' The Oil and Gas Development Corporation Limited, the appellant, has through this appeal, assailed the order of the learned Senior Civil Judge, Islamabad, dated the 25th September, 1997, whereby pursuant to an application moved by the respondent company under section 20 of the Arbitration Act, 1940, the appellant was directed to file the original agreement, dated the 4th October, 1992, entered into between the parties, in the Court.
2. Briefly, the facts giving rise to the appeal are that on the 4th October, 1992, the appellant and respondent-company entered into a Turnkey Contract alongwith the Purchase Contract and Works Contract for designing, fabrication procurement, transportation, construction and commissioning of Gas/Condensable Processing Plant at Dhodak. On 23rd May, 1997; the respondent-company moved an application under section 20 of the Arbitration Act, 1940 the learned Senior Civil Judge, Islamabad, praying that, since certain disputes had arisen in respect of payment of various, amounts, the appellant Corporation be directed for filing the original Purchase Contract and Works Contract in the Court and the matter be referred to the arbitration in accordance with clause (24) and clause (57) of the said Contracts respectively.
3. The application was opposed by the appellant-Corporation through a written reply filed on the 25th September, 1997, on which date the learned Court was pleased to pass the following order in vernacular:-
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4. The appellant being aggrieved of the aforesaid order has brought this appeal claiming that the direction of the learned trial Court for filing of original agreements in the Court was premature as the Court had not yet determined if there was actually any dispute between the parties requiring settlement thereof through arbitration. Relying upon Dhanrajamal Gobindram v. M/s. Shamji Kalidas & Company (AIR 1961 SC 1285), Mr. Mansoor Ahmad, Advocate, the learned counsel for the appellant contended that before directing the appellant for filing the original agreements in the Court, it was incumbent upon the Court to make determination if actually any dispute existed between the parties which required arbitration in accordance with the terms of the agreements.
According to the learned counsel, after filing of agreement no such determination can be made as, thereafter, the Court will be left to undertake only certain formal ministerial actions such as forwarding of the agreement to arbitrator alongwith the questions for determination in accordance with the provisions of the Arbitration Act, 1940. The learned counsel further contended that, in fact the parties were not in dispute concerning the terms of the Contracts. It was contended that under the Contracts, the respondent company was liable to pay all taxes, but in order to avoid payment of withholding tax in accordance with section 50 of the Income Tax Ordinance, 1997, the application under section 20 .Of the Arbitration Act, 1940, was moved so that the amount of tax which is deductable by the appellant on all payments to be made to the respondent, may not be deducted.
Since such deductions are to be made in accordance with the provisions of law, the said issue cannot be referred to arbitrator for settlement.
5. The appeal was vehemently opposed by the respondent claiming that any enhancement in any tax or the payment of taxes by the respondent was liable to reimbursement by the appellant- Corporation, hence, a dispute did exist between the parties and under the terms of the Contracts, the same, could only be resolved through arbitration. Barrister Mian Gul Hassan Aurangzeb representing the respondent-Company, claimed the appeal to be mala fide as having been filed with an intention to delay the arbitration proceedings. It was contended by the learned counsel that the respondent-Company was not denying the liability or payment of withholding tax, but only seeking its re-adjustment vis-a-vis the contract price. It was claimed that it was agreed between the parties that in the case of any change in the taxes and duties, the contract price of the project was to be accordingly adjusted. The change in the rate of tax had certainly given rise to a controversy as to whether the respondent-Company was entitled to any compensation or entitled to adjustment of contract price for the deduction of withholding tax pursuant to enhancement in rates of such tax from the payments being made to the respondent-Company. The learned counsel very strongly urged that a dispute had, thus, arisen between the parties as the appellant had clearly expressed its inability for re-adjustment of contract price. He also contended that, in fact, the appellant had been asking the respondent for negotiation and settlement of dispute outside the Court subject to withdrawal of application moved by the respondent-Company under section 20 of the Arbitration Act, 1940. Hence, in view of the learned counsel, the appellant should have not obstructed the arbitration proceedings on flimsy grounds.
6. The learned counsel next contended that under rule 3 of Order XLII of the Code of Civil Procedure read with rule 2 thereof, before filing of and appeal against an interim order the appellant was required to serve notice upon the respondent and failure to do so renders the. Very appeal liable to dismissal. In support of his contentions, the learned counsel relied upon Supreme Court judgment in Mrs. Dino Manekji Chinoy and 8 others v. Muhammad Matin (PLD 1983 SC 693) and dictum of the Division Bench of the High Court of Sindh in Ali Asbestos Ltd. And 4 others v. Bank of Credit and Commerce (1997 MLD 2003), wherein it was laid down that prior to filing of an appeal against the order of Court during pendency of the suit service of notice under rule 3 of Order XLVIII, C.P.C. Was mandatory.
