In this appeal under S.39 of the Arbitration Act, 1940, order dated 24-9-1990 of a learned Civil Judge, Lahore, whereby Award dated 1-9-1984 was made rule of the Court by rejecting the objections raised by the appellants, has been challenged. The appeal arises in the fallowing circumstances:
2. Tenders for the supply of Elastic Rail Clips were invited by the Pakistan Railways. The respondent was awarded the contract for the supply of the same. In terms of clause (4) of the contract, bank guarantee of the value of US $ 29,694 being 5% of the contract value was furnished by the respondent. A dispute arose between the parties as to the due performance of the said contract which resulted in the encashment of the bank guarantee by the appellant. The respondent invoked arbitration clause. Mr.M.Y. Arif, Chief Engineer (Rtd.), Pakistan Railways was appointed as sole arbitrator who gave award in favour of the respondent on 1-9-1984, inter alia, that:- "The encashed amount of the Guarantee Bond (plus interest on this amount at the prevalent Bank rate from 8-4-1980 to 1-9-1984) should be restored to the Account of the petitioner by 30-9-1984."
3. An application was filed by the respondent in the Civil Court for a direction to the arbitrator to file the award and to make the same rule, of Court, whereas the appellants filed objections to the award alleging that the arbitrator had misconducted himself and the proceedings, as such the award was liable to be set aside. On 29-9-1986, the learned trial Court framed issues where after, the parties produced the evidence. The learned trial Court, however, proceeded to accept the application of the respondent and the award was ordered to be made a rule of the Court on 24-9- 1990. This is an appeal against the same.
4. An application (C.M. No,488-C/99) was filed by the appellants that the main grievance against the award was about the misconduct of the arbitrator but no issue was framed by the learned trial Court despite the fact that number of objections were raised by the appellants/applicants. This application was contested by the respondent by filing a reply to the same.
5. It is contended by the learned counsel for the appellants that a number of objections had been raised to the validity of the award on the ground that the same was tainted with misconduct, as a result whereof gross miscarriage of justice had occasioned and the same was liable to be set aside. It is contended that the learned trial Court seized of the proceedings did not frame any issue as to the misconduct by the arbitrator, as a result whereof the real controversy has remained unresolved. It is further contended that the Appellate Court is fully empowered to frame correct issues arising out of the pleadings and to remand the matter to the learned trial Court for proceedings afresh in accordance with law.
6. As against the above, the learned counsel for the respondent contended that the issues were framed on 29-9-1986 and the matter remained pending with the learned Trial Court for about 4 years but at no stage any such application was made for correction/addition of issues, therefore, it cannot be permitted now. It is further contended that issue No,5 was exhaustive enough which had been framed and the parties produced evidence, on consideration of which the learned trial Court passed the order making the award a rule of the Court. He has placed reliance on Mst. Sugharn Bibi alias Miran Bibi v. Asghar Khan and another 1988 SCM R 4 in support of his submissions and to support the order of the learned Trial Court.
7. Under section 14 of the Arbitration Act, 1940 when an award is filed in the Court, notice is issued to the parties about the filing of the same. In the instant case, on receipt of notice from the Court the appellants filed objections under sections 30 and 33 of the Arbitration Act, 1940 for setting aside of the same. The objection petition elaborately contained the allegations of misconduct for setting aside of the award but no issue as to the misconduct was framed by the learned Trial Court.
8. Section 15 of the Arbitration Act, 1940 empowers the Court to modify the award on the grounds mentioned therein, whereas, section 16 empowers the Court to remit the award for any of the reasons mentioned in that section. Section 17 of the said Act lays down that where the Court sees no cause to remit the award or any of the matters referred to arbitration for consideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired or such application having been made after refusing it, proceed to pronounce the judgment according to the award. Number of objections had been taken against the award that the same was liable to be set aside on the ground of misconduct mentioned in the application.
