MUHAMMAD BASHIR JEHANGIRI, J.--This is an appeal against the order dated 17-9-1995 of the High Court of Balochistan, Quetta, whereby the order dated 27-7-1994 passed by the learned Senior Civil Judge, Quetta, on an application under sections 8 and 20 of the Arbitration Act (X of 1940) (hereinafter called as the Act) was set aside and the case was remanded to her for the appointment of the Arbitrator and for referring the matter to arbitration in accordance with the provisions of the Act.
2. On the basis of a tender floated by the appellant for the improvement and extension of Ari Pir Perennial Irrigation Scheme in Tehsil Doreji, District Lasbella, the respondent (the Contractor) succeeded to secure the contract whereby the Contractor undertook to execute the said project.
Contract agreement was executed between the parties. The Contrator lodged 10 claims to the appellant details whereof are as under: "Claim No,I Rs,20,13,324 Claim No,II Rs,12,86,774 Claim No,III Rs, 1,00,000 Claim No,IV Rs .35,00,000 Claim No,V Rs .90,00,000 Claim No,VI Rs,93,22,500 Claim No,VII Rs,3,87,087 Claim No,VIIII Rs,12,26,000 Claim No,IX Rs .6,00 ,000 Claim No,X Rs .50,00,000
3. The Contractor had acknowledged the receipt of Rs,16,13,087 under Claims Nos.VII and VIII whereas the remaining Claims Nos.I to VI, IX and X, according to the Contractor, had not been settled.
4. Conversely, the appellant had repudiated any such claim made by the contractor asserting that he had received on 27-12-1993 final bill amounting to Rs,23,57,885 under protest. Subsequently, it was further urged, the parties entered into an agreement and balance worked out was settled at Rs,3,56,734 which amount had since been paid on 30-5-1994 to the Contractor and in token thereof the Contractor withdrew protest and acknowledged the settlement of his final bill.
5. This assertion of the appellant was repudiated by the Contractor in the rejoinder pleading that the dispute in hand was different from that referred to in the letter dated 30-5-1994.
6. The learned Senior Civil Judge vide order dated 27-7-1994 held that in view of having received the final bill by the Contractor there existed no dispute between the parties which could be referred to arbitrators and, while holding that the plea for appointment of arbitrators and referring the dispute to arbitration had become infructuous, dismissed the application.
7. From the judgment of the learned Senior Civil Judge, Quetta, the Contractor filed Civil Revision in the Balochistan High Court. A learned Single Judge in the High Court at the outset made a pointed reference to his earlier order in sim"ar Revision Petition No,215 of 1994 wherein Arbitration Clause
(67) of the Contract Agreement was referred to and the case was also remanded during the first round "for disposing the application in accordance with law". Even after remand, the application of the Contractor was dismissed again on the same ground, namely, that the Contractor had already been paid the final bill and, therefore, he could not legally ask for enforcement of the Arbitration Clause. The Contractor again filed the revision petition before the High Court to question the legality and propriety of the decision rendered by the trial Court. The same learned Judge in the Chambers again accepted the revision petition, set aside the order of the trial Court and remanded the case to her "to appoint Arbitrator in accordance with the provisions of the Act and to refer the matter to the same".
8. Feeling dissatisfied, the appellant filed petition of leave to appeal in this Court.
9. Leave was granted by this Court to consider, firstly, as to whether there remained any dispute whatsoever which could, at all, be referred to arbitration notwithstanding the payment to the Contractor of the final bill under protest; payment of another huge amount in pursuance of the subsequent settlement between the parties out of Court and withdrawal of protest qua the receipt of final bill and, secondly, as to whether the observation of the High Court, that the appellant having omitted to file appeal against the earlier order of remand, proceedings before the trial Court under sections 8 and 20 of the Act were not open to challenge, were misconceived.
10. The parties are admittedly not at variance on the provision in the agreement of an arbitration clause for adjudication of dispute arising out of the agreement since the controversy between the parties revolves around clause (67) providing for adjudication of disputes through arbitration, it is reproduced hereunder:-- "Clause (67).--Settlement of dispute. --Delete existing clause (67) in Part I General Conditions and substitute the following:-- Should dispute arise that is not resolved within 60 days it shall be submitted to arbitration. Either party shall notify the other and request that the matter be referred to arbitration:
(i) The Contractor shall select an arbitrator, the employer shall select an arbitrator and the two arbitrators shall select a third arbitrator (umpire).