7. In the case of Mrs. Dino Manekji Chinoy and 8 others v. Muhammad Matin (supra), although the Supreme Court had observed that any appeal which is not accompanied by an affidavit of issuing notice of appeal and copy of receipt of such notice by the opposite-party should not be entertained, it was also held therein that the main purpose of he notice under rule 3 of Order XLVIII, C.P.C. Was that the opposite-party should not be taken by surprise. But where the opposite-party is duly heard at pre-admission hearing, his right are not jeopardized. In this regard, in was observed by the Court as under:-- ' "Since the proper place of procedure is to help and not to thwart the obtaining of justice and procedural laws, as pointed out by Mr. Sharifuddin Pirzada, should be utilised as 'stepping stones' rather than we might add, as stumbling blocks; the right of a party in this case to have his appeal heard, cannot be allowed to be defeated for failure to comply with the form where the substance has, in fact, been complied with."
8. Mr. Mansoor Ahmad, Advocate, the learned counsel for the appellant contended that where an appeal is admitted for hearing an omission to issue notice in accordance with rule 3 of Order XLVII, C.P.C. Is brought to the notice, such omission is not fatal and can be rectified. In this respect, he relied upon various judgments of this Court including Muhammad Ramzan and another v. Haji Karim Bakhsh and 5 others (1988 CLC 448), Noor Mhammad and another v. Ch. Liaquat Ali Khan (1990 CLC 929) and Ch. Bashir Ahmad v. Province of Punjab (1991 CLC 1263). In view of divergent views of the Courts over the interpretation of dicum laid down by the Supreme Court in the case of Mrs. Dino Manekji Chinoy and 8 others v. Muhammad Matin (supra), the case of Bashir Ahmad v.
Province of Punjab was specifically referred to a Division Bench which held that after admission of an appeal the same cannot be dismissed for non-compliance of the provisions of rule 3 of Order XLIII, C.. P.C. The relevant extract of the judgment of the Division Bench as reported in 1990 MLD 986 is reproduced below:-- ' "Service of previous notice, as observed by the Supreme Court, is meant to avoid delay that is occasioned in issuing notice to and having it served on the respondent by the Court and to afford an opportunity to the respondent to contest the admission of the appeal and seek its dismissal in limine. Of course the respondent has no unqualified right to enter appearance at limine stage to contest the appeal and seek its dismissal; he can do so, as it transpires from sub-rule (2) of rule 3, Order XLIII, only with the permission of the Court, exercise of right being dependent upon the grant of permission by the Court. Rule 3 is evidently intended to cater for the hearing of appeal at limine stage; its application cannot be stretched to post-admission stage of the appeal. As discussed in Muhammad Ramzan v. Karim Bakhsh (1988 CLC 448) wrong entertainment of appeal by the Court or by its officers and admission thereof would not adversely recoil upon the appellant for he is not to be penalised for any act or omission of the Court. The maxim actus curiae meminem gravabit (an act of the Court shall prejudice no man) would be squarely applicable to and cover his case.
The utility of giving previous notice of filing of appeal is meant to be restricted to the stage of preliminary hearing of the appeal and is not to have any further effect once the appeal has crossed that stage and has been admitted for regular hearing; thereafter, the appeal is to be heard and decided on merits. It follows that after its admission the appeal cannot be dismissed for non-compliance with the provisions of Order XLIII, rule 3 of the Code of Civil Procedure."
9. In the instant case, no notice before filing of appeal in this Court in accordance with rule 3 of Order XLIII, C.P.C. Claimed to have been served upon the respondent. In fact, from the order-sheet maintained by the learned Civil Judge it appears that the appellant had no intention to apprise the respondent of filing an appeal as after passing the impugned order, dated 25-9-1997, the appellant had obtained several adjournments for filing the agreement, even subject to payment of costs and only on 9-1-1998, the appellant informed the learned trial Court that an appeal against the order, dated 25-9-1997 has been filed in the High Court. Nevertheless, the fact remains that the appeal was admitted for hearing on the 7th January, 1998. Hence, relying upon the decision of Division Bench of this Court in Ch. Bashir Ahmad v. Province of Punjab (1990 MLD 986), the present appeal will be maintainable notwithstanding that no notice prior to filing the present appeal was served upon the respondent.
10. On merits, there is quite a force in the contentions of the learned counsel that before making an order for filing agreements the learned trial Court should have determined if the parties were at variance on a matter which requires resolution through arbitration. In this respect, it would be expedient to reproduce the relevant extract of the judgment of the Indian Supreme Court in Dhanrajamal Gobindram v. M/s. Shamji Kalidas & Co. (AIR 1961 SC 1285):-~~ ' "But the crux of the argument is that the provisions of subsection (4) of section 20 read with subsection (1), (ibid), cannot apply and the Court, after filing the agreement, will have to do nothing more with it, and this shows that section 20 is not applicable. This argument overlooks the fact that this is a statutory arbitration governed by its own rules, and that the powers and duties of the Court in subsection (4) of section 20 are of two distinct kinds. The first is the judicial function to consider whether the arbitration agreement should be filed in Court or not. That may involve dealing with objections to the existence and validity of the agreement itself. Once that is done, and the Court has decided that the agreement must be filed, the first part of its powers and duties is over. It is significant that an appeal under section 39 lies only against the decision on this part of subsection (4). Then follows a ministerial act of reference to arbitrator or arbitrators appointed by the parties."
