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Civil Revision Petition No. 6/2 of 1955 decided on 25th January, 1955 for revision from the judgment of Mian Fazal Khaliq Khan, Sub-Judge 1st Class, Peshawar, dated 4th October, 1954.
Ss. 2 and 34-"Director of Civil Supplies" named as arbitrator in submission clause of agreement-Clause, held, not ambiguous-"Director" intended is one at time of dispute-Proceedings in suit, however, not stayed, as the relevant Director had already been taking decisions on behalf of Government to prejudice of plaintiff.
The parties agreed that any dispute arising out of the contract was to be referred to the arbitration of the Director of Civil Supplies; held, this officer being a definite persona and a legal entity, there was no ambiguity about the submission clause.
Governor-General in Council v. Simla Banking and Indus trial Co. Ltd., New Delhi and another A I R 1947 Lah. 215 (=P L D 1914-1947 (Part I) Lah. 495) distinguished.
The words "Director of Civil Supplies" referred to the person who was holding that post at the time when the dispute arose.
A contract appointing an arbitrator is a contract uberrima fides and it would be absolutely wrong to bind a party to its contract and compel it to get a decision from a biased tribunal.
Where the arbitrator mentioned in submission clause was the "Director of Civil Supplies" and that officer had already been taking decisions on behalf of Government to the prejudice of the plaintiff, order of stay of proceedings in suit passed on Government's application under section 34 Arbitration Act was set aside, especially when the plaintiff before filing suit had notified Government to appoint an independent arbi trator with the concurrence of the plaintiff.
Peer Bakhsh Khan, for the Appellant.
Ghazanfar Ali, Government Pleader for the Government.
-By an agreement dated 8th March 1949, Governor North-West Frontier Province, acting through the Director of Civil Supplies and Secretary to Government North-West Frontier Province, Food and Civil Supplies Departmant, appointed Khwaja Muhammad Yusaf as an agent to take delivery of 10,000 standard maunds of maize purchased by the Government North-West Frontier Province from the Swat State, weigh it and store it in the Dargai Fort, and then clear and supervise its despatch at Dargai under certain conditions.
On 9th Apri1.1954, Khwaja Muhammed Yusaf on the basis of the above agreement instituted a suit in the Court of the Senior Sub-Judge Peshawar, who transferred it to Sub-Judge 1st Class, Peshawar, against the Government North-West Frontier Province, for the recovery of Rs. 26,513/3/6.
On 5th May, 1954, the Government North-West Frontier Province made an application under section 34 of the Arbitra tion Act X of 1940, for the stay of these proceedings, on the ground that in the agreement entered into between the parties; there was a submission clause, by which all questions whatsoever, touching the agreement or the subject-matter thereof or arising out of it, were to be referred to the arbitra tion of the Director of Civil Supplies, whose decision was to be final.
The learned Sub-Judge by his order dated 4th October 1954, acceded to Government's request and stayed the proceedings.
Khwaja Muhammed Yusaf has come up in revision against the above order to this Court. It is conceded by both the parties that an appeal is competent in the case, and consequently this revision petition is treated as an appeal.
The first objection which has been taken by the learned counsel appearing for Khwaja Muhammed Yusaf to the arbitration clause was that it was ambiguous and was, therefore, unenforceable on account of uncertainty. It will not be out of place to reproduce this clause verbatim. It runs as under :-
"All questions whatsoever which may at any time herein after arise touching their presents or the subject-matter thereof or arising out of it in relation thereto respectively, and whether as to construction or otherwise shall be referred to the arbitration of the Director of Civil Supplies whose decision shall be final."
The objection taken to this clause is based on a Division Bench Ruling in Governor-General-in-Council v. Simla Banking and Industrial Company Limited New Delhi and another (A I R 1947 Lah. 215=P L D 1914-1947 (Purt I) Lah. 495), wherein it was held in the agreement between the Government arid a party providing that the decision of the Superintending Engineer of the Circle for the time being would be final as to any question, claim, etc. arising between the parties, was ambiguous, because it was not clear whether the words "for the time being" referred to the Circle or to the Superintending Engineer, and if the expression "Superintending Engineer of the Circle" was taken collectively, whether it was the person who held that office at the time of the institution of the suit, or the person holding the office when the cause of action arose, that was to be arbitrator.
Whatever the circumstances in the above case might have been, so far as the contract in this case is concerned, it is perfectly clear that the parties agreed that any dispute arising out of the contract was to be referred to the arbitration of the Director of Civil Supplies, who is a definite persona and a legal entity. There is no ambiguity about it.