(ii) If either of the parties fail to appoint its arbitrator within 60 days after the receipt of notice for the appointment or if the arbitrators for the parties are unable to agree upon a third arbitrator as the case may be then the dispute shall be settled under the Pakistan Act/Rules of Arbitrator. The findings of the arbitration shall be final and binding on both parties.
(iii) Work shall, if reasonably possible, continue during arbitration proceedings and no payment due or payable under the Contract shall be withheld unless it is a matter under arbitration.
(iv) The Arbitrator's decision shall be final, binding on both parties and enforceable upon both client and the Contractor. The Arbitration award shall be in lieu of any other remedy."
11. Mr. Muhammad Aslam Chishti, learned Senior Advocate Supreme Court in support of this appeal has urged in essence that the Contractor's final bill had been settled and there remained no dispute between the parties to be referred to Arbitration and, therefore, the Contractor had no cause of action to invoke under sections 8 and 20 of the Act for referring the dispute to arbitration.
In this context, our attention was drawn to a letter dated 30-5-1994 (Photo copy Annexure 'A') addressed by the Contractor to the appellant and Statement of works performed - Received Bill for Civil works (Photo copies of both of which are placed on file). The learned counsel for the appellant next submitted that the contention of the appellant as aforesaid lends support from withdrawal of the suit vide order dated 21-4-1994 passed by the Civil Judge 1st Class, Quetta. In this context our attention was drawn to the photo copy of the order-sheet in vernacular (Placed at page 65 of the Paper Book (Part-I)).
12. As against this, stance of Mr. Muhammad Riaz, learned Advocate Supreme Court, appearing for the Contractor was that contract had not only been rescinded but his various claims were also not entertained besides declining to give effect to clause (67) of the Agreement reproduced above on the alleged ground that final bill had been paid to the Contractor. According to him, it was precisely on this ground that the contract was said to have been finally determined and that there existed no controversy calling for its reference to arbitration. The learned counsel relied on the amended plaint for declaration and injunction photo copy whereof has been placed at page 44 of Concise Statement filed on behalf of the Contractor generally and para.4 thereof and the relief claimed in Para.11 particularly.
12-A. We have given our anxious consideration to the arguments advanced by the learned counsel for the parties and have also perused the record with their valuable assistance.
13. The crucial question surviving for determination in the case is as to whether the undertaking given by the Contractor by virtue of the letter dated 30-5-1994 (Annexure 'A') (at page 51 of the Paper Book Para. I) and consequential Statement of Works Performed (photo copy at page 52) was a circumstance which barred the arbitration for which the Civil Court had the jurisdiction to make adjudication or whether the effect of the said undertaking was amenable to arbitration and was one which would be looked into and adjudicated upon by the Arbitrators. Since the interpretation of relevant provisions of section 20 of the Act is involved it is reproduced hereunder:-- "20. Application to file in Court arbitration agreement.--(1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement of 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.
(2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder as defendant or defendants, if the application has been presented by all the parties, or, if otherwise, between the applicant as plaintiff and the other parties as defendants.
(3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed.
(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.
(5) Thereafter, the arbitration shall proceed in accordance with and shall be governed by, the other provisions of this Act, so far as they can be made applicable."
14. According to subsection (1) of section 20, before a person can make an application under the provisions of the Act for a prayer that an agreement to be filed in Court, following conditions have to be satisfied:--
(i) That there is an agreement between the parties containing arbitration clause.
(ii) That the agreement had been entered into before institution of the suit with respect to the subject-matter of the agreement.
(iii) That a difference has arisen between the parties to which the agreement applies.
(iv) That the Court to which application is made has jurisdiction in the matter to which the agreement relates.
