In this suit arising out of application under section 20 of the Arbitration Act, 1940 (hereinafter referred to as the Act 1940) plaintiff, firm seeks an order directing defendant No,1 M/s. L & M International Private Limited to file the arbitration agreement in this Court and reference of dispute between the plaintiff and defendant No,1 to arbitration under Act 1940.
2. Plaintiff's case in brief is that, defendant No,1 was awarded a contract for construction of dual carriage way along National Highway between Hala and Moro by the National Highway Authority.
Defendant No,1 by agreement, dated 5-11-1995 awarded sub-contract for construction of a part of the Highway to the plaintiff. By virtue of agreement between the plaintiff and defendant No, 1 a Memorandum of Understanding was executed between both the parties on 20-12-1995. By such agreement/memorandum terms and conditions of the agreement between the plaintiff and defendant No,3 were made applicable to the sub-contract between the contesting parties. It is the case of the plaintiff that he carried out a substantial part of contract for which part payments were made but there arose a dispute between the parties over the payment for rest of the work executed by plaintiff. Plaintiff addressed a number of letters to defendant No,1 for payment of the bills for the work carried out by him which were regretted and declined. Ultimately he issued legal notice dated 21-4-1997 to the defendant No,1 and made a reference to the Engineer for resolving the dispute but receiving not positive response approached this Court.
3. Alongwith the plaint, plaintiff filed Civil Miscellaneous Application No,2772 of 1997 under section 41 of the Act, 1940 seeking a restraint order against defendant No,1 from disturbing his possession in any manner whatsoever till a Local Commissioner was appointed by this Court for recording and evaluating the work done by him. Notice of injunction application was ordered and by ad interim order it was directed that in the meanwhile plaintiff shall not be dispossessed from the site. Later plaintiff moved Civil Miscellaneous Application No,2773 of 1997 for appointment of a Local Commissioner to visit the site of work, measure and evaluate the entire work done in terms of subcontract and to prepare complete inventory of the store and materials, etc.
4. On the other hand, defendant No,1 moved Civil Miscellaneous Applications Nos.3591 of 1997 and 4542/1997 under section 34 of the Act, 1940 for stay of the proceedings as well as Civil Miscellaneous Application No,4535 of 1997 under Order XXXIX, rule 4, C.P.C. For vacating the interim order. Defendant No,3 through Civil Miscellaneous Application No,5107 of 1997 filed objections to the suit with a prayer that in the absence of any contract between N.H.A., and the plaintiff, it may be struck out from the array of parties.
5. In view of applications under section 34 of Act 1940 defendant No,1 did not file any written statement and its defence can only be spelt out from their counter-affidavits to the Civil Miscellaneous Applications filed by the plaintiff as well as their applications.
6. At the hearing, learned counsel for the defendant No,1 assailed and impugned the maintainability of the proceedings under section 20 of the Act, 1940 for the reason that in terms of clause 67.1 of the agreement plaintiff did not approach the Engineer for his decision on the dispute as stipulated. According to the learned counsel for this reason alone the suit being premature is not tenable at law and liable to be summarily dismissed. Mr. Bilal A. Khawaja, learned counsel for the plaintiff, however, referred to the notice/letter issued to the said Engineer on 21-4-1997 and vehemently contended that the period of 84 days for the decision of the dispute by the said Engineer expired on 15-7-1997 whereas a further period of 54 days for amicable settlement of the dispute also expired on 9-9-1997 during the pendency of this suit, therefore, the suit cannot be thrown out on this technical score alone. In the facts and circumstances of the case when written statement has not been filed controverting the pleas raised in the plaint and verified on oath, I am not inclined to accept the contention of the counsel for the defendant No,1. In law the averments made in the plaint are deemed to be correct and accepted for the assumption of jurisdiction, which ex facie do not bar the jurisdiction of this Court to entertain the suit.
7. It was next contended that the plaintiff has no locus standi to file the suit as he is not a party to the agreement between defendants Nos.1 and 3. The contention on the face of it is misconceived as the plaintiff claiming to be the sole proprietor of Indus Engineers has filed this suit through his attorney Ahmed Ghazal Usmani his real son and attorney who is admittedly a party to agreement for award of sub-contract by defendant No,
1. He has signed the agreement as well as Memorandum of Understanding on behalf of Indus Engineers as proprietor which prima facie establishes that the plaintiff is a sole proprietary concern. At any rate averments in the agreement as well as Memorandum of Understanding clearly stipulate that the sub-contract shall be governed by the terms and conditions of the agreement dated 12-10-1992 between defendant No,1 and the National Highway Authority i,e,, defendant No,3 which undisputedly provides for reference to arbitration in the event of a dispute as to the interpretation of terms of the agreement and the execution of the project, or otherwise. In view of this circumstance, it is difficult to subscribe the view that the plaintiff has no locus standi to approach this Court with the present suit for filing the agreement in Court and for referring the dispute to arbitration.