11. In the instant case, the existence of arbitration clause in the contracts executed between the parties is not denied, but from the very outset the appellant had raised objections that the application under section 20 of Arbitration Act, 1940, filed by the respondent was not maintainable, inter alia, on the ground that there was no dispute between the parties which required arbitration in accordance with the terms of the contracts. Subsection (4) of section 20 (ibid) specifically provides that where 'no sufficient cause is shown the Court shall C order the agreement to be filed and shall make order of reference to the arbitrator'. It is clear from the impugned order, dated 25- 9-1997 that the learned Trial Court had on receipt of reply to the application moved under section 20 of the Arbitration Act, 1940, without even making any observation if the divergent claims of the parties required determination, simply made a direction for filing of the agreement in the Court.
The expression 'sufficient cause' used in subsection (4) of section 20 of the Arbitration Act, 1940, is of great import and requires determination of the Court as to whether the agreement should or should not be filed in the Court for making reference to the arbitrator. In this context in accordance with section 20 of the Act, the party making an application thereunder-is entitled to seek filing of agreement in the Court, unless there is a sufficient cause shown by the opposite-party in not doing so. In this respect it will be pertinent to refer to Messrs Friends Trading Co. v. Messers Muhammad Usman Moula Bux (PLD 1954 Sindh 56), wherein it was held by the High Court as under:-- ' "It is not open to a party to an agreement of reference to revoke the submission to arbitration except for sufficient cause. But on the other hand if sufficient cause is shown there is no doubt that such revocation can be allowed. The words 'sufficient cause' mentioned in the subsection (4) of section 20 of the Act are not restricted to grounds such as are mentioned in section 30 of the Act or to grounds of fraud, undue influence or coercion; they cover all the grounds of justice, equity and good conscience on which a Court thinks an agreement should not be ordered to be filed."
12. In G.D. & Co. v. Union Carbide (India) Ltd. (AIR 1962 Calcutta 360), it was laid down that 'the party opposing an application under section 20 is entitled to show other causes why no order should be made and the Court is empowered to refuse the application upholding the objection'. It was further held therein that 'the Court has a disretion in the matter of filing the agreement and directing a reference under section 20, even in cases where there is an effective arbitration agreement and the dispute stated in the petition is covered by the arbitration agreement'. Similar view was taken in Abdul Kadir v. Madhav Prabhakar (AIR 1962 SC 406) that 'subsection (4) of section 4 lays down that where no sufficient cause is shown, the Court shall order the agreement to be filed and make an order of reference to the arbitrator. It is, therefore, open to a Court under this subsection, where sufficient cause is show not to order the agreement to be filed and not to make a reference to the arbitrator'.
13. Since the appellant as stated above had raised several objections against the maintainability of the application under section 20 of the Arbitration Act, 1940, it was incumbent upon the Trial Court to give a specific finding before issuing direction for filing the agreement that the objections raised by the appellant did or did not disclose a sufficient cause for making such a direction. Under the provisions of subsection (4) of section 20 (ibid), the Court is not only to order for filing the agreement but also requires to make a reference to the arbitrator. The order of reference is, thus, more important than the order of filing the agreement. Meaning thereby that if no order for reference can be made there should not be an order for filing of agreement In particular, in the reference the Court is required to identify the dispute between the parties on which opinion of the arbitrator or arbitrators, as the case may he, in the form of award is required. If the Court finds that there is no dispute between the parties which requires resolution in accordance with the terms of the agreement certainly no reference shall be made to the arbitrator. In the instant case, the learned trial Court has, however, clearly passed a mechanical order for filing the agreement without recording its findings on the sufficiency or otherwise of the objections raised by to appellant.
14. The learned counsel for the respondent contended that in order to expedite the proceedings, this Court may itself give findings as to existence or otherwise of the dispute between the parties for resolution through arbitration. Since the order under subsection (4) of section 20 (ibid) is appealable, it would not be expedient to make such finding as it will deprive the parties the right of appeal against the decision of the trial Court determining the filing of agreement or otherwise.
15. In view of the above discussion, since the learned Trial Court had not recorded its findings in accordance with subsection (4) of section 20 of the Arbitration Act, 1940, on the objections raised by the appellant, the order, dated 25-9-1997 passed by the learned Civil Judge, Islamabad, in regard to filing of agreement is set aside and the case is remanded for recording its finding in accordance with law. The appeal is allowed accordingly without any order as to costs.