15. In the present case, as noted earlier, the parties do not appear to be at variance on the first two conditions nor on the fourth one. The contest, however, is in respect of condition No,(iii) which is as to whether there is difference between the parties to which the agreement applies. The question, therefore, is whether on account of the said undertaking, there is between the parties a dispute which is covered by clause (67) (ibid) of the Agreement. The dispute implies an assertion of right by one party and repudiation thereof by another. The Contractor claims the value of the work done and losses suffered by it. The appellant, however, denies the liability to make any payment on the ground that at the time of the withdrawal of the suit the Contractor had undertaken vide letter dated 3-5-1994 (Annexure 'Aat page 51) read with Statement of Works Performed (photo copy at page 52). It is clear, therefore, that there was assertion of claim by the Contractor and repudiation thereof by the appellant and, thus, a dispute had arisen between the parties in respect of contract agreement. In the present case, however, it had never been alleged in the reply to the Application under section 20 that all the claims made by the Contractor reproduced in para.2 (ante) had ever been paid excepting the two enumerated therein. On the other hand, undertaking as aforesaid pertains to final Bill No,28, dated 27-12-1993. The undertaking as aforesaid is with regard to only two Items, namely, Item No,8-Corrrete Class 'Aand Item No,11 -- Reinforcement total whereof comes Rs,3,56,734. Be that as it may, on the Contractor's side the validity of this undertaking was itself being questioned. There was, therefore, clearly a dispute existing between the parties, and almost a similar proposition fell for determination before the Lahore High Court in Manzoor Construction Co. Ltd. v. University of Engineering & Technology, Taxila (1984 CLC 3347) wherein a learned Judge in Chambers had construed subsection (4) of section 20 of the Arbitration Act in a case in which the prayer for reference to Arbitration of dispute was declined on the ground that the Contractor had given an undertaking at the time of refund of earnest money to him that he would not claim any further amount. The Contractor therein had pleaded that the undertaking aforesaid was obtained under duress and coercion. The learned Single Judge in the case of Manzoor Construction Co. Ltd. (supra) had reached the conclusion that the said undertaking does not constitute such a sufficient cause as to warrant an order declining to make such a direction. In support of this conclusion the reasons which weighed with the learned Judge were, firstly, that a dispute in an Arbitration is in the nature of a cause of action in a suit. In this context, the learned Judge had raised a question as to whether in a civil suit the plaint discloses cause of action or not is decided by the averments in the plaint and not on the basis of any plea raised by the opposite- party in the written statement.
Drawing a parallel to a dispute which arises between the parties containing an Arbitration Clause and the prayer for resolution of the said dispute and the cause of action in civil suit had been drawn. It was held that it could not 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 sum of money due for the other party constitutes an averment in the plaint and the plea that the undertaking given by the Contractor 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 Contractor. It was, therefore, held that 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".
16. The second reason for coming to the said conclusion which weighed with the learned Judge in Chambers of Lahore High Court was that in claims for arbitration questions relating to the 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 consensus, committed to the judgment of the arbitrator. For this reason it was held that 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.
17. We are inclined to approve the law enunciated by the learned Single Judge in the case of Manzoor Construction Co. Ltd. (supra) that whenever there is a dispute between the parties which is covered by the arbitration clause of the contract, the crucial question is whether there is sufficient cause within the meaning of subsection (4) of section 20 of the Act for not making an order for filing an agreement and referring the matter to Arbitration or in other words whether such undertaking which is the sheet anchor of the case of the employer was such a sufficient cause as debarred the Court from making such an order. The answer to this question is that in claims for arbitration, all the questions relating to the original contract or matters which can be decided by Arbitrator alone is by virtue of the relevant clause of Contract, they are by mutual consensus, committed to the judgment of the arbitrator and do not fall within the jurisdiction of the Civil Court.
The view that we have taken regarding the arbitrator being the sole Judge of the nature and effect of the said undertaking is that the Civil Court had no jurisdiction to decide the same. The learned Judge in Chambers of the High Court in support of the view that he had taken and which we have approved, reliance was placed on an unreported judgment of this Court in Province of the Punjab v.
