1. This is first appeal under section 39 of the Arbitration Act, 1940 against the order of the learned Senior Civil Judge, Rahimyar Khan dated 11-4-1996 whereby he rejected the application made under section 20 of the Arbitration Act by the appellant for the appointment of an Arbitrator.
2. 2.The facts as alleged in the application before the learned Senior Civil Judge were that the appellant is a Private Limited Company who works in construction while the respondent is also a Limited Company which manufactures fertilizer etc. A contract was entered into and completed between the parties on 25-5-1991 according to which the applicant had to construct 40 'F' Type quarter for the employees of the respondent adjacent to the factory. According to the contract the work was started and while it was under completion that the administration of the respondent company seeing the hard work, honesty and standard of work entrusted another job of construction of a Staff Club and SM Baries within the factory concerning for which a contract took place between the parties on 1-12-1991. The work on both the projects was in progress and the administration of the respondent was fully satisfied with the performance of the appellant the administration of respondent offered more work to the appellant which was for the extension of administration block of the factory. Concerning it a contract was executed on 15-7-1992. The appellant performed the work according to the three contracts and even performed additional work entrusted by the respondent and now no work is left and that the appellant has submitted the whole accounts to the respondent but the administration of the respondent is raising objections one way or the other instead of making payment of the amount and is pointing out defects in the performance without any reason. The respondent has also taken possession of the construction and works and is using them. At present an amount of Rs,20,71,700 is payable to the appellant by the respondents according to the statement of account. In all the three contracts there exists Arbitration Clause in case of any dispute between the parties. The matter is to be referred to the Arbitrator whose award will be according to the prevalent law of the land. As in the said contracts no Arbitrator is specified hence the appellant requested for appointment of an Arbitrator through Court. The appellant had sent a legal notice dated 28-6-1994 to the administration of respondent through its counsel which was replied on 7-7-1994 and the appellant sent a rejoinder to it on 17-9- 1994. Thereafter, meetings were held between the parties and letters were exchanged on 6-3-1995, 16-3-1995, 3-4-1995 and 30-4-1995 and the appellant sent final notice to the respondent on 3-6- 1995 to appoint an honest person as Arbitrator to settle the disputed matters and payment could be made to the appellant. The respondent did not send reply to the said final notice. The terms and conditions, the parties and the legal and factual points involved in all the three contracts being the same hence the appellant made a single application concerning the three contracts. The appellant also stated in the said application that the cause of action arose for the first time when the respondent instead of making payment of the work done raised objection and started correspondence and lastly a week before that the respondent refused to point an Arbitrator with the consent of both the parties. It was also stated that the respondent company is within the territorial jurisdiction of the trial Court and all the contracts were also entertained within that jurisdiction and all the constructions etc. were completed within the said jurisdiction hence the said Court had the jurisdiction to hear and decide the matter. It was prayed that an order be passed directing the respondent to produce the original contract in the Court and the Court may appoint an honest and qualified person as an Arbitrator and the application be decided according to law and the appellant be refunded the amount due to it with costs.
3. 3.The application was resisted by the respondent company taking the plea that the application was not competent as prior to invoking the Arbitration clause the matter was to be referred to the owner in writing for his decision which has not been so referred, nor there is any decision of the owner in the field, nor notice to invoke the Arbitration clause within 15 days of the decision of owner's decision was given. The application was also objected on the point of jurisdiction as the venues of Arbitration were Karachi, Rawalpindi or Goth Machi or as directed by the owner.
4. 4.The learned Senior Civil Judge has rejected the petitioner accepting those objections as valid.
5. 5.I have heard the learned counsel for the parties and perused the 'record with their above assistance.
6. The first contention of the learned counsel for the respondent is that before invoking the Arbitration Clause within reference to the Owner was a mandatory pre-condition. Clause 48 of the Special Conditions of Contracts deals with the Settlement of disputes. It has four sub-clauses and reads as under:-- "48. Settlement of Disputes.--(1) In the event of any dispute between the Contractor the Owner, or the Contractor and the Engineer/Engineers Representative, the matter shall be referred to the owner in writing for his decision. The Owner shall, after making such enquiries as he may deem fit, give his decision, which shall be final and binding on both the Owners and Contractors till such time as the Contractor is completed. The Owner and/or Contractor shall forthwith give effect to the decision of the Owner until completion of the Contract whether arbitration is intended or not.