8. It was then contended that the proceedings under section 20 are not maintainable for the reason that the plaintiff did not issue any notice to defendant No,1 and more particularly application under section 41 of the Act, 1940 is not maintainable for the reason that no arbitration proceedings are pending before an Arbitrator. In my view for attracting the provisions of section 20 of Act, 1940, three essential ingredients are required to exist: (i) existence of arbitration agreement,
(ii) difference arising between the parties to the agreement, and (iii) proceedings under Chapter II of Arbitration Act have riot commenced. Section 20(1) of the Act, 1940 categorically postulates that where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen 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. Admittedly, plaintiff did not resort to the proceedings for arbitration under Chapter II of Act, 1940 and in the event of a dispute with regard to the terms of the agreement between the parties application under section 20 of the Act, 1940 is quite clearly maintainable at law. The existence of agreement as well as the dispute between the parties as agitated in the plaint has not been disputed either in the counter-affidavit or in the applications filed by defendant No,1. On the contrary soliciting stay of proceedings under section 34 of the Act, 1940 implies that there is an arbitration agreement between the parties. All the essential conditions subsisting in this case a fit case for filing the agreement in Court and reference of dispute to the arbitration is made out.
9. The prerequisites for an application under section 20 are:
(i) A subsisting and valid written arbitration agreement executed before the institution of the suit.
(ii) Suit should not have been filed with respect to the subject-matter of agreement which is not forbidden by law or against public policy.
(iii) Difference must have arisen to which the agreement applies.
(iv) The arbitrators should not have started arbitration proceedings.
(v) The award should not have been made.
(vi) The subject-matter should be such as is not forbidden by law.
(vii) The Court to which an application is made has jurisdiction.
' If any of the condition is absent, the filing of the application under this section and passing of orders by Court that the agreement be filed in Court and a reference to arbitration be made will be barred.
10. Upon cause being shown in terms of subsection (4) of section 20, the Court may refuse to order to file the agreement. If no cause is shown or if cause is shown and it is rejected, the Court may cause the agreement to be filed. On the agreement being filed, the Court shall make an order of reference to the arbitrator appointed by the parties by agreement or otherwise or to appoint an arbitrator if parties do not agree upon an arbitrator. Without an agreement being filed, further question regarding appointment of arbitrator does not arise. Where an application addressed to the Court stating that the parties have agreed to refer their dispute to the arbitrators is handed over to the Commissioner for presenting it to Court and the Court passes an order making a reference to the arbitrator the order passed by the Court is perfectly valid.
11. In Gul Son Air Cargo Services (Pvt.) Ltd. v. Compagnie International Air France (1997 CLC 1250) I have already taken the view that the provisions of law contained in Chapter II as well as section 20 of the Arbitration Act being supplementary to each other and judged in the light of case law cited before me, both the provisions must be harmonized in order to avoid redundancy. Accordingly, in order to maintain the sanctity of the agreement between the parties and as no cause to the contrary is shown, I am of the view that arbitration agreement deserves to be filed in Court and dispute referred to arbitration. I order accordingly.
Civil Miscellaneous Application No,2773 of 1997: In this Civil Miscellaneous Application prayer of the plaintiff is to appoint a Local Commissioner to visit the site and to record measurements of the work done so that dispute could be justifiably adjudicated upon by the Arbitrator. There is no controversy about the fact that the plaintiff did undertake substantial work on the sub-contract leading to the construction of a portion of the Highway. I see no strong reason to decline this prayer which would not only be in the interest of the parties but also provide sufficient material for determination of the dispute between them. I am therefore, inclined to direct NESPAK Regional Office situated in Bahria Complex No,1 . Moulvi Tamizuuddin Khan Road to nominate an experienced, impartial, professionally sound and well equipped Engineer to visit the site, take measurements, prepare inventory in presence of both the parties and submit a detailed report about the execution of work so far carried out by the plaintiff.
The report should be submitted to Court within 30 days of the receipt of the order. Provisionally fees of the Commissioner is fixed at Rs,50,000 to be borne by the plaintiff subject to final determination on the submission of his bill alongwith the report.
Civil Miscellaneous Applications Nos.2772 of 1997 and 4535 of 1997: ' While the first Civil Miscellaneous Applications is for injunction by plaintiff the second Civil Miscellaneous Applications is for vacation of interim order moved bv. Defendant No, 1 . In view of the order passed on Civil Miscellaneous Applications No,2773 of 1997 interim injunction order shall come to an end with the submission of the report by the Commissioner within the period prescribed hereinabove. Thereafter, construction work can be taken up and project completed.
Vacation of the interim order at this juncture may give rise to complications for the parties In my view it would be neither just nor fair and equitable to disturb the position existing at the moment. It is ordered accordingly.
Civil Miscellaneous Applications Nos.3591 of 1997 and 4542 of 1997: ' Both the applications seek to stay the proceedings under section 34 of the Act, 1940. In the face of proceedings under section 20 of Act, 1940, I see no reason to stay the proceedings. Prayer for stay of proceedings under section 34 presupposes the existence of an arbitration agreement between the parties. Moreover, since an order has been passed for filing arbitration agreement before the Court and reference of dispute to arbitration, both these applications are rendered infructuous and are disposed of accordingly.
Civil Miscellaneous Application No,5107 of 1997: Both the learned counsel have no objection to the deletion of defendant No,3 i,e,, National Highway Authority from the array of parties. As no cause of action has been shown to exist against the said defendant and no relief has been sought against National Highway Authority, it is only just and proper to strike out this defendant from the array of parties. I order accordingly.
In view of what has been stated above, plaintiff suit is decreed and defendant No,1 is directed to file agreement in Court. Dispute between the parties is referred to arbitration by Mr. Justice (Retd.)
Saleem Akhtar former Judge Supreme Court of Pakistan for making award within four months of the date of receipt of communication from the office of this Court. Arbitrator may quote his fees for sanction and approval by this Court, as deemed fit and proper.