M/s. Muslim Traders (Civil Appeal No,35 of 1977, decided on 14-10-1980) wherein it was held that the effect of an alleged admission made by the Contractor that he had no outstanding dues in respect of the work done can be examined by the arbitrator in arbitration proceedings. In that case, the Contractor or his attorney had made an endorsement on the final bill that he had no further claim in respect of the said bill and had signed the same but had later claimed arbitration on the ground that the payment made to him was muchless than his real entitlement. Before the Civil Judge, he had accepted all the said circumstances but had further stated that the said writing had been made in order to get his bill passed while the actual position was absolutely different and claimed that if no such writing had been made on the final bill, the final bill would not have been prepared even. The learned Civil Judge dismissed the application under section 20 (ibid) in that case on the ground that there was no need for arbitration proceedings as it was admitted by the plaintiff in writing made on the final bill that he had no claim due against the department. In appeal against that order, the learned Additional District Judge reversed the said decision on the ground that the plaintiff-Contractor had not made an unqualified statement and in the later portion of the said statement he had stated that these words had been written to see through the passing of the bill but these were against facts and unless the formality of the said endorsement had been completed, the final bill would not have been prepared. He held that these explanations were plausible and according to section 31 of the Evidence Act (corresponding to Article 45 of the Qanun-e-Shahadat, 1984) an admission is not a conclusive proof of the matter admitted but may operate as estoppel under certain conditions. He further held that it was settled law that a party making an admission can always show that it was mistaken or had been made under misapprehension of true circumstances. On these grounds he remanded the case to the Civil Judge under Order XLI, rule 23, C.P.C. Revision was taken against this order and a learned Judge in the High Court (Muhammad Akram, J. As His Lordship then was) by his judgment, dated 9-7-1971 dismissed the said revision and maintained the order of the Additional District Judge on the ground that the view of the learned Additional District Judge that the admission of the plaintiff-Contractor in that behalf was not conclusive was correct and that the question of effect of the admission of the contractor that he had no further claim against the Government on the said final bill could itself be examined by the arbitrator during the course of enquiry before him.
18. Leave was granted by this Court in the case of Messrs Muslim Traders (supra) against the order of the High Court in order to examine if, in principle, a party can be permitted to take inconsistent pleas. This Court dismissed the appeal with the following observations:-- ...After having gone through the record of the case and hearing the learned counsel for the parties, we entirely agree with the view of the High Court that the effect of the alleged admission by the respondent can very well be examined in the arbitration proceedings. (Underlining is ours in order to provide emphasis).
We, therefore, find no merit and dismiss it."
19. In the present case, there is also an alleged admission and, therefore, the question of its propriety under section 31 of the Evidence Act (corresponding to Article 45 (ibid)) also calls for examination by the Arbitrators. The question of relinquishment or waiver on the basis of the alleged undertaking herein is a material which is identical to the undertaking to that in the case of Messrs Muslim Traders (supra). In the circumstances taken note of by us, the answer to question whether the alleged undertaking by the contractor did make the original dispute in respect of the claim of the appellant to remain covered by arbitration clause and it did not constitute a sufficient cause within the meaning of subsection (4) of section 20 of Arbitration Act for the Civil Judge to refuse to make a reference to the arbitration is in the affirmative. It was clearly a matter within the jurisdiction of the arbitrators. They being the Judges both of fact and law can adjudicate upon the mixed question of law and fact as to whether the said undertaking was or was not pertaining to the claims pressed into service by the Contractor. This job could not be performed by the learned Civil Judge as the question of undertaking did not fall within the four conditions laid down in para. 14
(ante) of this judgment nor did it constitute a sufficient cause within the meaning of subsection (4) of section 20 of the Act to decline the request made in the application. In view of the above, the learned Senior Civil Judge clearly erred in not referring the dispute to the arbitration. The learned Judge in the High Court in the factual background explained above, was, therefore, justified to have set aside the order of the learned Senior Civil Judge and remanded the case to her for appointment of the arbitrators and referring the dispute for their resolution under clause (67) of the Contract Agreement.
20. As to second point on which leave to appeal was granted it would suffice to observe that even if the observation of the High Court which had been noticed in the leave granting order is misconceived still it has got no bearing on the finding that has been recorded by us on the first question on which leave had been granted.
21. Some arguments touching the merits of the claims could not be raised by the parties before us.
Those contentions, prima facie, touch the merits of the respective claims of the parties amenable to the jurisdiction of the Arbitrators to be appointed under clause (67) of the Agreement, therefore, we leave it at that for their resolution if they are raised before the Arbitrators.
22. For the foregoing reasons we, therefore, dismiss this appeal but leave the parties to bear their respective costs.