6. (2)If the Owner and/or Contractor are dissatisfied with the decision of the Owners and desire arbitration they shall give notice of such intention within a period of 15 days of the receipt of the Owner's decision, the said notice shall contain the cause of action, material facts of the case, and the relief sought, and shall be delivered to the Owner with copy to the Contractor/owner. It should be clearly understood that it is agreed that the Owners decision shall be final and binding till the completion of the Contract, and arbitration proceedings will commence after completion of work and after handing over of the completed work to the Owner for, use as they deem fit.
7. (3)Arbitration shall be conducted as per the arbitration laws prevalent in the country, and the venue of arbitration shall be Rawalpindi, Goth Machhi or as directed by the Owner.
8. (4)No decision given by the Owner in accordance with the foregoing provisions shall disqualify him from being called as a witness and giving evidence before the arbitration(s) on any matter whatever relevant to the dispute or different referred to the arbitration."
9. The parties to reference for arbitration are always besides the referee or the arbitrator. A man who is himself a party to a dispute can't become a judge of his own cause according to the principles of natural justice. As such reference of the matter to the owner and his decision being final and binding is invalid and to that extent sub-clauses (2) and (4) of clause 48 of the Special Condition of Contract are void and those are so declared. Further, before a person can apply under section 20 of the Arbitration Act four conditions must be satisfied:-- (i)That the petitioner has entered into an Arbitration agreement with some other person; (ii)That the agreement has been entered into before the institution of any suit with respect to the subject-matter of the agreement or any part of it; (iii)that a different has arisen between the parties to which the agreement applies; and (iv)that the Court to which the application is made has jurisdiction in the matter to which the agreement relates.
10. There is no other condition for an application to file in Court for Arbitration agreement.
7. As to the objection regarding lack of jurisdiction by Trial Court, at Rahimyar Khan it is an admitted fact that the respondent has its head office and carries on its business at Goth Machhi, Sadiqabad, the three agreements were entered into and signed by the parties at Sadiqabad as the cause of action arose at Sadiqabad and the mention of venue of Arbitration as Karachi or Rawalpindi cannot oust the jurisdiction of the Senior Civil Judge, Rahimyar Khan as section 20 of the Code of Civil Procedure clearly gives jurisdiction to a Court where defendant resides or carries on business.
11. Section 20 of the C.P.C. is reproduced as under:-- "20. <u>Other suits to be instituted where defendants reside or cause of action arises</u>.--Subject to the limitation aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction:-- (a)The defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or (b)any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or (c)the cause of action, wholly or in part, arises."
12. 8.The next objection is that necessary notice has not been given by the appellant. Firstly, the objection is not factually valid because notices dated 6-3-1995, 16-3-1995, 3-4-1995, 30-4-1995 and 3-6-1995 were given. Even otherwise, there are two sections in the Arbitration Act, namely, section 8 in Chapter II and section 20 in Chapter III. A comparison of the sections 8 and 20 shows that where the parties have entered into an agreement to refer their dispute to Arbitration they may either adopt the procedure laid down in section 8 or in the alternate the procedure laid down in section 20. Under section 8 a notice has first to be given and the Court can be approached after the expiry of 15 clear days from the service of the notice to concur in the appointment of arbitrator or arbitrators or umpire as the case may be. Under section 20 on the other hand no such notice is necessary and whenever a difference or dispute arises to which the agreement applies, they or any of them, instead of proceeding under Chapter-II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court. The point of time at which the right to apply under section 20 of the Arbitration Act, 1940, accrues is, therefore, the point of time at which a difference has arisen and the difference arises when one party does not agree with the other on any particular question covered by the arbitration agreement. In the present case the difference arose when the respondent refused to pay the amount payable to the contractor in full. The present application is under section 20 of the Arbitration Act, hence, no notice was necessary and no one can change law by entering into contract as any change offending the law will be void.
9. The next objection that there are three agreements and that there should have been three independent applications is also not valid in the circumstances of the present case as all the three agreements are about the same work except the difference that they are part of the same work between the same parties and the same questions of law and fact arise in them. Order I, rule I, C.P.C. clearly states that all persons may be joined in one suit as plaintiffs in whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transaction is alleged to exist, whether jointly, severally or in the alternative where if such persons brought separate suits, any common question of law or fact would arise. In the case of M. Imam-ud-Din Janjua v. The Thal Development Authority through the Chairman, T.D.A., Jauharabad (PLD 1972 SC 123) the appellant was a contractor and there were two contracts with the respondent/Authority for construction of the Spinning sections of its Textile Mills at Liaquatabad and Bhakkar respectively and the same Court decided the matter.
13. For the above reasons the appeal is allowed and the impugned order dated 11-4-1996 is set aside and case is remanded to the learned trial Court to appoint an Arbitrator in accordance with law.