the plaintiff had received the payment of its dues on the stipulated rates in respect of the first phase of the building in full and final settlement of claim and cannot be allowed to reopen the dispute.
4. In essence the applicability of the aforesaid office memorandum to the contract between the parties is not disputed. According to the plaintiff, despite clause 7(a) of the contract whereby it is provided that no claim for escalation or compensation due to rise in the cost of prices of any type of material and labour will be accepted by the owners the instructions and general principles contained in the aforesaid official memo being applicable, the plaintiff is entitled to the claim.
9. The learned counsel for the defendant contended that in view, of the aforesaid article of the contract, the dispute cannot be referred to, the arbitration as no reading of the aforesaid article, no dispute can be said to exist. In other words, his submission is that this Court should hold that no dispute exists between the parties. For reaching the above conclusion, the Court has necessarily to from an opinion with regard to, the effect of the aforesaid covenant in the contract on the said memorandum or vice versa.
10. The pleadings of the parties and the submissions made at the bar bring to surface the issues; whether the aforesaid office memo. Is applicable to the contract or not, or if the above memo. Is applicable, what will be the effect thereof on clause 7(a) of the contract. The above issues need to be resolved.
11. The learned counsel for the defendant relied on the cases of Prince Trading Company v.
12. Muhammad Usman Maula Bux (PLD 1954 Sindh 56) and Muhammad Umar v. Zakaria Adamji Charitable Corporation (1988 MLD 1190) in support of his contention that there being in dispute in existence, the matter cannot be referred to arbitration.
13. In the first-cited case, it was observed that the existence of dispute is an essential condition for reference to arbitration. This condition was said to be as essential as cause of action in a civil suit and the very essence of the arbitration agreement is that there should be some difference between the parties. In the above case, it was found that firstly the defendant had admitted the claim of the plaintiff and secondly, that it had been discharged by the defendant. It was in view of the above specific admitted fact that the claim raised by the plaintiff was found duly discharged, which led the Court to the conclusion that no dispute consequently existed between the parties. In the second case, a learned Judge of this Court had found .That the original agreement between the parties which contained the arbitration clause was superseded by another agreement in consonance with the terms of the previous agreement. It was further found that the dispute which had existed under the previous agreement was resolved between the parties in so far as it pertained to payment of certain amount and with regard to additional dispute the defendant had undertaken to perform his part of contract for execution of the sub-lease in terms of the agreement after getting the clearance from the Building Control Authority. In the above context conclusion was drawn that no dispute existed between the parties.
14. The above authorities are distinguishable and do not provide any parallel to the facts of the case to hold that no dispute has arisen between the parties, calling for reference to arbitration.
15. The following observations made by Zaffar Hussain Mirza, J. (as he then was) in the case of Jamila Industries Ltd. v. Pakistan Refinery Ltd. PLD 1976 Kar. 644 bring the point raised into focus:-- "There can be no cavil against the proposition of law that the existence of a difference or dispute is an essential condition for making a reference to the arbitrator- for that constitutes a cause of action for an application under section 20, Arbitration Act. The Court has, therefore, to be satisfied that a real question of difference has arisen before compelling the parties to submit to arbitration.
16. A dispute implies an assertion of right by one party and repudiation thereof by another. In other words materials for a lis as such must be shown to exist. Unless a dispute has developed which requires adjudication, there will be nothing to refer to arbitration. Further, the dispute must be real as the Court will not leave a mere pretence of dispute to arbitrator for decision. However, the scope of the power conferred on the Court under section 20 is merely limited to determination of the factum of a real dispute and no more. It is not for the Court to go into the question pertaining to the disputes raised or suggest the manner of decision thereof. For that would amount to usurping the jurisdiction of the domestic tribunal constituted under the arbitration agreement."
17. The disputes raised in the case cannot-be said to be mere pretence. The defendant is a statutory corporation. But for clause 7(a) of the contract, the applicability of the aforesaid memorandum not being disputed, the issues stated above and other questions that arise are to be--adjudicated in the light of the provisions of the contract and the memorandum and exposition thereof.
18. Interpretation of the said provisions by the Court will amount to usurpation of the jurisdiction vested in the domestic tribunal- constituted under the agreement.
19. In addition to escalation, the plaintiff has also raised claim on account of overhead expenses arising from elongation of the contract which also requires adjudication. .
5. The second submission of the learned counsel for the defendant that the plaintiff having received the payment in full and final settlement, at the rates stipulated in the contract, no dispute can be said to exist is also devoid of any merit. In disputes of the nature raised by the plaintiff, the payments are received under fiduciary compulsion and the right to enforce the claim is not extinguished thereby..
20. The above are the reasons for the short order elated 6-12-1993, whereby the plaintiffs application under section 20 of the Arbitration Act, 1940 was allowed and the defendant gas directed to file agreement dated 24--1981 arid Article, -2-1 of instructions to tenders and general conditions of contract in Court within two weeks,