Without application of mind to the same, the learned Trial Court proceeded with the matter and made the award a rule of the Court even without framing an issue as to the allegations of misconduct. It was the duty of the Court itself under section 17 to have examined the objections in order to determine the legality and validity of the award. This duty of the Court was highlighted in Pakistan v. QMR Expert Consultant PLD 1990 SC 800 and it w.,s observed at page 812 that:- It is the duty of the Court to examine whether there was any reason for modifying of the award or for setting aside the award notwithstanding that an affected party may have failed to file objections to the award on account of the expiry of the limitation period or the parties to the arbitration proceedings may be in collusion and because of that, they may not file any objection to a collusive award." Relying upon Union of India v. Pratap Chandra Biswas AIR 1964 Asam and Nagaland 141; Chhaba Lal v. Kallu Lal and others AIR (33) 1946 PC 72, it was observed that this power was available to the Court even suo motu.
9. In Messrs Awan industries Ltd. v. The Executive Engineer, Lined Channel Division and another 1992 SCM R 65 also it was held that:-- "Even otherwise while examining the award for the purposes of making it rule of the Court, the Court could consider whether there was a valid arbitration agreement or reference to arbitration pursuant to which the award was given or whether the award was in existence. It is correct that an award could be set aside only on the grounds mentioned in section 30 of the Act, but besides section 17, this section also contains clause (c), which provides the ground that an award has been improperly procured or is otherwise invalid."
It is, thus, evident from the facts and circumstances of the present case that the trial Court, seized of the matter, failed to perform its duty casts upon it under LA section 17 of the Arbitration Act, 1940 in accordance with law.
10. The contention of the learned counsel for the respondent that for a long time after framing of the issues the matter has not been agitated by the appellants and that non-framing of proper issues has not prejudiced the case of the appellants, is not tenable in the facts and circumstances of the case. In Mst. Sughran Bibi's case (supra) relied upon by the learned counsel, the view taken by the High Court in second appeal that no prejudice was caused to the parties due to framing of bus issue, was not interfered with by their lordships of the Supreme Court. The matter before this Court, however, has came up in the nature of first appeal under section 39 of the Arbitration Act, 1940, from the order of the learned trial Judge which is as of right on facts and law and the entire matter has reopened.
11. The importance of framing of correct issues arising out of the pleadings of the parties cannot be ignored in view of Rule 1(3) of Order XIV, C.P.C. Which lays down that each material proposition affirmed by one party and controverted by the other, shall form the subject of a distinct issue. The rationale behind this is that the parties are required to prove the issues and not the pleadings, as required by Order XVIII, Rule 2 of C.P.C. Even the Court is to record its findings and decision on each issue in terms of Order XX, Rule 5 of C.P.C. It is only when proper issues are framed by the Court that the controversy between the parties is crystalized who then produce evidence in support of their respective pleas. In Balchat Zamin v. Said Majeed 1989 SCM R 1719 remand order by the High Court, owning to the non-framing of the proper issues by the learned trial Court, was affirmed by their Lordships of the Supreme Court holding that:- "A fair and proper adjudication require that there should have been an issue on the subject so that the parties do not remain unaware of the exact controversy involved. It was, therefore, within the powers of the High Court to set aside the judgments and decrees of the Courts below and direct that the case may be reheard on the issue framed by it in the light of evidence of the parties." Muhammad Akbar v. The Province of Punjab 1985 SCM R 116 an order of this Court accepting the appeal and remanding the case to the learned trial Court for deciding the application under section 14 of the Arbitration Act after giving the parties opportunity to produce the evidence, was not interfered with by their lordships and the petition for leave was dismissed.
12. in the present case, the learned Trial Court failed in its duty to appreciate the real controversy and to frame a material issue which was essential for the just adjudication of the matter. The application, thus, cannot be rejected simply for the reason that the same is a belated one.
13. In view of the above, this appeal is accepted. The order of the learned Trial Court dated 24-9- 1990 is set aside. The petition filed by the respondent under section 14 of the Arbitration Act, 1940 as also the objection petition, filed by the appellants, shall be heard and decided afresh after framing proper issues arising out of the pleadings of the parties in accordance with law. In order to avoid delay in the disposal of the matter, the parties shall enter appearance before the learned Senior Civil Judge, Lahore on 15-11-1999, who may hear the matter himself or entrust the same to some other learned Judge. It is observed that the learned Judge, seized of the matter, shall take all possible steps to expedite the hearing and conclusion of the matter and decide the same by 31st July, 2000. No order as to costs.