The learned trial Judge, however, seems to have gone off the rails when he decided that the gentleman holding the office of Director of Civil Supplies at the time of the execution of the contract (Mr. Ghulam Ishaq Khan) was the person who was appointed as an arbitrator, and not Sheikh Abdul Hamid, who was holding this post at the time of the dispute. If the parties intended Mr. Ghulam Ishaq Khan or any gentleman holding the post, of the Director of Civil Supplies at the time the parties entered into the contract as an arbitrator, there was nothing to stop them from writing the name of the gentleman in the agreement as an arbitrator. Supposing if that gentleman died in the meantime, or for one reason or another became incapable of acting as an arbitrator at the time when the dispute between the parties arose, then would it mean that the arbitration clause had become inoperative I am definitely of the opinion that this cannot be the intention of the parties or that of law, that the arbitra tion clause which appointed an arbitrator by reference to designation and not by name should be taken to mean that a person for the time being holding that post was appointed as an arbitrator, and if that person became non-existent subsequently then the entire arbitration clause was rendered ineffective. When they wrote that the dispute which might at any time arise between the parties would be referred to the Director of Civil Supplies, it clearly meant that it was to be referred to the gentleman who was holding that post at the time when the dispute arose. An agreement to arbitration should be given the meaning which would not defeat the intention of the parties and the purpose of the contract.
I consequently hold that the arbitrator appointed by the parties was the gentleman holding the post of the Director of Civil Supplies at the time when the dispute arose, who was Sheikh Abdul Hamid, and riot Mr. Ghulam Ishaq Khan, as has been held by the learned trial Court.
As against Sheikh Abdul Hamid some very serious allegations were made by Khwaja Muhammed Yusaf. A perusal of the record would show that this gentleman has been taking certain decisions on behalf of the Government to the prejudice of Khwaja Muhammad Yusaf. This fact is riot even denied by the learned counsel appearing for the Government, North-West Frontier Province. The learned trial judge has also found the same when he wrote the following in his order :-
" These letters (Exh. P. D. to Exp. P, I) have been addressed to the plaintiff by Sheikh Abdul Hamid Khan on behalf of the Provincial Government. A careful perusal of these letters will show prima facie, that the defendant have given a conflicting opinion about the plaintiff's claim. The lurking fear of plaintiff is that Sheikh Abdul Hamid Khan, who has already committed himself to a definte opinion about the plaintiff's claim, would not do ;justice to his case as he was already prejudiced. This is a strong suspicion well founded."
A contract appointing an arbitrator is a contract uberrima fides and it is .the most fundamental principle of justice that if the tribunal appointed by the parties has lost confidence of anyone of these parties, or it has acted in a manner which creates a strong suspicion that substantial miscarriage of justice might result, if the dispute is referred to such tribunal, then it would be absolutely wrong to bind a party to its contract and compel it to get the decision from a biased tribunal. Sheikh Abdul Hamid Khan on account of his own conduct has made himself incapable of acting as an arbitrator in the case, it will be a complete denial of justice to Khwaja Muhammad Yusaf if he is compelled to have the dispute decided by him.
Under section 34 of the Arbitration Act, the proceedings can only be stopped if the Court is satisfied (1) that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement, and (2) that the applicant was at the time when the proceedings were commenced and still remained ready and willing to do all things necessary to the proper conduct of the arbitration.
So far as No. (1) is concerned, as has already been discussed the matter cannot be referred to the arbitration of the Director of Civil Supplies in accordance with the arbitra tion agreement. As regards No. (2), it is conceded by the learned counsel, appearing for -the Government, that on 5th October, 1953, i.e., about six months prior to the institution of the suit Mr. Peer Bakhsh Khan, the Advocate of Khwaja Muhammad Yusaf had served a notice on the Government to appoint an independent arbitrator or arbitrators with the concurrence of his client for the decision of his client's claim within fifteen days of the receipt of that notice. The Government did not take any notice of this communication, and this makes it perfectly clear that the Government was not ready and willing to do all things necessary to the proper conduct of the arbitration. The two sole ingredients entitling the Court to stay the civil proceedings were, thus, lacking in this case, and the Court consequently had no jurisdiction to act in the matter.
The order under appeal, therefore, being without jurisdic tion, is hereby set aside, and the trial Court is ordered to proceed with the main case in accordance with law.
The appeal is accepted with costs. Pleader's fee Rs. 70.
A. H. Petition accepted.
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